Ayurvedic drug classification failed where the oil was found primarily to function as hair oil for sales tax purposes.

A product sold as Ayurvedic Cool Banphool Oil was held not to qualify as an ayurvedic drug or medicine for sales tax purposes because the evidence did not show manufacture exclusively according to the authoritative ayurvedic formulae required by the Drugs and Cosmetics Act definition. A drug licence, approved composition, advertisements and selective prescriptions were not conclusive for classification under the sales tax notification, and the commodity was found to be used predominantly as hair oil. It was therefore taxable under the hair oil entry, and the challenge to the assessment failed.

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Issues: Whether the product manufactured and sold as Ayurvedic Cool Banphool Oil was an ayurvedic drug or medicine eligible for the concessional rate under the notification, or was taxable as hair oil under the sales tax entry applicable to hair oil.

Analysis: The product was claimed to be an ayurvedic medicine because it had a drug licence, its composition was approved by the drug control authority, it was advertised as having medicinal benefits, and some prescriptions and purchase records were produced. The notifications under the sales tax law, however, treated ayurvedic drugs and hair oil as separate taxable entries. The relevant definition of ayurvedic drug under section 3(a) of the Drugs and Cosmetics Act required not merely medicinal ingredients or claimed therapeutic effect, but manufacture exclusively according to formulae in the authoritative ayurvedic books specified in the First Schedule. The evidence produced did not establish that the product was manufactured in that manner. The drug licence and other materials were held not to be conclusive for sales tax classification, and the product was found to be used predominantly as oil for the hair and head. The supporting prescriptions, cash memos and research paper were treated as insufficient and unreliable for proving that the commodity was an ayurvedic medicine for tax purposes.

Conclusion: The product was not proved to be an ayurvedic drug or medicine within the meaning of the relevant notification and was rightly assessed as hair oil. The challenge to the assessment failed.

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