2021 (3) TMI 488 - HC - Central Excise

Classification of goods - rate of tax - Orbit White Chewing Gum - taxable at 4% or 12.5%? - HELD THAT - This Court in HIMALAYA DRUG COMPANY VERSUS STATE OF KERALA 2020 (3) TMI 1317 - KERALA HIGH COURT has taken the view that importing of the definition in a statute in the regulatory regime into a fiscal statute would not be warranted in view of the fact that the exemptions or concessions granted in a fiscal statute are to be strictly construed. The entitlement to concessional rate is first established by demonstrating the nature of the product, applicable rate of tax, and the comparative study of acceptance of same product under other enactments, such as Customs Act, Central Excise Act, etc, could be undertaken. The Tribunal committed an error of jurisdiction by solely relying on Invoice and treating the chewing gum as a product falling under Ayurvedic, Unani, etc. In the case on hand, for the view we have taken in the preceding paras, we do not want to dwell further into the matter and we are convinced that the common order under revision is untenable, suffers from too much of brevity, and the relevant aspects, either way, which have bearing on determining the applicable rate of tax, are not considered by the Tribunal and reconsideration of issue is warranted. The matter remitted to Tribunal for disposal afresh, in accordance with law, within three months from the date of receipt of a copy of this order - Petition allowed by way of remand.

Summary

Issues:
1. Applicable rate of tax on 'Orbit White Chewing Gum' sold by the respondent.

Analysis:
1. Applicable Rate of Tax: The petitioner, Revenue, challenged the common order dated 24.03.2014 in three revisions regarding the applicable rate of tax on 'Orbit White Chewing Gum' sold by the respondent, a registered dealer under the KVAT Act. The assessing officer determined the tax rate at 12.5%, rejecting the respondent's claim of 4%. The Tribunal allowed the appeals filed by the Revenue, leading to the tax revisions.

2. Arguments by Revenue: The Senior Government Pleader argued that the Tribunal erred in accepting the invoices as conclusive evidence of the product's classification under H.S.N. Code 3004.90.11 as Ayurvedic Medicine taxable at 4%. He contended that the product did not qualify as an Ayurvedic medicament under the KVAT Act, making the concessional rate of tax inappropriate. The Tribunal's findings were deemed incomplete and inconclusive, warranting a remittance of the matter for further adjudication.

3. Arguments by Respondent: Advocate Shanmughan D. Jayan contended that the Tribunal's reasoning supported the 4% tax rate for the chewing gum, considering it as falling under the category of Ayurvedic medicine. He did not oppose a remand but requested an opportunity to present additional material supporting the 5% tax rate under Entry 36 of the KVAT Act.

4. Court's Decision: The Court found the Tribunal's order lacking in detailed reasoning and clarity on the classification and applicable tax rate of the product. Referring to a previous judgment, the Court emphasized the strict construction of exemptions or concessions in fiscal statutes. It concluded that the Tribunal's reliance on the invoice alone was insufficient, and a comprehensive analysis of the product's nature and applicable tax rate was necessary. Consequently, the common order was set aside, and the matter was remitted to the Tribunal for fresh disposal within three months, allowing both parties to present further material for consideration.

This detailed analysis of the judgment highlights the key issues, arguments presented by both parties, and the Court's decision, providing a comprehensive understanding of the legal proceedings and outcomes.