2014 (5) TMI 368 - HC - VAT and Sales Tax

Rate of Tax Ramtirth Brahmi Oil Hair oil or medicament - Classification - Entry 1(ii) of Part F or Entry 20 Part C of 1st Schedule Held that - The Revenue has not produced any material or has disputed the materials produced by the assessee to support its contention that Ramtirth Brahmi Oil was ever sold as a hair oil and not as medicament - It is a settled principle of law that the onus to prove that a particular product falls under a particular head of the Schedule is on the Revenue - It is for the Revenue to show and establish that the goods in question is not a medicament or that the common man did not treat it as a medicament. - Refer Commissioner of Central Excise Vs. Sharma Chemical Works 2003 (4) TMI 102 - SUPREME COURT OF INDIA and Puma Ayurvedic Herbal (P) Ltd. Vs. Commissioner, Central Excise, Nagpur 2006 (3) TMI 141 - SUPREME COURT OF INDIA Relying upon Commissioner of Central Excise, Delhi v. Ishaan Research Lab (P) Ltd.) 2008 (9) TMI 4 - SUPREME COURT - In laying down the principles for classification, SC pointed out that the extent of a small percentage of ingredients having therapeutic or prophylactic value and use of the product for beautification, would not, ipso facto, make a product a cosmetic preparation - The Apex Court pointed out that the common parlance test is not be all and end all of the matter and merely because a product could be put to cosmetic use, that would not, by itself, make it a cosmetic product - The claim that it is an ayurvedic product must be substantiated on factual basis. Entry 1(ii) of Part F of the I Schedule deals with hair oils, hair creams, hair dyes, etc., and the Explanation to the said entry stated that any of the items, even if medicated, or as defined under Section 3 of the Drugs and Cosmetics Act, or manufactured on the licence issued under the said Act, will fall under this item - Thus, if an item has to fall under Part F Entry 1, even going by the Explanation, a medicated oil has to be a hair oil simpliciter - However, if medicated oil is not sold just as a hair oil, but, as already pointed out in the preceding paragraqph and as certified by the Director of Ayurveda that it has multifarious functions and one of which happens to be for the scalp or for the hair, it would not make the oil sold by the assessee, a pure and simple hair oil - In the background of the decision of the Apex Court reported in Meghdoot Gramodyog Sewa Sansthan Vs. Commissioner of Central Excise, Lucknow 2004 (10) TMI 93 - SUPREME COURT OF INDIA and the contemporaneous treatment given to the item Ramtirth Brahmi Oil by the other States, there is no hesitation in confirming the order of the Tribunal, thereby rejecting the Revenue s appeal - In the result, the Tax Case Revision is dismissed and the order of the Tribunal is confirmed Decided against Revenue.

Summary

Issues Involved:
1. Classification of Ramthirth Brahmi Oil under the appropriate tax entry.
2. Determination of whether Ramthirth Brahmi Oil is a medicinal preparation or a hair oil.
3. Evaluation of the burden of proof and evidentiary requirements for tax classification.

Detailed Analysis:

1. Classification of Ramthirth Brahmi Oil under the appropriate tax entry:
The primary issue revolves around whether Ramthirth Brahmi Oil should be taxed under Entry 20 Part C of the First Schedule as an ayurvedic medicine at 5% or under Entry 1(ii) of Part F of the First Schedule as a hair oil at 16%. The Tribunal originally ruled in favor of the assessee, classifying the oil as a medicinal preparation. The Revenue appealed, asserting that the oil should be taxed as a hair oil, citing the explanation in Entry 1(ii) of Part F.

2. Determination of whether Ramthirth Brahmi Oil is a medicinal preparation or a hair oil:
The assessee contended that Ramthirth Brahmi Oil is a medicinal formulation used for various disorders and not just a hair oil. The Tribunal supported this view, noting that the oil has multifarious applications, including body massage and treatment of headaches, dandruff, and sleeplessness. The Tribunal referenced the decision in 104 STC 198, which supported the classification of similar products as medicinal preparations.

The Revenue argued that even if the oil is medicated, it should still be considered a hair oil under the explanation to Entry 1(ii) of Part F. However, the Tribunal and various state authorities, including the Commissioner of Central Excise and the Director of Ayurveda, consistently classified the oil as an ayurvedic medicinal preparation. The literature and certificates provided by the assessee substantiated the claim that the oil is marketed and used as a medicinal product.

3. Evaluation of the burden of proof and evidentiary requirements for tax classification:
The court emphasized that the onus to prove the correct classification of a product lies with the Revenue. The Revenue failed to provide evidence to counter the assessee's claim that Ramthirth Brahmi Oil is primarily a medicinal product. The court cited several Supreme Court decisions, including (2003) 5 SCC 60 (Commissioner of Central Excise Vs. Sharma Chemical Works) and (2006) 3 SCC 266 (Puma Ayurvedic Herbal (P) Ltd. Vs. Commissioner, Central Excise, Nagpur), which underscored the importance of the product's primary use and the common understanding of its nature.

The court also noted that the mere presence of coconut oil or the fact that the product is sold over the counter does not negate its classification as a medicinal preparation. The primary use and the way the product is marketed and understood by consumers play a crucial role in determining its classification.

Conclusion:
The court upheld the Tribunal's decision, confirming that Ramthirth Brahmi Oil is a medicinal preparation taxable under Entry 20 Part C of the First Schedule at 5%. The Revenue's appeal was dismissed, and the court reinforced the principle that the burden of proof for tax classification rests with the Revenue. The court's decision was based on extensive evidence provided by the assessee and consistent rulings by various state authorities and the Commissioner of Central Excise.