1. Whether dehusking dhania and adding salt for its preservation amounts to a manufac-turing process u/s. 2(15) of MVAT Act, 2002 and whether purchase of dhania and selling dhana dal amounts to resale?

2. What is the classification of the product ‘dhana dal’ under MVAT Act, 2002?

Transaction date: 28-6-2005

Held – 1. Is a manufacturing process, does not amount to resale

 2. E-1, 12.5%

Facts in issue

The applicant is carrying on the business of processing dhania by dehusking the same and reselling dhana dal to the various customers.

The applicant purchases coriander seeds, removes the husk, mixes the seeds with water and puts it in dehulling machine for removing bran. The kernels are dried and roasted to produce dhana dal.

Submissions of the applicant

The applicant contended that dhana dal is a form of spices covered by entry A-51(iv) up to 31-3-2006 and by Schedule entry C-91(b) after 1-4-2006. The applicant submitted that the process of dehusking did not amount to manufacture and that dhana dal being ‘coriander seeds’ was covered by Schedule entry A-51(iv) from 1-4-2005 up to 31-3-2006 and from 1-4-2006 it got covered by Schedule entry C-91(b). If the product is not considered as falling under the above two entries, it would fall under entry C-91(a) for being covered as spices.

In the alternative, the product may be considered as being classified under Schedule entry C-83 which relate to roasted or fried pulses including gram.

Views of the Department

The Commissioner considered the entire process involved in preparation of dhana dal and relied on the following judgments.

1. M/s. Meghraj Vidaram & Co. (S.S. 535/536/78 decided on 23-4-1979) In this case, dhana dal was held as covered by entry E-22 of the BST Act, 1959.

2. M/s. Ujwal Industries (DDQ-1196/Adm-5/159/B-5 dated 17-10-1996) Preparing dhana dal from dhania amounts to manufacture.

3. M/s. D.K. Foods & Chemicals Pvt. Ltd. (DDQ-1191/Adm-5/034/B-2 dated 2-1-1992

It was held that “dhana dal (roasted)” fell within the scope of the Schedule entry C-102 of BST Act, 1959.

The Commissioner then considered the definitions of manufacture and resale under the BST Act, 1959 and MVAT Act, 2002 and found that both the definitions were congruent under both the acts.

Further he observed that Dhania seed in its raw form was used as a spice whereas the finished product that is salted dhana dal is not used as a spice but is used as a mouth freshner. Both dhania seed and dhana dal are recognized in common parlance and by trade as commercially different commodities.

Thus when there is a direct judgment on the grounds in question, the same cannot be overlooked. Therefore, the process of dehusking dhania and adding salt amounts to a manufacturing process as defined under section 2(15) of the MVAT Act, 2002.

The schedule entries A-51(iv) and C-91(b) relate to the coriander seeds and not dhana dal and therefore, these entries are not applicable to the final product. The Entry C-91(a) relates to spices of all varieties and forms, however dhana dal prepared out of dhania would be neither spices nor oil seed. The spices would cover coriander seeds but not dhana dal.

The contention of the applicant that the product dhana dal is a pulse and covered by Entry A-9/A-9A/C-20 also does not stand.

In the case of M/s. D.K. Food and Chemicals, it was held that dhana dal (roasted) fell under the scope of residuary entry C-102. In case of M/s. Jaihind Dhanadal Factory (S. A. Nos. 423 to 426 of 1965 dated 9-9-1966) the observations were made that pulses being listed for the purpose of “declared goods” neither dhania nor dhana dal found place under the provisions of CST Act, 1956.

The other Schedule entry C-83 relating to roasted pulses including gram also would not include dhana dal as observed in the following judgments.

1. Samaleshwari Store vs. State of Orissa (68 STC 228)(Cuttack High Court).

2. S.K. Nataraja Mudaliar & Co. vs. the State of TamilNadu and Another (Madras High Court) (51 STC 55).

Therefore, dhana dal would be covered by the residuary entry E-1 of MVAT Act, 2002.

As regards the grant of prospective effect of the order there being no statutory misguidance, the Commissioner rejected the same.

Held

1. The Commissioner held the process of manufacturing dhana dal as covered under section 2(15) of MVAT Act, 2002 and that purchase of dhania and selling dhana dal did not amount to resale.

2. The product dhana dal got covered under the residuary entry E-1 attracting tax at 12.5%.

[M/s. Monarch Industries DDQ NO. DDQ-11-2005/Adm-5/52/B-6 dated 30-4-2006]

11. What is the classification and rate of tax for the following products ?

1. Stent

2. Tracheostomy Tube, Endobronchial Tube, Performed Tracheal Tube and other Anesthesia and critical care products.

Transaction date: 9-5-2005

Held– 1) From 1-4-2005 to 5-10-2005 E-1, 12.5%;
            From 6-10-2005, C-29A(a) – 4%

2) E-1, 12.5%

Facts in issue

The applicant carries on the business of importing and reselling of various types of drugs including stent, anesthesia and critical case products.

The product stent is used by implanting it inside the artery during a angioplasty procedure. It is coated with drugs.

