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Whether Hajmola candy is exigible to tax as an Ayurvedic medicine under list A of the Orissa Sales Tax Act, 1947 ('OST Act')?

3. The background facts are that the Petitioner Assessee is a public limited company engaged in manufacturing and selling of a variety of products including ayurvedic medicines. During the relevant periods i.e., 1993-94, 1994-95, 1997-98 and 1998-99, the Petitioner was initially assessed under Section 12 (4) of the OST Act. Subsequently, as per the objection raised by the A.G. audit, the Sales Tax Officer (STO) reopened the assessments under Section 12 (8) of the OST Act. The objection mostly concerned payment of sales tax by the Petitioner @ 4% by treating its products, including Hajmola candy as Ayurvedic medicines. The STO however in the assessment order dated 29th July, 1996 treated the products as residual goods taxable @ 12% sales tax. Accordingly, a demand was raised in the sum of Rs.7,24,802/- for the period 1993-94. Likewise, the demand for the period 1994-95 was Rs.7,03,361/-, for 1997-98 Rs.7,31,717/- and for 1998-99 Rs.13,14,901/-.

4. Being aggrieved by the above order of re-assessments, appeals were filed by the Petitioner, which were disposed of on various dates by the Assistant Commissioner of Sales Tax (ACST) holding that Hajmola candy is an Ayurvedic medicine and needs be taxed at the prevailing rate of tax under Entry-37 of the list of goods.

5. Against the order of the ACST, further appeals were filed by the Assessee before the Orissa Sales Tax Tribunal (Tribunal) in Second Appeals. Cross-objections were filed by the Department. The sole question of law framed by the Tribunal for consideration was, "whether Hajmola candy is exigible to tax as an Ayurvedic medicine."

The question was answered by the CEGAT, after referring to the decision of the Madhya Pradesh High Court in Panama Chemical Works v. Union of India 1992 (62) ELT 241 (M.P.) as under:

"On a careful consideration of the submissions made by both sides with reference to the facts and case law, we find that this issue has been covered by the decision of the Madhya Pradesh High Court in the case of Panama Chemical Works as it was rightly pointed out by the appellants' counsel. Since the ingredients of 'Swad' and 'Hajmola' are one and the same, we are not inclined to take different view on this issue. It is not even the case of the Department that ingredients of Hajmola are different from Swad. The Hon'ble High Court after examining the ingredients of the item with reference to the provision of Drugs & Cosmetics Act, authoritative Ayurvedic text books, and experts' opinion arrived at the conclusion that it was an Ayurvedic medicine. No contrary decision of any High Court or of Apex Court with reference to the item in question or of identical goods having similar ingredients placed before us. The position would have been different if it was so. In the absence of any contrary decision respectfully we are following the decision of Madhya Pradesh High Court on this issue. Accordingly, we hold that Hajmola Candy is classifiable under heading 3003.30 of C.E.T."

Clearly therefore the Tribunal in the instant case committed a fundamental error in omitting to notice what was actually decided in Panama Chemical Works v. Union of India (supra).

10. There is also the decision of the CEGAT, New Delhi in Commissioner, Central Excise, Chandigarh-I v. Dabur India Ltd. 2002 (144) ELT 365 (Tri-Del.). There again the question was of exigibility of Hajmola Tablets to excise duty. Following the earlier decisions, the CEGAT reiterated that Hajmola Tablets are Ayurvedic medicines. Similar appeals filed by the Department against the said decision were dismissed by the Supreme Court vide order dated 6th September, 2002 in Civil Appeal No.5172-77 of 2002.