LAW FOR ALL

Thursday, September 8, 2011

whether sale of margarine is to be taxed at 8% or 4% under the provisions of Kerala General Sales Tax Act, 1963 (hereinafter referred to as “the Act”). « advocatemmmohan

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 7731 OF 2011

(Arising out of S.L.P.(C) No.7969 of 2008)

Aluva Sugar Agency .....Appellant.

Versus

State of Kerala .....Respondent

J U D G M E N T

ANIL R. DAVE, J.

1. Leave granted.

2. Being aggrieved by the judgement and order dated 22nd September,

2006, delivered in S.T.R. NO. 569 OF 2004 by the High Court of Kerala at

Ernakulam, the appellant has filed this appeal.

3. The short question which arises for consideration in this appeal is

whether sale of margarine is to be taxed at 8% or 4% under the provisions of

Kerala General Sales Tax Act, 1963 (hereinafter referred to as "the Act").

4. The Sales Tax Officer held that margarine is a lubricant and animal

fat, which is used for making bakery products, is neither edible nor inedible

oil. According to him, edible oil is defined in circular no.2439/96/TD dated

19.2.96, where it is stated that edible oil includes refined or hydrogenated

oil such as ground nut oil, refined oil and vanaspathi and, therefore, he held

that margarine is not edible. As margarine is not consumed directly,

according to him, it is inedible oil. Entry 90 in the First Schedule

specifically uses the phrase "and margarine" which establishes the fact that

the same is neither edible nor inedible oil. Hence, margarine would come

only under Entry 90 and, therefore, would be taxable at the rate of 8% and

not at the concessional rate of 4%. Hence, the sale of margarine would be

subjected to tax at 8%.

5. The appellant preferred an appeal before the Appellate Assistant

Commissioner, Commercial Taxes, Ernakulam. The appeal was dismissed

and the order of the Sales Tax Officer was upheld. Aggrieved by the above

order, the appellant preferred an appeal against the said order before the

Kerala Sales Tax Appellate Tribunal. The Tribunal set aside the order of the

Appellate Assistant Commissioner in so far as it related to the rate of tax on

margarine. According to the Tribunal:

"..........margarine could be considered as "edible oil".

According to New Webster's Dictionary, margarine is "a

substitute for butter consisting of a mixture of prepared edible

fats extracted from vegetable oils, and treated with lactic acid

bacilli". According to Chambers Twentieth Century Dictionary,

margarine is "any imitation butter". According to Concise

Oxford Dictionary, margarine is "butter substitute made from

edible oils and animal fats with milk". Thus, margarine is

considered as a substitute for butter".

The Tribunal further held that by virtue of Circular No.

2439/83/96/TD dated 19.2.1996, the Government had clarified

the doubt as to whether hydrogenated edible oil like vanaspathi

oil would come within the ambit of edible oil. In the words of

the Tribunal "The Government clarified that the expression

edible oil would include hydrogenated oil such as groundnut

oil, gingely oil, refined oil and vanaspathi. But this does not

mean that margarine cannot be considered as edible oil. Further

it is to be noted that the expression used in the above

Government notification is "such as" and hence, it is not an

exhaustive list. It is only illustrative. In any case, it is pertinent

to note that margarine has been classified in Entry 90 (as

extracted in para 2 above) which relates to oils. Hence, the

intention of the legislature is to treat margarine as oil. Thus, the

authorities below cannot take the stand that margarine is not oil.

Considering all the above facts, we are of the view that

margarine could be considered as edible oil. Since margarine is

edible oil, the appellant is entitled to the benefit of the reduced

rate of tax of 4 % as provided in Entry 17A of the Second

Schedule of the Government notification S.R.O. No. 1725/93".

6. Against the order of the Tribunal, the respondent - State

Government filed a revision petition in the High Court of Kerala at

Ernakulam. The question raised in the revision petition was whether the

Tribunal was justified in granting concessional rate of tax on BISBRI brand

of bakery margarine sold by the appellant by treating it as an edible oil under

Entry17A of the Second Schedule as per notification SRO 1728/1993 for

the assessment year 1997-98. The High Court in the impugned judgement

held that BISBRI brand bakery margarine sold by the appellant cannot be

used for all purposes for which edible oils are used. The High Court

observed:

"........The product description of Respondent's product

in the leaflet further shows that the item is enriched with

vitamin A and vitamin D and also contains permitted

emulsifiers and stabilizers. Even though counsel for the

Respondent referred to the leaflet of Dalda produced in

court and contended that vitamin addition is there in

other hydrogenated oils also, we do not think Dalda sold

by hydrogenated oil is similar to bakery margarine sold

by the Respondent. From the product description and the

limited use of the item in the bakery and confectionary

industry, it is clear that the Respondent's product namely,

bakery margarine is a product made for a specific

purpose i.e. for use in bakery and confectionary industry

and the manufacturer has specifically prohibited use of

the item for any other purpose. Edible oil, on the other

hand, whether in hydrogenated form or not, is used for all

cooking purposes. Even though hydrogenated oil or

refined oil also can be used in the bakery or

confectionary industry, the reverse is not true. In other

words, margarine exclusively make to use in bakeries or

confectionary industry cannot be treated as edible oil as

the same cannot be used for all purposes for which edible

oil is used. In fact, the Tribunal has allowed respondent's

claim on the ground that the circular clarifying the

notification uses the word "such as" and so much so, the

list is not exhaustive. However, we find from the circular

that the use of words "such as" after including

hydrogenated oil is followed by specific items namely

ground nut oil, gingili oil and vanaspathi. This only

means that those items also are covered by notification.

