Kerala High Court
Deputy Commissioner Of Sales Tax (Law), ... vs V.V. Kammath And Sons on 28 January, 1998
Equivalent citations: [1998]111STC44(KER)
Author: G. Sivarajan
Bench: G. Sivarajan
JUDGMENT K.K. Usha, J.
1. These revisions at the instance of the Revenue arise out of a common order passed by the Kerala Sales Tax Appellate Tribunal, Additional Bench, Ernakulam, in T.A. Nos. 855 and 856 of 1992 dated June 28, 1993. Relevant assessment years are 1986-87 and 1987-88. Following are the common questions of law raised :
"(1) Whether, in the facts and circumstances of the case, the Tribunal was right in holding that vicco vajradanti and vicco turmeric vanishing cream sold by the assessee are only ayurvedic medicines falling under entry 95/116 of the First Schedule to the Kerala General Sales Tax Act, 1963 ?
(2) Has not the Tribunal went wrong in finding that vicco vajradanti is not tooth paste falling under entry 79/199 of the First Schedule and vicco turmeric covered by entry 80/189 meant for cosmetics ?
(3) Is the reasoning, finding and conclusion arrived at by the Tribunal justified in law ?"
2. Respondent herein is an assessee under the Kerala General Sales Tax Act, 1963 (hereinafter for short "the Act"). The assessee deals in wholesale trade of vicco vajradanti (paste and powder) and vicco turmeric, products of Vicco Laboratories, Bombay. The assessment for the above mentioned two years were completed by accepting the return filed by the assessee levying sales tax at the rate of 6 per cent as ayurvedic medicines and drugs. The Deputy Commissioner, Ernakulam, by exercising his power of suo motu revision under Section 35(1) of the Act set aside the assessments as irregular and improper. He took the view that though the above mentioned products are manufactured on ayurvedic formula, they are not used as medicines for cure of any disease but. they are being used as tooth paste and tooth powder and vanishing cream. In common parlance these articles are considered to be toilet articles and vanishing cream and not as ayurvedic medicines. Therefore, vicco vajradanti has to be taxed at the rate of 8 per cent as tooth paste and tooth powder and vicco turmeric at the rate of 10 per cent as cosmetic. Aggrieved by the order passed by the Deputy Commissioner the assessee filed second appeal before the Tribunal. The Tribunal accepting the plea made by the assessee took the view that the products are ayurvedic medicines and liable to be taxed only at the rate of 6 per cent. It is the above finding that is under challenge in these revisions.
3. The assessee contended before the Tribunal that vicco vajradanti (paste and powder) and vicco turmeric are manufactured by Vicco Laboratories as per ayurvedic licence issued under the provisions of the Indian Drugs and Cosmetics Act, 1940. The products are medicinal formulations used for treatment of disease in human beings and they would come under entry 75 of the First Schedule to the Act. Entry 75 in Schedule I reads as follows :
"Sl. No. Description of goods Point of levy Rate of tax 75 Other medicines and drugs including ayurvedic, homeopathic, sidha and unani preparations. At the point of first sale in the State by a dealer who is liable to tax under section 5. 6"
On the other hand, it was contended by the Revenue that vicco vajradanti sold by the assessee is tooth paste and tooth-powder which comes under a separate entry 79 in the First Schedule and vicco turmeric would come under entry 80 meant for cosmetics. Even if the products are prepared on the basis of ayurvedic formula, they are not sold in the market as medicines, but as tooth-paste, toothpowder and vanishing cream. Therefore, these items are liable to be taxed at the rate of 8 per cent and 10 per cent, respectively.
4. The assessee relied on very many materials in support of his contention. Reference, was made to various text books on ayurveda, opinion of experts like Dr. D.S. Antarkar, Dr. Upasani and Dr. Pal and also on affidavits sworn to by chemists, druggists and shop-keepers. The Commissioner, Food and Drug Administration, Bombay, an authority under the Drugs and Cosmetics Act, 1940, has certified that the relevant products of the assessee are ayurvedic medicines. The Indian Standards Institution was not inclined to issue licences to the assessee to use ISI marks for vicco vajradanti tooth paste and vicco turmeric vanishing cream as a product falling under IS 6956-1978 and 6608-1978 respectively for the reason that these two products are manufactured under an ayurvedic drag licence and they are classified as ayurvedic medicines and therefore cannot be covered under the existing ISI. The institution was not handling standardization of drugs whether allopathic, ayurvedic or unani. Similar view was taken in the case of vicco vajradanti tooth powder also. The Board of Revenue, Madhya Pradesh and Sales Tax Appellate Tribunal of Madras and Tamil Nadu had also taken the view that the above mentioned products are ayurvedic medicines. Apart from these and other materials the assessee relied on a Bench decision of the High Court of Bombay in First Appeal No. 613 of 1992 dated April 27, 1988. The question that arose for consideration in the above decision was whether vicco vajradanti tooth paste and vicco turmeric vanishing cream are ayurvedic medicinal preparations and therefore not liable for excise duty under the Central Excises and Salt Act, 1944. After examining large amount of materials produced before the court it came to the conclusion that the two products arc to be regarded as ayurvedic medicine, although they are used as tooth paste and cosmetic cream. It was further contended by the assessee that the special leave petition filed by the department against the above judgment before the Supreme Court was dismissed. The Tribunal has observed that these products are sold in the market as ayurvedic medicines. It is specifically printed in bold letters on its packets that they are proprietary ayurvedic medicines. The Tribunal therefore came to the conclusion that in common parlance people who used the products understand them as ayurvedic medicines. It came to the conclusion that these products are ayurvedic medicines and not tooth paste, tooth powder or vanishing cream in the nature of toilet articles or cosmetics and they would come under entry 75 of the First Schedule to the Kerala General Sales Tax Act, 1963. The order passed by the Deputy Commissioner, Sales Tax dated July 10, 1992 was set aside and the original assessment orders were restored.
