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2024 (8) TMI 392
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....he revision petitions involve the common question of law as to whether, under the facts and circumstances of the case, the Commercial Tax Tribunal was legally justified in holding that Boro-Plus Antiseptic Cream (hereinafter referred to as the 'BPAC') is a medicated ointment and covered under entry no. 41 of Schedule II Part (A). 2. As the issue involved in all the revision petitions is common, the said petitions are being decided by a common order. 3. The factual matrix in all the revision applications is also similar. Accordingly, I have outlined the factual matrix of only one case (STRE No. 274 of 2018) below: a. The instant revision petition pertains to the rate of tax to be levied on the sale of BPAC. b. The Assessing Authority in the instant case had levied tax on BPAC at the rate of 14% after categorising it as an 'unclassified item'. c. Being aggrieved by the aforesaid assessment order passed by the Assessing Authority, M/s Emami Ltd. (hereinafter referred to as the 'Respondent') preferred an appeal before the First Appellate Authority which was dismissed vide order dated July 26, 2016. d. The Respondent then filed an appeal before ....
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.... cream and advertises the same on electronic media as an antiseptic cream. g. The respondent has specifically advertised that "Millions of users believe in Boroplus- India's number one antiseptic cream...". According to the respondent, the fact that BPAC is a 'medicated ointment' is not advertised or mentioned. h. The Tribunal has wrongly concluded that the authorities below have ignored the contents mentioned in the drug licence and have decided the classification of BPAC based on the prescription on the packet. i. Common parlance has always been accepted by the Hon'ble Supreme Court for the determination of nature and character of goods. BPAC is being purchased by the consumers for its regular use without any prescription of the doctor. Consumers never use it to cure any disease. On the other hand, a 'medicated ointment' is always used for an ailment and its use comes to the end when the ailment comes to the end. Hence, BPAC cannot be held to be a 'medicated ointment'. j. The Hon'ble Supreme Court in CTT -v- Kartos International Ltd. reported in 2011 NTN (Vol 146) 17 has held that classification of any commodity cannot be made on its scientific....
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....Dant Manjan' is liable to be taxed as an unclassified item even though the same was manufactured under a drug license issued by the competent authority. r. In the instant case, antiseptic cream has been excluded from the schedule and hence the same is liable for taxation as an 'unclassified item'. s. Once the product that is 'antiseptic cream' stood excluded from Part-A of Schedule - II and did not fall either in Schedule - I or Schedule - III or Schedule - IV or in any other entry of Schedule - II in either Part-A or Part-B, the product 'antiseptic cream' was thus classified under Schedule - V in terms of Section 4(1)(d) of the Act by the Revenue. t. There is a clear diversion made by the legislature which is for a definitive purpose. The classification entry was amended in terms of Section 4 of the Act whereby 'antiseptic cream' was specifically excluded. The Revisionist discharged its burden by placing on record the fact that there has been amendment in the schedule and this fact was duly noted by the Assessing Officer, Appellate Authority and the Tribunal. The Revisionist has established that it has taken the product out from the ambit of a particular....
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....judgment of the Privy Council in Quebec Railway, Light Heat and Power Co. Ltd. -v- Vandry and Ors. reported in AIR (1920) PC 181. x. In the instant case, the Respondent is claiming to be classified under Part-A of Schedule-II of the Act and is claiming to be covered under Entry-41 whereas it stands already classified under Schedule-V of the Act. As a consequence, the Respondent is claiming to be entitled to pay a reduced rate of tax by taking aid of the fact that it falls under a different head. Where the Assessee claims to pay a lower rate of tax, the burden falls on the Assessee to establish that they are liable to pay a lower rate of tax under a different head. Therefore, the primary burden is to be discharged by the Respondent in the instant case and not by the Revenue. y. The Respondent never put to challenge the amendment introduced by the notification dated October 10, 2012 by filing a separate writ petition. Therefore, the notification dated October 10, 2012 by which the amendment was made by the state legislature remains operative and is binding on the Respondent. z. There is a difference between exemption and classification. Under Section 7 of t....