However, margarine referred above is not similar to those

items is what we found. Therefore, we are of the view

that bakery margarine is not edible oil covered by the

notification and clarified in the circular and therefore, the

decision of the Tribunal holding otherwise is liable to be

reversed".

7. Being aggrieved by the said judgment, this appeal has been filed by

the appellant-assessee.

8. The learned counsel for the appellant submitted that as margarine is

an edible vegetable oil, it squarely falls in Entry 17A of the Second Schedule

of the Act and, therefore, it becomes eligible for concessional rate of tax at

4%. To substantiate this claim, he submitted that there are two types of

margarine, namely, table and bakery margarine. The product dealt with by

the appellant is bakery margarine. Photocopies of the labels affixed on the

container of margarine manufactured by a few companies have been placed

on record. The first one is the label of BISBRI bakery margarine. It is stated

in the label that the said margarine is made from vegetable oils only and that

it is enriched with vitamins A and D and is made from any or all of the

following permitted ingredients:

"refined and/or hydrogenated sunflower, soyabean,

cottonseed, palmoline, palm and sesame oils, salt,

permitted emulsifier and stabilizers".

9. Similarly, details of some other brands were given so as to

substantiate his case that margarine is an edible oil, which is being used in

eatables. He further submitted that the margarine used by the appellant does

not become inedible oil just because it is meant for preparing bakery

products. The question is not the use to which the oil is put but whether the

oil is edible. The learned counsel for the appellant also argued that the

intention of Entry 17A of the Second Schedule was to confer a concessional

rate of tax at 4% for edible oils. Margarine, being hydrogenated oil and also

edible, qualifies for the concession.

10. On the other hand, the learned counsel for the respondent contended

that the notification SRO 1728/93 granted exemption only to edible oils,

whereas Entry 90 of the First Schedule to the Act includes oils, edible or

inedible, including refined or hydrogenated oils and margarine. It means that

the concession is not granted to margarine as it is included in Entry 90 of the

First Schedule. It was argued that as the intention of the legislature is clear,

the appellant cannot claim the benefit of reduced rate by submitting that its

product also comes within the ambit of edible oils. He further submitted that

the BISBRI brand margarine sold by the appellant cannot be used for all

purposes for which edible oils, including hydrogenated oils and vanaspathi,

are used. It was his case that margarine was used for a limited purpose i.e.

only for preparing certain eatables and not for all purposes and, therefore, it

cannot be said to be edible oil.

11. The learned counsel relied upon a judgment delivered in the case of

Commissioner of Trade Tax, UP v. Associated Distributors, 2008(7) SCC 409.

There the dispute was whether bubble gum was a mithai and could be taxed

at 6.25% or whether bubble gum was an unclassified item to be taxed at

10%. This Court held that although bubble gum contained 60% of sucrose,

still the same was not a mithai. Relying on the decision of the Apex Court in

the aforestated case, the counsel contended that although margarine may be

an edible product and used in bakeries, it cannot fall within the classification

of `edible oil' which is essentially a cooking medium in common parlance.

12. We have heard the learned counsel and also perused the records.

13. The main issue for adjudication in this appeal is whether margarine

can be treated as edible oil and thus, fall under Entry 17A of the Second

Schedule of the said Act.

14. 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. Moreover, vegetable oils, salt, permitted

emulsifiers and stabilizers are also used for manufacturing margarine. So

far as the margarine manufactured by the appellant is concerned, it is made

only from vegetable oils as stated by the appellant and as borne out from the

record. The margarine manufactured by the appellant is exclusively used

as raw-material by bakeries and those who manufacture confectionaries.

15. Looking to the contents of margarine, it is clear that it contains

all edible things. Margarine 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 by the manufactures

of margarine. Vegetable and hydrogenated oils are used in manufacturing

margarine and as it is used for making eatables, margarine is also edible

though it is not 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.

16. So far as imposition of tax under the Act is concerned, there are two

relevant entries, which are as under:

"First Schedule of KGST Act:

Sl. No. Description of goods Point of levy Rate of tax

(percentage)

90. Oils, edible or inedible At the point of first 8

including refined or hydrogerated sale in the State by

oils and margarine not elsewhere a dealer who is liable

mentioned in this Schedule or in to tax under Section 5.

the second schedule.

Second Schedule:

Sl.No. Description of goods Existing rate of tax Reduced rate of tax

(percentage) (percentage)

17A Edible oil 8 4

17. According to the above Entry 90 in the First Schedule, oils,

whether edible or inedible, including refined or hydrogenated oils and

margarine, not elsewhere mentioned is to be taxed at 8%. It is pertinent to

note that concessional rate of 4% is levied on all edible oils as per Entry

17A 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%. The

question is whether the appellant is entitled to the aforestated benefit for the

margarine manufactured by it. Margarine is definitely an edible oil as it is

used for preparing bakery products but it is not used for normal 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. In the circumstances, Circular No. 2439/TD dated 19.2.1996 was

issued by the Government, which reads as under:

"CIRCUAR

Sub:- Reduced rate of tax on Edible Oil - Clarification -

regarding.

1. As per the Entry 90 in the 1st Schedule to the

Kerala General Sales Tax Act, Oils, - edible or

inedible, including refined or hydrogenated oil and

margarine not elsewhere mentioned in the

Schedule are taxable @ 8% at the point of 1st sale

in the State. As per the notification SRO 429/95

dated 31.3.1995, the rate of tax edible oil is

reduced to 4% with effect from 1.4.1995.

