BHUMIKA NOVELTIES Vs. STATE OF ANDHRA PRADESH

JUDGEMENT

(1.) THIS appeal is preferred against the order of the Deputy Commercial Tax Officer -II, Mehdipatnam Circle, Hyderabad, Dt. 31.12.2010. The appellant stated that he was not authorized by the Deputy Commissioner to do the assessment along with the audit. He further stated that the VAT Manual contemplates a separate authorization for assessment based on audit and also relied upon the judgment in W.P. No. 855 of 2008 dated 30.12.2010 by our Hon'ble A.P. High Court. He further stated that levy of tax on Moong Dall at 14.5% is not correct and it falls under Entry 29 of the IV Schedule to the VAT Act and the rate of tax is only 4%. The reasoning of the DCTO., to deny the benefit of Entry 29 of the IV Schedule is that the commodity was sold in packages. But, there is no such requirement under the Entry that it should not be sold in packages. Admittedly, the Moong Dall was cleaned, soaked and fried in oil. The fried Moong Dall was covered by Entry 29. Merely because it is mixed with salt and packed into a consumable product, it does not get excluded from the scope of Entry 29. He further stated that Entry 29 is restrictive and it cannot be understood that it is not applicable to those grams or dhalls which cannot be consumed directly. So also Peanut is liable to tax @ 4% under Entry 76 of the IV Schedule to the VAT Act, 2005. But the DCTO., stated that they are sold in packages and the commodity is not plain Peanut but mixed with masala and fried in oil, as it is a processed Peanut it could not fall within the scope of Entry 76. But, the language of Entry 76 refers to groundnut or peanut without any restriction regarding the form and manner in which it should be sold and thus denying the benefit of reduced rate is not correct. Mere consumption directly is not the test. He further stated that the DCTO., referred the decisions of the Advance Ruling Authority but they were not mentioned in Show cause notice and he has relied upon the decision of this Tribunal in Pepsico India Holdings Private Limited, Hyderabad v. State of A.P. (STAT), (2007) 45 APSTJ 84 and thus requested the Tribunal to set aside the order. Whether the order of the Deputy Commercial Tax Officer, Mehdipatnam, Hyderabad, dated 31.12.2010 is without any authorization or not?

(2.) AS per the order of the DCTO., dated 31.12.2010, he stated that he was authorized by the Deputy Commissioner (CT), Charminar Division, Hyderabad, to inspect the business of the dealer for audit on 22.10.2010. He verified the books of accounts, issued notice of assessment on 13.12.2010 and the objections were filed by the dealer on 27.12.2010 and after considering the objections passed an assessment order. The appellant relied upon the citation of the Hon'ble A.P. High Court in Sri Balaji Flour Mills, Chittoor v. The Commercial Tax Officer -II, Chittoor [ : (2011) 40 VST 150] in which our Hon'ble High Court discussed the relevant provisions in detail and held that authorization to audit u/s. 43 of the Act read with item (7) in the Table in rule 59(1) of the Rules by itself does not enable audit officer to undertake assessment. It is not the case of the Department that the DCTO., was also authorized to proceed with the assessment apart from audit. Admittedly, the scope and definition of audit is different from assessment, as he is not specifically authorized to proceed with the assessment, the orders passed by him are without any authorization and is to be set aside on that ground alone.

(3.) THE Dictionary meaning of "Parch" means make or become dry through intense heat - roast (corn, peas, etc.) lightly. Admittedly, the Moong Dhall is cleaned, soaked and fried in oil and by adding salt and packed them as direct consumables it will be sold in the market as Namkeen. In Entry 29 of Schedule IV it was specifically mentioned that parched and fried grams or dhalls are liable to be taxed @ 4%. As far as the Peanuts are concerned, they are mixed with masala and fried in an oil and packed in a consumable pack. The DCTO., held that it is a processed food and does not fall under Schedule IV of the Act and thus it is liable to tax @ 12.5% upto 14.1.2010 and 14.5% thereafter. A perusal of the Schedule V shows that all the goods other than those specified in Schedules I, IV & VI are liable to tax @ 12.5% or 14.5% respectively. Therefore, when there is a specific entry 76 of IV Schedule that groundnut or peanut (hypogea) and as there is no exclusion that the fried groundnut or peanut are to be excluded from the said entry and as the nature of the item is not altered in toto even after fried with masala, it falls under Entry 76 of IV Schedule. The appellant contended that the nature of the items is not changed merely because they are mixed with salt and packed into a consumable product and it does not fall under V Schedule and liable to tax @ 12.5% to 14.5% and he also stated that mere consumption directly is not the test for the commodities. He further argued unless they are packed they cannot be sold. The appellant also relied upon a citation reported in Pepsico India Holdings Private Limited, Hyderabad v. State of A.P. (STAT), (2007) 45 APSTJ 84, in which it was observed that the potato chips even after process remain as potato slices. The DCTO., in his order stated that the facts of the said case are not applicable to the facts of this case as they are related to vegetables in raw shape. But the principle laid down in the said case clearly shows that even after altering the potato as potato chips the essential charters of the potato slices were retained. Even in this case though the Peanut was mixed with masala and fried and sold as consumable product the original nature of it was not altered and in Entry 76 of the IV Schedule processed food is not excluded specifically. Therefore, the matter requires to be re -examined by the assessing authority at first in the light of judgment of Hon'ble A.P. High Court in Sri Balaji Flour Mills, Chittoor v. The Commercial Tax Officer -II, Chittoor [ : (2011) 40 VST 150] to obtain post authorization in respect of finalizing the assessment and secondly assess and levy tax @ 4% to Moong Dhall as per Entry 29 of IV Schedule and to the Peanut as per Entry 76 of IV Schedule to the Act.