High Court of KeralaSingle Judge2018-11-08Writ petitions disposed of; impugned assessment...

WP(C).6944/2011; WP(C).21588/2013; WP(C).4087/2013 – M/S. C. Chacko & Sons and Excel Trading Agency (Kerala) v. State of Kerala and others

Case / Petition Number:WP(C).No.6944/2011; WP(C).No.21588/2013; WP(C).No.4087/2013

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: A. Muhamed Mustaque
Judgment Date: 2018-11-08
Court Decision / Holding: The impugned assessment is set aside to the extent it treats Strepsils as a candy/confectionery. A fresh decision shall be taken after considering the cited judgments, and after due notice to the petitioners within three months. The writ petitions are disposed of as above.
Final Disposition: Writ petitions disposed of; impugned assessment partly set aside with directions for fresh decision within three months after notice, taking into account cited judgments and the ongoing Supreme Court decision on rate of tax.

Parties to the Case

Appellants / Petitioners

M/S. C. Chacko & Sons, Mavelikkara, represented by its Managing Partner, Jacob Mathew
M/S. Excel Trading Agency (Kerala), Calicut, represented by Senior Manager, Vinod V.

Respondents

State of Kerala represented by the Chief Secretary to the Government, Thiruvananthapuram
Commercial Tax Officer (KVAT) - II, First Circle Kozhikode
District Collector, Kozhikode
Commercial Tax Officer, Mavelikkara

Legal Representation & Advocates

Counsels for Petitioners

• Sri. P. Radhakrishnan
• Sri. Madhu Radhakrishnan
• Sri. Nelson Joseph

Counsels for Respondents

• Special Government Pleader, C. Unnikrishnan

Case Synopsis & Summary

These writ petitions challenge the valuation regime governing Dettol and Strepsils under Kerala VAT, focusing on the tax rate and the admissibility of credit for VAT paid by manufacturers. The petitioners contend that Strepsils, though containing sugar or glucose, should not be classified as confectionery; instead, an objective test should determine whether it is a medicament, citing Supreme Court judgments such as Naturalle Health Products (P) Ltd. v. Collector of Central Excise, Warner Hindustan Ltd. v. Collector of Central Excise, Maruti Wire Industries Pvt. Ltd. v. S.T.O. (1st Circle), and E.I.D. Parry (India) Ltd. v. Asstt. Commissioner of Commercial Taxes. They argue that the manufacturer treated Strepsils as a medicament and that doctors do not always prescribe it as medicine, yet classification should not hinge solely on sugar content. The State/Revenue counters with the existing assessment framework, asserting confectionery treatment and relying on the ongoing rate-of-tax dispute before the Supreme Court. The court notes the need to reconsider in light of the cited authorities and related judgments, and ultimately sets aside the impugned assessment to the extent it classifies Strepsils as candy/confectionery, directing a fresh decision after due notice to petitioners within three months. The petitions are disposed of accordingly, while the rate-of-tax dispute remains sub judice before higher courts.

Provisions of Law Cited

Section 25(1) Notice

Submissions & Arguments

Contentions of Appellants / Petitioners

The petitioners argued that Strepsils should be treated as a medicament rather than confectionery. They rely on the judgments of Naturalle Health Products (P) Ltd., Warner Hindustan Ltd., Maruti Wire Industries Pvt. Ltd., and E.I.D. Parry (India) Ltd. to support the medicament classification, noting that the manufacturer itself treats Strepsils as a medicament and that VAT credit should be available for medicines. They urge an objective analysis beyond sugar content to determine classification and seek appropriate tax treatment accordingly.

Contentions of Respondents

The respondents defended the existing classification and assessment, asserting confectionery as the correct tax category for Strepsils and contesting broad credits, while acknowledging the ongoing rate-of-tax dispute at the Supreme Court and seeking consistency with prevailing assessments until that matter is resolved.