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....stributors (P) Ltd. reported in (1995) 1 SCC 259, and State of Karnataka -v- State of T.N. reported in (2016) 10 SCC 617. af. The core issue is that whether from the evidence that was led by the Respondent with respect to BPAC, the formulation was antiseptic or not. There is no discussion by the Tribunal of the formulation of an antiseptic. For qualifying as a drug or medicine it is antiseptic quality or its properties that are to be considered as relevant factors. The vehicle to carry antiseptic property or quality will be irrelevant. It is a well-known fact that all ointments are creams but all creams are not ointments. However, no finding in this regard has been returned by nor any evidence has been led before the Tribunal. For common parlance, 'antiseptic' is not understood as medicine. ag. The proper approach in the instant case would be to remand the matter and give opportunity to both the parties to bring fresh material on record and to lead evidence so that proper conclusion may be drawn by the Tribunal. Reliance is placed upon the judgment of the High Court of Uttarakhand in Cadbury India Ltd. -v- Commissioner, Commercial Tax, Uttarakhand reported in 2019....
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....etween antiseptic cream and medicated ointment. The Tribunal considered meaning of both the said expressions and held that from the evidence it was clear that antiseptic cream and medicated ointment have different characteristics. In the drug licence also, BPAC was categorised as "ointment - Ayurvedic medicine". g. As per the expert evidence of Shri Loknath Pramanik (formerly Additional Director, Drugs Control and Member, Pharmacist Council of India), BPAC is "an ointment with approximately 67% oil ingredient and 10% water content and the balance being active ingredients and excipients. Moreover, BPAC is occlusive in nature which is the property of an ointment". As per various authoritative publications such as British Pharmacopoeia, International Journal of Pharmaceutics, Remington's Pharmaceutical Manufacturing (Part V) and other publications cream and ointment are two different items. Comparatively, in cream the quantity of water is much more whereas in ointment the quantity of water is much less as compared to the quantity of oil. Due to this reason, cream spreads easily on the skin and skin absorbs the same quickly and easily. As against this, ointment is a greasy pro....
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....aced upon the judgement of the Constitution Bench of the Hon'ble Supreme Court in Sardar Gurmej Singh versus Sardar Pratap Singh Kairon reported in AIR 1960 SC 122. k. Drugs and medicines may be of hundreds of types and varieties. These may also be available in various forms for external use and application. Such drugs and medicines have not been excluded from Entry 41. On the other hand, medicated ointment is specifically covered by the entry. It was never the intention in amending Entry 41 to exclude any drugs and medicines simply due to their being in the form of an ointment. The expression "medicated ointment" is not qualified and it covers all types and varieties of medicated ointments. Nothing is excluded from the scope and ambit of "medicated ointment". If the goods are medicated ointment, these may have various medicinal properties and some of these may be antiseptic in nature but due to any such reason, these do not cease to be "medicated ointment". No such limitation or restriction can be imposed on the expression "medicated ointment" used in Entry 41. The entry cannot be amended or recast by the Departmental authorities. l. Without prejudice to the afor....
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.... to the aforesaid, even assuming that two views are possible relating to classification of BPAC, since it is a matter of chargeability, the view favourable to the Assessee is to be applied. The position is however different in relation to interpretation of exemption notifications which is not the position in the present case. This principle of law was recently reiterated by the Constitution Bench of the Hon'ble Supreme Court in Commissioner of Customs -v- Dilip Kumar & Co. reported in (2018) 9 SCC 1. p. Principles relating to classification of Ayurvedic drugs and medicines are well settled by the judgements of the Hon'ble Supreme Court. The twin tests are as to whether the commodity is known as a medicament in common parlance and as to whether the ingredients used in the product are mentioned in the authoritative Ayurvedic books. Both the said tests are satisfied in respect of BPAC. In support of common parlance test, the respondent produced a whole lot of documents and evidence including certificates and affidavits from medical shops, Ayurvedic doctors, dermatologists, hospitals and dispensaries, consumers, survey reports, clinical trial reports, communications from Gover....
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.... is that when there is a specific entry covering the goods, whether the residual entry can at all be invoked and the legal position in this regard is well settled by the judgements of the Hon'ble Supreme Court. t. In light of the aforesaid, the instant revision petition needs to be dismissed by this Court. ANALYSIS AND CONCLUSION 6. I have heard the learned counsel appearing for the parties and perused the materials on record. 7. First and foremost, the issue lies at the centre of the instant dispute is with regard to the statutory interpretation of Entry 41 to Schedule II of the Act. 8. Entry 41, as effective from October 11, 2012, reads as follows: "Drugs and Medicines excluding medicated soap, shampoo, antiseptic cream, face cream, massage cream, eye jel and hair oil but including vaccines, syringes and dressings, medicated ointments, light liquid paraffin of IP grade; Chooran; sugar pills for medicinal use in homeopathy; human blood components; C.A.P.D. Fluid; Cyclosporin." 9. In the case of Sardar Gurmej Singh (supra), the Hon'ble Supreme Court shed light on the importance of interpreting legislative provisions as a whole, ensuring that both in....
