1. Stock Transfer – Burden of proof. Whether registers maintained under Excise Rules are sufficient ?

Held : No

The dealer was engaged in the business of manufacture of aluminium oxide granules at Edappally in Ernakulam District. He had a branch at Visakhapatnam. The dealer was assessed for the year 1999-2000 under CST Act, 1956. The dealer had filed returns claiming exemption on stock transfer for Rs. 75,77,525/- to factory at Visakhapatnam. The assessing authority disallowed on the ground that the assessee had not produced proof for the transfer and movement of goods to the factory and evidence for crossing the check post.

In appeal claim of appellant was rejected because he failed to produce F form declaration. The appellant authority relied on the Ashok Leyland Ltd. vs. State of Tamil Nadu 134 STC 473 wherein the Supreme Court held that the initial burdern of proof is on the dealer to prove that the movement of goods was occasioned by reason of transfer of such goods otherwise than by way of sale. The appellate authority also found that filing of Form F declaration is mandatory and only on filing of such declaration, the assessing authority would be able to make an inquiry for the purpose of passing an order after arriving at the requisite satisfaction that the movement of goods was occasioned otherwise than as a result of sale. In appeal against this order before the Tribunal, no relief sought. Tribunal concurred with the view of appellate authority and dismissed the appeal.

The appellant revision petition submitted that, Form F is not mandatory to prove transfer, he placed his reliance on Vijaymohini Mills vs. State of Kerala 75 STC 63. He also submitted that, in the absence of Form F declaration the assessee produced other evidence to show that there was a stock transfer. Register RG 24 maintained under Central Excise Rules is the best to prove the claim of stock transfer, After hearing both the sides, Hon'ble High Court came to conclusion that, after reading the Sec. 6A of the CST Act, 1956 along with Central Sales Tax (Registration and Turnover) Rules, 1957 burden of proof is on the assessee to show that there is transfer of goods other than by way of sale. The question is whether Form RG 23A produced by the assessee would clearly show that there was stock transfer from State of Kerala to Visakhapatnam? After perusal of records the Hon'ble Court formed an opinion that, Form RG 23A deals with stock account of inputs for use in or in relation to the manufacture of final products. This document as such would not show that there was movement of goods from Kerala to Visakhapatnam. This is form prescribed under rule 57A of the Central
 
Excise Rules framed in exercise of the powers conferred by sections 6,12, and 37 of Central Excise Act, 1944 and maintained by the assessee itself. We are in this case concerned with the provisions of the Central Sales Tax Act, 1956 and Central Sales Tax Rules, 1957. The petitioner has to comply with the provisions of Central Sales Tax Act and Rules framed thereunder, Declaration form under Central Excise Rules is not a reliable piece of evidence to show transfer of stock from one State to another. This document is not binding on the officers functioning under the Central Sales Tax Rules. The assessee has not produced any reliable evidence to show that there was stock transfer. All the fact finding authorities have concurrently found that the assessee has not discharged the burden under Section 6A of the CST Act, with this revision petition is dismissed.

[Carborundum Universal Ltd. vs. State of Kerala 148 STC 339]

2. Whether Reassessment done on audit objection without application of mind, only to give effect to audit compliance is not a valid proceeding ?
   
   The appellant is the manufacturer and seller of implements which are used in agricultural operations for spraying insecticides and pesticides, etc. The sprayers manufactured and sold by the appellant are of various types, and sold mostly to the Government Departments and the Government too taking them as agricultural implements did not pay any sales tax on their purchases.
   
   The appellant was assessed for the periods 1982-83 and 1983-84 u/s 17(2)(a) of the Bihar Sales Tax Act. The claim of appellant was accepted in the order of assessment by the competent authority after verification of records.
   
   Subsequently, on the basis of auditor’s objection that implements (sprayers) manufactured and sold by the appellant were not entitled to exemption from payment of sales tax for the reason that those were not agricultural implements since sprayers were not included in the list of agricultural implements in the notification initiated reassessment proceedings u/s 19(1) of the Bihar Sales Tax Act
   
   In response to SCN issued by the Deputy Commissioner of Sales Tax, appellant submitted his reply taking the plea that the sprayers manufactured by it were agricultural implements entitled to exemption from sales tax notwithstanding the fact that those were not separately included in the notification. The Deputy Commissioner passed reassessment orders ex parte as appellant did not appear before him.
   The appellant filed writ petitions against these orders on the grounds that 1) reassessment proceeding was wholly without jurisdiction inasmuch as the audit objection did not satisfy the statutory requirement of the prescribed authority and 2) sprayers manufactured and sold by it were in any case entitled to exemption being agricultural implements even though those were separately included in the list under the notification.
   
   The matter came up for decision before the single judge, who dismissed the petition on the ground that, sprayers manufactured and sold by the appellant are not covered under notification. Against this, appellant preferred appeals and took objection that, mere reference to the exemption notification in the reassessment order could by no means satisfy the stringent precondition for initiation of a re- assessment proceeding under section 19(1) of the Act, because the prescribed authority was in any case supposed to know the notification issued by the department and mere reference to the notification cannot be construed as a fresh or a new information coming to into the possession of the prescribed authority. In support appellant relied on Eastern Newspaper Society 119 ITR 996 of Supreme Court and Full Bench decision of Patna High Court in the case of Bimraj Madanlal vs. State of Bihar reported in 56 STC 273
   
   After hearing both the sides, and after referring to the judgments cited, court came to finding that reassessment orders suffers from very basic infirmity that orders are passed completely mechanically and without any independent application of mind by the prescribed authority. While passing the assessment orders both assessee and assessing authority proceeded on the premise that the sprayers manufactured and sold by the appellant were agricultural implements, exempted from payment of any sales tax. High Court also noticed that, from reading the reassessment order one fails to fins the slightest application of mind by the prescribed authority himself and he appears to have simply followed and gave effect to the objection raised by the internal auditors, thus reassessment orders do not come to the test of an independent application of mind by the authority passing the order therefore liable to be struck down.
   
