2007 (4) TMI 663 - AT - VAT and Sales Tax

Summary

Issues:
1. Taxability of medicines supplied free of cost to stockists/distributors under the West Bengal Sales Tax Act, 1994.

Analysis:

Issue 1: Taxability of free medicines under the West Bengal Sales Tax Act, 1994

The main question in this case was whether the value of medicines supplied free of cost to stockists/distributors by the petitioner-company would be subject to tax under the West Bengal Sales Tax Act, 1994. The petitioner, a pharmaceutical company, had its registered office and factory in Goa but was registered under the 1994 Act and the Central Sales Tax Act. The Commercial Tax Officer initially rejected the petitioner's books of account and estimated the turnover, leading to a series of challenges and appeals.

The Deputy Commissioner of Commercial Taxes modified the assessment order, but the petitioner further challenged it before the West Bengal Commercial Taxes Appellate and Revisional Board. The Board remanded the matter back to the assessing authority for a fresh assessment, where the claim for free distribution of medicines was disallowed. The petitioner then filed a petition under the West Bengal Taxation Tribunal Act, 1987, challenging the Board's and the assessing authority's orders.

The petitioner argued that the free distribution of medicines was part of a scheme to promote sales and should be considered as a quantity discount, not subject to tax. The State Representative opposed this, stating that such claims were not provided for under the 1994 Act and that diverting imported goods for purposes other than sale was impermissible.

After hearing both sides, the Tribunal found fault with the Board's observation regarding the taxability of free medicines, stating that it restricted the assessing authority's ability to decide judiciously. The Tribunal set aside the previous orders and directed a fresh assessment, outlining specific particulars that needed to be examined, such as the nature of the schemes, invoicing details, selection criteria for free medicines, and whether stockists/distributors paid sales tax on the free medicines.

In conclusion, the Tribunal directed the assessing authority to conduct a fresh assessment, considering the outlined particulars and allowing the petitioner to present evidence and information. The Tribunal disposed of the application without costs, with the Chairman concurring with the decision.

This comprehensive analysis covers the issues and detailed examination of the judgment concerning the taxability of free medicines under the West Bengal Sales Tax Act, 1994.