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....s and usage, establishing that specific therapeutic items are included for beneficial tax treatment. The clear separation of excluded and included items brings out the distinct nature and purpose of the products, with "medicated ointments" being recognised for their essential therapeutic roles. 11. It is important to understand that the conjunction "but" has been used in Entry 41 not only because of a mere linguistic choice but because it is a vital factor with regard to delineating inclusions and exclusions within the same legislative framework. The term "but" is used to place forward an exception to the preceding exclusions, implying that although several items have been excluded, medicated ointments are specifically included here. This construction in particular makes it evident that the exclusion of antiseptic creams does not unintentionally exclude products with similar applications but different compositions and therapeutic intents, such as medicated ointments. 12. The term "but" has played an important role in legislative language wherein it has introduced exceptions and elucidated the scope of regulatory provisions. "But", in Entry 41, is parallel with terms like "exp....
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....ther they are understood to be used in their cognate sense. They take as it were their colour from each other, that is, the more general is restricted to a sense analogous to a less general. The same rule is thus interpreted in "Words and Phrases" (Vol. XIV, p. 207): "Associated words take their meaning from one another under the doctrine of noscitur a sociis, the philosophy of which is that the meaning of a doubtful word may be ascertained by reference to the meaning of words associated with it; such doctrine is broader than the maxim ejusdem generis". In fact the latter maxim "is only an illustration or specific application of the broader maxim noscitur a sociis". The argument is that certain essential features of attributes are invariably associated with the words "business and trade" as understood in the popular and conventional sense, and it is the colour of these attributes which is taken by the other words used in the definition though their normal import may be much wider. We are not impressed by this argument. It must be borne in mind that noscitur a sociis is merely a rule of construction and it cannot prevail in cases where it is clear that the wider words have been deli....
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.... ointments may be categorised as antiseptic creams. If a product is more than just an antiseptic cream and qualifies as a medicated ointment, it will be included in Entry 41. 16. The issue that now requires to be answered is whether BPAC is to be classified as a medicated ointment or not. The Tribunal, in all its wisdom, after examining relevant evidence and the difference between antiseptic creams and medicated ointments, came to the conclusion that BPAC falls under the ambit of 'medicated ointment', which would qualify it for claiming the benefit of exclusion under Entry 41. The relevant portion is extracted below: "From the above description it is evident that on the basis of 'base' and 'vehicle', cream and ointments are two separate things. According to the available material, oil quantity is more than water in ointment, whereas oil is less than water in cream. This is why cream easily spreads on skin and skin easily absorbs cream, whereas ointment is greasy and sticky and hard to spread on skin. Ointment is not absorbed by skin easily. In the license, issued to the appellant, the disputed product Boroplus antiseptic cream is placed in the category of ointm....
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.... and volatiles is cream. c. Further, based on the information contained on the website of a famous American pharma company Walgreens, the Tribunal pointed out that a cream is preparation of a medication for topical use on the skin with a water base whereas an ointment is a preparation of medication for topical use that contains oil base. It was also highlighted that ointments have a higher concentration of oil compared to cream." 18. As far as BPAC is concerned, the Tribunal placed reliance on the expert opinion of Shri. Loknath Pramanik who had served as Additional Director, Drugs Control, Government of West Bengal and the Member of Pharmacy Council of India and was on the date of Tribunal's judgment a technical consultant in regulatory matter of drugs and cosmetics: "Thus, I would like to conclude that BPHSAC having >50% oil contains and <20% water content is an ointment with approx. 67% oil ingredients and 10% water content and balance active ingredients and excipients. Moreover, BPHSAC is occlusive in nature which is the property of an ointment. The drug license of the product is also granted under the category of ointment. The word "Ointment" is also clear....
