IN THE HIGH COURT OF KERALA AT ERNAKULAM
OT.Appeal.No. 8 of 2008()
1. M/S.JOHNSON & JOHNSON LIMITED
... Petitioner
Vs
1. ASSISTANT COMMISSIONER (ASSESSMENT)
... Respondent
2. ASSISTANT COMMISSIONER (AUDIT
3. THE COMMISSIONER OF COMMERCIAL TAXES
For Petitioner :SRI.JOSEPH JERARD SAMSOM RODRIGUES
For Respondent :SRI.MUHAMMED RAFIQUE
The Hon'ble MR. Justice C.N.RAMACHANDRAN NAIR
The Hon'ble MR. Justice K.SURENDRA MOHAN
Dated :24/03/2009
O R D E R
C .N. RAMACHANDRAN NAIR &
K. SURENDRA MOHAN, JJ.
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O. T. A. No. 8 OF 2008
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Dated this the 24th day of March, 2009
C.R.
JUDGMENT
Ramachandran Nair,J.
Appeal is filed against clarification issued by the Commissioner
of Commercial Taxes under Section 94 of the Kerala Value Added Tax
Act. The appellant among other things is a manufacturer and dealer in
drugs and medicines. Even though an application for compounding
was not filed in form I-D, the appellant was remitting tax at the
compounded rate that is at 4% on the Maximum Retail Price on the sale
of drugs and medicines under Section 8(e) of the Act. When
assessment was made the assessing officer applied the same rate of tax
on MRP on medicines sold in other divisions of the company as well.
Appellant’s case is that only in the Pharma division they have paid tax
at compounded rate and so far as other divisions are concerned, drugs
and medicines sold cannot be subjected to assessment at compounded
rate under Section 8(e) of the Act. Appellant filed clarification petition
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before the Commissioner, who held that appellant is liable to pay tax at
compounded rate on the sale of drugs and medicines as stated in
Section 8(e) of the Act, no matter whether application is filed under
prescribed Form or not for availing compounding facility. We have
heard counsel appearing for the appellant and Government Pleader
appearing for the respondents.
2. We do not find anything wrong with the Commissioner’s order
because even without a formal application for compounding appellant
adopted the scheme of compounding for payment of tax in respect of
drugs and medicines which is at 4% on MRP. Proviso (b) to
Explanation to Section 8(e) makes it clear that when tax is collected at
the compounded rate on MRP by the seller, the purchasing dealer is
entitled to exemption. Going by the collection of tax in the Pharma
Division appellant cannot deny that they have not opted for payment of
tax at compounded rate under Section 8(e) of the Act. All what the
Commissioner has stated is that once the appellant has started billing in
accordance with compounding scheme, then the same itself amounts to
opting to pay tax under the compounding scheme and the appellant
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cannot therefore back out of the same. We uphold this position
declared by the Commissioner because by appellant’s conduct the
purchasers have claimed exemption under the proviso above referred.
In other words, sale of the drugs and medicines by appellant should be
assessed on MRP at 4 per cent as provided under Section 8(e) of the
act. So far as other products are concerned, compounding is not
applicable and the normal provisions of the Act will be applied for
assessment and levy of tax. If there is surviving dispute then it is for
the appellant to pursue the same before the statutory authority in
appeal.
Appeal is disposed of as above.
(C.N.RAMACHANDRAN NAIR)
Judge.
(K. SURENDRA MOHAN)
Judge.
kk
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