Classification of Jaljira - Whether an appetizer or masala

PJ/Case Laws/2011-12/1150

Case: Commercial Taxes Officer v/s Jalani Enterprises

Citation: 2011(266) E.L.T. 289 (S.C.)

Issue:- Whether Jaljira is only an appetizer or is a masala?

Brief Facts:- The respondent firm is a manufacturer and seller of Jaljira. The respondent deposited sales tax at the rate of 10% assuming that Jaljira is not a Masala and hence taxable at the general rate of 10% as residuary entry 199, which reads as under: "199. General rate, that is all goods that are not covered by S. No. 1 - 198. 10%" The assessing officer passed order against the respondent.

Being aggrieved by the aforesaid order passed by the assessing officer, the respondent preferred an appeal before the Deputy Commissioner (Appeals) Commercial Taxes, challenging the order passed by the Commercial Tax Officer, Special Circle-II, Jodhpur. The Deputy Commissioner (Appeals) by his order held that Jaljira is not a Masala and therefore tax levied at general rate of 10% was justified and he set aside the demand raised by the Assessing Authority.

Appellant filed two appeals before the Rajasthan Tax Board, Ajmer challenging the aforesaid order of Deputy Commissioner (Appeals), Ajmer. The Rajasthan Tax Board, Ajmer by its common order set aside the order passed by the Deputy Commissioner (Appeals) and restored the orders passed by the Assessing Authority.

Being aggrieved by the said order the respondent herein filed a Revision Petition before the Rajasthan High Court which came to be allowed by the High Court under the impugned judgment and order.

Feeling aggrieved the appellant filed the appeals before Supreme Court.

Appellant’s Contention:- The appellant submitted that the respondent is liable to pay sales tax at the rate of 16% on the product manufactured by it and the assessing officer was justified in treating the respondent liable to pay sales tax at the rate of 16% as per the Notification was issued by the state Government on 26.03.1999, which was to the mentioned that All kinds of eatables & non alcoholic potable 12% liquids. Subsequent thereto also a notification was issued by the appellant herein on 22.03.2002 making the same effective from the date of its issuance, wherein Entry 80 includes the following: Sr. No. Detail of Goods Tax Rate 80 Dry Fruits, Supari, Kirana items, Masala 4% ([when sold in unmixed form, whether lose or in polyethylene packs]) like Mirchi, Dhaniya, sonf, methi, ajwain, suwa, haldi, kathodi, amchoor and asalia, jeera (cumin seed).

Whereas Entry 186 includes the following: Sr. No. Detail of Goods Tax Rate 186 All kinds of eatables & non-alcoholic potable 16% liquids such as fruit syrups, distilled juices, jams [chatni, murabbas], fruit juices, drink concentrates of all types and forms, essences, concentrates, corn flaks and wheat flakes, custard powder, baking powder, ice-cream powder and [multi-ingredient packed masala].

The appellant also submitted that a letter dated 12.11.2001 was issued by the Deputy Secretary, Finance Department, Tax Division, Government of Rajasthan to the Commissioner, Commercial Taxes Deptt, Rajasthan, Jaipur, which reads as follows:

"........I am to state that "Packed Masala" used in entry number 184 means, a Masala where two or more ingredients are mixed and sold in packed conditions. Spices sold singly will continue to be taxed as per entry number 82......"

The appellant further submitted that respondent has itself shown the product manufactured by it Jaljira as Packed Masala and therefore the assessing officer was justified in treating the respondent liable to pay sales tax at the rate of 16%.

Respondent’s Contention:- The respondent submitted that the assessment year in question, the said notification dated 22.03.2002 being not applicable and the earlier notification being applicable, rate of sales tax at the rate of 10% for the same is only payable.

