1. Whether the sale of following items is covered by Schedule Entry C-II-26/26(1) of BST Act, 1959 read with notification entry No. 48 in Group A taxable at 8%?

1. Hot Casserole
2. Hot Tiffin
3. Hot Pot

Whether prospective effect can be granted?

Transaction date: 9-2-2005 Held – Not covered by C-II-26(1)but Covered by C-II-53, Taxable at 13% Prospective effect Granted

Facts in issue

The applicant deals in items made of stainless steel. The applicant has treated the items, hot casserole, hot tiffin and hot pot as covered by Schedule Entry C-II-26/C-II-26(1) of the BST Act, 1959. The rate of tax under entry C-II-26 was 12% up to 1-10-1996 and thereafter increased to 13% effective up to 31-3-2005. A notifica-tion issued under Section 41 reduced the rate of tax to 8% w.e.f. 1-1-1996.

Submissions of the applicant

The applicant contended that his products were covered by Schedule entry C-II-26/26(1) of BST Act, 1956. The rate of tax was reduced to 8% on account of notification issued u/s. 41 of the BST Act.

Further, his contention had been confirmed in the assessment orders passed up to 31-3-2003. Various Stainless Steel Associations had certified that the products were used for serving purpose only and thus covered by Schedule entry C-II-26/26(1).

In the alternative, the applicant prayed for prospective effect to be given to the determination order.

Views of the Department

The Commissioner interpreted the meaning of the words used in Schedule entry C-II-26/26(1). The entry covers cookware, serveware and kitchenware, which purely cover vessels which are used to cook and serve food.

The Commissioner also interpreted the meaning of the words used in Schedule entry C-II-53. The entry does not cover vessels or utensils, which are used to cook/serve food. It covers only those products, which are used to keep food or beverages hot or cold and parts, accessories and components thereof.

Thus the Schedule Entry C-II-53 pertains to vacuum flasks, thermoses, urns, ice boxes or other domestic containers which are used to keep food or beverages hot or cold and components, parts or accessories of containers. It also covers a casserole.

On tests being conducted by boiling water in casserole, the bottom plate got deformed. It was thus advised not to use the casserole as a cooking device. Similarly, it was advisable not to cook in a hot pot also. The question of cooking in a tiffin carrier did not arise.

The meaning of the three products brings to light the following facts.

1. they are not used to cook food.

2. they are not used to serve food.

3. they are only used to keep food so that it remains hot for a long period of time by virtue of storing in the same.

The judgment relating to issue of general and specific entry in the case of Bradma of India Ltd. vs. State of Maharashtra (140 STC 17(SC)) become applicable. If there are two entries - one general and the other special, the special entry should be applied for levying tax.

Further, the Schedule Entry C-II-26 speaks of cookware, serveware and kitchenware coated with any material to make heat resistant or non-stick. Such coating is visible from outside as in a non-stick pan, copper vessels, etc. In case of impugned products the coating is between the outer and inner casing and is not visible from outside. Thus the applicant’s products are not covered by Entry C-II-26/26(1).

As for the prayer for grant of prospective effect to the determination order, it can be seen that the applicant was misguided by the earlier assessment orders. Therefore, there being statutory misguidance, the case was fit for consideration of prospective effect.

Held

The Commissioner held that the sales of products were not covered by Schedule entry C-II-26/26(1) but were covered by Schedule entry C-II-53, taxable at 13%.

The Commissioner granted protection up to the date the applicant was communicated about the misclassification.

[M/s. Vinod Stainless Steel Works DDQ No. DDQ-11-2005/Adm-5/17/B-1 dated 13-3-2006]

2. Whether the applicant is a dealer u/s. 2(8) read with explanation (iva) of MVAT Act, 2002 and whether Exception II whereby educational institutions are exempt, is applicable?

Transaction date: 17-6-2005 Held –Deemed dealer Covered by Exception

Facts in issue

The applicant is a workshop for the blind which is registered as a public trust and holds a certificate from Maharashtra State Board of Vocational Examination.

The applicant is a training institution which aims at training the adult blind for industries and vocations or in light engineering jobs, fabrication jobs and contract work as well as providing medical rehabilitation and vocational training to blind trainees.

The applicant centre also provides magnification aids to persons with impaired vision as well as provides support welfare services.

Submissions of the applicant

The applicant submitted that they are fully covered by the Exception II to the definition of dealer under section 2(8) of MVAT Act, 2002 wherein an educational institution carrying on activity of manufacturing, buying or selling goods in the performance of its functions for achieving its objects is excluded from the ambit of the definition of dealer.

The applicant further contended that the goods which are sold are items made by trainees while imbibing the skill and thus are sales in the performance of its functions.

Views of the Department

The Commissioner observed that the applicant was granted exemption from whole of tax by notification u/s. 41 of BST Act and the applicant never raised an issue about its exclusion as an educational institution.

