TaxTMI 
TaxTMI 
2012 (12) TMI 908
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....ority. 2. The essential facts as required for appreciation of the challenge are noticed hereunder: The Officer-in-charge, Churaibari Check Post seized a consignment of the petitioner containing 'Betonin AST Tonic' vide Seizure Case No.1549/CRB/2010-11 on 25.03.2011. The seizure was made on the ground that the petitioner had mis-declared seized goods as 'H.L. medicine' attracting tax @ 5% but on physical verification during the search at Churaibari Check Post it was found by the seizing authority that the item is 'Appetite Tonic' which is taxable @ 13.5% as per Entry No.183 under Schedule II(b). A total quantity of seized goods was 86 C/Bs having value of Rs. 1,30,000/-. Being aggrieved by the said order of seizure dated 25.03.2011, the petitioner filed for revision under Section 70(2) of the TVAT Act, being Revision Case No.08/2011. In the said revision petition, the previous order dated 29.04.2011 (Annexure-P/6) and the report of the Deputy Drugs Controller dated 17.03.2011 passed in a previous proceeding were heavily relied by the petitioner and claimed that there was no mis-declaration inasmuch as the Deputy Drugs Controller had categorised the said 'Betonin AST Tonic' ....
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.....5% instead of schedule 11(a) taxable @ 5%. Therefore, the conclusions drawn by this court in Rev. case No. 08/2011 dt. 03.05.2011. 8. The Tripura VAT Act 2004 and the Tripura VAT Rules 2005 do not define the term 'medicines' and 'drugs' appearing in the Entry No. 67(i) of Schedule 11(a) taxable @ 5%. Therefore, the meaning of the drug as given in Section 3 of Drugs and Cosmetics Act 1940 cannot be taken as sole definition for the purpose of the classification & taxation of the product under TVAT Act 2004. Moreover, it is an established law that when two interpretations or explanations of a particular point are possible and one such interpretation has been explicitly mentioned in the statute and other interpretation is only an inference from some other statute, then the interpretation flowing out of the statute book governing the action of the adjudicator will have primacy over the other. In present case, the Entry No. 183 of Schedule II (b) clearly included the Tonics irrespective of its preparation method but the Entry 67(i) of Schedule only mentions drug, whose meaning & scope has not been even defined in the Tax law. Therefore, in such case the contents of Entry No. 183 w....
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....H.L. medicine, so that ground for seizure is not justified. Heard both parties. After hearing and on perusal of the records, it appears that the goods was properly declared and the ground for seizure is not justified. Accordingly, it is ordered that S.T. Churaibari would release the seized goods to the petitioner. Thus the case is disposed of." For drawing further support, Mr. Deb drew attention of this court to the report of the Deputy Drugs Controller, dated 17.03.2011 as available at Annexure-P/3 to the petition, wherein the Deputy Drugs Controller had in an unambiguous term given his opinion that 'Betonin' is a drug as per definition of 'drugs' under the Drugs & Cosmetics Act,1940. The reference to the Deputy Drugs Controller was made by the Revisional Authority vide their letter No.F.1-2/Vol-IV/ST/CRB/86(P)/800-801, dated 28.02.2011. The petitioner also has made reference to similar opinion of Inspector of Taxes, Kamrup, Guwahati as available at Annexure-P/4 to this petition. To demonstrate the correlation with the present case and the previous case, the petitioner has annexed the order of seizure and invoices of both the cases. 6. In a nutshell the p....
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....ct inasmuch as the very purpose of the said mechanism is to curb evasion of tax. But in the instant case, the petitioner had made a mis-declaration of the taxable goods namely 'Betonin AST Tonic' as 'H.L. Medicine' to evade the VAT unlawfully. Such mis-declaration is a serious offence. He further stated that the 'Tonic' falls under Entry 183 of Schedule II(b) of the TVAT Act,2004 but the same was declared by the petitioner as 'H.L. medicine' which falls under Entry 67(i) of Schedule II(a) of the TVAT Act,2004 to evade tax. During physical inspection at the barrier at Churaibari Check-post, it was detected that the goods were 'Appetite Tonic' but the petitioner had mis-declared to evade tax. Those were lawfully seized by the order dated 25.03.2011 after search. Mr. N.C. Pal, learned Govt. Advocate supported the impugned order and urged for no interference. On the point of not following the previous order dated 29.04.2011 as passed in Rev. Case No.08/2011 by the Revisional Authority, Mr. Pal contended that in the impugned order the statutory provisions have been followed and the Revisional Authority was not confronted with any ambiguity in those provisions and as such he did not feel....
