2003 (5) TMI 503 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether soda bicarbonate should be regarded as a medicine or a chemical.
2. Whether the nature of the commodity could be determined by considering the nature of the buyers of those goods.
3. Whether earlier judgments delivered in respect of the same item by two other Sales Tax Tribunals were binding on the present Tribunal.

Detailed Analysis:

Issue 1: Whether soda bicarbonate should be regarded as a medicine or a chemical.
The main dispute in all three appeals revolves around the taxability of soda bicarbonate. The appellant argued that soda bicarbonate should be taxed at 6% as a medicine, rather than 8% as a chemical. The appellant cited dictionary definitions and pharmacopoeia references to support the claim that sodium bicarbonate has medicinal uses, such as an antacid. However, the State/Revenue countered that sodium bicarbonate is primarily used in fire extinguishers, baking powder, and cooking, and the appellant had not obtained a medical license under the Indian Drug Licence Act. The court noted that the primary use of soda bicarbonate is as a chemical, and previous notifications and case law supported this classification. Thus, the court concluded that soda bicarbonate should be taxed at the rate of 8% as a chemical.

Issue 2: Whether the nature of the commodity could be determined by considering the nature of the buyers of those goods.
The court examined whether the nature of the buyers could influence the classification of soda bicarbonate. The appellant failed to provide evidence that soda bicarbonate was sold primarily to medicine dealers. The Tribunal noted that the appellant's major clients were chemical firms, not chemists or druggists. The court referenced previous case law, which established that if goods are capable of more than one use, the primary use should be considered. Therefore, the court upheld the classification of soda bicarbonate as a chemical based on its primary use and the nature of the buyers.

Issue 3: Whether earlier judgments delivered in respect of the same item by two other Sales Tax Tribunals were binding on the present Tribunal.
The appellant cited previous Tribunal decisions where soda bicarbonate was classified as a medicine. However, the court noted that these decisions were based on specific facts and circumstances, such as the nature of the buyers and the evidence presented. The court emphasized that each case must be decided on its own merits and facts. The Tribunal's current decision was based on the evidence that soda bicarbonate was primarily sold to chemical firms and used as a chemical. Thus, the earlier judgments were not binding on the present Tribunal.

Conclusion:
The court concluded that soda bicarbonate should be classified as a chemical and taxed at the rate of 8%. The appeals for the assessment years 1984-85 and 1985-86 were dismissed, affirming the Tribunal's decision. However, the appeal for the assessment year 1983-84 was allowed, and the case was remanded to the assessing authority for fresh assessment after examining the relevant forms. The court emphasized that the primary use of the commodity and the nature of the buyers were crucial in determining its classification. The petitions were dismissed, and the Tribunal's view and decision were affirmed.