By TIOL News Service

NEW DELHI, JULY 25, 2016: BY a Special Leave Petition, the State of Madhya Pradesh have challenged the order passed by the Division Bench of Madhya Pradesh High Court whereby the order passed by the Additional Commissioner, Commercial Tax imposing entry tax on the products, namely, Mediker and Starch (Revive) has been dislodged and both the products have been held not to be within the ambit of entry tax.

The stance of the assessee is that "Mediker" being a drug & Starch (Revive) being not a chemical, are not liable to levy of entry tax under the Madhya Pradesh Entry Tax Act, 1976.

The Revenue view is that Mediker is a hair shampoo and "Revive Instant Starch" is a chemical and hence liable to Entry tax.

After considering the elaborate submissions and adverting to the cited case laws, the Supreme Court concluded thus -

Mediker

+ Mediker which is used for anti-lice treatment is a drug because of its medicinal affect. This position has been accepted by this Court (Order passed by the Tribunal in Collector of Central Excise v. Pharmasia (P) Ltd. 1990 (47) E.L.T. 658 (Tribunal) was assailed in Civil Appeal No. 3220 of 1990 and the Supreme Court had dismissed the Civil Appeal in Collector of Central Excise, Hyderabad v. M/s Pharmasia Pvt. Ltd. 1996 (83) ELTA178 (SC)).

+ Once it is a drug, it cannot be a shampoo. As a natural corollary, it will not invite the liability of levy of entry tax.

Revive Instant starch:

+ The revenue claimed it to be a chemical.

+ The stand of the assessee before the authorities was that it is not a chemical. It is not sold or used for that purpose. It is a starch manufactured by using Tapioca roots. The revenue, per contra , without any material brought on record, put it in the category of a chemical.

+ In Union of India v. Garware Nylons Ltd. - 2002-TIOL-725-SC-CX it has been held that the burden of proof is on the taxing authorities to show that the particular case or item in question is taxable in the manner claimed by them. Elucidating further, the Court has held that there should be material to enter appropriate finding in that regard and the material may be either oral or documents and it is for the taxing authority to lay evidence in that behalf even before the first adjudicating authority. Revive instant starch is used while washing the clothes. In common parlance it is not regarded and treated as a chemical or a bleaching powder. If the very substance or product would have a chemical composition, then only it would make the said substance a chemical within the meaning of Entry.Needless to say, the purpose and use are to be taken note of.

+ Common parlance test has to be applied. If the revenue desired to establish it as a chemical, it was obligatory on its part to adduce the evidence. As is manifest, no evidence has been brought on record by the revenue that it is a chemical. Therefore, it can safely be concluded that it is not a chemical.

Holding that the appeal is devoid of any substance, the same was dismissed.

(See 2016-TIOL-112-SC-CT)