2019 (5) TMI 204 - HC - VAT and Sales Tax

Classification of goods - drugs and medicines or not - Himami Navratna Oil - Himami Boroplus Antiseptic Cream - Himami Boroplus Prickly Heat Powder - Himami Gold Turmeric Cream - Himami Nirog Dant Powder Lal - whether fall in the Entry 4/7 (from 1.1.2000 to 14.03.2000) or Entry 41/49 (15.03.2000 to 31.03.2006) of Part III Schedule II instead of Entry 11 of Part IV Schedule II (where it was previously classified prior to the amendment) from the financial years 1999-2000 to 2005-2006? HELD THAT - The entries in the present case under the schedule are very specific and this Court does not find any reason to look into the provisions of Central Excise Tariff Act, 1985 for the purpose of classification. For the purpose of payment of excise duty and other taxes, which are under different statutes the classification is provided under the Central Excise Tariff Act, 1985 as well as under other statutes. In the present case, there is no ambiguity in respect of the taxing statute - In similar circumstances, while dealing with certain products manufactured by Vicco, the Division Bench in the case of STATE OF M.P. VERSUS VICCO PRODUCTS (BOMBAY) 2017 (5) TMI 376 - MADHYA PRADESH HIGH COURT has held that The classification of a product under a statute cannot be read into another statute. Each statute has to be interpreted on the basis of the provisions contained therein. Therefore, classification of the products in the said judgments dealing with the Central Excise Laws are not relevant for examining the classification of the products under the local Act, which have specifically included face cream under the Entry of Cosmetics and tooth paste and tooth powder under the Entry of Toilet articles. When the entries under the schedule in respect of payment of tax under the Madhya Pradesh Commercial Tax Act, 1994 are very clear, there is no ambiguity, the classification of product under the Madhya Pradesh Commercial Tax Act, 1994 has to be looked into and the classification of the product under the different statutes cannot be looked into as argued before this Court. The Madhya Pradesh Commercial Tax Appellate Board was justified in upholding the classification of the specified goods manufactured by Emami under Entry No.47 from 01/01/2000 to 14/03/2000 / Entry No.41/49 w.e.f. 15/03/2000 to 31/03/2006 of Part-III Schedule-II instead of Entry No.11 of Part-IV of Schedule-II - By no stretch of imagination the products manufactured by Emami Limited can be treated as drugs and medicines. Reference disposed off.

Summary

Issues Involved:
1. Classification of goods under the Madhya Pradesh Commercial Tax Act, 1994.
2. Applicability of tax rates based on the classification.
3. Relevance of judgments under other statutes for classification under the Madhya Pradesh Commercial Tax Act, 1994.

Detailed Analysis:

Classification of Goods:
The primary issue before the court was whether the products manufactured by the respondent should be classified under Entry No. 41/49 of Part III Schedule II or Entry No. 11 of Part IV Schedule II of the Madhya Pradesh Commercial Tax Act, 1994. The products in question were:
- Himami Navratna Oil
- Himami Boroplus Antiseptic Cream
- Himami Boroplus Prickly Heat Powder
- Himami Gold Turmeric Cream
- Himami Nirog Dant Powder Lal

The court examined the legislative amendments effective from 1.1.2000 and the relevant statutory provisions of the Madhya Pradesh Vanijyik Kar Adhiniyam, 1994, specifically the schedules that categorize goods for tax purposes.

Applicability of Tax Rates:
The counsel for the State argued that the products should be taxed at 12% as specified in Entry No. 41/49 of Part III Schedule II, which includes items like hair oils, face creams, and other cosmetics. The respondent contended that their products, being manufactured under a license from the Drugs and Cosmetics Act, 1940, should be classified as drugs and medicines under Entry No. 11 of Part IV Schedule II, attracting a lower tax rate of 8%.

Relevance of Judgments Under Other Statutes:
The court noted that judgments under the Central Excise Tariff Act, 1985, and other statutes cannot be used to interpret the Madhya Pradesh Commercial Tax Act, 1994. Each statute must be interpreted based on its provisions.

The court referred to previous judgments, including:
- State of M.P. Vs. Vicco Products (Bombay): Highlighted that the classification of products under one statute cannot be read into another.
- Emami Limited & Another Vs. State of Assam & Another: Discussed the classification of similar products under different tax statutes.
- M/s. Popular Sales Vs. The State of Madhya Pradesh: The Division Bench held that certain products are classified as drugs/medicines based on their use and not merely on their manufacturing process.

Court's Conclusion:
The court concluded that the entries in the schedule of the Madhya Pradesh Commercial Tax Act, 1994, are specific and unambiguous. The products manufactured by the respondent fall under Entry No. 41/49 of Part III Schedule II and not under Entry No. 11 of Part IV Schedule II. The court emphasized that the classification under different statutes, such as the Central Excise Tariff Act, 1985, is irrelevant for the purpose of the Madhya Pradesh Commercial Tax Act, 1994.

The court upheld the decision of the Madhya Pradesh Commercial Tax Appellate Board, stating that the products manufactured by Emami Limited cannot be treated as drugs and medicines. Consequently, the products are subject to a tax rate of 12% as per Entry No. 41/49 of Part III Schedule II.

Final Order:
The reference was answered in favor of the State, confirming the classification of the specified goods under Entry No. 41/49 of Part III Schedule II from 15.03.2000 to 31.03.2006, and not under Entry No. 11 of Part IV Schedule II. The products manufactured by Emami Limited are not classified as drugs and medicines.