2. Now certain doubts have been raised as to whether

hydrogenated edible oil like vanaspathy will come

within the concessional rate. Government, having

examined the matter, are pleased to clarify that the

term "Edible Oil" mentioned in the notification

SRO 429/95 dated 31.3.1995 included refined or

hydrogenated oil such as ground nut oil, gingely

oil, refined oil and vanaspathi."

18. By virtue of the abovereferred circular, it has been clarified that the

term "edible oil" mentioned in the Notification SRO 429/95 dated 31.3.1995

includes refined or hydrogenated oil such as groundnut oil, gingely oil,

refined oil and vanaspathi. Thus, the term "edible oil" has been explained

by virtue of the circular dated 19.12.1996. The afore-stated circular makes it

clear that edible oil like refined or hydrogenated oil such as groundnut oil,

gingely oil, refined and vanaspathi oils are to be taxed @ 4% and not at

@8%. The definition of "edible oil" given in the aforestated circular is not

dealing exhaustively with all edible oils. It merely illustrates some of the

oils which are edible oils. It means that the definition of the term "edible oil"

in the circular is not exhaustive but is illustrative. This circular does not

say that only edible oils referred to in the said circular would be taxed

@4%.

19. In the aforestated circumstances, one has to consider whether

margarine can be considered as an edible oil. We clearly understand that

edible oil is that oil which can be used for human consumption. It is not

necessary that all edible things should be consumed in the form in which

they are available. There are number of ingredients used in cooking for

preparation of food articles which we do not consume in the same form but

they are used in preparation of food articles which are consumed.

20. So as to simplify the conclusion, we may say that normally anything

which is used for preparation of a food article is edible because ultimately

it is being consumed by human beings. 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 beings and, therefore, margarine is also edible. Having around 80%

fat, and being in the nature of oil, in our opinion, it should be considered as

edible oil.

21. Upon perusal of the Circular dated 19th February, 1996, explaining the

term "edible oil", we find that intention of the government was to give relief

in tax to edible oils. So as to clarify the doubt, it has been specifically stated

in the said circular that edible oils would also include hydrogenated oils such

as ground nut oil, gingely oil, refined oil and vanaspathi oil. The aforestated

circular clarified that hydrogenated edible oil like vanaspathi oil should be

treated as edible oil. In our opinion, the Tribunal was right when it came

to the conclusion that margarine should be taxed @ 4% as it is edible oil.

22. For the aforestated reasons, we are of the view that the conclusion

arrived at by the Tribunal to the effect that margarine is an edible oil is

correct and, therefore, the appellant is entitled to benefit of reduced rate of

4%.

23. We, therefore, allow the appeal by quashing the impugned order

dated 22.9.2006 passed by the High Court. The appeal, is allowed

accordingly with no order as to costs.

..................................................J.

(Dr. MUKUNDAKAM SHARMA)

.................................................J.

(ANIL R. DAVE)

New Delhi

September 7, 2011.

whether sale of margarine is to be taxed at 8% or 4% under the provisions of Kerala General Sales Tax Act, 1963 (hereinafter referred to as “the Act”). « advocatemmmohan

the effect of the ban order imposed by the State Government vide Memo No.1280/COSE/A2/2004-4 dated 20th October, 2004, on the filling up of existing vacancies in the aided posts of teachers where the recruitment process had already been initiated by the management of the private schools. « advocatemmmohan

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

SPECIAL LEAVE PETITION (CIVIL) NO.9541 of 2007

GOVT. OF A.P. & ORS. ... PETITIONERS

Vs.

SRI SEVADAS VIDYAMANDIR HIGH

SCHOOL & ORS. ... RESPONDENTS

WITH

S.L.P.(C) No.10945 of 2007

AND

S.L.P.(C) No.469 of 2011

AND

S.L.P.(C) No.15231-32 of 2011

J U D G M E N T

ALTAMAS KABIR, J.

1. Two Special Leave Petitions, being SLP (C)

Nos.9541 of 2007 and 10945 of 2007, arising out of

the judgment and final order dated 29th December,

2006, passed by the Andhra Pradesh High Court have

been taken up for consideration together, along

with SLP(C)No.469 of 2011, which is directed

against the judgment and order dated 9th July, 2009,

passed by the said High Court in W.A.M.P.No.661 of

2008 in W.A.No.954 of 2009 and SLP(C)Nos.15231-32

of 2011, which are directed against the judgment

and order 17th August, 2010, passed by the said High

Court in W.A.No.1868 of 2003 and W.P.No.24066 of

2004. Inasmuch as, SLP(C)Nos.469 of 2011 and

15231-32 of 2011 arise out of different orders of

the Andhra Pradesh High Court, the same will be

dealt with separately, although, they have been

taken up for hearing along with the other Special

Leave Petitions.

2. For the sake of convenience, we shall refer to

the facts in SLP(C)No.9541 of 2007 (Government of

Andhra Pradesh & Ors. Vs. Sri Sevadas Vidyamandir

High School & Ors.) in deciding the matters.

