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Sales Tax Review |
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May 2007 |
Gist of DDQs
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Whether request for prospective effect in the case of determination order passed
for the product ‘jerry cans’ is granted?
Transaction date: 12-5-2006
Held: Prospective effect granted
Facts in issue
A common determination order was passed in case of 14 applicants out of which 3
applicants have requested for prospective effect to be granted to the order No.
DDQ-11/2000/Adm-5/110-99-…/B-11, Mumbai. Dated: 17-7-2001. Under this
determination order, the product ‘jerry cans’ was considered taxable at 13%
under Schedule entry
C-II-93 for the period 15-8-2000 to
31-3-2001. From 1-4-2001 onwards the product got included under the notification
entry No. 141 to Schedule entry C-I-29, taxable at 4%. The applicant has thus
requested to grant prospective effect to the determination order dated
17-7-2001.
Submissions of the applicant
The applicant submitted that there was no difference between ‘jerry cans’ and
‘carboys’. The very fact that the subsequent notification of industrial inputs
specifically included both ‘jerry cans’ and ‘carboys’ showed the intention of
the legislature to treat both the products at par. Even in common parlance, the
words ‘jerry cans’ and ‘carboys’ were used interchangeably.
The applicant had not collected taxes in excess of 4% as he was under the bona
fide belief that his product was covered by the notification of industrial
inputs. Thus, the request for grant of prospective effect.
Views of the Department
The Commissioner observed that the product ‘carboys’ was notified w.e.f.
15-8-2000 in the notification dated
11-8-2000 for industrial inputs and packaging materials, the rate of tax
determined at 4%. The product ‘jerry cans’ was not included in the said
notification. However, the Government by notification dated 14-5-2001 for
industrial inputs expanded the scope of the earlier notification dated 11-8-2000
so as to include the product ‘jerry cans’ along with ‘carboys’. The earlier
notification was for the period
15-8-2000 to 31-3-2001. The amended notification dated 14-5-2001 was made
effective from 1-4-2001. Thus, the question related to the period 15-8-2000 to
31-3-2001.
The Commissioner observed that the applicants were under the bona fide belief as
regards interpretation of the products ‘jerry cans’ and ‘carboys’ being one and
the same. They treated ‘jerry cans’ as covered by the word ‘carboys’. Also
‘jerry cans’ and ‘carboys’ were classified under the same heading under Central
Excise. The product ‘jerry cans’ was later on added along with ‘carboys’ in the
notification dated 14-5-2001 on industrial inputs and packaging materials for
the purpose of Schedule entry C-I-29.
Thus, the request for prospective effect was to be considered favourably.
Held
The Commissioner granted the request for prospective effect to the determination
order dated 17-7-2001, favourably.
[M/s. Crown Plastic, M/s. Ashok Plastic, M/s. Ashok Enterprises. DDQ No.
DDQ-11-06/Adm-5/65-37-36/B-3. Dated: 20-2-2007]
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Whether the product ‘Cidex Solution’ can be considered as a drug covered by
Schedule entry C-II-37 in light of Bombay High Court judgment
in the case of M/s. Merind Limited?
Transaction Date: 26-9-2006
Held: Not a drug, Covered by Schedule Entry C-II-152, Rate of Tax 13 %
Facts in issue
A determination order was passed vide order No. DDQ-1198/Adm-5/10/B-13. dated
20-7-1998 under which the product ‘Cidex Solution’ was treated as covered under
Schedule entry C-II-152 eligible to tax at 13%.
The order was challenged before the Tribunal stating that the product was a drug
covered by Schedule entry C-II-37 of the BST Act since it had an internal
application on the human body when used in endoscopy.
The matter was remanded with a direction to decide the issue afresh in light of
the Bombay High Court judgment in the case of M/s. Merind Ltd.
Submissions of the applicant
The applicants submitted that ‘Cidex’ was a chemical used to cleanse apparatus
like endoscopes or other surgical instruments. The applicants also stated that
in view of the judgement in the case of M/s. Merind Ltd., the words internally
and externally should not be given a restricted meaning. The present case was
squarely covered by the judgment in the case of M/s. Merind Ltd.
Case Laws relied upon
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M/s. TTK Pharma Ltd. (Appeal No. 146 of 1998. Dated: 9th October, 2001)
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State of Gujarat vs. M/s. C.K. Gauze Bandage Mfg. Co. [84 STC 572 (Guj)]
Views of the Department
The Commissioner first examined the facts and ratio decision of
M/s. Merind Ltd. The Bombay High Court held that medicinal formulations
/preparations used for diagnosis of the disease in human beings outside the body
would be covered under the entry relating to medicines/drugs. Thus, if
diagnostic kits are medicinal formulations used for diagnosis of the diseases in
human beings, they could not be classified under entry C-II-106 which pertained
to instruments. The High Court thus held that, diagnostic kits were medicinal
formulations/ preparations classifiable under entry
C-II-37.
The Commissioner then examined the properties of the product ‘Cidex Solution’.
The product was a high level disinfecting and sterilizing solution used for
disinfection and sterilization of instruments. It could also kill certain
viruses.
The product was classified under the Central Excise heading 3808.90 which
covered disinfectants. Also, the website of the applicant, described the product
as used in sterilizing surgical instruments.
The applicant claimed that the product is covered by entry C-II-37 for ‘drugs’.
The conditions to be satisfied for a product to qualify as a drug are as
follows:
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It should be any medicinal formulation or preparation.
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It should be ready for use both internally and externally on human beings,
animals and birds.
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It is for diagnosis, treatment, mitigation or prevention of any disease or
disorder.
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It should be manufactured or imported into India.
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It should be stocked, distributed or sold under licence granted under the
Drugs and Cosmetics Act, 1940.
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It should not include any mosquito repellants in any form.
The Commissioner examined if the product could be considered a medicinal
formulation or preparation.
A medicine or a drug in common parlance is a substance or preparation used in
the treatment of diseases and must have a curative power so as to make it
effective for treatment of ailments.
The ingredients of the product ‘Cidex’ were ‘Glutaraidehyde’ and ‘activator
salt’.
‘Glutaraidehyde’ is a colorless, oily liquid chemical used to disinfect
equipment which cannot be heat sterilized.
Thus, the product could not be said to be a ‘medicinal formulation’ having
therapeutic or prophylactic uses. It was basically a disinfectant.
Case laws relied upon
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ICPA Health Products Pvt. Ltd. vs. CCE, Vadodara & vice versa
[1999-(108)-ELT-0598-Trib]
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Bengal Chemicals and Pharmaceuticals (P) Ltd. vs. Collector
[1999-(053)-ELT-0140-Trib]
The judgment of the Bombay High Court in the case of M/s. Merind Ltd. did not
apply to the product in question since the product therein; i.e., diagnostic
kits was a medicinal formulation whereas the product ‘Cidex Solution’ was not a
medicament but a disinfectant. Hence, the coverage of the product by Schedule
entry C-II-37 did not arise.
The judgments relied upon by the applicant covered the products Accutest HOG
Strip (for detection of pregnancy by testing urine) and cotton rolled bandages
which were classifiable as drugs.
Held
The Commissioner held that the earlier determination order as to product ‘Cidex’
not being covered by Schedule entry C-II-37 was proper and did not require
reconsideration with reference to decision in the case of M/s. Merind Ltd.
[M/s. Johnson & Johnson. DDQ No. DDQ-11-06/Adm-5/77/B-2.
Dated: 3-3-2007]
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