1991 (7) TMI 330 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of "water for injection" under the Gujarat Sales Tax Act, 1969.
2. Binding nature of a previous determination order under the Bombay Sales Tax Act, 1959.
3. Prospective effect of the Deputy Commissioner's determination order under the Gujarat Sales Tax Act, 1969.

Issue-Wise Detailed Analysis:

1. Classification of "Water for Injection":
The primary issue was whether "water for injection" fell under entry 26(1) of Schedule II, Part A, or entry 13 of Schedule I of the Gujarat Sales Tax Act, 1969. The assessee argued that "water for injection" should be classified as water under entry 13, which would make it tax-free. The Tribunal, however, held that "water for injection" fell under entry 26(1) as it is used for medicinal purposes. The Court upheld this view, stating that the classification should be based on the "popular parlance" test established by the Supreme Court in Ramavatar Budhaiprasad v. Assistant Sales Tax Officer, which requires interpreting terms as understood by common people. The Court concluded that "water for injection" is not water simpliciter but medicinal water, thus falling under entry 26(1).

2. Binding Nature of Previous Determination Order:
The second issue was whether the previous determination order dated March 25, 1964, under the Bombay Sales Tax Act, 1959, was binding on the Sales Tax Department for all time. The Tribunal held that the previous determination order did not have finality for all time and was not binding on the Department. The Court agreed, referencing the Supreme Court's decision in Doma Sao Mohanlal v. State of Bihar, which stated that each assessment period is distinct and a decision in one period does not operate as res judicata for another period. The Court also cited Commissioner of Sales Tax v. Halward Engineers, supporting the view that subsequent determination orders could be made even if there was a previous order.

3. Prospective Effect of Deputy Commissioner's Determination Order:
The third issue was whether the Deputy Commissioner was justified in not giving prospective effect to his determination order under section 62 of the Gujarat Sales Tax Act, 1969. The Tribunal held that the Deputy Commissioner rightly exercised discretion in not giving prospective effect, aligning the effective date with the Government notification dated April 1, 1976, which provided a concessional tax rate for "water for injection." The Court upheld this view, noting that the notification was issued in response to recommendations by the Hathi Committee, which required special treatment for certain essential drugs. Therefore, the Tribunal's decision to apply the determination from the date of the notification was justified.

Conclusion:
The Court answered all three questions in the affirmative, ruling against the assessee and in favor of the Revenue. The classification of "water for injection" under entry 26(1) was upheld, the previous determination order was not considered binding for all time, and the prospective effect of the Deputy Commissioner's order was deemed appropriate from the date of the relevant Government notification.