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TMI Blog2024 (8) TMI 392X X X X Extracts X X X X X X X X Extracts X X X X ..... hether, under the facts and circumstances of the case, the Commercial Tax Tribunal was legally justified in holding that Boro-Plus Antiseptic Cream (hereinafter referred to as the 'BPAC') is a medicated ointment and covered under entry no. 41 of Schedule II Part (A). 2. As the issue involved in all the revision petitions is common, the said petitions are being decided by a common order. 3. The factual matrix in all the revision applications is also similar. Accordingly, I have outlined the factual matrix of only one case (STRE No. 274 of 2018) below: a. The instant revision petition pertains to the rate of tax to be levied on the sale of BPAC. b. The Assessing Authority in the instant case had levied tax on BPAC at the rate of 14% after categorising it as an 'unclassified item'. c. Being aggrieved by the aforesaid assessment order passed by the Assessing Authority, M/s Emami Ltd. (hereinafter referred to as the 'Respondent') preferred an appeal before the First Appellate Authority which was dismissed vide order dated July 26, 2016. d. The Respondent then filed an appeal before the Tribunal which was allowed vide order dated June 8, 2018. The Tribunal held that BPAC falls ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lieve in Boroplus- India's number one antiseptic cream...". According to the respondent, the fact that BPAC is a 'medicated ointment' is not advertised or mentioned. h. The Tribunal has wrongly concluded that the authorities below have ignored the contents mentioned in the drug licence and have decided the classification of BPAC based on the prescription on the packet. i. Common parlance has always been accepted by the Hon'ble Supreme Court for the determination of nature and character of goods. BPAC is being purchased by the consumers for its regular use without any prescription of the doctor. Consumers never use it to cure any disease. On the other hand, a 'medicated ointment' is always used for an ailment and its use comes to the end when the ailment comes to the end. Hence, BPAC cannot be held to be a 'medicated ointment'. j. The Hon'ble Supreme Court in CTT -v- Kartos International Ltd. reported in 2011 NTN (Vol 146) 17 has held that classification of any commodity cannot be made on its scientific and technical meaning. It is only the common parlance meaning of the commodity which should be taken into consideration for the purpose of determining the tax liability. k. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edule and hence the same is liable for taxation as an 'unclassified item'. s. Once the product that is 'antiseptic cream' stood excluded from Part-A of Schedule - II and did not fall either in Schedule - I or Schedule - III or Schedule - IV or in any other entry of Schedule - II in either Part-A or Part-B, the product 'antiseptic cream' was thus classified under Schedule - V in terms of Section 4(1)(d) of the Act by the Revenue. t. There is a clear diversion made by the legislature which is for a definitive purpose. The classification entry was amended in terms of Section 4 of the Act whereby 'antiseptic cream' was specifically excluded. The Revisionist discharged its burden by placing on record the fact that there has been amendment in the schedule and this fact was duly noted by the Assessing Officer, Appellate Authority and the Tribunal. The Revisionist has established that it has taken the product out from the ambit of a particular classification. The burden of the Revisionist thus stood discharged, and therefore, all the authorities cited by the Respondent to the effect that the Revisionist did not discharge its burden of classification are of no relevance. u. It is also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Entry-41 whereas it stands already classified under Schedule-V of the Act. As a consequence, the Respondent is claiming to be entitled to pay a reduced rate of tax by taking aid of the fact that it falls under a different head. Where the Assessee claims to pay a lower rate of tax, the burden falls on the Assessee to establish that they are liable to pay a lower rate of tax under a different head. Therefore, the primary burden is to be discharged by the Respondent in the instant case and not by the Revenue. y. The Respondent never put to challenge the amendment introduced by the notification dated October 10, 2012 by filing a separate writ petition. Therefore, the notification dated October 10, 2012 by which the amendment was made by the state legislature remains operative and is binding on the Respondent. z. There is a difference between exemption and classification. Under Section 7 of the Act, the provisions for exemption are contained and the goods that stand exempted find due mention in Schedule - I of the Act. Classification and exemptions are two different aspects but when it comes to exemption and payment of reduced rate of tax, the principles applicable would be t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmulation of an antiseptic. For qualifying as a drug or medicine it is antiseptic quality or its properties that are to be considered as