1998 (9) TMI 640 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of Ayurvedic Cool Banphool Oil as an Ayurvedic drug or hair oil.
2. Applicability of tax rate under the West Bengal Sales Tax Act, 1954.
3. Validity of the drug license as conclusive evidence for tax purposes.
4. Evaluation of evidence provided by the applicant, including research reports, prescriptions, and cash memos.

Issue-wise Detailed Analysis:

1. Classification of Ayurvedic Cool Banphool Oil as an Ayurvedic drug or hair oil:
The applicant contended that Ayurvedic Cool Banphool Oil is an ayurvedic medicine, supported by a drug license issued under the Drugs and Cosmetics Act, 1940. The applicant argued that the product cures various ailments and should be classified under Sub-head 3003.30 of the Excise Tariff, dealing with ayurvedic medicine. However, the Commercial Tax Officer treated the product as hair oil, taxable at 8% instead of 4%. The Assistant Commissioner and the West Bengal Commercial Taxes Appellate and Revisional Board upheld this classification, stating that the product is a general hair oil and not an ayurvedic medicine.

2. Applicability of tax rate under the West Bengal Sales Tax Act, 1954:
The applicant sought a tax rate of 4% applicable to ayurvedic medicines. The respondents argued that hair oil, including ayurvedic hair oil, is a separate commodity liable to tax at 8%. The Assistant Commissioner and the Appellate and Revisional Board confirmed this, stating that the product's main use as hair oil justifies the higher tax rate. The Tribunal agreed, emphasizing that the product's primary application as hair oil aligns with the tax rate applied by the Commercial Tax Officer.

3. Validity of the drug license as conclusive evidence for tax purposes:
The applicant relied on the drug license issued by the Director of Drugs Control, West Bengal, to assert the product's classification as an ayurvedic medicine. The Tribunal noted that a drug license under the Drugs and Cosmetics Act, 1940, is not conclusive evidence for tax purposes under the West Bengal Sales Tax Act, 1954. The sales tax assessing authority must independently determine the product's classification. The Tribunal emphasized that obtaining a drug license does not automatically classify a product as a drug or ayurvedic medicine for sales tax purposes.

4. Evaluation of evidence provided by the applicant, including research reports, prescriptions, and cash memos:
The applicant presented cash memos from medical stores, prescriptions from ayurvedic practitioners, and a research report by Dr. Mriganka Mohan Roy to support the claim that the product is an ayurvedic medicine. The Tribunal found the evidentiary value of these documents suspect, noting their procurement shortly before filing the petition. The Tribunal also criticized the research report's scientific rigor and relevance, stating that it lacked proper experimental design and controls. Consequently, the Tribunal dismissed the evidence as insufficient to prove the product's classification as an ayurvedic medicine.

Conclusion:
The Tribunal upheld the classification of Ayurvedic Cool Banphool Oil as hair oil, taxable at 8%, and dismissed the application. The Tribunal emphasized that a drug license is not conclusive evidence for tax purposes and that the applicant failed to provide satisfactory evidence to classify the product as an ayurvedic medicine. The application was dismissed without any order as to costs.