Primary use test governs classification of drugs and cosmetics; ancillary cosmetic use does not exclude concessional treatment.

Goods are classified by their primary use, common parlance meaning and user perception, not merely by the presence of medicinal ingredients or an ancillary cosmetic use. Under entry 21 of the Fourth Schedule to the Assam Value Added Tax Act, products that are essentially drugs and medicines remain within the concessional entry even if they can also be used in a cosmetic or toilet manner. The Explanation to entry 21 excludes only goods that are properly treated as cosmetics, toilet preparations, toothpaste, tooth powder, toilet articles or soaps. On that basis, the goods were classified as drugs and medicines under entry 21 and not as cosmetics under entry 1 of the Fifth Schedule; the contrary classification orders were set aside.

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Issues: Whether the goods in question were classifiable as drugs and medicines under entry 21 of the Fourth Schedule to the Assam Value Added Tax Act, 2003, or as cosmetics and toilet preparations taxable under entry 1 of the Fifth Schedule; and whether the Explanation to entry 21 excluded products that are primarily drugs and medicines but also capable of ancillary cosmetic use.

Analysis: Entry 21 covered drugs and medicines at the concessional rate, while the Explanation excluded only those products which are capable of being used as cosmetics, toilet preparations, toothpaste, tooth powder, toilet articles and soaps. The controlling tests were the primary use of the product, its common parlance understanding, and user perception. Applying those principles, the products before the Court were found to be essentially drugs and medicines, with only ancillary cosmetic or toilet use. The mere fact that they could also be used in a cosmetic manner did not take them out of entry 21, nor did the extent of medicinal ingredients by itself determine classification.

Conclusion: The impugned goods were classifiable under entry 21 of the Fourth Schedule and not under entry 1 of the Fifth Schedule; the classification orders and related directions taxing them at 12.5 per cent were set aside.

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