Under the MVAT Act, 2002, the definition of dealer is widened, to include within its fold a public charitable trust. However, Exception II to the definition excludes an educational institute carrying on activity of manufacturing, buying or selling goods in the performance of its functions for achieving its objects. Thus even if the education institute is a public charitable trust, it shall not be deemed to be a dealer if it carries on activities of sales and purchases of goods in the performance of its functions to achieve its objects.

The educational institutions that would be excluded from the purview of definition of dealer are those which satisfy the following criteria.

1. are recognised as an educational institution by the University or UGC or educational or technical board.

2. have prescribed courses or syllabus for the alumni.

3. have teaching staff on payroll of the college or institution.

4. issue certificates to its alumni.

5. Conduct tests/exams

The applicant has approval of being an educational institution from the Maharashtra Government. The institute has a prescribed syllabus for the alumni and has teaching staff on payroll. They conduct exams as per prescribed rules and also issue certificates.

Thus the Institute is an educational institution as per Exception II to the definition of dealer. The applicant is not a dealer in respect of sales and purchases in the performance of its functions for achieving the objects of the institution.

The sales and purchases which are not made in the performance of the functions of the institute are liable to tax and to that extent, the applicant would be a dealer.

Held

The Commissioner held that the applicant was covered by Exception – II to the definition of dealer only to the extent the applicant undertook the activities of manufacturing, buying or selling which are in the performance of its functions for achieving its objects.

[The NAB Workshop for the Blind DDQ No. DDQ-10/2005/Adm-5/89/B-2 dated 13-3-2006]

3. Whether the product ‘Monkey Brand Ayurvedic Black Tooth Powder’ can be considered as a drug ?

Transaction date: 8-9-2003 Held – Not a drug, covered by C-II-32, rate of Tax 13 %.

Facts in issue

The applicant is a manufacturer of "Black Tooth Powder". He considers the product as an ayurvedic preparation since the ingredients of the product are taken from Grantha ‘Ayurvedic Sar Sangraha and Grantha Rasa Tantra Sara’ which are included in the First Schedule of the Drugs & Cosmetics Act.

He considers that although the product is used for dental cleanliness, this is only one of the uses of the product.

Submissions of the applicant

1. The applicant contends that his product is a drug on account of following factors.

1. The ingredients are from ayurvedic granthas included in the first schedule to the Drugs & Cosmetics Act.

2. The FDA has approved the said product as an ayurvedic proprietary medicine.

2. The manufacturing process and testing process is carried out under the directions of Ayurvedic professionals.
    

3. The raw material and finished product sample test is carried out by Government authorised laboratory.

The applicant strongly feels that his product should be considered as a drug/medicine.

Views of the Department

The Commissioner observed that the product was projected as tooth powder and not medicine and the words ‘for cleanliness of teeth’ were found on the wrapper.

The applicant had submitted the excise heading of the product as 3306.10 which relates to dentifrices which means a substance (paste or powder) for cleaning teeth.

Further, a toothpaste or a tooth powder is one which is used daily for undertaking dental care, it is easily available in the market and does not require a prescription of the doctor.

The Commissioner also observed that the nature of ingredients being used or the license being granted and manufacturing and testing being carried out does not qualify the product as medicine.

Further, entry C-II-37 requires certain conditions to be established for a product to be classified as a drug. One such condition relates to diagnosis, treatment, mitigation or prevention of any disease or disorder.

Tooth pastes are used for cleanliness of teeth and they cannot in any way cure/treat/prevent or mitigate a disease. The applicant has not shown any use of the product which differentiates it from other tooth pastes/powders available in the market which do not claim to be drug/medicine. No use other than cleanliness of teeth is highlighted by the applicant.

Thus the applicant’s product cannot be said to be a drug/medicine but is a toothpaste/powder. The entry applicable to the applicant’s product would be C-II-32, which covers toothpaste, tooth powder and tooth brushes.

Case Laws

1. Shree Baidyanath Ayurved Bhavan Ltd vs. Collector of Central Excise, Nagpur (1996) 83 ELT 492(SC)
    

2. Commissioner of Sales Tax, Maharashtra State, vs. La Bela Products (59 STC 221)
    

3. M/s. Himani Limited vs. Asstt. Commissioner of Commercial taxes, Corporate Dn., & Others (118 STC 193)
    

4. M/s. Vicco Laboratories and Vicco Product (Bombay) Ltd. vs. The Municipal Corporation of Greater Bombay (dated 18/10/1994)
    

5. Commissioner of Sales Tax, M.P.Indore vs. Shri. Sadhana Aushadhalaya ( 14 STC 813)
    

6. M/s. Johnson & Johnson Ltd. (Appeal No. 4 of 1996) and M/s. Park Davis (India) Ltd. (Appeal 158 of 1995) decided on 21/6/1997 (1997 (16 MTJ 70))

Held

The Commissioner held the product ‘Monkey Brand Ayurvedic Tooth Powder’ as covered by Schedule Entry C-II-32 attracting tax at 13%.

[M/s. Vishal Enterprises, Dombivali (E)] DDQ No. DDQ-11/Adm-5/56/B-3 dated 23-3-2006]