Hon'ble Mahesh Chandra Tripathi,J.
(Delivered by Hon'ble Ashok Bhushan, J.) The question for consideration in this writ petition is as to whether on oxygen IP (Indian Pharmacopoeia) the tax under the U.P. Trade Tax Act, 1948 is to levy under Entry "Medicine and Pharmaceutical Preparation" or under Entry "Oxygen and other gases".
The facts of the case as emerge from the pleadings of the parties are; the petitioner, a partnership firm, is engaged in manufacture of Oxygen gas, both for industrial use and oxygen (IP) being a drug/medicinal oxygen used in medical treatment. A licence in Form-25 from the Drug Licensing and Controlling Authority of U.P. under the Drugs and Cosmetics Rules, 1945 for manufacture of oxygen IP was obtained by the petitioner. The petitioner is registered under the U.P. Trade Tax Act, 1948 as well as under the Central Sales Tax Act, 1956. The petitioner submitted return for the years 2001-02, 2002-03 and 2003-04 showing sale of both industrial oxygen and medicinal oxygen. On industrial oxygen, the liability of trade tax to the extent of 12% and on medicinal oxygen the liability of trade tax to the extent of 8% was admitted by the assessee. The assessment orders were passed by the assessing officer accepting tax liability on industrial oxygen at 12% and on medicinal oxygen at 8%. A reassessment notice under Section 21 of the U.P. Trade Tax Act, 1948 (hereinafter referred to as the 1948 Act) for the assessment year 2003-04 was issued to the petitioner stating that on medicinal oxygen the tax was required to be paid at 12%, hence the tax has escaped assessment. The petitioner filed reply to the notice dated 21st March, 2006 reiterating that tax has rightly been paid on the medicinal oxygen at the rate of 8% since it is a drug. The notice was withdrawn by order dated 28th September, 2006. The Deputy Commissioner (Trade Tax) sought permission from the Additional Commissioner for reassessing the assessee for the year 2002-03, 2003-04 stating that tax has been charged on the sale of medicinal oxygen at the rate of 8% whereas vide notification dated 29.1.2001 there was liability of 12% tax. To the notice dated 8th February, 2007, the petitioner filed his objection again reiterating that medicinal oxygen is a drug, hence tax has rightly been paid at the rate of 8%. The Additional Commissioner on 18th May, 2007 passed an order authorising the Deputy Commissioner to make reassessment. The said order noted that no one appeared on behalf of the firm. The permission for reassessment was granted for the years 2001-02, 2002-03 and 2003-04 on 18th May, 2007. Thereafter orders have been passed for reassessment on 13th June, 2007 for the relevant years on the ground that on sale of medicinal oxygen the tax was to be paid at the rate of 12% whereas in the assessment orders the tax at the rate of 8% was charged, hence the tax liability was imposed. The petitioner filed this writ petition and has prayed for quashing the orders dated 18th May, 2007 passed by the Additional Commissioner and the reassessment orders dated 13th June, 2007.
We have heard Sri S.D. Singh, Senior Advocate appearing for the petitioner and Sri C.B. Tripathi, Special Counsel appearing for the State-respondents.
Sri S.D. Singh, learned counsel for the petitioner submitted that assessment orders accepting the tax liability at the rate of 8% on oxygen (IP) i.e. medicinal oxygen was in accordance with the notification dated 15.1.2000 treating the oxygen (IP) as medicine and pharmaceutical preparation. He submits that liability of tax at the rate of 12% cannot be imposed under Entry 47 of the notification dated 29.1.2001 as 'oxygen and other gases'. He submits that Entry 47 covers 'oxygen and other gases' but exclude 'such other gases as are included in any other notification issued under the Uttar Pradesh Trade Tax Act, 1948'. He further submits that oxygen (IP) (medicinal oxygen) shall not be covered by Entry 47 i.e. a general entry but is covered by the Entry 'Drugs and Medicines'. He submits that assessment orders were perfectly in accordance with law. He further submits that present is not a case for initiating any reassessment proceeding since the assessing authority after considering the relevant Entries and properties of oxygen (IP) has imposed tax liability at the rate of 8%. The reassessment is nothing but change of opinion. He further submits that neither any reason has been mentioned in the order granting permission for reassessment nor in the reassessment order any reason has been given as to why medicinal oxygen is taxable at the rate of 12%. He further submits that reassessment orders have been passed without any opportunity as against the notice dated 8th February, 2007 initiating reassessment proceeding, the petitioner filed his objection and without communicating the outcome of the objection, order dated 18th May, 2007 has been served on the petitioner. It is submitted that the order mentions that firm partner namely Kamal refused to accept the notice whereas there is no such partner named Kamal in the petitioner's firm and the ex-parte order of reassessment was passed.
Sri C.B. Triphati, learned counsel appearing for the State-respondents submits that tax at the rate of 12% on oxygen (IP) i.e. medicinal oxygen is to be charged since it is covered by Entry 47 of the notification dated 29.1.2001. He submits that Entry 47 covers 'oxygen and other gases' and oxygen (IP) cannot be covered by the Entry of medicine and pharmaceutical preparation. It is submitted that reassessment proceedings were rightly initiated on sufficient materials and there was no error in initiating reassessment proceedings. He further submits that reassessment orders were passed after issuing notice to the petitioner which was refused to be taken by one partner namely Kamal, hence the order is not ex-parte. It is further submitted that against the reassessment order, the petitioner has statutory remedy under the 1948 Act, hence the writ petition be not entertained.
Learned counsel for both the parties have relied on various judgments of this Court, other High Courts and the Apex Court which shall be referred to while considering the submissions in detail.
Before we proceed to consider respective submissions of learned counsel for the parties, it is useful to note the statutory provisions and notifications governing the field.
Section 3A of the U.P. Trade Tax Act provides for rates of tax. Sub-section (1) of Section 3A is quoted below:-
3-A - Rates of tax. - (1) Except as provided in Section 3-D, the tax payable by a dealer under this Act shall be levied:--
(a) on the turnover in respect of "declared goods", at the point of sale to the consumer at the maximum rate for the time being specified in Section 15 of the Central Sales Tax Act, 1956, or where the State Government, by notification, declares any other single point or a lesser rate, at such other point or at such lesser rate ;
(b) on the turnover in respect of such goods, other than the goods referred to in clause (a), at such point and at such rate, not exceeding fifty per cent, as the State Government may, by notification, declare, and different points and different I rates may be declared in respect of different goods.
(c) on the turnover in respect of goods, other than those referred to in clause (a) or clause (b), at the point of sale by manufacturer or importer at the rate of ten percent."
A notification dated 15th January, 2000 was issued in exercise of powers under Clause (e) of sub-section (1) of Section 3-A of the 1948 Act providing for description of goods, point of tax and rate of tax percentage. Entry 26 of the notification dated 15th January, 2000, which is relevant for the present case, is quoted below:-
"English translation of Kar Avam Nibandhan Anubhag-2, Government Notification No. KA.NL-2-101/XI-9(231)/94-U.P. Act-15-48-Order-2000, dated 15th January, 2000.