Cited Precedents (4)

Case Name	Citation	Treatment	Explanation
Naturalle Health Products (P) Ltd. v. Collector of Central Excise, Hyderabad	[(2004) 9 SCC 136	Mentioned Only	Cited by petitioners to support medicament classification; court does not affirm or reject this ratio in the final order, but references it for reconsideration.
Warner Hindustan Ltd. v. Collector of Central Excise, Hyderabad	[(1999) 6 SCC 762]	Mentioned Only	Cited as part of the set of authorities for medicament classification; not expressly adopted or overruled in the final holding.
Maruti Wire Industries Pvt. Ltd. v. S.T.O. 1st Circle, Mattancherry and Others	[(2001) 3 SCC 735]	Mentioned Only	Cited in the context of medicament/confectionery classification; the court does not explicitly apply or distinguish this ratio.
E.I.D. Parry (India) Ltd. v. Asstt. Commissioner of Commercial Taxes, Chennai	[(2005) 4 SCC 779]	Mentioned Only	Cited for comparative jurisprudence on classification; final decision leaves the interpretation open for reconsideration.

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Extracted Judgment Text

Exact text extracted from official judgment records.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR. JUSTICE A.MUHAMED MUSTAQUE** **THURSDAY, THE 08TH DAY OF NOVEMBER 2018 / 17TH KARTHIKA, 1940** ## **WP(C).No.6944 of 2011** ## **PETITIONER/S:** **M/S. C.CHACKO & SONS, MAVELIKKARA, REPRESENTED BY ITS MANAGING PARTNER, JACOB MATHEW, RESIDING AT RIVER VIEW BUNGLOW, MANAKKAD, MAVELIKKARA, ALAPPUZHA DISTRICT, KERALA.** **BY ADVS. SRI.P.RADHAKRISHNAN (1) SRI.MADHU RADHAKRISHNAN SRI.NELSON JOSEPH** ## **RESPONDENT/S:** - **1 STATE OF KERALA, REPRESENTED BY THE CHIEF SECRETARY TO THE GOVERNMENT, THIRUVANANTHAPURAM.** - **2 COMMERCIAL TAX OFFICER, MAVELIKKARA.** **BY SPECIAL GOVERNMENT PLEADER, C.UNNIKRISHNAN** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 08.11.2018, ALONG WITH WP(C).21588/2013, WP(C).4087/2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **WP(C)No.6944/2011 & conn.cases 2** ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR. JUSTICE A.MUHAMED MUSTAQUE** **THURSDAY ,THE 08TH DAY OF NOVEMBER 2018 / 17TH KARTHIKA, 1940** ## **WP(C).No.21588 of 2013** ## **PETITIONER/S:** **M/S.EXCEL TRADING AGENCY (KERALA), 8/241, BEACH HOTEL CAMPUS, SILK STREET, CALICUT, KERALA - 67303, THROUGH ITS PROPRIETOR MR.VINOD N.** **BY ADVS. SRI.P.RADHAKRISHNAN (1) SRI.MADHU RADHAKRISHNAN SRI.NELSON JOSEPH** ## **RESPONDENT/S:** - **1 THE STATE OF KERALA, REPRESENTED BY THE CHIEF SECRETARY TO THE GOVERNMENT, THIRUVANANTHAPURAM, KERALA-695001.** - **2 COMMERCIAL TAX OFFICER (KVAT) -II, FIRST CIRCLE KOZHIKODE - 680 502.** **BY SPECIAL GOVERNMENT PLEADER, C.UNNIKRISHNAN** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 08.11.2018, ALONG WITH WP(C).4087/2013 AND WP(C).6944/2011, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **WP(C)No.6944/2011 & conn.cases 3** ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR. JUSTICE A.MUHAMED MUSTAQUE** **THURSDAY, THE 08TH DAY OF NOVEMBER 2018 / 17TH KARTHIKA, 1940** **WP(C).No. 4087 of 2013** ## **PETITIONER/S:** **EXCEL TRADING AGENCY (KERALA), 8/241A, BEACH HOTEL CAMPUS, SILK STREET, KOZHIKODE, KERALA - REPRESENTED BY SENIOR MANAGER, VINOD V., PIN- 673 032.