2008 (7) TMI 870 - HC - VAT and Sales Tax

Whether Chlormint candy , Chlormint gum , Chlormint ice , Chlormint ice gum , Chlormint with herbasole , Happydent , Gum draggy , chewable gum draggy , and Chatar patar , are, wrongly held to be ayurvedic medicine by the Trade Tax Tribunal? Held that - Items Chlormint with herbasole and Happydent manufactured by the assessee under valid drug licence are ayurvedic medicines and trade tax payable on said items is four per cent as provided in clause (b) of sub-section (2) of section 4 of the Uttaranchal Value Added Tax Act, 2005. However, applying the same principles as discussed above, we hold that other items, i.e., Chlormint candy , Chlormint ice , Chlormint gum , Gum draggy , chewable gum draggy and Chatar patar , manufactured and sold by the assessee/respondent, cannot be said to be ayurvedic preparations as in respect of these items it is not shown that the same are according to formulations prescribed by authoritative books of ayurvedic medicines. Therefore, charging of 12.5 per cent trade tax in respect of these items cannot be said to be wrong. Accordingly, the question of law stands answered. And the four revisions are partly allowed.

Summary

Issues:
Identification of items as ayurvedic medicines or confectionary items for the purpose of trade tax assessment.

Analysis:
The case involved four revisions filed by the Commissioner, Trade Tax/Commercial Tax, Uttarakhand, challenging the Trade Tax Tribunal's order that classified certain items as ayurvedic medicines. The core question was whether items like "Chlormint candy," "Chlormint gum," "Chlormint ice," "Chlormint ice gum," "Chlormint with herbasole," "Happydent," "Gum draggy," "chewable gum draggy," and "Chatar patar" were wrongly categorized as ayurvedic medicines by the Tribunal.

The respondent, a registered business under the Uttaranchal Value Added Tax Act, manufactured and sold these items, claiming them to be ayurvedic medicines. The dispute arose over the applicable tax rate, with the revisionist arguing for a higher tax rate applicable to confectionary items rather than the lower rate for ayurvedic medicines.

After considering the arguments from both sides, the Court analyzed the relevant provisions of the Uttaranchal Value Added Tax Act, 2005, which specified different tax rates for various goods. The Act classified certain items under Schedule II(B) for a lower tax rate of four percent, including drugs, medicines, and pharmaceutical preparations, irrespective of their medical system.

To interpret the classification of ayurvedic medicines, the Court referred to the definitions under the Drugs and Cosmetics Act, 1940. It highlighted the criteria for considering a product as an ayurvedic medicine, emphasizing the medicinal use and utility based on authoritative books of Ayurveda.

The Court examined the specific items in question, such as "Chlormint with herbasole" and "Happydent," and found evidence of their manufacturing under an ayurvedic medicine license, approved by the Directorate of Ayurvedic Medicines. The products' formulations and utility supported their classification as ayurvedic medicines, warranting the lower tax rate of four percent.

However, for other items like "Chlormint candy," "Chlormint ice," "Chlormint gum," "Gum draggy," "chewable gum draggy," and "Chatar patar," the Court concluded that they did not meet the criteria for ayurvedic preparations. These items lacked evidence of formulation adherence to authoritative books of ayurvedic medicines, leading to the application of the higher tax rate of 12.5 percent.

In the final judgment, the Court partially allowed the revisions, modifying the Trade Tax Tribunal's order to reflect the correct classification of items as either ayurvedic medicines or confectionary items for trade tax assessment purposes.