Bakery Shortening is not ‘Vanaspati’: Kerala HC Confirms Residuary Tax Rate [Read Judgment]

Bakery

While hearing the case of M/S.Parisons Foods Pvt. Ltd, the Kerala High Court recently ordered that bakery shortening cannot be termed as vanaspati and therefore, the residuary tax rate is applicable to the same.

The assessee in the instant case was engaged in the manufacture of ‘bakery shortening’. The sole issue about the tax rate applicable to ‘bakery shortening’. According to the assessee, it was under Entry 38 of the Third Schedule of the KVAT (Kerala Value Added Tax) Act exigible to tax at 5 percent.

While analyzing the facts, the revenue department observed that it would not fall under Entry 38, for reason of the product not being covered under the specific Harmonised System of Nomenclature (HSN) Code shown against Entry 38(18), therefor bakery shortening cannot be termed as vanaspati and the same is eligible to tax at  12.5/13.5/14.5 percent under the residual entry in S.R.O. 82 of 2006.

Aggrieved by the order, the assessee approached the High Court by challenging the applicability of residual entry in the present issue.

Before the Court, the assessee contended that ‘bakery shortening’ is ‘vanaspati’ and further argued that the Encyclopaedic Law Lexicon also defines ‘bakery shortening’ as ‘vanaspati’, meant for use as a shortening or leavening agent in the manufacture of bakery products. He further argued that ‘Bakery shortening’ having not been specifically included in any of the entries under S.R.O and the essential nature of the product being that of ‘vanaspati’.

After considering the rival submissions of both the parties, High Court Judge K.Vinod Chandran and Judge Ashok Menon observed that “vanaspati being an edible hydrogenated vegetable oil, definitely falls under that eight digit HSN code. The Court further observed that the bakery shortening, is a preparation of hydrogenated vegetable oils, it cannot be included under HSN heading, consequently bakery shortening and vanaspati are not similar and fall respectively under HSN heading 1517 and 1516”. While concluding the issue, it was declared by the Court that bakery shortening is not vanaspathi and accordingly it would come under the residuary tax rate.

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