The Hindu Business Line : Bathing bars and chemical assault

TO tax and to please, no more than to love and to be wise, is not given to men, said Edmund Burke, though we'd like to believe in the opposite. And to din in the truth, Winston Churchill declared, "There is no such thing as a good tax." If you still hold a different view, you've only to read the tax cases, such as what I thumb through in the recent references, to find how the taxman can battle with assessees.

For instance, Hindustan Lever Ltd was before the Mumbai Tribunal recently, to resolve a dispute about its Dove `bathing bar.' The company had imported the product and got one Prime Agencies to affix MRP (maximum retail price) labels and make bundles with slogans such as `Buy one get one free,' and `3 bars for Rs 100.' The taxman, who came in snooping, said that the activity was `manufacture' under the Central Excise Act.

Section 2(f) of the Act defines `manufacture' as including any process incidental or ancillary to the completion of a manufactured product, and also speaks of packing or re-packing of goods in a unit container or "labelling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer."

The Department argued that the slogans were efforts to render the goods marketable, and, therefore, manufacture had occurred. There may be merit in that stand because if one were to see the tariff on www.cbec.gov.in and search for `marketable' in Chapter 33-34, the following would meet the eye: "the conversion of powder into tablets, labelling or re-labelling of containers intended for consumers or repacking from bulk packs to retail packs or the adoption of any other treatment to render the products marketable to the consumer, shall be construed as `manufacture'."

But the Tribunal said, look, there is no evidence that the bars were not marketable as imported, that is, "without the slogan placed on the packs." It added that in the international course of trade, the product has been bought and sold, deciding against the Revenue. That reminds me of buying oil in the loose! "You gotta be careful with your body. Your body is like a bar of soap. The more you use it, the more it wears down," cautions Richie Allen.

Likewise, the more I discuss tax cases, the more your patience may get worn down. Yet, I'd move on to another case to show how technically savvy decisions can be. Brace up, therefore, to read this snatch from the Unicorn Organics case that the Bangalore tribunal decided not long ago: "In view of the presence of 2 per cent of Mannitol and about 0.2 per cent Polyhydric alcohols and about 29 per cent of water, the presence of Sorbitol is only 69 per cent and, therefore, the product cannot be defined as separate chemically defined organic compound."

Well, you may like to reach out for a dash of your favourite beverage to recover from that chemical assault, but before I put my pen down, there's this case of G.M. Pens International that the New Delhi tribunal decided a few months ago. The question was whether the ink for market pens could be called `writing ink', as the company argued, or as `other', the way the Department wanted the classification to be. Chapter 32 was under focus, and it talks about `tanning or dyeing extracts; tannins and their derivatives; dyes, pigments and other colouring matter; paints and varnishes; putty and other mastics; inks'.

Much ink can be spilled about ink, it may seem, if I were to tell you that `printing inks' under heading 32.15 are "pastes of varying consistency, obtained by mixing a finely divided black or coloured pigments with a vehicle." The `vehicle' here isn't the one in the parking lot, but "consists of either natural resins or synthetic polymers, dispersed in oils or dissolved in solvents, and contains a small quantity of additives to impart desired functional properties."

All right, but what did the tribunal decide? Jyoti Balasundaram and V.K. Agrawal, who heard the case, said that the ink on the table was no ordinary writing or drawing ink; and, in the process, they differed from the view expressed by a co-ordinate Bench. Therefore, their ruling ends with a request to the tribunal president to place the issue of marker ink classification before the Larger Bench.

ExParte@TheHindu.co.in

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