2016 (8) TMI 133 - HC - VAT and Sales Tax

High Court classifies 'KADIPROL' as poultry feed under tax law, emphasizing commercial usage over warranty label.

The High Court ruled in favor of the appellant, determining that the product 'KADIPROL' should be classified as poultry feed under entry 25 of Schedule I ... Classification of goods - poultry feed versus drugs and medicines - Common parlance / use-test for construing taxing entries - Deference to expert administrative classification - Construction of taxing entries to avoid redundancyClassification of goods - poultry feed versus drugs and medicines - Common parlance / use-test for construing taxing entries - Deference to expert administrative classification - Construction of taxing entries to avoid redundancy - The product 'KADIPROL' manufactured by the appellant is covered by entry 25 of Schedule I of the Gujarat Sales Tax Act, 1969 (poultry feed) and not by the entry dealing with drugs and medicines. - HELD THAT: - The Court accepted the contemporaneous determination by the competent expert authority (Assistant Commissioner, Food & Drugs Control Administration) that the product is an animal feed supplement labelled 'Not for Medicinal Use' and does not require a licence under the Drugs and Cosmetics Act; the taxing authority and Tribunal were not warranted in substituting their view for that expert classification. The Court applied the principle in Pfizer that the characterisation of such products under a sales tax enactment is to be made by reference to common parlance and commercial use rather than purely technical composition; additives including antibiotics can form part of 'poultry feed' where their common/ordinary use is as feed additives. Further, where two specific entries exist, they must be construed so as not to render one redundant; having regard to the expert classification and the common use test, the product falls within the scope of entry 25 of Schedule I. [Paras 5, 6, 7]The Reference is answered in favour of the appellant: 'KADIPROL' is to be treated as poultry feed under entry 25 of Schedule I and not as a drug or medicine.Final Conclusion: The Gujarat High Court allowed the reference, holding that the product 'KADIPROL' is covered by entry 25 of Schedule I (poultry feed); the Tribunal's classification as a drug/medicine was set aside and the matter decided in favour of the appellant. Issues:Interpretation of entry 25 of Schedule I of the Gujarat Sales Tax Act, 1969 regarding the classification of the product 'KADIPROL' as poultry feed or drugs and medicines.Analysis:The case involved a reference made by the Gujarat Sales Tax Tribunal to consider whether the product 'KADIPROL' manufactured by the appellant falls under entry 25 of Schedule I of the Gujarat Sales Tax Act, 1969. The Deputy Commissioner initially classified the product as a drug or medicine under a different entry. The Tribunal upheld this classification, stating that 'KADIPROL' is a non-nutritional feed additive and not primarily for nutrition, thus not qualifying as poultry feed under entry 25. The Tribunal referred to previous judgments for interpretation.The appellant argued that the product was an animal feed supplement labeled as 'Not for Medicinal Use' and did not require a license under the Drugs & Cosmetics Act. They contended that the Tribunal misinterpreted previous judgments and should rule in their favor. The Assistant Government Pleader supported the Tribunal's decision.The High Court analyzed the Tribunal's order and the relevant judgments. It emphasized that the expert authority had deemed no license necessary under the Drugs & Cosmetics Act for manufacturing the product. The Court highlighted the commercial understanding of the term 'poultry feed' and the evolving concept of additives in such feeds. It rejected the government's contention that the warranty on the bill implied medicinal use, emphasizing the common understanding of the term.Referring to specific paragraphs from a previous judgment, the Court concluded that 'KADIPROL' fell under entry 25 of Schedule I as poultry feed. It criticized the Tribunal for its error in classification and ruled in favor of the appellant. The judgment clarified that the product was correctly classified as per the common understanding and commercial usage, overturning the Tribunal's decision.In conclusion, the High Court's judgment resolved the issue by interpreting the relevant entry in the Sales Tax Act and considering the common understanding of the term 'poultry feed.' The Court emphasized the importance of expert opinions and commercial usage in determining the classification of products for taxation purposes, ultimately ruling in favor of the appellant based on the correct interpretation of the law and previous judgments.