2017 (5) TMI 655 - HC - VAT and Sales Tax

Classification of sunglasses - interpretation of Entry 28A (ii) to Schedule II of the Gujarat Value Added Tax Act, 2003 - whether the Fastrack brand sunglasses are medical devices and fall in Entry 28A (ii) of Schedule II to the VAT Act read with Entry 5 of the Notification dated 31st March 2006? - Held that - Spectacles, Correctives and Protectives came to be deleted and only those medical equipments, devices and implants are specified to the medical equipments, devices and implants to be the Medical equipments, devices and implants for the purpose of the said Entry 28A of Schedule II to the Act. And therefore, use of spectacles, correctives and/or protectives would loose its significance. There is a material change in the earlier Notification dated 31st March 2006 and the subsequent Notification dated 16th May 2008. The words/entry in the schedule more particularly item mentioned at Serial No. 5, specifies Spectacles, Correctives and Protectives has been deleted and as per the substituted Notification dated 16th May 2008, the medical equipments, devices and implants shall be specified to be the medical devices and implants for the purpose of the said entry 28A of Schedule II to the Act. Fastrack brand sunglasses/ sunglasses cannot be said to be medical device merely because they are protectives; more particularly, considering the Legislative intend to supersede the earlier Notification dated 31st March 2006 by a new Notification dated 16th May 2008. It cannot be disputed, while interpreting an entry in the taxing statute, the legislative intend to play an important role, some meaning as to be given to the intention of the Legislature in superseding the earlier Notification dated 31st March 2006 and bring in the new Notification dated 18th May 2008. If the intention of the Legislature was to continue to consider spectacles and protectives as medical equipments, devices and implants for the purpose of Entry 28A of Schedule II of the Act, there was no necessity to supersede the Notification dated 31st March 2006 to come out with a new Notification dated 16th May 2008. Appeal allowed - decided in favor of Revenue.

Summary

Issues Involved:
1. Interpretation of Entry 28A (ii) to Schedule II of the Gujarat Value Added Tax Act, 2003.
2. Classification of "sunglasses" as "medical devices."

Issue-wise Detailed Analysis:

1. Interpretation of Entry 28A (ii) to Schedule II of the Gujarat Value Added Tax Act, 2003:
The court examined whether the Tribunal correctly interpreted Entry 28A (ii) of Schedule II to the VAT Act, which pertains to "medical equipment, devices, and implants." The original Notification dated 31st March 2006 included "Spectacles, Correctives and Protectives" as "medical devices." However, this was superseded by the Notification dated 16th May 2008, which excluded these items and specified only "medical equipment, devices, and implants." The subsequent Notification dated 4th October 2013 clarified that "goggles, spectacles of sun-glass and sun-glass which are not correctives" are excluded from the definition of "medical devices." The court emphasized that the legislative intent behind these changes was to exclude protective sunglasses from being classified as "medical devices."

2. Classification of "sunglasses" as "medical devices":
The Tribunal had held that Fastrack brand sunglasses are "medical devices" because they protect the eyes from ultraviolet rays and prevent early onset of cataract and dry eyes. However, the court found this interpretation flawed. The court noted that the definition of "medical devices" according to the World Health Organization and other sources pertains to instruments used for diagnosis, treatment, or rehabilitation of diseases or injuries. Sunglasses, being protective but not corrective, do not fit this definition. The court also referenced the Rajasthan High Court's decision in RayBan Sun Optics India Limited, which held that "sunglasses" should be classified under the residuary clause and not as "medical devices." The court concluded that the Tribunal erred in classifying sunglasses as "medical devices" and held that they should be taxed under the residuary category at 12.5%.

Conclusion:
The court quashed the Tribunal's orders, holding that Fastrack brand sunglasses do not qualify as "medical devices" under Entry 28A (ii) of Schedule II to the VAT Act. The questions of law were answered in favor of the Revenue, and the appeals were allowed, setting aside the Tribunal's judgments.