2009 (11) TMI 564 - HC - VAT and Sales Tax

Medicaments Vicks tablet whether medicaments or confectionery - Vicks tablets and Balm may contain certain added medicaments and in common parlance it is not treated as a medicine as appearing in Entry 36 of 3rd schedule - Whether Vicks Vaporub and Vicks inhaler known in common parlance as Ayurvedic medicines classifiable under Tariff Heading 3003.30 Medicaments including those used in Ayurvedic system - The Tribunal found that there is no definition of Ayurvedic medicine in the Central Excise Tariff Act though Ayurvedic medicine is defined under Section 3(a) of the Drugs and Cosmetics Act, but that definition cannot apply for the purpose of classification of the product under the Central Excise Tariff Act and the Central Excise Salt Act Held that the product satisfy the test of common parlance be known as Ayurvedic medicine and therefore fall under Entry 36 attracting VAT @ 4% Kerala Value Added Tax Act, 2003 Appeal to High Court Aggrieved person - Though the appellant is the manufacturer of the products, a clarification was sought for by the dealer Order passed by Commissioner under the provision of Section 94 of KVAT Act, 2003 binding on all authorities subordinate to Commissioner Person affected by the order has the right to file an appeal against the order Section 62 and 94 Appeal to High Court Limitation - The period of 90 days is to be reckoned from the date on which the order was served on the person, in the manner prescribed The period starts from the date of knowledge when clarification not sought before Commissioner by person filling appeal to High Court Section 62 of Kerala Value Added Tax Act, 2003

Summary

Issues Involved:
1. Maintainability of the appeal.
2. Classification of 'Vicks' products under the Kerala Value Added Tax Act.
3. Applicability of Rule 23 of the Rules of Interpretation.

Detailed Analysis:

1. Maintainability of the Appeal:

The appeal was filed under Section 62 of the Kerala Value Added Tax Act, challenging an order of clarification by the Commissioner of Commercial Taxes. The preliminary objection raised was regarding the maintainability of the appeal since the clarification was sought by a dealer and not the appellant. The court ruled that the appellant, being the manufacturer of the products, is a "person aggrieved" by the order and thus has a right of appeal under Section 62. The court clarified that the period of limitation for filing the appeal starts from the date of knowledge of the order, not from the date of service, and since the appeal was filed within 90 days from the date of knowledge, it was deemed in order.

2. Classification of 'Vicks' Products:

The primary issue was whether 'Vicks' products should be classified under Entry 36 of the 3rd schedule of the Kerala Value Added Tax Act, which pertains to drugs and medicines, or under Entry 24(1) of SRO 82/2006, which pertains to confectionery. The Commissioner had classified 'Vicks' tablets and balm as confectionery, taxable at 12.5%, arguing that these items are sold over the counter and are not commonly treated as medicines. However, the court referred to several precedents, including the classification of 'Halls' Ayurvedic Tablets and 'Vicks Vaporub' by the Supreme Court, which were considered Ayurvedic medicines. The court emphasized the common parlance test, where products are classified based on how they are understood by the public and those dealing with them. It was noted that 'Vicks' products, manufactured under a drug license, are considered Ayurvedic medicines in common parlance and should be classified under Entry 36, attracting a 4% tax rate.

3. Applicability of Rule 23 of the Rules of Interpretation:

The Commissioner had relied on Rule 23 of the Rules of Interpretation to differentiate 'Vicks' products from classification under Entry 36. However, the court found that Rule 23, which excludes certain food and beverages, soaps, and products containing added medicaments from Entry 36, does not apply to 'Vicks' products. The court concluded that once 'Vicks' products are determined to be Ayurvedic preparations, Rule 23 does not alter their classification under Entry 36. The court held that the reasons provided in the Commissioner's order did not justify classifying the products otherwise and set aside the order, declaring that 'Vicks' products are classifiable under Entry 36, attracting a 4% tax rate.

Conclusion:

The appeal was allowed, and the court declared that 'Vicks', 'Vicks Vaporub', and tablets are classifiable under Entry 36 of the 3rd schedule of the Kerala Value Added Tax Act, attracting a 4% rate of tax. The preliminary objection regarding the maintainability of the appeal was overruled, and it was established that the appellant had the right to appeal. The court's decision was based on the common parlance test and precedents that recognized 'Vicks' products as Ayurvedic medicines.