MS. SWARUP ENTERPRISE V. COMMISSIONER OF TAXES,GOVT. OF TRIPURA and ANR

CRP/74/2011

AI Insights

The case involves multiple petitions challenging the seizure of products by the Revenue authorities in Tripura, alleging mis-declaration for tax evasion. The products in question were Ayurvedic and Homeopathic medicines, which the petitioners argued were correctly declared under Entry No.67 of Schedule II(a) of the Tripura Value Added Tax Act, 2004, and not under Entry No.183 of Schedule II(b) as claimed by the Revenue. The court examined whether the products were mis-declared and the appropriate tax entry applicable. The judgment emphasized the need for a detailed reassessment of the products' classifications using a 'twin test' method.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 725769 (HC-TRIPURA)
• Appeal Type: Others
• Pronouncement Date: 13-05-2013
• Assessment Year: misc
• Other Referred Cases: Reliance Trading Company Vs. State of Kerala, New Medical (Agartala) P. Ltd. Vs. Superintendent of Taxes and Ors., Commissioner of Income Tax, Punjab Vs. Kulu Valley Transport Co. P. Ltd.
• Laws Referred To: Tripura Value Added Tax Act, 2004, Drugs and Cosmetics Act, 1940
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: N C PAL
• Assessee Lawyers: B N MAJUMDER
• Keywords: Mis-declaration; Tax Evasion; Value Added Tax; Seizure of products; Ayurvedic and Homeopathic medicines
• Section: 183; 67(i)

Judgement Text

"1 CRP No.74/2011, CRP No.03/2012, W.P.(C) No.279/2012, W.P.(C) No.383/2012, W.P.(C) No.81/2013. Page 1 of 9 IN THE HIGH COURT OF TRIPURA AGARTALA CRP No. 74 of 2011 M/s Swarup Enterprise, Ronaldsay Road, Battala, Agartala, West Tripura. represented by its appointed attorney, Sri Ramdhan Paul, S/o Lt. Kalidas Paul, Resident of Bordwali, P.S. East Agartala, Agartala, West Tripura. ………………… Petitioner – Vs – 1. The Commissioner of Taxes, Govt. of Tripura, P.N. Complex, P.S. East Agartala, Agartala, West Tripura. 2. The Superintendent of Taxes, Churaibari Checkpost, P.O. Churaibari, North Tripura. …..………….Respondents CRP No. 03 of 2012 M/s Loknath Medical Hall, represented by its proprietor, Sri Sadhan Rudra Paul, S/o Debendra Rudra Paul, 8, Ronaldsay Road, Battala, Agartala, West Tripura. ………………… Petitioner – Vs – 1. The Commissioner of Taxes, Govt. of Tripura, P.N. Complex, P.O. Kunjaban, Agartala, West Tripura. 2. The Superintendent of Taxes, Churaibari Checkpost, P.O. Churaibari, North Tripura. …..………….Respondents W.P.(C) No. 279 of 2012 M/s Allen Health Care Ltd., represented by its Managing Director, Sri Gobinda Saha, Allen Bhawan, Krishnanagar Road, Kolkata-700102. ………………… Petitioner 2 CRP No.74/2011, CRP No.03/2012, W.P.(C) No.279/2012, W.P.(C) No.383/2012, W.P.(C) No.81/2013. Page 2 of 9 – Vs – 1. The State of Tripura, represented by the Secretary to the Govt. of Tripura, Finance Department, Agartala, West Tripura, P.O. Kunjaban. 2. The Commissioner of Taxes, Govt. of Tripura, Agartala, West Tripura, P.O. Kunjaban. 3. The Superintendent of Taxes, Churaibari, P.O. Churaibari, North Tripura. …..………….Respondents W.P.(C) No. 383 of 2012 M/s Allen Health Care Ltd., represented by its Managing Director, Sri Gobinda Saha, Allen Bhawan, Krishnanagar Road, Kolkata-700102. ………………… Petitioner – Vs – 1. The State of Tripura, represented by the Secretary to the Govt. of Tripura, Finance Department, Agartala, West Tripura, P.O. Kunjaban. 2. The Commissioner of Taxes, Govt. of Tripura, Agartala, West Tripura, P.O. Kunjaban. 3. The Superintendent of Taxes, Churaibari, P.O. Churaibari, North Tripura. …..………….Respondents W.P.(C) No. 81 of 2013 M/s Allen Health Care Ltd., represented by its Managing Director, Sri Gobinda Saha, Allen Bhawan, Krishnanagar Road, Kolkata-700102. ………………… Petitioner – Vs – 1. The State of Tripura, represented by the Secretary to the Govt. of Tripura, Finance Department, Agartala, West Tripura, P.O. Kunjaban. 3 CRP No.74/2011, CRP No.03/2012, W.P.(C) No.279/2012, W.P.(C) No.383/2012, W.P.(C) No.81/2013. Page 3 of 9 2. The Commissioner of Taxes, Govt. of Tripura, Agartala, West Tripura, P.O. Kunjaban. 