Madhya Pradesh High Court
State Of M.P. vs Vicco Products (Bombay) on 26 April, 2017
W.A. No.102/2006 1
HIGH COURT OF MADHYA PRADESH
BENCH AT INDORE
DIVISION BENCH : Hon'ble Shri Justice Hemant Gupta, the
Chief Justice and Hon'ble Shri Justice Ved Prakash Sharma
W.A. No.102/2006
State of M.P.
Vs.
Vicco Products (Bombay)
-x-x-x-x-x-x-x-x-x-x-x-
Shri Yogesh Mittal, counsel for the applicant-State.
Shri P.B.S. Nair, counsel for the respondent.
-x-x-x-x-x-x-x-x-x-x-x-
ORDER
(Passed on 26th day of April, 2017) Per : Hemant Gupta, Chief Justice.
The challenge in the present appeal is to an order passed by the learned Single Judge on 21.09.2001, whereby a show cause notice dated 24.02.1995 for re-assessment under Madhya Pradesh General Sales Tax Act, 1958 was set aside.
02. The learned Single Bench has relied upon an order passed by the Division Bench of this Court reported as (1998) 111 Sales Tax Cases 319 (Commissioner of Commercial Tax vs. Dawar Brothers) to hold that Vicco Vajradanti tooth paste and powder or Vicco Turmeric cream possess medicinal properties, therefore, fall under the category of medicines and drugs and not the cosmetics, therefore, not chargeable W.A. No.102/2006 2 to Tax as claimed by the Revenue.
03. The petitioner filed quarterly returns for the assessment year 1989-90 before the respondent No.1 showing the figure of sale of the said products in the State of Madhya Pradesh. According to the petitioner, the aforesaid products were assessable under Entry 16, part IV of Schedule II of M.P. General Sales Tax Act, 1958 (for short 'The Act') under category "Drugs and Medicines" and therefore, tax was payable at the rate of 3% of the total sales effected by the petitioner. The respondent No.1, however, was of the opinion that the aforesaid products fell under category of "Toilet articles...." covered by Entry 2 of part III of Schedule II of the said Act and, therefore, tax at the rate of 12% in respect of Vicco Vajradanti (paste and powder) and at the rate of 16% in respect of Vicco Turmeric cream as applicable to cosmetics under Entry 21 part II of Schedule II of the said Act. The petitioners were, therefore, called upon to pay Sales Tax at the rate of 12% and 16% in respect of the Sales of Vicco Vajradanti (Paste and Powder) and Vicco turmeric Cream respectively. The petitioner paid the tax in advance on the basis of the quarterly returns accordingly as demanded by the respondent No.1 at the rate of 12% and 16% under protest.
04. The argument of the Learned Counsel for the appellant is that the Division Bench has not noticed that the specific provisions of the Madhya Pradesh General Sales Tax, 1958 as the entries in the W.A. No.102/2006 3 Statute itself are clear and that no external aid is necessary to examine the scope and ambit of the entries in the Act in question. The relevant classification as reproduced by the writ petitioner in the writ petition in Schedule II reads as under:-
Entry No. Description of goods Rate of tax Entry 21 Part Scents, perfumes, hair tonics, hair shampoo, 16% II Schedule depilatories and cosmetics including face II creams, snows, lipsticks, rouge and nail polish. Entry 2 Part- Toilet articles including tooth paste, tooth 12% III Schedule- powder, perfumed hair oil, talcum powder, II brushes, razors, razor blades, but including articles specified in Entry 21 of Part-II Entry 16 Drugs & Medicines 3% Part-IV Schedule-II
05. It is thus contended that the judgment of this Court in Dawar Brothers case is the judgment per incuriam rendered in ignorance of the statutory provision and thus, is not a binding precedent. It is the judgment in Dawar Brothers case which has been made basis to quash the notices for reassessment issued by the Assessing Officer.
