Common parlance test kept medicinal products within the drugs and medicines entry, displacing residuary taxation.

Classification under the Kerala Value Added Tax Act was determined by the common parlance test where the schedule did not define the product. Vicks tablets, Vicks Vaporub and balm were found to have medicinal character and to be understood as Ayurvedic medicine, so their sale over the counter without prescription did not exclude them from Entry 36 of the Third Schedule. The residuary or confectionery entries could not apply when the goods were covered by that specific entry, resulting in taxation at the lower rate. The text also notes that a clarification under Section 94 can be challenged by a person aggrieved, and limitation may run from date of knowledge where the appellant did not seek the clarification.

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Issues: (i) Whether the appellant was a person aggrieved entitled to maintain an appeal under Section 62 of the Kerala Value Added Tax Act against the clarification issued under Section 94 of the Kerala Value Added Tax Act, and whether the appeal was within limitation on the basis of date of knowledge; (ii) whether Vicks tablets, Vicks Vaporub and balm were classifiable under Entry 36 of the Third Schedule to the Kerala Value Added Tax Act as drugs or medicines, or under the confectionery/residuary entries attracting tax at 12.5%.

Issue (i): Whether the appellant was a person aggrieved entitled to maintain an appeal under Section 62 of the Kerala Value Added Tax Act against the clarification issued under Section 94 of the Kerala Value Added Tax Act, and whether the appeal was within limitation on the basis of date of knowledge.

Analysis: A clarification under Section 94 is final and binding on the applicant and authorities subordinate to the Commissioner. Since the clarification directly affected the manufacturer of the goods, the appellant was held to be a person aggrieved for the purpose of appeal under Section 62. The Court further held that where the person challenging the order had not sought the clarification, limitation could be reckoned from the date of knowledge of the order, and the appeal filed within 90 days from such knowledge was in time.

Conclusion: The appeal was maintainable and was within limitation.

Issue (ii): Whether Vicks tablets, Vicks Vaporub and balm were classifiable under Entry 36 of the Third Schedule to the Kerala Value Added Tax Act as drugs or medicines, or under the confectionery/residuary entries attracting tax at 12.5%.

Analysis: Classification was held to depend on the common parlance test where the tariff or schedule did not define the product. The Court relied on the principle that goods are to be understood in their ordinary and popular sense, and that sale across the counter without prescription does not by itself disqualify a product from being a medicament. The medicinal ingredients, their accepted use, and the character of the product were held to support classification as Ayurvedic medicine. Rule 23 of the Rules of Interpretation was held not to override that conclusion, and the residuary entry could not apply when the goods were covered by Entry 36.

Conclusion: The products were classifiable under Entry 36 of the Third Schedule and taxable only at 4%.

Final Conclusion: The clarification order was set aside and the products in question were held to fall within the drugs and medicines entry, giving the assessee the lower rate of tax.

Ratio Decidendi: Where a taxing statute does not define the product, its classification must be determined in the common parlance sense, and a product with medicinal character is not excluded from being a medicament merely because it is sold over the counter or contains subsidiary non-medicinal features.

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