Full Judgment Text
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[REPORTABLE]
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.7322 OF 2021
STATE OF GUJARAT .. Appellant
Versus
CADILA HEALTHCARE LTD. ..Respondent
J U D G M E N T
M.R. Shah, J.
1. Feeling aggrieved and dissatisfied with the impugned
judgment and order dated 05.07.2016 passed by the High
Court of Gujarat, at Ahmedabad in STR No.4 of 2005 by
which the High Court has answered the reference in favour
of the respondent – assessee – dealer holding that the
product “KADIPROL” sold by the respondent can be
categorized as “Poultry Feed” falling under Entry 25 of
Signature Not Verified
Digitally signed by R
Natarajan
Date: 2022.07.11
17:11:56 IST
Reason:
Schedule I of the Gujarat Sales Tax Act (hereinafter referred
to as “GST Act”) and not as a “Drug and Medicine” under
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Entry 26(1) of Schedule II Part A of the GST Act, the State of
Gujarat has preferred the present Appeal.
2. At the outset it is required to be noted that the present
proceeding arise out of the Determination Order passed by
the Deputy Commissioner of Sales Tax under Section 62 of
the GST Act by which the Deputy Commissioner held that
the product in question – KADIPROL would be covered as
“Drug and Medicine” under Entry 26(1) of Schedule II Part A
of the GST Act.
2.1 The respondent filed an application before the Deputy
Commissioner of Sales Tax under Section 62 of the GST Act
to determine the rate of tax on “KADIPROL” sold under their
invoice dated 20.03.1989. The respondent also preferred an
application before the Assistant Commissioner, Food and
Drugs Control Administration regarding whether the
respondent is required to obtain a license under the Drugs
and Cosmetics Act, 1940 (hereinafter referred to as “Act,
1940”) for manufacturing the product “KADIPROL”. That, the
Authority under the Act, 1940 informed the respondent that
the license for manufacturing of product “KADIPROL” under
the Act, 1940 was not required. However, the Deputy
Commissioner of Sales Tax, by his order dated 16.04.1990
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held that the product in question contains some preventive
medicine and therefore, categorized as “Drug and Medicine”
as per Entry 26(1) of Schedule II Part A of the GST Act. The
Tribunal upheld the order of the Deputy Commissioner. The
respondent preferred a Reference Application under Section
69 of the GST Act before the Tribunal for referring the matter
for decision of the High Court. The reference was made to
the High Court which was numbered as Sales Tax Reference
No.4 of 2005.
2.2 By impugned judgment and order, the High Court has
answered the reference in favour of the respondent –
assessee and has held that the product “KADIPROL” would
be covered as “Poultry Feed” under Entry 25 of Schedule I of
the GST Act.
2.3 Feeling aggrieved and dissatisfied with the impugned
judgment and order passed by the High Court holding that
the product “KADIPROL” manufactured by the respondent
would be covered by Entry 25 of Schedule I of the GST Act
as “Poultry Feed”, the State of Gujarat has preferred the
present Appeal.
3. Ms. Aastha Mehta, learned Counsel has appeared on behalf
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of the appellant – State of Gujarat and Ms. Kavita Jha,
learned Counsel has appeared on behalf of the respondent –
assessee.
4. Ms. Aastha Mehta, learned Counsel appearing on behalf of
the appellant – State of Gujarat has submitted that in the
facts and circumstances of the case, the High Court has
committed grave error in overturning the findings given by
the Tribunal and the Deputy Sales Tax Commissioner
holding that the product “KADIPROL” can be categorized as
“Drug and Medicine”.
4.1 It is submitted that the High Court has not given any reason
whatsoever to overturn the findings given by the Tribunal as
well as the Deputy Sales Tax Commissioner. It is submitted
that both the authorities below in fact considered the expert
literature on the subject which ought not to have been
brushed aside by the High Court without giving any
independent reasoning.
4.2 It is submitted that the composition of “KADIPROL” for every
100 gm was (a) Emporium (Amprolium) Hydrochloride – 25
gm and (b) Vitamin K3 – 250 gm.
