Ayurvedic medicine classification turns on authoritative texts, not licence alone, for proper tax treatment

For classification as an Ayurvedic medicine under the Uttarakhand VAT Act, the decisive test was whether the product's ingredients were shown to be covered by authoritative Ayurvedic texts in the First Schedule to the Drugs and Cosmetics Act. An Ayurvedic drug licence was relevant but not conclusive, and the quantity of active ingredients or sale without prescription was not determinative. The Tribunal had not properly examined the assessee's claim of acceptance in other States or the absence of evidence linking the product to authoritative texts, so the classification could not be finalised on the existing record and the matter was remanded for fresh consideration.

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Issues: Whether the product 'Halls' was proved to be an Ayurvedic medicine for the purpose of Entry 41 of Schedule II(B) of the Uttarakhand Value Added Tax Act, 2005, and whether the Tribunal's order required interference and reconsideration.

Analysis: The classification of the product depended on whether its ingredients were shown to be mentioned in the authoritative Ayurvedic texts referred to in the First Schedule to the Drugs and Cosmetics Act, 1940. The existence of an Ayurvedic drug licence was a relevant circumstance, but it was not conclusive by itself. The Court noted that the quantity of active ingredients and the fact that the product was sold without prescription were not decisive. It also found that the Tribunal had not properly examined the assessee's claim that the same product had been treated as an Ayurvedic medicine in other States, and had not adequately addressed the absence of evidence showing reference to authoritative Ayurvedic texts.

Conclusion: The product could not be finally classified on the existing material, and the Tribunal's order was set aside with a remand for fresh consideration in accordance with law.

Ratio Decidendi: For classification as an Ayurvedic medicine, a drug licence is only one relevant factor; the decisive test is whether the product's ingredients are shown to be covered by authoritative Ayurvedic texts, and the classification must be determined on proper evidence.

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