2016 (7) TMI 139 - HC - VAT and Sales Tax

Rate of tax on bulk drugs - Classification - Tribunal rejected the rectification application - Earlier Tribunal has held that there is no price fixation of bulk drugs manufactured by the appellant and therefore the appellant is liable to pay tax @ 12.50% as mentioned in the Residuary Entry. - Held that - It transpires from the impugned orders that before the Tribunal the appellant had put into service the submission regarding applicability of the provision of Section 4 of the Drugs (Price Control) Order to its case. However the Tribunal dismissed the Rectification Application holding that it was an issue of law and that the Tribunal cannot enter into disputed questions of law in such Application. The submission regarding applicability of Section 4 of the Order goes into the root of the matter and the Tribunal was required to deal with the same. However the Tribunal committed serious error by merely citing it as a disputed question of law. Hence the matter requires reconsideration by the Tribunal. - Matter remanded back to the Tribunal for consideration afresh - Decided in favor of assessee.

Summary

Issues:
Tax Appeals under Section 78 of the Gujarat Value Added Tax Act, 2003 challenging the judgment of the Gujarat Value Added Tax Tribunal regarding the liability to pay tax on bulk drugs.

Analysis:
1. Common Questions on Law and Facts: The Tax Appeals involved common questions on law and facts, leading to a joint judgment by the High Court. The issue revolved around the liability to pay tax on bulk drugs manufactured by the appellant.

2. Substantial Questions of Law: The substantial questions of law raised in the appeals focused on the interpretation of provisions related to the Drugs Price Control Order. The primary concerns were whether a bulk drug, once removed from its Schedule, becomes a Non-Scheduled drug free from price control, and if the provisions of section 4 of the Drug Price Control Order should be disregarded in such cases.

3. Background and Tribunal's Decision: The appellant, a manufacturer of various products including drugs, received a notice alleging tax liability on two bulk drugs. Despite the appellant's contentions, the Revising Officer upheld the tax liability. The Tribunal, in its orders, affirmed the tax liability on the bulk drugs, leading to the filing of Revision and Rectification Applications by the appellant.

4. Arguments and Court's Observations: The appellant's counsel argued that the Tribunal's decision contradicted itself by considering the price fixation under the Drugs (Price Control) Order while dismissing the appellant's contentions. The Advocate General supported the Tribunal's orders. The High Court, after reviewing the submissions and records, found that the Tribunal failed to adequately address the applicability of Section 4 of the Drugs (Price Control) Order, necessitating a reconsideration of the matter.

5. Court's Decision: The High Court partially allowed the appeals, quashing the Tribunal's orders and remanding the matter for fresh consideration. The Tribunal was directed to reexamine the issue, particularly the applicability of Section 4 of the Drugs (Price Control) Order, after hearing both parties. The High Court emphasized the importance of addressing the core issue raised by the appellant for a proper resolution.

In conclusion, the High Court's judgment provided clarity on the interpretation of legal provisions concerning the taxation of bulk drugs and highlighted the necessity for thorough consideration of all relevant aspects in tax disputes.