JOHNSON AND JOHNSON LTD Vs. ASSISTANT COMMISSIONER

JUDGEMENT

(1.) Appeal is filed against clarification issued by the Commissioner of Commercial Taxes under Section 94 of the Kerala Value Added Tax Act, 2003. The appellant among other things is a manufacturer and dealer in drugs and medicines. Even though an application for compounding was not filed in form ID, the appellant was remitting tax at the compounded rate, that is, at four per cent on the maximum retail price on the sale of drugs and medicines under Section 8(e) of the Act. When assessment was made the assessing officer applied the same rate of tax on MRP on medicines sold in other divisions of the company as well. The appellant's case is that only in the pharma division they have paid tax at compounded rate and so far as other divisions are concerned, drugs and medicines sold cannot be subjected to assessment at compounded rate under Section 8(e) of the Act. The appellant filed a clarification petition before the Commissioner, who held that the appellant is liable to pay tax at compounded rate on the sale of drugs and medicines as stated in Section 8(e) of the Act, no matter whether application is filed under prescribed form or not for availing of compounding facility. We have heard Counsel appearing for the appellant and the Government Pleader appearing for the respondents.

(2.) We do not find anything wrong with the Commissioner's order because even without a formal application for compounding, the appellant adopted the scheme of compounding for payment of tax in respect of drugs and medicines which is at four per cent on MRP. Proviso (b) to Explanation to Section 8(e) makes it clear that when tax is collected at the compounded rate on MRP by the seller, the purchasing dealer is entitled to exemption. Going by the collection of tax in the pharma division the appellant cannot deny that they have not opted for payment of tax at compounded rate under Section 8(e) of the Act. All what the Commissioner has stated is that once the appellant has started billing in accordance with compounding scheme, then the same itself amounts to opting to pay tax under the compounding scheme and the appellant cannot therefore back out of the same. We uphold this position declared by the Commissioner because by the appellant's conduct the purchasers have claimed exemption under the proviso above referred. In other words, the sale of the drugs and medicines by the appellant should be assessed on MRP at four per cent as provided under Section 8(e) of the Act. So far as other products are concerned, compounding is not applicable and the normal provisions of the Act will be applied for assessment and levy of tax. If there is surviving dispute then it is for the appellant to pursue the same before the statutory authority in appeal.

(3.) Appeal is disposed of as above.