06. On the other hand, Mr. Nair appearing for the petitioner argued that the writ petitioner had earlier filed a suit before the Civil Judge, Thane challenging the classification made by the Asst. Collector, W.A. No.102/2006 4 Central Excise. The suit was decreed on 06.05.1982. The First Appeal No. 613 of 1982 was dismissed on 27.04.1988 by the Division Bench of Bombay High Court. It was held that the products manufactured by the writ petitioner are medicines and not cosmetics. The Court recorded the following finding:-
"However, a point which does create considerable difficulty is the question, whether on the footing that these two products would be covered by Heading 14E, whether they are wholly exempt as exclusively Ayurvedic medicines. This averment is not found in the Plaint and hence not specifically traversed and therefore, no issue is specifically framed in this behalf. In the opinion of this Court it may not be sufficient only to aver and prove that these two products are medicinal products using Ayurvedic ingredients or even that the thereaputic ingredients used in the products are hundred percent ingredients or in other words ingredients known to Ayurveda. No where has the trial Court given an opinion as to what is understood by the phrase "exclusive Ayurvedic medicine". One can visualise several considerations which may become material for being considered as exclusively Ayurvedic medicines.
The argument that in taxation matters the onus is one the Revenue will be inapplicable to the present case. If an item can fall within two Entries, it may be for the person affected by the levy to decide as to under which head it should be classified and there, perhaps, it may be correctly observed that the Court or Tribunal deciding the matter must lean in favour of the subject and against the Revenue. That principle has been properly applied by us in order to determine that the two products V. Vajradanti and V. Turmeric, would be covered by Entry 14E and not Entries 14F and 14FF respectively. ....................."W.A. No.102/2006 5
07. The said order of the Division Bench of Bombay High Court was challenged before the Supreme Court in Special Leave to Appeal No.1918 of 1989. The petition was dismissed on 6.9.1990 for the reason that the Union of India has not been able to make out reasons for condonation of delay. But, in an appeal against an order passed by the Bombay High Court in Writ Petition No.2193/2005, dated 07/10/2006, the Supreme Court examined the issue in a judgment reported in (2005) 4 SCC 17 (Commissioner of Central Excise Vs. Vicco Laboratories). The Court held that the product is to be classified as pharmaceutical product for levy of excise duty under Chapter 30 and not as cosmetic under Chapter 33 of the Central Excise Tariff Act, 1985. The department was also given liberty to take such tests if entitled to in respect of the products in question. The matter again travelled to Supreme Court which was decided in a judgment reported as (2007) 13 SCC 270 (Union of India & Anr. Vs. Vicco Laboratories. The Court held as under:-
"32. Case of the respondent is that the classification of the said products having attained finality, pursuant to the decision of this Court, the appellants have no jurisdiction to issue impugned show-cause notice on the ground on which it has been issued and it virtually amounts to reopening of the issue which stands concluded by the decision of this Court, and that therefore it is an abuse of process of law. The High Court after referring to the history of litigation rightly concluded that the matter stood concluded by judgments of this Court and the W.A. No.102/2006 6 high Court in the respondent's case."
08. The issue before the Bombay High Court or before the Supreme Court was in respect of the entries for the purpose of levy of excise duty under the Tariff Heading 14 E of the First Schedule of the Central Excise and Tariff Act 1944 or the classification under the Central Excise Tariff Act, 1985 in respect of classification under Chapter 30 or Chapter 33 of the Central Excise Tariff Act, 1985. None of the Judgments referred to by the writ petitioner relates to classification for the purpose of sales tax under the Act.
09. The learned counsel for the respondent argued that once the Hon'ble Supreme Court has given a categorical finding that the products of the writ petitioner are medicines, therefore, such issue cannot be reopened or re-examined. It is also argued that relying upon the order of Bombay High Court, a Division Bench of this Court had already given a finding that products manufactured by the writ petitioner are the medicinal products, therefore, such question cannot be re-examined in the present appeal. It is also argued that this Court is bound by the decision of the coordinate Bench relying upon an order passed by the Supreme Court in the cases mentioned above.
10. We have heard the learned counsel for the parties and find that the order of the learned Single Bench following the order in the W.A. No.102/2006 7 Dawar Brother's case, cannot be sustained. In Dawar Brother's case, it has been noticed that the argument of the revenue was that the taxing statute does not define drugs and medicines, therefore, the provisions under consideration required to be given meaning in trade. The argument of the revenue, as recorded in the order, reads as under:-
"4. The case of the Revenue is that since the taxing statute did not define "drugs and medicines", the disputed products required to be given their trade meaning and treated as such and not under the category of "drugs and medicines" as these contained no substance or preparation used in prevention or treatment of a disease and could not be credited with any curative power. It is also submitted that even the assessee was selling these products as cosmetic items and not medicines. Lastly it is argued that mere obtaining of licence by the assessee under the Drugs and Cosmetics Act, could not clothe these products with medicinal properties and bring them under "drugs and medicines" and that the judgments of the Bombay and Karnataka High Courts [United Trading Agency v, Additional Commissioner of Commercial Taxes [1997] 104 STC 182 (Kar)] were referable to some other enactments and Acts and were not attracted to point in issue."