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4.3 It is submitted that the same product was used to provide
protection against coccidiosis due to anticoccodial property
of emporium. It is submitted that the presence of Vitamin K
in “KADIPROL” prevents loss of blood by ensuring adequate
availability of prothrombin and thus supplements the anti
coccidial action for emporium. It is submitted that product
also eliminates subclinical coccidian infection and improves
the health of the blood. It is submitted that therefore the
predominant purpose for which the product in question was
used by persons rearing poultry is to eliminate subclinical
coccidian infection. It is submitted that the indirect effect of
the said drug is only consequential and may be to improve
the health of the poultry or help in growth of poultry. It is
submitted that however that does not dilute the main
purpose of the ingredients, the composition as well as the
purpose for which it was administered. It is submitted that
therefore the product would fall under Entry 26(1) of
Schedule II Part A of the GST Act as “Drug and Medicine”.
4.4 It is further submitted on behalf of the State that a drug can
be administered either for prevention or treatment of
disease. The Deputy Sales Tax Commissioner considering
the expert literature specifically held that the drug is to
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ensure that an infectious disease does not spread and was
administered to the poultry feed as a “preventive measure”.
It is submitted that if the nutrition is not for predominant
purpose, then the product cannot be ‘poultry feed’.
4.5 It is submitted that the Tribunal considered the decision of
the High Court in the case of State of Gujarat vs. M/s. Pfizer
(India) Ltd. in Sales Tax Reference No.38 of 1980 in which
the High Court held that if main purpose is medicinal and
not nutrition, then even if there is some indirect help in
increasing production of eggs, the product would not be
called “poultry feed”. It is submitted that in the present case
the Tribunal specifically held that the product is a “non
nutritional additive” which as per the existing literature falls
within the category of “Drug”. It is submitted that even in
the case of M/s. Pfizer (India) Ltd. (Supra), one of the
products which had Terramycin and was used for the
purpose of preventing or treating diseases was held to be a
“drug”. It is submitted that in the case of M/s. Pfizer Ltd.
(Supra), it was specifically held that the product which does
not have any nutritional value as predominant use cannot
be a poultry feed. It is submitted that while deciding the
reference in the case of M/s. Pfizer (India) Ltd. (Supra), the
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High Court also considered its earlier decision in the case of
Glaxo Laboratories (India) Ltd. vs. State of Gujarat
[(1979) 43 STC 386 (Guj)] . It is submitted that neither
Pfizer judgment nor Glaxo judgment of the High Court have
held that nonnutritional additives would be considered as
“poultry feed”.
4.6 It is submitted that the view taken by the High Court relying
on the decision in case of M/s. Pfizer (India) Ltd. (Supra) has
widened the ambit of “poultry feed” so as to restrict the
meaning of Entry “Drug and Medicine”. It is submitted that
no Entry under the Schedule can be interpreted so broadly
so as to include even products which have medicinal
properties. It is submitted that since the product is sought to
be exempted under Entry 25, the meaning given to “poultry
feed” cannot be widened and has to be construed strictly. It
is submitted that such an interpretation gives undue and
subjective power on dealers to use any product as “poultry
feed” thereby getting exemption of tax.
4.7 It is submitted that in the case of
Eskayef Limited vs.
, it is held
Collector of Central Excise [(1990 4 SCC 680]
by this Hon’ble Court that the products “Neftin50 and
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Neftin200” which are used for prevention and treatment of
ailments such as “coccidiosis” and “histomonoiasis” in
poultry cannot be considered as ‘poultry feed’ and ought to
be categorized as a “drug”. It is submitted that in the said
decision it is specifically held that merely because these
products can be used for improving egg production and
increase in growth rate of broilers would not in any way
detract from the fact that said products are medicine. It is
submitted that in the present case also, “KADIPROL” is used
for the purpose of prevention and treatment, with an indirect
positive consequence for the health of the poultry.