In exercise of the powers under clause (e) of sub-section (1) of Section 3-A of the Uttar Pradesh Trade Tax Act, 1948 ( U.P. Act No. XV of 1948) read with Section 21 of the Uttar Pradesh General Clauses Act, 1904 (U.P. Act No.1 of 1904) and in supersession of all previous notifications issued in this behalf, the Governor is pleased to declare that with effect from 17th January, 2000, the turnover in respect of the goods mentioned in Column 2 of the List below shall be liable to tax at the point of sale specified in column 3 of said List at the rate specified against each in column 4 thereof.
LIST M stands for sale by the Manufacturer in Uttar Pradesh I stands for sale by the Importer in Uttar Pradesh Sl.No.
Description of goods Point of tax Rate of tax percentage 1 2 3 4 2 .....
...
...
.
.....
...
...
Medicines and pharmaceutical preparations.
M or I 8.00% .....
...
..."
Another notification dated 29th January, 2001 has been issued in exercise of powers under Clause (b) of sub-section (1) of Section 3-A of the 1948 Act providing for description of goods, point of tax and rate of tax percentage which is quoted as below:-
"English Translation of Government Notification No. KA-NI.-2-306/XI-9(113)/99-U.P. Act-15-48-Order-(8)-2001, dated 29th January, 2001.
In exercise of the powers under Clause (b) of sub-section (1) of Section 3-A of the Uttar Pradesh Trade Tax Act, 1948 (U.P. Act No. 15 of 1948), the Governor is pleased to declare that with effect from 1st February, 2001, the turnover in respect of the goods mentioned in Column 2 of the List below shall be liable to tax at the point of sale specified in Column 3 of the said List at the rate specified against each in Column 4 thereof.
LIST M stands for sale by the Manufacturer to Uttar Pradesh I stands for sale by the importer in Uttar Pradesh Sl.No.
Description of goods Point of tax Rate of tax percentage 1 2 3 4 2 .....
...
...
.
.....
...
...
Oxygen and other gases but excluding fuel gas, natural gas and such other gases as are included in any other notification issued under the Uttar Pradesh Trade Tax Act, 1948 M or I 12.00% .....
...
..."
As noted above that point of controversy is as to whether oxygen (IP) is covered by Entry 26 of the notification dated 15th January, 2000 or by Entry 47 of the notification dated 29th January, 2001. For finding out 'medicine and pharmaceutical preparations', the provisions of the Drugs and Cosmetics Act, 1940 (hereinafter referred to as the 1940 Act) are relevant. Section 3(b) defines the word 'drug' which is to the following effect:-
"3(b). "drug" includes
(i) all medicines for internal or external use of human beings or animals and all substances intended to be used for or in the diagnosis, treatment, mitigation 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;
(ii) Such substances (other than food) intended to affect the structure or any function of the human body or intended to be used for the destruction of vermin or insects which cause disease in human beings or animals, as may be specified from time to time by the Central Government by notification in the Official Gazette;
(iii) All substances intended for use as components of a drug including empty gelatin capsules ; and
(iv) Such devices intended for internal or external use in the diagnosis, treatment, mitigation or prevention of disease or disorder in human beings or animals, as may be specified from time to time by the Central Government by notification in the Official Gazette, after consultation with the Board."
All medicines are drugs as per definition given in Section 3(b) of the Drugs and Cosmetics Act, 1940. In the second schedule of the 1940 Act standards to be complied with by imported drugs and by drugs manufactured for sale, sold, stocked or exhibited for sale or distributed has been provided. Relevant portion of Entry 5 of the second schedule of the 1940 Act which provides for other drugs is quoted below:-
"5. Other drugs-
(a) Drugs included in the Indian Pharmacopoeia."
Section 21 of the 1948 Act deals with reassessment. Section 21 is quoted below :-
"21 - Assessment of tax on the turnover not assessed during the year - (1) If the Assessing Authority has reason to believe that the whole or any part of the turnover of a dealer, from any assessment year or part thereof, had escaped assessment to tax or has been under assessed or has been assessed to tax at a rate lower than that at which it is assessable under this Act, or any deductions or exemptions has been wrongly allowed in respect thereof, the Assessing Authority may, after issuing notice to the dealer and making such inquiry, as it may consider necessary, assess or re-assess the dealer to tax according to law:
Provided that the tax shall be charged at the rate, at which it would have been charged, had the turnover not escaped assessment, or full assessment, as the case may be.
(2) Except as otherwise provided in this section, no order of assessment or re-assessment under any provision of this Act for any assessment year shall be made after the expiration of two years from the end of such year or March 31, 1998, whichever is later:
Provided that if the Commissioner, on his own or on the basis of reasons recorded by the assessing authority, is satisfied that it is just and expedient so to do, authorises the Assessing Authority in that behalf, such assessment or re-assessment may be made after the expiration of the period aforesaid, but not after the expiration of 1[six years from the end of such year or March 31, 2002, whichever is later] notwithstanding that such assessment or re-assessment may involve a change of opinion:
Provided further that the assessment or re-assessment for the assessment year 1987-88 may be made by March 31, 1993:
Provided also that if the eligibility certificate granted under Section 4-A has been amended or cancelled by the Commissioner under subsection (3) of Section 4-A, the order of assessment or re-assessment may be made within one year from the date of receipt by the assessing authority of the copy of the order amending or cancelling the aforesaid certificate or by March 31, 1995, whichever is later:
Provided also that the assessment or re-assessment for the assessment year 1989-90 may be made by March 31, 1995.
(3) Where the notice under sub-section (1) for any assessment year has been served within the period specified iii sub-section (2), the order of assessment or re-assessment in pursuance thereof may be made within six months, after the expiration of such period.
(4) If an order of assessment is set aside and the case is remanded for re-assessment by any authority under the provisions of this Act or by a competent Court, the order of re-assessment may be made within one year from the date of receipt by the assessing authority of the copy of the order remanding the case, or by December 31, 1982, whichever is later.
(4-A) If an order of assessment is quashed on the ground of want of jurisdiction of the Assessing Authority or any other like ground, by any competent authority or Court, fresh order of assessment may be made by the assessing authority having jurisdiction within one year from the date of receipt by the assessing authority, whose order is so quashed, of the copy of order of such authority or Court or by March 31, 1993, whichever is later.
(5) If an order of assessment or re-assessment for any assessment year is set aside under Section 30, a fresh order of assessment or re-assessment for that year may be made within six months from the date, on which such earlier order was set aside.
(5-A) If an ex parte order of assessment or re-assessment or penalty passed against a sick unit is set aside by the State Government by an order under sub-section (2) of Section 38, a fresh order of assessment or re-assessment or penalty, as the case may be, for that year may be made within one year from the date of receipt of such order of the State Government by the Assessing Authority concerned.
(6) Where the proceedings for assessment or re-assessment for any assessment, year remain stayed under the orders of any Court or authority, the period commencing on the date of stay order and ending with the date of receipt by the assessing authority concerned of the order vacating the stay, shall be excluded in computing the period of limitation provided in this section:
Provided that if in so computing, the period of limitation comes to less than six months, such assessment or re-assessment may be made within six months from the date of receipt by the assessing authority of the order vacating the stay.
