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Rate of tax that is payable on a sale or import of Energy Drinks and inter-alia what is the appropriate classification of Energy Drinks under the Schedules to the DVAT Act
October, 30th 2012
                  IN THE COURT OF COMMISSIONER
                  DEPARTMENT OF TRADE AND TAXES
                   GOVERNMENT OF N.C.T. OF DELHI
                    VYAPAR BHAVAN, NEW DELHI


No. 308/CDVAT/2012/55                                          Date: 09.07.2012


M/s Red Bull India Pvt. Ltd.,
D-38, Okhla Industrial Area, Phase-I
DELHI-110020.


                                  ORDER


Present for the Applicant                :        Shri Rakesh Garg, Advocate
Present for the Department               :        Shri T.C.Sharma, DR



      The above named applicant has filed this application u/s 84 of the
      Delhi Value Added Tax Act, 2004 (hereinafter referred to as the
      "Act") and the question put up before this Court for determination
      under the aforesaid provision of law is as under -

         "What is the rate of tax that is payable on a sale or
         import of Energy Drinks and inter-alia what is the
         appropriate classification of Energy Drinks under the
         Schedules to the Act?"





2.    Application for determination has been made in the prescribed
      format DVAT-42 and the requisite fee of INR 500/- paid through
      E-payment challan No. 000433702/03/1240105 dated March 2,
      2012.


3.    The     Applicant   is   engaged       in   nationwide   marketing   and
      distribution of the `Red Bull' brand of Energy Drinks.
                                    2



4.   The Applicant has approached this Court for determination as to
     whether the item Energy Drink is covered under the residuary
     Entry (chargeable at 12.5 percent) or whether it constitutes
     `aerated waters' and therefore shall be classifiable under Entry no
     11 of the Fourth Schedule to the Act and be accordingly,
     chargeable to tax at 20 percent.

5.   Shri Rakesh Garg, Advocate appeared on behalf of the applicant
     and stated that the Applicant company is currently charging VAT
     on `Energy Drinks' at the rate of 12.5 percent. But there is some
     confusion in trade with regard to the rate of VAT on the said
     item, hence clarification is sought under section 84 of the Act.
     The applicant has submitted the following documents:

      (i)     A copy of notification F 3 (30)/Fin (T&E)/ 2009-10/ jsfin/
              285 dated April 1, 2010 regarding levy of VAT @ 20
              percent on aerated drinks;

      (ii)    A copy of order dated October 5, 2007 regarding
              classification of imports of Energy Drinks as a `proprietary
              food' by the Commissioner (Appeals) in the matter of
              Narang Hospitality Services Pvt. Ltd., rejecting Revenue's
              plea that the Energy Drinks are classifiable as aerated
              drinks;

      (iii)   Documents showing classification of energy drinks as
              distinct product/ proprietary food item finds acceptance in
              international trade practice;

      (iv)    Copy of judgement dated December 20, 2005 wherein
              differentiation between the Energy Drinks and `aerated
              waters' has been recorded by the Division Bench of
              Madras High Court;

      (v)     Documents showing that as opposed to Carbonated
              Water which has specified standards under the FSSAI
              Regulations, Energy Drinks are classified as Proprietary
              Food under the FSSAI Regulations.
                                        3






6.        The Departmental Representative accepted that in common
          parlance "energy drinks" do not qualify as "aerated drinks" and
          are not used as the substitute of each other.


7.        I heard both the parties and also went through the submissions
          placed on record by the counsel for applicant in support that
          "Energy Drinks" are `Proprietary Foods' which is not covered
          under the category of aerated drinks. After due consideration, I
          am of the considered opinion that the `Energy Drinks' are distinct
          from aerated drinks and therefore cannot be covered under Entry
          No 11 of the Fourth Schedule appended to the Act. Keeping in
          view the fact that there is no other potential entry within realm of
          which energy drinks could fall, therefore, it has to be classified as
          an unspecified item under the residual category provided under
          Section 4 (1)(e) of the Act and thus would be taxable at the rate
          of 12.5 percent.

          Held accordingly.



                                                        (Rajendra Kumar)
                                                       Commissioner, VAT.


Copy for information and necessary action to:

     1.   The Applicant.
     2.   The Addl. Commissioner (Law & Judicial).
     3.   The Value Added Tax Officer (Policy Branch).
     4.   President, Sales Tax Bar Association (Regd.).
     5.   Guard File.


