1992 (9) TMI 329 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Whether the sales of "Dandwala Keshkalpa" are covered under entry 7 of Schedule III or entry 26(1) of Schedule II, Part A of the Gujarat Sales Tax Act, 1969.
2. Whether the Tribunal was justified in not giving prospective effect to the order of the Deputy Commissioner of Sales Tax.

Issue-Wise Detailed Analysis:

Issue 1: Classification of "Dandwala Keshkalpa"

The core issue was whether "Dandwala Keshkalpa" should be classified under entry 7 of Schedule III (hair-oils) or entry 26(1) of Schedule II, Part A (drugs and medicines) of the Gujarat Sales Tax Act, 1969. The applicant-assessee claimed the product as an ayurvedic medicine, arguing it was used to treat hair-related issues such as premature baldness, hair loss, and dandruff, and was composed of medicinal herbs like brahmi, bhangra, amala, and others. The Deputy Commissioner and the Tribunal, however, classified it as a hair-oil under entry 7 of Schedule III, noting the product contained 82% oil and was primarily used for hair care. The Tribunal emphasized that despite its medicinal properties, the product's primary function was as a hair-oil, not a medicine. The Court upheld this view, stating that the product's description in literature or branding as a medicinal preparation did not alter its fundamental nature as a hair-oil. The Court referenced similar judgments, including the M.P. High Court decision in *Commissioner of Sales Tax v. Sadhna Aushadhalaya* and the Bombay High Court decision in *C.C. Mahajan and Co. v. State of Bombay*, to support its conclusion that the product should be taxed as a hair-oil.

Issue 2: Prospective Effect of the Determination Order

The second issue was whether the Tribunal erred in not giving the Deputy Commissioner's order prospective effect. The applicant argued that under section 62(2) of the Act, the determination order could be given prospective effect, meaning it would apply only to future transactions. However, the Court noted that this was a discretionary power vested in the Commissioner, not a right of the assessee. The Tribunal found no compelling reason to apply the order prospectively, especially since the product had been sold as a hair-oil. Additionally, the applicant had not requested prospective application during the determination proceedings. Consequently, the Court agreed with the Tribunal's decision to apply the order retrospectively.

Conclusion:

The Court answered both questions in the affirmative, ruling against the assessee and in favor of the Revenue. The product "Dandwala Keshkalpa" was classified under entry 7 of Schedule III as a hair-oil, and the Tribunal was justified in not giving prospective effect to the determination order. The reference was answered in the affirmative with no order as to costs.