TMI Blog2018 (5) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... ture. Whether Clarification issued by Commissioner cannot be given retrospective effect? - Held that: - Sub Section (8) of Section 59 does not give any such power to the learned Commissioner to issue any such Clarification or Ruling with a retrospective effect. In the absence of any such specific power, the respondent-Commissioner could not have issued the impugned clarification by the impugned order at Annexure-A dated 11.09.2014 to be effective from 01.04.2005 onwards - the retrospectivity of the said order does not fit into the parameters of Sub Section (8) of Section 59 of the Act and to that extent, it deserves to be quashed. Rate of tax - All-in-one Diapers, Underpads and Sanitary Napkins - Held that: - It is well settled that if a commodity can by some rational understanding or analysis be brought or related to specific entry in the tax laws, the same cannot be taxed under the residuary entry and what is important is to apply the Trade Parlance Test or Common Parlance Test and not to apply the hair splitting exercise to apply the technical terms. The heading of the said Entry 60 namely, ‘Medical and Pharmaceutical preparations’ enumerating several items also inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act and which order is final, as per Section 60(7) of the Act but it was passed after examining the matter in detail and giving an opportunity of hearing to the Department also and it held that that these items were taxable as Medical and pharmaceutical preparations; Medicated ointments manufactured or imported under license granted under the Drugs and Cosmetics Act, 1940; light liquid paraffin of IP grade; Wadding gauze, bandages and similar articles for medical, surgical, dental or veterinary purpose; Diagnostics or laboratory reagents including prepared diagnostic or laboratory reagents and rightly so, but the learned Commissioner in the impugned order at Annexure-A dated 11.09.2014 following such Clarifications issued by him in two other cases of M/s. Xtra Care Products Private Limited and M/s. Dowell Surgical Private Limited, Bangalore, held that the Adult Diapers of various sizes were taxable under Residuary entry taxable from 12.5% to 14.5% for the periods commencing from 01.04.2005 till the date of passing of the order. 4. The Learned counsel for petitioner, Mr. Shivadass G., also submitted that the State Government later on has issued a Notification on 31.03.2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll officers [including Commercial Tax Inspectors] and persons employed in the execution of this Act as they may deem fit for the administration of this Act, and all such officers and persons shall observe and follow such orders, instructions and directions of the Government and the Commissioner. (2) No such order, instructions, or directions shall be issued under sub-section (1) so as to interfere with the discretion of any appellate authority in the exercise of its appellate functions. (3) All officers and persons employed in the execution of this Act, shall observe and follow such administrative instructions as may be issued to them for their guidance by the Additional Commissioner or Joint Commissioner within whose jurisdiction they perform their functions. (4) Without prejudice to the generality of the foregoing power, the Commissioner may, on his own motion or on an application by a registered dealer liable to pay tax under the Act, if he considers it necessary or expedient so to do, for the purpose of maintaining uniformity in the work of assessments and collection of revenue, clarify the rate of tax payable under this Act in respect of goods liable to tax unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner of Commercial Taxes, (Karnataka), Bangalore, (Annexure-A) is reproduced for ready reference: 8. All contentions raised in the Statement of Objections are considered and findings are as below: (i) A diaper is a kind of underwear that allows one to defecate or urinate in discreet manner. Disposable diapers contain absorbent chemicals and are thrown away after use. Under pads are made with soft, non-woven top layers for wicking fluid away from the skin. Cellulose fibers make them comfortable and absorbent, and a strong, leak proof back sheet holds fluid. Both these products can be used in hospitals as well as in the home. (ii) Diapers are used by adults with incontinence or in certain circumstances where access to a toilet is unavailable. These can include those of advanced age, individuals with certain types of physical or mental disability and people working in extreme conditions. Diapers are primarily also worn by children who are not yet potty trained or experience bedwetting. Similarly, Sanitary Napkins are absorbent pads worn by a woman while she is menstruating. All these products i.e., Adult Diapers, Baby Diapers, Underpads, Sanitary Napkins are similar i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gauze, bandages, etc., can be drawn from these products to say that they are falling under articles for medical purpose as mentioned in the Entry 60 of the III Schedule. (v) Thus, disposable diapers and Underpads cannot be held as goods falling under entry 60 of III Schedule as held by the ACAR in its order dated 30.03.2017. In fact they are unscheduled goods liable to tax at the rate of 14.5% with effect from 01.08.2012 under Section 4(1)(b)(iii) of the said Act. 9. In the light of the above discussion, I am of the considered opinion that the goods- All in one diapers , Underpads and Sanitary Napkins are not falling under Entry 60 of III Schedule to the KVAT Act, 2003 and are taxable at 14.5% under Section 4(1)(b)(iii) of the Karnataka Value Added Tax Act, 2003. 10. In view of the above findings, the following Clarification is issued: CLARIFICATION NO.CLR.CR.26/2014-15 DATED11.09.2014 In suppression of the clarification No.AR.CLR.CR.119/2006-07 dated 30.03.2007 issued by the Authority for clarification and advance rulings and in exercise of the powers vested in me under sub-section (8) of Section 60 of KVAT Act, 2003, it is clarified that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtment (CT-1) and 1000 copies to the Commissioner of Commercial Taxes, Gandhinagar, Bengaluru-560009. Copy to: 1. The Accountant General(Accounts)/ (Audit), Karnataka, Bengaluru. 2. The Commissioner of Commercial Taxes, Gandhinagar, Bengaluru. 3. The Secretary, Karnataka Legislature Secretariat, Bengaluru. 12. Having given the earnest consideration to the relevant material, this Court is of the opinion that the petitioner cannot successfully challenge the constitutional validity and vires of Section 60(8) of the Act and this Court does not find any lack of legislative competence of the State Government in enacting and amending Section 60(8) of the Act, quoted above. The delegation by the Commissioner of his powers to issue clarifications and Advance Rulings by constituting an Authority for clarifications and Advance Rulings comprising of atleast three Additional Commissioners, his subordinates is not illegal in any manner. However, such orders of Advance Ruling Authority can be undone or modified by overriding power vested in the Commissioner himself under Sub Section (8) inserted by Act No.54 of 2013 with effect from 01.08.2013, and that cannot be said to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely help them in maintaining good medical and hygienic conditions of their body and therefore, such items can certainly be said to be similar articles read with wadding gauze and bandages for medical and surgical purpose etc. 15. It is well settled that if a commodity can by some rational understanding or analysis be brought or related to specific entry in the tax laws, the same cannot be taxed under the residuary entry and what is important is to apply the Trade Parlance Test or Common Parlance Test and not to apply the hair splitting exercise to apply the technical terms. 16. Going by the said well settled principles, this Court does not find any cogent reason in the impugned order passed by the Commission except the reason given by him of relying upon two previous orders passed by the Commissioner himself in two other cases, the facts of which are not discussed in detail in para No.2 of the order. This Court is therefore of the opinion that the impugned order passed on 11.09.2017 by the learned Commissioner does not deserve to be upheld even on merits and the same is liable to be quashed. 17. Yet another reason not to allow the impugned order to hold the field is th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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