3. The Superintendent of Taxes, Churaibari, P.O. Churaibari, North Tripura. …..………….Respondents B E F O R E THE HON’BLE CHIEF JUSTICE MR. DEEPAK GUPTA THE HON’BLE MR. JUSTICE S. TALAPATRA For the petitioners : Mr. B.N. Majumder, Advocate. For the respondents : Mr. N.C. Pal, Govt. Advocate. Date of hearing : 22.04.2013 Date of judgment & order : 13.05.2013 Whether fit for reporting : YES / NO JUDGMENT & ORDER (Talapatra J.) All these petitions are attended by a similar question of law, as such, are clustered for disposal by a common judgment and order. 2. The Revenue seized some products from the petitioners while importing to the State of Tripura for alleged mis-declaration of their composition for purpose of evading the tax by the various orders which are challenged either by way of revision against the order of the Commissioner of Taxes, Govt. of Tripura passed in the revision proceeding or directly in this court on the ground that there had been no mis-declaration as those products are well covered by Entry No.67 of the Schedule II(a) of the Tripura Value Added Tax Act, 2004 and those product does not fall under Entry No.183 of the Schedule II(b) of the said 4 CRP No.74/2011, CRP No.03/2012, W.P.(C) No.279/2012, W.P.(C) No.383/2012, W.P.(C) No.81/2013. Page 4 of 9 Act as claimed by the Revenue. For purpose of appreciation, Entry No.67 of the Schedule II(a) and Entry No.183 of the Schedule II(b) of the Tripura Value Added Tax Act, 2004 are excerpted hereunder : “67. i) Medicine and drugs including vaccine, syringes, dressing medicated ointment produced under drug license, light liquid paraffin of IP grade, Ayurvedic, Homeopathic and Unani medicines. ii) Hospital instruments, apparatus, appliances, tools and aids used in medical, surgical, dental, veterinary sciences or physiotherapy including electrical and electronic equipments and appliances; syringes and needles; operation theatre equipments, shadow bulbs and tubes, specially made operation and examination tables and cots and suction apparatus; stands, stretchers, trolleys, dental chairs, laboratory equipments and glassware; stethoscopes, thermometers, lacometers, B.P. instruments, surgical cotton wool; enema cans, bed pans, kidney trays and such other hospital ware; surgical gloves, aprons, operation suits, rubber sheets, catheters, I.V. sets and the like; cervical collars, abdominal belts, telonet paraffin gauze dressing, ultrasound jelly, pinchers (steel), medical oxygen, medical kits, medical disposable intravenous administration set, thermometer, mechanical nasal filters, instrument steriliser, hospital wares, gypsona plaster of paris, bandage, fixed, partial dentures, enamelled iron trays, and abasis (used in the hospitals), Hospital instruments – ECG instrument, ECG recording chart, ECG jelly, diagnostic and therapeutic equipments, drip set, disposable hypodermic needles, cotton buds, bed elevators, absorbent cotton rolls and the like. iii) Medical equipment / devices and implants not specified mentioned elsewhere in other Schedule.” “183. Vegetable, mineral and other preparations, tonics, food supplements, appetizers, dietical foods and all other preparations for human consumption in liquid, pill, powder forms, whether prepared according to pharmacopial standards of otherwise, other than those specified elsewhere in this Schedule.” 5 CRP No.74/2011, CRP No.03/2012, W.P.(C) No.279/2012, W.P.(C) No.383/2012, W.P.(C) No.81/2013. Page 5 of 9 3. Mr. B.N. Majumder, learned counsel appearing for the petitioners has submitted that Entry No.67 of the Schedule II(a) of the Tripura Value Added Tax Act, 2004 demonstrates that all sorts of drug formulations including Ayurvedic and Homeopathic drugs fall under Entry 67(i) and there is no room for holding the seized composition as the tonic simplicitor to bring those under the Entry No.183 of the Schedule II(b) of the said Act. If one composition or product falls under Entry No.67(1) it would be taxable at 5% whereas if the said composition/product is treated as the tonic, the same would be taxable at 13.5%. As the petitioners had declared while crossing the barrier/check- post their products as medicine, those composition/products were seized by the Revenue by the impugned orders of seizure as reflected in the table below against each of the case with reference to the respective products. The seizure is under challenge for being wholly illegal as there is no mis-declaration as assigned by the Revenue. Mr. Majumder, learned counsel for the petitioners has stated further that those products are Ayurvedic and Homeopathic medicines and are manufactured under the licence granted under the Drugs and Cosmetics Act and Rules. 