(6-A) The period during which any appeal or other proceeding in respect of any other assessment or re-assessment or any other matter of the assessee remained pending before the High Court or the Supreme Court, involving a question of law, having a direct bearing on the assessment or re-assessment in question, shall be excluded in computing the period of limitation provided in this section.
(7) Where in the assessment or re-assessment of a dealer for any assessment year, any Assessing Authority--
(a) has included any turnover and any superior authority or Court has, in exercise of the powers lawfully vested in it, held such turnover to relate to the assessment--
(i) of such dealer for any other assessment year, or
(ii) of such dealer under the Central Sales Tax Act, 1956, or
(iii) of any other dealer, whether under this Act, or under the Central Sales Tax Act, 1956;
(b) has not included any turnover on the ground that it relates to assessment under the Central Sales Tax Act, 1956 and any superior authority or Court has, in exercise of the powers lawfully vested in it, held such turnover to relate to the assessment of that dealer under this Act, whether for such assessment year or any other assessment year, then nothing contained in this section limiting the time shall apply to assessment or re-assessment whether under this Act or under the Central Sales Tax Act, 1956 of such dealer or such other dealer, relating to such assessment year, or such other assessment year, as the case may be.
The petitioner has been manufacturing oxygen (IP) and industrial oxygen. In the assessment order the sale of oxygen (IP) i.e. medicinal oxygen as well as industrial oxygen have been separately noted and the rate of tax has been imposed at the rate of 8% and 12% respectively. The petitioner has also filed copy of the licence for sale and distribution of drugs in Form-25. In the licence the name of drugs as mentioned in paragraph 1(b) is to the following effect:-
"1(b) Names of drugs (each item to separately specified) OXYGEN I.P."
There is no dispute between the parties that petitioner has been selling oxygen (IP) as well as industrial oxygen which have been noted in the assessment order. The question is that whether oxygen (IP) i.e. medicinal oxygen is also to be taxed at the rate prescribed under Entry 47 i.e. 'oxygen and other gases'. The oxygen (IP) is an oxygen for which licence is required for manufacture of drug under the Drugs and Cosmetic Rules, 1946. The oxygen (IP) which is also referred as medicinal oxygen is used in the hospitals and nursing homes as a medicine for curing the ailment of human beings. It is used medicinally in the cases of pneumonia and gas poisoning and mixed with nitrous oxide, ether vapour or other anaesthetic. The licence of manufacturing of oxygen (IP) under the Drugs and Cosmetic Act and the Rules framed thereunder clearly indicates that oxygen (IP) is a drug. Entry 26 of the notification dated 15.1.2000 uses the words "medicines and pharmaceutical preparation". Looking to the use of oxygen (IP) and its properties, it cannot be denied that it is a medicine and a pharmaceutical preparation since the use of abbreviation 'IP' against the word 'oxygen' means that it is included in the Indian Pharmacopoeia.
The submission, which has been pressed by Sri C.B. Tripathi is that in Entry 47 of the notification dated 29.1.2001 oxygen (IP) is also to be covered under the 'oxygen and other gases'. It is relevant to note that Entry 47 also begins with the words 'oxygen and other gases' but it excludes 'fuel gas, natural gas and such other gases as are included in any other notification issued under the Uttar Pradesh Trade Tax Act, 1948'. Thus 'oxygen and other gases' are covered by Entry 47 if they are not included in any other notification issued under the 1948 Act. The oxygen, when used as a medicine, a pharmaceutical preparation, being covered by Entry 26 of the notification dated 15.1.2000 is outside the general entry of oxygen and other gases in Entry 47.
Learned counsel for the petitioner in support of his submissions, has placed reliance on several judgments of this Court and other High Courts where the issue of taxability on the medical oxygen was under consideration. The first judgment which has been relied by the learned counsel for the petitioner is in the case of Industrial gases Ltd. vs. Commissioner Sales Tax, Lucknow reported in [1968] 21 STC 124 (ALL), which is a Division Bench judgment of this Court. At the relevant time notification was issued under Section 3-A of the U.P. Sales Tax Act, 1948 where one of the Entries was 'chemical of all kind'. The issue in the aforesaid case was 'whether oxygen so prepared is a chemical liable to be taxed under Section 3A at the rate of 0-1-0 anna per rupee or it is a medicine requiring tax at a reduced rate?'. The Division Bench of this Court in the said case laid down following:-
"A chemical, however, can also be a medicine and, therefore, merely arriving at the conclusion that oxygen is a chemical will not answer the question as framed. The second limb of the question is whether oxygen manufactured by the assessee is a chemical or a medicine. The learned Judge (Revisions) has in framing the question considered that medicines would fall to be assessed under Section 3, that is, under the general classification. There is, however, a Notification No. ST-3504/X, dated 10th May, 1956, which again is one issued under the powers conferred by Section 3-A of the U.P. Sales Tax Act, 1948, and which provides for a reduced rate of tax at the rate of three pies per rupee in respect of medicines or medicinal preparations. A chemical when sold as a medicine and used for medicinal purposes will qualify for the lower rate of taxation. Therefore, in a case such as this where part of the oxygen was sold for industrial purposes and the other for medicinal purposes it was necessary to apportion the turnover and assess it accordingly.
For the reasons given above the question is answered by saying that oxygen is a chemical and it will be taxed at 0-1-0 anna per rupee when sold for industrial purposes and at three pies per rupee when sold for medicinal purposes. Reference is answered accordingly; but in the circumstances of the case the parties are left to bear their own costs."
The next judgment relied by learned counsel for the petitioner is in the case of Indian Oxygen Ltd. vs. State of Karnataka reported in [1990] 79 STC 351 (Karnataka). The issue which had arisen for consideration in the said case was noted in first paragraph of the judgment which is to the following effect:-
"1. The petitioner in all the revision petitioner was assessed under section 5(1) of the Karnataka Sales Tax Act, 1957 ("the Act"), regarding the sale of articles called "medicinal oxygen" and "nitrous oxide" used for the purpose of anaesthesia, by the Assistant Commissioner of Commercial Taxes, for the years 1973-74 to 1976-77. The Deputy Commissioner of Commercial Taxes, however, invoked his power under section 21 of the Act and held that the classification was wrong and treated the oxygen as falling within entry 121 of the Second Schedule to the treated the Act. This order of the Deputy Commissioner was affirmed by the Karnataka Appellate Tribunal. Hence these revision petitions.
The short question for consideration is, whether the oxygen called "medicinal oxygen" falls within entry 121 of the Second Schedule ? The said entry reads as follows :
"Industrial gas, such as oxygen, Thirteen per cent".
acetylene, nitrogen and the like."
