TMI Blog1995 (12) TMI 370X X X X Extracts X X X X X X X X Extracts X X X X ..... Second Schedule. On appeal, the Joint Commissioner of Commercial Taxes set aside the reassessment orders and restored that of the assessing authority made originally. This order made by the appellate authority was found to be erroneous and prejudicial to the interest of the Revenue for the reasons set forth in the notice issued to the appellant under section 22A of the Act. The reasons set forth by the revisional authority are as follows: "1. Serial No. 5 of Part M of the Second Schedule reads as medicinal and pharmaceutical preparations (other than those specified elsewhere). 2.. Serial No. 10 of Part T of the Second Schedule reads as 'toilet articles (whether medicated or not) except toilet soaps and such other toilet articles as may be specified by the State Government by notification in the official gazette'." Before the issue is interpreted by considering the abovementioned wording, it is necessary to state that it is not disputed that the Vicco products are nothing but a mixture of various types of herbs, barks, roots, etc. In this connection, the Karnataka High Court in the case of L.M. Rajappachetty Bros. v. Commissioner of Commercial Taxes [1991] 81 STC 109 has h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chnical objections raised such as initiation of the suo motu revision proceedings when an appeal had been pending before the Appellate Tribunal. The revisional authority formulated the question before him as follows: "Whether Vicco Vajradanthi and other Vicco products are toilet articles or medicines?" In answering the said question, the revisional authority referred to a clarification issued by the excise authorities to the effect that according to the existing practice, each medicament used in various system of treatments for, e.g., ayurvedic, unani and siddha has to be examined on merits. Broadly, the preparation would merit classification as an ayurvedic medicine if in common parlance it is known as ayurvedic medicine and all the ingredients are mentioned in authoritative books on ayurveda. Thus, the two tests for determining the classification of the products claimed to be an ayurvedic medicine excluding herbal or ayurvedic cosmetic should be kept in view while dealing with such cases. He relied on certain decisions: 1.. For any formulation to be considered as ayurvedic medicine, the same should be either recognised so in a standard ayurvedic work or should be so proved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing or using medicine. Soaps, scents and perfumes were separately listed because they were subject to different rates and he therefore, took the view that the intention of the framers of the notifications was to include all articles in the expressions "cosmetics and toilet requisites", as are popularly regarded as articles falling within that category but such of those articles as were intended to be taxed at different rates were separated and listed separately. He also took note of the fact that even the manufacturers of dentifrices like tooth-paste and tooth-powder regarded them as items of cosmetic and toiletry and he referred to Ciba which is a well-known company engaged in the manufacture of pharmaceuticals and cosmetics. He noticed the decision in Sarin Chemical Laboratory v. Commissioner of Sales Tax [1970] 26 STC 339 (SC) wherein it was decided that in common parlance, a tooth-powder is considered as a toilet article. That meaning accords with the dictionary meaning as well. He did not deal with the material produced by the appellant. He disposed of the same by stating that the voluminous, documentary evidences produced by the respondent before the first appellate authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the human body. 3.. Under the provisions of section 18 of the Drugs Act, there is a prohibition for the manufacture of either a drug or a cosmetic without a valid licence and that Chapter is inapplicable to ayurvedic drug for which a licence is required to be obtained under section 33EEC of the Drugs and Cosmetics Act. Under rule 150A framed thereunder, the standard for cosmetics have been prescribed under the Schedule S and cosmetics mentioned therein will have to necessarily conform to the standard set by the Indian Standards Institution. If the cosmetic does not conform or adhere to the ISI specifications, it amounts to an offence under the Drugs Act. 4.. The manufacturers of these products have been doing so long prior to January 15, 1971 and Chapter IVA of the said Act came into force and made applicable to ayurvedic drugs. Under rule 154 of the Drugs and Cosmetics Rules, before a licence to manufacture the products claimed by the manufacturer to be a ayurvedic drug is granted, the technical committee will have to examine the claim thereto and such committee will consist of experts on the subject namely, ayurvedic drug and it is upon such satisfaction the licence is gra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the taxing statute with nearly similar entries like the Central Excises and Salt Act, the Bombay High Court on April 27, 1988 held the product namely, the tooth-paste, as not a tooth-paste or cosmetic but an ayurvedic medicine exigible to excise duty under the relevant entry of ayurvedic medicines. It is therefore submitted that the decision in [1968] 22 STC 169 (Bom) (Commissioner of Sales Tax v. Vicco Laboratories) need not be attached much importance. 