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....l, the Apex Court held that it is not correct to give as wide a meaning as possible to the terms used in a statute simply because the statute does not define an expression. It was further contended that the correct law is that the Courts have to endeavour to find out the exact sense in which the words have been used in a particular context. It was also contended that the Courts are entitled to look at the statute as a whole and give an interpretation in consonance with the object of the statute and what logically follows from the terms used. The learned Govt. Advocate also relied another decision of the Supreme Court in State of Maharashtra vs. P.B. Desai, as reported in (2003) 4 SCC 601 on the point that when the plain reading of the provision brings out what is intended by the legislature, the court or any other statutory authority should not venture for further interpretation. 10. Referring to the provisions of Entry No.183 of Schedule II(b) of the TVAT Act, Mr. Pal, learned Govt. Advocate would contend that the 'Tonic' is covered by Entry 183 of Schedule II(b) of the TVAT Act, irrespective of whether that was prepared according to pharmacopial standards or otherwise. As s....
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.... by the tyre cord. The properties and characteristics of the fibre constituting the tyre cord, it is said, determines the tyre performance. The weft in the fabric, it is pointed out, merely plays the subsidiary role of holding the cord in place before the process of tyre manufacturing is commenced. 7. Now, in determining the meaning or connotation of words and expressions describing an Article or commodity the turnover of which is taxed in a sales tax enactment, if there is one principle fairly well-settled it is that the words or expressions must be construed in the sense in which they are understood in the trade, by the dealer and the consumer. It is they who are concerned with it, and it is the sense in which they understand it that constitutes the definitive index of the legislative intention when the statute was enacted. As sales tax the liability falls on the seller, who in his turn passes it on to the consumer. As purchase tax, the liability falls directly on the purchaser. A long train of authorities supports that view, and we need refer only to the recent Judgment of this Court in Porritts and Spencer (Asia) Ltd v. State of Haryana, in which reference has been made to s....
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....nion of India & Ors., as reported in (1985) 3 SCC 284, on a similar circumstances where the classification of Properzi Rods vis-à-vis the wire rods had fallen for consideration of the Apex Court. In paras 12 and 13, the Apex Court held : "12. ... This Court has consistently taken the view that, in determining the meaning or connotation of words and expressions describing an article in a tariff schedule, one principle which is fairly well-settled is that those words and expressions should be construed in the sense in which they are understood in the trade, by the dealer and the consumer. The reason is that it is they who are concerned with it and, it is the sense in which they understand it which constitutes the definitive index of the legislative intention. (See CST v. Jaswant Singh Charan Singh; Minerals & Metals Trading Corporation of India Ltd. v. Union of India; Dunlop India Ltd. v. Union of India; State of UP. v. M/s. Kores (India) Ltd. and Delhi Cloth and General Mills Co. Ltd. v. State of Rajasthan). The difficulty in applying the principle of these decisions to the instant case is that the contention of the appellant itself in the earlier revision application whic....
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.... reported in 1994 Supp (3) SCC 122, on the classification of products, the Apex Court held that there is no single test of determining the class of the taxable goods. Profitably, paragraphs 4 and 5 are extracted hereunder: "4. Having set out the above circumstances, the tribunal applied the test predominance as well as the test of common parlance or commercial understanding, as it may be called, and arrived at the conclusion in favour of the dealer. In our opinion, the circumstances mentioned as items 1, 2, 5, 7 and 8 read with the affidavits referred to in item 6 are strong circumstances in favour of the view that these suit cases are plastic articles. It is not disputed that the main raw material which goes into manufacture of the said suit cases is plastic. Even in common parlance these suit cases are understood to be plastic goods. It is true that certain other materials are also used in manufacturing the said suit cases and it may also be that their value is substantial - and in some cases more than the value of the plastics - but having regard to the several circumstances aforementioned and applying the common parlance test and the test of usage in trade circles, these goo....
