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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”).

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 1

 REPORTABLE 

 IN THE SUPREME COURT OF INDIA

 CIVIL APPELLATE JURISDICTION

 CIVIL APPEAL NO. 7731 OF 2011 

 (Arising out of S.L.P.(C) No.7969 of 2008)

Aluva Sugar Agency .....Appellant.

 Versus

State of Kerala .....Respondent

 J U D G M E N T

ANIL R. DAVE, J.

1. Leave granted.

2. Being aggrieved by the judgement and order dated 22nd September, 

2006, delivered in S.T.R. NO. 569 OF 2004 by the High Court of Kerala at 

Ernakulam, the appellant has filed this appeal. 

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3. The short question which arises for consideration in this 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, 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 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 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 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 

 3

Kerala Sales Tax Appellate Tribunal. The Tribunal set aside the order of the 

Appellate Assistant Commissioner in so far as it related 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 prepared edible 

 fats extracted from vegetable oils, and treated with 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 for butter". 

 The Tribunal further held that by virtue of Circular No. 

 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 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 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 

 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".

 4

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 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 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 

 vitamin A and vitamin D and also contains permitted 

 emulsifiers and stabilizers. Even though counsel for the 

 Respondent referred to the leaflet of Dalda produced in 

 court and contended that vitamin addition is there in 

 other hydrogenated oils also, we do not think Dalda sold 

 by 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, 

 bakery margarine is a product made for a specific 

 purpose i.e. for use in bakery and confectionary industry 

 and the 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 reverse is not true. In other 

 5

 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 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 

 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 

 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.

8. The learned counsel for the appellant submitted that as margarine is 

an edible vegetable oil, it squarely falls in Entry 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 of the 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 

 6

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 or all of the 

following permitted ingredients:

 "refined and/or hydrogenated sunflower, soyabean, 

 cottonseed, palmoline, palm and sesame oils, salt, 

 permitted emulsifier and stabilizers". 

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 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 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, including refined or hydrogenated oils and margarine. It means that 

 7

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 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 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 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 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 `edible oil' which is essentially a cooking medium in common parlance.

12. We have heard the learned counsel and also perused the records. 

 8

13. The main issue for adjudication in this appeal is 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 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 margarine manufactured by the appellant is concerned, it is made 

only from vegetable oils as stated by the appellant and 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 contains almost 80% fat and remaining constituents 

of margarine are edible things which are added thereto by the manufactures 

of margarine. Vegetable and hydrogenated oils are used in manufacturing 

 9

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.

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:

Sl. No. Description of goods Point of levy Rate of tax

 (percentage)

90. Oils, edible or inedible At the point of first 8

 including refined or hydrogerated sale in the State by 

 oils and margarine not elsewhere a dealer who is liable 

 mentioned in this Schedule or in to tax under Section 5.

 the second schedule.

Second Schedule: 

Sl.No. Description of goods Existing rate of tax Reduced rate of tax

 (percentage) (percentage)

17A Edible oil 8 4

 10

17. According to the above Entry 90 in the First Schedule, oils, 

whether edible or inedible, including refined or 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 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 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

 Sub:- Reduced rate of tax on Edible Oil - Clarification - 

 regarding.

 1. As per the Entry 90 in the 1st Schedule to the 

 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 

 11

 dated 31.3.1995, the rate of tax edible oil is 

 reduced to 4% with effect from 1.4.1995.

 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 

 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 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" has been explained 

by virtue of the circular dated 19.12.1996. The afore-stated circular makes 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 "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 oils. It means that the definition of the term "edible oil" 

in the circular is not exhaustive but is illustrative. This circular does not 

say that only edible oils referred to in the said circular would be taxed 

@4%. 

 12

19. In the aforestated circumstances, one has to consider 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 

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 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 

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, 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 

 13

as ground nut oil, gingely oil, refined oil and vanaspathi oil. The aforestated 

circular clarified that hydrogenated edible 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 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. The appeal, is allowed 

accordingly with no order as to costs.

 ..................................................J.

 (Dr. MUKUNDAKAM SHARMA)

 .................................................J.

 (ANIL R. DAVE)

New DelhiSeptember 7, 2011. 

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