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2019 (6) TMI 1132 - HC - VAT and Sales TaxClassification of goods - different flavours of Halls - whether could not be treated as proprietary Ayurvedic medicine so as to fall within the category of drugs medicine and pharmaceutical preparations etc. enumerated under Items No.41 of Schedule II (B) of the Act? - HELD THAT - Manufacture of Halls under an Ayurvedic Drug licence issued by the competent authority is one of the factors to show that the said product is an Ayurvedic medicine. The common parlance test is yet another factor. The main criterion to determine whether the product is an Ayurvedic medicine is if all the ingredients of the said product find mention in authoritative books of Ayurvedic medicine though the formula for preparation of the medicament is not in accordance with the formula in those text books. In the light of the law declared by the Supreme Court in Naturalle Health Products (P) Limited Vs. C.C.E. 2003 (11) TMI 69 - SUPREME COURT as long as the active agents of the product Halls find mention in the Ayurvedic Texts referred to in the First Schedule to the Act it would suffice to bring it within the ambit of an Ayurvedic medicine. While the assessee has no doubt been remiss in not drawing the attention of the Tribunal to the authorized texts referred to in the first schedule to the Act to show that the active agents of Halls are referred to therein the Tribunal has also failed to examine the petitioner s contention that the very same product Halls has been treated as an Ayurvedic medicine in the five States of Northern India (Jammu Kashmir Punjab Haryana Uttar Pradesh Rajasthan and Himachal Pradesh) - appeals remanded back to the Tribunal for its re-examination in accordance with law. Revision allowed by way of remand.
Issues Involved:
1. Classification of 'Halls' as Ayurvedic medicine or confectionary. 2. Applicability of tax rate under the Uttarakhand Value Added Tax Act, 2005. 3. Interpretation of relevant provisions of the Drugs and Cosmetics Act, 1940. 4. Reliance on judgments and orders from other states and courts. Detailed Analysis: 1. Classification of 'Halls' as Ayurvedic medicine or confectionary: The primary issue revolves around whether 'Halls' should be classified as an Ayurvedic medicine or a confectionary item. The Tribunal, affirming the orders of the Joint Commissioner and Assessing Authority, held that 'Halls' is a confectionary and not an Ayurvedic medicine. This decision was based on the judgment of multiple high courts and the composition of 'Halls', which includes only 0.33% active Ayurvedic ingredients like Pudina (Menthol) and Nilgiri Tailam (Eucalyptus Oil), with the rest being sugar and other non-medicinal substances. 2. Applicability of tax rate under the Uttarakhand Value Added Tax Act, 2005: Goods classified under Entry 41 of Schedule II (B) of the Uttarakhand VAT Act are taxed at 4%. The Tribunal held that 'Halls' does not fall under this entry and should be taxed as unclassified goods at 12.5%. The assessee argued that 'Halls' should be taxed at 4% as it is an Ayurvedic medicine, a claim supported by tax assessments in other states where 'Halls' was taxed at 4%. 3. Interpretation of relevant provisions of the Drugs and Cosmetics Act, 1940: The definition of Ayurvedic medicine under Section 3(a) of the Drugs and Cosmetics Act, 1940 includes medicines intended for internal or external use for diagnosis, treatment, mitigation, or prevention of disease, manufactured according to formulae described in authoritative Ayurvedic texts. The Tribunal noted that the assessee did not provide evidence that the ingredients of 'Halls' are mentioned in any prescribed Ayurvedic texts. The mere issuance of a drug license under the Act does not suffice to classify 'Halls' as an Ayurvedic medicine. 4. Reliance on judgments and orders from other states and courts: The assessee cited judgments from the Supreme Court and various High Courts, including the Madras High Court and the Allahabad High Court, to support their claim. The Tribunal, however, emphasized that decisions from other states or authorities, such as the Commissioner of Commercial Taxes in Chennai, do not necessarily apply to Uttarakhand. The Tribunal also referenced the Division Bench judgment in "Commissioner of Trade Tax v. M/s Perfetti Van Melle (India) Pvt. Ltd.," which held that products manufactured under an Ayurvedic drug license are not necessarily Ayurvedic medicines unless their ingredients are listed in authoritative Ayurvedic texts. Conclusion and Remand: The High Court found that the Tribunal did not adequately consider the evidence provided by the assessee regarding the classification of 'Halls' in other states and the relevant Ayurvedic texts. The High Court set aside the Tribunal's order and remitted the case back to the Tribunal for re-examination. The Tribunal is directed to allow both parties to present fresh material, including authoritative Ayurvedic texts, and to determine whether the VAT entries in other states are comparable to those in Uttarakhand. The Tribunal is requested to expedite the decision within three months.
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