11. The said argument of the revenue is factually incorrect. No doubt the drugs and medicines falling in Entry 16 Part-IV Schedule-II of the Act are not defined but cosmetics have been explained so as to include face cream and the toilet articles to include tooth paste and powder. Thus the statute itself have clarified the classification of the products manufactured by the writ petitioner as face cream and the W.A. No.102/2006 8 tooth paste and tooth powder. There is no question as to whether it is an ayurvedic medicine or cosmetic cream. The entry is "face cream" such as turmeric cream manufactured by the writ petitioner. It would attract rate of taxes @ 16 per cent in terms of Entry 21 of Part II of Schedule II of the Act. The entries are clear and categorical that the face cream attracts rate of tax @ 16 per cent. It is not the case that the turmeric cream manufactured by the writ petitioner is not a face cream. Once a face cream manufactured by the writ petitioner falls in Entry 21 of Part II of Schedule II of the Act, it attracts rate of tax @ 16 per cent. Similarly, in respect of tooth paste or powder, the Entry 2 of Part III of Schedule II of the Act attract tax @ 12 per cent. Again, there is no classification on the basis whether it is a medicine or a cosmetic. The tooth paste or tooth powder, whether it is a medicine or a cosmetic will attract tax @ 12 per cent i.e. the classification specified in the Act itself.
12. The argument that the product manufactured by the petitioner are required to be given trade meaning and treated as such, is factually incorrect. Such situation would require examination, if the Statue is silent. In the event, the Statue contemplate particular rate of Tax in respect of a product, which does not admit any debate, then rate of tax applicable will be as specified in the Statute alone. Since the statutory provisions were not brought to the notice of the Court, the judgment of this Court in Dawar Brothers case is a judgment per incuriam. W.A. No.102/2006 9
13. The question as to when a judgment can be said to be per incuriam has been interpreted by the Supreme Court time and again. The Constitution Bench in a judgment reported as A.R. Antulay v. R.S. Nayak, (1988) 2 SCC 602 held as under:
42. It appears that when this Court gave the aforesaid directions on 16-2-1984, for the disposal of the case against the appellant by the High Court, the directions were given oblivious of the relevant provisions or law and the decision in Anwar Ali Sarkar case [AIR 1952 SC 75 : 1952 SCR 284 :
1952 Cri LJ 510] . See Hulsbury's Laws of England, 4th Edn., Vol. 26, page 297, para 578 and page 300, the relevant notes 8, 11 and 15; Dias on Jurisprudence, 5th Edn., pages 128 and 130; Young v. Bristol Aeroplane Co. Ltd. [(1944) 2 All ER 293, 300] Also see the observations of Lord Goddard in Moore v. Hewitt [(1947) 2 All ER 270, 272-A] and Penny v. Nicholas [(1950) 2 All ER 89, 92-A] . "Per incuriam" are those decisions given in ignorance or forgetfulness of some inconsistent statutory provision or of some authority binding on the court concerned, so that in such cases some part of the decision or some step in the reasoning on which it is based, is found, on that account to be demonstrably wrong. See Morelle v. Wakeling [(1955) 1 All ER 708, 718-F] . Also see State of Orissa v. Titaghur Paper Mills Co. Ltd. [1985 Supp SCC 280 : (1985) 3 SCR 26] We are of the opinion that in view of the clear provisions of Section 7(2) of the Criminal Law Amendment Act, 1952 and Articles 14 and 21 of the Constitution, these directions were legally wrong.
"47...............We are of the opinion that Shri Jethmalani is not right when he said that the decision was not made per incuriam as submitted by the appellant. It is a settled rule that if W.A. No.102/2006 10 a decision has been given per incuriam the court can ignore it.