relevant factors. The vehicle to carry antiseptic property or quality will be irrelevant. It is a well-known fact that all ointments are creams but all creams are not ointments. However, no finding in this regard has been returned by nor any evidence has been led before the Tribunal. For common parlance, 'antiseptic' is not understood as medicine. ag. The proper approach in the instant case would be to remand the matter and give opportunity to both the parties to bring fresh material on record and to lead evidence so that proper conclusion may be drawn by the Tribunal. Reliance is placed upon the judgment of the High Court of Uttarakhand in Cadbury India Ltd. -v- Commissioner, Commercial Tax, Uttarakhand reported in 2019(65) GSTR-283 wherein in a nearly identical situation, the High Court of Uttarakhand had remanded the matter to the tribunal. ah. In view of the aforesaid contentions, the instant Revision is prayed to be allowed. CONTENTIONS BY THE RESPONDENT 5. Learned Senior Counsel appearing for the Respondent has made the following submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acist Council of India), BPAC is "an ointment with approximately 67% oil ingredient and 10% water content and the balance being active ingredients and excipients. Moreover, BPAC is occlusive in nature which is the property of an ointment". As per various authoritative publications such as British Pharmacopoeia, International Journal of Pharmaceutics, Remington's Pharmaceutical Manufacturing (Part V) and other publications cream and ointment are two different items. Comparatively, in cream the quantity of water is much more whereas in ointment the quantity of water is much less as compared to the quantity of oil. Due to this reason, cream spreads easily on the skin and skin absorbs the same quickly and easily. As against this, ointment is a greasy product and does not spread on the skin easily nor is it absorbed easily by the skin. h. As per the drug licence of BPAC, the quantity of oil is much more than the quantity of water and it has been specifically categorised as "ointment". It has already been established in the earlier proceedings that BPAC is a medicine having all the required drugs and properties of medicine. Consequently, the said product is a "medicated ointment" and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the intention in amending Entry 41 to exclude any drugs and medicines simply due to their being in the form of an ointment. The expression "medicated ointment" is not qualified and it covers all types and varieties of medicated ointments. Nothing is excluded from the scope and ambit of "medicated ointment". If the goods are medicated ointment, these may have various medicinal properties and some of these may be antiseptic in nature but due to any such reason, these do not cease to be "medicated ointment". No such limitation or restriction can be imposed on the expression "medicated ointment" used in Entry 41. The entry cannot be amended or recast by the Departmental authorities. l. Without prejudice to the aforesaid, it is submitted that in any case, the expression antiseptic cream in the said exclusion category in Entry 41 is to be read ejusdem generis with other excluded items such as medicated soaps or shampoo or antiseptic cream or face cream or massage cream etc. which are all primarily cosmetics and toilet preparations. The principles of ejusdem generis as well as noscitur a sociis squarely apply to the said exclusion clause which comprises different items mentioned abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 SCC 1. p. Principles relating to classification of Ayurvedic drugs and medicines are well settled by the judgements of the Hon'ble Supreme Court. The twin tests are as to whether the commodity is known as a medicament in common parlance and as to whether the ingredients used in the product are mentioned in the authoritative Ayurvedic books. Both the said tests are satisfied in respect of BPAC. In support of common parlance test, the respondent produced a whole lot of documents and evidence including certificates and affidavits from medical shops, Ayurvedic doctors, dermatologists, hospitals and dispensaries, consumers, survey reports, clinical trial reports, communications from Government of India, Ministry of Health and Family Welfare. The respondent also produced writings on the tube and packing of the said product clearly declaring it to be Ayurvedic medicated ointment. Therapeutic and curative properties of the goods are clear from the drug license and other materials mentioned including the certificates and affidavits of doctors and medical practitioners. All the ingredients of the product are mentioned in authoritative Ayurvedic books mentioned in the Schedule I to the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the statutory interpretation of Entry 41 to Schedule II of the Act. 8. Entry 41, as effective from October 11, 2012, reads as follows: "Drugs and Medicines excluding medicated soap, shampoo, antiseptic cream, face cream, massage cream, eye jel 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." 