TaxTMI 
TaxTMI 
2020 (3) TMI 1317
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.... Ayurvedic Baby Soap 2. Ayurvedic Tooth Paste 3. Ayurvedic Mouth Wash 4. Baby gift pack and 5. Ayurvedic Baby Powder manufactured by the appellant under the drug licence granted under the Drugs and Cosmetics Act, 1940 are eligible for concessional rate of tax in terms of the newly introduced Clause 27 under Entry No. 36 of the IIIrd Schedule to the KVAT Act, 2003. It was contended that, Entry 36 of the 3rd Schedule was with regard to drugs, medicines and bulk drugs including Ayurvedic, Unani and Homeopathic medicine. It is stated that the products enumerated under Entry 36 are specific and had HSN Codes indicated against each of them. Medicaments of the Ayurvedic system, with specific eight digit Harmonized System of Nomenclature (HSN for short) Codes were included in Entry 36. A new sub entry, that is Sub Entry 27, was inserted in Entry 36 of the IIIrd Schedule by the Kerala Finance Act, 2012. The said sub entry read as follows:- (27). Ayurvedic cosmetics containing added medicaments manufactured under drug licence granted under the Drugs and Cosmetics Act, 1940 (Central Act 23 of 1940). (Note:-This entry shall be deemed to have come into force on the 13th day of N....
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....ed specifically taking note of Entry 36 and Rule 23 of the Rules of Interpretation. 5. The learned Senior counsel appearing for the appellant would place reliance on the decision of this Court in Kilban Foods India (P) Ltd., Calicut v. Commissioner, Commercial Taxes, Tvm (2014 (2) KLT SN 4 (C. No. 8) : 2014 KHC 125) to contend that, where two interpretations are possible, the interpretation which is favourable to the assessee should be accepted. It is contended that, the intention of the legislature is to confer a concessional rate of tax and a benefit on the manufacturers of a particular type of commodity and that the Authority for Clarification went wrong in losing sight of this aspect of the matter. 6. It is further contended that the definition of Cosmetics in the Drugs and Cosmetics Act originally contained the words "but does not include soap", at the end of the definition, which was omitted by Act 68 of 1982 with effect from 01.02.1983. It is therefore contended that the definition of Cosmetic, which is presently obtained in the Act, takes in 'soap' as well. 7. Relying on a decision reported in Maharashtra S.B.O.S. and H.S. Educational and Another v. Paritosh: (19....
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.... classification is normally the use it is put to by consumers. 10. The learned Senior Government Pleader, on the other hand, submits that the provisions of a fiscal statute are liable to be construed strictly. It is stated that Entry 27 provides for the inclusion of 'Ayurvedic Cosmetics' containing added medicaments and manufactured under a Drug Licence in Entry 36, for the purpose of grant of concessional rate of tax. It is stated that, to meet the requirements of Sub Entry 27, the product would initially have to be an "Ayurvedic Cosmetic". It is contended that, in the absence of any definition of the word Cosmetic in the statute in question, there can be no importing of the definition from another statute under the regulatory regime, which is bound to be wide in nature than a fiscal statute which intends to grant the benefit to specific products. Relying on the decision of the Apex Court in Commissioner of Central Excise v. Shree Baidyanath Ayurved Bhavan Ltd. (2009 (2) KLT Suppl. 1070 (SC) : (2009) 12 SCC 419), Medley Pharmaceuticals Ltd. v. Commissioner of Central Excise and Customs, Daman (2011 (1) KLT SN 49 (C. No. 66) SC : (2011) 2 SCC 601) and Shree Baidyanath Ayur....
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.... seen in the context of the HSN Code and the judgments based thereon. However, where no HSN Code is assigned, learned counsel submits that, the Article has to be understood in the sense of common parlance and not with regard to the definition in another enactments. 13. Relying on a decision of this Court in State of Kerala v. Tips and Toes Cosmetics India Ltd. (2004 (2) KLT 183 : 2004 KHC 566), it is contended that, 'Kajal', a product of the assessee which was manufactured under a Drug Licence issued by the Drugs Controller, was held to be an 'Ayurvedic Medicine' liable to be taxed at the rate applicable under Entry 79 of the Ist Schedule, it was contended that the Apex Court held that how the commodity is understood in common parlance is the decisive test where the commodity can be classified under different heads. 14. Learned Government Pleader would also place reliance on a decision in Sreedharareeyam Ayurvedic Medicines (P) Ltd. v. State of Kerala ((2011) 19 KTR 561 (Ker.)) which was also rendered in an O.T. Appeal arising from an order of classification under Entry 36. It is contended by the learned Government Pleader that, Sub-Entry 27 of Entry 36 was necess....
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.... concluded by the decisions of the Apex Court that Tooth Paste and Tooth Powder are toilet articles and cannot be considered as Cosmetics in the common parlance. It is contended that, in the case of 'Baby Gift Packs', the articles are sold as a 'composite packet' with a common MRP and that as such, if the specific article that is "Baby Gift Rack" is not available in Entry 36 of the IIIrd Schedule, the same would be exigible to tax as a unified product in the residual entry, that is at the default rate of tax. With regard to Baby Powder, the learned Government Pleader would submit that there could be an interpretation that it is a Cosmetic in common parlance and that as such, the question with regard to the exigibility of tax of that one product can be reconsidered. 18. It is not in dispute before us that Kerala VAT Act is aligned to the 'Customs Tariff', which in turn is aligned to 'Harmonised Systems of Nomenclature'. In the above view of the matter, in the case of products included in the Schedules where the HSN codes are indicated in the schedules or the notifications, there is no difficulty since the products and the interpretations on the basis....
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....matter, contention raised by the petitioners with regard to Tooth Paste which is one of the products, for which clarification is sought for has to fail. With regard to Baby Soap as well, Rule 23 of the Rules of Interpretation specifically excludes Soaps from the purview of Entry 36. In view of the fact that Soaps stand specifically excluded under Rule 23, we are not called upon to decide the question whether Baby Soap is a toilet article in common parlance or not. The clarification given in Annexure-IV order with regard to Soap also is therefore perfectly sustainable. With regard to the clarification sought for in respect of Mouth Wash, Gift Packs and Ayurvedic Baby Powder, we are of the opinion that the clarificatory order is devoid of any reasons whatsoever in holding that those items would not fall within Sub Entry 27. If the common parlance theory is put to use, we fail to see how the clarificatory authority declined the clarification as sought for by the petitioner, in respect of Baby Powder which can be considered as a Cosmetic in common parlance. With regard to Mouth Wash and Gift Pack also, the clarificatory order does not state any sustainable reasons. In the above view of....