The question in the said case was as to whether medicinal oxygen is to be covered by industrial gas etc. The Tribunal in the said case has held that since Act no where refers to 'medicinal oxygen', it would be covered by the general word 'oxygen' in entry 121. The Karnataka High Court disapproved the aforesaid view and laid down following in the said judgment:-
"The Tribunal is not right in holding that, because, the Act nowhere refers to "medicinal oxygen", it would be covered by the general word "oxygen" in entry 121. This is an assumption unwarranted. In a taxing statute, charge can be attracted only be the language used; there is no scope for the supposed intention of the Legislature. In case of any doubt as to the meaning of words, the benefit of construction should go to the assessee. The burden (as observed by the Supreme Court in G. S. Pai's case ) is on the Revenue to bring in a particular commodity within the particular taxing provision. The Tribunal relied upon a decision of the Punjab and Haryana High Court in Porritts & Spencer (Asia) Ltd. v. State of Harayana [1977] 40 STC 333 wherein it was held that cotton wollen dryer felts used in paper mills for paper manufacture would not fall within the expression "textiles".In fact this decision was reversed by the Supreme Court, . Similarly, the decision reported in [1972] 29 STC 148 (H.T. Chemical Laboratories v. State of U.P.) of the Allahabad High Court, holding that, "distilled water" is "water", has no relevance. The question before the Allahabad High Court was whether, "distilled water" was to be treated as "pharmaceutical preparation" : "distilled water" has many uses and its user is not predominantly as a pharmaceutical preparation; the High Court held it is as not falling within the meaning of "pharmaceutical preparation"."
......
The learned counsel for the Revenue contended that "medicinal oxygen" also can be used as "industrial oxygen" since "medicinal oxygen" is only a purified form of "industrial oxygen". That may be so, But the question is, normally, would anyone use the purified oxygen, known in trade circles, as "medicinal oxygen" as an "industrial gas" ? The dominant purpose for which the "medicinal oxygen" is used and the normal human behaviour in the matter of using an "industrial gas" detract anyone from using "medicinal oxygen" as an "industrial gas". Abnormality and exceptional circumstances are entirely irrelevant to consider the question. There is always a difference, in practical life, between the actuality a mere possibility.
.....
Reference was made to "Pharmacopoeia of India" and the specification for compressed oxygen gas, issued by the Indian Standard Institute, to explain the distinctive features of "medicinal oxygen". There can be no doubt its distinctive quality in contradistinction to the "industrial oxygen".
The next judgment relied by learned counsel for the petitioner is in the case of Southern Gas Ltd. vs. State of Kerala reported in [2005] 139 STC 504 (Kerala) which considered similar controversy. The question in the said case was, whether medical oxygen and nitrous oxide can be treated as medicines for the purpose of levy of tax under the Kerala General Sales Tax Act, 1963. The facts of the said case and the relevant entries have been noted in paragraphs 1 and 2 which are quoted below:-
"1. Whether medical oxygen and nitrous oxide can be treated as medicines for the purpose of levy of tax under the Kerala General Sales Tax Act, 1963 (for short, "the Act") is the question involved in this case.
2. The assessee is the revision-petitioner. State is the respondent. The assessment year is 1987-88. The assessee is engaged in the manufacture and sale of medical oxygen and nitrous oxide. In the assessment for the year 1987-88 the assessee contended that the said two items are liable to be assessed at the rate of 5 per cent under the Notification G.O. (Rt.) No. 242/84/TD. The assessment was originally completed by assessing "medical oxygen" at 5 per cent under the above notification and "nitrous oxide" at 6 per cent under entry No. 85 of the First Schedule to the Act as it stood at the relevant time. However, the said assessment was reopened under Section 19 of the Act on the ground that "medical oxygen" and "nitrous oxide" are liable to be assessed at higher rates. In spite of the objections taken by the assessee, the assessing authority passed a revised assessment order dated July 22, 1992 (annexure A) under which "medical oxygen" was assessed at the rate applicable to "gases liquefied or not" at 8 per cent under entry No. 85 of the First Schedule to the Act which came into force with effect form July 1, 1987. The assessing authority took the view that the Notification G.O. (Rt.) No. 242/84/TD dated April 2, 1984 did not survive after the introduction of entry No. 85 of the First Schedule to the Act. The assessing authority also took the view that the subsequent Notification S.R.O. No. 976/89 had effect only from June 13, 1989 and therefore for the period from July 1, 1987 to June 13, 1989 "medical oxygen" has to be classified only as a "gas" as specified in entry No. 85 of the First Schedule to the Act. The contention of the assessee that "nitrous oxide" is a "medicine" was also rejected by the assessing authority by stating that it is sold by the assessee in gaseous form and this also is liable to be assessed at the rate applicable under entry No. 85 of the First Schedule to the Act."
Two questions, which were framed, were reproduced in paragraph 4 of the said judgment which are to the following effect:-
"4. In this revision, the assessee had raised the following two questions of law.
"(i) Whether, on the facts and circumstances of the case, was the Tribunal justified in holding that medical oxygen and nitrous oxide would fall under entry No. 85 and not under entry 116 (Medicines) of the First Schedule to the KGST Act ?
(ii) Should not the Tribunal have held that medical oxygen and nitrous oxide being used in treatment are taxable under the specific entry providing for "medicines" under entry No. 116 of the First Schedule to the KGST Act ?"
The Kerala High Court in the said case laid down following in paragraphs 14, 15, 16, 17, 18, 19 and 20 of the judgment:-
"14. The goods must be classified according to their popular meaning or as they are understood in their commercial sense and not as per the scientific or technical meaning. How the product is identified by the class or sections of people dealing with or using the product is also a test when the statute itself does not contain any definition and commercial parlance would assume importance when the goods are marketable. These principles are well-settled by the decisions of the Supreme Court in Dunlop India Ltd. v. Union of India AIR 1977 SC 597, Indo International Industries v. Commissioner of Sales Tax [1981] 47 STC 359, P.A. Thillai Chidambara Nadar v. Additional Appellate Assistant Commissioner [1985] 60 STC 80 and Chiranjit Lal Anand v. State of Assam [1985] 60 STC 89. The dictionary meaning of a word can be looked into where the word has not been statutorily defined or judicially interpreted to ascertain the meaning of a word in common parlance bearing in mind that a word is used in different senses according to its context and the court has to select the particular meaning which is relevant to the context in which it has to interpret the word. State of Orissa v. Titaghur Paper Mills Co. Ltd. AIR 1985 SC 1293.
15. There is no definition of the word "medicine" in the Act nor any judicial interpretation given to the said word was brought to our notice. Black's Law Dictionary defines the word "medicine" thus:
"Medicine.--The science and art dealing with the prevention, cure and alleviation of diseases ; in a narrower sense that part of the science and art of restoring and preserving health which is the province of the physician as distinguished from the surgeon and obstetrician. Bruke v. Kansas State Osteopathic Ass'n., C.C.A. Kan, 111 F.2d 250, 253. The term is not limited to substances supposed to possess curative or remedial properties. People v. Kabana 32 III APP. 158, 52 N.E. 2d 320."
Mitra's Legal and Commercial Dictionary by A.N. Saha gives the meaning of the word "medicine" thus :
"Medicine" or "drug" includes-
(i) all medicines for internal or external use of human beings or animals,
(ii) all substances, intended to be used for or in the diagnosis, treatment, mitigation or prevention of diseases in human beings or animals,
(iii) all substances intended to be used for or in the maintenance of public health, or the prevention or control of any epidemic disease among human beings or animals,
(iv) insecticides, germicides, fungicides, weedicides and all other substances intended to be used for the protection or preservation of plants.
