TaxTMI 
TaxTMI 
2025 (9) TMI 1083
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....assification of the product White Petroleum Jelly I.P. under the Madhya Pradesh VAT Act, 2002. 2. About the similitude in the controversy involved in these cases, they are being heard analogously and decided by a common order. Facts of the case, in short, are as under:- 3. The appellant is a reputed public limited company engaged in the business of manufacturing and marketing a range of fast-moving consumer goods (FMCG), including toilet soaps, detergents, hair oils and allied products. The appellant maintains a branch depot at Indore and is duly registered under the MP VAT Act, 2002, the Central Sales Tax Act, 1956 and is also a registered dealer under the M.P. Entry Tax Act, 1976. 4. The dispute concerning the proper classification of the product led to the passing of separate assessment orders, appellate orders which have been challenged by the appellant in the present two VAT Appeals and the learned MPCTAB has also preferred Tax reference before this Court, all of which involve the core dispute that whether White Petroleum Jelly I.P. is classifiable as a Drug and Medicine or as a Cosmetic / Medicinal Preparation of Cosmetic. VATA 73/2019 & VATA 74/2019 5. The ....
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....P grade manufactured under a drug license and sold as a drug and (ii) a perfumed variant sold as a cosmetic on which tax was duly paid at the higher rate. It was submitted that the drug variant alone was claimed under Entry 19A, while the other was always treated as a cosmetic. 10. Despite these submissions, the Appellate Board, by its impugned order dated 14.05.2019, dismissed both appeals and held that the product in question did not qualify as a drug merely because it was manufactured under a drug license. The Board reasoned that the product was not prescribed by doctors nor exclusively sold through medical shops, and that the appellant's predominant business was in cosmetics and toilet articles. 11. Challenging these findings, the appellant has now approached this Court by way of the present appeals under Section 53(1) of the MP VAT Act, 2002 and Section 13 of the Entry Tax Act, 1976, raising the following substantial questions of law relating to the classification of the said product and the legality of interest levied. Whether on the facts and in the circumstances of the present case the product 'White Petroleum Jelly of IP grade' manufactured & sol....
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....ification of goods in the M.P. Commercial Tax Act, 1994, the Madhya Pradesh Commercial Tax Appellate Board was justified in upholding the classification of the White Petroleum Jelly I.P. manufactured by the applicant in the Entry No. 41/49 of Part III of Schedule II instead of Entry 11 of Part IV Schedule II of M.P. Commercial Tax Act, 1994?" Submission of Appellant's counsel 16. Shri P.M. Choudhary, learned Senior Counsel, submitted that the central question involved is the proper classification of White Petroleum Jelly I.P., which is manufactured and sold by the petitioner under a valid Drug Manufacturing License. Learned Senior Counsel submitted that the product squarely falls in the definition of a "drug" as contemplated in the statutory regime and has been recognised as such by binding judicial pronouncements, including the decision of the Hon'ble Apex Court in Ponds India (Supra) wherein White Petroleum Jelly I.P. was expressly held to be a drug and not a cosmetic. 17. Learned Senior Counsel while referring to Entry 19-A of Part II of Schedule II to the Madhya Pradesh VAT Act, 2002 submitted that the said entry provides for concessional taxation of "Drugs and....
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....ion (Nycil prickly heat powder) was classifiable under a cosmetic entry in the First Schedule to the Kerala General Sales Tax Act which was materially different from the MP VAT entry. Learned senior counsel further pointed out that although the product was manufactured under a drug license the court considered its predominant usage, consumer perception and marketing strategy in arriving at its conclusion where in contrast White Petroleum Jelly I.P. is not marketed as a cosmetic, is not perfumed and is not intended for beautification but is medicinal in nature used for skin ailments, abrasions and wounds and forms part of the essential drug list in several jurisdictions. 21. Learned Senior counsel further relied on the decisions of this court in M/S Popular Sales v. State of M.P., reported in (2012) 20 STJ 287; M/S Pidlite Industries Ltd. vs. The commissioner of Commercial Tax in W.P. 14268 of 2010andIndian Oil Corporation Ltd. v. State of M.P., reported in(2018) 32 GSTJ 185 to reinforce the proposition that classification based on trade perception or audit objection cannot substitute the legal test of predominant character. Learned senior counsel thus prayed that the classificat....
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....the test for distinguishing medicaments from cosmetics. Learned G.A. also relied on the decision of this Court in M/s Popular Sales, Jabalpur (Supra )to assert that even if a product has some curative elements if its primary purpose is care rather than cure it cannot be classified as a drug or medicine and further also relied on the decision of this court in M/s Mondelez India Foods Pvt. Ltd. vs. Commissioner of Commercial Tax in VATA 24/2018 wherein it was held that the definition of "drug" under the Drugs and Cosmetics Act, 1940 cannot be mechanically imported for classification under the VAT Act. Learned G.A., thus prayed that the VAT appeals be dismissed and the tax reference be answered in favour of respondents, upholding the order of the MPCTAB and directing the appellant to pay the tax, interest and penalty as determined. Our appreciation and conclusion 26. The appellant manufactures and sales two distinct types of White Petroleum Jelly: (i) a non-perfumed variant with light liquid paraffin, which is manufactured under a drug license and (ii) a perfumed variant, salable as a cosmetic on which tax is being paid at the higher rate. The appellant has categorized two diffe....
