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Emami Limited and another Versus State of Assam and another (and other cases)

2015 (11) TMI 1319 - GAUHATI HIGH COURT

Classification of goods under Assam VAT - ayurvedic medicines or cosmetics and toilet preparations - Goods fall under Entry 1 of the Fifth Schedule or Entry 21 of the Fourth Schedule - Held that:- Drugs and medicines clearly falls within the purview of entry 21 of the Fourth Schedule to the Act of 2003 and as such, taxable at four per cent on MRP basis. The Explanation which was added to the aforesaid entry No. 21 by notification dated July 29, 2005 states that expression "drugs and medicines" s .....

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ered by entry 1 of the Fifth Schedule. - products which are involved in the proceedings before us are basically treated as drugs and medicines although they have ancillary use as cosmetics and toilet products, and as such, the respondent-authorities herein were not right in treating those articles as cosmetics and toilet products for the purpose of levy of tax at 12.5 per cent in terms of entry No. 1 of the Fifth Schedule to the Act of 2003. Rather, tax on those products was to be levied at per .....

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Khan, O. P. Bhati, M. K. Jain, T. C. Das, R. L. Yadav, Ms. K. Yadav, Ms. A. Barua, A. Kabra and J. Choudhury for the petitioners. The SC. Finance and Taxation and D. Saikia for the respondents. ORDER Since all these proceedings involve common question of law and facts, we propose to dispose of all these proceedings by a common order. We have heard Dr. A.K. Saraf, learned senior counsel, assisted by Mr. R.L. Yadav learned counsel for the petitioners and also heard Mr. M. Nath, learned standing c .....

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not covered under entry 21 of the Fourth Schedule to the Assam Value Added Tax Act, 2003 (in short, "the said Act or the Act of 2003") further holding such goods are liable to be taxed at the rate of 12.5 per cent in terms of entry 1 of the Fifth Schedule to the said Act. 3. Being aggrieved by such classification, the petitioner had approached this court by way of W.P. (C) No. 3023 of 2008 contending that the articles, so mentioned in the impugned order, being ayurvedic medicines, fal .....

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are basically used medicines and when in common parlance too, such goods are treated as medicines and drugs, entry 1 of the Fifth Schedule of the said Act cannot be made applicable to those goods to collect tax on such goods at the rate of 12.5 per cent as held by respondent No. 2 in the impugned order. 5. It is also the case of the petitioner that the Explanation to entry 21 of the Fourth Schedule of the Act is designed to exclude goods which are drugs and medicines having characteristics and .....

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to become drugs and medicines as contemplated under the law since decisive test is what is main use of such products. According to Dr. Saraf, learned senior counsel, the aforesaid articles are basically used for medicinal purpose. 7. In support of such contention, the decision of Puma Ayurvedic Herbal (P.) Ltd. v. Commissioner, Central Excise, Nagpur reported in [2006] 145 STC 200 (SC) : [2006] 3 SCC 266 as well as the decision of V.C. Ramalingam and Sons v. State of Tamil Nadu reported in [200 .....

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hand, Mr. M. Nath, learned standing counsel for the Tax Department/State respondent submits that by applying two tests, recognised under the law, namely, users test and common parlance test to the items in the impugned order one would find that the goods in question are not drugs and medicines as contemplated under the law. The fact that those articles are capable of being used as cosmetics and toilet preparations, make such a conclusion inevitable. In support of such contention, the decision in .....

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147 passed by the Commissioner of Tax on June 3, 2008 whereby product "Boroline" manufactured by the petitioners-company had been classified as cosmetic falling outside the scope of entry 21 of the Fourth Schedule of the Act of 2003 and is, therefore, liable to be taxed at 12.5 per cent in terms of entry 1 of the Fifth Schedule to the said Act. 11. In W.P. (C) No. 5622 of 2008, the petitioners are M/s. Sharma Ayurvedic Pvt. Ltd., (a Pvt. Ltd. Co.) Ms. M.P. Agencies (a partnership-firm) .....

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he said Act. 12. In W.P. (C) No. 4330 of 2008, the petitioners are Assam Chemical and Pharmaceuticals Pvt. Ltd. and its officer (hereinafter collectively referred to as the petitioner No. 4) questioned the order No. CTS 78/2007/146 passed by the Commissioner of Tax on July 3, 2008 whereby product 'Aspoline' manufactured by the petitioners-company had been classified as cosmetic falling outside the scope of entry 21 of the Fourth Schedule to the Act of 2003 and as such, liable to be taxed .....

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the Fourth Schedule of the Act of 2003 and as such, is liable to be taxed at 12.5 per cent in terms of entry 1 of the Fifth Schedule to the said Act. 14. Dr. Saraf, learned senior counsel in all those proceeding being a counsel for the petitioners, advanced arguments, similar to the arguments in W.P. (C) No. 3023 of 2008 to contend that the products in all those proceedings cannot be assessed at 12.5 per cent in terms of entry No. 1 of the Fifth Schedule to the Act of 2003. Rather, tax on such .....

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f the Fifth Schedule to the Act so as to collect tax on those goods at 12.5 per cent in terms of entry No. 1 of the Fifth Schedule to the Act of 2003. 16. Before addressing competing arguments, we find it necessary to have a look at the provisions of entry No. 21 of the Fourth Schedule as well as entry No. 1 to the Fifth Schedule of the Act of 2003. For ready reference those provisions are reproduced below:- "Sl. No. Description Rate of tax paise in the rupee 21 Drug and medicine including .....

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l other goods not covered by First, Second, Third and Fourth Schedule 12.5" 17. In that connection, we also find it necessary to have a look at the decisions, rendered by the apex court of the country in the case of Puma Ayurvedic Herbal [2006] 145 STC 200 (SC) : [2006] 3 SCC 266. It may be stated that Puma Ayurvedic Herbal (P.) Ltd. [2006] 145 STC 200 (SC) : [2006] 3 SCC 266, was a manufacturer of ayurvedic products. It had licence to manufacture those and other products from the Drugs Con .....

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al before the apex court of the country which is decided in favour of the company in the following manner (pages 208 and 209 in 145 STC):- "19. The word 'medicament' is not defined anywhere while the word 'cosmetic' is defined in the Drugs and Cosmetics Act, 1940 as under:- '3A. Cosmetic means any article intended to be rubbed, poured, sprinkled or sprayed on, or introduced into, or otherwise applied to the human body or any part thereof for cleansing, beautifying, promo .....

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concerned may improve. What is to be seen is the primary use of the product. To illustrate, a particular ayurvedic product may be used for treating baldness. Baldness is a medical problem. By use of the product if a person is able to grow hair on his head, his ailment of baldness is cured and the person's appearance may improve. The product used for the purpose cannot be described as cosmetic simply because it has ultimately led to improvement in appearance of the person. The primary role of .....

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ent is said to be paraffin wax, while the medicinal part, i.e., menthol is only two per cent. Vicks Vaporub has been held to be medicament by this court in Collector of Central Excise v. Richardson Hindustan Ltd. [2004] 9 SCC 156. Therefore, the fact that the use of medicinal element in a product was minimal does not detract from it being classified as a medicament." 19. Similar decision has been rendered in the case of Commissioner of Central Excise [2003] 132 STC 251 (SC) : [2003] 5 SCC 6 .....

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