InS.B. Sales Tax Revision/Reference No. 119/2020 -RAJ HC-Rajasthan High Court classifies 'Kurkure' & 'Cheetos' as ‘Namkeen ’under Entry 131 of Schedule IV to the RVAT Act
Justice Sameer Jain [06-10-2023]

Read Order:M/s Pepsico India Holdings Private Ltd. v. Assistant Commissioner, Commercial Taxes Department, Special Circle Rajasthan, Jaipur

Chahat Varma

New Delhi, October 11, 2023: The Rajasthan High Court has ruled in favour of the M/s Pepsico India Holdings Private Ltd. (petitioner-assessee), holding that ‘Kurkure’ and ‘Cheetos’ are classifiable as ‘namkeen’ under Entry 131 of Schedule IV to the Rajasthan Value Added Tax Act, 2003 (RVAT Act).

The issue in these revision/references pertained to the Tax Board's classification of ‘Kurkure’ and ‘Cheetos’, determining whether they should be categorized as Namkeen under Entry 131 of Schedule IV or if they should be placed under Schedule V (Residual Rate) of the VAT Act. This classification was influenced by a previous decision that had rejected a similar contention under a different entry in the erstwhile Rajasthan Sales Tax Act, 1994 (RVAT Act).

The brief background of the issue involved in the present case was that the petitioner-assessee, a private limited company with its registered office in Gurugram and principal place of business in Jaipur, Rajasthan, was a registered dealer under the RVAT Act. The company primarily dealt with the sale of various food products, including 'Kurkure' and 'Cheetos.' They also sold branded potato chips under the brand names 'Lays' and 'Uncle Chips.' The petitioner-assessee classified 'Kurkure' and 'Cheetos' along with branded potato chips under Entry 131 [Sweetmeat Deshi (including Gajak&Revri), bhujiya, branded and unbranded namkeens.] of Schedule IV to the RVAT Act, and consequently paid tax at the rate of 4% / 5%. However, after a survey conducted at the petitioner-assessee's business premises, the revenue reclassified the goods in question, including the branded potato chips, under the Residual Entry in Schedule V to the RVAT Act. This reclassification subjected the goods to a higher tax rate of 12.5% / 14%. The petitioner-assessee contested the revenue's classification of the goods in question under the residual entry.

The single-judge bench of Justice Sameer Jain observed that, in accordance with the settled position of the law, a specific entry would always take precedence over a general entry. Furthermore, it was the responsibility of the revenue to demonstrate that the goods in question should be classified under the general entry rather than the specific entry.

The bench opined that the Tax Board had misinterpreted the ruling in Pepsico India Holdings Private Limited v. Cto, Special Circle Rajasthan, Jaipur and Others [LQ/RajHC/2016/2239]. It was observed that this judgment, aside from being under the previous regime of the RST Act, related to the classification within two specific competing entries. In contrast, in the present case, the specific entry was in competition with the general or residual entry.

Furthermore, the bench ruled that the use of the residual entry can only be a last resort, and the residuary clause should only be invoked if the department can demonstrate that, by no conceivable process of reasoning, the goods in question can be placed under any of the tariff items.

The bench observed that the revenue did not seek any technical or expert opinion, nor did they present any evidence to support their argument. It appeared that the Tax Board relied solely on a basic Google search result that described the goods in question as snacks.

The bench also took note of the reliance placed by the Tax Board on the description of Cheetos as snacks on the global website of the petitioner-assessee. However, it was clarified that since the petitioner-assesseewas part of a global conglomerate with international presence, the description of Cheetos as a snack on their global website would not necessarily preclude its categorization as ‘namkeen’ in India. This was especially relevant as namkeen, in essence, was also a type of snack. However, the court emphasized that not all snacks would be considered as namkeen.

The bench also observed that the Tax Board arrived at the conclusion that the goods in question were snacks based solely on a reading of the ingredients. This decision, which relied solely on the ingredients, was deemed to be erroneous and lacking in proper reasoning by the bench.

Thus, the court held that the revenue had failed to meet its burden of proof to establish that the goods in question should be classified under the general, residual, or orphan entry rather than the specific entry. The court found that no compelling reason had been provided to categorize the goods in question as ‘snacks’, especially considering that the FSSAI license had classified them as namkeen.

Accordingly, all the revisions/references were allowed in favour of the petitioner-assessee and against the respondent-revenue, resulting in the quashing of the challenged order of the Tax Board.