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.... the White petrolatum is used as a highly effective moisturiser for dry areas of the body, such as the hands, feet, elbows, and knees. By forming a barrier on the skin it prevents water from evaporating, helping to lock in moisture and alleviate dryness. Its moisturising effect is enhanced when applied to slightly damp skin immediately after a shower or bath. The product's properties make it an ideal ingredient for lip care, serving as a standalone lip balm, a gloss, or a base for homemade formulations, which creates confusion that it is a beauty product. 30. The taxability of this product had been under consideration i.e. White Petroleum Jelly, before the Supreme Court of India in Ponds India (Supra), and specifically held in favour of the assessee that it is a medicament. The appellant had taken over the "Ponds India" with the same name and brand of Veseline Intensive Care Heal Guard. The Apex Court shifted the burden on the revenue to establish that the goods ceased to fall under the entry of drugs and medicines, whereas the chemical examiner submitted a report in favour of the assessee. The Apex Court has held that the product used for the purpose cannot be described as ....
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....maceutical product or it was a cosmetic/toiletry preparation. The only difference was of sub-headings under those Chapters. This Court went into the essential characteristics of the product and found it that dominant use of the product was medicinal, as it was sold only on medical prescription as a medicine for treatment of disease known as Seborrhoeic Dermatitis, commonly known as Dandruff. It was manufactured under a Drug Licence; the Food and Drug Administration had certified it as a Drug; and the Drug Controller had categorically opined that Selenium Sulfide present in Selsun was in a therapeutic concentration etc. The relevant passages from the said judgment throwing light on these aspects are reproduced below: "19. So far as medicinal properties of the product are concerned it can be gathered from the technical and/or pharmaceutical references that Selenium Sulfide has anti-fungal and antiseborrhoeic properties and is used in a detergent medium for the treatment of dandruff on the scalp which is milder form of Seborrhoeic Dermatitis and Tinea Versicolour 2.5% of this compound is the therapeutic quantity. 24. Elaborating the above submissions, the learned cou....
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.... question. Certainly, the product in question is not intended for cleansing, beautifying, promoting attractiveness or altering appearance. On the other hand it is intended to cure certain diseases as mentioned supra. 35. The learned counsel also placed reliance on a number of judgments to support his argument that in common and commercial parlance the product is known as medicine rather than cosmetic. As pointed out already and in support of that submission, affidavits and letters from chemists, doctors and customers are filed to show that the product is sold under prescription only in chemists' shops unlike shampoos sold in any shop including provision shops. This conclusion, namely, that the product is understood in the common and commercial parlance as a patent and proprietary medicine was also found by the Central Board of Excise and Customs as early as in 1981 and accepted by the Excise authorities and in the absence of any new material on the side of the respondents there is no difficulty in accepting this contention without referring to decision cited by the counsel for the appellants." 8. The aforesaid case draws and delineates a clear distinction betw....
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....s, as already mentioned above, prickly heat/ Milaria Rubra. The sale of these products is much higher in hot summer months when this disease frequently erupts. 10 Accepting the aforesaid case set up by the assessee therein, the Court held that the said prickly heat power was a medicament for treatment of red rashes, itching and burning and not merely a powder for care of skin or for the purpose of beauty. The Court was greatly influenced by the fact that a department like Drug Controller and Central Sales Tax authorities had accepted the product in question as medicinal preparation. The discussion which is relevant for our purposes is contained in paras 11 and 12 of the said judgment and we reproduce the same hereinbelow: 11. But in the present case when throughout the meaning given to products in question not only by the department itself but also by other departments like Drug Controller and Central Sales Tax authorities is that the product in question is a medicinal preparation should be accepted. 12. Applying the principles enunciated in BPL Pharmaceuticals Ltd. case and taking into consideration various circumstances as to the manner in which the goo....
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....ondition. A product that is used mainly in curing or treating ailments or diseases and contains curative ingredients even in small quantities, is to be branded as a medicament. 16. As pointed out above, the product in question, Vaseline Intensive Care Heel Guard, is marketed as a solution for cracked heels and it is claimed that this solution is specially developed by the scientists at Vaseline Research. The composition of this product includes salicylic acid I.P. 1.5% w/w. lactic acid 8.0% w/w. Triclosan 0.1% w/w. Cream base - q.s. Salicylic acid is described as keratolytic substance having bacteriostalic and fungicidal properties used in the treatment of fungus infection of the skin. The Tribunal, while deciding that the aforesaid product is a medicament, pointed out that the product was formulated and essentially used for treatment of 'cracked heels', protection from further cracks in the human heels due to extreme climatic conditions and low humidity, constant exposure of feet to water and due to absence of shoe or other protection while walking. It also found that this product was manufactured under a drug licence as drug authorities had treated the same as a ....