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State of Madhya Pradesh Versus Marico Industries Ltd.

2016 (7) TMI 1057 - SUPREME COURT

Entry tax - products, namely, Mediker and Starch (Revive) - common parlance test - Madhya Pradesh Entry Tax Act, 1976 - Held that:- Mediker which is used for anti-lice treatment is a drug because of its medicinal affect. This position has been accepted by this Court. Once it is a drug, it cannot be a shampoo. As a natural corollary, it will not invite the liability of levy of entry tax. - Decided against the revenue. - Civil Appeal No. 8656 of 2015 (@ S.L.P. (C) No. 21106 of 2014) - Dated:- 22-7 .....

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roducts, namely, Mediker and Starch (Revive) after declining to entertain the stance of the assessee that Mediker being a drug Starch (Revive) being not a chemical, are not liable to levy of entry tax under the Madhya Pradesh Entry Tax Act, 1976, (for short the E.T. Act ), has been dislodged and both the products have been held not to be within the ambit of entry tax. 2. The facts giving rise to the present appeal are the respondent is a manufacturer of hair oil, edible oil, Mediker and Starch ( .....

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before the Additional Commissioner, Commercial Tax, Indore. It was contended before the said authority that the entry tax imposed on the assessee on Mediker, which is meant for anti-lice treatment, was illegal being not permissible under any of the entries mentioned in Schedule II of the E.T. Act and there was no material on record to treat starch as a chemical. It was also urged that Mediker is a medicine and hence, it did not attract entry tax. The said submissions were repelled and tax was im .....

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ence of its mention in the Schedule. It was also held that starch is not a chemical. 3. Criticising the order passed by the High Court, Mr. C.D. Singh, learned counsel appearing for the State would contend that Mediker, in common parlance, is considered as shampoo and not as a medicine because it is nowhere mentioned in the label of the product that after removal of the lice, it cannot be used again or cannot be used as other shampoos for hair wash. Relying on the decision in Deputy Commissioner .....

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awn inspiration from United Offset Process Pvt. Ltd. v. Asst. Collector of Customs, Bombay & Ors (1989) Supp. 1 SCC 131 . Submission of Mr. Singh is that just because the product contains D-Phenothrin EP and is used for treating lice, it cannot be termed as medicament in view of the principles stated in Sunny Industries Pvt. Ltd. v. Collector of Central Excise, Calcutta (2003) 4 SCC 280. According to the learned counsel for the State, Mediker is a kind of shampoo and hence, it is covered und .....

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urged by him that Mediker anti-lice treatment is manufactured after obtaining the drug licence under the Drugs and Cosmetics Act, 1940 (for short, the 1940 Act ) wherein it has been classified as a drug falling under Section 3(b) of the 1940 Act. It is contended by him that that Mediker anti-lice treatment satisfies the definition of the drug and after due scrutiny, the drug control authorities have granted licence for the said product as a drug. Mr. Bagaria would submit that period of treatment .....

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tion either in the Schedule I or Schedule II and are not liable to levy of entry tax. Incrementing the submission learned senior counsel would contend that the revenue has charged entry tax under Entry 32 of Schedule II which really relates to different cosmetics, depilatories, etc. and hair shampoo is one of such items, but Mediker anti-lice treatment is not a hair shampoo but is a medicine/drug. As far as the Revive instant starch is concerned, learned senior counsel has propounded that starch .....

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E.T. Act deals with incidence of taxation. Section 3(1)(a) reads as follows:- There shall be levied an entry tax: (a) on the entry in the course of business of a dealer of goods specified in Schedule II, into each local area for consumption, use or sale therein; and (b) …….. 6. In the case at hand, we are concerned with certain entries in Schedule II. Entry 32 which has been sought to be used to justify the imposition of entry tax on Mediker, reads as follows:- Scents, perfumes, ha .....

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t Mediker contains active Permethrin which is used to paralyse the insect lice, thereby killing it; that Mediker is basically a medicinal product, since the skin (cuticulam) of the louse is similar to the structure of human nail it has first to be made porous so that the active ingredient can penetrate and enter the louse and paralyse it; that for the purpose of treatment a wetting agent is needed and this wetting agent is the surface active agent used in Mediker; that the surface agent is nothi .....

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there is one cardinal rule of interpretation which has always to be borne in mind while interpreting entries in sales tax legislation and it is that the words used in the entries must be construed not in any technical sense nor from the scientific point of view but as understood in common parlance. We must give the words used by the legislature their popular-sense meaning that sense which people conversant with the subject-matter with which the statute is dealing would attribute to it . The wor .....

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lip; Learned counsel for the State has heavily relied on the said passage. It is well settled in law that ratio of a judgment is to be appreciated in the factual backdrop of the case. In the said case, as we find, the factual background was absolutely different and, therefore, we have no hesitation in holding that the said authority remotely does not assist the revenue for buttressing the contention that Mediker is a shampoo. 9. In Commissioner of Central Excise, Nagpur v. Shree Baidyanath Ayurv .....

