1990 (10) TMI 339 - HC - VAT and Sales Tax

Summary

Issues:
Whether herbs, roots, and barks of trees can be considered as medicinal and pharmaceutical preparations under entry 41 of the Second Schedule to the Karnataka Sales Tax Act, 1976.

Detailed Analysis:

1. Facts of the Case:
The petitioner, a dealer in dried herbs, roots, and barks, argued that the goods sold were general goods attracting a 4% sales tax rate. The assessing authority accepted this plea. However, the Assistant Commissioner initiated action, contending that the goods should be taxed at the higher rate under entry 41 of the Second Schedule for medicinal and pharmaceutical preparations.

2. Contentions of the Parties:
The petitioner argued that the goods sold were not medicinal or pharmaceutical preparations, while the State contended that since the goods were used as country drugs, they fell under entry 41. The State relied on a judgment from the Allahabad High Court regarding the classification of medicinal herbs.

3. Judgment Analysis:
The Court interpreted the relevant entry in the Karnataka Sales Tax Act, emphasizing the distinction between medicinal and pharmaceutical preparations and general medicinal products like herbs, roots, and barks. The Court held that for an item to be classified as a medicinal or pharmaceutical preparation, it must be a distinct product prepared from raw materials. The common parlance understanding of medicinal preparations does not encompass herbs, roots, and barks, even if they have medicinal value.

4. Decision:
The Court concluded that herbs, roots, and barks of trees do not qualify as medicinal and pharmaceutical preparations under entry 41 of the Second Schedule to the Karnataka Sales Tax Act. Consequently, the revision petitions were allowed, the orders of the Karnataka Appellate Tribunal and Assistant Commissioner were set aside, and the assessing authority's decision was reinstated.

In summary, the judgment clarified the distinction between general medicinal products and medicinal preparations under the relevant sales tax entry, ultimately ruling that herbs, roots, and barks do not fall under the latter category for taxation purposes.