SYNTHITE INDUSTRIAL CHEMICALS LTD Vs. STATE OF KERALA

JUDGEMENT

(1.) The main question raised in the connected Sales Tax Revision cases arising from the orders of the Sales Tax Appellate Tribunal pertaining to sales assessment under the KGST Act and CST Act for the years 1997-98 and 1998-99 is whether the products manufactured and sold by the petitioner, namely, spice oil and Oleoresin fall under Entry 56 of the First Schedule to the KGST Act taxable at the rate of 12.5%. The assessment made at 12.5% by the Officer were confirmed in first appeal and also by the Tribunal. It is against this decision of the Tribunal, Revisions are filed.

(2.) We have heard Senior Counsel Sri Pathros Mathai appearing for the petitioner and the Government Pleader appearing for the respondent. In other to appreciate the contentions raised with regard to rate of tax, Entry 56 of the First Schedule to the KGST Act at the relevant time is extracted hereunder for easy reference.

(3.) Leaflet specifically deals with extraction of Oleoresins from Pepper, Capsicum, Chilly, Turmeric and the process involved is solvent extraction and thereafter removal of solvent. The application of the product is specifically stated therein "as use in food industry" for giving colour and flavour. The items produced are stated to be Black . Pepper Oil, White Pepper Oil, Celery Seed Oil, Cinnamon Leaf Oil, Cardamom Oil, Coriander Oil, Galic Oil, Mustard Oil, Onion Oil etc. The leaflet says even Red Sandal Wood extract and fruit and vegetable extract are used as food colours in the place of synthetic colours, which have now disappeared from the market. From the leaflet it is clear that the items manufactured and sold by the petitioner are extracts or essences of spices, mostly in the form of oil, which are used essentially in the food industry for imparting colour and flavour to food items. Petitioner has a case that substantial sale is to drug industry, where the product has application. They have also pointed out that some items have application in cosmetics and perfumery industry. They have furnished statement containing names of purchasers, which does not show the nature of use of the items by them. Counsel stated that their buyers are engaged in manufacture of Cosmetics, Agarbathis, Pharmaceuticals etc. However, the petitioner does not deny the use of the product in food industry both for the purposes of colour and flavour. The question therefore to be considered is whether the use of the items also in drug and cosmetic industry will take it outside Entry 56. It is clear from the entry that essentially it covers only food articles and articles used to make food. In fact food colours and essences are specifically covered by Entry 56. We have already found that the products of the petitioner are essences or oil from spices mentioned above. Classification has to be done with reference to main use and purpose of an item sold. It is possible as in this case that the same item may have different uses. The question therefore to be considered is what is the main principal use of the item. The raw materials used by the petitioner, which are Pepper, Turmeric, Cardamom, Garlic etc., are food items and are generally called spices. The extracts taken by the petitioner in the form of essences and oils continue to be used in food industry as a colouring or flavouring agent. Even if the same product is sold to various industries for other use also, the same does not affect the essential nature and use of the items as food essences. It is therefore rightly classified under Essences and food colours under Entry 56. Therefore, we confirm the order of the Tribunal and reject the Revisions on this issue.