1990 (8) TMI 377 - HC - VAT and Sales Tax

Court rules sandalwood oil not 'perfume' under tax law, invalidating govt decision

Punjab Aromatics Versus State of Kerala

Punjab Aromatics Versus State of Kerala - [1992] 86 STC 74 (Ker) Issues Involved:1. Whether sandalwood oil qualifies as a 'perfume' under the Kerala General Sales Tax Act, 1963.2. Interpretation and application of judicial decisions regarding the classification of sandalwood oil.3. Analysis of the chemical properties and uses of sandalwood oil in determining its classification.4. The impact of statutory schemes and entries on the classification of sandalwood oil.5. The validity of the government's decision regarding the classification of sandalwood oil.Detailed Analysis:1. Whether sandalwood oil qualifies as a 'perfume' under the Kerala General Sales Tax Act, 1963:The primary issue addressed is whether sandalwood oil falls under the definition of 'perfume' as per the entries in the First Schedule to the Kerala General Sales Tax Act, 1963. The court examined various judicial decisions and statutory interpretations to address this issue. It concluded that sandalwood oil, in its crude form, does not qualify as a 'perfume' because it lacks the necessary characteristics and immediate usability associated with perfumes.2. Interpretation and application of judicial decisions regarding the classification of sandalwood oil:The court referred to multiple judicial decisions to interpret the term 'perfume.' Notably, the Madras High Court in Mettur Sandalwood Oil Co. v. State of Madras [1965] 16 STC 9, concluded that sandalwood oil could not be classified as a perfume because it is not ready for use and requires further processing. The Supreme Court's decision in Commissioner of Sales Tax v. Indian Herbs Research and Supply Co. [1970] 25 STC 151, which dealt with 'dhoop-batti,' was also considered. The court distinguished the Supreme Court's decision, noting that it was specific to the statutory scheme and commodity in question and should not be broadly applied to sandalwood oil.3. Analysis of the chemical properties and uses of sandalwood oil in determining its classification:The court examined the chemical properties of sandalwood oil, noting that it vaporizes at a high temperature and requires a solvent like alcohol to become volatile. Sandalwood oil serves as an odoriferous element and fixative in perfumes but is not a perfume by itself. The court emphasized that sandalwood oil needs to be processed and blended with other substances to achieve the characteristics of a perfume.4. The impact of statutory schemes and entries on the classification of sandalwood oil:The court analyzed the statutory schemes and entries in various state acts to determine the classification of sandalwood oil. It noted that the context and company of words in the statutory entries are crucial in understanding the term 'perfume.' The court referred to the Bombay High Court's decision in Commissioner of Sales Tax v. Gordhandas Tokersey [1983] 52 STC 381, which distinguished the Supreme Court's decision and concluded that sandalwood oil is mainly used as a fixative in the preparation of perfumes and not as a perfume itself.5. The validity of the government's decision regarding the classification of sandalwood oil:The court scrutinized the government's decision and found it lacking intellectual treatment of the topic. The court quashed the government's orders, declaring them invalid and inoperative. The court emphasized that sandalwood oil, as dealt with by the assessees, does not come within the purview of 'perfume' under entry No. 80 of the First Schedule to the Kerala General Sales Tax Act, 1963.Conclusion:The court concluded that sandalwood oil, in its crude form, does not qualify as a 'perfume' under the Kerala General Sales Tax Act, 1963. The court quashed the government's orders and declared them invalid and inoperative, thereby allowing the writ petitions.