Tax applicability rule did not work based on Product Non Inventory Fiscal Classification Code

Configured tax applicability rule as below:

Default Tax Applicability - Tax Applicable

Determining Factor Set - Product Non Inventory

Condition Set - Two conditions to work as or condition, meaning, if product category not equal to X category or Y category, then tax is not applicable.

Configured Tax Status and Tax Rate Rule to work as

If Product Category is X then 20% VAT

If Product Category is Y then 0% VAT

Expected behaviour is, if product category is not given for AR transaction, then VAT will not be applied. But it does not work as expected.