TaxTMI 
TaxTMI 
TaxTMI 
2017 (9) TMI 2050
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....s light liquid paraffin, which is drug within the meaning of Drug & Cosmetic Act, 1940, according to the petitioner, it should fall under Entry 67 (i) of the Schedule (ii)(a) of the TVAT Act, 2004 and the same should be taxable at 5%. Entry 67(i) of the Schedule II(a) to the Tripura Value Added Tax Act, 2004 as amended by notification No. F.I.11(62)-TAX/VAT/2014 dated 24.03.2015, reads as follows: Schedule II(a) "Entry 67 (i) : Medicine and drugs (including Ayurvedic, Siddha, Unani, Spirituous medical drugs and Homeopathic drugs) including tonics, food supplements, appetizers, vaccines, syringes, dressing, medicated ointment produced under drug license, light liquid paraffin of IP grade but does not include the products capable of being used as cosmetics and toilet preparations including toothpaste, toothpowder, toilet articles, soaps and hair oil." [3] The respondents were of the view that the said product is cosmetics which is used in normal condition for beautification of the skin and as such, the same should fall under Entry 45 of the Schedule II(b) of the TVAT Act, 2004 and thereby, the same shall be exigible to tax at 14.5%. Entry 45 of the Schedule ....
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....ng specified in the Schedule K is a drug within the meaning provided in Drugs and Cosmetics Act, 1940. The petitioner No. 2 has emphatically asserted further that the product in question is not capable of being used as cosmetic or toilet preparations inasmuch as the product in question is not used for beautification or care of skin under normal circumstances. Reference to Ponds India Ltd. (supra) was further made to contend that the petroleum jelly manufactured by a person holding license under the Drugs and Cosmetics Act, 1940 is a 'drug' and not 'cosmetic'. [6] In the wake of the said letter dated 24.06.2016, the Dy. Commissioner of Taxes issued a clarification on VAT rate on item-white petroleum jelly on 01.10.2016 [Annexure-VI to the writ petition] reiterating the position the revenue had earlier issued the letter dated 16.02.2016. In the said clarification, no reflection on the points raised by the petitioner No. 1 in their letter dated 24.06.2016 is available. [7] Dr. A.K. Saraf, learned senior counsel assisted by Mr. S. Chetia, learned counsel appearing for the petitioners has submitted that the decision reflected in the letter dated 16.02.2016 [Annexure-IV t....
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....ooks. Of course the formula may not be as per the text books but a medicament can also be under a patented or proprietary formula. The main criteria for determining classification is normally the use it is put to by the customers who use it. The burden of proving that Banphool Oil is understood by the customers as an hair oil was on the revenue. This burden is not discharged as no such proof is adduced. On the contrary we find that the oil can be used for treatment of headache, eye problem, night blindness reeling head weak memory, hysteria amnesia blood pressure, insomnia etc. The dosages required are also set out on the label. The product is registered with Drug Controller and is being manufactured under a drug licence." [8] The other reports as relied by Dr. Saraf, learned senior counsel has laid the law in the same manner. Dr. Saraf, learned senior counsel has relied on the following passages of Ponds India Ltd. (supra): 2. Whether petroleum jelly is a `drug' or a `cosmetic' within the meaning of the provisions of U.P. Trade Tax Act, 1948 is the question involved herein. ****** ****** ****** 35. It is therefore, difficult to agree with Mr. Dwived....
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....rademark." The contention of Mr. Dwivedi is that it is merely a skin protectant and remains widely used in cosmetic skin care and thus it does not have any curative value. ****** ****** ****** 42. However, as a source of authority, Wikipedia is frequently cited by judges around the world. This is not restricted to India alone. The New York Times reports that beginning in 2004, more than 100 opinion in the States have cited Wikipedia, including 13 from Federal Appeals Courts. ****** ****** ****** 44. The said material itself shows that white petroleum jelly helps keep the outside world out and it protects the skin from the effects of weather and exposure. Secondly, it acts like a sealant to help keep the inside world in. 45. It is, therefore, accepted that if used as a preventive measure, of course, it would have a curative value. In any event having regard to the definition of drugs, any product which prevents a disorder of human function would also come within the purview of drug. ****** ****** ****** 47. This Court in Chamanlal Jagjivandas Sheth Vs. State of Maharashtra [(1963) Supp. 1 SCR 344], opined that even absorbent, cot....
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....ive intention in this behalf despite the fact that Vaseline had been deleted from the entry relating to cosmetic and toilet preparation. ****** ****** ****** In this case also, the report of the Chemical Examiner is in favour of the assessee. Furthermore, in a case of this nature, where the revenue itself has been holding the assessee to be a producer of a pharmaceutical product, the burden would be on the Revenue to establish that the goods cease to fall under a given entry. For the said purpose, no material was placed by the Revenue which was imperative. ****** ****** ****** 80. 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. Balaji (supra) was clearly not applicable whereupon reliance has been placed by the High Court and/or the Tribunal. In our opinion, the impugned judgments, for these reasons, cannot be sustained. They are set aside accordingly." [9] Further, Dr. Saraf, learned senior counsel has submitted that the petitioners have categorically stated about the medical use of the said product in their rejoinder filed on 04.08.2017 inasmuch as the product is used to cur....
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....lly as sub-product of petroleum. [11] It would be apposite for us to refer to the definitions of 'Cosmetics', 'Drug' and 'toilet preparations' as defined under Section 3 (aaa), Section 3(b) and Section 2(k) of Medicinal and Toilet Preparation (Excise Duty) Act, 1955 defines the toilet preparations. Section 3(aaa) : "Cosmetic" means any article intended to be rubbed, poured, sprinkled or sprayed on, or introduced into, or otherwise applied to, the human body or any part thereof for cleansing, beautifying, promoting attractiveness, or altering the appearance, and includes any article intended for use as a component of cosmetic. Section 3(b) : "Drug" includes: (i) all medicines for internal or external use of human beings or animals and all substances intended to be used for or in the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings or animals, including preparations applied on human body for the purpose of repelling insects like mosquitoes; (ii) such substances (other than food) intended to affect the structure or any function of the human body or intended to be used for the destruction of vermin or insec....
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....the class of nylon observed that the evidence led in that case conclusively showed that nylon twin manufactured by the assesee is treated as kind of nylon yarn. Hence, it is to be classified accordingly. Since the revenue has failed to establish the contrary, the claim of the assessee has to be accepted [para 15]. In Dunlop India (supra) it has been distinctly enunciated as follows: "When an article has, by all standards, a reasonable claim to be classified under an enumerated item in the Tariff Schedule, it will be against the very principle of classification to deny it the parentage and consign it to an orphanage of the residuary clause." [14] Having regard to the position of law as enunciated by the apex court that white or yellow petroleum jelly is a distinct product covered by the definition of drug as cited above and cannot be held as a sub-product of petroleum to bring it under Entry 45 of the Schedule II(b) of the TVAT Act and hence, the VAT @14.5% cannot be charged for its sale. As consequence thereof, the decision of the revenue borne in the letter dated 01.10.2016 [Annexure-VI to the writ petition] and the clarification dated 16.02.2016 [Annexure-IV to the wr....