2006 (1) TMI 584 - AT - VAT and Sales Tax

Summary

Issues:
Classification of Hajmola Candy as ayurvedic medicine or lozenge under the West Bengal Sales Tax Act, 1994.

Detailed Analysis:

The petitioner contended that Hajmola Candy should be treated as an ayurvedic medicine and subjected to a sales tax rate of five percent under entry No. 24 of Schedule IV of the 1994 Act. They argued that the candy is manufactured in accordance with the formula from an authenticated ayurvedic text book and is certified by the Director, Ayurvedic and Unani Directorate, Lucknow. The petitioner cited legal precedents to support their claim, emphasizing that Hajmola Candy is a patent and proprietary medicine under the ayurvedic system of medicine. They highlighted similarities with other products classified as ayurvedic medicines by various tribunals and courts. The petitioner also challenged the reliance on a previous tribunal's decision regarding a different product, asserting that the burden of proof lies with the revenue to establish the correct classification.

The respondent disputed the petitioner's claim, arguing that Hajmola Candy is a confectionery item enjoyed by people of all ages and is not recognized as a medicine in common trade parlance. They emphasized that the candy is not prescribed by doctors and is widely available in retail outlets. The respondent's position was supported by the learned State Representative, who highlighted the principle that products should be classified based on their popular meaning rather than scientific or technical definitions. The State Representative pointed out the absence of a specific definition of "drugs and medicines" in the 1994 Act and argued that the legislative intent was to interpret these terms based on common understanding.

In delivering the judgment, the Tribunal considered the arguments presented by both parties. The Tribunal noted that while the petitioner demonstrated compliance with manufacturing standards and ingredients specified in ayurvedic texts, they failed to provide evidence of prescriptions by ayurvedic doctors or specific medical usage of Hajmola Candy. The Tribunal highlighted the importance of considering the popular understanding of a product in determining its classification. Based on the lack of evidence supporting the medicinal usage of Hajmola Candy and the respondent's assertion that it is primarily viewed as a confectionery item, the Tribunal dismissed the petition. The judgment emphasized the significance of factual circumstances and popular perception in classifying products for taxation purposes.

In conclusion, the Tribunal rejected the petitioner's claim to classify Hajmola Candy as an ayurvedic medicine under the 1994 Act, ruling that the product is commonly perceived as a confectionery item rather than a medicament. The judgment underscored the need for concrete evidence supporting the medicinal usage of a product to justify its classification as a medicine, emphasizing the importance of popular understanding in determining tax treatment.