3. The subject matter of the various writ

petitions, which were disposed of by the learned

Single Judge of the Andhra Pradesh High Court,

culminating in the various appeals, which were

disposed of by the common judgment dated 29th

December, 2006, is the effect of the ban order

imposed by the State Government vide Memo

No.1280/COSE/A2/2004-4 dated 20th October, 2004, on

the filling up of existing vacancies in the aided

posts of teachers where the recruitment process

had already been initiated by the management of the

private schools. The learned Single Judge, who had

heard the writ petitions, had declared that the

said ban would not be applicable to the recruitment

process already initiated by the management of the

private schools for filling up the vacant aided

posts of teachers prior to the coming into effect

of the aforesaid memo. The learned Judge had given

a further direction to the said authorities to

allow the writ petitioners to complete the process

of selection. In some cases, a further prayer was

made that the concerned authorities be also

restrained from transferring teachers from one

school to another by declaring them surplus and to

release the amount of salaries payable to the

teachers appointed against the aided posts.

4. For the sake of convenience, the Division Bench

of the Andhra Pradesh noted the facts from the

paper book of W.A.(S.R.)No.121938 of 2005, filed by

the Government of Andhra Pradesh and Others against

an order dated 9th March, 2005, passed by the

learned Single Judge in Writ petition No.22804 of

2004, i.e., C.A.M. High School, Nellore Vs.

Government of Andhra Pradesh and others, wherein,

pursuant to leave granted, a prayer had been made

for quashing the impugned Memo dated 20th October,

2004, along with Rc.No.140/B2-1/2005 dated 3rd

November, 2005, issued by the Director of School

Education, Andhra Pradesh, Hyderabad.

5. C.A.M. High School, Nellore, is a private aided

school established by Samavesam of Telugu Baptist

Churches, wherein all the posts of teachers

sanctioned for the school are aided posts. In

2004, the management of the school approached the

District Education Officer, Nellore, for grant of

permission to fill up the existing vacant posts.

The said officer, by his letter dated 17th

September, 2004, to the Regional Joint Director,

School Education, Guntur, recommended grant of

sanction to the management of the school to fill up

the vacant aided posts. Such permission was duly

granted by letter dated 22nd September, 2004, which

has been reproduced in full in the judgment of the

Division Bench of the Andhra Pradesh High Court.

Pursuant to such permission being granted by the

Regional Director of School Education, Guntur, the

management of the school initiated the recruitment

process by requesting the District Employment

Officer, Nellore, to forward the names of eligible

candidates and also by publishing advertisements in

two daily newspapers inviting applications for

filling up the vacant posts.

6. While the recruitment process was underway, the

school was informed that the Government had issued

the above-mentioned Memo dated 20th October, 2004,

imposing a ban on the filling up of the vacant

posts and, therefore, the selection process could

not be completed. The management thereupon filed

Writ Petition No.22804 of 2004 for a declaration

that the decision contained in the said Memo dated

20th October, 2004, was not retrospective and the

same could not, therefore, be applied to the

ongoing process of recruitment initiated for the

purpose of filling up the vacant aided posts for

which permission had already been granted by the

competent authority. As was noted by the Division

Bench, in the counter filed by the District

Education Officer, Nellore, it was not disputed

that in furtherance of the sanction granted by the

Regional Joint Director, Guntur, the process of

recruitment of 8 teachers had been initiated by the

management of the school and that Shri M.

Ramalingam, Deputy Educational Officer, had been

nominated as the departmental representative on the

Staff Selection Committee. In fact, the date of

interview had been fixed in consultation with Shri

Ramalingam, but the same could not be completed on

account of the promotion of Shri Ramalingam as the

District Education Officer.

7. Thereafter, the management of the school suo

motu fixed 14th December, 2004, as the date of the

interview, but, although, the interviews were held,

no further steps could be taken up on account of

the ban order imposed by the State Government vide

Memo dated 20th October, 2004. The Division Bench

observed that the learned Single Judge had taken

note of the fact that while permission had been

given to fill up the vacant posts on 22nd September,

2004, the Memo in question was issued subsequently

on 20th October, 2004.

8. Various appeals had been filed by the State of

Andhra Pradesh against the said decision of the

learned Single Judge before the Division Bench.

While the appeals were pending, the Government

began a process of rationalization for filling up

all the vacant posts. Taking note of the same, the

Division Bench adjourned the hearing of the appeals

with liberty to the counsel for the writ

petitioners in one of the cases to comprehensively

amend the pleadings and also to challenge the

legality of the Memo dated 20th October, 2004, if so

advised. In furtherance of such leave, the writ

petition filed by the C.A.M. High School, Nellore,

was amended to challenge the legality of the said

Memo dated 20th October, 2004. Ultimately, the

Division Bench dismissed the appeals filed by the

Government of Andhra Pradesh and allowed the writ

petitions filed by the management of the private

schools and directed that they would be free to

appoint selected candidates and seek approval of

such appointments from the Competent Authority.

The Division Bench also quashed the exercise of

rationalization undertaken in furtherance of the

interim order dated 31st October, 2005, together

with the directions contained in the letter dated

3rd November, 2005, issued by the Director of School

Education, with liberty to the Competent

Authorities to undertake a fresh exercise of

rationalization, which might lead to certain

teachers being declared surplus and for their

absorption.