5.. Interpreting the entry in question, it was submitted that the toilet articles whether medicated or not would only mean that it applies to articles which are not medicines but which are only medicated. In the present case, the goods with which we are concerned is a medicine and therefore, the question of whether medicated or not would not arise at all. The expression "whether medicated or not" would not convert a medicine into a toilet article. It only means, essentially a toilet article shall not lose the character of toilet article merely because certain medicinal components have been added to it. By referring to the provisions of the Drugs Act, it was very seriously contended that much of the products which are ayurvedic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon the decisions in Union of India v. Delhi Cloth General Mills Co. Ltd. (1977) 1 ELT 199 (SC), Porrits Spencer (Asia) Limited v. Union of India (1980) ELT 679, Parry Confectionery Ltd., Madras v. Government of India (1980) ELT 468, Devidayal Rolling Refineries Pvt. Ltd. v. A.V. Borkar, Superintendent, Central Excise (1983) ELT 338 and Empire Industries Limited v. Union of India [1987] 64 STC 42 (SC); (1985) 20 ELT 179 (SC). 7.. Learned counsel also approached this matter from another angle as to how the parallel judicial authorities either under the sales tax law or analogous tax and enactments have considered these goods to which some reference has been made earlier. It was therefore submitted that, the factual and legal data placed before the court should be adequate enough to answer the question in favour of the appellant that the products squarely fall within the scope of entry 5 of Part M of the Second Schedule to the Act. In addition, material was sought to be placed in the shape of certificates issued by medical practitioners, doctors, chemists, druggists and lastly the consumers who are the persons who use the products as to whether they use or consider them as d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evied in respect of the products by proper classification thereto and such provisions will have to be construed strictly and if two views are possible, the one favourable to the assessee should be accepted and if there is any ambiguity, it should also be interpreted to the advantage of the assessee. On that basis, it was contended that these appeals were liable to be allowed. 9.. After we heard the matter on an earlier occasion and put of further consideration, a decision in BPL Pharmaceuticals Ltd. v. Collector of Central Excise, Vadodara [1997] 104 STC 164 (SC); (1995) 77 ELT 485 rendered by the Supreme Court is brought to our notice on behalf of the appellant. In that decision, the Supreme Court was concerned with "Selsun" anti-dandruff preparation containing 2.5 per cent of selenium sulphide which is the full therapeutic limit permissible under the pharmacopoeia. The said product was manufactured under the drugs licence as a medicine, put up as a medicine, used under doctor's advice and sold through chemist's shops and a doctor's prescription. It is understood as a medicine in common parlance on the basis of the material placed before the court. Pricewise it was found to be m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter with reference to the dictionary meaning of cosmetic and toiletry in the absence of any definition on such expression in the Act. They also approved the decisions in V.P. Somasundara Mudaliar v. State of Madras [1963] 14 STC 943 (Mad.) and Commissioner of Sales Tax v. Vicco Laboratories [1968] 22 STC 169 (Bom). It is therefore contended by the learned Government Pleader on behalf of the State that whatever may be the material that may have been placed in the context of excise enactment or for other purposes like the Drugs Act, so far as the sales tax enactments are concerned, it is clear that the courts have taken the view that the products in question are toiletry items and nothing else. Learned Government Pleader further elaborated that the entry in relation to toiletry items would include not merely toilet articles but, whether medicated or not also are covered by the same. Merely because a toilet article has certain medication in it would not render it a medicine or a medicinal preparation to fall outside that entry. He further contended that the entry will have to be read with Explanation VI to the Schedule. Learned Government Pleader