2003 (8) TMI 521 - HC - VAT and Sales Tax

Summary

Issues:
Determining whether "Kajal" is an ayurvedic preparation, a drug, or a cosmetic for tax purposes under the Kerala General Sales Tax Act, 1963.

Analysis:
The case involves a dispute regarding the classification of "Kajal," a product of Paramount Kumkum Private Limited, Gujarat State, as either an ayurvedic preparation or a cosmetic for tax assessment purposes under the Kerala General Sales Tax Act, 1963. The respondent-assessee claimed that "Kajal" falls under entry 79 of the First Schedule to the Act, taxable at 8%, while the assessing authority considered it a cosmetic under entry 127, taxable at 20%. The Sales Tax Appellate Tribunal, relying on previous decisions and evidence, determined that "Kajal" is an ayurvedic preparation, thus taxable at 8%. The Government Pleader argued that "Kajal" is used for beautifying the eyes and should be treated as a cosmetic, citing relevant case law.

The Government Pleader contended that the evidence provided by the assessee, namely a photocopy of the manufacturer's license under the Drugs and Cosmetics Act, was insufficient to prove "Kajal" as an ayurvedic preparation. The counsel for the assessee, however, argued that the manufacturer's license clearly indicated the production of ayurvedic drugs, including "Shingar Kajal," and that the product was prepared according to ayurvedic texts with medical and curative ingredients. The counsel relied on previous judgments and the nature of the product to support the classification as an ayurvedic medicine.

The High Court considered the submissions and evidence presented by both parties, emphasizing the importance of how the product is understood in common parlance. Despite the lack of additional evidence from the assessee, the court noted that the department failed to counter the assertions made regarding the nature of the product. Relying on previous decisions and the manufacturer's drug license, the court held that "Kajal" is an ayurvedic medicine taxable at the rate applicable under entry 79 of the First Schedule to the Act. The court's decision was further supported by a Supreme Court case regarding the classification of goods as ayurvedic medicine based on common understanding and supporting documentation.

In conclusion, the tax revision cases were dismissed, and a copy of the judgment was to be forwarded to the Income-Tax Appellate Tribunal, Cochin Bench, Ernakulam.