Reasoning of Judgment:- The Supreme Court perused the order of the High Court and observed that the High Court in is judgment held that Jaljira cannot be termed as a Masala in itself, but it is a mixture of masalas and other materials, which can be used for digestion. The High Court therefore held that Jaljira is nothing but edible preparation ready for use either directly or after dissolving in water for human consumption and as it is not used as additional constituent in any food substance, therefore, it cannot be termed as packed masala. The aforesaid findings were arrived at by the High Court after referring to the contents of Jaljira shown to be as follows: Sr. No. Name of Item Percentage 1. Salt 40%,2. Kala Namak 1%,3. Nimbu Ka Sat (Citric Acid) 8%,4. Sonth 10%,5. Kalimirch 10%,6. Pudina 10%,7. Hing 1% ,8. Jira 18%, and 9. Lalmirch 2% According to the High Court Jaljira would therefore fall in the residuary clause and therefore tax should be levied at the rate of 10% and not 16%.

The Court observed that each one of the contents of the product referred to above and relied upon by the High Court would indicate that most of the items used in the manufacture of Jaljira are nothing else but spices. They are grinded and mixed. When spices are grinded and mixed, it gives rise to a new product, which is a mixed masala. Different ingredients are used in preparation of Masala after grinding and mixing several ingredients and when they are so grinded they lose their own identity and character and a new product separately known to the commercial world comes into existence. Sales tax is levied on sale of commercial commodities; therefore, individual spices could be termed as different commercial commodities. When they are grinded and mixed they give rise to a separate commercial commodity altogether which could be taxed separately. It is settled law that when one particular item is covered by one specified entry, then the Revenue is not permitted to travel to the residuary entry. If from the records it is established that the product in question could be brought under a specific entry then there is no reason to take resort to the residuary entry. There is no doubt that Jaljira is a drink. The contents of Jaljira is put into water and taken as digestive drink but when we look into the manner and method of preparation of the product Jaljira, we find that it is a mixture of different spices after grinding and mixing. Therefore, it is nothing but a Masala packed into packets of different nature/quantity and sold to the consumers. It would, therefore, for all practical purposes would come within the Entry No. 184 and it cannot be said that it would come under the residuary entry as held by the High Court.

The Supreme Court considered that the clarificatory letter dated 12.11.2001 which was issued by the Deputy Secretary, Finance Department, Tax Division, Government of Rajasthan is also placed on record which specifically states that "Packed Masala" used in entry number 184 means, a Masala where two or more ingredients are mixed and sold in packed conditions. The said letter is in the nature of clarification of entry number 184 with which we are concerned. Although the said letter is an inter-departmental communication,but it cannot be said that clarification given by the Department cannot be made use of for interpreting the entry in the notification.

The Supreme Court was of the opinion that the entries in the notification by Department are quite clear to include the product in question within the ambit and parameters of the expression packed masala and therefore the assessing officer was justified in demanding sales tax from the respondent at the rate of 16% holding that the product manufactured by the respondent falls within the category of items included in Entry No. 184.

The Supreme Court further considered that Other products of the assessee such as Aachar Masala, Jaljeera powder, Anar Masala, Methi Chatani, Pudina, Lehsoon Chatni, Chat Masala, Kitchen Masala, Mangodi Masala, Sambhar Masala, Dal Masala, Kasuri Methi, Heena Powder, Shikkai Powder, Lahsoon powder, must be held to be Masala packed falling under Entry No. 184 of the notification dated 29.03.2001. So far as Masala and other products are concerned the same principle would apply but at the same time Idli Mix and Dosa Mix cannot be said to be Masala and therefore the same would be excluded from being assessed for the purpose of sales tax assessment as `masala'. Judgment and order passed by the High Court is set aside. The order passed by the Tax Assessment Officer is restored

Decision:- Appeal allowed.

Comment:- This is very important decision. The CESTAT has decided the matter against the same party saying that “Jaljeera” is drink and not Masala. But the Apex Court has decided in this sales tax matter that it is Masala only. Thus, for Central excise matter, it is drink but for Sales tax matter, it will be termed as Masala. Now, there is exemption to Jaljeera from payment of Central Excise duty and hence there is no dispute but it may arise in future.

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PJ/Case Laws/2011-12/1150

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