2014 (3) TMI 992 - HC - VAT and Sales Tax

Fixation of rate of taxability Revisionist claim was accepted by assessing officer that in respect of sale of Jeeva soap , revisionist is liable to pay eight per cent tax, later, when matter was re-opened, revisionist was made liable to pay 12 per cent tax Revisionist contended that Jeeva soap is not soap, but is ayurvedic medicine Held that - revisionist obtained drug licence entitling revisionist to manufacture pharmaceutical preparations Revisionist was manufacturing nothing but pharmaceutical preparations and, for pharmaceutical preparations, tax liability was to extent of eight per cent only However branding of product Jeeva as soap, held out to its prospective buyers that revisionist is selling nothing but soap and there being no contention that Jeeva soap is not washing soap , same would be covered by entry soap other than washing soap attracting sales tax liability of 12 per cent Thus, court refuse to interfere with revisions Decided against revisionist.

Summary

Issues:
Interpretation of tax liability for the sale of a product labeled as both soap and ayurvedic medicine.

Analysis:
The judgment dealt with revision applications concerning the tax liability of a product named "Jeeva soap" sold by the revisionist. The revisionist claimed a lower tax rate of eight percent for the sale of "Jeeva soap" based on it being classified as an ayurvedic medicine. However, the assessing officer reclassified it under the category of "soap other than washing soap," attracting a tax rate of 12 percent. The appellate authority and the Tribunal upheld this decision. The revisionist argued that since they held a drug license for manufacturing "Jeeva soap," it should be considered a pharmaceutical preparation with an eight percent tax liability. The court noted that while the revisionist had a drug license, there was no evidence that they marketed "Jeeva soap" solely as a pharmaceutical preparation to buyers. By branding the product as "Jeeva soap," the revisionist implied it was selling a soap product, subject to the higher tax rate. The court concluded that the revisionist's representation of the product as soap warranted the 12 percent tax liability, and thus refused to interfere with the revisions, dismissing the applications.