1982 (4) TMI 266 - HC - VAT and Sales Tax

Summary

Issues: Classification of tartaric acid as a chemical or a medicine for sales tax purposes.

The judgment by RASTOGI, J., of the Allahabad High Court in Commissioner, Sales Tax, Uttar Pradesh, Lucknow v. Fadral Chemical Works Ltd. revolves around the classification of tartaric acid as a chemical or a medicine for sales tax assessment. The respondent-assessee, a dealer in chemicals and medicines, claimed that tartaric acid should be taxed as a medicine under a specific entry in the notification, while the Sales Tax Officer classified it as a chemical under a different entry. The main issue was whether tartaric acid should be considered a chemical or a medicine for the purpose of sales tax assessment.

The Assistant Commissioner (Judicial) and the Additional Judge (Revisions), Sales Tax, both accepted the assessee's contention that tartaric acid should be classified as a medicine. The revising authorities emphasized that the purpose for which the commodity is sold is crucial in determining its classification. They argued that since the commodity was sold to dealers of medicines and used in the manufacture of medicines, it should be treated as a medicine. The revising authorities also highlighted the specific entry in the notification covering the levy and rate of tax for medicines.

The judgment delves into the understanding of tartaric acid in the medical world, citing references from the British Pharmaceutical Code to establish that tartaric acid is a saline purgative used to relieve constipation. The judge concluded that based on its actions and uses, tartaric acid should be classified as a medicine, even though it falls under the broader category of chemicals. The judgment also references precedents where items were classified based on their intended use and common understanding, rather than strict scientific definitions.

In conclusion, the court upheld the classification of tartaric acid as a medicine by the appellate and revising authorities. The revision was dismissed, and costs were awarded to the respondent-assessee. The judgment provides a detailed analysis of the classification criteria for commodities under sales tax laws, emphasizing the importance of the purpose for which the item is sold in determining its tax category.