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of <h1>Court rules seizure of 'Betonin AST Tonic' illegal due to improper tax classification. Commissioner directed to reclassify within 6 weeks.</h1> <h3>New Medical (Agartala) Pvt. Ltd. Versus The Superintendent of Taxes, Churaibari & Others</h3> New Medical (Agartala) Pvt. Ltd. Versus The Superintendent of Taxes, Churaibari & Others - TMI, [2014] 69 VST 465 (Gau) Issues Involved:1. Legality of the seizure of goods under the Tripura Value Added Tax Act, 2004.2. Classification of 'Betonin AST Tonic' for tax purposes under the TVAT Act.3. Interpretation of tax entries and their precedence over definitions from other statutes.4. Application of the common parlance test for product classification.5. Burden of proof in tax classification disputes.Issue-wise Detailed Analysis:1. Legality of the Seizure of Goods:The petitioner challenged the seizure of 'Betonin AST Tonic' by the Officer-in-charge, Churaibari Check Post, under Seizure Case No.1549/CRB/2010-11, dated 25.03.2011. The seizure was based on the allegation that the petitioner mis-declared the goods as 'H.L. medicine' (taxable at 5%) instead of 'Appetite Tonic' (taxable at 13.5%). The petitioner argued that the product was correctly declared as a drug under the Drugs & Cosmetics Act, 1940, and should be taxed at 5%.2. Classification of 'Betonin AST Tonic' for Tax Purposes:The core issue was whether 'Betonin AST Tonic' should be classified under Entry No. 67(i) of Schedule II(a) (taxable at 5%) or Entry No. 183 of Schedule II(b) (taxable at 13.5%) of the TVAT Act. The Revisional Authority held that the tonic falls under Entry No. 183, taxable at 13.5%, despite the product being a drug as per the Drugs & Cosmetics Act, 1940.3. Interpretation of Tax Entries and Their Precedence:The Revisional Authority emphasized that when two interpretations are possible, the one explicitly mentioned in the tax statute takes precedence over interpretations derived from other statutes. The authority argued that the classification under Entry No. 183 of Schedule II(b) was clear and unambiguous, and thus, it should prevail over Entry No. 67(i) of Schedule II(a).4. Application of the Common Parlance Test:The court referred to multiple Supreme Court judgments emphasizing the common parlance test for product classification. This test considers how the product is understood by those in the trade and by consumers. The court noted that the common parlance test is not the sole determinant and that a scientific test to determine the product's composition and character is also essential.5. Burden of Proof in Tax Classification Disputes:The court highlighted that the burden of proof lies with the Revenue to establish the correct classification of the product. The Revenue failed to provide sufficient evidence to support the classification of 'Betonin AST Tonic' under Entry No. 183. The court criticized the Revisional Authority for not examining the product label and ingredients properly and for not discharging their burden to classify the product accurately.Conclusion:The court concluded that the order of seizure dated 25.03.2011 could not be sustained in law due to the failure of the Revenue to properly classify the product. The Revisional Authority's order dated 21.10.2011 was set aside. The court directed the Commissioner of Taxes to adopt the twin test (common parlance and scientific test) for determining the classification of 'Betonin AST Tonic' and to complete this exercise within six weeks. Until the classification is determined, VAT on the product should not exceed 5%. The revision petition was allowed to this extent, with no costs awarded.
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