9. Appearing for the Government of Andhra Pradesh,

Mr. P. Vishwanatha Shetty, learned Senior Advocate,

submitted that the ban order imposed by the State

Government, vide Memo dated 20th October, 2004, came

into operation in respect of appointments of

teachers in private aided institutions in the

State. Mr. Shetty submitted that the Government of

Andhra Pradesh, which had the full authority to

extend grant-in-aid to educational institutions,

also possessed the consequential and incidental

power to adjust the posts covered under the grant-

in-aid scheme and to transfer personnel from one

institution to another. Since a decision had been

taken up by a High Power Committee presided over by

the Chief Minister, its decision was final and

conclusive and it was not open to the High Court to

scrutinize the same. It was submitted that in

certain eventualities it could become necessary to

declare staff of a school to be surplus and to

transfer them to other schools and the power of the

Government in such cases could not be curtailed.

Mr. Shetty submitted that it is to meet such

eventualities that a decision had been taken by the

State Government to rationalize the staff pattern

of the different institutions on a need-based

basis.

10. On the other hand, it was emphatically argued

on behalf of the respondent School that the Memo

dated 20th October, 2004, did not have retrospective

effect and could not, therefore, stultify the

recruitment process initiated by the management of

private aided schools where permission of the

Competent Authority had been given prior to 20th

October, 2004. Accordingly, it was incumbent on

the part of the Competent Authority to grant

approval for the appointments made pursuant to the

permission granted prior to 20th October, 2004, to

the private aided schools for filling up the vacant

posts in the school.

11. Holding the brief on behalf of Ms. Sunita Rao,

learned Advocate, appearing for the respondent

schools, Ms. Mahalakshmi Pavani, learned Advocate,

submitted that as had been held by the Division

Bench of the Andhra Pradesh High Court, the

rationalization process was violative of Rule

10(17) of the A.P. Educational Institutions

(Establishment, Recognition, Administration and

Control of Schools Under Private Management) Rules,

1993, inasmuch as, although, the said statutory

Rules stipulated that the strength of students in

private aided schools for two consecutive years

would be the determining factor for transfer of

surplus staff, the State had resorted to a wholly

whimsical and arbitrary method to determine such

surplus staff. Ms. Pavani submitted that in any

event, having permitted the schools in question to

fill up the vacant grant-in-aid posts after taking

into account the need and the roll and attendance

of students, it was no longer open to the State

Government to adopt a different posture on account

of the Memo dated 20th October, 2004, which was, in

any event, prospective and not retrospective. Ms.

Pavani submitted that interviews had been duly

conducted on 14th December, 2004, for filling up the

vacant posts in question, but the State Government

had quite unreasonably refused to allow the

recruitment process to be completed and to grant

approval to candidates who had already been

interviewed and had been selected for appointment.

12. Having considered the submissions made on

behalf of the respective parties, we are of the

view that no interference is called for with the

judgment and order of the Division Bench of the

High Court. There is no dispute that the Memo

dated 20th October, 2004, imposing a ban on

recruitment to grant-in-aid posts was issued after

the schools in question had been given permission

by the State authorities to fill up the vacant

posts in the schools being managed and run by the

writ petitioners, who are the respondents in these

Special Leave Petitions. There is also no dispute

that the said Memo was not given retrospective

effect so as to negate the approval already given

for filling up the grant-in-aid posts. The State

Government and its authorities could not,

therefore, contend that the rationalization process

which had been introduced, would also apply in

respect of the private aided schools, where the

process of recruitment had already been commenced

pursuant to the approval granted earlier.

Furthermore, as was submitted by Ms. Pavani, even

the approval which was granted for filling up the

vacant aided posts, had been granted after due

scrutiny as to the requirements of the schools in

question. Since it is well-settled that

administrative orders are prospective in nature,

unless they are expressly or by necessary

implication made to have retrospective effect,

there is no need to refer to the decisions cited by

Ms. Pavani, appearing on behalf of the respondent

schools.

13. As indicated hereinbefore, we, therefore, see

no reason to interfere with the judgment and order

of the Division Bench of the Andhra Pradesh High

Court impugned in these Special Leave Petitions and

the same are accordingly dismissed.

14. As far as SLP(C)Nos.15231-32 of 2011 are

concerned, the same have been filed by the

Government of Andhra Pradesh, represented by its

Principal Secretary, Education Department,

Hyderabad, against Shaik Lal Mohammed and others.

These Special Leave Petition are directed against

the orders in the Writ Appeals filed by the

Correspondent, Asafia High School, Malakpet,

Hyderabad, against Shaik Lal Mohammed and others.

The school was aggrieved by the order of the

learned Single Judge in a writ petition filed by

two employees of the school for a direction upon

the State authorities to convert their posts into

Class IV posts with effect from 9th June, 1980 and

16th March, 1981, respectively, and to pay them

their arrears of salaries, which, according to

them, were due. The two respondents had worked as

sweeper and gardener-cum-watchman from 9th June,

1980 and 16th March, 1983, respectively. It was

their claim that since their posts had been

admitted into the grant-in-aid scheme and they had

been appointed as full-time contingent employees,

they were entitled to claim the benefit of certain

Government Orders under which they were entitled to

be converted as employees on the last grade service

and the salary attached to such grade.

15. Claims of the said respondents were rejected

by the State authorities on the ground that the

posts had not been created under the orders of the

Competent Authority and they had not been in

service for a period of 10 years as on 1st April,

1985. Furthermore, they had not acquired the

minimum educational qualification of Class VII as

on the day G.O.Ms.No.259 dated 18th June, 1993, had

been published. The learned Single Judge held that

the said G.O.Ms. dated 18th June, 1993, was

applicable to the said two respondents, who were

the writ petitioners, and since the said findings

had not been challenged by the Government, they had

become final and, accordingly, the said respondents

were entitled to have their posts converted into

Class IV posts. Consequently, the order of

rejection passed by the Regional Joint Director,

Hyderabad, dated 6th April, 2004, was set aside and

the writ appeal filed by the State against the said

decision of the learned Single Judge was dismissed

and the writ petitions filed by the said respondent

Nos.1 and 2 were allowed.

