Supreme Court of India
STATE OF GUJARATversusCADILA HEALTHCARE LTD.
- Citation
- 2022 INSC 676
- Decided
- 11 July 2022
- Disposal
- Disposed off
- Bench
- M R SHAH
Holding
The appeal was dismissed as the matter is of academic interest with no revenue implication, and the larger question on the common parlance test was left open for future consideration.
Summary
The State of Gujarat appealed a High Court judgment that the product Kadiprol, sold in 100‑gram sachets and mixed with poultry feed, should be classified as "poultry feed" under Entry 25 of Schedule I of the Gujarat Sales Tax Act, 1969, rather than as a "drug and medicine" under Entry 26(1) of Schedule II Part A. The Deputy Commissioner and the Sales Tax Tribunal had originally classified Kadiprol as a drug/medicine, but the High Court reversed that view. The Supreme Court noted that the product is not fed directly to birds and that the High Court’s reasoning did not engage with the Tribunal’s findings. However, because the issue was purely academic with no tax demand or revenue impact, the Court declined to remand the matter for fresh consideration and closed the appeal, leaving the broader question of the "common parlance test" open for future cases.
Issues considered
- The correct classification of Kadiprol under the Gujarat Sales Tax Act – whether it falls under Entry 25 (poultry feed) or Entry 26(1) (drug and medicine).
- Whether the "common parlance test" should be applied to determine the meaning of "poultry feed".
- Whether the appeal should be remitted for fresh adjudication despite the lack of revenue implication.
Legislation cited
- Drugs and Cosmetics Act, 1940
- Gujarat Sales Tax Act, 1969s. Section 62, s. Section 69
- Gujarat Value Added Tax Act, 2003
Subjects
classificationsales taxpoultry feeddrug and medicinecommon parlance testacademic interestrevenue implicationGujarat Sales Tax Actschedule interpretation
Judgment
[2022] 6 S.C.R. 819 819
STATE OF GUJARAT A
v.
CADILA HEALTHCARE LTD.
(Civil Appeal No.7322 of 2021)
JULY 11, 2022 B
[M. R. SHAH AND SANJIV KHANNA, JJ.]
Gujarat Sales Tax Act, 1969: Entry 25 of Schedule I, Entry
26(1) of Schedule II Part A – Product “KADIPROL” sold by the
assessee – Classification as, Poultry Feed under Entry 25 of
C
Schedule I or as a Drug and Medicine under Entry 26(1) of Schedule
II Part A – Assessee classified the product as poultry feed whereas
the Department held that it should be classified as drug and medicine
– Order passed by the High Court that Kadiprol would be classified
as poultry feed – On appeal, held: In the judgment passed by the
High Court there was no detailed and in-depth examination of the D
facts – Though the matter would have been remitted to the High
Court for decision afresh but since the issue is in the academic
interest and there is no revenue implication, present proceedings
closed keeping the larger question on the Common Parlance Test
open, to be considered in an appropriate case.
E
Disposing of the appeal, the Court
HELD: 1.1 It is noticed that the product in question
KADIPROL was sold in a sachet/packet of 100 gm. 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 F
directly fed and/or given to the birds. Therefore, there is some
merit in the submission of the Revenue that the impugned
judgment and order does not deal with the reasoning given by
the tribunal. Therefore, usually in the said background, the matter
would have been remitted to the High Court for a fresh decision.
However, there is no inclination to pass an order of this nature G
as it is accepted that the issue in question is of academic interest
and even if the appeal is decided in favour of the Revenue, it
would not have any revenue implication as there are no tax dues.
In view of the above facts, the present proceedings are closed
keeping the larger question on the Common Parlance Test open, H
819
820 SUPREME COURT REPORTS [2022] 6 S.C.R.
A to be considered in an appropriate case in a like matter. [Para 7,
8][828-F-H; 829-A-B]
State of Gujarat v. M/s. Pfizer (India) Ltd.; Glaxo
Laboratories (India) Ltd. v. State of Gujarat (1979) 43
STC 386 (Guj); Eskayef Limited v. Collector of Central
B Excise (1990) 4 SCC 680 : [1990] 1 Suppl. SCR 442;
Glindia Ltd. v. Union of India 1989 (22) ECC 311; State
of Gujarat v. Pfizer Ltd. (1991) 82 STC 374 (Guj); Sun
Export Corporation v. Collector of Customs, Bombay
(1997) 6 SCC 564 : [1997] 1 Suppl. SCR 434; M/s.
Golden Streak Drug & Pharmaceuticals Ltd., Lucknow
C v. Commissioner Trade Tax Lucknow 2017-TIOL-2502-
HC-ALL-CT; Collector of Central Excise, Kanpur v.
Krishna Carbon Paper Co. (1989) 1 SCC 150 : [1988]
3 Suppl. SCR 12; Plasmac Machine Manufacturing
Company Private Limited v. Collector of Central Excise,
D Bombay (1992) 84 STC 107 (SC) : [1990] 3 Suppl.
SCR 384; Commissioner of Customs (Import) Mumbai
v. Dilip Kumar and Company and Ors. (2018) 9 SCC 1
: [2018] 7 SCR 1191 – referred to.