9. In the case of Sardar Gurmej Singh (supra), 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. Relevant paragraphs are extracted below: "5. It is an elementary rule that construction of a section is to be made of all the parts together and not of one part only by itself, and that phrases are to be construed according to the rules of grammar. So construe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... term "but" is used to place forward an exception to the preceding exclusions, implying that although several items have been excluded, medicated ointments are specifically included here. This construction in particular makes it evident that the exclusion of antiseptic creams does not unintentionally exclude products with similar applications but different compositions and therapeutic intents, such as medicated ointments. 12. The term "but" has played an important role in legislative language wherein it has introduced exceptions and elucidated the scope of regulatory provisions. "But", in Entry 41, is parallel with terms like "expect", "nevertheless", and "however," which indicate an exception to the list of exclusions preceding the same. This usage is in consonance with standard dictionary meanings and legal interpretations, assuring that what follows the conjunction has been intentionally included despite previous exclusions. Accordingly, the inclusion of medicated ointments is a deliberate and clear legislative choice, ensuring these products are not inadvertently excluded due to their therapeutic importance. The Tribunal's reading of Entry 41 is in tandem with this interpretat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maxim "is only an illustration or specific application of the broader maxim noscitur a sociis". The argument is that certain essential features of attributes are invariably associated with the words "business and trade" as understood in the popular and conventional sense, and it is the colour of these attributes which is taken by the other words used in the definition though their normal import may be much wider. We are not impressed by this argument. It must be borne in mind that noscitur a sociis is merely a rule of construction and it cannot prevail in cases where it is clear that the wider words have been deliberately used in order to make the scope of the defined word correspondingly wider. It is only where the intention of the legislature in associating wider words with words of narrower significance is doubtful, or otherwise not clear that the present rule of construction can be usefully applied. It can also be applied where the meaning of the words of wider import is doubtful; but, where the object of the legislature in using wider words is clear and free of ambiguity, the rule of construction in question cannot be pressed into service." This principle has been applied in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is extracted below: "From the above description it is evident that on the basis of 'base' and 'vehicle', cream and ointments are two separate things. According to the available material, oil quantity is more than water in ointment, whereas oil is less than water in cream. This is why cream easily spreads on skin and skin easily absorbs cream, whereas ointment is greasy and sticky and hard to spread on skin. Ointment is not absorbed by skin easily. In the license, issued to the appellant, the disputed product Boroplus antiseptic cream is placed in the category of ointment. If we look at ingredients of the product mentioned in the drug license, it shows that oil is more than water in the disputed product. *** Therefore, from the above evidence and material it is established that Boroplus antiseptic cream manufactured by appellant firm is an 'Ointment'. Since it has already been established that the disputed product contains medicinal properties; hence, it falls in the category of ''medicated ointment'' and is included in the SI. No. 41 of Schedule 2 Part A and tax with additional tax @ 5% is payable on it." 17. It is clear from a perusal of the Tribunal's order that its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmacy Council of India and was on the date of Tribunal's judgment a technical consultant in regulatory matter of drugs and cosmetics: "Thus, I would like to conclude that BPHSAC having >50% oil contains and <20% water content is an ointment with approx. 67% oil ingredients and 10% water content and balance active ingredients and excipients. Moreover, BPHSAC is occlusive in nature which is the property of an ointment. The drug license of the product is also granted under the category of ointment. The word "Ointment" is also clearly written on the level of the product." 19. BPAC has been marketed primarily as an antiseptic cream, emphasising its role in preventing and treating minor skin infections. However, if one were to take a closer look at its composition, it would reveal that the same contains multiple active ingredients typically found in medicated ointments. The key ingredients consist of neem, tulsi, and aloe vera. These possess various antimicrobial, anti-inflammatory, and healing properties, which are often leveraged in medicated treatments for various skin conditions. Not only are these ingredients antiseptic, but also therapeutic, thereby effectively addressing a broa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 23. The Revenue's inability to produce evidence that exclusively supports BPAC's classification as an antiseptic cream significantly weakens its argument. In regulatory and tax disputes, the party challenging the existing classification must provide substantial evidence to support its claims. The Revenue's failure to do so in this case leaves the Respondent's evidence unrefuted and the Tribunal's findings intact. 