It is also true that the decision of this Court in the case of Bengal Immunity Co. Ltd. v. State of Bihar [AIR 1955 SC 661 : (1955) 2 SCR 603, 623] was not regarding an order which had become conclusive inter parties. The court was examining in that case only the doctrine of precedents and determining the extent to which it could take a different view from one previously taken in a different case between different parties."
14. Another Constitution Bench in a judgment reported as Punjab Land Development and Reclamation Corpn. Ltd. v. Presiding Officer, Labour Court, (1990) 3 SCC 682, the Supreme Court held that the Latin expression per incuriam means through inadvertence.
15. In State of U.P. v. Synthetics and Chemicals Ltd., (1991) 4 SCC 139 , the Court held that the Court is not bound by earlier decision if it was rendered without any argument, without reference to the crucial words of the rule and without any citation of the authority. The Court held as under:-
"40. 'Incuria' literally means 'carelessness'. In practice per incuriam appears to mean per ignoratium. English courts have developed this principle in relaxation of the rule of stare decisis. The 'quotable in law' is avoided and ignored if it is rendered, 'in ignoratium of a statute or other binding authority'. (Young v. Bristol Aeroplane Co. Ltd. [(1944) 1 KB 718 : (1944) 2 All ER 293] ). Same has been accepted, approved and adopted by this Court while interpreting Article 141 of the Constitution which embodies the doctrine of W.A. No.102/2006 11 precedents as a matter of law. In Jaisri Sahu v. Rajdewan Dubey [(1962) 2 SCR 558 : AIR 1962 SC 83] this Court while pointing out the procedure to be followed when conflicting decisions are placed before a bench extracted a passage from Halsbury's Laws of England incorporating one of the exceptions when the decision of an appellate court is not binding.
41. Does this principle extend and apply to a conclusion of law, which was neither raised nor preceded by any consideration. In other words can such conclusions be considered as declaration of law? Here again the English courts and jurists have carved out an exception to the rule of precedents. It has been explained as rule of sub-silentio. "A decision passes sub-silentio, in the technical sense that has come to be attached to that phrase, when the particular point of law involved in the decision is not perceived by the court or present to its mind." (Salmond on Jurisprudence 12th Edn., p.
153). In Lancaster Motor Company (London) Ltd. v. Bremith Ltd. [(1941) 1 KB 675, 677 : (1941) 2 All ER 11] the Court did not feel bound by earlier decision as it was rendered 'without any argument, without reference to the crucial words of the rule and without any citation of the authority'. It was approved by this Court in Municipal Corporation of Delhi v. Gurnam Kaur. [(1989) 1 SCC 101]............"
16. In a judgment reported as Govt. of A.P. v. B. Satyanarayana Rao, (2000) 4 SCC 262 the Court held that the rule of per incuriam can be applied where a court omits to consider a binding precedent of the same Court or the superior Court rendered on the same issue or where a Court omits to consider any statute while deciding that issue. W.A. No.102/2006 12
17. In another judgment reported as State of Bihar v. Kalika Kuer, (2003) 5 SCC 448, the Supreme Court quoted from Halsbury's Laws of England (4th Edn.) Vol. 26 to hold that a decision is per incuriam which is given in ignorance of some inconsistent statute or binding authority. The Court held as under:-
"5. At this juncture we may examine as to in what circumstances a decision can be considered to have been rendered per incuriam. In Halsbury's Laws of England (4th Edn.) Vol. 26: Judgment and Orders: Judicial Decisions as Authorities (pp. 297-98, para 578) we find it observed about per incuriam as follows:
"A decision is given per incuriam when the court has acted in ignorance of a previous decision of its own or of a court of coordinate jurisdiction which covered the case before it, in which case it must decide which case to follow [Young v. Bristol Aeroplane Co. Ltd., 1944 KB 718 at 729 : (1944) 2 All ER 293 at 300.
