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214 Goods & Services Tax Cases - Reports [Vol. 1 existed up to 31-3-2006 under which spices were specified were ‘spices in all forms’ the Authority for Clarification and Advance Rulings was right in having held that crushed chilly/spent chilly which are different forms of dry chillies were not within the meaning of ‘dry chilles’ in Sl. No. 61 and therefore, in respect of the period prior to 1-4-2006, the goods were liable to tax under section 4(1)(b) at 12.5 per cent ? (2) On the facts and in the circumstances of the case of the appellant, whereby an amendment made with effect from 1-4-2006 the expression ‘dry chillies’ in Sl. No. 89 of Third Schedule to KVAT Act, 2003 was expanded to include ‘cut chillies’, spent chillies and chilly seeds’ and the amendment being clarificatory was applicable for construing the expression ‘dry chillies’ in the old Sl. No. 61 of Third Schedule as existed up to 31-3-2006 to include cut chillies, spent chillies and chilly seeds for the said goods to be eligible for levy of tax at 4 per cent, the Authority for Clarification and Advance Rulings was right in having held otherwise and issued the clarification that for the period prior to 1-4-2006 ‘cut chillies, spent chillies and chilly seeds’ were liable to tax under section 4(1)(b) at 12.5 per cent ? (3) On the facts and in the circumstances of the case of the appellant, where according to common parlance understanding cut chillies, spent chillies and chilly seeds are also regarded as dry chillies and therefore, were within the scope and ambit of the expression ‘dry chillies’ in the old Sl. No. 61 of Third Schedule to KVAT Act, 2003 as it existed up to 31-3-2006 to be eligible for levy of tax at 4 per cent, the Authority for Clarification and Advance Ruling was right in having held otherwise and issued the clarification that for the period prior to 1-4-2006, cut chillies, spent chillies and chilly seeds were liable to tax under section 4(1)(b) at 12.5 per cent ? 9. In order to consider the contentions raised by the respective counsel, it would be of necessary to extract the relevant provisions of the Act viz. section 4(1)(b) and Schedule III of the Act which came to be amended with effect from 1-4-2006. Insofar as Sl. Nos. 61 and 89 as it stood for the period 1-4-2005 to 6-6-2005 and 1-4-2005 to 31-3-2006 has already been extracted herein supra. S.4 : Liability to tax and taxes thereof (a) Every dealer who is or is required to be registered as specified in sections 22 to 24, shall be liable to pay tax, on his taxable turnover. (b) in respect of other goods, at the rate of 12.5 (twelve and one half) per cent. 10. It is seen that in Entry No. 61, spices in all forms including the dry chillies finds a place. The Legislature in its wisdom having introduced by incorporating Sl. No. 89 by Amendment Act, 2006 enlarged the scope of the GOODS & SERVICES TAX CASES ❑ JANUARY 20 - FEBRUARY 4, 2010 ◆ 90 A B C D E F G
2010] Tropical Flavours (P.) Ltd. v. State of Karnataka (Kar.) 215 A B C D E F G dry chillies by bringing within the ambit of said dry chillies, the cut chillies, spent chillies and chilly seeds within the fold of dry chillies. 11. The question that requires to be examined in the instant case is : “by virtue of the extraction process, whether the reminiscence of the dry chilly can be sold as a product or commodity independently and is accepted in common parlance as such?” The process carried out for extraction of oleoresin results in the parts of dry chilly and in trade parlance it is called as skinned/cut chilly or crushed chilly or spent chilly. The crushed chilly consists of stem, a part of the skin and the chilly seeds. This extracted chilly can be used as a product is not disputed by the Revenue. The only ground on which the Revenue is attempting to contend is that, the reminiscence of the extracted chilly would attract the residuary clause is by virtue of non-inclusion of these products viz., cut chilly, crushed chilly, and spent chilly in Entry No. 61 for the relevant period. When the said product can be sold as such in the market and it is accepted as such in common trade parlance, we are unable to accept the contention of the Revenue that though it partakes the character of different commodity, only by virtue of its non-inclusion in the entry at Sl.No. 61, it cannot be held that residuary clause gets attracted. In this regard, the judgment of this Court in the case of Habeeb Proteins & Fats Extracts (supra) requires to be extracted which reads as follows :— “26. Secondly, the learned counsels for the parties have not placed any material before us to demonstrate how the sunflower oil cake and groundnut oil cake are in any way different from de-oiled sunflower cake and groundnut oil cake. Therefore, the only way we need to understand these commodities is the way in which they are understood in common parlance and in trade circles. The oil cake contains a certain percentage of oil and several other ingredients. When these commodities are subjected to processing of extraction of oil, some quantum of oil is removed, but they continue to remain as oil cakes with lesser content of oil, and the original commodity is not used in the manner as to cease to exist or cease to be available in that form for sale or purchase to attract levy of tax under section 6 of the Act. An article which is commonly and generally known as oil cake would not lose its identity merely because the purchasing dealer utilises the same for extraction of oil and therefore, the essential ingredients required to attract the levy of purchase tax under section 6 of the Act are not satisfied and accordingly it requires to be held that there is no consumption of oiled sunflower cake and oiled groundnut oil cake in the manufacture of other goods for sale nor there is any consumption otherwise, since even after extraction of oil, the oiled sunflower cake and oiled groundnut oil cake continue to remain as oil cake with lesser quantity of oil and therefore, they continue to remain the same commodity.” 13. This Court while considering as to character of de-oiled cakes remaining after extraction from oil cake held that, it does not lose its identity as whole cake nor it ceases to exist as an oil cake. Applying the proposition laid down in the said judgment which is pressed into service by the appellant to the facts of this case, the only way to understand the commodities which ultimately comes out on crushing of the chilly in common parlance and in GOODS & SERVICES TAX CASES ❑ JANUARY 20 - FEBRUARY 4, 2010 ◆ 91
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