Trade understanding test governs classification of bulk drugs and pharmaceutical preparations; incomplete facts required fresh reconsideration.

Bulk drugs and pharmaceutical preparations were considered for sales tax classification under the Kerala General Sales Tax Act, with the issue turning on whether they were medicines or drugs under entry 116, or chemicals under entry 42. The relevant test was their true commercial character, assessed by how traders and consumers understood the goods in the market. Although chemical content was present, entry 42 applied only to chemicals not elsewhere specified, while the Drugs and Cosmetics Act definition of "drug" was also relevant. Because the factual material was incomplete on market understanding, the classification could not be finally determined on the existing record and required fresh consideration with additional evidence.

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Issues: Whether bulk drugs and pharmaceutical preparations sold by the assessee are to be classified as medicines or drugs falling under entry 116 of the First Schedule to the Kerala General Sales Tax Act, 1963, or as chemicals falling under entry 42 of that Schedule, and whether the matter required remand for fresh consideration.

Analysis: The rate depends on the true commercial character of the goods. Although the goods had chemical content, entry 42 applies only to chemicals not elsewhere specified, while entry 116 covers medicines and drugs. The definition of "drug" in section 3(b) of the Drugs and Cosmetics Act, 1940 was relevant, particularly the inclusion of substances intended for use as components of a drug. The material before the authorities was insufficient to determine whether traders and consumers understood the goods as drugs or only as chemicals. The existing finding rested on an incomplete factual inquiry and did not adequately address the common understanding of the goods in the market.

Conclusion: The classification issue could not be finally decided on the existing record and had to be reconsidered by the Tribunal after allowing further evidence.

Ratio Decidendi: For sales tax classification, the decisive test is how the goods are understood in trade and by consumers, and where the factual foundation for that inquiry is lacking, the matter must be remitted for fresh determination.

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