In Huddersfield Police Authority v. Watson, 1947 KB 842 : (1947) 2 All ER 193.] ; or when it has acted in ignorance of a House of Lords decision, in which case it must follow that decision; or when the decision is given in ignorance of the terms of a statute or rule having statutory force [Young v. Bristol Aeroplane Co. Ltd., 1944 KB 718 at 729 : (1944) 2 All ER 293 at
300. see also Lancaster Motor Co. (London) Ltd. v. Bremith Ltd., (1941) 1 KB 675 : (1941) 2 All ER 11. For a Divisional Court decision disregarded by that court as being per incuriam, see Nicholas v. Penny, (1950) 2 KB 466 : (1950) 2 All W.A. No.102/2006 13 ER 89.] . A decision should not be treated as given per incuriam, however, simply because of a deficiency of parties [Morelle Ltd. v. Wakeling, (1955) 2 QB 379 : (1955) 1 All ER 708 (CA)] , or because the court had not the benefit of the best argument [Bryers v. Canadian Pacific Steamships Ltd., (1957) 1 QB 134 : (1956) 3 All ER 560 (CA) Per Singleton, L.J., affirmed in Canadian Pacific Steamships Ltd. v. Bryers1958 AC 485 : (1957) 3 All ER 572.] , and, as a general rule, the only cases in which decisions should be held to be given per incuriam are those given in ignorance of some inconsistent statute or binding authority [A. and J. Mucklow Ltd. v. IRC, 1954 Ch 615 : (1954) 2 All ER 508 (CA), Morelle Ltd. v. Wakeling, (1955) 2 QB 379 : (1955) 1 All ER 708 (CA), see also Bonsor v. Musicians' Union, 1954 Ch 479 : (1954) 1 All ER 822 (CA), where the per incuriam contention was rejected and, on appeal to the House of Lords although the House overruled the case which bound the Court of Appeal, the House agreed that that court had been bound by it;
see Bonsor v. Musicians' Union, 1956 AC 104 : (1955) 3 All ER 518 (HL).] . Even if a decision of the Court of Appeal has misinterpreted a previous decision of the House of Lords, the Court of Appeal must follow its previous decision and leave the House of Lords to rectify the mistake."
[Williams v. Glasbrook Bros. Ltd., (1947) 2 All ER 884 (CA)] Lord Godard, C.J. in Huddersfield Police Authorities case [Young v. Bristol Aeroplane Co. Ltd., 1944 KB 718 at 729 : (1944) 2 All ER 293 at 300. In Huddersfield Police Authority v. Watson, 1947 KB 842 : (1947) 2 All ER 193.] W.A. No.102/2006 14 observed that where a case or statute had not been brought to the court's attention and the court gave the decision in ignorance or forgetfulness of the existence of the case or statute, it would be a decision rendered in per incuriam.
(emphasis supplied)
18. A Division Bench of this Court in a judgment reported as State of M.P. v. Shiv Shankar, (2000) 1 MP LJ 156 held that the doctrine of per incuriam only applies where another Division Bench of this Court has reached a decision in the absence of knowledge of a decision binding on it or a statute, and that in either case it has to be shown that had the Court had this material, it must have reached a contrary decision. The Court held as under:-
"49. It must be emphasised that the doctrine of per incurium only applies where another Division Bench of this Court has reached a decision in the absence of knowledge of a decision binding on it or a statute, and that in either case it has to be shown that had the Court had this material, it must have reached a contrary decision. This is per incurium. This doctrine however cannot be extended to a case where if different arguments had been placed before it or if different material had been placed before it, it might have reached a different conclusion."
19. Since the Learned Counsel for the revenue erroneously conceded in Dawar Brothers's case that there is no statutory provision, therefore, the judgment of the Division Bench of this Court in Dawar Brothers case is not a binding precedent. It is judgment per incuriam. W.A. No.102/2006 15
20. The judgments of Supreme Court in M/s Vicco Laboratories case deals with classification of the provisions under the Central Excise Tariff Act, 1985. The classification of a product under a statute cannot be read into another statute. Each statute has to be interpreted on the basis of the provisions contained therein. Therefore, classification of the products in the said judgments dealing with the Central Excise Laws are not relevant for examining the classification of the products under the local Act, which have specifically included face cream under the Entry of Cosmetics and tooth paste and tooth powder under the Entry of Toilet articles.
21. In view thereof, we find that the order passed by the learned Single Bench cannot be sustained. It deserves to be set aside and is ordered to be set aside and the writ petition is dismissed. Consequently, the Department shall proceed with the decision on the show cause notice in accordance with the law.
Certified copy as per rules.
(Hemant Gupta) (Ved Prakash Sharma)
Chief Justice Judge
soumya