2003 (7) TMI 664 - HC - VAT and Sales Tax

Summary

Issues:
1. Tax classification of "Lal dantamanjan" - under item No. 37 or residual item No. 105.

Analysis:

The case involved determining the appropriate tax classification for the product "Lal dantamanjan" (red tooth powder) - whether it should be taxed under item No. 37 or under residual item No. 105. The petitioner, a limited company manufacturing ayurvedic medicines, pharmaceutical medicines, and medicated toilet goods, contended that Lal dantamanjan should be taxed at 4% under item No. 37 as an ayurvedic medicine. The Sales Tax Officer initially accepted this argument, but later reassessed the tax liability at 12% under residual item 105. The petitioner challenged these assessments through multiple writ petitions over different assessment years.

In a previous judgment, the Court observed that Lal dantamanjan being an ayurvedic medicine was taxable at 4%. However, subsequent reassessments by the Assistant Commissioner and the Commissioner of Commercial Taxes concluded that Lal dantamanjan was a tooth powder and not an ayurvedic medicine, thus liable to be taxed at 12% under the residual item.

The critical issue revolved around the definition of "drug" as per clause (b) of section 3 of the Drugs and Cosmetics Act, 1940. The Court analyzed the definition of "drug," which includes substances intended for use in the diagnosis, treatment, mitigation, or prevention of diseases. The Court also considered the specific definition of "ayurvedic, siddha, or unani drug" under section 3(a) of the Act. The Court emphasized that Lal dantamanjan did not meet the criteria of a drug as defined in section 3(b) based on observations that it was not prepared as per authoritative prescriptions and was primarily used for cleansing teeth without specific medicinal properties.

Ultimately, the Court agreed with the assessments made by the tax authorities, determining that Lal dantamanjan did not qualify as a drug under the relevant legal definitions. Consequently, the Court upheld the tax liability at 12% under the residual item No. 105, dismissing the writ petitions challenging the tax classification of Lal dantamanjan.

In conclusion, the Court's decision clarified the tax classification of Lal dantamanjan, emphasizing the importance of meeting specific legal definitions to determine the applicable tax rate under the Orissa Sales Tax Act, 1947.