Sales tax classification of baby oil turned on whether it was a medicine or a cosmetic under the rate notification

Keo Karpin Baby Oil was treated as a medicine or drug rather than a cosmetic for sales tax classification purposes under the Rajasthan Sales Tax Act rate notification. The court noted that the notification separately covered medicines and cosmetics, and the Revenue had not discharged the burden of showing that the product fell within the cosmetic entry because its ingredients, label and literature were not properly examined. Earlier judicial findings on its chemical composition, manufacture under a drug licence and prophylactic qualities were followed, with the settled classification view maintained where the facts and law remained unchanged.

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Issues: Whether Keo Karpin Baby Oil was classifiable as a medicine or drug and taxable at the lower rate, or as a cosmetic taxable at the higher rate under the Rajasthan sales tax notification.

Analysis: The rate notification issued under section 5 of the Rajasthan Sales Tax Act, 1954 separately prescribed entries for medicines and cosmetics. The Court noted that the Revenue had not discharged the burden of proving that the product fell within the cosmetic entry, as no material regarding its ingredients, label, or literature had been properly considered by the assessing or appellate authorities. The product had already been treated as a medicine or drug on the basis of earlier judicial findings, including its chemical composition, manufacture under a drug licence, and prophylactic qualities. The Court also applied the principle that in tax matters, an earlier settled view is ordinarily followed when the facts and law remain the same.

Conclusion: Keo Karpin Baby Oil was rightly treated as a medicine or drug, not as a cosmetic, and the revision challenge failed.

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