State of Kerala v. Mahal Traders

# IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS TUESDAY, THE 02ND DAY OF MARCH 2021 / 11TH PHALGUNA, 1942 OT.Rev.No.145 OF 2014 AGAINST THE ORDER/JUDGMENT IN TA (VAT) 714/2010 DATED 24-03-2014 OF KERALA VAT APPELLATE TRIBUNAL, ERNAKULAM ## REVISION PETITIONER/S: STATE OF KERALA BY SR.GOVERNMENT PLEADER MOHAMMED RAFIQ RESPONDENT/S: M/S.MAHAL TRADERS POONTHURA P.O., THIRUVANANTHAPURAM. R1 BY ADV. SMT.S.K.DEVI R1 BY ADV. SRI.M.RAJ MOHAN R1 BY ADV. SRI.SANTHOSH P.ABRAHAM R1 BY ADV. SRI.SHANMUGHAM D. JAYAN THIS OTHER TAX REVISION (VAT) HAVING BEEN FINALLY HEARD ON 02.03.2021, ALONG WITH OT.Rev.148/2014, OT.Rev.150/2014, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: **O.T.(Rev.) No. 145, 148 & 150/2014** **-2-** IN THE HIGH COURT OF KERALA AT ERNAKULAM ## PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS TUESDAY, THE 02ND DAY OF MARCH 2021 / 11TH PHALGUNA, 1942 ## OT.Rev.No.148 OF 2014 AGAINST THE ORDER/JUDGMENT IN TAVAT 715/2010 DATED 24-03-2014 OF KERALA VAT APPELLATE TRIBUNAL, ERNAKULAM ## REVISION PETITIONER/S: STATE OF KERALA BY SR.GOVERNMENT PLEADER MOHAMMED RAFIQ ## RESPONDENT/S: M/S. MAHAL TRADERS POONTHURA P.O., THIRUVANANTHAPURAM. R1 BY ADV. SMT.S.K.DEVI R1 BY ADV. SRI.M.RAJ MOHAN R1 BY ADV. SRI.SANTHOSH P.ABRAHAM R1 BY ADV. SRI.SHANMUGHAM D. JAYAN THIS OTHER TAX REVISION (VAT) HAVING BEEN FINALLY HEARD ON 02.03.2021, ALONG WITH OT.Rev.145/2014, OT.Rev.150/2014, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: **O.T.(Rev.) No. 145, 148 & 150/2014** **-3-** IN THE HIGH COURT OF KERALA AT ERNAKULAM ## PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS TUESDAY, THE 02ND DAY OF MARCH 2021 / 11TH PHALGUNA, 1942 ## OT.Rev.No.150 OF 2014 AGAINST THE ORDER/JUDGMENT IN TAVAT 716/2010 DATED 24-03-2014 OF KERALA VAT APPELLATE TRIBUNAL, ERNAKULAM ## REVISION PETITIONER/S: STATE OF KERALA BY SR.GOVERNMENT PLEADER MOHAMMED RAFIQ ## RESPONDENT/S: M/S.MAHAL TRADERS POONTHURA P.O., THIRUVANANTHAPURAM. R1 BY ADV. SMT.S.K.DEVI R1 BY ADV. SRI.M.RAJ MOHAN R1 BY ADV. SRI.SANTHOSH P.ABRAHAM R1 BY ADV. SRI.SHANMUGHAM D. JAYAN ## OTHER PRESENT: ## SR GP MOHAMMED RAFIQ THIS OTHER TAX REVISION (VAT) HAVING BEEN FINALLY HEARD ON 02.03.2021, ALONG WITH OT.Rev.145/2014, OT.Rev.148/2014, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: **O.T.(Rev.) No. 145, 148 & 150/2014** **-4-** ## **O R D E R** [ OT.Rev.145/2014, OT.Rev.148/2014, OT.Rev.150/2014 ] Dated this the 2nd day of March 2021 ## S.V. Bhatti, J. Revenue is the petitioner in the instant three revisions and challenges the common order dated 24.03.2014 in T.A. (VAT) Nos.714/2010, 715/2010 and 716/2010. The respondent is a registered dealer under the KVAT Act. The details of the three revisions are stated thus: |Sl.No.|Assessment<br>Year|Tax Appeal No.|O.T.Rev. No.| |---|---|---|---| |1|2006-07|714/2010|145/2014| |2|2007-08|715/2010|148/2014| |3|2008-09|716/2010|150/2014| 2. In these three revisions the issue deals with the applicable rate of tax on a product sold and covered in the sales ## **O.T.(Rev.) No. 145, 148 & 150/2014** **-5-** return of respondent, i.e., 'Orbit White Chewing Gum'. The assessee reported the sales of 'Orbit White Chewing Gum' and paid tax at the rate of 4%. The assessing officer rejected the claim of respondent and determined the ratable tax of 'Orbit White Chewing Gum' at 12.5%. The chronological dates and events noted in O.T.Rev. No.145/2014 are considered for disposing of all the revisions, as the circumstances are identical and the issue is same. 3. The assessing officer, through Annexure A, revised the return and called upon the respondent to pay balance tax of Rs.43,428/- towards difference of tax and interest due thereon. The respondent filed appeal, before the Deputy Commissioner (Appeals) Thiruvananthapuram, and the appellate authority through Annexure B modified the order. The respondent filed second appeals before the Tribunal, and the Tribunal through the impugned order allowed the appeals filed by the Revenue, hence the tax revisions. ## **O.T.