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TMI Blog2008 (9) TMI 845X X X X Extracts X X X X X X X X Extracts X X X X ..... cil Prickly Heat Powder" from Talcum Powder is the constituent Chlorphenesin I.P., base zinc oxide I.P., Starch I.P., and Talcum Purified IP. The content of Chlorphenesin is maintained at 1%, since this was established as the optimum concentration effective against fungal infection. The other ingredients like zinc oxide, starch and talc are used as a base for dispersing Medicament Chlorphenesin. Chlorphenesin is the local anti-fungal agent and used in tropical preparations for the treatment of beautification and smoothening the human skin. In fact, the presence of starch in the preparation makes the powder coarse and rough in texture for the purpose of effective adherence to the skin affected by indications like prickly heat, sores, dhobi itch, athlete foot etc. 4. These cases relate to the assessment years 1999-2000 and 2002-2001. For the assessment year 1999-2000, the assessee had filed its annual return and in that had conceded the tax payable on the taxable turnover at 8%, treating the sale of Nycil Prickly Heat Powder as an item falling under Entry 79 of the First Schedule to KGST Act. The assessing authority had completed the assessment by accepting the returns filed, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on were essentially cosmetics? (c) Whether the Tribunal applied the incorrect test of placing emphasis on the percentage of chlorophenesin while failing to take note that the relevant test to be applied was whether an ingredient was an active ingredient? (d) Whether the Tribunal brushed aside relevant evidence by merely observing that it was "difficult to see" how Nycil was a medicine when in fact there was abundant material to prove the same? (e) Whether the Tribunal committed a grave error of law in failing to note that the burden of proof in matters involving classification was on the revenue and the revenue not having laid any evidence, the appellants had to succeed on the principles laid down by the Hon'ble Supreme Court reported in 1997 (89) E.L.T. 16 (S.C.) = (1997) 2 SCC 677 in the case of Hindustan Ferodo. v. Collector of Central Excise, Bombay? (f) Whether the Tribunal committed an error of law while referring to Sl. No. 127 as a specific entry? (g) Whether the Tribunal committed an error of law in placing emphasis on the form in which the product w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this Schedule". 14. The answer to the question will turn on proper interpretation of Entry 79 and Entry 127 of First Schedule to KGST Act. 15. Entry 79 of the First Schedule speaks of Medicine and drugs including ayurvedic medicine etc. In the instant case, we are concerned only with medicine and drugs and not ayurvedic medicine. Therefore, we need to know only what is a medicine and drug? 16. The word "Medicine" is not statutorily defined and as such, the meaning given in common parlance has to be attributed to it. A medicine is a substance or preparation used in the treatment of diseases. The substance must have curative power so as to make it effective for treatment of ailments. A substance which has a curative power need not be used in the very form in which it naturally occurs. It will retain its character as a medicine even though some processing is required before it becomes fit for use by human beings or other living creatures. In Webster's Dictionary, 3rd Edn., medicine has been defined to mean, substance or preparation used in treating diseases; the science and art dealing with the maintenance of health and the prevention, alleviation or cure of dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of Gujarat, 28 STC 5. "Nycil Powder has the following features and attributes : (1) Chlorphenesin, being a medical substance was introduced as a result of original work in the British Drug House Research Laboratories. "Nycil" is the trade name under which the British Drug House product of chlorphenesin is manufactured and marketed. (2) Chlorphenesin is a potent antifungal, antibacterial and trichomonicidal substance of low toxicity. Organisms against which it is effective include the common dermatophytes causing tinea pedis (Athelct's foot) and other dematomycoses, epidermophyton, floccosum and the various trichophyton species such bacteria as streptococci, staphyloccocci, coliform organisms and clostridii. Nycil is effective in eliminating pruritus ani and pruritus vulvae. Pruritus ani and pruritus vulvae are frequently of bacterial or fungal origins, or the lesions may become infected with bacterial or fungi, and Nycil is effective in eliminating such organisms. (3) Nycil in the form of powder or ointment is recommended for the treatment of prickly heat and dhobie itch and active skin protection during ringworms and other fungicidal infections. Nycil powder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21. Entry 127 of the First