Is ‘aloo bonda’ processed vegetable? SC says no

NEW DELHI: If pickles — vegetables and fruits seasoned in oil and spices — are classified as processed food and attract 4% value added tax (VAT), why shouldn’t ‘aloo bonda’, comprising mainly potato, not get the same tax benefit?
Bengaluru-based Merino Industries Ltd asked this question to the Supreme Court. It said the revenue department was levying 13% tax on the ‘Vegit’ brand packed snacks it produced — aloo hara bhara kebab, aloo veg cutlet, aloo yummy cheese balls, aloo mazedar bonda and aloo jatpat tikki.
A bench of Chief Justice H L Dattu and Justice Amitava Roy refused to entertain the petition saying, “Aloo bonda can never be categorized as processed vegetable merely because of high content of potato.Processed vegetables are generally canned or frozen.”
READ ALSO: Food, bar bills may dip with simpler tax system
Merino’s counsel argued that all these ready-made snacks had over 50% potato content and should get the benefit of lower VAT as applicable to processed food. The SC bench agreed with the reasoning given by the Karnataka HC and rejected the petition.
The commissioner, commercial tax, in a July 24, 2010, order had said the snacks manufactured by Merino were unscheduled goods liable to tax at the rate of 13.5%. Merino challenged it in the HC. A single-judge bench favoured the snacks firm and ordered that its products would attract VAT at the rate of 4% like pickles and processed food items.
However, a division bench allowed the revenue department’s appeal and said while interpreting provisions relating to classification of commodities, the predominant test to be applied was based on the understanding of the commodity in its popular and commercial sense.
READ ALSO: Food processing industry set to generate 50,000 jobs
“Applying the said test, it could be construed that the commodities in question are understood in common parlance or trade parlance as snack mix — a different commercial commodity from that of dehydrated potato flakes. It is settled principle of law that an entry in a fiscal statute has to be read as it is. Nothing could be added to enlarge the meaning of the entry,” the HC had said and drew a contrast between processed food and snacks.
It said the general perception of processed vegetables or fruits was that these could be accepted as an alternative to fresh vegetables available in the market.