24. In Dilip Kumar (supra), 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. Relevant paragraphs are extracted below: "14. We may, here itself notice that the distinction in interpreting a taxing provision (charging provision) and in the matter of interpretation of exemption notification is too obvious to require any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons is wider than that in Section 14 of the Central Sales Tax Act, 1956. It must be remembered that the notifications are not exception notifications but contain charging provisions. As such the onus to prove that the malted barley does not fall within foodgrains or cereals was on the Revenue. They have failed to discharge the onus. Both the Tribunal and the High Court have concurrently found that malted barley is a foodgrain or cereal for the purposes of the three notifications for reasons that cannot be discarded as perverse. We therefore see no reason to interfere with their conclusion." 26. In Marico Industries (supra), the Hon'ble Supreme Court held that the burden of proof shifts on the Revenue to show a particular item is taxable in the manner claimed by them. Relevant paragraph is extracted below: "25. The stand of the Assessee before the authorities was that it is not a chemical. It is not sold or used for that purpose. It is a starch manufactured by using Tapioca roots. The Revenue, per contra, without any material brought on record, put it in the category of a chemical. In Union of India v. Garware Nylons Ltd. [Union of India v. Garware Nylons Ltd., (1996) 10 SCC 413] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without any basis in law. 29. The failure of the Revenue to produce any evidence to support its claim of reclassification is crucial and to be noted. In legal and administrative proceedings, the burden of proof is a fundamental principle that ensures fairness. When the Revenue seeks to reclassify goods, it must provide evidence that substantiates its position. This evidence might include expert opinions, industry standards, or specific legislative provisions that justify the reclassification. Here, the Department's inability to produce any evidence suggests either a lack of basis for their claim or a failure in their administrative processes. Thereby, the Department's claim for reclassification lacks credibility and cannot be upheld. 30. The judgments relied upon by the Revenue do not advance its case in any manner. The judgment in Balaji Agency (supra) is notably outdated and pertained to a dealer where the decision was primarily based on the lack of evidence presented by the dealer. This is a critical point, as the absence of substantive evidence in Balaji Agency (supra) significantly undermines its applicability as a precedent for the instant case involving BPAC, wherein adeq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... texts, reflecting the intent of the lawmakers. The golden rule of literal interpretation serves as a foundational principle, ensuring that the judiciary does not overstep its role by reinterpreting or rewriting laws based on subjective perceptions of justice. It is also important to acknowledge the need for purposive interpretation in circumstances where a literal reading would thwart the legislative intent or lead to unreasonable outcomes. However, we are not joining issues with the same for these judgments do not help the revisionist and only reiterate the general principles. 33. In the judgements of Kantaru Rajeevaru (Sabarimala Temple Review-5 J.) -v- Indian Young Lawyers Assn. reported in (2020) 2 SCC 1, Spencer & Co. Ltd. -v- Vishwadarshan Distributors (P) Ltd. reported in (1995) 1 SCC 259 and State of Karnataka -v- State of T.N. reported in (2016) 10 SCC 617, the facts stated therein are very different from those present in this case. The main justification behind the judgments relied upon by the revisionist is that the Tribunal is bound by Article 144 of the Constitution of India and while applying the twin test it has to consider the authoritative text relating to Ayurved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ims. 35. The principle that marketing or advertising cannot dictate tax classification has been laid down in several cases that place objective assessment over subjective interpretation. In the case of M/s Blue Star -v- UOI (supra), the Bombay High Court was considering the classification of "walk-in coolers". The department had, in that case, classified the product to the detriment of the assessee. The Bench therein held that it is not on the basis of what the petitioner advertises to attract customers that its liability to pay duty under a particular tariff item be fastened. The Court stated that the same can only be