Schedule, apart from others speaks of Talcum Powder including Medicated Talcum Powder. The word 'includes' is to indicate that the particular so defined by the use of the word 'includes' not only continues to have its ordinary meaning, its natural import, but it also includes within its ambit all those things which the definition says that it shall include. The Supreme Court in the case of Income Tax Officer, Andhra Pradesh v. Taj Mahal Hotel, (1971) 3 SCC 550 has held, that, the word "includes" is often used in interpretation clauses in order to enlarge the meaning of the words or phrases occurring in the body of the Statute, and when it is used, the words and phrases must be construed as comprehending not only such things as they signify according to their nature and import, but also those things which the interpretation clause declares that they shall include. 22. The Apex Court in Godfrey Phillips India Ltd. v. State of U.P. [2005] 139 STC 537 has stated, the word "including" must be given some meaning. In ordinary parlance it indicates that what follows the word "including" comprises or is contained in or is part of the whole of the word p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lude' such and such, the definition is prima facie extensive. When by an amending Act, the word 'includes' was substituted for the word 'means' a definition section, it was held that the intention was to make it more extensive. Further a definition may be in the form of 'means and includes' where again the definition is exhaustive; on the other hand, if a word is defined 'to apply to and include', the definition is understood as extensive. 25. Again on the same subject, Bindras Interpretation of Statutes, 6th edn. states: "It is a well known rule of interpretation that the word 'include' is used as a word of enlargement and ordinarily implies that something else has been given beyond the general language which precedes it: to add to the general clause a species which does not naturally belong to it." 26. The learned Counsel for the petitioner Sri. Prasad submits that the petitioner has been granted a licence to manufacture 'Nycil Prickly Heat Powder' by the drug controller as a Medicine; the definition of 'drug' and 'cosmetic' is given in the Drugs and Cosmetics Act, 1940; the said commodities are used either for cure or prevention of diseases. The learned Counsel woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for that purpose, various products are differently classified, the entries are not to be understood in its scientific and technical meaning. The terms and the expressions used in the Schedules have to be understood by their popular meaning, that is the meaning attached to them by those using the product. The chemical ingredients of the product are not decisive on the question of classification of the product for levy of sales tax. 28. The learned Counsel for the revenue would further submit, that, the law is well-settled, that, if there are two entries - one general and the other special the special entry should be applied for the purpose of levying tax and the general entry will give way to the special entry. In the present case, the legislature has included medicated talcum powder along with talcum powder. The entry when construed in its proper perspective, the talcum powder includes Medicated talcum powder and necessarily should fall under separate entry other than drugs and medicine. The learned Counsel for the Revenue emphasised at the time of hearing that, Nycil Powder is a talcum powder and the mere fact that some medicine are added to it will not make any difference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and others v. Leukoplast (India) Ltd. - 1997 (92) E.L.T. 19 (S.C.) = [1997] 4 SCC 82, the Apex Court was asked to decide whether plaster, dressings and bandages produced by the assessee under licence from Drugs Controller, whether fell within the expression "Drugs and Medicine", one the contentions raised therein was, that it has got a licence to manufacture these products under the Drugs and Cosmetics Act and its production is controlled at every stage by the Drugs Control authorities. This is also one of the contention raised by Sri. Prasad, learned Counsel for the petitioner that since the Nycil Powder is manufactured only under a licence issued under the Drugs and Cosmetics Act, the product requires to be classified as Medicine/Drug. The Apex Court while repelling this contention has observed that, merely because the product is manufactured under a drug licence, it does not conclude the matter. In view of the observations made by the Apex Court, we need not have to labour much to answer the contention canvassed by learned Counsel for the petitioner. The mere fact that Nycil is a medicated powder and that it required a drug licence for its manufacture is not sufficient to hold t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up for interpretation before the Apex