Explore the in-depth legal analysis conducted by the court in determining the classification of KADIPROL. This case delves into the nuanced distinctions between poultry feed and drug and medicine, shedding light on the implications for tax categorization and industry standards. Stay tuned to understand the complexities of the legal reasoning behind the court’s decision.
Facts
- 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’.
- The High Court numbered the reference as Sales Tax Reference No.4 of 2005.
- The respondent also sought clarification from the Assistant Commissioner, Food and Drugs Control Administration regarding the need for a license under the Drugs and Cosmetics Act, 1940 for manufacturing ‘KADIPROL’.
- The Deputy Commissioner of Sales Tax categorized ‘KADIPROL’ as ‘Drug and Medicine’ under Entry 26(1) of Schedule II Part A of the GST Act.
- The respondent challenged this categorization and filed a Reference Application under Section 69 of the GST Act before the Tribunal.
- The High Court ruled in favor of the respondent, categorizing ‘KADIPROL’ as ‘Poultry Feed’ under Entry 25 of Schedule I of the GST Act.
- The State of Gujarat has appealed against the High Court’s decision.
- The High Court answered the reference in favor of the respondent – assessee, considering ‘KADIPROL’ as ‘Poultry Feed’ under Entry 25 of Schedule I of the GST Act.
- The State of Gujarat appealed against this decision.
- The Tribunal supported the Deputy Commissioner’s order.
- The High Court’s decision was challenged in this appeal.
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Arguments
- The product ‘KADIPROL’ is aimed at preventing loss of blood in the intestine by enhancing clotting time of blood in birds.
- The predominant purpose of using ‘KADIPROL’ in poultry rearing is to eliminate subclinical coccidian infection.
- The indirect effect of the drug is consequential and may improve poultry health or growth.
- Reliance is placed on court decisions to support the argument that ‘KADIPROL’ should be considered as poultry feed.
- Presence of Vitamin K in ‘KADIPROL’ prevents blood loss and supplements anti-coccidial action.
- The High Court decision in M/s. Pfizer (India) Ltd. case is discussed to emphasize the medicinal nature of the product.
- The view taken by the High Court has widened the ambit of ‘poultry feed’ too much, restricting the meaning of ‘Drug and Medicine’.
- The product is administered for prevention or treatment of disease in poultry.
- Argument made against broad interpretation of ‘poultry feed’ to restrict ‘Drug and Medicine’ classification.
- The impugned judgment and order does not address the reasoning provided by the Tribunal
- It simply refers to and relies on the decisions in the cases of Glaxo Laboratories (India) Ltd. and M/s. Pfizer (India) Ltd.
- There is a lack of detailed and in-depth examination of the facts as found in the case
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Analysis
- An order is not passed due to the issue being of academic interest
- There would be no revenue implication even if the appeal is decided in favor of the Revenue
- No tax dues are involved, leading to a zero tax effect
- The larger question on the Common Parlance Test is kept open for consideration in a similar matter
- The present appeal is closed with no remittance to the High Court for a fresh decision
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Case Title: THE STATE OF GUJARAT Vs. CADILA HEALTHCARE LTD. (2022 INSC 676)
Case Number: C.A. No.-007322-007322 / 2021