set on the facts and the circumstances and determination on the basis of those facts and circumstances as disclosed by the records. The relevant paragraph is extracted below: "...In any event, what the petitioner may advertise by way of attracting customers can be no criterion for adjudicating upon the issue whether our duty is payable under a particular tariff item. In other words, payment of duty under a particular tariff item must depend upon the facts of the case and not on the advertisement gimmick of the advertiser. Thus, it is not on the basis of what the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Antiseptic Cream, Boroplus Prickly Heat Powder, and Sonachandi Chavanprash. The issue that was put forth before the High Court of Telangana was whether the products would fall under Entry 36 or Entry 37 of the Central Goods and Services Tax Act and Telangana Goods and Services Tax Act. If the products were to fall under the classification of cosmetics, then they would become leviable for GST at a rate of 20%. Otherwise, if the products were to be treated as drugs within Entry 37, then they would be leviable of duty at the rate of only 10%. Here, too, the Court had to deal with whether or not BPAC was to be considered a cosmetic or a medicated ointment. The Court, in its judgement, stated that the cream cannot be brought under the ambit of being a cosmetic simply because it can only be used for its medicinal value and is not otherwise capable of being used as a cosmetic or toiletry product. It is not a medicated good either because those, too, serve a purpose beyond their intended medicinal uses. The Court further added that BPAC is "preventive in nature and has curative and healing ayurvedic ointment", which is prescribed for several skin disorders. Thereby, the Court held that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmination of the amount, and the Tribunal shall thereupon pass such orders as are necessary to dispose of the case in conformity with the said decision. (5) All applications for revision of orders passed under Section 57 in appeals arising out of the same cause of action in respect of an assessment year shall be heard and decided together: Provided that where any one or more of such applications have been heard and decided earlier, if the High Court, while hearing the remaining applications, considers that the earlier decision may be a legal impediment in giving relief in such remaining applications, it may recall such earlier decision and may thereafter proceed to hear and decide all the applications together. (6) The provisions of Section 5 of the Limitation Act, 1963, shall mutatis mutandis, apply to every application, for revision under this section. Explanation.-For the purpose of this section, the expression "any person" includes the Commissioner and the State Government." 41. A Constitution Bench of the Supreme Court in Hindustan Petroleum Corporation Limited -v- Dilbahar Singh, reported in (2014) 9 SCC 78, expounded on the scope of revisional jurisdiction. Relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C 131] has enabled the High Court to interfere with the findings of fact by reappreciating the evidence. We do not think that the three-Judge Bench has gone to that extent in Ram Dass [Ram Dass v. Ishwar Chander, (1988) 3 SCC 131] . The observation in Ram Dass [Ram Dass v. Ishwar Chander, (1988) 3 SCC 131] that as the expression used conferring revisional jurisdiction is "legality and propriety", the High Court has wider jurisdiction obviously means that the power of revision vested in the High Court in the statute is wider than the power conferred on it under Section 115 of the Code of Civil Procedure; it is not confined to the jurisdictional error alone. However, in dealing with the findings of fact, the examination of findings of fact by the High Court is limited to satisfy itself that the decision is "according to law". This is expressly stated in Ram Dass [Ram Dass v. Ishwar Chander, (1988) 3 SCC 131] . Whether or not a finding of fact recorded by the subordinate court/tribunal is according to law, is required to be seen on the touchstone whether such finding of fact is based on some legal evidence or it suffers from any illegality like misreading of the evidence or overlookin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Here, the Revenue has not articulated any specific grounds of perversity in its pleadings or submissions. Perversity would require demonstrating that the Tribunal's findings were not based on a rational assessment of the evidence or that they ignored relevant legal principles or material facts. Neither was any evidence produced by the Department before the assessing officer, Commissioner, Commercial Tax and the Tribunal nor was any evidence produced before this Court to controvert the evidence produced by the respondents. 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. 44. As a last-ditch effort, the Revenue had argued to remand the matter back to the Tribunal by placing reliance on the judgment in Cadbury India (supra). The judgement in Cadbury India (supra) wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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