Ayurvedic medicine classification turns on formulation, drug licence and regulatory approval, not medicinal ingredients alone.

Products marketed as ayurvedic medicines are classified by their formulation, manufacture under a valid drug licence, and recognition within the medicinal regulatory framework, not merely by the presence of ingredients with medicinal properties. Under the Uttarakhand VAT rate structure, goods falling within the medicinal schedule attracted the concessional rate, while products lacking proof of authorised ayurvedic preparation remained taxable at the higher rate. On the stated material, Chlormint with herbasole and Happydent were treated as ayurvedic medicines, whereas Chlormint candy, Chlormint ice, Chlormint gum, Gum draggy, chewable gum draggy and Chatar patar were not.

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Issues: Whether the items marketed as Chlormint and related products were classifiable as ayurvedic medicines or as confectionary items for the purpose of trade tax under the Uttaranchal Value Added Tax Act, 2005, and whether different tax rates applied to the different products.

Analysis: The rate structure under section 4(2)(b) of the Uttaranchal Value Added Tax Act, 2005, applied a concessional rate to goods in Schedule II(B), including drugs, medicines and pharmaceutical preparations, while goods not so included attracted the higher rate. The relevant enquiry was whether the products were prepared according to recognised ayurvedic formulations and were manufactured under a valid drug licence, or whether they were merely sweetmeats or mouth-fresheners sold for taste. Mere presence of ingredients with medicinal properties was held insufficient by itself, but the decisive factors were the nature of the formulation, the drug licence, and the approval of the preparations under the Drugs and Cosmetics Act, 1940. On the material on record, Chlormint with herbasole and Happydent were shown to be manufactured under a valid ayurvedic drug licence and were supported by the prescribed formulation and licensing approval. By contrast, the other items did not have proof of manufacture according to authoritative ayurvedic formulations.

Conclusion: Chlormint with herbasole and Happydent were held to be ayurvedic medicines taxable at the concessional rate, while Chlormint candy, Chlormint ice, Chlormint gum, Gum draggy, chewable gum draggy and Chatar patar were held not to be ayurvedic medicines and remained taxable at the higher rate.

Final Conclusion: The revisions succeeded only in part, with the classification altered product-wise and the Tribunal's order modified accordingly.

Ratio Decidendi: A product is taxable as an ayurvedic medicine only if its character is established by its formulation, manufacture under a valid drug licence, and recognition under the relevant medicinal framework, and not merely because it contains ingredients having medicinal properties.

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