** **BY ADVS. SRI.P.RADHAKRISHNAN (1) SRI.MADHU RADHAKRISHNAN** ## **RESPONDENT/S:** **1 STATE OF KERALA, REP. BY THE CHIEF SECRETARY TO THE GOVERNMENT, THIRUVANANTHAPURAM, PIN - 695 001.** **2 COMMERCIAL TAX OFFICER, 1ST CIRCLE, KOZHIKODE, KERALA680 502. 3 THE DISTRICT COLLECTOR, KOZHIKODE, PIN-673 020.** **BY SPECIAL GOVERNMENT PLEADER, C.UNNIKRISHNAN** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 08.11.2018, ALONG WITH WP(C).21588/2013 AND WP(C).6944/2011, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **WP(C)No.6944/2011 & conn.cases 4** ## **JUDGMENT** **[WP(C) 6944/2011, WP(C).21588/2013, WP(C).4087/2013]** Spoke. Oral judgment dated 01.11.2018 is recalled. 2. The petitioners are distributors of Dettol and Strepsils. The issue in these writ petitions is in regard to the rate of tax applicable to Dettol and Strepsils. Apart from that the petitioners have a case that the assessing authority had not given the credit to the VAT paid by the manufacturer. The issue regarding the credit is covered in favour of the petitioners. The judgment of this Court in W.P.(C) No.27584/2010 and connected cases dated 10.01.2013 held that, the dealers shall be given the credit of the VAT paid by the manufacturer. That issue is answered accordingly. This will be subject to the decision regarding rate of tax applicable, pending before the Hon’ble Supreme Court. The assessing authority assessed Strepsils as though it is a confectionery. **WP(C)No.6944/2011 & conn.cases 5** 3. The learned counsel for the petitioners would argue that merely because Strepsils contain sugar or glucose, it cannot be treated as a confectionery. According to the petitioners, the assessing authority ought to have guided by an objective test to analyze the product to determine whether it is a medicament or confectionery. 4. The learned counsel for the petitioners placed reliance on the judgments of the Hon’ble Supreme Court in Naturalle Health Products (P) Ltd. v. Collector of Central Excise, Hyderabad [(2004) 9 SCC 136], Warner Hindustan Ltd. v. Collector of Central Excise, Hyderabad [(1999) 6 SCC 762], Maruti Wire Industries PVT. LTD. v. S.T.O. 1[st] Circle, Mattancherry and Others [(2001) 3 SCC 735] and E.I.D.Parry (India) Ltd. v. Asstt. Commissioner of Commercial Taxes, Chennai [(2005) 4 SCC 779], and would argue that Vicks balm and Sloan's Rub are being treated as medicament and therefore, there is no reason to treat Strepsils as a medicament. **WP(C)No.6944/2011 & conn.cases 6** 5. The learned counsel for the petitioners also submits that manufacturer also treated strepsils as a medicament. It may be true that merely because it contains sugar, it cannot be treated as confectionery. Merely because doctors do not prescribe the Strepsils as medicine, also cannot be a reason to reject the claim to be a medicament. 