Court in the case of Puma Ayurvedic Herbal Pvt. Ltd. - 2006 (196) E.L.T. 3 (S.C.) = (2006) 145 STC 200. In the said decision, the court has observed, whether the item is commonly understood as a medicament, which is called common parlance test. For this test, it will have to be seen whether in common parlance item is accepted as a medicament. If a product falls in the category of medicament, it will not be an item of common use. A user will use it only for treating a particular ailment and will stop use after ailment is cured. The extent or quantity of medicament used in a particular product is not a relevant factor. The medicinal ingredients are mixed with what is in trade parlance called fillers or vehicles, in order to make the medicament useful. Therefore, the fact that use of medicinal element in a product was minimal does not detract from it being classified as a medicament. The court has further observed that it order to be a medicinal preparation or medicament, it is not necessary that the item must be sold under a doctor's prescription. Similarly availability of the product across the counter of shops is not a relevant factor as it ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have already stated, is used in interpretation clause to enlarge the meaning of the word in the statute. When such word is used in an interpretation clause, it must be construed as comprehending, not only such things as they signify according to their natural import, but also those things which the interpretation clause declares that they shall include. A court of law in construing a statute with an interpretation clause using the expression 'includes' is bound to give effect to the direction in the statute itself, unless it can be shown that the context of that particular passage where the expression is used shows clearly that the meaning is not in this place to be given effect to. The courts have to resort to such interpretation and construction which is reasonable and purposive with the object sought to be achieved by the Act enacted by the legislature, where the primary object is to raise revenue and for that purpose, various products are differently classified, the entries are not to be understood in its scientific and technical meaning, but the terms and expressions used in entries have to be understood by their popular meaning, i.e., the meaning that is attached to them by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1959 and not a toilet article within the meaning of Entry 21A of Schedule E to the Act. 44. In the aforesaid decision, the assessee firm was carrying on business in "drugs and medicine" and was also a distributor of Nycil Medicated Powder manufactured by the British Drug House (India) Pvt. Ltd., Bombay. The firm had made an application under Section 52 of the Act to the Commissioner of Sales Tax for determination of the question as to the rate of tax payable on the Sales of Nycil Powder. In the application, it was specially stated that Nycil Powder is used as a "Medicated Powder" for many external skin and other diseases and therefore not a toilet article. That only means even according to the assessee firm, it is a medicated powder used to keep the skin clean so as to offer protection against prickly heat and infection, besides giving comfort and fairness. 45. We are in agreement with the decision of the Gujarat High Court in so far as its conclusion that Nycil Powder is a Medicated Powder. The legislature which has freedom to classify the commodities for the purpose of taxation, has classified it under Entry 127 of First Schedule to the Act by using the expressi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision the question before the court was whether 'Nycil' is a patent or proprietary medicine or body or make up preparations for cure of the skin. The court applying common parlance test has come to the conclusion, it is a medicine since the product is specifically used for treating heat. In our view, this decision would not assist the case of the petitioner, for the reason, the Schedule to KGST Act has two entries - one General and the other special. The general entry speaks of 'Medicine and drugs' and special entry speaks of 'Medicated Talcum Powder'. The expression 'medicament' came up for consideration before the Apex Court in Puma Ayurvedic Herbal Pvt. Ltd. - 2006 (196) E.L.T. 3 (S.C.) = 145 STC 200. In the said decision, the court has explained the tests that requires to be applied to find out what is medicament. They are, whether the item is commonly understood as medicament which is called the common parlance lest. For this test, it will have to be seen whether in common parlance the item is accepted as a medicament, if the product falls in the category of medicament, it will not be an item of common use. In our view, if for any reason, the question before the court was whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .C.), wherein it is stated, that, it is not in dispute before us, as it cannot be, that, the onus of establishing that the said rings fell within item 22-F lay upon the revenue. The revenue had led no evidence. The onus was not discharged. Assuming therefore, that the Tribunal was right in rejecting the evidence that was produced on behalf of the appellants, the appeal should, nonetheless have been allowed. In the instant case, the case of the revenue is that the commodity in question is a medicated talcum powder and therefore it should be classified under special entry. Therefore, these two decisions would not assist the learned Counsel for the assessee. 