Goods And Service Tax India

In Ponds India Ltd (Merged with HL Ltd) v. Commissioner of Trade Tax, Lucknow , the Supreme Court answered the question, whether petroleum jelly is a “drug” or a “cosmetic”

The tax authorities have been assessing petroleum jelly as a drug (and not as a cosmetic) for a long time. This product is produced under a drug manufacturing licence under the Drugs and Cosmetics Act, 1940. The report of the Chemical Examiner also supported the contention of the appellant that petroleum jelly is a drug.

Therefore, Supreme Court held that white petroleum jelly is a drug and not a cosmetic.

In Peekay Re-rolling Mills (P) Ltd vs The Assistant Commissioner & Anr decided on 20th March 2007, the Supreme Court had to decide whether the assessing officer is justified in seeking to invoke Sec 5A of the Kerala General sales Tax Act, 1963 and levy tax on the dealer in cases where the goods had not suffered tax at the earlier point of sale on account of exemption enjoyed by the seller.

Sec 5A of the KGST Act, 1963 seeks to tax purchases in the hands of the purchaser where the goods have not suffered tax and such goods are consumed in manufacture of other goods by the purchasing dealer.

A number of goods including cereals, coal, cotton, certain cotton fabrics, crude oil, iron and steel, etc are declared to be of special importance in Inter State trade or commerce by Sec 14 of the Central Sales Tax Act, 1956. Collectively these goods are called Declared Goods.

Sec 15 of the CST Act, 1956 imposes certain restrictions on the powers of the states to levy tax on declared goods.

The restrictions are :

01) The tax payable under the local law shall not exceed 4% and the tax shall not be levied at more than one stage.

The SC, in Assistant Commissioner Anti Evasion Commercial Taxes, Bharatpur vs Amtek India Limited, has passed strictures on commercial tax officers who pass arbitrary and unreasonable orders.

The SC said, “…the action of the concerned assessing officer, in overlooking the documents produced coming to the conclusion about manipulation appears to be totally uncalled for and without any reasonable basis. This is a case where the officer should have been more careful and should not have acted in a manner as if he was a bloodhound and not a watchdog of revenue. It is unfortunate that in large number of cases, orders totally bereft of rationality are being passed. They do not in any manner serve public interest, much less the interest of revenue.

This was the question before the West Bengal Taxation Tribunal in Dabur India Ltd vs Asst Commissioner of Commercial Taxes, Corporate Division.

The WBTT rejected the contention of the petitioner that this is an ayurvedic medicine. While the WBTT accepted the fact that this product is produced using ingredients specified in ayurveda texts, it rejected the claim that these be assessed as drugs and medicines. the WBTT accepted the arguments of the Department that in common parlance this is considered to be confectionery.

In Federal Bank & ors vs State of Kerala & ors, the Supreme Court decided that banks selling gold that was pledged to them were covered by the definition of “dealer” under the Kerala General Sales Tax Act, 1963 after the amendment by the Kerala Finance Act, 1998.

Date of decision : 21 March 2007