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g the pendency of the appeals before this Court, the Central Excise Tariff Act, 1985 was enacted which replaced the Schedule to the Central Excise and Salt Act, 1944. The 1985 Act, as the Court noticed, dealt with pharmaceutical products and there was a Sub-Heading 3003.30 which provided for no excise duty leviable on medicaments, including those used in ayurvedic, unani, siddha, homeopathic or bio-chemic system. The Court also noticed that in 1987 the First Schedule to the 1940 Act was amended .....

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as drawn our attention to paragraph 46 of the decision in Shree Baidyanath Ayurved Bhavan Limited-II (supra) to emphasise on the common parlance test. We think it appropriate to reproduce the entire paragraph:- As a matter of fact, this Court has consistently applied common parlance test as one of the well-recognised tests to find out whether the product falls under Chapter 30 or Chapter 33. In a recent decision in Puma Ayurvedic Herbal (P) Ltd. v. CCE (2006) 3 SCC 266 this Court observed that i .....

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t the test is determinative for the issue involved. The tests are: I. Whether the item is commonly understood as a medicament which is called the common parlance test. For this test it will have to be seen whether in common parlance the 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 its use after the ailment is cured. The approach of the consumer towar .....

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accepted the submissions of the revenue. 10. There can be no dispute over the proposition of law laid down in the aforesaid authority. The thrust of the matter is how the courts have treated a particular product for the purpose of classification under the excise law and what status is to be given. The issue of anti-lice treatment arose in Collector of Central Excise v. Pharmasia (P) Ltd. 1990 (47) E.L.T. 658 (Tribunal) . The tribunal reproduced the label appearing on every bottle of Mediker. Th .....

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se q.s. MEDIKER is the registered trade mark of Richardson - Vicks Inc. Manufactured by PROCTER & GAMBLE INDIA LIMITED BOMBAY 400011 Licenced Users of the Trademark Contents 45ml Mfg. Lic No. 526/A/AP Retail price not to exceed ₹ 9.60 (Local Tax extra) FOR EXTERNAL USE ONLY MADE IN INDIA Expiry date 2 years from the date of Mfg. Batch No. 8969 Date of Mfg. 12/88." 11. The tribunal, as the judgment would show, analysed many an aspect and opined that:- 17. Considering the arguments .....

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in and other ingredients. The penetrating power of D-Phenothrin whereby it paralyses the lice was established before us during the course of hearing. The label itself immediately after the name of the product (Mediker) mentions "anti-lice treatment". These show that "Mediker" is a special product made for the treatment of lice. The submissions made by the learned Advocate that the anti-lice treatment is not subsidiary to the cosmetic function but is in the main function is bo .....

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-phenothrin, its various isomers and its use as insecticides. Extra pharmacopea (Martindale) also mentions phenothrin as being used in drugs as insecticides. In this connection we find that the certificate from the Drug Control Administration, Government of Andhra Pradesh dated 22-6-1987 is relevant. The following extract supports the case of the respondents : "As D-phenothrin is used on human body for topical use and has medicinal properties on scalp for antilice treatment as per the Notif .....

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a medicament. Therefore, we conclude that Mediker is a medicament. We further observe that the medicinal use of the product is not its subsidiary function but is the only function. Be it noted, the order passed by the tribunal was assailed in Civil Appeal No. 3220 of 1990 and this Court had dismissed the Civil Appeal in Collector of Central Excise, Hyderabad v. M/s Pharmsia Pvt. Ltd. 1996 (83) ELT A178 (SC). 13. In Sujanil Chemo Industries v. Commissioner of C. Ex. & Cus., Pune 2005 (181) EL .....

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peutic. It is also prophylactic inasmuch as it prevents disease which will follow from infestation of lice. Thus, this is a product which is used for therapeutic and prophylactic purposes. It would thus be a Medicament within the meaning of the term Medicament in Note 2 of Chapter 30. It therefore gets excluded from Chapter 38. 7. This view has also been taken by us in the case of ICPA Health Products (P) Ltd. v. Commissioner of C. Ex., Vadodara reported in 2004 (167) ELT 20. We are also in agre .....

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uty, whereas a medicinal product or a medicament is meant to treat some medical condition. It may happen that while treating a particular medical problem, after the problem is cured, the appearance of the person 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 cure .....

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ppreciating the facts that the products are used by the surgeons for the purpose of cleaning or degerming their hands and scrubbing the surface of the skin of the patient before that portion is operated upon. Thereafter the Court observed thus:- The purpose is to prevent the infection or disease. Therefore, the product in question can be safely classified as a medicament which would fall under Chapter Sub-Heading 3003 which is a specific entry and not under Chapter Sub-Heading 3402.90 which is a .....

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