Transaction date: 12-8-2005
Held – Allowable as sales return
Facts in issue
There was a determination order dated 14-3-1996 in the case
of M/s. Bharat Petroleum Corpn. Ltd. (BPCL) whereby the sale of SKO (LABFS) by
BPCL to RIL was treated as covered by C-I-26 read with notification entry 160
and thereby exempt from tax. Also the return stream of kerosene (SKO) did not
qualify for "goods return" since
N- Paraffin was extracted therefrom.
Against this order, the applicant BPCL had preferred an
appeal before the Maharashtra Sales Tax Tribunal. The Tribunal confirmed the
order. The applicant RIL filed a Rectification Application which was allowed
by the Tribunal.
The Commissioner of Sales Tax filed a writ petition against
the Tribunal judgment allowing the Rectification Application of RIL. The BPCL
also filed a writ petition challenging the dismissal of their Reference
Application.
The Bombay High Court in the writ petition accepted the
alternate submission of the Commissioner to permit him to decide afresh the
question regarding return stream and also directed both BPCL and RIL to adduce
such evidence as they may deem fit.
Submissions of the applicant
The appellant BPCL submitted that RIL were supplied SKO (LABFS)
superior kerosene oil for their manufacturing activities. After removal of
N-Paraffin from SKO-LABFS the return stream of SKO conformed to the BIS
specifications of kerosene and such material was sold by BPCL to its
customers.
The appellant, therefore, contended that the return stream
would qualify for claim of goods return.
Also the matter was referred to UDCT and they too,
expressed their opinion that return kerosene
conformed to the specification of superior kerosene.
A determination order of Gujarat Sales Tax Commissioner
holding that the transaction of return stream did not amount to purchase by
IOC from IPCL, was also furnished.
In light of above submissions, it was contended by BPCL
that supply of return stream should be treated as "goods return".
The appellant RIL also contended that on procuring SKO (LABFS)
and removing N-Paraffin therefrom, the return stream is nothing but SKO.
Therefore the return stream would constitute a claim of goods return as
provided in Rule 4 of Bombay Sales Tax Rules, 1959.
As per UDCT’s letter, as per the IS specifications, the
feedstock kerosene and return kerosene are to be treated as superior kerosene.
The appellant relied on the Excise judgment by the larger
bench of CEGAT reported in 2000 (119) ELT 26 (Tribunal – Larger Bench) dated
17-5-2000 wherein, it was observed that paraffin was nothing but kerosene.
Even as per the Dictionary meaning as per Oxford dictionary paraffin and
kerosene are one and the same.
Even in case of Supreme Court judgment, in the case of
M/s. Sham Oil Cake Ltd. 2004 (174) ELT 145, it was held that edible oil
after undergoing the process of refining remained edible vegetable oil.
The appellant stressed on the latest judgment of the
Tribunal in the case of M/s. Dynamix Dairy Industries Ltd. (Appeal No. 18 of
2004 decided on 17-3-2006).
Here, it was held that the process of bactofuging,
pasteurization and sterilisation employed by the applicant to natural cow
milk, thereby, producing ‘toned milk’ or ‘skim milk’ did not amount to
manufacture and that these got covered by entry 6(2) in Schedule ‘A’.
Therefore the claim of goods return be allowed.
Views of the Department
The Commissioner went through the submissions of the
applicant, the letter from UDCT and the dictionary meaning of ‘kerosene’ &
‘paraffin’.
He observed that there was no difference between the
kerosene and the paraffin as both were hydrocarbons. The utility of the
product before and after processing; i.e., after removal of N-Paraffin
remained the same i.e. kerosene.
The Commissioner referred to the Apex Court judgment in the
case of Shiv Dutt & Sons (84 STC 497). Here, it was held that if a wide
interpretation was given to the word ‘manufacture’ in section 2(17), there may
be very absurd results flowing as a consequence thereof. For instance, the
definition includes the word ‘ornamenting’. If a dealer purchased certain
goods and merely added some decorative material thereto, according to the
State’s interpretation, this would amount to manufacture. The section should
be so interpreted to mean only such of the various processes referred to in
the definition and applied to the goods as are of such a character as to have
an impact on the nature of the goods.
Thus, when the commodity retains substantial identity
through the processing stage, it cannot be said that it has been manufactured.
It remains, despite such process, the same commodity.
The kerosene oil is a mixture of different hydrocarbons.
Although the relative abundance of different hydrocarbons varies to an extent
between the kerosene supplied and kerosene received the product remains the
same, its commercial utility remains unaltered.
Thus the claim of the appellant is allowable as goods
return.
Held
The Commissioner held that the return of kerosene by RIL to
BPCL after extraction of N-Paraffin would be allowable as sales return.
