Amway INDIA Enterprises Private Limited vs. Commissioner, Vat, Delhi & Ors.

Facts

Amway India Enterprises Private Limited (Amway) appealed against a judgment of the Delhi Value Added Tax Appellate Tribunal (Tribunal). The Tribunal had upheld an order by the Additional Commissioner – Objection Hearing Authority (OHA) concerning the classification of Amway's coconut oil and a publication called 'Amagram'. Amway contended that coconut oil should be classified as 'Edible Oils and Oil cake' (Entry No. 25, Third Schedule, DVAT Act), while the Revenue argued it was a residuary item. Amway also argued 'Amagram' was a periodical exempt from tax (Entry No. 5, First Schedule), but the Tribunal classified it as printed material like a diary or calendar (Entry No. 52, Third Schedule). The dispute arose from a special audit for the period 2011-12, leading to a tax demand, interest, and penalties. The OHA had partially set aside the demand regarding handling and delivery charges but upheld the classification of Amagram as a catalogue and coconut oil as taxable at 12.5%. The Tribunal affirmed the OHA's findings on Amagram and coconut oil.

Held

The Court held that the periodical ‘Amagram’ was rightly classified as a catalogue under Entry No. 52 of the Third Schedule of the DVAT Act. The Tribunal's reliance on definitions from dictionaries and Circular No. 2 of 2005-06, which clarified that catalogues fall under printed material, was upheld. The Court found that Amagram, in its nature and presentation, functioned as a catalogue, providing product information to Amway's direct sellers. Regarding coconut oil, the Court held that it was wrongly sought to be classified under Entry No. 25 of the Third Schedule. Applying the popular intention test and common parlance test, as established in precedents like M/s Bombay Oil Industries (P) Ltd. v. Commissioner of Trade Tax and State of Madhya Pradesh v. Marico Industries, the Court noted that the appellant admitted the oil was sold in small packs, displayed in the 'hair care' category on its website, and purchased by consumers for hair application. These factors indicated that, in common parlance, the product was marketed and bought not as an edible oil, despite being 100% coconut oil. The Court dismissed the appellant's reliance on the CESTAT judgment in Raj Oil Mills Ltd. v. Commissioner of Central Excise, Thane-II, distinguishing it based on the facts and packing sizes. The question of law concerning coconut oil classification was answered in favour of the Revenue.

Key Issues

1. Whether the periodical ‘Amagram’ is rightly classified as a catalogue liable for tax under Entry No. 52 of the Third Schedule of the DVAT Act, despite being specifically referred to in Entry No. 5 of the First Schedule of the DVAT Act. The appellant argued that Amagram is a periodical providing product and event information to its direct sellers and retailers, and thus should be exempt under Entry No. 5 of the First Schedule. They contended that the Tribunal and authorities wrongly classified it as a catalogue based on Circular No. 2 of 2005-06. The Revenue argued, and the Tribunal held, that Amagram is a catalogue falling under Entry No. 52 of the Third Schedule. 2. Whether the coconut oil, despite being an edible oil, was wrongly classified under Entry No. 25 of the Third Schedule of the DVAT Act. The appellant claimed it should be classified as 'Edible Oils and Oil cake' under Entry No. 25. The Revenue argued it should be classified under a residuary entry taxed at 12.5%, asserting it was primarily used for cosmetic purposes. The Tribunal upheld this view, finding Amagram to be a catalogue and coconut oil taxable at 12.5%.