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....t, which is essential for its appropriate tax treatment under Entry 41. 22. The onus was on the Revenue to disprove the Respondent's claim and establish that BPAC is solely an antiseptic cream. To meet this burden, the Revisionist needed to provide compelling evidence that BPAC's primary and exclusive function was antiseptic in nature. This required a detailed analysis and presentation of the product's composition and therapeutic effects, demonstrating that any additional benefits were either negligible or ancillary to its antiseptic properties. However, the Revisionist failed to provide such evidence. The absence of contrary evidence from the Revisionist means that the Tribunal's findings, based on the Respondent's robust evidence, stand unchallenged and are not perverse. This failure underscores the critical importance of meeting the burden of proof in legal and regulatory disputes. 23. The Revenue's inability to produce evidence that exclusively supports BPAC's classification as an antiseptic cream significantly weakens its argument. In regulatory and tax disputes, the party challenging the existing classification must provide substantial evidence to support its claims. Th....
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....e has to be interpreted strictly because the State cannot at their whims and fancies burden the citizens without authority of law. In other words, when the competent Legislature mandates taxing certain persons/certain objects in certain circumstances, it cannot be expanded/interpreted to include those, which were not intended by the legislature." 25. In National Cereal (supra), the Hon'ble Supreme Court held that onus to proof chargeability under a different provision lies with the Revenue. Relevant paragraph is extracted below: "12. The notifications by which the rate of tax has been fixed in respect of foodgrains makes it clear that the definition of foodgrains in the notifications is wider than that in Section 14 of the Central Sales Tax Act, 1956. It must be remembered that the notifications are not exception notifications but contain charging provisions. As such the onus to prove that the malted barley does not fall within foodgrains or cereals was on the Revenue. They have failed to discharge the onus. Both the Tribunal and the High Court have concurrently found that malted barley is a foodgrain or cereal for the purposes of the three notifications for reasons tha....
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....e, the revenue's argument that the inclusion of medicated ointment as a drug and cosmetic under Entry 41 of Schedule 11 of the Act is an exemption is completely misplaced. It is to be noted that whether BPAC falls within Entry 41 is in relation to chargeability in a particular schedule and not that of an exemption. It is trite law that an item would be classified as a residuary item only when it does not fall in any other classification. In the present case, using tools of interpretation, the Tribunal has categorically held that BPAC would fall within Entry 41 of Schedule II. The burden of proof was upon the revenue to indicate that the said classification made by the Tribunal was absolutely incorrect and without any basis in law. 29. The failure of the Revenue to produce any evidence to support its claim of reclassification is crucial and to be noted. In legal and administrative proceedings, the burden of proof is a fundamental principle that ensures fairness. When the Revenue seeks to reclassify goods, it must provide evidence that substantiates its position. This evidence might include expert opinions, industry standards, or specific legislative provisions that justify the re....
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....ade its determination based on a well-documented evidentiary record presented by the Respondent. 32. In the judgements of M.T. Khan -v- Govt. of A.P. reported in (2004) 2 SCC 267, Union of India -v- Hansoli Devi reported in (2002) 7 SCC 273, State of Gujarat -v- Patel Ramjibhai Danabhai reported in (1979) 3 SCC 347, Quebec Railway, Light, Heat and Power Company Limited - v- Vandry reported in 1920 SCC OnLine PC 10 and Balram Kumawat -v- Union of India reported in (2003) 7 SCC 628, the facts stated therein are very different from those present in this case. The overarching rationale behind the judgments relied upon by the revisionist is to respect and implement the clear and unambiguous language of legislative texts, reflecting the intent of the lawmakers. The golden rule of literal interpretation serves as a foundational principle, ensuring that the judiciary does not overstep its role by reinterpreting or rewriting laws based on subjective perceptions of justice. It is also important to acknowledge the need for purposive interpretation in circumstances where a literal reading would thwart the legislative intent or lead to unreasonable outcomes. However, we are not joining issue....
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.... vary widely between companies and over time. To put forth an example, a product marketed as a beauty cream might have significant medicinal properties that qualify it as a medicament. However, if its classification were to be done solely on the marketing strategies, its true nature and intended therapeutic use could be overlooked. The detailed descriptions on the packaging, which highlight BPAC's healing, curative, and prophylactic properties, are important to consider because they provide concrete information about the product's intended use and medicinal value. These details go on to establish BPAC as a medicated ointment because they offer a factual basis for its classification, independent of any advertising claims. 35. The principle that marketing or advertising cannot dictate tax classification has been laid down in several cases that place objective assessment over subjective interpretation. In the case of M/s Blue Star -v- UOI (supra), the Bombay High Court was considering the classification of "walk-in coolers". The department had, in that case, classified the product to the detriment of the assessee. The Bench therein held that it is not on the basis of what the petit....
