Is “soft serve” an ice-cream? The Supreme Court says yes. The case was admitted by the Supreme Court in 2003 as an appeal and after nine years it has been decided. Interestingly the ice-cream has not melted in nine years.
There have been many judgements of the Supreme Court on various aspects of ice-cream but not exactly not on the definition of ice-cream. From this point of view, the present judgement is as interesting as it is detailed. Those who want to study interpretation of statutes will find this judgement a store house of information. The judgement which we are discussing here is in the case of Commissioner of Central Excise, New Delhi vs. Connaught Plaza Restaurant (P) Ltd. – 2012(286)ELT321(SC).
Revenue claimed the classification under heading 25.05 of Central Excise Tariff as ice-cream and the assessee claimed under 04.04 as other dairy products or 21.08 as edible preparations. The Tribunal held it as 2108.91 as edible preparations not bearing a brand name. The Supreme Court set aside the Tribunal’s order and upheld the Revenue’s view that soft serve is ice-cream.
The product soft serve is manufactured in the following way. The assessee used to procure soft serve mix in liquid form from one M/s Amrit Foods, Ghaziabad; at Amrit Foods, raw milk was pasteurised, skimmed milk powder was added (the milk fat content in the said mixture is stated to be 4.9%, not exceeding 6% at any stage); sweetening agent in the form of sugar or glucose syrup and permitted stabilizers were added; the mixture, in liquid form, was then homogenized, packed in polyethylene pouches and sored at 0 to 4?C. This material was then transported to the outlets under the same temperature control, where the liquid mix was pumped into a ‘Taylormake’ vending machine; further cooled along with the infusion of air, and finally, the end product, ‘soft serve’,
was drawn through the nozzle into a wafer cone or in a plastic cup and served to the customers at the outlet.
Now let us see the alternative tariff classifications which are reproduced below:
On the basis of the above information now we can enter into the basic arguments. The assessee argued that it is not ice-cream because it is not falling within the definition of ice-cream as given in the prevention of Food Adulteration Act, 1955 (PFA Act, 1955). The Supreme Court held that the PFA is a separate Act meant for prevention of adulteration and therefore very strict definitions are given here. These standards are meant for ensuring that the perfect products are sold in the market and any adulteration is prevented.
This proposition of the Supreme Court is unexceptionable. It is already a settled issue on the basis of several Supreme Court judgements on the subject. I have written on the subject elaborately in Chapter 33 of my book named “Interpretation of Fiscal Satutes in India” 3rd edition. I observed there in that it is a well settled principle of interpretation that definitions in other statutes are not relevant for construing the meaning of terms in another statutes. The PFA has its purpose so wide that practically anything a person consumes comes under its fold but excise or customs law does not have this wide ranged purpose. Similarly the definition of manufacturing in the Factories Act 1948 does not apply to fiscal statutes, held the Madras High Court in the case of C.I.T. vs. Buhari Sons Pvt. Ltd. – 1983 (144)ITR 12 (Mad.). In the case of Commissioner of Sales Tax vs. Gyanmal Kesrichand – 1984(55)STC140 (M.P)(Full Bench), it was held that the objects of M.P. General Sales Tax Act 1958 and the prevention of Food Adulteration Act, 1955 were not pari materia and therefore the definition cannot be used interchangeably. There are many judgements on the issue and I do not want to quote all of them here. The principle enunciated from all these judgements is that if the objects of two acts are pari materia and not materially different from each other, the definition in one act can be used in another act. In the present case PFA is not pari materia with Excise Act.
The assessee did not want to rely on the market parlance understanding of soft serve. The Supreme Court has argued extensively to prove where there is no statutory definition in the tariff we should go by the market parlance. This is also quite well known. That is why I am not quoting judgements to prove this point. The assessee wanted to argue that in technical matters, it is not necessary to go by the market parlance. For this the assessee depended on the judgement in the case of Akbar Badruddin Jiwani v. Collector of Customs, Bombay – 1990(47)ELT161(SC). However, this judgement is not applicable in this case as correctly pointed out by the Supreme Court. In the Akbar Badruddin case, the goods were marbles and the controversies were regarding descriptions of marbles in terminology such as travertine, ecaussine and other calcareous monumental or building stone of an apparent specific gravity of 2.5 or more and Alabaster.... These are all technical terms understood only to technical people and these are not known terms in the common parlance. So the lawyer of the assessee was vain in arguing that the theory of common parlance does not apply in the case of ice-cream. He should have realise that ice-cream is an item of mass consumption which is known from children to grandparents. It is not like marbles with high profile technical names. The Supreme Court has rightly rejected this unworkable argument.
The next issue is whether soft serve is really known in the market as ice cream. The Tribunal had observed that it is not. It has said that some people may say that it is ice-cream. The Tribunal’s argument is incomplete in this respect. The Supreme Court on the other hand depended on a Trade Notice issued in 2001 by the Central Excise Commissioner, Mumbai-IV, which says that “the product is sold and consumed as ice-cream”. This Trade Notice is not binding on the Supreme Court, (as the Court has observed) but it certainly gives the indication that soft serve is regarded as ice-cream by consumers. So the Supreme Court has concluded that in the common parlance soft serve is known as ice-cream. The Supreme Court has rightly admitted that ice-cream is no longer is known in the traditional sense as being served in a cup, made of either paper or plastic. Due to technological innovation, they are also served in wafer cones and from vending machines, etc.
I respectfully agree with the conclusion of the Supreme Court that soft serve is an ice cream as understood in the common parlance.
Conclusion: The following principles have been enunciated and reiterated by the Supreme Court in the judgement.
(a) When there is no statutory definition of a product in the tariff, the common parlance definition will rule over the technical definition;
(b) The definition in another Act cannot be imported into Excise Act if the purposes of the two Acts are not materially the same;
(c) To determine common parlance, a Trade Notice issued by the Revenue can be depended upon apart from other materials;
(d) A product’s identity cannot be understood only in the traditional manner but it may vary according to technological innovations.