2009 (11) TMI 824 - HC - VAT and Sales Tax

Rate of tax applicable on Vicks, Vicks Vaporub and tablets - Held that - Rules of Interpretation, more in the nature of clarification of the product referred to in rule 23 or the use are totally different as far as products in question are concerned. We do not find that rule 23 of the aforesaid Rules of Interpretation appended to the statute will in any way tarnish these items against classification under entry 36 of the Third Schedule. More so, none of the reasons as stated in the annexure A order will show that the products in question are classifiable otherwise than under entry 36 of the Third Schedule to the Kerala Value Added Tax Act. Accordingly, the order in annexure A of the Commissioner of Commercial Taxes, Thiruvananthapuram in so far as the goods in question are concerned is set aside and we declare that the products, namely, Vicks, Vicks Vaporub and tablets are classifiable under entry 36 of the Third Schedule, attracting only four per cent rate of tax.

Summary

Issues Involved:
1. Maintainability of the appeal.
2. Classification of "Vicks" products under the Kerala Value Added Tax Act.
3. Applicability of Rules of Interpretation to the classification of "Vicks" products.

Issue-wise Detailed Analysis:

1. Maintainability of the Appeal:
The appellant, a manufacturer of "Vicks" products, challenged an order of clarification issued by the Commissioner of Commercial Taxes. A preliminary objection was raised regarding the maintainability of the appeal since the clarification was sought by a dealer, not the appellant. The court held that under Section 94(1) of the Kerala Value Added Tax Act, the Commissioner's clarification is binding on all subordinate authorities, and since the appellant is affected by this order, they are an "aggrieved person" with the right to appeal under Section 62. The appeal was filed within 90 days from the date of knowledge of the order, making it timely and maintainable. The court referenced a similar view taken in P.O. Abraham Associates v. Commissioner, Commercial Taxes, reinforcing the appellant's right to appeal.

2. Classification of "Vicks" Products:
The primary issue was whether "Vicks" products should be classified under entry 36 of the Third Schedule of the Kerala Value Added Tax Act, which pertains to drugs and medicines, or under entry 24(1) of S.R.O. No. 82/2006, which pertains to confectionery and is taxable at 12.5%. The Commissioner had classified "Vicks" tablets and balm as confectionery, taxable at 12.5%. However, the court examined various precedents, including the classification of "Halls" ayurvedic tablets and "Vicks Vaporub" under similar contexts, which were considered drugs or ayurvedic medicines. The court noted that "Vicks" products, manufactured under a drug license and containing medicinal ingredients, should be classified as medicines under entry 36, attracting a tax rate of 4%.

3. Applicability of Rules of Interpretation:
The Commissioner had relied on clause 23 of the Rules of Interpretation to differentiate "Vicks" products from those classified under entry 36. However, the court found that rule 23, which excludes certain food and beverage products from being classified as medicines, did not apply to "Vicks" products. The court emphasized that "Vicks" products are recognized as ayurvedic preparations in common parlance and are manufactured under a drug license, thus fitting within the definition of medicines under entry 36. The court concluded that rule 23 did not affect the classification of "Vicks" products as medicines.

Conclusion:
The court set aside the Commissioner's order, declaring that "Vicks" products, including Vicks Vaporub and tablets, are classifiable under entry 36 of the Third Schedule to the Kerala Value Added Tax Act, attracting a tax rate of 4%. The appeal was allowed with no costs.