ITAT overturns revision order, grants relief on Rosemary oil turnover, clarifies tax exemption criteria

Sha Rickabdas Bhoormal. Versus The State Of Tamil Nadu.

Sha Rickabdas Bhoormal. Versus The State Of Tamil Nadu. - TTJ 001, 053, Issues:
- Dispute over the rate of tax in respect of Rosemary oil under the Tamil Nadu General Sales Tax Act, 1959.

Analysis:
The appeal was filed by a partnership firm challenging the rate of tax on Rosemary oil under the Tamil Nadu General Sales Tax Act, 1959. The firm reported a total turnover, and after scrutiny, the reported turnovers were accepted. The authorities, however, noticed the purchase of Rosemary oil from a dealer in Bombay and sought to tax it at 7% under Item 51 of the First Schedule. The firm argued that Rosemary oil did not fall under Item 51 as it was not a scent or perfume but a minor ingredient for hair oil. The Assessing authority disagreed, considering it a useful additive for hair growth. The firm's appeal was rejected by the AAC, who found the oil fragrant and confirmed the assessment. The firm then appealed to the ITAT.

During the ITAT proceedings, a book on modern perfumery was presented, stating Rosemary oil's use as a stabilizer and modifying agent in soap perfume. The firm argued that the oil was never sold as a perfume by itself. The State Representative argued that the purchase by a company selling perfumed hair oil supported the Revenue's stance. After reviewing the arguments and the book on modern perfumery, the ITAT concluded that Rosemary oil was only one of many components in perfume and was not sold or purchased as perfume itself. The ITAT held that for an article to fall under Item 51, it must be sold as a scent or perfume specifically, which was not the case with Rosemary oil. The ITAT found no justification for the revision made by the authorities and upheld the original assessment, canceling the revision order.

In conclusion, the ITAT allowed the appeal, canceling the revision order and restoring the original assessment. The firm was entitled to relief on the turnover of Rosemary oil at 4%. The judgment emphasized that Rosemary oil, being a base oil and not sold or treated as a perfume or scent, did not qualify for taxation under Item 51 of the First Schedule.

This detailed analysis highlights the legal dispute over the tax rate on Rosemary oil, the arguments presented by the firm and the authorities, the evidence from the book on modern perfumery, and the ITAT's reasoning in upholding the original assessment.