Case Law Reference
E [1990] 1 Suppl. SCR 442 referred to Para 4.7
[1997] 1 Suppl. SCR 434 referred to Para 5.4, 5.8
[1988] 3 Suppl. SCR 12 referred to Para 5.6
[1990] 3 Suppl. SCR 384 referred to Para 5.6
F
[2018] 7 SCR 1191 referred to Para 5.8
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7322
of 2021.
From the Judgment and Order dated 05.07.2016 of the High Court
G of Gujarat at Ahmedabad in Sales Tax Reference No.4 of 2005.
Ms. Aastha Mehta, Ms. Deepanwita Priyanka, Advs. for the
Appellant.
Ms. Kavita Jha, Shammi Kapoor, Ms. Swati Agarwal, Udit Naresh,
Advs. for the Respondent.
H
STATE OF GUJARAT v. CADILA HEALTHCARE LTD. 821
The Judgment of the Court was delivered by A
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 B
that the product “KADIPROL” sold by the respondent can be
categorized as “Poultry Feed” falling under Entry 25 of Schedule I of
the Gujarat Sales Tax Act (hereinafter referred to as “GST Act”) and
not as a “Drug and Medicine” under Entry 26(1) of Schedule II Part A
of the GST Act, the State of Gujarat has preferred the present Appeal. C
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 D
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 E
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 F
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
held that the product in question contains some preventive
medicine and therefore, categorized as “Drug and Medicine” G
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
H
822 SUPREME COURT REPORTS [2022] 6 S.C.R.
A 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
B 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
C 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 of
the appellant – State of Gujarat and Ms. Kavita Jha, learned Counsel
D 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
E 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
F 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)
G
Hydrochloride – 25 gm and (b) Vitamin K3 – 250 gm.
4.3 It is submitted that the same product was used to provide
protection against coccidiosis due to anti-coccodial property
of emporium. It is submitted that the presence of Vitamin
K in “KADIPROL” prevents loss of blood by ensuring
H
STATE OF GUJARAT v. CADILA HEALTHCARE LTD. 823
[M. R. SHAH, J.]
adequate availability of prothrombin and thus supplements A
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
B
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 C
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 D
disease. The Deputy Sales Tax Commissioner considering
the expert literature specifically held that the drug is to 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’. E
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 F
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 G
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
H
824 SUPREME COURT REPORTS [2022] 6 S.C.R.
A 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 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
B
neither Pfizer judgment nor Glaxo judgment of the High
Court have held that non-nutritional 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)
C 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
D 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.
E 4.7 It is submitted that in the case of Eskayef Limited vs.
Collector of Central Excise [(1990 4 SCC 680], it is
held by this Hon’ble Court that the products “Neftin-50 and
Neftin-200” 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
F 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
G 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
H aside the impugned judgment and order passed by the High
STATE OF GUJARAT v. CADILA HEALTHCARE LTD. 825
[M. R. SHAH, J.]
Court and restore the decisions of the Sales Tax Tribunal A
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.
B
5. Present appeal is vehemently opposed by Ms. Kavita Jha,
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 C
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 D
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 E
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 F
essential for the maintenance of poultry, the concentrates
i.e. vitamins in the food stuff enable the poultry to maintain
energy; to 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 G
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
H
826 SUPREME COURT REPORTS [2022] 6 S.C.R.
A 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
B in a farm in a state of non-production. 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
C 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
are essential for better development of poultry etc. which
is purpose of having a good yield from such activities. In
D 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
E
1989 (22) ECC 311
(3) State of Gujarat vs. Pfizer Ltd.
(1991) 82 STC 374 (Guj)
(4) Sun Export Corporation vs. Collector of Customs,
F Bombay (1997) 6 SCC 564
(5) M/s. Golden Streak Drug & Pharmaceuticals Ltd.,
Lucknow vs. Commissioner Trade Tax Lucknow
2017-TIOL-2502-HC-ALL-CT
G 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
H
STATE OF GUJARAT v. CADILA HEALTHCARE LTD. 827
[M. R. SHAH, J.]
“poultry feed” under Entry 25 of Schedule I of the GST A
Act.
5.6 It is further submitted by Ms. Jha, learned Counsel appearing
for the respondent that this Court has consistently taken
the view that in determining the meaning of an article in a
tariff schedule, one principle which is fairly well-settled is B
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 C
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]. D
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 E
for medicinal use”. It is submitted that therefore applying
common parlance test also, the product “KADIPROL” is
to be considered as “poultry feed”.
5.8 It is submitted that the subsequent decision of this Court in
the case of Commissioner of Customs (Import) F
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 G
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 H
828 SUPREME COURT REPORTS [2022] 6 S.C.R.
A 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
B 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 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
C 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
D “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.
E 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
F Court, it is noticed that the product in question was sold in a sachet/
packet of 100 gm. 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
G 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 in-depth 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
H
STATE OF GUJARAT v. CADILA HEALTHCARE LTD. 829
[M. R. SHAH, J.]
are not inclined to pass an order of this nature as it is accepted that the A
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 B
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.
With this, the present appeal stands disposed of.
C
Nidhi Jain Appeal disposed of.
D
E
F
G
H
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