The other products are used to connect oxygen cylinders on one side and the other end is connected to the patient.

Submissions of the applicant

The applicant submits that the products be treated as drugs falling under Schedule Entry C-29/C-29(a) or may be classified as devices under Schedule entry C-29A(a) or C-107(8) of the MVAT Act, 2002. Alternatively, if the products are treated as covered under residuary entry E-1, the applicant’s past liability may be protected till the date of the determination order.

Views of the Department

The Commissioner ascertained the meaning of the three schedule entries, the nature and use of the products and the connecting link between the schedule entries and the products.

To qualify as a drug, the product has to satisfy all the following five conditions:

1. It should be a medicinal formulation or preparation ready for use internally or externally on human beings, animals and birds.

2. It is used for diagnosis, treatment, mitigation or prevention of any disease or disorder.

3. It should be manufactured or imported into India.

4. It should be stocked, distributed or sold under licence granted under the Drugs and Cosmetics Act, 1940.

5. It does not include mosquito repellents in any form.

The coronary stents are used to prevent restenosis and the improve the functioning of coronary arteries. Thus, the product is a device.

The product stent does not satisfy the four fold test of diagnosis, treatment, mitigation or prevention of disease and hence it cannot be said to be a drug as understood by the Entry C-29/C-29(a).

However with effect from 6-10-2005 the product stent gets covered by Schedule entry C-29A(a) of MVAT Act, 2002 which pertains to devices notified by the Central Government.

As regards the other products the very name indicate their use as devices. They cannot be said to be drugs. These products do not pass the four-fold test of diagnosis, treatment, mitigation or prevention of diseases or disorder, the products being medical devices or aids. They are not included in the notification on medical devices and implants by Central or State Government. Hence, the products get covered by the residuary entry E-1 attracting tax at 12.5%.

As regards the prospective effect to be granted, since the issue was decided in a plethora of judgments and the Determination Order No. DDQ-11-2005/Adm-5/19/B-1 dtd. 21-7-2005 in the case of M/s. Inox Products under MVAT Act, 2002, the Commissioner rejected the applicant’s request.

Held

The Commissioner held as follows:–

Sr. No.	Product	1-4-2005 to 5-10-2005		6/10/05		Remarks
1	Coronary Sent Vision	E-1	12.50%	C-29A(a)	4%	Notified as a device but it is not a drug
2	Inflation Device	E-1	12.50%	E-1	12.50%	Not drug but a device
3	Cross it PTCA guide wire	E-1	12.50%	E-1	12.50%	Not drug but a device
4	Connector Kit.	E-1	12.50%	E-1	12.50%	Not drug but a device
5	Y-Connector	E-1	12.50%	E-1	12.50%	Not drug but a device
6	Manifold Kit	E-1	12.50%	E-1	12.50%	Not drug but a device

[M/s. Neham International DDQ NO. DDQ-11-2005/Adm-5/77/B-4 dated 10-4-2006]

12. What is the classifica-tion and rate of tax for the following products?

1. Leather Diabetic/Arthritic Shoes (PC-803)

2. Ortho – Wedge Heeling Shoes (Code 807)

3. Arthritic/Diabetic Insoles (Code 942)

4. Ortho Silicone Heel Cushion – L (Code No. 917)

5. ¾ Flat Foot Intasoles (Code No. 922)

6. Aerobic / Court / Cross Trainer Insoles (Code 940)

7. Ortho Gel Insoles (Code 929)

8. Metatarsal Pads (Code 955)

9. Gel Toe Spreader (Code No. 919)

10. Adjust-A- Lift Heel Cushion (Code 926)

Transaction date: May and June 2005

Held – A-2, E-1

Facts in issue

The applicant is a regular importer of the products put up for determination. The products are got made on local basis from specialized footwear manufacturers in Mumbai.

The products so made are special purpose products to alleviate various disorders, deformities or pain like foot pain, back pain, etc. and to provide relief in walking.

Submissions of the applicant

The applicant contended that the impugned products are used externally by orthopaedically disabled persons for preventing or correcting bodily deformities. The products are covered by the notification issued under the MVAT Act, 2002 for the purpose of Schedule Entry A-2 of the Act. The products are orthosis or orthopaedic footwear used as aids and implements by handicapped persons and therefore are covered under the notification issued under the Schedule entry.

Views of the Department

The Commissioner examined the notification entry under Schedule entry A-2 as well as the Central Excise Tariff heading 9021.10.00. The meaning of the expression ‘orthopaedic appliances’ was interpreted under the HSN heading 90.21.

The orthopaedic appliances satisfy the following criterion so as to be covered by the notification:

1. They should be used externally by orthopaedically handicapped persons.

2. They should be used for

1. preventing or correcting bodily deformities or

2. for supporting or holding organs following an illness or operation or

3. for mobilizing injured parts of the body (for extension or protection) or,

4. for setting fracture.

3. They include appliances which are worn or carried or used externally to compensate for a defect, disability or a deformity.

The Commissioner examined each of the products individually for the applicability of the notification.

The following products satisfied the description “for supporting or holding organs” following an illness or operation or for mobilising injured parts of the body (for extension or protection)” as required under the Schedule entry A-2 and the notification.