16. It is in the light of the finding of the

Division Bench of the High Court that findings of

the learned Single Judge, had not been challenged,

that G.O.Ms.No.259 dated 18th June, 1993, was made

applicable to the petitioners. As the same had

become final as between the writ petitioners and

the State and it was no longer open to the State to

come to a different conclusion, we see no reason to

interfere with the impugned decision of the High

Court and the said Special Leave Petitions are,

accordingly, dismissed also.

17. As far as SLP(C)No.469 of 2011 is concerned,

the same has been filed against the judgment and

order dated 9th July, 2007, passed by the Division

Bench of the Andhra Pradesh High Court, rejecting

the prayer made on behalf of the State and the

State authorities to condone the delay of 366 days

in filing the writ appeal. Even the filing of the

Special Leave Petition was delayed by 107 days.

Since the subject matter of the writ petition was

also with regard to the application of the ban

order imposed by the Memo dated 20th October, 2004,

which we have already considered in SLP(C) Nos.9541

and 10945 of 2007 decided in the earlier part of

the judgment, we are not inclined to interfere with

the order of the Division Bench dismissing the writ

appeal on the ground of delay. The SLP(C)No.469 of

2011 is, therefore, dismissed in the light of the

decision rendered in the aforesaid Special Leave

Petitions and also on the ground of delay.

18. Having regard to the different circumstances in

which the Special Leave Petitions have been filed,

the parties will bear their own costs therein.

............................................................J.

(ALTAMAS KABIR)

............................................................J.

(CYRIAC JOSEPH)

............................................................J.

(SURINDER SINGH NIJJAR)

New Delhi,

Dated: 06.09.2011

the effect of the ban order imposed by the State Government vide Memo No.1280/COSE/A2/2004-4 dated 20th October, 2004, on the filling up of existing vacancies in the aided posts of teachers where the recruitment process had already been initiated by the management of the private schools. « advocatemmmohan

Wednesday, September 7, 2011

whether laminated panels of particle and medium density fiber board should be classified under sub- heading no. 4406.90 and 4407.90 or under sub- heading no. 4408.90. The appellant alleged that the product manufactured by the respondent herein was classifiable under sub heading 4408.90. For this purpose the appellant relied on Chapter Note 5 of Chapter 44 of the Central Excise Tariff Act, 1985 (hereinafter referred to as `the Act') which reads as under:- "For the purposes of heading No. 44.08, the expression "similar laminated wood" includes blockboard, laminboard and battenboard, in which the core is thick and composed of blocks, laths or battens of wood glued or otherwise joined together and surfaced with the outer plies and also panels in which the wooden core is replaced by other materials such as a layer or layers of particle board, fiberboard, wood waste glued or otherwise joined together, asbestos or cork".

1

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.4462 OF 2003

COMMNR. OF CENTRAL EXCISE, NOIDA .....Appellant.

Versus

M/S. KITPLY INDUSTRIES LTD. .....Respondent

WITH

CIVIL APPEAL NO.9736 OF 2003

J U D G M E N T

ANIL R. DAVE, J.

1. The present appeals arise out of the judgments and orders passed on

23.9.2002 and 6.6.2003 by the Customs, Excise & Gold (Control) Appellate

Tribunal, New Delhi and the Customs, Excise & Service Tax Appellate

Tribunal, dismissing the appeals filed by the appellant- Revenue

2

Department. By this judgment, we dispose of Civil Appeal Nos. 4462/2003

and 9736/2003 as they involve similar questions of law.

2. The issue which falls for consideration in the present appeals is

whether laminated panels of particle and medium density fiber board should

be classified under sub- heading no. 4406.90 and 4407.90 or under sub-

heading no. 4408.90. The appellant alleged that the product manufactured

by the respondent herein was classifiable under sub heading 4408.90. For

this purpose the appellant relied on Chapter Note 5 of Chapter 44 of the

Central Excise Tariff Act, 1985 (hereinafter referred to as `the Act') which

reads as under:-

"For the purposes of heading No. 44.08, the expression

"similar laminated wood" includes blockboard, laminboard

and battenboard, in which the core is thick and composed of

blocks, laths or battens of wood glued or otherwise joined

together and surfaced with the outer plies and also panels in

which the wooden core is replaced by other materials such

as a layer or layers of particle board, fiberboard, wood

waste glued or otherwise joined together, asbestos or cork".

For the sake of convenience, the relevant headings are also extracted below:

"44.06 - Particle board and similar board of wood or other ligneous

materials, whether or not agglomerated with resins or other organic

binding substances.

3

4406.10- Plain particle boards.

4406.20- Insulation board and hardboard

4406.30- Veneered particle board, not having decorative veneers on any

face

4406.90-Other.

44.07 - Fiber board of wood or other ligneous materials, whether or not

bonded with resins or other organic substances.

4407.10-Insulation board and hardboard

4407.90- Other.

44.08-Pplywood, veneered panels and similar laminated wood.

4408.10 - Marine plywood and aircraft plywood.

4408.30- Decorative plywood

4408.40- Cuttings and trimmings of plywood of width not exceeding 5

centimeters

4408.90 - Other".