1 2 3 4 Sl. No. In Civil Revision Petition & Writ Petition Seizure Case Number with date Name of the products seized 1. CRP No.74/2011 No.1029/CRB/2010-11, dated 24.12.2010 Livosin Liquid 2. CRP No.03/2012 No.608/CRB/2011-12, dated 20.08.2011 R.B. Tone Syrup 3. W.P.(C) No.279/2012 No.116/CRB/2012-13, dated 24.05.2012 Alvine, Allenzyme, Livosin Total, Livosin. 4. W.P.(C) No.383/2012 (i) No.1127/CRB/2011-12, dated 20.12.2012 (ii) No.53/CRB/2012-13, dated 22.04.2012 Allenzyme, Alvine, Livosin Total 5. W.P.(C) No.81/2013 No.407/CRB/2012-13, dated 10.10.2012 Livosin Liquid (CE)A 6 CRP No.74/2011, CRP No.03/2012, W.P.(C) No.279/2012, W.P.(C) No.383/2012, W.P.(C) No.81/2013. Page 6 of 9 4. While refuting the submissions of Mr. B.N. Majumder, learned counsel for the petitioner, Mr. N.C. Pal, learned Govt. Advocate has submitted by means of the counter-affidavit filed by the respondents that the petitioners made mis-declaration in Form XXV, declaring the Health Tonic or the tonic as ‘AY medicine’ or ‘Homeopathic medicine’ and thereby have attempted to evade a huge amount of tax. Thus the seizure cannot be held illegal. However, he has contended that whenever there is a conflict as to whether some products would fit either in the general or specific entry, the ordinary rule of construction would be that a general entry must give way to a specific entry, but when two entries are apparently in conflict, an attempt must be made to construe them harmoniously and not to treat them repugnant to each other. In this case, the products do not fit in the specific entry No.67(i) of Schedule II(a) of the Tripura Value Added Tax Act, 2004 for medicine and drugs etc., those are to be fitted in the Entry No.183 of Schedule II(b) of the said Act. Mr. Pal, learned Govt. Advocate has relied on a decision of the apex court in Reliance Trading Company Vs. State of Kerala, reported in (2000) 119 STC 321 in this respect, even though none has questioned that position of law. Mr. Pal, learned Govt. Advocate, however, has not disputed that Section 3(b)(i) of the Drugs and Cosmetics Act, 1940 includes all medicine for internal and external use of the human beings or animals and all substances intended to be used for or in the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings or animals, including preparations applied on human body for the purpose of repelling insects like mosquitoes. But he has contended that the tonic or the health tonic, even if some pharmacopial standards are followed in the preparation, are fitted only in the 7 CRP No.74/2011, CRP No.03/2012, W.P.(C) No.279/2012, W.P.(C) No.383/2012, W.P.(C) No.81/2013. Page 7 of 9 Entry No.183 of the Schedule II(b) of the Tripura Value Added Tax Act, 2004. Thus the petitioners had clearly mis-declared the products. Hence the action taken cannot be faulted with. 5. The controversy is precipitated in the determination as to whose obligation it is to determine the composition of the product in dispute and what method is required to be followed by the authority for that purpose. The aspects have been dissected and determined in New Medical (Agartala) P. Ltd. Vs. Superintendent of Taxes and Ors., reported in (2013) 1 TLR 593, on considering all the precedents in the field and held that common parlance test is not “be all and end all” and the common parlance test by itself is not conclusive. In para 29 of New Medical (Agartala) P. Ltd. (supra), it has been observed that- “In view of this, the Commissioner of Taxes is directed to adopt the twin test for determining the classification, meaning thereby the common parlance test such as the functional utility and pre- dominance of the primary uses of the commodity apart from taking into account other understanding in common parlance such as to consider the product literature and label, etc., and thereafter to determine the composition and character of the product on resorting to the scientific test”. In any case it is found that two different opinions have surfaced by the twin test, the Revenue shall be bound by the opinion that favours the dealer or his agent. 