Is a parota like a roti?

In the public imagination, tax law occupies a strange binary – too boring for words or too silly for a sensible discussion. For the boring version, we can see debates on the taxation of multinationals, which some intrepid person has captured in the idea of the ‘two pillars’ approach to global taxation. The construction terminology, however, has not helped. Until GST 2.0 came along, the silly version received its sustenance from classification disputes. These disputes relate to the category under which a particular good or service ought to be taxed. Last week, the government rationalised the rates in such a way that goods and services similar to each other carry the same rates, and therefore, many classification disputes are now irrelevant.

No amount of rationalisation can eliminate all classification disputes, and there’s always a fair bit of amusement when some of these disputes hit the headlines. Classification disputes are at their most hilarious when they are about foodstuffs. I think it’s the combination of common kitchen terms, combined with the solemnity of judicial language, that makes for great amusement.

In 1893, the US Supreme Court in Nix v Hedden weighed in on a question: Is the tomato a fruit or a vegetable? This question was important because the US tariffs at that time applied only to vegetables and not fruit. Importers argued that tomatoes brought in from the West Indies were fruits because they belonged to the fleshy part of the plant and contained seeds. The court distinguished between botanical meanings and ordinary meanings. While a tomato was a fruit in a botanical sense, in common parlance it was a vegetable, and it is the ordinary meaning of words in statutes that should count. The ordinary-meaning approach continues to influence legal debates.

The United Kingdom’s Value Added Tax (VAT) system has zero tax on cakes and a standard tax rate (20%) on biscuits. Quite naturally, suppliers would like to argue that what they are selling is a cake, not a biscuit. McVitie’s, a company known for its biscuits, sold ‘Jaffa Cakes’ that looked like biscuits but tasted a bit like cakes, thus leading to much legal sparring with the revenue. The courts ended the dispute through a painstaking balancing of cake v biscuit factors. The cakes won on taste, durability, and ingredients, while the biscuits won on packaging, presentation, and marketing. The cakes won overall, and Jaffa Cakes were not subject to VAT.

After reading the legal intricacies in these decisions, I have developed some sympathy for Indian judges. Last year, the Kerala High Court in Modern Food Enterprises v Union of India had to decide whether the Malabar parota was similar to khakhras, rotis, and chapatis for the purposes of imposing a reduced 5% GST. I could understand why my students struggle with tax law. Before reaching the judgement, one has to navigate through ‘Harmonised System of Nomenclature’, numerous ‘general principles of interpretation’, and several ‘explanatory notes’. These judgements give the impression that tax law is an island of interpretation untethered to other areas of law where more intellectual and moral pursuits are allowed and encouraged.

Nothing can be further from the truth. Even in the most mundane of tax matters, interpretation of the law proceeds much like interpretation in other areas of the law. Take the parota case. The judge used analogical reasoning to decide that parotas, for GST purposes, are no different from rotis. Not stirring stuff, but plenty of livelihoods are affected by the decision, and the judicial decision-making process is no different from that in other legal cases.

Many tax cases are not about classification but more complex matters regarding the nature and sources of income. Those cases are also dependent on analogical reasoning, bringing in its wake issues of ethics and morality. Take, for example, the oft-discussed ‘no motor vehicles in the park’ rule that faces the quandary of allowing an electric toy car into the park. Beyond the simple task of deciding whether a toy car can be considered a vehicle, the judge has to decide whether the rule is meant to maintain peace or security in the park. Peace and security are deceptive terms because they impugn other grand ideas about community living and regulation of technology.

The legal differences between biscuits and cakes might look trivial, but in use are interpretational techniques we find in other areas of the law. Nevertheless, we must allow ourselves to be amused by the amount of time courts spend on the differences between fruits and vegetables.

(The writer is a law professor who thinks that the law is too important to be left to the lawyers.)

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.