   [Bharat Agricultural & Mechanical Engineering Co. 148 STC 372 (Patna High Court)]
    

3. Hajmola Candy – Whether medicine and Drug or confectionery ?
   
   Held it is Confectionery
   
   The petitioner manufactures Hajmola Candy after obtaining drug licence from the Drug Licencing Authority, Lucknow, and it is manufactured in accordance with the formula given in the authenticated ayurdic text book “Bhav Prakash” and is certified by the Director, Ayurvedic and Unani Directorate, Lucknow, U.P. Therefore petitioner in the assessment proceedings for the fourth quarter of March 1977 claimed that the product “Hajmola Candy” be taxed u/e Drugs and Medicine. The assessing authority did not accept this proposition.
   
   In appeal before the Taxable Tribunal, contention of the appellant was that Hajmola Candy is an ayurvedic preparation which improves digestion. According to the petitioner Hajmola Candy is patent and proprietary medicine in relation to ayurvedic system of medicine containing ingredients mentioned in the formula described in authoritative ayurvedic text book and therefore, satisfies section 3(h) of Drugs and Cosmetics Act, 1940. In support of this submission appellant submitted list of ingredients and placed his reliance on Panama Chemical works vs. Union of India 62 ELT 241, wherein it has been held that “Swad” is an ayurvedic medicine. Following ratio of this judgment Special Bench of CEGAT, New Delhi, held that Hajmola Candy is an ayurvedic medicine under Central Excise Tariff Act. 71 ELT 1069. The petitioner also argued that the expression medicines and medicaments are interchangeable.
   
   The respondent revenues opposed the arguments of petitioner with the submission that Hajmola Candy is sweet, sour and tasty candy liked by young and old. Children are very much fond of this candy and unlike medical doses they take it at any number of time. It is also available in grocery, pan shop, public transport and from hawkers unlike medicines and in common trade parlances it is understood as lozenge and not as medicine. To rub out this petitioner relied on Commissioner of Central Excise, Calcutta vs. Sharma Chemical Works 132 STC 251 wherein Supreme Court has held “Banphool Oil" is an ayurvedic medicine and not perfumed hair oil. According to petitioner in this judgment Supreme Court has laid down the ratio that the onus or burden to show that a product is within a particular tariff item is always on the revenue and mere fact that a product is sold across the counters and not under a doctors prescription does not by itself lead to the conclusion that it is not a medicament.
   
   After hearing both the sides, court found that the petitioner has based all his arguments on the decision of CEGAT and the apex court and other court regarding classification of a product as a medicine under the Central Excise Tariff Act. In the Central Excise Tariff Act under Chapter 30, it has been mentioned that the product manufactured exclusively in accordance with the formula prescribed in the authoritative text book specified in the Drugs and Cosmetics Act, 1940 are to be regarded as medicaments/medicines. The entry in West Bengal Sales Tax Act simply says drugs and medicines except those specified elsewhere in the schedule or in any other schedule. There is no mention that product manufactured in accordance with the formula prescribed in the authoritative text book specified in the Drugs and Cosmetic Act are to be treat as drugs and medicine. Hence in absence of any definition on any drugs and medicine under the 1994 Act, a product is to be regarded as drug or a Medicine as understood in the common parlance. In a case reported in Dabur India Ltd. vs. Commissioner of Central Excise 4SCC 9, the Supreme Court has held that in classifying a product, the scientific and technical meaning is not to be resort to. The product must be classifiable according to the popular meaning attached to to by those we using the product. In the said case, the appellant company had shown that all the ingredients in the product are those which are mentioned in ayurvedic text books. In addition, the appellant has also shown that they had a drug controls licence for the product and they also produced the clinching evidence by way of prescription of ayurvedic doctors, who have prescribed this for treatment. But in the said case revenue failed to produce any evidence that in common parlance, the product is not understood a medicaments. In the instant case, the petitioner company has shown that all the ingredients in the product are those which are mentioned in a authoritative ayurvedic text book and they manufactured the product under a drug control licence. But the petitioner has not produced any evidence whether the said product is prescribed by any ayurvedic doctor. On the contrary, the revenue has mentioned that this product is sold across the counters and not under the doctors prescription and the revenue authorities have also mentioned that it is a sweet, sour and tasty confectionery item liked by young and old. The petitioner has not denied the said contention of the revenue. It is true that mere fact that a product is sold across the counters and not under a doctor's prescription does not by itself lead to the conclusion that it is not a medicament but facts and circumstances made out in the pleadings of the parties factors to be considered in applying such a principle. With this court held that the Hajmola Candy is a confectionery.
   
   [Dabur India Ltd vs. Acct/Corporate Division & Others 5 VST 190 (wbtt)]