1989 (9) TMI 378 - HC - VAT and Sales Tax

Issues Involved:
1. Whether agarbathies fall under the category of perfumes.
2. Whether agarbathies are liable to sales tax under item 36 of the First Schedule to the Andhra Pradesh General Sales Tax Act, 1957.

Detailed Analysis:

1. Whether agarbathies fall under the category of perfumes:
The primary issue in these writ petitions is to determine if agarbathies (incense sticks) qualify as "perfumes" under item 36 of the First Schedule to the Andhra Pradesh General Sales Tax Act, 1957. The petitioners argued that agarbathies are used primarily for religious purposes to keep the atmosphere fragrant and should not be categorized as "scents and perfumes," which are luxury goods. They contended that applying the principle of ejusdem generis, the term "perfumes" should be understood in the context of other luxury items listed under cosmetics and toilet preparations, such as face creams, hair oils, and tooth-paste.

The respondents, represented by the learned Government Pleader, countered that agarbathies fall under the category of "perfumes" as held by the Supreme Court in Commissioner of Sales Tax v. Indian Herbs Research and Supply Co. [1970] 25 STC 151. The Supreme Court had defined "perfume" using the Oxford English Dictionary, which includes substances that emit an agreeable odor when burned, such as incense. The Orissa High Court in Kamaru Zuman Khan v. State of Orissa [1981] 47 STC 22 also held that agarbathies could be taxed as an article of perfumery.

2. Whether agarbathies are liable to sales tax under item 36 of the First Schedule to the Andhra Pradesh General Sales Tax Act, 1957:
Before February 1, 1987, there was no separate entry for agarbathies. However, by G.O. Ms. No. 85 Revenue dated January 27, 1987, which came into force on February 1, 1987, agarbathies were specifically included and taxed at 6 percent. Prior to this, the court had to determine if item 36 applied.

The petitioners relied on various High Court decisions to argue against the classification of agarbathies as perfumes. In Assessing Authority v. Amir Chand Om Parkash [1974] 33 STC 120, the Punjab and Haryana High Court considered whether dhoop and agarbathies were luxury items under the Punjab General Sales Tax Act. The court found that luxury goods must be specified in the Schedule, and a generic term could include both luxury and non-luxury items. However, this decision was based on specific provisions of the Punjab Act, which do not apply to the Andhra Pradesh Act.

The Bombay High Court in Commissioner of Sales Tax v. Gordhandas Tokersey [1983] 52 STC 381 held that sandalwood oil did not come under "perfumes" because it is used in industries and medicinal preparations, not solely for emitting an agreeable odor. Similarly, the Madras High Court in A. Boake Roberts and Co. (India) Ltd. v. Board of Revenue (C.T.) [1978] 42 STC 270 held that synthetic essential oils did not fall under "perfumes" as they did not emit fragrance by themselves.

Despite these arguments, the Andhra Pradesh High Court concluded that the Supreme Court's decision in Commissioner of Sales Tax v. Indian Herbs Research and Supply Co. [1970] 25 STC 151 was directly applicable. The Supreme Court had clearly defined "perfume" to include substances like agarbathies that emit fragrance when burned. Therefore, agarbathies fall under the category of "perfumes" and are liable to be taxed under item 36 of the First Schedule to the Andhra Pradesh General Sales Tax Act.

Conclusion:
The writ petitions were dismissed, and the court held that agarbathies fall under the category of "perfumes" and are liable to sales tax under item 36 of the First Schedule to the Andhra Pradesh General Sales Tax Act, 1957. The court relied on the Supreme Court's decision in Commissioner of Sales Tax v. Indian Herbs Research and Supply Co. [1970] 25 STC 151 to reach this conclusion.

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