2009 (10) TMI 854 - HC - VAT and Sales Tax

Whether on the facts and in the circumstances of the case the Trade Tax Tribunal is legally justified to hold that panjon is bulk drug and is taxable at the rate of six per cent under Notification No. 1912 dated June 1 1994 despite panjon or its formulation are not specified under Schedule First or Second to the Drug (Prices Control) Order 1987? Held that - Panjon is not a formulation of the bulk drugs specified in the Second Schedule and therefore does not fall within the category of formulations specified as on March 31 1994 in the Third Schedule under the Drugs (Prices Control) Order 1987 and falls only under the residuary entry not included in item (a) above and liable to tax at the rate of eight per cent plus surcharge. The Tribunal has committed an error in levying the tax at the rate of six per cent under the entry formulations specified as on 31st March 1994 in the Third Schedule to the Drugs (Prices Control) Order 1987. Revision allowed.

Issues:
1. Interpretation of the term "bulk drug" under Notification No. 1912 dated June 1, 1994
2. Taxability of "panjon" under the U.P. Trade Tax Act, 1948

Interpretation of "bulk drug":
The main issue in this case revolves around the interpretation of the term "bulk drug" under Notification No. 1912 dated June 1, 1994. The Tribunal had to determine whether "panjon" qualifies as a bulk drug and is taxable at the rate of six percent under the said notification. The contention was that although "panjon" was not specifically mentioned in the First or Second Schedules to the Drug (Prices Control) Order, 1987, it was treated as a bulk drug by the assessing authority. The Deputy Commissioner (Appeals) upheld this view, considering "panjon" to be a drug containing paracetamol and therefore a bulk drug. However, the Revenue challenged this decision, arguing that the formulation of "panjon" included caffeine anhydrous, which was not specified as a bulk drug under any schedule.

Taxability of "panjon":
The crux of the matter lies in the taxability of "panjon" under the U.P. Trade Tax Act, 1948. The Revenue contended that "panjon" should be taxed at eight percent plus surcharge, as it did not fall under the category of formulations specified in the Third Schedule to the Drug (Prices Control) Order, 1987. On the other hand, the dealer argued that "panjon" was covered under the formulations specified in the Third Schedule and should be taxed at six percent. The dispute centered around whether the ingredients of "panjon," namely acetyl salicylic acid, paracetamol, and caffeine anhydrous, collectively constituted a formulation based on bulk drugs specified in the Second Schedule, as required by the relevant notification.

Analysis:
The judgment carefully analyzed the definitions and provisions of the Drug (Prices Control) Order, 1987, particularly the categorization of formulations based on bulk drugs specified in the First and Second Schedules. It was observed that while acetyl salicylic acid (aspirin) and paracetamol were listed in the Second Schedule, caffeine anhydrous was not. The court emphasized that for a formulation to be considered under the category of formulations specified in the Third Schedule, it must consist of bulk drugs specified in the Second Schedule. Since caffeine anhydrous was not mentioned in the Second Schedule, the court concluded that "panjon" did not fall within the specified category and should be taxed at eight percent plus surcharge, as per the residuary entry.

In conclusion, the court allowed the revision, setting aside the Tribunal's decision to tax "panjon" at six percent. The Tribunal was directed to pass an appropriate order in accordance with the law, highlighting the importance of adherence to the specified schedules and definitions under the Drug (Prices Control) Order, 1987 for determining the taxability of formulations like "panjon" under the U.P. Trade Tax Act, 1948.

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