2014 (5) TMI 368 - HC - VAT and Sales Tax

Tribunal Decision Upheld: Ramthirth Brahmi Oil Taxable as Medicinal Product at 5%

The State of Tamil Nadu represented by the Deputy Commissioner of Commercial Taxes Versus Sri. Ramtirth International

The State of Tamil Nadu represented by the Deputy Commissioner of Commercial Taxes Versus Sri. Ramtirth International - TMI Issues Involved:1. Classification of Ramthirth Brahmi Oil under the appropriate tax entry.2. Determination of whether Ramthirth Brahmi Oil is a medicinal preparation or a hair oil.3. Evaluation of the burden of proof and evidentiary requirements for tax classification.Detailed Analysis:1. Classification of Ramthirth Brahmi Oil under the appropriate tax entry:The primary issue revolves around whether Ramthirth Brahmi Oil should be taxed under Entry 20 Part C of the First Schedule as an ayurvedic medicine at 5% or under Entry 1(ii) of Part F of the First Schedule as a hair oil at 16%. The Tribunal originally ruled in favor of the assessee, classifying the oil as a medicinal preparation. The Revenue appealed, asserting that the oil should be taxed as a hair oil, citing the explanation in Entry 1(ii) of Part F.2. Determination of whether Ramthirth Brahmi Oil is a medicinal preparation or a hair oil:The assessee contended that Ramthirth Brahmi Oil is a medicinal formulation used for various disorders and not just a hair oil. The Tribunal supported this view, noting that the oil has multifarious applications, including body massage and treatment of headaches, dandruff, and sleeplessness. The Tribunal referenced the decision in 104 STC 198, which supported the classification of similar products as medicinal preparations.The Revenue argued that even if the oil is medicated, it should still be considered a hair oil under the explanation to Entry 1(ii) of Part F. However, the Tribunal and various state authorities, including the Commissioner of Central Excise and the Director of Ayurveda, consistently classified the oil as an ayurvedic medicinal preparation. The literature and certificates provided by the assessee substantiated the claim that the oil is marketed and used as a medicinal product.3. Evaluation of the burden of proof and evidentiary requirements for tax classification:The court emphasized that the onus to prove the correct classification of a product lies with the Revenue. The Revenue failed to provide evidence to counter the assessee's claim that Ramthirth Brahmi Oil is primarily a medicinal product. The court cited several Supreme Court decisions, including (2003) 5 SCC 60 (Commissioner of Central Excise Vs. Sharma Chemical Works) and (2006) 3 SCC 266 (Puma Ayurvedic Herbal (P) Ltd. Vs. Commissioner, Central Excise, Nagpur), which underscored the importance of the product's primary use and the common understanding of its nature.The court also noted that the mere presence of coconut oil or the fact that the product is sold over the counter does not negate its classification as a medicinal preparation. The primary use and the way the product is marketed and understood by consumers play a crucial role in determining its classification.Conclusion:The court upheld the Tribunal's decision, confirming that Ramthirth Brahmi Oil is a medicinal preparation taxable under Entry 20 Part C of the First Schedule at 5%. The Revenue's appeal was dismissed, and the court reinforced the principle that the burden of proof for tax classification rests with the Revenue. The court's decision was based on extensive evidence provided by the assessee and consistent rulings by various state authorities and the Commissioner of Central Excise.