Classification of petroleum jelly as a drug under VAT law confirmed on medicinal use and drug-regime treatment.

White or yellow petroleum jelly [IP] was treated as a drug because it was manufactured under a drug licence, listed in Schedule K of the Drugs and Cosmetics Rules, 1945, and had recognised medicinal use for mitigating or preventing skin-related disorders. Applying the statutory distinctions between drugs, cosmetics and toilet preparations, the Court noted that cosmetics are meant for cleansing, beautifying or altering appearance, and that classification turns on the nature, use and statutory treatment of the product. The revenue failed to show that the product was a petroleum sub-product attracting the higher entry. It was therefore classified as a drug under Entry 67(i) of Schedule II(a) and taxed at 5%.

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Issues: Whether white or yellow petroleum jelly [IP] is classifiable as a drug under Entry 67(i) of Schedule II(a) of the Tripura Value Added Tax Act, 2004, or as a cosmetic or petroleum product under Entry 45 of Schedule II(b) of the said Act, and the applicable rate of VAT.

Analysis: The product was shown to be white or yellow petroleum jelly [IP], manufactured under a drug licence and specifically referred to in Schedule K of the Drugs and Cosmetics Rules, 1945. The applicable statutory definitions of "drug", "cosmetic" and "toilet preparation" indicated that an article used for mitigation or prevention of skin-related disorder could fall within the ambit of drug, while cosmetics are intended for cleansing, beautifying or altering appearance. The Court placed reliance on the reasoning in the governing authorities that classification depends on the nature, use and statutory treatment of the product, and that the burden lies on the revenue to establish the claimed classification when it seeks to depart from the assessee's claim. The revenue did not produce material to show that the product was a sub-product of petroleum so as to attract the higher rate under Entry 45. On the contrary, the product's recognised medicinal use and inclusion in the drug regime supported its classification as a drug.

Conclusion: White or yellow petroleum jelly [IP] is a drug and not a cosmetic or petroleum sub-product for the purpose of the VAT schedule, and it is taxable at 5% under Entry 67(i) of Schedule II(a) of the Tripura Value Added Tax Act, 2004.

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