referred to several decisions to expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d "toiletry items" with reference to the dictionary. The court held that in the absence of any special definition of "toilet articles" the reasoning adopted in Sarin Chemical Laboratory's case [1970] 26 STC 339 (SC) should be adopted in every case, to which we have made a reference. The court held that a tooth-paste is a toilet article within the meaning of entry 21A of Schedule E to the Bombay Sales Tax Act as amended by Gujarat Act and it is also noticed that shampoo is a kind of liquid soap and it has all the essential ingredients of soap and hence, that item was also held to be a toiletry article. It was lastly contended that Vicco Vajradanthi contains certain extracts of Babhul, Jambhul, Lavang, Manjistha, Dalchini, Bor, Vajradanti, Acrod, Khair, Patang, Akkal Kadha, Bakul, Jesthamadh, Kabab, Chini (Chirfal), Anant Root, Ajwan, Maifal, and Trifala, and merely because certain herbs, roots and barks of trees are used, the same cannot be treated as medicinal or pharmaceutical preparation and herbs, roots and barks in common parlance may be drugs or medicines but are not medicinal preparations and therefore, he submitted that the goods in question must be treated as toiletry item ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... toiletry item but only as a drug, the matter needs closer examination. As the matter stood prior to 1971 and when the Drugs Act stood amended and became enforceable in Maharashtra in relation to ayurvedic drugs also, the position took a different complexion altogether. Therefore, all those decisions that have been rendered prior to January 15, 1971 were in the context of dictionary meanings to such expressions as "toiletry items". There is no material before any one of the authorities in those cases as to the nature of the goods much less any licence obtained, under the Drugs Act or expert opinion furnished by the Technical Committee of the ISI, to classify it as a cosmetic or a toiletry item. In the absence of such material forth coming, the court had no other view possible to take in those circumstances. After the goods in question had been treated as ayurvedic drugs for the purpose of the Drugs Act, the excise authorities functioning under the Central Excises and Salt Act for purposes of classification of the goods and levy of tax, examined the matter and took the view that they were drugs and not cosmetics or toiletry items though they had earlier taken the view to the contrary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d if they also have some medicinal ingredients added to them, it would not cease to be so. The specific case put forth by the appellant is that they are medicines or medicinal preparations and that is why they were put to the necessity of obtaining licence under the Drugs Act. If the goods in truth are medicines or medicinal preparations, the same cannot be described to be a toiletry item by reason of the nature of the use to which they may be put otherwise. 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 the same will have to be treated as a medicinal preparation and not as a toiletry item. However the learned counsel appearing for the State submitted that the goods in question are not such preparations which could be obtained from a chemist's shop under prescription of a doctor. It is no doubt true that if certain goods have to be sold by a chemist alone under the prescription of a doctor, undoubtedly, such goods would fall in the category of medicinal preparation. If such goods could also be obtained in shops of ordinary m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods. In the present case, learned counsel for the appellant has placed material before this Court to show that the cost of Vajradanthi paste is much higher than either Colgate, Cibaca, Forhans, Babul or Promise and the cream is also much costlier than Fair Lovely or Ponds. 13.. In the view we have taken, it is wholly unnecessary to refer to the decisions relied upon by the learned counsel on either side in any great detail for, none of those decisions except in BPL Pharmaceuticals case [1997] 104 STC 164 (SC); (1995) 77 ELT 485 the effect of obtaining licence under the Drugs Act has been considered. It is rather unfortunate in these cases that the revisional authority did not examine the matter in the perspective with which it should have been done particularly, with reference to the material that was placed before him. He merely proceeded to hold assuming that the goods are toiletry items and concluded. 14.. Before parting with the case, it may be necessary to refer to one decision of this Court on which very strong reliance had been placed on behalf of the respondents. In L.M. Rajappachetty Bros. v. Commissioner of Commercial Taxes [1991] 81 STC 109 (Kar), this Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X
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