IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE K.SURENDRA MOHAN TUESDAY, THE 24TH MARCH 2009 / 3RD CHAITHRA 1931 OT.Appeal.No. 8 of 2008() ------------------------- AGAINST THE ORDER DATED 14/01/2008 IN CT IN ORDER.C3.35160/2007/CT of COMMR. OF COMMERCIAL TAXES, TRIVANDRUM .................... APPELLANT ----------------------------- M/S.JOHNSON & JOHNSON LIMITED C&FA-M/S.KOTTARAM AGENCIES XI/423, HMT ROAD, KALAMASSERY, ERNAKULAM 683 503 BY ADV. SRI.JOSEPH JERARD SAMSOM RODRIGUES RESPONDENT(S): RESPONDENTS -------------------------- 1. ASSISTANT COMMISSIONER (ASSESSMENT) SPECIAL CIRCLE-1,DEPARTMENT OF COMMERCIAL TAXES ERNAKULAM. 2. ASSISTANT COMMISSIONER (AUDIT ASSESSMENT) OFFICE OF THE DEPUTY COMMISSIONER (AUDIT ASSESSMENT) DEPARTMENT OF COMMERCIAL TAXES ERNAKULAM. 3. THE COMMISSIONER OF COMMERCIAL TAXES THIRUVANANTHAPURAM. BY G.P. SRI. V.K. SHAMSUDEEN THIS OTHER TAX APPEAL HAVING BEEN FINALLY HEARD ON 24/03/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C .N. RAMACHANDRAN NAIR & K. SURENDRA MOHAN, JJ. -------------------------------------------- O. T. A. No. 8 OF 2008 -------------------------------------------- Dated this the 24th day of March, 2009 C.R. JUDGMENT Ramachandran Nair,J. Appeal is filed against clarification issued by the Commissioner of Commercial Taxes under Section 94 of the Kerala Value Added Tax Act. 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 I-D, the appellant was remitting tax at the compounded rate that is at 4% 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. 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. Appellant filed clarification petition 2 before the Commissioner, who held that 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 compounding facility. We have heard counsel appearing for the appellant and 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 appellant adopted the scheme of compounding for payment of tax in respect of drugs and medicines which is at 4% 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 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 3 cannot therefore back out of the same. We uphold this position declared by the Commissioner because by appellant's conduct the purchasers have claimed exemption under the proviso above referred. In other words, sale of the drugs and medicines by appellant should be assessed on MRP at 4 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. Appeal is disposed of as above. (C.N.RAMACHANDRAN NAIR) Judge. (K. SURENDRA MOHAN) Judge. kk 4