ALUVA SUGAR AGENCYversusSTATE OF KERALA

                        [2011] 11 S.C.R. 206


A                    ALUVA SUGAR AGENCY
                                  v.
                         STATE OF KERALA
                  (Civil Appeal No. 7731 of 2011)
                       SEPTEMBER 7, 2011
B
    [DR. MUKUNDAKAM SHARMA AND ANIL R. DAVE, JJ.]

         Kera/a General Sales Tax Act, 1963: Second Schedule,
    Entry 17A - Margarine used for preparing bakery products
C   and confectionaries - Taxability @ 4% or 8% - Held:
    Margarine is used as a substitute for butter and is used in
    preparation of food articles specially for preparing bakery
    products and also used in confectionary industry - For
    manufacturing margarine, refined and/or hydrogenated oils
D   of sun-flower, soyabean, cotton seed, pa/moline, palm and
    sesame are used - Like butter, margarine also contains
    almost 80% fat and remaining constituents of margarine are
    edible things which are added thereto by the manufacturer of
    margarine - According to Entry 90 in the First Schedule to
E   the Kera/a General Sales Tax Act, 1963, oils, whether edible
    or inedible, including refined or hydrogenated oils and
    margarine, not elsewhere mentioned is to be taxed at 8% -
    Concessional rate of 4% is levied on all edible oils as per
    Entry 17A of the Second Schedule read with Notification SRO
F   No. 429195 dated 31.2.1995 - Circular 2439/TD dated
    19.2. 1996 made it clear that edible oil like refined or
    hydrogenated oil such as groundnut oil, gingel/y oil, refined
    and vanaspathi oils are to be taxed @ 4% and not at @ 8%
    - Edible oil is that oil which can be used for human
G   consumption - It is not necessary that all edible things should
    be consumed in the form in which they are available - 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

H                                206
  ALUVA SUGAR AGENCY v. STATE OF KERALA                    207


beings and, therefore, margarine is also edible and is eligible   A
to benefit of rate of tax of 4% - Sales Tax - Notification SRO
No. 429195 dated 31.2.1995, Second Schedule, Entry 17A -
Circular 2439/TD dated 19. 2. 1996.

     The question which arose for consideration in the
                                                                  8
instant appeal was whether margarine used by appellant
for preparing bakery products can be treated as edible
oil and thus, the appellant is entitled to the benefit
concessional of rate of tax of 4% as provided in Entry 17A
of the second schedule of the Kerala General Sales Tax
Act, 1963 read with Government Notification SRO No.               C
1725/93 and 429/95. The Department's case was that
margarine would come under Entry 90 and, therefore, is
taxable @ 8% and not at concessional rate of 4%.

    Allowing the appeal, the Court                                D

     HELD: 1. 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
                                                                  E
and/or hydrogenated oils of sun-flower, soyabean,
cotton seed, palmoline, palm and sesame oils are used.
Vegetable oils, salt, permitted emulsifiers and stabilizers
are also used for manufacturing margarine. Margarine
contains all edible things and is used exclusively as a
raw-material for preparing bakery products and is also            F
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. As it is used for
making eatables, margarine is also edible though it is not        G
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. [Paras 14, 15] (214-G-
H; 215-A-D]
                                                                  H
    208    SUPREME COURT REPORTS             [2011) 11 S.C.R.


A        2. According to Entry 90 in the First Schedule of the
    Kerala General Sales Tax Act, oils, whether edible or
    inedible, including refined or hydrogenated oils and
    margarine, not elsewhere mentioned is to be taxed at 8%.
    Concessional rate of 4% is levied on all edible oils as
s per Entry 17 A 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%.
    Margarine is definitely an edible oil as it is used for
    preparing bakery products but it is not used for normal
c 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. By virtue of the circular 2439/TD dated 19.2.1996, it
    was clarified that the term "edible oil" mentioned in the
    Notification SRO 429/95 dated 31.3.1995 included refined
0
    or hydrogenated oil such as groundnut oil, gingelly oil,
    refined oil and vanaspathi. The circular made 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
E "edible oil" given in the circular was not dealing
    el_<haustively with all edible oils. It merely illustrated
    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 did not say
F that only edible oils referred to in the said circular would
   ·be taxed @ 4%. 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
G cooking for preparation of food articles which are not
    consumed in the same form but they are used in
    preparation of food articles which are consumed.
    Normally anything which is used for preparation of a food
    article is edible because ultimately it is being consumed
H by human beings. Though one may not consume
  ALUVA SUGAR AGENCY v. STATE OF KERALA                     209


margarine directly or may not use for normal cooking,              A
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, it should be considered
as edible oil. Upon perusal of the Circular dated 19th             B
February, 1996, explaining· the term "edible oil", the
intention of the government was to give relief in tax to
edible oils. 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         c
rate of 4%._ (Paras 17-22) (216-C-E; 217-C-H; 218-A-E]
     Commissioner of Trade Tax, UP v. Associated
Distributors 2008 (7)SCC 409: 2008 (7) SCR 695 - referred
to.
                                                                   D
                     Case Law Reference:
    2008 (7) SCR 695          Referred to.           Para 11
    CIVIL APPELLATE JURISDICTION : Civil Appeal No.
7731 of 2011.
                                                                   E
    From the Judgment & Order dated 22.9.2006 of the High
Court of Kerala at Ernakulam in S.T.R. No. 569 of 2004.
    Subramonium Prasad for the Appellant.

