Food supplement classification prevails where therapeutic character and drug-sale regulatory compliance are not established for concessional treatment.

Food supplements purchased and sold unchanged could not be reclassified as proprietary Ayurvedic medicines for concessional taxation without proof of therapeutic character and compliance with drug-sale regulatory requirements. Applying the common parlance and authoritative tests, the notes state that a manufacturer's drug licence does not establish that the goods are medicines in the seller's hands, particularly where the seller lacks authority to deal in drugs and the products are not shown to diagnose, treat, mitigate or prevent disease. The statutory exclusion concerning Ayurvedic, Siddha and Unani drugs does not remove applicable licensing requirements. The products therefore remain residuary goods taxable at the higher rate; costs may also be awarded where no appellate provision prohibits them.

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Issues: (i) Whether the Appellate Tribunal was empowered to dismiss the appeal with costs; (ii) Whether the Tribunal erred in finding that the products purchased as food supplements could not be claimed as Ayurvedic medicines on sale; (iii) Whether a licence was unnecessary for dealing in proprietary Ayurvedic medicines; (iv) Whether the products were liable to classification as residuary goods rather than drugs under the specific schedule entry; (v) Whether the products qualified as Ayurvedic medicines rather than food supplements.

Issue (i): Whether the Appellate Tribunal was empowered to dismiss the appeal with costs.

Analysis: No provision in the applicable appellate and revision framework prohibited the Tribunal from awarding costs. Its authority to compensate a successful litigant for vexatious litigation was treated as inherent, and the exercise of that discretion was not excessive.

Conclusion: The Tribunal was empowered to dismiss the appeal with costs, against the assessee.

Issue (ii): Whether the Tribunal erred in finding that the products purchased as food supplements could not be claimed as Ayurvedic medicines on sale.

Analysis: The products were purchased in inter-State trade and declared as food supplements under the registration held by the assessee. The manufacturer's drug licence did not establish that the products were medicines in the hands of the assessee. Applying the Common Parlance Test and the Authoritative Test, the products did not acquire the character of medicines merely for securing a lower rate of tax, particularly where the assessee lacked authority to deal in drugs or medicines and no therapeutic quality was established.

Conclusion: The products purchased as food supplements could not be treated as Ayurvedic medicines on sale, against the assessee.

Issue (iii): Whether a licence was unnecessary for dealing in proprietary Ayurvedic medicines.

Analysis: Section 33A only excludes the application of a chapter to Ayurvedic, Siddha and Unani drugs; it does not dispense with the regulatory requirements governing their manufacture and sale. The statutory scheme separately prohibits unlawful manufacture or sale and prescribes penalties for contraventions concerning such drugs.

Conclusion: The claim that no licence was required for dealing in proprietary Ayurvedic medicines was rejected, against the assessee.

Issue (iv): Whether the products were liable to classification as residuary goods rather than drugs under the specific schedule entry.

Analysis: The goods were bought and sold unchanged as food supplements. No evidence established that they were intended to diagnose, treat or cure disease, or that the assessee was licensed to sell them as drugs or medicines. A product sold without alteration retains the character in which it was purchased; consequently, it could not be recharacterised as a medicine solely for tariff purposes.

Conclusion: Classification of the products as residuary goods liable to the higher rate was upheld, against the assessee.

Issue (v): Whether the products qualified as Ayurvedic medicines rather than food supplements.

Analysis: The Common Parlance Test was not conclusive. To qualify as a drug, the product had to be useful for diagnosis, treatment, mitigation or prevention of disease and be marketed as a drug in compliance with the applicable regulatory law. Those requirements were not satisfied.

Conclusion: The products did not qualify as Ayurvedic medicines and remained food supplements, against the assessee.

Final Conclusion: The claimed concessional classification as proprietary Ayurvedic medicines was unavailable, and the products remained taxable under the residuary classification.

Ratio Decidendi: Goods purchased and sold unchanged as food supplements cannot be reclassified as medicines for concessional taxation without proof of therapeutic character and compliance with the regulatory requirements applicable to drug dealing.

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