                                                        (Rajendra Kumar)
                                                       Commissioner, VAT.
                  IN THE COURT OF COMMISSIONER
                  DEPARTMENT OF TRADE AND TAXES
                   GOVERNMENT OF N.C.T. OF DELHI
                    VYAPAR BHAVAN, NEW DELHI


No. 308/CDVAT/2012/55                                          Date: 09.07.2012


M/s Red Bull India Pvt. Ltd.,
D-38, Okhla Industrial Area, Phase-I
DELHI-110020.


                                  ORDER


Present for the Applicant                :        Shri Rakesh Garg, Advocate
Present for the Department               :        Shri T.C.Sharma, DR



      The above named applicant has filed this application u/s 84 of the
      Delhi Value Added Tax Act, 2004 (hereinafter referred to as the
      "Act") and the question put up before this Court for determination
      under the aforesaid provision of law is as under -

         "What is the rate of tax that is payable on a sale or
         import of Energy Drinks and inter-alia what is the
         appropriate classification of Energy Drinks under the
         Schedules to the Act?"


2.    Application for determination has been made in the prescribed
      format DVAT-42 and the requisite fee of INR 500/- paid through
      E-payment challan No. 000433702/03/1240105 dated March 2,
      2012.


3.    The     Applicant   is   engaged       in   nationwide   marketing   and
      distribution of the `Red Bull' brand of Energy Drinks.
                                    2



4.   The Applicant has approached this Court for determination as to
     whether the item Energy Drink is covered under the residuary
     Entry (chargeable at 12.5 percent) or whether it constitutes
     `aerated waters' and therefore shall be classifiable under Entry no
     11 of the Fourth Schedule to the Act and be accordingly,
     chargeable to tax at 20 percent.

5.   Shri Rakesh Garg, Advocate appeared on behalf of the applicant
     and stated that the Applicant company is currently charging VAT
     on `Energy Drinks' at the rate of 12.5 percent. But there is some
     confusion in trade with regard to the rate of VAT on the said
     item, hence clarification is sought under section 84 of the Act.
     The applicant has submitted the following documents:

      (i)     A copy of notification F 3 (30)/Fin (T&E)/ 2009-10/ jsfin/
              285 dated April 1, 2010 regarding levy of VAT @ 20
              percent on aerated drinks;

      (ii)    A copy of order dated October 5, 2007 regarding
              classification of imports of Energy Drinks as a `proprietary
              food' by the Commissioner (Appeals) in the matter of
              Narang Hospitality Services Pvt. Ltd., rejecting Revenue's
              plea that the Energy Drinks are classifiable as aerated
              drinks;

      (iii)   Documents showing classification of energy drinks as
              distinct product/ proprietary food item finds acceptance in
              international trade practice;

      (iv)    Copy of judgement dated December 20, 2005 wherein
              differentiation between the Energy Drinks and `aerated
              waters' has been recorded by the Division Bench of
              Madras High Court;

      (v)     Documents showing that as opposed to Carbonated
              Water which has specified standards under the FSSAI
              Regulations, Energy Drinks are classified as Proprietary
              Food under the FSSAI Regulations.
                                        3



6.        The Departmental Representative accepted that in common
          parlance "energy drinks" do not qualify as "aerated drinks" and
          are not used as the substitute of each other.


7.        I heard both the parties and also went through the submissions
          placed on record by the counsel for applicant in support that
          "Energy Drinks" are `Proprietary Foods' which is not covered
          under the category of aerated drinks. After due consideration, I
          am of the considered opinion that the `Energy Drinks' are distinct
          from aerated drinks and therefore cannot be covered under Entry
          No 11 of the Fourth Schedule appended to the Act. Keeping in
          view the fact that there is no other potential entry within realm of
          which energy drinks could fall, therefore, it has to be classified as
          an unspecified item under the residual category provided under
          Section 4 (1)(e) of the Act and thus would be taxable at the rate
          of 12.5 percent.

          Held accordingly.



                                                        (Rajendra Kumar)
                                                       Commissioner, VAT.


Copy for information and necessary action to:

     1.   The Applicant.
     2.   The Addl. Commissioner (Law & Judicial).
     3.   The Value Added Tax Officer (Policy Branch).
     4.   President, Sales Tax Bar Association (Regd.).
     5.   Guard File.


                                                        (Rajendra Kumar)
                                                       Commissioner, VAT.
 
 
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