3. In order to decide the issue arising in the present case in its proper

perspective, basic facts leading to filing of the present appeals are being

recapitulated hereunder:

4

The respondent asessee, who is engaged in the manufacture of wood and

articles of wood falling under Chapter 44, was issued show cause notices

dated 16.2.2000 and 27.12.2000 by the appellant authorities, inter alia,

calling upon it to show cause as to why classification of its products (1)

Laminated Particle Board and (2) Laminated Medium Density Fibre Board

should not be changed to chapter Sub-heading no 4408.90 The respondent

replied to the said notices refuting the allegations on merits as well as on

limitation. The said show cause notices were adjudicated and the demand

proposed therein was dropped by the Commissioner of Central Excise,

Meerut-II vide Orders dated 20.4.2001 and 31.10.2001 respectively. The

Commissioner, ultimately found that the pre requisites of Chapter Note 5 of

Chapter 44 were not satisfied and, therefore, no further action was taken so

far as the aforestated classification was concerned.

4. Aggrieved by the orders, the Revenue filed appeals before the

Tribunal. The Tribunal dismissed the said appeals vide orders dated

23.9.2002 and 6.6.2003, upholding the findings of the Commissioner.

5. Aggrieved by the orders of the Tribunal, the Reveue has filed the

present appeals.

5

6. The learned counsel for the appellant submitted that the Tribunal had

erred in not appreciating that the manufacturing process, as stated by the

factory manager clarified that "pre-laminated" meant already laminated and

as a result of the process, the surface of the panels become water resistant as

well as scratch resistant and due to melamine surface, it resisted cigarette

burns and also got an attractive look. In spite of the above facts stated by the

factory manager with regard to the process, the respondent-assessee never

mentioned the word "Panel" in the manufacturing process submitted along

with classification declared under Rule 173 B of the Act.

7. Learned counsel for the appellant further argued that Chapter Note

44.08 specifically speaks of plywood, veneered panels and `similar

laminated wood'. He pointed out that in the instant case, it is an admitted

fact that the goods in question, which are `wood products' are laminated

and they are covered under chapter heading 44.08 and not under chapter

heading 44.06 as there is no mention of lamination in the latter chapter sub

heading.

8. The learned counsel for the appellant also submitted that the Tribunal

failed to appreciate that if a product is capable of being classified under two

chapter headings, then Rule 3 (c) of the Rules for interpretation of the Act

6

envisages that classification under the heading, which occurs last in the

numerical order. Therefore, chapter sub-heading 4408.90 would be the

appropriate sub heading for classification of the products in question.

9. To substantiate his claim, he relied on the cases of CCE, SHILLONG

v. WOOD CRAFT PRODUCTS LTD. 1995 (77) ELT 23, M/S

SAUSASHTRA CHEMICALS v. COLLECTOR OF CUSTOMS,

BOMBAY 1986 (23) ELT 283, DECORATIVE LAMINATED (INDIA)

PVT LTD v. COLLR. OF C. EX., BANGALORE 1996 (86) ELT 186

(S.C.).

10. On the other hand, the learned counsel for the respondent submitted

that for Chapter Note 5 of Chapter 44 to apply, an essential pre-requisite is

that the similar laminated wood must be surfaced with outer piles, which is

conspicuously absent in the present case and hence the said chapter note

would not apply. He also submitted that the impregnation is only an

additional process, which is done on the particle board to increase its

strength and, therefore, the goods would still continue to fall under heading

4406.

11. The learned counsel also submitted that the decision in the case of

Wood Craft Products Ltd. (supra) would not be applicable to the instant

7

case as it was with respect to classification of block board. The respondent

relied on the case of CCE, INDORE v. BOMBAY BURMAH TRADING

CORPN. LTD. 2000(39) RLT 184 to substantiate its claim that pre-

laminated particle board is classifiable under heading 44.06 and not under

heading 44.08.

12. We have heard the learned counsel for the parties and perused the

records.

13. It is not in dispute that the product before the lamination is not

classifiable under tariff heading 44.08. However, it is the case of the

appellant that after the lamination, the panels so obtained become a distinct

product falling outside the purview of 44.06. Hence, what needs to be

determined by us is whether even after the lamination, the products falls

under sub-heading 4406.90 and 4407.90 or would it fall under sub- heading

4408.90.

14. For this purpose, it is important to refer to the statement of the factory

manager Shri B.V Rao, who stated that in the process of manufacture of the

panels, plain panels of the mother boards (plain particle/MDF fiber) are

used. Papers are passed through the impregnating unit wherein the resin and

other required chemicals are spread on the paper and the paper gets

8

impregnated. The impregnated paper is further dried and cut into required

length. These paper sheets are assembled with the mother boards in such a

way that the impregnated paper is placed on the upper side and one layer of

impregnated design paper is placed over one layer of impregnated tissue

paper. This assembly is put for pressing under the required heat and

pressure. The above assembly is taken out as pre-laminated boards and is

ready for dispatch.