51. In V.G. Ramalingam and Sons v. State of Tamilnadu and others, 127 STC 382, the question before the Court was whether "Vicco Vajradanti" tooth paste and Vicco Turmeric face cream are ayurvedic products and ayurvedic drugs properly classifiable under Entry 20 of Part C of First Schedule to Tamil Nadu General Sales Tax Act, 1959. The revenue had classified "Vicco Vajradanti" tooth paste as an item falling under Serial No. 7 of Part E of First Schedule and Vicco Turmeric face cream as an item falling Entry 1 of Part E of Fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parations as claimed by the revenue. In the appeal it was contended that prickly heat powder not only relieves prickly heat faster but actually helps to prevent it; that when a person perspires profusely the sweat stays on the skin too long and the persons potential victim of prickly heat; that specially formulated prickly heat powder absorbs the sweat better and faster and prevents the build up of bacteria on the skin; that, therefore, the person avoids getting a red rash, itching and burning; that no person who requires ordinary talc for the purpose of beautifying herself or himself would use the said products, which contain the aforesaid active therapeutic ingredients. One of the pertinent observations made by the court in the course of its order is, what is required to be considered in the matters of this nature where commodity taxation is taken up by the State authorities, the court should be guided by the manner of classification of the goods which are brought to tax rather than the etymological meaning of the product in question or experts opinion thereto. In conclusion, the court was pleased to observe : "Applying the principles enunciated in BPL Pharmaceuticals Ltd. cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dded to them, they would not cease to be so. Though a tooth-paste, a tooth-powder or a skin cream by itself may not be characterised as medicinal preparation, if such goods attract the provisions of the Drugs Act, and are classified as such, certainly they have to be treated as medicinal preparations and not as toiletry items. If such goods could also be obtained in shops of ordinary merchandise or in chemists shops also but, nevertheless if they are medicines or medicinal preparation, they would not cease to be so. The necessity of obtaining a prescription for selling such goods only by a chemist would arise in case of any such goods where the law requires it particularly, where the goods as such have harmful effects on the system of human body. In other cases, there will be no such restrictions placed at all. In those cases, the goods could be sold either in a pharmacy or a druggist shop or any other shop. Therefore, that test may not be a clinching one in a case of this nature.' 55. The court proceeded primarily on the basis that though a tooth paste, a tooth powder or a skin cream by itself may not be characterised as medicinal preparation, if such goods attract the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilet and nursery". The letter-head on the paper used by the appellants says that they are dealers in cosmetics and drugs. It is admitted that they do not deal in any powders other than the kinds of powders mentioned in the order of the Collector of Sales fax. In our opinion, even if the connotation accepted in America be considered to be too wide, the articles in question can undoubtedly be regarded as aids to beautification, and therefore, as cosmetics. It may be possible to regard them also as toilet articles within the meaning of entry 39. In our opinion, the latter expression is intended for a wider range of objects than is covered by the expression "cosmetics". In this sense, cosmetics may legitimately, in our opinion, be regarded as a specific case of toilet articles, and in this view, the more specific provision in item 66 rather than item 39 will apply. We do not, therefore, think that the decision arrived at by the Collector of Sales tax can be said to be erroneous. The appeal is, therefore, dismissed.' 58. Our attention is invited to the decision of the Apex Court in the case of the Commissioner of Income Tax v. M/s. Shahzada Nand & Sons, AIR 1966 SC 1342, only to i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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