(v) all chemical substances which are ordinarily used as intermediates in the preparation or manufacture of any of the medicines or substances above referred to. Patents Act, 1970, Section 2(1)."
A Dictionary of Modern Legal Usage by Bryan A. Garner defines the word "Medicine" as follows :
" 'Medicine', 'medication' 'medicament'-Medication has traditionally meant 'the action of treating medically', but, through sliphod extension, has recently come to mean 'a medical substance, medicament' a sense that careful writers avoid. Medicament (= a substance taken internally or used externally in curative treatment) are synonymous with the loose meaning of medication."
The Concise Oxford Dictionary of Current English, Fifth Edition defines the word "Medicine" as follows:
"Art of restoring and preserving health, especially by means of remedial substances and regulation of diet, etc............... one taken internally..........."
Collins Cobuild English Dictionary for Advanced Learners, Major New Edition, defines the word "Medicine" thus :
"Medicine is the treatment of illness and injuries by doctors and nurses; is a substances that you drink or swallow in order to cure an illness."
16. The common user of the gases in question is also relevant in applying the common parlance theory. In the instant case, as already noted, the assessee, who is the manufacturer of "medical oxygen" and "nitrous oxide", has clearly stated that these two items are manufactured only for the use in hospitals and that the dominant user of these two items are only as medicines. There is also a well-known test to be applied in interpreting the entry, which is the functional test. There is no dispute that "medical oxygen" is used for administering it on patients. Similarly, the function of "nitrous oxide" is to act as an anesthetic agent. Thus, going by the user test and the functional test, it is evident that "medical oxygen" and "nitrous oxide" are served as medicines.
17. Admittedly, "medical oxygen" and "nitrous oxide" are gases which will fall under the broad categories mentioned in entry No. 85 of the First Schedule to the Act. Here it must be noted that entry No. 85 itself says "other than those specified elsewhere in the Schedule" which would mean that if any item of gas specifically falls under any other items in the First Schedule to the Act then such gas would not fall within entry No. 85 of the First Schedule to the Act. "Medical oxygon" and "nitrous oxide" are not specifically mentioned in any other entries in the First Schedule to the Act. The contention of the Government Pleader is that the expressions "not elsewhere" provided is with reference to the petroleum products particularly entry No. 140, sub-entry (xxii) and otherwise. However, we have taken the view that those two items would fall under entry No. 116 of the First Schedule to the Act-"medicine".
18. In a case where an item falls under two entries in the Schedule in order to decide the taxable entry the question is as to which of the two is the special entry, for the special entry will exclude the general entry. [Importex International (P) Ltd. v. State of Kerala [1991] 81 STC 351 (Ker) and Deputy Commissioner of Sales Tax v. Food Specialities Ltd. [1991] 82 STC 298 (Ker)]. The Kamataka High Court in Indian Oxygen Ltd.'s case [1990] 79 STC 351, took the view that "medical oxygen" is distinct from "industrial oxygen". Entry No. 85 deals with all kinds of gases. If as a matter of fact a particular category of gas, in the instant case, "medical oxygen", has got the exclusive user as a medicine and if there is an entry relating to medicine, the item so carved out from the general entry relating to "gases" will have to be brought under the entry medicine and it has to be assessed under that entry. Here, as we have already noted, entry No. 85 deals with all kinds of gases, "medical oxygen" is one of the items of gases dealt with in entry No. 85. However, "medical oxygen" being medicine, certainly, it has to be assessed as a special item falling under the entry relating to medicine. Thus "medical oxygen" and "nitrous oxide" are to be treated as a special category falling under entry medicine in entry No. 116 of the First Schedule to the Act. In this view of the matter, the above two items are to be assessed only at the rate applicable to medicines.
19. Since "medical oxygen" and "nitrous oxide" fall under entry No. 116 relating to medicine it is specifically excluded from entry No. 85 of the First Schedule to the Act. Though the assessee had raised a contention that even after the substitution of entry No. 85 with effect from July 1, 1987, the notification of 1984 has application, it cannot be accepted in view of the fact that the notification of 1984 was issued in the context of entry No. 85 of the First Schedule to the Act as it stood at that time and the rate of tax was at 7 per cent and the notification reduced the tax from 7 per cent to 5 per cent. Since under the new entry the rate of tax was 8 per cent, necessarily, the earlier notification has no application. Probably, it is in this view, the Government thought of giving relief by issuing Notification S.R.O. No. 976/89 granting reduction in the rate of tax in respect of medical oxygen from 8 per cent to 6 per cent. These notifications at the most can only show that the Government entertained the view that "medical oxygen" will fall under entry No. 85 of the First Schedule to the Act. Since this view is against the assessee it cannot bind the assessee if in law "medical oxygen" in fact falls under entry No. 116 relating to medicine. Hence we are unable to agree with the view taken by the Tribunal.
20. In the view which we have already taken in the matter, we hold that "medical oxygen" and "nitrous oxide" have to be assessed under entry No. 116 of the First Schedule to the Act as it stood at the. relevant time. The assessing authority will modify the assessment by applying the rate applicable under entry No. 116 of the First Schedule to the Act in respect of "medical oxygen" and "nitrous oxide"."
The Kerala High Court in the said case held that medical oxygen being medicine has to be assessed as special item falling under the entry relating to medicine i.e. Entry 116 and the same cannot be covered in the entry of gases. The above judgment supports the contention of the petitioner's counsel.
Another judgment which needs to be noted is the judgment of the Rajasthan High Court in S.B. Sales Tax Revision Petition No.9 of 2009 (A.C.T.O., Special Circle-I, Jodhpur vs. M/s Jodhpur Gases) decided on 13.5.1999 in which the Division Bench judgment of this Court in Industrial Gas Limited's case (supra) has been relied. In the said case the Rajasthan High Court had occasion to consider taxability on medicated oxygen. Following was laid down by the Rajasthan High Court in the said judgment:-
"According to facts of the case, the respondent is producing medicated oxygen gas under licence issued as per the Medicated Oxygen & Drugs Rules, 1945. Use of medicated oxygen is only for the human patients and there is no other commercial use, therefore, the respondent challenges the additional demand created by the petitioner department which is set aside by the Deputy Commissioner (Appeals), Commercial Taxes, Jodhpur in the appeal filed under Section 84 of the Act of 1994. The said order was, however, further challenged by the department by way of filing appeal before the Tax Board. The Tax Board, Ajmer, while following the judgment of the Allahabad High Court, reported in 21 STC p.124, held that medicated oxygen is only used for treatment in hospitals for human patients, therefore, it is medicine, for which, 8 per cent tax is rightly levied earlier and the subsequent additional demand raised by the department is illegal.
Learned counsel for the petitioner vehemently argued that in view of the express entry in the Notification dated 22.03.2002, at Entry No.176, tax at the rate of 12 per cent was to be levied because on the use of the product in question it is a gas which cannot be termed as medicine or drug. Further, it is argued that when specific entry regarding tax rate has been prescribed, then, it has to be accepted in its totality.
I have perused the pleadings as well as impugned judgment passed by the Deputy Commissioner (Appeals) and, so also, judgment passed by the learned Tax Board. I have also gone through the judgment reported in 21 STC 124 (All) and 53 STC 419.