6. This Court is of the view that the matter requires reconsideration after adverting to the above judgments placed by the petitioners. Therefore, the impugned assessment is set aside to the extent and treating the strepsils as a candy or confectionery. Fresh decision shall be taken after adverting to the above judgments and after notice to the petitioners within a period of three months. The writ petitions are disposed of as above. ## **Sd/-** ## **A.MUHAMED MUSTAQUE** ## **JUDGE** **WP(C)No.6944/2011 & conn.cases 7** ## **APPENDIX OF WP(C)NO.6944/2011** ## **PETITIONER'S/S EXHIBITS:** **EXHIBIT P1 TRUE COPY OF THE SHOW CAUSE NOTICE DATED 2012-2010.** **EXHIBIT P2 TRUE COPY OF THE REPLY TO SCN DATED 22-12011.** - **EXHIBIT P3 TRUE COPY OF THE ASSESSMENT ORDER DATED 311-2011.** **EXHIBIT P4 TRUE COPY OF THE DEMAND NOTICE DATED 10-22011.** - **EXHIBIT P5 TRUE COPY OF THE CERTIFICATE DATED 09-032010 ISSUED BY THE ASSISTANT COMMISSIONER, COMMERCIAL TAXES, ERNAKULAM.** - **EXHIBIT P6 TRUE COPY OF THE ORDER DATED 07-04-2006 PASSED BY THE COMMISSIONER OF COMMERCIAL TAXES.** - **EXHIBIT P7 TRUE COPY OF THE JUDGMENT DATED 17-12-2008 IN O.T. APPEAL NO. 6/2006.** - **EXHIBIT P8 TRUE COPY OF THE ORDER PASSED BY THE HON'BLE SUPREME COURT DATED 24.08.2009.** - **EXHIBIT P9 TRUE COPY OF THE ORDER DATED 27.01.2010 PASSED BY THIS HON'BLE COURT.** - **EXHIBIT P10 TRUE COPY OF THE MODIFICATION ORDER DATED 22-12-2009 PASSED BY THE HON'BLE HIGH COURT IN W.P.(C) NO.31086/2009.** - **EXHIBIT P11 TRUE COPY OF THE INTERIM ORDER PASSED BY THE HIGH COURT IN W.P.(C) 27584/2010.** RESPONDENTS EXHIBITS:NIL. //TRUE COPY// P.A.TO JUDGE ln **WP(C)No.6944/2011 & conn.cases 8** ## **APPENDIX OF WP(C)NO.4087/2013** **PETITIONER'S/S EXHIBITS:** **EXHIBIT P1 TRUE COPY OF THE IMPUGNED ASSESSMENT ORDER DATED 30/11/2012 ISSUED BY THE 2ND RESPONDENT. EXHIBIT P2 TRUE COPY OF THE REVENUE RECOVERY DEMAND NOTICE DATED 07/02/2013.** **EXHIBIT P3 TRUE COPY OF THE SECTION 25(1) NOTICE.** **EXHIBIT P4 TRUE COPY OF REPLY DATED 31/05/2012.** **EXHIBIT P5 TRUE COPY OF ORDER IN SLP DATED 24/08/2009.** **EXHIBIT P6 TRUE COPY OF THE CERTIFICATE DATED 25/07/2011 ISSUED BY THE ASSISTANT COMMISSIONER, ERNAKULAM.** **EXHIBIT P7 TRUE COPY OF THE JUDGMENT IN WP(C) NO. 2487/2010 DATED 10/01/2013.** **EXHIBIT P8 TRUE COPY OF THE JUDGMENT IN WPC NO. 2540/2010 DATED 10/01/2013.** **EXHIBIT P9 TRUE COPY OF THE INTERIM ORDER IN WPC 2242/2012 DATED 01/02/2012.** RESPONDENTS EXHIBITS:NIL. //TRUE COPY// P.A.TO JUDGE ln **WP(C)No.6944/2011 & conn.cases 9** ## **APPENDIX OF WP(C) NO.21588/2013** **PETITIONER'S/S EXHIBITS:** **EXHIBIT P1 TRUE COPY OF THE IMPUGNED ORDER ALONG WITH NOTICE OF DEMAND DATED 27/07/2013.** **EXHIBIT P2 TRUE COPY OF THE INTERIM ORDER PASSED BY THIS HON'BLE COURT IN WRIT PETITION NUMBER 2242/2012 DATED.** **EXHIBIT P3 TRUE COPY OF THE INTERIM ORDER PASSED BY THIS HON'BLE COURT IN WRIT PETITION NUMBER 4087/2013. EXHIBIT P4 TRUE COPY OF SHOW-CAUSE NOTICE DATED 24/05/2013. EXHIBIT P5 TRUE COPY OF REPLY TO THE SHOW-CAUSE NOTICE DATED 14/6/2013 SUBMITTED BY THE PETITIONER.** **EXHIBIT P6 TRUE COPY OF THE ORDER IN SLP DATED 18/01/2010 OF THE HON'BLE SUPREME COURT. EXHIBIT P7 TRUE COPY OF JUDGMENT DATED 05/06/2013 IN WRIT PETITION NO.14158 OF 2013.** RESPONDENTS EXHIBITS:NIL. //TRUE COPY// P.A.TO JUDGE ln