1999 (9) TMI 931 - HC - VAT and Sales Tax

Summary

Issues:
Classification of goods as scents and perfumes or chemicals for tax purposes.

Analysis:
The judgment involves two revision petitions concerning the classification of certain goods for tax assessment. The dealer, a manufacturer of various products including Capinone, Sandalica, Isobornyl acetate, Terpineol, Astrolide, and Thymol, disputed the revenue's classification of these goods as scents and perfumes under a specific notification. The dealer argued that these items should be considered as chemicals, subject to different tax rates. The Tribunal's order mentioned the characteristics and applications of these goods, highlighting their use in blends for various products like soaps, detergents, and cosmetics, rather than direct use as scents or perfumes.

In determining the appropriate classification, the judgment referred to previous legal precedents. The Madras High Court's decision in A. Boake Roberts and Co. (India) Ltd. v. Board of Revenue established that goods used for making toilet requisites like soaps and powders, rather than direct body application, should not be considered scents and perfumes. Similarly, in Commissioner of Sales Tax v. S.N. Brothers, it was held that edible goods like syrup essences could not fall under the category of scents and perfumes. The judgment also cited Mettur Sandalwood Oil Co. v. State of Madras, where sandalwood oil was not classified as a perfume due to its need for admixture before use.

Further, the Supreme Court's decision in G. Radhakrishna Murthi & Co. v. Commercial Tax Officer clarified that agarbattis could not be taxed as perfumes, emphasizing the need for direct use on the body or clothes for classification as scents and perfumes. The judgment highlighted that goods with pleasant smells do not automatically qualify as scents and perfumes; only those commonly used directly for fragrance purposes fall under this category.

Consequently, the Tribunal's decision to tax the dealer's goods as scents and perfumes was deemed incorrect. The judgment directed the Tribunal to reconsider the dealer's appeals and classify the goods as chemicals, not scents and perfumes, for tax assessment purposes. The revision petitions were allowed based on this analysis.