In my opinion, admittedly medicated oxygen is produced under the Medicated Oxygen & Drugs Rules, 1945 and use of medicated oxygen is for saving life of serious human patients in the hospitals and there is no other use of the medicated oxygen. In fact, for such medicated oxygen, under Article 21 of the Constitution of India, it is duty of the welfare State either to exempt the tax completely or charge negligible tax because medicated oxygen gas is to be used for those human patients who are in critical condition and the gas is required to save their life.
In this view of the matter, I am in full agreement with the view taken by the Allahabad High Court that if one commodity is used for different purposes, then, tax can be levied at different rates. But, here in this case, admittedly medicated oxygen is to be used for saving life of human patients and no other purpose or use is there with regard to medicated oxygen. Of course, where the industrial use of the oxygen gas is in question, then, liability of tax need be satisfied under Entry No.176 of the notification dated 22.03.2002. In respect of medicated oxygen, in my opinion, the Deputy Commissioner (Appeals), so also, learned Tax Board have rightly arrived at the finding that tax levied at 8% while treating the medicated oxygen as medicine/drug does not require any interference. Moreover, the said finding is based upon sound reasoning that the commodity is to be used for saving human life and it has neither any industrial or commercial use. In this case, therefore, it need be observed that at the time of deciding matter which is related to saving lives of human patients, the welfare State is further under obligation to take into consideration that unnecessary burden of tax may not be imposed upon the citizens."
Against the above judgment of the Rajasthan High Court dated 15th May, 2009, Special Leave to Appeal (Civil) No.19067 of 2009 was filed which was dismissed by the Apex Court on 21st August, 2009.
One more judgment relevant to be noted is the judgment of the Madras High Court in the case of State of Tamil Nadu vs. Ram Oxygen (Pvt) Ltd and another reported in [2010]35 VST 478. The issue involved in the said case was, whether medical oxygen falls within entry 95 for of Schedule 1, Part 1 or within the entry of other gases. It was contended before the Madras High Court that medicinal oxygen is nothing but gas and therefore it will fall within the definition of gas. The said contention was rejected and following was held by the Madras High Court in the said case:-
"Assailing the order of the Tribunal, learned Special Government Pleader would contend that the "medicinal oxygen" is nothing but 'gas' and therefore, it would fall within the definition of 'gas' as notified in Entry 106 of Schedule-I and Entry 25 of the same Schedule in the years 1991 to 1993 respectively. Learned Special Government Pleader sought to distinguish the direct decision of the Kerala High Court in SOUTHERN GAS LTD. v. STATE OF KERALA (2005 - 139 STC 504) finding that Entry 106 is only the exclusion to the specific item 139 which refers fuel gas including Liquefied Petroleum Gas all other gas items including oxygen fall within the expression "gas".
Learned counsel for the respondent would however, contend that the issue having been covered by the ratio of the decision in State of Goa v. Leukoplast (India) Ltd. [1997]105 STC, 318 (SC), and the Tribunal having applied the tests laid down in the said decision, there was no scope for taking a different view than what was held by the Tribunal. Learned counsel also placed reliance upon the decision of the Kerala High Court in 139 STC 504, supra. Learned counsel also pointed out that before the lower authorities, the respondent produced the licence issued to the respondent for manufacture of "medical oxygen" which licence was issued by the Director of Drugs Control Board, under the provisions of Drugs and Cosmetics Act 1940 and the Rules framed thereunder and therefore, it was no longer open to the petitioner to contend that the "medical oxygen" falls under the general category of 'gas' and not a specific item of medical product.
Having heard learned counsel for the respective parties and having perused the material papers and the reasons contained in the relevant entries in the Schedule as well as the definition of "drug" under the Drugs and Cosmetics Act as well as the relevant Rules framed under the said Act, we are convinced that the conclusion of the Tribunal cannot be interfered with. The definition of 'drug' under the Drugs and Cosmetics Act in the year 1991 and the Entry 95 of Schedule-I, Part-I, is concerned, it specifically states that in order to ascertain the drug one should be guided by the definition of 'drug' as it is defined in the Drugs and Cosmetics Act, 1940. The definition in the said Section reads as under:
......
Subsequently, when Entry 20-A came to be inserted in the Schedule-I, Part-C in the year 1993, the reading of the said entry shows that in effect, the definition of "drug" has been more or less bodily lifted into the said entry. It is also not in dispute that the "medical oxygen" has got 99.9% purity of purified oxygen and that its use is only for treatment of patients and to mitigate contrary intensity of any disease or disorders in human being. It is common knowledge at times of emergency, the application of "medical oxygen" to a patient is resorted to in order to prevent any sudden collapse of a patient, which process is nothing but part of a treatment meted out to a patient to recoup the deterioration of health condition. Therefore, keeping the above basic features in mind, the tests laid down by the Honourable Supreme Court in the decision in State of Goa v. Leukoplast (India) Ltd.105 STC ,318, have to be applied. The tests laid down are as under:
(i) What is the medicinal contents of the product has to be ascertained;
(ii) Further its curative function has to be found out to decide whether the product can be called a medicament at all.
(iii) Finally, it should be verified as to whether it is used to cure or alleviate or to prevent disease or to restore health or to preserve health hazard.
Having regard to the use of "medical oxygen" to a patient, as rightly concluded by the Additional Appellate Assistant Commissioner, the "medical oxygen" would positively satisfy the above three tests laid down by the Honourable Supreme Court. Therefore, when once the said findings of the Appellate Assistant Commissioner, as regards the nature of product viz., "medical oxygen" has been noted, it would travesty of justice to still hold that would be falling under the category of 'gas' and not under the category of Entry 95, 20-A of Schedule-I in the year 1991 to 1993. Therefore, the ultimate conclusion of the Tribunal in the orders impugned in setting aside the order of the Appellate Assistant Commissioner, cannot be found fault with. We are not therefore, inclined to interfere with the said order. Moreover, the said issue is directly covered by the decision of Kerala High Court in Southern Gas Ltd. vs. State of Kerala [2005]139 STC., 504 as the provisions are pari materia. In the said circumstances, applying the said decision also we have no hesitation to hold that the "medical oxygen" would fall only under Entry 95 as of the year 1991 and under Entry 20-A as of the year 1993 and will not fall under Entry 106 as of the year 1991 and Entry 25 as of the year 1993 as contended by the petitioner. We therefore, do not find merit in these Tax case revisions as well as the writ petitions and the same fail and are dismissed. No costs."
Sri C.B. Tripathi, learned counsel appearing for the State-respondents, relying on the judgment of the Apex Court in the case of Dunlop India Ltd. and Madras Rubber Factory Ltd. vs. Union of India and others reported in (1976)2 SCC 241, has submitted that for interpreting the meaning of a word in taxing statute, the acceptation of a particular word by trade and its popular meaning should be accepted. It is useful to quote paragraphs 36, 37 and 38 of the said judgment which are to the following effect:-
"36. We are however, unable to accept the submission. It is clear that meanings given to articles in a fiscal statute must be as people in trade and commerce, conversant with the subject, generally treat and understand them in the usual course. But once an article is classified and put under a distinct entry, the basis of the classification is not open to question. Technical and scientific tests offer guidance only within limits. Once the articles are in circulation and come to be described and known in common parlance, we then see no difficulty for statutory classification under a particular entry.
