2024 (8) TMI 392 - HC - VAT and Sales Tax

Statutory interpretation of Entry 41 to Schedule II of the Act - classification of Boro-Plus Antiseptic Cream (BPAC) - to be treated as a medicated ointment and covered under entry no. 41 of Schedule II Part (A) - HELD THAT - In the case of Sardar Gurmej Singh 1959 (9) TMI 71 - SUPREME COURT , the Hon ble Supreme Court shed light on the importance of interpreting legislative provisions as a whole, ensuring that both inclusive and exclusive clauses are harmonised. This aspect in particular is indispensable when it comes to understanding Entry 41, where the conjunction but introduces an exception, which specifically includes medicated ointments regardless of the exclusion of other similar products. A careful construction of Entry 41 showcases a deliberate legislative intent to classify products based on their medicinal properties and usage, establishing that specific therapeutic items are included for beneficial tax treatment. The clear separation of excluded and included items brings out the distinct nature and purpose of the products, with medicated ointments being recognised for their essential therapeutic roles. Even though antiseptic creams are excluded from Entry 41, medicated ointments would be included due to the use of the word but . The word but is a clear indication that the legislature intended to include, as an exception, medical ointment, even though certain medicated ointments may be categorised as antiseptic creams. If a product is more than just an antiseptic cream and qualifies as a medicated ointment, it will be included in Entry 41. Whether BPAC is to be classified as a medicated ointment or not? - HELD THAT - The onus was on the Revenue to disprove the Respondent s claim and establish that BPAC is solely an antiseptic cream. To meet this burden, the Revisionist needed to provide compelling evidence that BPAC s primary and exclusive function was antiseptic in nature. This required a detailed analysis and presentation of the product s composition and therapeutic effects, demonstrating that any additional benefits were either negligible or ancillary to its antiseptic properties. However, the Revisionist failed to provide such evidence. The absence of contrary evidence from the Revisionist means that the Tribunal s findings, based on the Respondent s robust evidence, stand unchallenged and are not perverse. This failure underscores the critical importance of meeting the burden of proof in legal and regulatory disputes. In Dilip Kumar 2018 (7) TMI 1826 - SUPREME COURT , the Hon ble Supreme Court highlighted the distinction between provisions relating to chargeability and exemption. The Hon ble Supreme Court further espoused that even if two views are possible in interpreting a charging section, the one favouring the Assessee needs to be adopted. The Supreme Court, in National Cereal s case 2005 (3) TMI 448 - SUPREME COURT , has clearly held that the onus to prove the chargeability of a particular item in a provision other than the provision chosen by the Assessee falls squarely on the revenue. In our present case, the revenue s argument that the inclusion of medicated ointment as a drug and cosmetic under Entry 41 of Schedule 11 of the Act is an exemption is completely misplaced. It is to be noted that whether BPAC falls within Entry 41 is in relation to chargeability in a particular schedule and not that of an exemption. It is trite law that an item would be classified as a residuary item only when it does not fall in any other classification. In the present case, using tools of interpretation, the Tribunal has categorically held that BPAC would fall within Entry 41 of Schedule II. The burden of proof was upon the revenue to indicate that the said classification made by the Tribunal was absolutely incorrect and without any basis in law. It is well settled that the Tribunal is the last fact-finding body and that this Court, in revision, would not go into an enquiry with regard to the factual aspects that have been decided by the Tribunal. In the exercise of revisional jurisdiction, the High Court has a limited mandate. The scope of revisional jurisdictional, is primarily focused on questions of law, jurisdictional errors, or procedural irregularities. The High Court, in a revision petition, must refrain from engaging in a de novo inquiry into factual matters already adjudicated upon by the Tribunal unless compelling grounds warranting such intervention are made. The concept of perversity in legal contexts refers to a situation where a decision or finding is so unreasonable or contrary to the evidence that no reasonable person could have arrived at it. When dealing with administrative and judicial reviews, including tax and regulatory matters, perversity is a crucial ground upon which decisions can be challenged or revised. However, for perversity to be successfully invoked, certain legal thresholds and evidentiary standards must be met - Simply disagreeing with the Tribunal s decision without substantiating such disagreement with concrete evidence or legal arguments does not meet the threshold for invoking perversity. In Cadbury India 2019 (6) TMI 1132 - UTTARAKHAND HIGH COURT , the lack of sufficient evidence presented by the Assessee necessitated further examination and led to the remanding of the case. The tribunal needed a more comprehensive evidentiary basis to make an informed decision about the classification of the goods in question. Consequently, the High Court s decision to remand the matter was appropriate in that context, aiming to ensure that all relevant facts and evidence were adequately considered. In the instant case, however, the Tribunal s decision was not made in a vacuum but was grounded in substantial and persuasive evidence that supported the classification of BPAC as a medicated ointment. The Respondent had established beyond doubt that BPAC is a medicated ointment, and no contrary evidence was presented by the Revisionist to challenge this classification effectively. The principles of judicial efficiency and finality also argue against remanding a matter when the evidence has been thoroughly considered and no new facts have emerged to challenge the established findings. There are no reason to interfere with the findings of the Tribunal, and accordingly, the instant revision petitions are dismissed.

