LexALUVA SUGAR AGENCY versus STATE OF KERALA
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A B [2011] 11 S.C.R. 206 ALUVA SUGAR AGENCY v. STATE OF KERALA (Civil Appeal No. 7731 of 2011) SEPTEMBER 7, 2011 [DR. MUKUNDAKAM SHARMA AND ANIL R. DAVE, JJ.] Kera/a General Sales Tax Act, 1963: Second Schedule, Entry 17 A - Margarine used for preparing bakery products C and confectionaries - Taxability @ 4% or 8% - Held: Margarine is used as a substitute for butter and is used in preparation of food articles specially for preparing bakery products and also used in confectionary industry - For manufacturing margarine, refined and/or hydrogenated oils D of sun-flower, soyabean, cotton seed, pa/moline, palm and sesame are used - Like butter, margarine also contains almost 80% fat and remaining constituents of margarine are edible things which are added thereto by the manufacturer of margarine - According to Entry 90 in the First Schedule to E the Kera/a General Sales Tax Act, 1963, oils, whether edible or inedible, including refined or hydrogenated oils and margarine, not elsewhere mentioned is to be taxed at 8% - Concessional rate of 4% is levied on all edible oils as per Entry 17 A of the Second Schedule read with Notification SRO F No. 429195 dated 31.2.1995 - Circular 2439/TD dated 19.2. 1996 made it clear that edible oil like refined or hydrogenated oil such as groundnut oil, gingel/y oil, refined and vanaspathi oils are to be taxed @ 4% and not at @ 8% - Edible oil is that oil which can be used for human G consumption - It is not necessary that all edible things should be consumed in the form in which they are available - Though one may not consume margarine directly or may not use for normal cooking, the fact is that margarine is used for preparing bakery items which are consumed by human H 206 ALUVA SUGAR AGENCY v. STATE OF KERALA 207 beings and, therefore, margarine is also edible and is eligible A to benefit of rate of tax of 4% - Sales Tax - Notification SRO No. 429195 dated 31.2.1995, Second Schedule, Entry 17A - Circular 2439/TD dated 19. 2. 1996. The question which arose for consideration in the 8 instant appeal was whether margarine used by appellant for preparing bakery products can be treated as edible oil and thus, the appellant is entitled to the benefit concessional of rate of tax of 4% as provided in Entry 17A of the second schedule of the Kerala General Sales Tax Act, 1963 read with Government Notification SRO No. C 1725/93 and 429/95. The Department's case was that margarine would come under Entry 90 and, therefore, is taxable @ 8% and not at concessional rate of 4%. Allowing the appeal, the Court HELD: 1. Margarine is a generic term and it is used as a substitute for butter. It is used in preparation of food articles and specially used for preparing bakery products. For the purpose of manufacturing margarine, refined and/or hydrogenated oils of sun-flower, soyabean, cotton seed, palmoline, palm and sesame oils are used. Vegetable oils, salt, permitted emulsifiers and stabilizers are also used for manufacturing margarine. Margarine contains all edible things and is used exclusively as a raw-material for preparing bakery products and is also used in confectionary industry. Like butter, margarine also contains almost 80% fat and remaining constituents of margarine are edible things which are added thereto D E F by the manufactures of margarine. As it is used for making eatables, margarine is also edible though it is not G used for normal cooking as other oils like coconut, sunflower, soyabean, sesame oils -are used but it can not be disputed that it is an edible oil. [Paras 14, 15] (214-G- H; 215-A-D] H 208 SUPREME COURT REPORTS [2011) 11 S.C.R. A 2. According to Entry 90 in the First Schedule of the Kerala General Sales Tax Act, oils, whether edible or inedible, including refined or hydrogenated oils and margarine, not elsewhere mentioned is to be taxed at 8%. Concessional rate of 4% is levied on all edible oils as s per Entry 17 A of the Second Schedule read with Notification SRO No. 429/95 dated 31.2.1995. Thus, instead of 8%, edible oil is taxed at the rate of 4%. Margarine is definitely an edible oil as it is used for preparing bakery products but it is not used for normal c cooking. As margarine is not used for normal cooking but is still used for preparing bakery products, a doubt prevailed whether margarine can be considered as edible oil. By virtue of the circular 2439/TD dated 19.2.1996, it was
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