VAT classification of empty HPMC capsule shells depends on the specific scheduled entry, not merely a drug licence.

Empty HPMC capsule shells were held not to qualify as "drugs and medicines" for VAT classification merely because they were manufactured under a drug licence. The Court applied the schedule under the Madhya Pradesh Value Added Tax Act, 2002 and noted that the definition of "drug" in the Drugs and Cosmetics Act, 1940 did not by itself establish coverage under the claimed entry. As the record did not show exclusive use as drugs or medicines, the product failed to satisfy the specific scheduled entry and was classifiable under the residuary entry at the higher rate.

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Issues: Whether empty HPMC capsule shells are classifiable as "drugs and medicines" under the Madhya Pradesh Value Added Tax Act, 2002 or fall under the residuary entry and are taxable at the higher rate.

Analysis: Section 70 of the Madhya Pradesh Value Added Tax Act, 2002 empowers the Commissioner to determine the proper tax entry for a commodity. The relevant schedule distinguishes between bulk drugs, drugs and medicines, and residuary goods. Mere manufacture under a drug licence does not, by itself, make the product a drug or medicine. The statutory definition of "drug" in Section 3(b) of the Drugs and Cosmetics Act, 1940 includes certain components of drugs, but the material on record did not establish that the capsule shells were exclusively used as drugs or medicines. The product was therefore not shown to satisfy the specific scheduled entry claimed by the petitioner.

Conclusion: Empty HPMC capsule shells are not covered by the drugs and medicines entry and are taxable under the residuary entry.

Ratio Decidendi: A product is not treated as a drug or medicine for VAT classification merely because it is manufactured under a drug licence; unless the specific scheduled entry is substantiated, it falls under the residuary category.

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