(Rev.) No. 145, 148 & 150/2014** **-6-** 4. Before adverting to the submissions of learned counsel appearing for the parties, we find it convenient to excerpt the operative portion of the common order under appeal, hereunder: “4. The matter was finally heard on 12.03.2014. The appellant has produced the invoice raised by M/s. Wringly India Pvt. Ltd. where the item orbit white chewing gum is including under the H.S.N. Code 3004.90.11 an Ayurvedic Medicine taxable @ 4%. This has been accepted by the Central Excise Department. The item specified under Sl.No.24 of RNR goods does not include the Ayurvedic preparation manufactured under license from the Director of Indian System of Medicine falling under H.S.N. Code 3004.90.11. Hence the matter is decided in favour of the appellant and the appeals are allowed.” 5. Learned Senior Government Pleader Mohammed Rafiq argues that the Tribunal fell in a serious error by _ipse dixit_ accepting the invoices raised by the manufacturer M/s.Wringly India Pvt. Ltd, in favour of dealer for the chewing gum, as covered by H.S.N. Code 3004.90.11, an Ayurvedic Medicine taxable @ 4%. The chewing gum has been accepted by the Central Excise Department as chargeable @ 4%. The classification is undertaken by keeping all primary **O.T.(Rev.) No. 145, 148 & 150/2014** **-7-** aspects in perspective, which are further assisted by supporting or secondary circumstances in favour of one or the other classification. Explained further, his argument is that neither the invoice nor the details set out in the invoice under the goods sold in favour of the dealer are finally or conclusively determining factors. Apart from the said contention, it is argued that H.S.N Code 3004.90 comes under ' _Ayurvedic, Unani, Homoeopathic, Siddha or Bio-chemic systems medicaments, put up for retail sale_ '. H.S.N. Code 3004.90.11 deals with ' _Of Ayurvedic system_ '. A bare perusal of the description of the said code will not lead to a conclusion that the product 'Orbit White Chewing Gum' can be treated as an Ayurvedic, Unani etc product, for the purpose of KVAT Act as well, leviable at concessional rate of tax. Entry 36(8)(h)(i) of Third Schedule of KVAT Act, 2003 deals with ' _Medicaments of Ayurvedic system_ '. According to him, there is no finding on the crucial aspect, namely that the chewing gum is a medicament of Ayurvedic system. Therefore, in the case on hand, extension of concessional rate of tax could be contrary to the ## **O.T.(Rev.) No. 145, 148 & 150/2014** **-8-** scheme of KVAT Act and through adjudication concessional rate is granted which is otherwise unavailable to the respondent dealer. He argues finally that on whether the subject product is taxable at 4% or 12%, the Tribunal being a final authority on fact and the findings, are incomplete or inconclusive, the matters ought to be remitted to Tribunal by setting aside the order under revision. The Revenue and the respondent could be allowed to establish their case in accordance with law on the applicable rate of tax. 6. Advocate Shanmughan D. Jayan argues that the reasoning of the Tribunal though can be characterized as very brief, the reasoning contains grist for recording a finding that the rate of tax applicable to the subject produce is 4%. He argues that chewing gum comes under the broad parlance of Ayurvedic medicine. The manufacturer has obtained license from the competent authority under Drugs and Cosmetics Act, 1940, for the subject product under 'Ayurvedic' category. He does not seriously object to remand, and requests the Court to direct the Tribunal to grant opportunity to **O.T.