Is McDonalds ‘soft serve’ an ice-cream?
The Supreme Court of India answered in affirmative. The Court ruled that that ‘soft serve’ (vanila cone or softy) marketed by McDonalds is to be classified under Excise Tariff sub-heading 2105.00 as “ice-cream” and hence liable for excise duty as mentioned therein.
McDonalds argued that ‘soft serve’ is technically not an “ice-cream” per the definition of ice-cream as defined in Prevention of Foods Adulteration Act (PFA).
Rejecting the importation of definition of ice-cream from PFA, the Court applied the Common Parlance test and observed, “…..in the absence of a statutory definition in precise terms (Excise Tariff); words, entries and items in taxing statutes must be construed in terms of their commercial or trade understanding, or according to their popular meaning. In other words they have to be constructed in the sense that the people conversant with the subject-matter of the statute, would attribute to it.”
“It is a settled principle in excise classification that the definition of one statute having a different object, purpose and scheme cannot be applied mechanically to another statute. …..the object of the Excise Act is to raise revenue for which various goods are differently classified in the Act. The conditions or restrictions contemplated by one statute having a different object and purpose should not be lightly and mechanically imported and applied to a fiscal statute for non-levy of excise duty, thereby causing a loss of revenue”, the Court said.
“The provisions of PFA, dedicated to food adulteration, would require a technical and scientific understanding of “Ice-cream” and thus, may require different standards for a good to be marketed as “ice-cream”. These provisions are for ensuring quality control and have nothing to do with the class of goods which are subject to excise duty under a particular tariff entry under the Tariff Act. These provisions are not a standard for interpreting goods mentioned in the Tariff Act, the purpose and object of which is completely different”, the Court further added.