Summary

Issues Involved:
1. Whether the Commercial Tax Tribunal was legally justified in holding that Boro-Plus Antiseptic Cream (BPAC) is a medicated ointment and covered under Entry No. 41 of Schedule II Part (A) of the Uttar Pradesh Value Added Tax, 2008.

Detailed Analysis:

1. Statutory Interpretation of Entry 41 of Schedule II of the Act:
Entry 41, effective from October 11, 2012, reads: "Drugs and Medicines excluding medicated soap, shampoo, antiseptic cream, face cream, massage cream, eye gel, and hair oil but including vaccines, syringes and dressings, medicated ointments, light liquid paraffin of IP grade; Chooran; sugar pills for medicinal use in homeopathy; human blood components; C.A.P.D. Fluid; Cyclosporin."

The conjunction "but" in Entry 41 introduces an exception, specifically including medicated ointments despite excluding other similar products. The Supreme Court in Sardar Gurmej Singh highlighted that the conjunction "but" serves to include certain items within the regulatory framework despite general exclusions. This interpretation ensures that specific therapeutic items like medicated ointments are included for beneficial tax treatment, distinguishing them from excluded items like antiseptic creams.

2. Application of Noscitur a Sociis Principle:
The principle of noscitur a sociis suggests that the meaning of a word is known from the accompanying words. In Entry 41, the exclusion of items like medicated soaps, shampoos, face creams, and massage creams, which are all cosmetics and toilet preparations, provides context for interpreting "antiseptic cream." This interpretation ensures consistency and avoids arbitrary classification.

3. Classification of BPAC as Medicated Ointment:
The Tribunal examined the evidence and the difference between antiseptic creams and medicated ointments, concluding that BPAC falls under the category of 'medicated ointment.' The Tribunal relied on expert opinion and authoritative publications to establish that ointments have a higher oil content and are less easily absorbed by the skin compared to creams.

4. Evidence Supporting BPAC's Classification:
The Respondent demonstrated that BPAC contains multiple active ingredients with antimicrobial, anti-inflammatory, and healing properties, aligning it more closely with medicated ointments. The Tribunal's findings were based on meticulous examination of evidence, including ingredient analysis and expert opinions, establishing BPAC as a product with multiple therapeutic uses beyond mere antiseptic functions.

5. Burden of Proof:
The onus was on the Revenue to disprove the Respondent's claim and establish that BPAC is solely an antiseptic cream. The Revenue failed to provide compelling evidence to support its claim, leaving the Tribunal's findings unchallenged. The absence of contrary evidence from the Revenue underscores the importance of meeting the burden of proof in legal disputes.

6. Marketing and Advertising Considerations:
The Revenue's argument that BPAC is marketed as an antiseptic cream is not a sound argument for tax classification. Taxation laws categorise products based on intrinsic properties and intended use, not promotional strategies. The detailed descriptions on BPAC's packaging, highlighting its healing, curative, and prophylactic properties, provide a factual basis for its classification as a medicated ointment.

7. Legal Precedents and Revisional Jurisdiction:
The Tribunal is the last fact-finding body, and the High Court, in revision, would not re-evaluate factual evidence unless there are compelling reasons. The Supreme Court in Hindustan Petroleum Corporation Limited -v- Dilbahar Singh expounded that revisional jurisdiction is not intended for re-litigating cases or reopening settled matters. The Revenue's inability to produce evidence supporting its claim of reclassification weakens its argument.

Conclusion:
The Tribunal's findings were based on substantial evidence, and there is no reason to interfere with its decision. The instant revision petitions are dismissed, and the questions of law are answered in favour of the assessee and against the Revenue.