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TMI Blog2018 (5) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... .09.2014 reversing the decision of Advance Ruling Authority has held that the said items cannot fall under Entry 60 of the Schedule III of the Act, and therefore, these items would be taxable in the residuary entry at the rate of 14.5% of the Act. The petitioner therefore, filed this petition challenging the said order as well as the vires of Section 60(8) of the Act, which was brought on the statute book by the later amendment w.e.f. 01.08.2013 by Act No.54 of 2013. 3. Learned counsel for petitioner Mr. Shivadass G. has urged before the Court that the ARA (a Committee of three Additional Commissioners constituted by the Commissioner himself and delegated the power by the Commissioner under Section 60 of the Act) had not only passed the order in favour of the petitioner under Section 60(2)(d) of the 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 liqui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -vires and therefore, the said section also deserves to be quashed and struck down. 6. On the other hand, learned counsel for Revenue, Mr. Vedamurthy, argued to support the impugned order on the basis of the reasons given in the impugned order itself namely, "that since these Diapers are not necessarily usable by the patients in the Hospital only, but can be used at home also; therefore, they cannot fall under Entry 60 of the Schedule III of the Act." 7. I have heard the learned counsels and perused relevant statutes. 8. The relevant Entry 60 of Schedule III of the Act is quoted below for ready reference: "Section 59: Instructions to Subordinate Authorities: (1) The Government and the Commissioner may from time to time, issue such orders, instructions and directions to all 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 di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, surgical, dental or veterinary purposes; Diagnostics or laboratory reagents". The matter is examined. The literatures furnished are perused It is made clear that these products are used on patients only during the time of medical treatments and therefore could be terms as wadding gauze, bandages and similar articles for medicals, surgical treatments. Therefore, it is hereby clarified that All-in- one diapers for adults and under pads use on patients in hospitals and in the course of medical treatment are covered under Entry No.60 of III Schedule to the KVAT Act, 2003 liable to tax at 4%. (H.R. Teghoor) Member (K.S. Rama Naik) Chairman 10. The relevant extraction of the order passed by the Commissioner 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 mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealer has not made out any case to show that these products are only used during the course of medical treatment. (iv) The ACAR vide its order dated 30.03.2007 has come to the conclusion that these products are used on patients only during the time of medical treatment and therefore could be termed as wadding gauze, bandages and similar articles for medical, surgical treatments. The ACAR has concluded that "all in one diapers and Underpads" are used by the patients in hospitals and in the course of medical treatment. This observation of the ACAR is not correct for the reason that these products can be used in hospital as well as in the home. No similarity with reference to wadding 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the name of the Governor of Karnataka, (K.S.PADMAVATHI) Under Secretary to Government, Finance Department (C.T-1) To. The complier, Karnataka Gazette, Bengaluru, for publication in the Extraordinary Gazette dated 31.03.2016 and supply 100 copies to the Finance Department (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 illega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... back sheet holds the fluid and old people and senior citizens generally require them to avoid embarrassment of leaking fluids or urine passed out by them without even noticing, as their senses get weak in the old age. Such Underpads or Diapers definitely 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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