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....ad fallen for consideration of the Apex Court was that whether the 'Selsun Shampo' is a medicament or a cosmetic. In para-26 of that decision, a distinction between the cosmetic and the drug was drawn, taking aid from the Drugs and Cosmetics Act, 1940. For appreciating the method that was followed by the Apex Court in B.P.L. Pharmaceuticals Ltd.(supra), paras 26, 27, 28, 29, 30 and 31 are reproduced hereunder : "26. It is true that the learned Counsel for the appellants have placed reliance on the definition of the words 'cosmetic and drug' as defined in the Drugs and Cosmetics Act, 1940. On a perusal of the definitions, we can broadly distinguish cosmetic and drug as follows: "A 'cosmetic' means any article intended to be rubbed, poured, sprinkled or sprayed on, or introduced into, or otherwise applied to the human body or any part thereof for cleansing, beautifying, promoting attractiveness, or altering the appearance, and includes any article intended for use as a component of cosmetic." and "A 'drug' includes all medicines for internal or external use of human beings or animals and all substances, intended to be used for or in the diagnosis, treatments, miti....
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....ess is likely to harm or result in adverse effect. Once the therapeutic quantity of the ingredient used, is accepted, thereafter it is not possible to hold that the constituent is subsidiary. The important factor is that this constituent (Selenium Sulfide) is the main ingredient and is the only active ingredient. (Emphasis added) 30. As rightly contended by the learned senior counsel for the appellants that merely because there is some difference in the tariff entries the product will not change its character. Something more is required for changing the classification especially when the product remains the same. We have noticed that the Excise Authorities have accepted the decision of the Central Board of Excise and Customs treating the product in question as patent and proprietary medicine by not challenging the same or by allowing the same to become final. We have also seen that the Central Board of Excise and Customs have given numerous points in support of its conclusions for holding the product in question as patent and proprietary medicine. Principal among them at the risk of repetition can be recalled. They are as follows: "(a) It was used for the treatment of a di....
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....sion, the Apex Court as rendered in Shree Baidyanath Ayurved Bhavan Ltd. Vs. Collector of Central Excise, Nagpur etc., as reported in (1996) 9 SCC 402, considered how to make the classification to fit the same in a fiscal statute, and held: "3. We have heard the learned Counsel at some length. He also invited our attention to the provisions of the Drugs & Cosmetics Act, 1940, the opinion of the Experts, the statements of a few consumers as well as the description given in certain Ayurvedic Books and contended that the preparation would fall within the relevant entry in the exemption notification. The Tribunal rightly points out that in interpreting statutes like the Excise Act the primary object of which is to raise revenue and for which purpose various products are differently classified, resort should not be had to the scientific and technical meaning of the terms and expressions used but to their popular meaning, that is to say, the meaning attached to them by those using the product. It is for this reason that the Tribunal came to the conclusion that scientific and technical meanings would not advance the case of the appellants if the same runs counter to how the product is ....
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....pra) got approval, holding that the said decision does not lay down the test of classification as concluded by the Department at all. In that case, the Tribunal on consideration of the evidence produced before it while found that in common parlance the product was not described as a medicinal preparation but was described as toilet preparation. It was held : "5. It is not the appellant's case that any of these circumstances were present in this case, besides the decision in Shree Baidyanath case (supra) does not lay down, the test of classification as concluded by the Department at all. In that case the Tribunal had considered the evidence produced before it with regard to the sale and purchase of the product in question. It was found as a matter of fact that in common parlance the product was not described as a medicinal preparation but was described as a toilet preparation. This court affirmed the tests laid down by the Tribunal, namely, that since the primary object of the Excise Act was to raise revenue, resort should not be had, for the purpose of classification, to the scientific and technical meaning of the terms and expressions used therein but to their popular meani....