    Yashbant Das, S. Geetha, R. Satish for the Respondent.         F
    The Jud~ment of the Court was delivered by
    ANIL R. DAVE, J. 1. Leave granted.
      2. Being aggrieved by the judgement and order dated          G
22nd September, 2006, delivered in ~.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
                                                                   H
    210       SUPREME COURT REPORTS                 [2011) 11 S.C.R.


A 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, and
8
  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
C 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
D 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
E 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
F 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 prepareQ
          edible fats extracted from vegetable oils, and treated with
G         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 tor
H         butter".
  ALUVA SUGAR AGENCY v. STATE OF KERALA                         211
             [ANIL R. DAVE, J.]
           The Tribunal further held that by virtue of Circular No.     A
    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           8
    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    C
    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            D
    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".                                   E

      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        F
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               G
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
                                                                        H
        212       SUPREME COURT REPORTS                   [2011] 11 S.C.R.


    A         vitamin A and vitamin D and also contains permitted
              emulsifiers aOO stabilizers. Even though counsel for the
              Re$pondent referred to the leaflet of Dalda produced in
I             court and contended that vitamin addition is there in other
              hydrogenated oils also, we do not think Dalda sold by
    B         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,
                                    a
              bakery margarine is product made for a specific purpose
              i.e. for use in bakery and confectionary industry and the
    c         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
    D         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
    E         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
    F         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
    G         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.
    H         8. The learned counsel for the appellant submitted that as
    ALUVA SUGAR AGENCY v. STATE OF KERALA                      213
               [ANIL R. DAVE, J.]
  margarine is an edible vegetable oil, it squarely falls in Entry     A
  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         B
  ofthe 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      c
  or all of the following permitted ingredients:

      "refined and/or hydrogenated sunflower, soyabean,
      cottonseed, palmoline, palm and sesame oils, salt,
      permitted emulsifier and stabilizers".
                                                                       0
        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 E
  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 F
  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,          G
 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
                                                                       H
   214       SUPREME COURT REPORTS               [2011] 11 S.C.R.


A 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
B 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
C 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
D 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
  ·~dible oil' which is essentially a cooking medium in common
  parlance.
E
        12. We have heard the learned counsel and also perused
  the records.

      13. The main issue for adjudication in this appeal is
F 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
G 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
H margarine manufactured by the appellant is concerned, it is
  ALUVA SUGAR AGENCY v. STATE OF KERALA                      215
             [ANIL R. DAVE, J.]
made only from vegetable oils as stated by the appellant and         A
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 contain&
almost 80% fat and remaining constituents of margarine are
edible things which are added thereto by the manufactures of         C
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.                                                          D

     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:                                         E

SI. No. Description of goods        Point of lew Rate of tax
                                                · (percentage)

90.     Oils, edible or inedible    At the point of first   8        F
        including refined or        sale in the State by
        hydrogerated                a dealer who is liable
        oils and margarine not      to tax under Section 5.
        elsewhere mentioned in
        this Schedule or in                                          G
        the second schedule.



                                                                     H
    216        SUPREME COURT REPORTS             [2011) 11 S.C.R.


A   Second Schedule:

               Description of       Existing rate    Reduced rate
               goods                of tax          of tax
                                    (percentage)    (percentage)

               Edible oil            8                      4

       17. According to the above Entry 90 in the First Schedule,
  oils, whether P.dible or inedible, including refined or
C 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
D 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
E 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
F
          Sub:- Reduced rate of tax on Edible Oil - Clarification ~
                regarding.

          1.    As per the Entry 90 in the 1st Schedule to the
G               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
H
   ALUVA SUGAR AGENCY v. STATE OF KERALA                        217
              [ANIL R. DAVE, J.]
            4% with effect from 1.4.1995.                               A

      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       8
             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       C
 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" ha's been explained by virtue of the
 circular dated 19.12.1996. The afore-stated circular makes it          D
 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   E
 o_ils, ·1t means that the definition of the term "edible oil" in the
 circular is not exhaustive but is illustrative. This circular does
 ~of say that only' edible oils referred to in the said circular
 would be taxed ~4%.

       19. In the afore.stated circumstances, one has to consider       F
 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                   G
  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              H
    218      SUPREME COURT REPORTS                [2011) 11 S.C.R.


A 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
B 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,
C 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
D 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
E 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.
F The appeal, is allowed accordingly with no order as to costs.

   D.G.                                            Appeal allowed.