4.8 Making above submissions and relying upon above
decisions, it is prayed to allow the present appeal and quash
and set aside the impugned judgment and order passed by
the High Court and restore the decisions of the Sales Tax
Tribunal as well as the Deputy Sales Commissioner and to
hold that the product “KADIPROL” can be categorized as
“Drug and Medicine” under Entry 26(1) of Schedule II Part A
of the GST Act and not as “poultry feed” falling under Entry
25 of Schedule I of the GST Act.
5. Present appeal is vehemently opposed by Ms. Kavita Jha,
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learned Counsel appearing for the respondent.
5.1 Ms. Jha, learned Counsel appearing for the respondent –
dealer – assessee has submitted that as such as on date
there is no existing demand on the respondent pertaining to
the issue and even all the assessments under the GST Act
are also closed with respect to the respondent. It is
submitted that therefore as such the issue involved in the
present appeal would be academic.
5.2 Making submissions on merits, learned Counsel appearing
for the respondent has vehemently submitted that in the
facts and circumstances of the case, the High Court has not
committed any error in categorizing the product “KADIPROL”
as “poultry feed” under Entry 25 of Schedule I of the GST
Act. It is submitted that while holding so the High Court has
taken into consideration the fact that over a period of time
concept of “poultry feed” has changed considerably.
5.3 It is submitted that the words “poultry feed” has acquired
definite connotation in livestock farming and so also has the
concentrates and whereas the feed simpliciter is essential for
the maintenance of poultry, the concentrates i.e. vitamins in
the food stuff enable the poultry to maintain energy; to
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perform the vital process of life and provide the material to
replace the essential tissues; breakdown of which occurs in
the body continuously. It is submitted that the ration of
poultry may be divided for convenience into two parts: (1)
maintenance ration, viz. the portion of the died which just
enables the poultry at rest to carry on the essential
processes of life, such as breathing and circulation of blood,
without either gain or loss of weight; and (2) feed supplied
over and above the maintenance requirement for augmenting
the production for growth or fattening; or for augmenting egg
laying capacity.
5.4 It is submitted that in the present days when the
maintenance of the poultry has become so costly, the poultry
is not kept in a farm in a state of nonproduction. It is
submitted that to make the poultry financially viable, it is
but necessary to supply a balanced poultry feed to increase
the production of eggs or fat and growth if the poultry is kept
for consumption of its meat. It is submitted that over a
period of time, when the concept of poultry feed has changed
considerably, it does not mean food for poultry in
conventional sense. It consists not only of concentrates but
even additives, like vitamins, minerals and antibodies which
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are essential for better development of poultry etc. which is
purpose of having a good yield from such activities. In
support of above submissions, reliance is placed on the
following decisions.
(1) Glaxo Laboratories (India) Limited vs. State of Gujarat
(1979) 43 STC 386 (Guj)
(2) Glindia Ltd. vs. Union of India
1989 (22) ECC 311
(3) State of Gujarat vs. Pfizer Ltd.
(1991) 82 STC 374 (Guj)
(4) Sun Export Corporation vs. Collector of Customs,
Bombay (1997) 6 SCC 564
(5) M/s. Golden Streak Drug & Pharmaceuticals Ltd.,
Lucknow vs. Commissioner Trade Tax Lucknow
2017TIOL2502HCALLCT
5.5 It is submitted that the product “KADIPROL” is added to
“poultry feed” so as to make good deficiency of Vitamin K.
The product “KADIPROL” is aimed at preventing loss of blood
in the intestine by enhancing clotting time of blood in birds.
It is submitted that the said product is an essential poultry
feed supplement and is liable to be classified as “poultry
feed” under Entry 25 of Schedule I of the GST Act.
