2008 (8) TMI 590 - HC - Central Excise

liquid glucose is taxable as medicine or not - The assessing authority after rejecting the contention of the dealer that it is nothing but a medicine, held that the liquid glucose is taxable at the rate of 10 per cent under the residuary entry being unclassified item by the order dated 20th of August, 1997 - ultimate user of the article in question i.e. the liquid glucose, it is beyond imagination to treat the commodity in question liquid glucose as drugs or medicine administered to the patients sold in bottles through the medical shops and hospitals. The commodity in question is neither being manufactured by medicine or drug manufacturer nor is being dealt with by the persons dealing in medicine nor it is being used as medicine by the consumers - Whether the commodity has got any therapeutic value or not, has not been canvassed or found by the tribunal even - The sale of article to the manufacturer of toffees and bakery man, negates the claim that the article is medicine - Decided in favour of revenue.

Summary

Issues:
1. Taxability of liquid glucose as medicine.

Analysis:
The High Court judgment revolves around the taxability of liquid glucose as medicine for the assessment year 1993-94. The Commissioner of Trade Tax filed a revision against the Tribunal's order, questioning whether liquid glucose should be taxed as medicine. The dispute arose as the dealer sold liquid glucose to manufacturers of bakery confectionery and tobacco, not to medicine dealers. The assessing authority initially taxed liquid glucose at 10% under the unclassified category, which was upheld in appeal but overturned by the Tribunal.

The Tribunal considered two primary grounds to classify liquid glucose as medicine: the low sugar content and the manufacturer's license under the Prevention of Food Adulteration Act. However, the High Court found this reasoning unsatisfactory. It emphasized that obtaining a license under the Act does not automatically categorize the product as a drug or medicine. Additionally, the Tribunal failed to establish that the manufacturer held a drug manufacturing license, crucial for such classification.

The Court further analyzed the glucose's composition, usage, and distribution. It concluded that the liquid glucose, primarily used in jam, jelly, and bakery items, was not sold in bottles like medicated glucose administered to patients. The Court highlighted the absence of evidence proving the manufacturer as a drug producer. It applied the principle that statutory terms should be understood in a commercial sense, considering common industry practices and consumer perceptions.

Drawing parallels with a Supreme Court case regarding petroleum jelly's classification as a drug, the High Court emphasized the need for specific criteria, such as licensing under relevant drug laws, to classify a product as medicine. Ultimately, the Court found the Tribunal's decision unjustifiable and set it aside. The revision was allowed, leading to the dismissal of the appeal before the Tribunal. The judgment concluded without imposing costs on either party.