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....by the consumers of the product in the common parlance. 19. In Commissioner of Central Excise, Delhi Vs. Carrier Aircon Ltd., as reported in (2006) 5 SCC 596, the Apex Court has categorically discarded that end use of the product, not by itself decisive. There are a number of factors to be taken into consideration. Some of such factors enumerated by way of illustration in that case. Profitably, paras 14 and 16 of Carrier Aircon Ltd.(supra) are extracted hereunder : "14. End use to which the product is put to by itself cannot be determinative of the classification of the product. See Indian Aluminium Cables Ltd. v. Union of India. There are a number of factors which have to be taken into consideration for determining the classification of a product. For the purposes of classification the relevant factors inter alia are statutory fiscal entry, the basic character, function and use of the goods. When a commodity falls within a tariff entry by virtue of the purpose for which it is put to (sic produced), the end use to which the product is put to, cannot determine the classification of that product. (Emphasis supplied) 16. Revenue is classifying the impugned chillers as parts o....
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.... product falls under Chapter 30 or Chapter 33. In a recent decision in Puma Ayurvedic Herbal (P) Ltd. v. CCE, this Court observed that in order to determine whether a product is a cosmetic or medicament, a twin test (common parlance test being one of them) has found favour with the courts. This is what this Court observed: (SCC pp. 269-70, para 2) "2. ...In order to determine whether a product is a cosmetic or a medicament a twin test has find favour with the courts. The test has approval of this Court also vide CCE v. Richardson Hindustan Ltd. There is no dispute about this as even the Department accepts that the test is determinative for the issue involved. The tests are: I. Whether the item is commonly understood as medicament which is called the common parlance test. For this test it will have to be seen whether in common parlance the item is accepted as a medicament. If a product falls in the category of medicament it will not be an item of common use. A user will use it only for treating a particular ailment and will stop its use after the ailment is cured. The approach of the consumer towards the product is very material. One may buy any of the ordinary soaps availa....
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.... seen is how the consumer looks at a product and what is his perception in respect of such product. The user's understanding is a strong factor in determination of classification of the products. 50. We find it difficult to accept the contention of the learned senior counsel for Baidyanath that because DML is manufactured exclusively in accordance with the formulae described in Ayurveda Sara Samgraha which is authoritative text on ayurvedic system of treatment and is notified in the First Schedule to the Drugs and Cosmetics Act, 1940 and the said product is sold under the name `Dant Manjan Lal' which is the name specified for the said product in Ayurveda Sara Samgraha, the common parlance test is not applicable. As a matter of fact, this contention is based on misplaced assumption that Chapter Sub- Heading 3003.31 by itself provides the definition of ayurvedic Medicine and there is no requirement to look beyond. (Emphasis supplied) 51. West Regional Bench of the Tribunal in its order dated 13.12.2000 which is subject matter of Civil Appeal 4048/2001 observed thus: "The Drugs and Cosmetic Act, 1940 provides for a licence to be obtained for manufacture of Ayurvedic, ....
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....roduct was a medicament, as is normally understood by persons in the trade, was shown to possess the therapeutic or prophylactic properties, was demonstrated as to be medicament by being prescribed for a limited period, for a specific disease or disorder. By virtue of the amendment made to the tariff, these considerations cannot be gone into. The judgment of the Supreme Court therefore cannot be a deciding factor in determining its classification under the heading as it now stands. This in fact is the view that has been expressed by the Commissioner (Appeals), Patna, whose order was cited by the advocate for the appellant. We therefore hold t hat the product was rightly classifiable under heading 30.03 as claimed by the appellant." 52. We do not agree. The approach of the West Regional Bench is fallacious in what we have indicated above as it overlooks and ignores common parlance test which is one of the well recognized tests to determine whether the product is classifiable as medicament or cosmetic and that has been consistently followed by this Court including with regard to this very product. It also overlooks the well-settled legal position that without a change in the natur....