37. It is good fiscal policy not to put people in doubt and quandary about their liability to duty, when a particular product like V.P. Latex known to trade and commerce in this country and abroad is imported, it would have been better if the article is eonomine, put under a proper classification to avoid controversy over the residuary clause. As a matter of fact in the Red Book (Import Trade Control Policy of the Ministry of Commerce) under Item 150, in Section II, which relates to 'rubber, raw and gutta percha, raw', synthetic latex including vinyl pyridine latex and copolymer of styrene butadiene latex are specifically included under the sub-head 'Synthetic Rubber'. We do not see any reason why the same policy could not have been followed in the I.C.T. book being complementary to each other. When an article has, by all standards, a reasonable claim to be classified under an enumerated item in the Tariff Schedule, it will be against the very principle of classification to deny it the parentage and consign it to an orphanage of the residuary clause. The question of competition between two rival classifications will, however, stand on a different footing.
38. It is not for the Court to determine for itself under article 136 of the Constitution under which item a particular article falls. It is best left to the authorities entrusted with the subject. But where the very basis of the reason for including the article under a residuary head in order to charge higher duty is foreign to a proper determination of this kind, this Court will be loath to say that it will not interfere."
There cannot be any dispute to the proposition as laid down by the Apex Court in the said judgment. The Apex Court itself in the said judgment held that when a article has, by all standards, a reasonable claim to be classified under an enumerated item in the Tarrif Schedule, it will be against the very principle of classification to deny it the parentage and consign it to an orphanage of the residuary clause. The present is a case where oxygen (IP) falls in the clause containing the medicine and pharmaceutical and is thus covered by specific Entry.
Reliance has also been placed by Sri C.B. Tripathi on the Full Bench judgment of this Court in the case of British India Corporation Ltd., Kanpur vs. Commissioner of Sales Tax, U.P. reported in 1987 UPTC 394, where the Full Bench has again held that words and terms not defined in statute, they have to be understood in their common parlance or as understood by traders in those articles. Again there cannot be any dispute to the proposition laid down in the said case.
Another judgment relied by Sri C.B. Tripathi is in the case of State of Maharashtra vs. Bradma of India Ltd reported in 2005(2) SCC 669. In the said judgment following was laid down in paragraph 7:-
"7. We are of the opinion that the High Court was wrong. Both the Tribunal and the High Court commonly enunciated the principle that a specific entry would override a general entry. In addition we would add, and as has been held in CCE Vs. Wood Craft Products Limited 1995 (3) SCC 454, 462, resort has to be had to the residuary heading only when a liberal construction by the specific heading cannot cover the goods in question. The language of Entry 97 (b) clearly shows, by use of the phrase "other than those specified elsewhere" that it is not only a residuary entry but also that electronic systems, instruments etc. may be classified under other entries. Entry 90 on the other hand does not contain any words of limitation. The items mentioned therein would cover every species thereof irrespective of the mode of their operation. Cash registering machines are specifically mentioned. In the absence of any limitation or qualification as to the different kinds of cash registering machines, there is no reason to read in any such qualification and limit the entry to particular kinds of cash registering machines. It is significant that by contrast, data processing machines have expressly excluded computers. Were it not so excluded, computers would have also fallen within Entry 90. In fact computers are separately dealt with Entry 97(a). But the exclusion of computers from data processing machines would indicate that the items mentioned in Entry 90 are generic covering all species of such items. Given the language of the two entries we fail to understand how the High Court could have come to the conclusion that Entry 97(b) was the specific entry and that Entry 90 was the general entry. Such an interpretation goes against the express language of the two entries."
The Apex Court in the said case has laid down that resort has to be had to the residuary heading only when a liberal construction by the specific heading cannot cover the goods in question.
Learned counsel for both the parties have placed reliance on the judgment of the Apex Court in the case of Mauri Yeast India Pvt. Ltd. vs. State of U.P. and another reported in (2008)5 SCC 680. In the said case the question was as to whether the Entry "Chemicals of all kinds" covers the "yeast". The principles of interpreting an Entry were considered in the said case. Following was laid down in paragraphs 34, 41, 45, 46 and 56 of the said judgment which are as under:-
"34. The Executive Act of issuing a notification is a legislative action. The authorities are supposed to know the meaning of the word used therein.
'Yeast', admittedly, has a chemical composition. It has a chemical formula. It was accepted to be a chemical by the assessing authority for a long time. It not only takes within its sweep as to what it would be, but what it can be or what it does.
41. There cannot be any quarrel with the proposition that construction of the word is to be adopted to the fitness of the matter of the statute. But for determining the said question, several factors which would be relevant are required to be gone into. The trade or commercial meaning or the end user context would, thus, be a relevant factor.
45. Submission of Mr. Venugopal that having regard to the provisions contained in Section 101 of the Indian Evidence Act, onus would be on the assessee, cannot be accepted for more than one reason. Firstly, because the provisions of the Evidence Act have no application. Secondly, because the classification adverted to by the assessee had been accepted by the revenue for more than 20 years. A different construction to an entry cannot be resorted to only because the rate of tax has been lowered. As the said classification had been accepted by the revenue for a long time, the onus would be on it to show as to why a different interpretation thereof should be resorted to particularly when no change in the statutory provision has taken place.
46. Reliance has been placed by the learned counsel on Krishna Steel Industries vs. vs Collector of Central Excise, Patna : (2004) 11 SCC 239 wherein having regard to the interpretation of Chapter Note 6, the classification had been made either under Chapter 84 or under Chapter 73 and the subject matter thereof having held to be not classifiable under Chapter 84, was held to be classifiable only under Chapter 73 stating :
"5. The authorities below, have on the basis of Note 6 held that these balls are classifiable under Tariff Item 73.08. We are in complete agreement with the view taken by the Collector and the Tribunal. Even though earlier these balls could have been classified under the then Tariff Item 26-AA, with the incorporation of Chapter Note 6, the item now has to be classified either under Chapter 84 or under Chapter 73. These balls cannot be classified under Chapter 84 and thus necessarily have to be classified under Chapter 73.
6. We are unable to accept the submission that it still continues to be a forged item and therefore must fall under Tariff Item 72.08 (which according to counsel for the appellant, is equivalent to old Tariff Item 26-AA). Such an argument, in our view, merely needs to be stated to be rejected. An item has to be classified in accordance with chapter notes. The only reason these balls were earlier classified under old Tariff Item 26-AA was because there was no such chapter note. Once Chapter Note 6 was introduced, the classification must be in accordance therewith."
It was in the aforementioned situation that the circular issued by the Board prior to introduction of Chapter VI was held to be not applicable stating:-
7. It must also be mentioned that an attempt was made to rely on a Board circular. We, however, find that the circular was not relied upon before the Collector nor before the Tribunal. Material not presented before the lower authorities and/or the Tribunal cannot be allowed to be relied upon for the first time in this Court. Even presuming that the circular could be shown to this Court, we find that the circular merely deals with forged items. The circular does not deal with such types of balls. Thus, the circular does not mention Chapter Note 6. The circular therefore has no application."
