The Supreme Court has issued notice to the Adani Wilmar Ltd with regards to the treating the ‘Bakery Shortening’ and Vanaspati ( Hydrogenated Vegetable Oil ) as one and the same commodity and is taxable at 4% under the Entry No. 130 of Schedule II, Part – A of the U.P. VAT Act, 2008.
The bench of Justices B V Nagarathna and Justice Augustine George Masih of the Supreme Court, upon hearing the counsels AOR Bhakti Vardhan Singh, Adv. S. N. Verma and Adv. Ankit Khatri appeared to have decided to condone delay and issue notice to the Adani Wilmar.
Before the Allahabad High Court, the ACSC for the revisionist submitted that the Tribunal wrongly dismissed the appeal of the Revenue. The opposite party, a registered dealer engaged in manufacturing edible oils and related products, has its primary business operations in Ghaziabad, Uttar Pradesh, receiving goods through stock transfers and making subsequent sales.
The core issue revolved around the tax classification of bakery shortening. The opposite party – Adani Wilmar admitted a tax liability of 8% on bakery shortening, treating it under Entry 130 of Part-A of Schedule-II, which specifies “Vanaspati (hydrogenated vegetable oil).” However, the Assessing Authority, rejecting this claim, levied a higher tax rate of 12.5%, treating bakery shortening as an unclassified item.
The opposite party – Adani Wilmar appealed, and the Tribunal confirmed the appeal, leading to the current revision petition by the Revenue. The Revenue cited a Kerala High Court judgment in M/s Parisons Food Private Limited v. Joint Commissioner of Commercial Tax & Others, supporting a higher tax classification for bakery shortening.
The ACSC argued that the Tribunal and lower authorities wrongly accepted the opposite party’s claim without considering bakery shortening as an unclassified item. Conversely, Adani Wilmar’s counsel argued for maintaining the Tribunal’s order, highlighting that bakery shortening and vanaspati ghee are manufactured from the same raw materials and processes, supported by certificates from competent authorities.
The court noted that admittedly, the issue is of a narrow compass about the tax liability of the item, i.e., as to whether bakery shortening should be covered under Entry 130, Part – A, Schedule II of UP GST Act or to be taxed as unclassified goods at a higher rate of tax, i.e., 12.5%.
Further the court observed that it is clearly evident that the chemical and physical properties of “Vanaspati’ and ‘Bakery Shortening” are one and the same, hence by any stretch of imagination they cannot be treated as two different items.
The Court’s attention was drawn to the definitions of “Bakery Shortening” (Section 2(b)), “Hydrogenation” (Section 2(e)), and “Vanaspati” (Section 2(m)) as per the Vegetable Oil Products (Regulation) Order, 1998, issued under the Essential Commodities Act, 1955. It was strongly contended that these statutory definitions must be adhered to and that no alternative interpretations are permissible under the law.
The court observed that the judgment relied upon by the Revenue from the Kerala High Court in the case of M/s Parisons Food Private Limited is distinguishable and not applicable to the present case. The differences in entries between the Kerala VAT Act and the UP VAT Act were noted. Specifically, the Kerala VAT Act includes “others” followed by “including vanaspati,” making the definition exhaustive and linked to an 8-digit HSN code.
In contrast, the UP VAT Act lists “Vanaspati (hydrogenated vegetable oil)” followed by general terms, making it broad and inclusive of both vanaspati, vegetable oil, and their admixtures, not confined to the 8-digit HSN code used in Kerala’s VAT entry.
Further, the notifications dated 16.12.1998 and 30.04.2003 issued by the Government of India were not placed for consideration before the Kerala High Court, wherein, it has been acknowledged by the Government of India that bakery shortening means and is commonly known as ‘vanaspati’.
Thus, the bench of Justice Piyush Agarwal of the Allahabad High Court dismissed the revision petition filed by the revenue and dismissed the same. Subsequently, the revenue approached the Supreme Court through this petition.
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