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.... was held to be a dependable test. However, in a decision as rendered by the Apex Court in Commissioner of Central Excise, Delhi Vs. M/s Ishaan Research Lab (P) Ltd. & Ors., as reported in 2008 AIR SCW 6235, it was held that the onus of establishing that the product falls within a particular item is always on the Revenue and if the Revenue did not lead satisfying evidence then the onus is not discharged.The following passages of the said judgment are extracted hereunder : "27. Following the above judgment this Court held in favour of the assessee in Calcutta Chemicals Co. Ltd. v. Commissioner of Central Excise, Chennai reported in 2003 (154) ELT 326(SC) in respect of Maha Bringaraj Oil to which we have already made a reference and also in the decision in Commissioner of Central Excise, Calcutta-IV v. Pandit D.P. Sharma reported in 2003 (154) ELT 324(SC) in case of Himtaj Oil. Thus in the aforementioned judgment this Court followed the law laid down in BPL Pharmaceutical's case (supra) even after noting the judgment in Shri Baidyanath Ayurved Bhavan's case(supra). We, therefore, cannot and would not accept the argument by Shri Radhakrishnan that we must ignore all these j....
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....mere decision of a court of law without more cannot be justification enough for changing the classification without a change in the nature of a product or a change in the use of the product, or a fresh interpretation of the tariff heading by such decision. The said decision was distinguished on the ground that the aforementioned tests were not applicable there. In para 5 it is pointed out by the court in the following words: "The court did not itself affirmatively hold that what was laid down by the Tribunal as a test to be `ordinarily' followed was invariably to be the sole test for determining whether a product is to be proved as a medicine or as a cosmetic. The Court then went on to approve the law laid down in BPL Pharmaceutical's case(supra) and other cases, namely, Sharma Chemical Works(supra) and Meghdoot Gramodyog Sewa Sansthan' case(supra) and ultimately held in favour of the assessee and against the Revenue. 28. Lastly the same question came to be considered in details in Puma Ayurvedic Herbal (P) Ltd. v. Commissioner Central Excise, Nagpur [2006(196)ELT3(SC)] though on the question of valuation. One of us (Ashok Bhan, J) was a party to this....
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.... on the part of the Revenue to prove that these products are cosmetic as has been held in BPL Pharmaceutical's case. In that view we are of the clear opinion that the Tribunal was right in holding these products to be the medicinal products and we approve of the findings of the Tribunal in that behalf regarding the classification of the product." Therefore, the twin test as adopted by the Tribunal was approved by the Apex Court and it was approved as the safe procedure to classify the product. 25. The Apex Court in Commissioner of Central Excise vs. M/s Wockhardt Life Sciences Ltd., as reported in 2012 AIR SCW 2017, in no uncertain terms held that the combined factors those are required to be taken note of for the purpose of the classification of the goods are the composition, the product literature, the label, the character of the product and the user to which the product is put. However, the miniscule quantity of the prophylactic ingredient is not a relevant factor. 26. It has been further held in M/s Wockhardt Life Sciences Ltd.(supra) as follows: "30. There is no fixed test for classification of a taxable commodity. This is probably the reason why the 'common p....
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....ut, cannot necessarily be determinative of the classification of that product under a fiscal schedule like the Central Excise Tariff. What is more important is whether the broad description of the articles fits in with the expression used in the Tariff. In M/s Wockhardt Life Sciences Ltd.(supra) the Apex Court considering Ishaan Research Lab (P) Ltd.(supra) held as under : "43. In Commissioner of Central Excise, Delhi v. Ishaan Research Lab (P) Ltd. : (AIR 2008 SC (Supp) 540 : 2008 AIR SCW 6235)(supra), the issue before this Court was whether the products manufactured by the Assessee would fall under Sub- Heading 3003.30 as medicament or under Chapter 33 as cosmetics. The Assessee contended that each of the products was having ayurvedic medicinal herbs in it and even the labels on these products claim specifically the medicinal properties of the product. The Assessee further urged that even if the user of product leads to improvement in appearance of a person that by itself cannot bring it into the category of "cosmetics" if otherwise the product is having a medicinal value and is marketed as such. According to the revenue, all these products were understood to be the "cosmet....