6. In this regard, a decision of the apex court in Commissioner of Income Tax, Punjab Vs. Kulu Valley Transport Co. P. Ltd., reported in (1970) 77 ITR 518 can profitably be referred to. The apex court in Kulu Valley (supra) held thus : 8 CRP No.74/2011, CRP No.03/2012, W.P.(C) No.279/2012, W.P.(C) No.383/2012, W.P.(C) No.81/2013. Page 8 of 9 “On behalf of the revenue it is pointed out that a great deal of venience will result if a voluntary return can be entertained at any time in accordance with section 22(3) when loss is involved and in order to give the asessee the benefit of the carry forward of the loss a number of assessments would have to be re-opened. It is difficult to accede to such an argument merely on the ground of inconvenience. Moreover, it is common ground that a voluntary return cannot be filed beyond the period specified in section 34(3) of the Act. It cannot be overlooked that even if two views are possible the view which is favourable to the assessee must be accepted more construing the provisions of taxing statute”. (Emphasis supplied) 7. On consideration of all the attending facts, this Court is inclined to interfere with all the impugned orders of seizures viz. (1) No.1029/CRB/2010-11, dated 24.12.2010 (In CRP No.74/2011), (2) No.608/CRB/2011-12, dated 20.08.2011 (In CRP No.03/2012), (3) No.116/CRB/2012-13, dated 24.05.2012 (In W.P.(C) No.279/2012), (4) No.1127/CRB/2011-12, dated 20.12.2012 & No.53/CRB/2012-13, dated 22.04.2012 (In W.P.(C) No.383/2012) and No.407/CRB/2012-13, dated 10.10.2012 (In W.P.(C) No.81/2013) and accordingly those are set aside. 8. All the matters are remitted to the Commissioner of Taxes for determining their composition by the twin test and thereafter to assess the liability of tax of the dealers (the petitioners herein). It is made clear that by persuading the twin test (the common parlance test and the scientific test) if it appears that for the divergent opinion or two views the products cannot be fitted against the Specific Entry (either in Entry No.67 of the Schedule II(a) or in Entry No.183 of the Schedule II(b) of the Tripura Value Added Tax Act, 2004) the opinion would favour the dealer shall be accepted by the Revenue. Till such determination, the Revenue shall not insist tax on the products more than 5%. If the products are not released as yet, the Revenue shall 9 CRP No.74/2011, CRP No.03/2012, W.P.(C) No.279/2012, W.P.(C) No.383/2012, W.P.(C) No.81/2013. Page 9 of 9 release the products on realising 5% tax in terms of the Entry No.67(i) of the Schedule II(a) of the Tripura Value Added Tax Act, 2004 alongwith an undertaking in definite terms that if it is found on completion of the twin test that the petitioners are liable to pay more tax, they shall pay the same within 3(three) months from the date of such determination, else the Revenue shall remain within the authority to realise the said tax or the balance of the tax as would be accounted for importing such products for purpose of sale within the State of Tripura as per the procedure as provided in the Tripura Value Added Tax Act, 2004. 9. With this observation and direction, all these petitions being (1) CRP No.74/2011, (2) CRP No.03/2012, (3) W.P.(C) No.279/2012, (4) W.P.(C) No.383/2012, (5) W.P.(C) No.81/2013 are allowed to the extent as indicated above. There shall be no order as to costs. A copy of this order be furnished to Mr. N.C. Pal, learned Govt. Advocate for transmitting the same to the Commissioner of Taxes, Govt. of Tripura for doing his needful. JUDGE CHIEF JUSTICE ROY "