[M/s. BPCL DDQ No. DDQ-11/2005/Adm-5/Remand/86-87/B-2 dated
11-9-2006]
Transaction date: 21-9-2002
Held – Covered by Entry C-II-34, rate of tax 20% + TOT +
SC
Facts in issue
The applicant is a manufacturer of "Krupa Hair Tonic". The
major ingredients of "Krupa Hair Tonic" are Wadparambi, Amla, Harada, Behada,
Kapur, Kachora, etc. and these ingredients have medicinal properties. The
product is manufactured under licence under the Drugs and Cosmetics Act, 1940.
In an earlier application for clarification of rate of tax
applicable to the product ‘Krupa Hair Tonic’, the applicant was informed that
his product would not be a drug/medicine and that similar issue had been the
subject matter of determination proceedings in the case of M/s. Godrej
Consumer Products Ltd. (DDQ dated 16-3-2004).
Submissions of the applicant
The applicant contended that the constituents of his
product were different from the constituents of the product in the case of
M/s. Godrej Consumer Products Ltd. (DDQ dated 16-3-2004).
He also contended that his product was covered by the
judgment in the case of M/s. BPL Pharmaceuticals vs. Collector of Central
Excise (104 STC 162), wherein it was held that the product ‘Selsun
shampoo’ used for prevention and cure of dandruff was a drug.
The applicant also submitted certificates of doctors and
chemists and the opinion of a leading ayurvedic hospital which pointed out
that the product of the applicant was an "Ayurvedic medicine".
He also submitted that his product was covered by the
judgment of the Apex Court in the case of M/s. BPL Pharmaceuticals vs.
Collector of Central Excise (104 STC 164) and Puma Ayurvedic Herbal (P)
Ltd. vs. Commissioner Central Excise Nagpur (145 STC 200).
The applicant further submitted that the Schedule Entry
C-II-34 covered hair tonics, hair oils which are of a general nature having no
therapeutic properties whereas his product was a drug covered by entry
C-II-37.
Views of the department
The Commissioner observed that a product, in order to
qualify as a drug, should satisfy the following five conditions
simultaneously.
-
It should be a medicinal formulation or preparation.
-
It should be ready for use internally or externally on
human beings, animals and birds.
-
It is for diagnosis, treatment, mitigation or prevention
of any disease or disorder.
-
It should be manufactured or imported into India.
-
It should be stocked, distributed or sold under licence
granted under the Drugs and Cosmetics Act, 1940.
-
It should not include mosquito repellants in any form.
The first condition requires a product to be a medicinal
formulation or preparation.
The ingredients used for this hair tonic do not have
definite medicinal value of their own. They are all common herbs which are put
to various uses, all of which are not necessarily medicinal. It is difficult
to call a product a ‘drug’ merely due to the presence of herbs in it.
The box packing of the product has emphasized on "hair
revitalizing" property of the product. The
product has been advertised in no different way that any other hair oil
promising long and thick hair growth to the user.
Further the customers of the said product perceive it as
‘hair oil’- a hair tonic’ which promotes health and vitality of hair and gives
good hair growth.
Case Laws relied on
-
Dandwala vs. State of Gujarat, 88 STC 459 (Guj)
Commissioner of Sales Tax vs. Shri Sadhna Aushadhalaya
(1963) 14 STC 813(M.P).
C.C. Mahajan & Co. vs. State of Bombay (1958) 9 STC
133 (Bom.)
M/s. Allen Laboratories (No. DDQ – 119/Adm-5/91/B-2)
dated 4-2-2002
M/s. Godrej Consumer Product Ltd. DDQ dated 16-3-2004
It can be seen that the product has more cosmetic
characteristics than medicinal characteristics. ‘Krupa Hair Tonic’ improves
the appearance of the hair by reducing hair fall, preventing greying and
getting rid of dandruff and is, therefore, very much a cosmetic.
The licence to manufacture Ayurvedic drugs issued under the
Drugs & Cosmetic Rules, 1945 is no conclusive proof of the fact that the
preparation for which the licence has been issued is a drug within the meaning
of the Drugs & Cosmetics Act, 1940.
In the case of M/s. Merind Ltd. (Appeal No. 35 of 1998
decided on 15-12-2001) it has been held that reference to Drugs Act cannot
decide whether any product is a medicine under the Sales Tax Law. Rather, it
has to be seen that the product satisfies the definition of ‘medicines’.
The cases relied on by the applicant are under the Central
Excise Act and are not relevant.
Therefore, the product ‘hair tonic’ is not a drug.
As regards the plea for grant of prospective effect u/s.
52(2) of the BST Act, there is no statutory misguidance since in the earlier
determination orders till date hair oil has been held as not a drug.
There is a specific entry C-II-34 which covers the
applicant’s product and therefore the applicability of entry C-II-37 for drug
does not arise.
Held
The Commissioner held the product as covered by Schedule
Entry C-II-34, attracting a rate of tax at 20% and turnover tax and surcharge.
[M/s. Krupa Aushadhalaya DDQ No. DDQ-11-2004-Adm-5/60/B-I
dated 26-10-2006]