1. Leather Diabetic/Arthritic Shoe

2. Ortho Wedge Heeling Shoes

3. Arthritic Diaba/Diabetic Insoles

4. Silicone Heel Cushions

5. Flat foot Insider – ¾ Flat Foot Insoles

6. Ortho Gel Insoles

7. Bunion Relievers – Gel Toe Spreader

8. Posture Corrective Insoles; i.e., Adjust – A Lift.

The following products are covered by the exclusion clause to the excise heading 9021. The description of the products is not one fitting an orthopaedic appliance/footwear. Further, the products are not notified under entry C-107(8). Thus these are covered by the residuary entry E-1 of MVAT, 2002.

1. Sports Impact Insoles-Aerobic/Court/Cross/Trainer

2. Metatarsal Pads-Pressure Pads (Felt/Foam)

Held

The Commissioner held the classification of the products as follows.

Sr. No.	Name of the Commodity	Schedule Entry	Tax Rate
1	Leather Diabetic/Arthritic Shoes (PC-803)	A-2	NIL
2	Ortho-Wedge Heeling Insoles (Code 942)	A-2	NIL
3	Arthritic/Diabetic Insoles (Code 942)	A-2	NIL
4	Ortho Silicone Heel Cushion-L (Code No. 917)	A-2	NIL
5	¾ Flat Foot Insoles (Code No. 922)	A-2	NIL
6	Aerobic/Court/Cross Trainer Insoles (Code 940)	E-1	12.50%
7	Ortho Gel Insoles (Code 929)	A-2	NIL
8	Metatarsal Pads (Code 955)	E-1	12.50%
9	Gel Toe Spread (Code No. 919)	A-2	NIL
10	Adjust – A – Lift Heel Cushion (Code 926)	A-2	NIL

Table

[M/s Ortho-Royal Inc. DDQ No. DDQ-11-2005/Adm-5/34/35/36/37/38/39/40/41/42/43/B-5 dated 26-4-2006]

1. Whether prospective effect can be granted to the determination order DDQ-11-205/Adm-5/56/B-1Mumbai dated 14-11-2005 from the date of the order?
    

2. Whether the order can be reviewed?

Transaction date : 21-11-2005

Held – Prospective effect

 Rejected

 Review rejected

Facts in issue

The issue for determination in the order dated 14-11-2005 was, whether ‘gypsum board & gypsum plaster” are covered within the ambit of the expression “Gypsum of all forms and description” under Schedule entry C-41 of the Maharashtra Value Added Tax Act, 2002. It was held that the benefits of inclusion under the entry C-41 cannot be extended to “gypsum board”. Accordingly, it was determined as covered by the residuary entry E-1 appended to the Maharashtra Value Added Tax Act, 2002.

Submissions of the applicant

The applicant prayed that the above order be given prospective effect from the date of the order.

The applicant submitted that since “Gypsum Board” contained more than 95% of natural gypsum, the applicant held a bona fide view that the product was covered by Schedule entry C-41 under MVAT Act, 2002.

The applicant relied on the followings cases for the purpose of grant of prospective effect.

1. The State of Gujarat vs. Sakarwala (19 STC 24 (SC))

2. The Collector of Sales Tax, Bombay State vs. Gaurimal Mahajan and Sons (10 STC 452)

The applicant further stated that as per the judgment of the Tribunal in the case of M/s. Ashish Enterprises vs. State of Maharashtra (Appeal No. 85 of 1998 decided on 24th Feb. 1999) the application for prospective effect can be made separately that is even after passing of the determination order.

Views of the Department

The Commissioner held that the determination of rate of tax as well as fixing liability is a conjoint process. It is always along with the determination of the applicable rate that the effective date from which the rate is applicable is decided. The initiation of proceedings u/s. 52(1) of BST Act gets closed when order u/s. 52(1) is passed. Section 52(2) only provides and empowers the Commissioner to direct the prospective effect of the order which is passed u/s. 52(1), no independent proceedings and order is contemplated u/s. 52(2).

The reliance of the applicant in the case of M/s. Ashish Enterprises is not acceptable as the department has filed a reference to the High Court.

The applicant had further argued that this application was in time within 60 days of the period of filing of appeal. However, the Commissioner held that since the request for prospective effect was not being made with the determination application such a request was not relevant.

Necessary to establish statutory misguidance as regards reliance on judicial precedents.

As for the power of review, the same can be exercised by the Commissioner suo motu. It cannot come as a request from the applicant. Review becomes necessary when there is a change of law or a change of opinion. Since there was no request for prospective effect in the determination application, there was no comment/ opinion/order passed regarding the same in the determination order DDQ-11-205/Adm-5/56/B-1 Mumbai dated 14-11-2005. Thus the request for review could not be accepted.

Held

The Commissioner held that the prospective effect to the determination order No. DDQ-11-205/Adm-5/56/B-1 Mumbai dated 14-11-2005 cannot be granted and also the request for review was not acceptable.

[M/s. India Gypsum Limited DDQ NO. DDQ-11-2005/Adm-5/96/B-1 dated 4th May, 2006]