15. From the above process, it is clear that the products are pre-laminated

wood, most aptly falling under chapter heading 44.08 as the said chapter

heading specifically speaks of plywood, veneered panels and similar

laminated wood. The word "similar" discussed in the above para has been

discussed by this court in the case of CCE, Shilling v M/S Wood Craft

Products Ltd. (supra) wherein a similar issue with regard to "Block board"

had arisen. For sound reasons recorded, this Court held that `Block board'

should be classified under heading No. 44.08. The logic applied in the case

of `Block board' can very well be applied in the instant case. In the said

judgment, this Court observed as under in paras 5 and 6

"5. It is significant that Heading No. 44.12 of the

HSN is the same as Heading No. 44.08 of the Indian

tariff and reads "Plywood, veneered panels and

similar laminated wood." The explanatory notes on

9

the HSN indicate the meaning of the expression

"similar laminated wood" as under:-

"similar laminated wood. This group can be divided

into two categories:

Block board, lamin board and batten board, in which

the core is thick and composed of blocks, laths or

battens of wood glued together and surfaced with the

outer plies. Panels of this kind are very rigid and

strong and can be used without framing or backing."

6. It is clear that if the expression "similar

laminated wood" in the Indian Tariff is understood as

it meant under the HSN on which pattern the Central

Excise Tariff Act is based, then block boards of all

kinds would fall within the expressionn "similar

laminated wood". This is how the amended Chapter

Note reads expressly. The question is whether it can

be so read even for the earlier periods particularly the

first period before amendment of Chapter Note 5 to

expressly include block board in the expression

"similar laminated wood".

16. Heading 44.08 in the instant case covers "plywood", "veneered

panels" together with all kinds of "similar laminated wood". In other words,

it is treating "plywood" or "veneered panels" as "laminated wood".

Therefore, it covers all kinds of laminated wood bearing any resemblance to

"plywood" or "veneered panels". The word used is "similar" and not "same".

Thus, some resemblance to "plywood" or "veneered panels" is enough,

10

provided the article can be treated as "laminated wood". The sweep of the

heading is, therefore, quite wide.

17. Therefore, for the product to be classified under the above heading, it

is enough if it is similar to laminated wood, which in the instant case is

proved beyond reasonable doubt. Even factory manager, Shri B.V. Rao

admitted the facts with regard to lamination. At this point we may again

refer to the case of M/s. Wood Craft Products Ltd. (supra). It has been

mentioned therein that "The meaning of the significant words and

description of the wood products as intermediate materials meant for

manufacture of final products clearly indicate that "laminated wood" means

a wood product prepared by placing layer on layer and "block board" is a

plywood board with a core of wood. Any plywood board with a core of

wood in which there are layers, one above the other is, therefore, laminated

wood similar to plywood or, veneered panels. It is "similar laminated wood"

included in the heading "Plywood, veneered panels and similar laminated

wood". Similarity with, and not identity with plywood or veneered panels is

required".

18. From the above, it is clear that the product is similar to plywood and

veneered panels and hence tariff heading 44.08 is squarely applicable.

11

Further, in the instant case, the core layer is made up of the particle board or

MDF board (referred to as "mother boards" in the process mentioned above)

and joined together with the help of resins and then laminated with

plasticised paper (paper impregnated with melamine formaldehyde resin).

Hence it is also clearly seen that the laminated panels manufactured by the

respondent are covered under Chapter Note 5 to Chapter 44 of the schedule

to the Act. The product need not be same as plywood or veneered panels but

mere similarity with them is enough for chapter note 5 to apply.

19. The Tribunal has erred in holding that as "particle board" is

specifically covered under heading 44.06, laminated particle board will

come under the scope of "similar board of wood" under the said heading. It

is clear that the product after the lamination is a distinct marketable

commodity different from the original one. This conclusion is further

substantiated by the fact that Shri B.V. Rao said in his statement that the

panels after lamination, become water resistant and look attractive due to

printed paper and brings about a change in the name, usage etc. Therefore,

the Tribunal's conclusion that the laminated board is similar to `particle

board' is incorrect and cannot be accepted.

12

20. The respondent has placed reliance on the pari materia heading in the

HSN 44.10 to contend that the product is classifiable under chapter heading

44.06. We cannot accept this argument. In the proviso to the said heading, it

has been mentioned that if the manufacturing process gives the product the

essential character of articles of another heading, then chapter heading

44.12 will not apply. In the instant case, going by the statement of the

respondent's own officer, the product after lamination assumes a distinct

marketability and brings about a change in the product. This change, after

lamination makes the product fall outside the purview of chapter heading

44.06 and that would place the product under chapter heading 44.08 as the

word used under chapter heading 44.08 is "similar laminated wood"

(emphasis supplied). Further recourse may also be taken to rule 3 (c) of the

Rules for interpretation of the Act which envisages that if the products are

capable of classification under two chapter headings, then as per the said

rule, the classification must be under the heading which occurs last in the

numerical order. Therefore, heading 4408.90 would be the appropriate sub

heading for classification of the product in question.

21. In terms of the above conclusions arrived at and on appreciation of the

materials on record, we are of the view that the findings arrived at by the

Tribunal are unjustified and cannot be accepted. The impugned judgments

13

and orders passed by the Tribunal in both the appeals are, therefore, set aside

and it would be open to the appellant to assess the respondent as per the

above findings. Accordingly, the appeals are allowed but leaving the parties

to bear their own costs.

...............

...................................J.

(Dr. MUKUNDAKAM SHARMA)

.....................................................J.

(ANIL R. DAVE)

New Delhi

September 7, 2011.

LAW FOR ALL

LawforAll

advocatemmmohan

Just for legal information but not form as legal opinion

Thursday, September 8, 2011

whether sale of margarine is to be taxed at 8% or 4% under the provisions of Kerala General Sales Tax Act, 1963 (hereinafter referred to as “the Act”). « advocatemmmohan

Wednesday, September 7, 2011