50. In our opinion 'yeast' is a chemical within the meaning of the entry in question."
The proposition laid down in the aforesaid case does not in any manner runs counter to the submissions raised by the learned counsel for the petitioner.
It is relevant to note that the Apex Court in Mauri Yeast India Pvt. Ltd.'s case (supra) as well as in the case of STP Limited vs. Collector of Central Excise, Patna reported in 1998(97) E.L.T. 16, has laid down that if there is any doubt in the construction of any provision of a taxing statute, that doubt must be resolved in favour of the assessee.
Sri C.B. Tripathi has also placed reliance on a judgment of the Apex Court in the case of Commissioner of Central Excise, Nagpur vs. Shree Baidyanath Ayuved Bhawan Ltd. reported in (2009)12 SCC 419. One of the products being manufactured by Baidyanath was D.M.L. (Dant Manjan Lal). An exemption notification dated 1st March, 1978 was issued by the Central Government extending exemption to "... all drugs, medicines, pharmaceuticals and drug intermediates not elsewhere specified". The Baidyanath claimed the benefit extended by Central Government and stop paying duty on the product "DML". Show cause notices were issued by the Central Excise Department. The Baidyanath resisted the notices on the ground that DML is an ayurvedic medicine. The Tribunal held that in common trade parlance, DML is neither treated nor understood as an ayurvedi medcine and hence could not be classified as such. The order of the Tribunal was challenged before the Apex Court. The Apex Court upheld the order of the Tribunal vide its order dated 30th March, 1995. On 25th September, 1991, the Central Board of Excise and Customs issued a circular in respect of DML and advised its classification as an ayurvedic medicine. The said circular was subsequently withdrawn. Again the matter went before the Tribunal which held that product 'DML' was classified under the heading 33.06 of the New Tariff Act. Against the order of Tribunal, the matter went to the Apex Court where the appeal filed by the Baidyanath was dismissed and appeal of the department was allowed. In paragraph 42 of the judgmet, following was laid down by the Apex Court:-
"42. There is no doubt that a specific entry must prevail over a general entry. This is reflected from Rule 3(a) of the general Rules of interpretation that states that heading which provides the most specific description shall be preferred to headings providing a more general description. DML is a tooth powder which has not been held to be Ayurvedic Medicine in common parlance in Baidyanath I1. We have already observed that common parlance test continues to be one of the determinative tests for classification of a product whether medicament or cosmetic. There being no change in the nature, character and uses of DML, it has to be held to be a tooth powder - as held in Baidyanath I1. DML is used routinely for dental hygiene. Since tooth powder is specifically covered by Chapter Sub-heading 3306, it has to be classified thereunder. By virtue of Chapter Note 1(d) of Chapter 30 even if the product DML has some therapeutic or medicinal properties, the product stands excluded from Chapter 30.
The judgment of the Apex Court in Commissioner of Central Excise, Nagpur vs. Shree Baidyanath Ayuved Bhawan Ltd.(supra) does not help the respondents in the present case. In the said case finding of the Tribunal was affirmed that DML is not an ayurvedic medicine and is a tooth powder. The present is a case where oxygen (IP) is a medicine/drug prepared under the licence granted under the provisions of the 1940 Act.
In view of the above, we are of the view that oxygen (IP) is fully covered by Entry 26 of the notification dated 15.1.2000 i.e. "medicines and pharmaceutical preparation" and shall not be covered by Entry 47 of the notification dated 29.1.2001 which relates to '"oxygen and other gases". The oxygen (IP) i.e. medicinal oxygen being a drug fully covered by Entry 26 of the notification dated 15.1.2000 cannot be included in the general entry i.e. Entry 47 of the notification dated 29.1.2001. It is relevant to note that in Entry 47 there is an exclusion clause which excludes "such other gases as are included in any other notification issued under the Uttar Pradesh Trade Tax Act, 1948". It is further relevant to note that both the notifications i.e. notification dated 15.1.2000 and 29.1.2001 have been issued in exercise of the powers under clause (e) of sub-section (1) of Section 3-A of the Uttar Pradesh Trade Tax Act, 1948 and in exercise of power under Clause (b) of sub-section (1) of Section 3-A of the Uttar Pradesh Trade Tax Act, 1948 respectively which are still continuing and continued during the relevant period governing the assessment orders in question.
In view of the foregoing discussions, we hold that tax liability on oxygen (IP) i.e. medicinal oxygen, was only 8% and the assessment orders were correctly passed levying tax liability at the rate of 8% insofar as on oxygen (IP) is concerned and at the rate of 12% insofar as oxygen for industrial use is concerned.
Now the submissions raised by learned counsel for the petitioner against the reassessment orders is to be noted. Learned counsel for the petitioner submits that there was no sufficient ground for initiating the reassessment proceeding under Section 21 of the 1948 Act. Sri C.B. Tripathi, learned Special Counsel appearing for the State-respondents, refuting the submission of learned counsel for the petitioner, submits that there was sufficient material for reassessment proceeding. He submits that on change of opinion also reassessment proceeding can be initiated. Reliance has been placed by Sri Tripathi on two unreported judgment of this Court i.e. in Writ Tax No.1045 of 2009 (M/s. Rubber Chern Sadabad Gate vs. Additional Commissioner Grade-I, Commercial Tax and another) decided on 15th March, 2013 and in Writ Tax No.995 of 2007 (M/s. Shubham Electronics (P) Ltd. vs. State of U.P. And others) decided on 26th November, 2013.
For the purposes of the present case, we need not enter into the issue as to whether the reassessment proceedings initiated against the petitioner were within the ambit of Section 21 of the 1948 Act or not. We proceed with the assumption that respondents could have initiated the reassessment proceedings there being doubt regarding levying of tax on oxygen (IP) i.e. medicinal oxygen but we having already held that tax liability on oxygen (IP)/medicinal oxygen was only 8% which was rightly levied in the assessment order, the order granting permission for reassessment proceedings and the reassessment orders are unsustainable.
We further note that this writ petition was entertained by this Court on 8th August, 2007 when an interim order was passed staying the recovery proceeding in pursuance of the reassessment order dated 13th June, 2007 subject to petitioner furnishing adequate security. The writ petition having been entertained on 8th August, 2007 and more than six and half years having passed, we also do not deem it fit to relegate the petitioner to avail the statutory remedy against the reassessment order dated 13th June, 2007. The issue which has been taken in the order granting permission for reassessment and in the reassessment order is only with regard to levying of the tax on oxygen (IP) i.e. medicinal oxygen at the rate of 12%. The said issue having already decided by us, the order dated 18th May, 2007 (Annexure-17 to the writ petition) and the reassessment orders dated 13.6.2007 (Annexures 18, 19 and 20 to the writ petition) are unsustainable and are liable to be set-aside.
In result, the writ petition is allowed. The the order dated 18th May, 2007 (Annexure-17 to the writ petition) and the reassessment orders dated 13.6.2007 (Annexures 18, 19 and 20 to the writ petition) are set-aside.
The parties shall bear their own costs.
Order Date :- 11.2.2014 Rakesh