Bakery Shortening And Vanaspati Are As Same: Allahabad High Court Applies Common Parlance Test

The Allahabad High Court has applied the Common Parlance Test and held that bakery shortening and vanaspati are the same.

The bench of Justice Piyush Agrawal has observed that on the test of 'Common Parlance' Notification No. 37/2003 dated April 30, 2003, issued by the Government of India is very important and relevant, as in the Notification the Union Government has very categorically and specifically mentioned bakery shortening, or partially or wholly hydrogenated vegetable fats and oils refracting, commonly known as "Vanaspati". The Union Government has used the word commonly known, which means known and understood in common parlance, and therefore, the Government of India is treating both the goods in question in common parlance as one and the same commodity in the eyes of law.

Common Parlance Test means that the goods have to be classified in a manner as understood by the common man.

The assessee/respondent is a registered dealer and is engaged in the business of manufacturing edible oil, and vanaspati ghee, including bakery shortening, coconut oil, refined oil, mustard oil, etc. The manufacturing unit of the assessee is in Mundra (Gujarat), Haldia (West Bengal), Andhra Pradesh, Rajasthan, and Jaipur, and has branches in the State of Uttar Pradesh at various places.

The assessee receives goods by way of stock transfer in the State of U.P. and makes sales. The assessee has admitted its 8% tax liability on the sale of bakery shortening, treating the same as covered under Entry 130 of Part A of Schedule II, which specifies “Vanaspati (hydrogenated vegetable oil)”. The Assessing Authority, while framing the assessment order, rejected the said claim and levied a higher rate of 12.5% tax treating the bakery shortening as an unclassified item.

An appeal was preferred by the assessee, which was allowed and confirmed by the Tribunal.

The department contended that the two authorities below have wrongly accepted the claim of the assessee as the item is not covered under hydrogenated vegetable oil but is an unclassified item and attracts a higher rate of tax. He prays for the revision.

The assessee contended that concurrent findings of fact have been recorded by the authorities below, which cannot be interfered with. The assessee has brought on record various certificates of the competent authorities literature, user certificates, details of its manufacturing product, etc., which are not in dispute at any stage. The burden is upon the department to bring material in support of the claim if they do not agree that the item is not identical to what was claimed by the assessee.

The issue raised was whether bakery shortening should be covered under Entry 130, Part A, Schedule II of the UP GST Act or be taxed as unclassified goods at a higher rate of tax, i.e., 12.5%.

The court noted that the Assessing Authority has rejected the claim of 4% tax on the ground that the items are different from vegetable oil (Vanaspati Ghee) and therefore not covered by a specific entry. The record further reveals that the certificate of expert from the Institute of Science & Technology for Advance Studies & Research, Gujarat, has been filed, clearly certifying bakery shortening as vegetable oil (vanaspati ghee).

The court held that any goods that are not in conformity with the "Vanaspati”, cannot be treated as 'Bakery Shortening'. In other words, it is essential that 'Bakery Shortening' be in conformity with the 'Vanaspati". 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 remarked that the purpose of the levy of tax at the point of manufacturing or import by the Central Government is that both goods, namely bakery shortening as well as 'Vanaspati', are covered under the same tariff entry number 1516 of the Central Excise Tariff Act as well as the Customs Tariff Act, both of which are indirect taxes like Uttar Pradesh Trade Tax for Uttar Pradesh VAT. Under the provisions of the Central Excise Tariff Act as well as the Customs Tariff Act, both goods are being treated as one and the same, and therefore, treating the same as two different commodities under the Sales Tax Law of the State is not correct.

Counsel for Revisionist: Ravi Shanker Pandey

Counsel for Opposite Party: Sanyukta Singh

Case Title: The Commissioner vs. Adani Wilmar [Sales/Trade Tax Revision No. - 100 Of 2023]

Case Citation: 2023 LiveLaw (AB) 370

Click Here To Read The Order