2020 (6) TMI 549 - HC - VAT and Sales Tax

Appeal Dismissed: Black Disinfectant Fluid Classified as Drug under Schedule C

The appeal was dismissed, affirming that Black Disinfectant Fluid (BDF) falls under Entry 25 of Schedule C of the 2003 Act. The Tribunal relied on the ... Classification of goods - Black Disinfectant Fluid (BDF) - whether covered by Entry 25 of Schedule C of HVAT Act and is therefore leviable to tax at concessional rate as Schedule C item, whereas the Entry 25 of the HVAT Act deals with specific items and BDF does not found mentioned therein - HELD THAT:- The conclusion arrived at by the Tribunal is in consonance with common parlance test. The assessee produced letter dated 7.1.2016 received from the Assistant State Drug Controller, Haryana under the Right to Information Act,2005. The letter stated that BDF is manufactured under Schedule O of the 1940 Act and falls in the category of 'drugs' defined in Section 3(b) of the said Act. The information is provided by the official of the office dealing with the said product and issuing licence under the 1940 Act for manufacture of BDF - There is no contradiction by the State to the contention that BDF is used as a disinfectant to sterilize houses, hospitals, veterinary hospitals etc. and that the product is also applied to the wounds of animals to kill maggots, worms etc. in the wounds. The case of the appellant is that BDF be treated to be covered under the residuary entry. The contention lacks merit. Resort to residuary entry can only be made if the product is not covered under a specific Entry - BDF is covered under Entry 25 of Schedule C of the 2003 Act. No interference is called for in the order of the Tribunal - Appeal dismissed. Issues:1. Interpretation of Entry 25 of Schedule C of HVAT Act2. Classification of Black Disinfectant Fluid (BDF) under Entry 25 of Schedule C3. Application of common parlance test in interpreting fiscal statutes4. Reliance on definition of 'drug' under the Drugs and Cosmetics Act, 19405. Consideration of BDF as a drug under Schedule C of the 2003 Act6. Use of residuary entry in tax classificationInterpretation of Entry 25 of Schedule C:The appeal raised questions regarding the interpretation of Entry 25 of Schedule C of the HVAT Act. The Tribunal had to determine if Black Disinfectant Fluid (BDF) falls under this specific entry.Classification of Black Disinfectant Fluid:The Tribunal concluded that BDF is indeed covered under Entry 25 of Schedule C of the 2003 Act. The appellant argued that BDF does not fit the definition of 'drug' as intended by the legislature. However, the Tribunal relied on the common parlance test to interpret the entry, emphasizing how goods are understood by those dealing with them.Application of Common Parlance Test:The judgment extensively discussed the application of the common parlance test in interpreting fiscal statutes. Citing various legal precedents, the court emphasized understanding terms in their popular sense, as perceived by individuals involved in the relevant industry.Reliance on Definition of 'Drug':In the absence of a specific definition under the 2003 Act, the Tribunal appropriately relied on the definition of 'drug' provided in Section 3(b) of the Drugs and Cosmetics Act, 1940. This definition includes substances used for diagnosis, treatment, or prevention of diseases in humans or animals.Consideration of BDF as a Drug:The Tribunal's decision to classify BDF as a drug under Entry 25 of Schedule C was supported by evidence from the Assistant State Drug Controller, confirming BDF's categorization as a drug under the 1940 Act. The court noted that BDF's usage as a disinfectant aligned with the definition of 'drug' under the legislation.Use of Residuary Entry:The appellant's argument to classify BDF under the residuary entry was dismissed as BDF was found to be specifically covered under Entry 25 of Schedule C. Legal precedent highlighted that if a product fits a specific entry, resorting to the residuary entry is not warranted.In conclusion, the appeal was dismissed, affirming the Tribunal's decision that BDF falls under Entry 25 of Schedule C of the 2003 Act. The judgment underscored the importance of applying the common parlance test and relying on relevant definitions to interpret tax classifications accurately.