(Rev.) No. 145, 148 & 150/2014** **-9-** respondent/assessee to bring on record material in support of the case of respondent that applicable rate of tax is only 5% under Entry 36 of KVAT Act. 7. The above arguments bring home our conclusion without much reasoning on the first objection taken by the Revenue, namely that in a matter dealing with classification of the product and deciding applicable Entry, the Tribunal would have certainly done better by setting out its reason in support of its conclusion. This Court, in a judgment reported in _Himalaya Drug Company v. State of Kerala_[1] has taken the view that importing of the definition in a statute in the regulatory regime into a fiscal statute would not be warranted in view of the fact that the exemptions or concessions granted in a fiscal statute are to be strictly construed. The entitlement to concessional rate is first established by demonstrating the nature of the product, applicable rate of tax, and the comparative study of acceptance of same product under other enactments, such as Customs Act, Central Excise Act, etc, could be 1 2020 (3) KLT 799 ## **O.T.(Rev.) No. 145, 148 & 150/2014** **-10-** undertaken. The Tribunal committed an error of jurisdiction by solely relying on Invoice and treating the chewing gum as a product falling under Ayurvedic, Unani, etc. In the case on hand, for the view we have taken in the preceding paras, we do not want to dwell further into the matter and we are convinced that the common order under revision is untenable, suffers from too much of brevity, and the relevant aspects, either way, which have bearing on determining the applicable rate of tax, are not considered by the Tribunal and reconsideration of issue is warranted. 8. Hence, the common order under revision is set aside. T.A. (VAT) Nos.714/2010, 715/2010 and 716/2010 are restored to file. The matter remitted to Tribunal for disposal afresh, in accordance with law, within three months from the date of receipt of a copy of this order. The parties, if so advised, are given liberty to place further material in support of their respective contentions before the Tribunal. On such request being made, the Tribunal considers and affords reasonable opportunity to both parties. ## **O.T.(Rev.) No. 145, 148 & 150/2014** **-11-** The revisions are allowed as indicated above. Sd/S.V.BHATTI JUDGE Sd/BECHU KURIAN THOMAS JUDGE jjj **O.T.(Rev.) No. 145, 148 & 150/2014** **-12-** O.T.REVN. NO. 145/2014 ## APPENDIX PETITIONER'S ANNEXURES A: TRUE COPY OF THE ASSESSMENT ORDER FOR THE EYAR 2006-07 DATED 02.02.2010 PASSED BY THE COMMERCIAL TAX OFFICER, SECOND CIRCLE, THIRUVANANTHAURAM B: THE TRUE COPY OF THE ORDER OF THE DEPUTY COMMISSIONER (APPEALS) THIRUVANANTHAPURAM DATED 11.08.2010 IN KVATA NO.416/2009 C: A CERTIFIED COPY OF THE COMMON ORDER IN TA(VAT) NO.714/2010 TO 716/2010 DATED 24.03.2014 ON THE FILE OF THE KERALA VALUE ADDED TAX APPELLATE TRIBUNAL, ERNAKULAM. **O.T.(Rev.) No. 145, 148 & 150/2014** **-13-** O.T.REVN. NO. 148/2014 APPENDIX PETITIONER'S ANNEXURES A: TRUE COPY OF THE ASSESSMENT ORDER FOR THE EYAR 2007-08 DATED 05.08.2009 PASSED BY THE COMMERCIAL TAX OFFICER, SECOND CIRCLE, THIRUVANANTHAURAM B: THE TRUE COPY OF THE ORDER OF THE DEPUTY COMMISSIONER (APPEALS) THIRUVANANTHAPURAM DATED 11.08.2010 IN KVATA NO.114/2009 C: A CERTIFIED COPY OF THE COMMON ORDER IN TA(VAT) NO.714/2010 TO 716/2010 DATED 24.03.2014 ON THE FILE OF THE KERALA VALUE ADDED TAX APPELLATE TRIBUNAL, ERNAKULAM. **O.T.(Rev.) No. 145, 148 & 150/2014** **-14-** O.T.REVN. NO. 150/2014 ## APPENDIX PETITIONER'S ANNEXURES A: TRUE COPY OF THE ASSESSMENT ORDER FOR THE EYAR 2008-09 DATED 02.02.2010 PASSED BY THE COMMERCIAL TAX OFFICER, SECOND CIRCLE, THIRUVANANTHAURAM B: THE TRUE COPY OF THE ORDER OF THE DEPUTY COMMISSIONER (APPEALS) THIRUVANANTHAPURAM DATED 11.08.2010 IN KVATA NO.417/2009 C: A CERTIFIED COPY OF THE COMMON ORDER IN TA(VAT) NO.714/2010 TO 716/2010 DATED 24.03.2014 ON THE FILE OF THE KERALA VALUE ADDED TAX APPELLATE TRIBUNAL, ERNAKULAM.