2008 (5) TMI 46 - SC - VAT / Sales Tax

Appeals allowed with costs; petroleum jelly (vaseline) properly classified as cosmetic/toilet preparation, not medicine, based on intent

PONDS INDIA LTD. Versus COMMISSIONER OF TRADE TAX, LUCKNOW

The SC allowed the appeals with costs, setting aside the impugned judgments. It held that classification of petroleum jelly under the U.P. Trade Tax Act ... Classification of petroleum jelly - 'drug' or a 'cosmetic' under the U.P. Trade Tax Act, 1948 - HELD THAT:- For the purpose of finding out the definition of `drug', within the meaning of the Sales Tax Act, this reference to the statutory meaning contained in the Act would be permissible. However, if the definition contained therein does not fit in with the object and purport for which an entry had been introduced under the local Sales Tax Act, the matter would be different. It has not been suggested nor could it be that even the ordinary meaning of `medicine' cannot be read into the taxing statute while interpreting an Entry made therein. We cannot be oblivious of the fact that Revenue itself thought 100 per cent pure white petroleum jelly of I.P. grade (non-perfumed) to be a pharmaceutical preparation from 1981 to 1989. No material change has occurred after the said period. When a case of obvious intent on the part of the Legislature is made out, a meaning which subserves the legislative intent must be given effect to. It is however also well known that when a word is defined by the legislature itself, the same meaning may be attributed even in the changed situation. Entry 5 relates to 'cosmetics' and 'toilet preparation'. If the common parlance test is to be applied, vaseline must come within the purview of cosmetic or toilet preparation. With a view to satisfy the requirements of the said definition, it must be held to be used for beautification or care of the skin in the normal circumstances. If the product, in question does not satisfy the aforementioned twin tests, it is difficult to presume any legislative intention in this behalf despite the fact that Vaseline had been deleted from the entry relating to cosmetic and toilet preparation. We have noticed hereinbefore that the meaning of 'drug' is very wide and same has been held to be so in a large number of cases. The court set aside the impugned judgments and allowed the appeals with costs. Issues Involved:1. Classification of petroleum jelly as a 'drug' or a 'cosmetic' under the U.P. Trade Tax Act, 1948.2. Interpretation of statutory definitions and entries in taxing statutes.3. Application of common parlance and commercial meaning tests.4. Reliance on previous judicial decisions and consistency in tax assessments.5. Use of external aids like dictionaries and Wikipedia in statutory interpretation.Detailed Analysis:1. Classification of Petroleum Jelly:The primary issue was whether petroleum jelly should be classified as a 'drug' or a 'cosmetic' under the U.P. Trade Tax Act, 1948. The court examined the definitions provided in the Drugs and Cosmetics Act, 1940. Section 3(aaa) defines 'cosmetic' as any article intended for beautifying or altering appearance, while Section 3(b) defines 'drug' in an extensive manner, including substances used for diagnosis, treatment, or prevention of diseases. The court noted that petroleum jelly is listed in Schedule K of the Drugs and Cosmetics Rules, 1945, as a drug, exempted from certain provisions if manufactured under a valid drug license.2. Interpretation of Statutory Definitions:The court emphasized the difference between inclusive and restrictive definitions. It cited various judgments to illustrate that the term 'drug' has an extensive definition, whereas 'cosmetic' has a restrictive one. The court referenced cases like Hamdard (Wakf) Laboratories vs. Dy. Labour Commissioner and Bharat Coop. Bank (Mumbai) Ltd. vs. Coop. Bank Employees Union to underscore that an inclusive definition is meant to be extensive, covering a broader range of items.3. Application of Common Parlance and Commercial Meaning Tests:The court discussed the importance of interpreting statutory terms based on common parlance and commercial meaning. It cited cases like M/s. Mahalakshmi Oil Mills vs. State of Andhra Pradesh and M/s. Asian Paints India Ltd. vs. Collector of Central Excise to emphasize that terms in taxing statutes should be understood in their popular sense, as perceived by those dealing with the products.4. Reliance on Previous Judicial Decisions and Consistency in Tax Assessments:The court highlighted the importance of consistency in tax assessments. It noted that the Sales Tax Tribunal had previously classified petroleum jelly as a pharmaceutical preparation, and this classification was not challenged by the Revenue. The court referenced Bharat Sanchar Nigam Ltd. and Another vs. Union of India and Others to stress that consistent interpretation should be maintained unless there is a material change in facts or law.5. Use of External Aids in Statutory Interpretation:The court discussed the use of external aids like dictionaries and Wikipedia in interpreting statutory terms. While acknowledging that Wikipedia can be a useful resource, the court cautioned against relying on it for critical legal issues, citing opinions from various judges and legal scholars. The court ultimately relied on statutory definitions and expert opinions over external aids.Conclusion:The court concluded that petroleum jelly should be classified as a 'drug' under the U.P. Trade Tax Act, 1948, based on its inclusion in Schedule K of the Drugs and Cosmetics Rules, 1945, and its consistent treatment as a pharmaceutical preparation in previous tax assessments. The court set aside the impugned judgments and allowed the appeals with costs.