5.6 It is further submitted by Ms. Jha, learned Counsel
appearing for the respondent that this Court has
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consistently taken the view that in determining the meaning
of an article in a tariff schedule, one principle which is fairly
wellsettled is that those words and expressions should be
construed in the sense in which they are understood in the
trade by the dealer and the consumer. It is submitted that
therefore while considering a particular product / article, a
common parlance test is to be applied. In support of above
submissions, reliance is placed on the decisions of this
Court in the case of Collector of Central Excise, Kanpur
vs. Krishna Carbon Paper Co. [(1989) 1 SCC 150] and
Plasmac Machine Manufacturing Company Private
Limited vs. Collector of Central Excise, Bombay [(1992)
84 STC 107 (SC) : [1990] Supp 3 SCR 384] .
5.7 It is submitted that in the present case, poultry rearing
industry, poultry feed concentrates like “KADIPROL” are not
bought as “Drug and Medicine”, but infact the same is
bought as “poultry feed”. It is submitted that even the
respondent is marketing its product “KADIPROL” as “not for
medicinal use”. It is submitted that therefore applying
common parlance test also, the product “KADIPROL” is to be
considered as “poultry feed”.
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5.8 It is submitted that the subsequent decision of this Court in
the case of Commissioner of Customs (Import) Mumbai
vs. Dilip Kumar and Company and Ors. [(2018) 9 SCC 1]
by which this Court overruled the decision of this Court in
the case of Sun Export Corporation vs. Collector of
Customs, Bombay [(1997) 6 SCC 564] to the extent
wherein Sun Export Case held that in case of ambiguity,
benefit of exemption notification should go to the assessee,
shall not be applicable to the facts of the case on hand. It is
submitted that in the present case, it is not the case of
respondent that the product “KADIPROL” was covered within
the ambit of any exemption notification and therefore, in
case of ambiguity, the benefit should go to the respondent. It
is submitted that present case pertains to the classification
of the product “KADIPROL” which is poultry feed supplement
as to whether the same is classifiable as “poultry feed” or as
“Drug and Medicine”.
5.9 It is further submitted by Ms. Jha, learned Counsel
appearing for the respondent that even under the Gujarat
Value Added Tax Act, 2003 (hereinafter referred to as
“Gujarat VAT Act”), sale and purchase of “poultry feed” are
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exempt from tax under Entry 48 Schedule I of the Gujarat
VAT Act. It is submitted that even under the Gujarat VAT
Act, food and dietary supplements are specifically excluded
within the ambit of Drug and Medicine. It is submitted that
thus, the same reflects intention of the legislature that entry
“Drug and Medicine” will not imbibe food and dietary
supplements within its ambit. It is submitted that by
drawing an analogy in the present case as well, it can be
argued that even “poultry feed” supplements like
“KADIPROL” will not be covered within the ambit of “Drug
and Medicine” under Entry 26(1) of Schedule II of the GST
Act.
Making above submissions, it is prayed to dismiss the
present appeal.
6. Heard learned Counsel appearing for the respective parties
at length.
7. Having heard the learned counsel appearing on behalf of the
respective parties and having perused the order passed by
the learned Tribunal as well as the impugned judgment and
order passed by the High Court, it is noticed that the
product in question was sold in a sachet/packet of 100 gm.
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It was not meant to be given as a food to the poultry. It was
required to be mixed with the feed given to the
poultry/birds. It cannot be directly fed and/or given to the
birds. Therefore, there is some merit in the contention of the
Revenue that the impugned judgment and order does not
deal with the reasoning given by the Tribunal. It merely
quotes and relies upon the two decisions in the case of
Glaxo Laboratories (India) Ltd. (supra) and M/s. Pfizer
(India) Ltd. (Supra) without a detailed and an indepth
examination of the facts as found. Therefore, usually in the
aforesaid background, we would have remitted the matter to
the High Court for a fresh decision. However, we are not
inclined to pass an order of this nature as it is accepted that
the issue in question is of academic interest and even if we
decide the appeal in favour of the Revenue, it would not have
any revenue implication as there are no tax dues.
8. In view of the above facts and as the issue in question is in
the academic interest and as there is no revenue implication
as there are no tax dues and therefore there is zero tax
effect, we close the present proceedings keeping the larger
question on the Common Parlance Test open, to be
considered in an appropriate case in a like matter.
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With this, the present appeal stands disposed of.
……………………………..J.
[M.R. SHAH]
……………………………..J.
[SANJIV KHANNA]
New Delhi,
July 11, 2022