The division bench of Supreme Court today held that, the Entry cannot be imposed on the products ‘Mediker and ‘Revive’ under the Madhya Pradesh Entry Tax Act, 1976.
The facts giving rise to the present appeal are the respondent is a manufacturer of hair oil, edible oil, Mediker and Starch (Revive) and other products and is a registered dealer under the Madhya Pradesh Commercial Tax Act, 1994, as well as a dealer under the E.T. Act.
The Assistant Commissioner, Commissioner Tax Division II, Indore vide order dated 28.04.2003 imposed entry tax on Mediker treating it as a hair shampoo and “Revive Instant Starch” as a chemical; and as the tax was not paid, interest and penalty were also levied. Being grieved by the aforesaid order the respondent-company preferred Review case No. 80/2003 before the Additional Commissioner, Commercial Tax, Indore. It was contended before the said authority that the entry tax imposed on the assessee on Mediker, which is meant for anti-lice treatment, was illegal being not permissible under any of the entries mentioned in Schedule II of the E.T. Act and there was no material on record to treat starch as a chemical. It was also urged that Mediker is a medicine and hence, it did not attract entry tax. The said submissions were repelled and tax was imposed and on that basis penalty and interest were also levied. Aggrieved by the order passed by the Additional Commissioner, Commercial Tax, Indore, the assessee approached the High Court
The bench comprising of Justice Dipak Misra and Justice Prafulla.C.Pant upheld the High Court’s view that, Mediker is basically a medicinal product and starch being not meant for sale but used in production of other articles, could not have been made amenable to entry tax, more so, in the absence of its mention in the Schedule. It was also held that starch is not a chemical.
While dismissing the appeal filed by the State Government, the bench observed that, that Mediker which is used for anti-lice treatment is a drug because of its medicinal affect. This position has been accepted by this Court. 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.
The second product is Revive instant starch the court observed 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.
The Court also relied on the case Union of India v. Garware Nylons Ltd 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 55. 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.
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