2010 (7) TMI 904 - HC - VAT and Sales Tax

Whether Homoeo Globules are not sugar as referred to at serial No. 35A of Schedule A to the West Bengal VAT Act 2003? Held that - Decision of the respondent-authorities though taken belatedly cannot be treated as illogical and improper keeping in view the use of the disputed item and general perception of the consumers regarding sugar as we are of the opinion that the disputed item is distinctly a different commercial commodity other than sugar manufactured and made in India as covered by Sl. No. 35A of Schedule A to the VAT Act.

Summary

Issues Involved:
1. Classification of homoeo globules under West Bengal Value Added Tax Act, 2003.
2. Taxability and rate of tax applicable to homoeo globules.
3. Validity of the Sales Tax Officer's memo and subsequent Tribunal and High Court decisions.

Issue-wise Detailed Analysis:

1. Classification of Homoeo Globules:
- The petitioner-company, Hahnemann Publishing Company Private Limited, challenged a memo issued by the Sales Tax Officer stating that homoeo globules would not fall within Sl. No. 35A of Schedule A to the West Bengal Value Added Tax Act, 2003 (VAT Act) and would be treated as an unspecified item taxable at 12.5%.
- The Tribunal initially held that "Homoeo Globules are not sugar as referred to at serial No. 35A of Schedule A to the West Bengal VAT Act, 2003."
- The Calcutta High Court set aside the Tribunal's order and remanded the matter for fresh hearing to consider the technical aspects involved in the manufacturing process of the disputed item.

2. Taxability and Rate of Tax:
- The petitioner argued that homoeo globules, being manufactured from sugar, should be classified as sugar and thus exempt from tax under Sl. No. 35A of Schedule A to the VAT Act.
- The manufacturing process involved grinding sugar, forming globules, drying, and coating, maintaining that the end product remains sugar.
- The respondent-authorities contended that homoeo globules are a distinct commercial commodity used differently from sugar and should not be classified under Sl. No. 35A.
- The Tribunal and the High Court evaluated whether the disputed item could be understood as sugar in common parlance and concluded that homoeo globules are not used as sugar but as a vehicle for homoeopathic medicine.

3. Validity of the Sales Tax Officer's Memo and Subsequent Decisions:
- The Sales Tax Officer's memo lacked specific reasons for reclassifying homoeo globules as an unspecified item taxable at 12.5%.
- The petitioner highlighted the historical treatment of the item as sugar and exempt from tax, arguing that no new reasons were provided for the change.
- The Tribunal and High Court upheld that despite the lack of detailed reasons in the memo, the decision to reclassify was logical given the distinct commercial identity and use of homoeo globules.
- The decision emphasized that common parlance and consumer perception did not align homoeo globules with sugar, thus justifying the reclassification and applicable tax rate.

Conclusion:
- The petition failed, with the Tribunal and High Court concluding that homoeo globules are a distinct commercial commodity and not classified as sugar under Sl. No. 35A of Schedule A to the VAT Act.
- Cases finalized prior to the notice in question need not be reopened, and there was no order as to costs.

Separate Judgments:
- The judgment was concurred by both members, with SAIKH ABDUL MOTALEB (Judicial Member) agreeing with the detailed analysis and conclusion.