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....stics and, thereby, removes any possibility of undue influence being used in marketing or advertising tactics whatsoever. 38. In the case of The State of Andhra Pradesh and Others -v- M/s Himani Limited and Others (TRC 166/2004), the Bench comprising of Hon'ble P. Sam Koshy and Hon'ble N. Tukaramji, JJ., dealt with a case wherein the petitioner had filed eleven tax revision cases, against the common order passed by the Sales Tax Appellate Tribunal, Hyderabad (STAT). The entire dispute primarily revolved around six products being manufactured and marketed by the two sister companies, namely M/s Himani Limited and M/s Emami Limited. The products in question were Navaratan Oil, Gold Turmeric Ayurvedic Cream, Nirog Dant Power Lal, Boroplus Antiseptic Cream, Boroplus Prickly Heat Powder, and Sonachandi Chavanprash. The issue that was put forth before the High Court of Telangana was whether the products would fall under Entry 36 or Entry 37 of the Central Goods and Services Tax Act and Telangana Goods and Services Tax Act. If the products were to fall under the classification of cosmetics, then they would become leviable for GST at a rate of 20%. Otherwise, if the products were to be ....
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.... (3) Where an application under this section is pending, the High Court may, on an application in this behalf, stay recovery of any disputed amount of tax, fee or penalty payable, or refund of any amount due under the order sought to be revised: Provided that no order for stay or recovery of such disputed amount shall remain in force for more than thirty days unless the applicant furnishes adequate security to the satisfaction of the Assessing Authority concerned. (4) The High Court shall, after hearing the parties to revision, decide the question, of law involved therein, and where as a result of such decision, the amount of tax, fee or penalty is required to be determined afresh, the High Court may send a copy of the decision to the Tribunal for fresh determination of the amount, and the Tribunal shall thereupon pass such orders as are necessary to dispose of the case in conformity with the said decision. (5) All applications for revision of orders passed under Section 57 in appeals arising out of the same cause of action in respect of an assessment year shall be heard and decided together: Provided that where any one or more of such applicati....
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....nal jurisdiction to that extent. 32. Insofar as the three-Judge Bench decision of this Court in Ram Dass [Ram Dass v. Ishwar Chander, (1988) 3 SCC 131] is concerned, it rightly observes that revisional power is subject to well-known limitations inherent in all the revisional jurisdictions and the matter essentially turns on the language of the statute investing the jurisdiction. We do not think that there can ever be objection to the above statement. The controversy centres round the following observation in Ram Dass [Ram Dass v. Ishwar Chander, (1988) 3 SCC 131] , "... that jurisdiction enables the court of revision, in appropriate cases, to examine the correctness of the findings of facts also...." It is suggested that by observing so, the three-Judge Bench in Ram Dass [Ram Dass v. Ishwar Chander, (1988) 3 SCC 131] has enabled the High Court to interfere with the findings of fact by reappreciating the evidence. We do not think that the three-Judge Bench has gone to that extent in Ram Dass [Ram Dass v. Ishwar Chander, (1988) 3 SCC 131] . The observation in Ram Dass [Ram Dass v. Ishwar Chander, (1988) 3 SCC 131] that as the expression used conferring revisional jurisdictio....
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....ightly disturb such judgments unless there are compelling reasons to do so. Revisional jurisdiction is not intended to be a mechanism for relitigating cases or reopening settled matters. High Courts cannot ordinarily interfere with factual findings arrived at by lower courts or tribunals unless such findings are perverse, based on no evidence, or suffer from a manifest error of law. Revisional jurisdiction does not empower High Courts to reevaluate factual evidence or substitute their own findings for those of the lower courts or tribunals. Revisional jurisdiction is aimed at correcting jurisdictional errors and excesses of law. 43. The concept of perversity in legal contexts refers to a situation where a decision or finding is so unreasonable or contrary to the evidence that no reasonable person could have arrived at it. When dealing with administrative and judicial reviews, including tax and regulatory matters, perversity is a crucial ground upon which decisions can be challenged or revised. However, for perversity to be successfully invoked, certain legal thresholds and evidentiary standards must be met. Here, the Revenue has not articulated any specific grounds of perversity....