5. It is contended before us by the Revenue that the Tribunal has committed an error in coming to the conclusion that the products of the assessee are to be treated as ayurvedic medicine and not as cosmetic or toilet preparations. It is further contended that when there is a specific entry 79 of "tooth paste" and "tooth powder", it would prevail over the general entry. According to the Revenue, the Tribunal should have followed the earlier decision of the Bombay High Court in Commissioner of Sales Tax v. Vicco Laboratories [1968] 22 STC 169, where it has been held that vicco vajradanti tooth powder would come under an entry relating to toilet preparation. The learned Government Pleader further pointed out that the above decision of the Bombay High Court was referred with approval by the Supreme Court in Sarin Chemical Laboratory v. Commissioner of Sales Tax, U.P. [1970] 26 STC 339. According to him, even though special leave petition against the judgment in First Appeal No. 613 of 1992 was dismissed by the Supreme Court, it was not on merits. In support of the contention raised by the Revenue that merely because these products are ayurvedic preparations it cannot go out of the entry of cosmetic or toilet article, reliance was placed on the decisions of High Courts of Madhya Pradesh and Madras, Commissioner of Sales Tax, Madhya Pradesh, Indore v. Shri Sadhna Aushadhalaya [1963] 14 STC 813 and V.P. Somasundara Mudaliar v. State of Madras [1963] 14 STC 943. In support of the contention that when there is a specific entry it shall be given preference to general entry reliance was placed on a decision of this Court in Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Food Specialities Ltd. [1991] 82 STC 298, and a decision of the High Court of Gujarat in State of Gujarat v. Pfizer Ltd. [1991] 82 STC 374.
6. The learned counsel for the assessee submitted that this Court will not interfere in revision with the finding entered by the Tribunal that the relevant products of the assessee are ayurvedic medicines coming under entry 75 on the basis of voluminous materials produced by the assessee before the Tribunal It was pointed out that apart from relying on certain decisions the Revenue had not produced any contra materials before the Tribunal in support of its contention that these products are known in the market as mere tooth paste and tooth powder that is as toilet preparation and not as ayurvedic medicine. The assessee is manufacturing these items under a licence for manufacture of ayurvedic drugs issued by the authorities under the Drugs and Cosmetic Act It is further submitted that the very same question came up for consideration before the High Court of Karnataka in United Trading Agency v. Additional Commissioner of Commercial Taxes, Zone-II, Bangalore [1997] 104 STC 182. After considering all the decisions on the point elaborately a Bench of the Karnataka High Court came to the conclusion that vicco tooth powder, tooth paste and cream are medicinal and pharmaceutical preparations for the purpose of exigibility to tax under the Karnataka Sales Tax Act. The special leave petition filed before the Supreme Court by the Revenue against the above judgment was dismissed on October 28, 1996 See [1997] 104 STC (JOURNAL) 9. The learned counsel pointed out that the High Court of Andhra Pradesh has also taken a similar view in State of Andhra Pradesh v. Srinivasa Fancy Stores (1996) 23 APSTJ 62.
7. According to the assessee, the manner of use of the product is not decisive. The relevant factors to be considered are the preparation, label, literature, character, common and commercial parlance understanding. In B.P.L. Pharmaceuticals Ltd. v. Collector of Central Excise, Vadodara [1997] 104 STC 164, the Supreme Court considered the question whether the product called "selsun" consisting of selenium sulfide lotion containing 2.5 per cent selenium sulfide used to treat dandruff is a medicine or cosmetic. It was held that the product was not a shampoo. It was not intended for cleansing, beatifying, promoting attractiveness or altering appearance. The selenium sulfide which forms 2.5 per cent of the ingredient of the product is the only active ingredient. The fact that a small quantity of perfume was added or that the product was packed in an attractive plastic bottle would not change its character, especially when the label gave warnings as to the mode of use. The fact that selsun had been for a long time, classified by the excise authorities as a patent and proprietary medicine accepting the decision of the Central Board of Excise and Customs rendered in the year 1981 is also a deciding factor. Strong reliance was placed on this decision by the learned counsel for the assessee. In answer to the contention raised by the Revenue that the assessee itself has described the product as vicco vajradanti tooth paste and tooth powder and therefore it would come under entry 79, the assessee submits that in the above mentioned decision of the Supreme Court (B.P.L. Pharmaceuticals Ltd. v. Collector of Central Excise [1997] 104 STC 164) even though the product was originally described as "selsun shampoo" that did not affect the classification of the product as medicine once the tests are satisfied. Another decision relied on by the assessee is that of the High Court of Andhra Pradesh in State of Andhra Pradesh v. Koduri Satyanarayana & Co, [1988] 68 STC 233, where assessee's contention was prickly heat powder was a drug and not a cosmetic as held by the sales tax authorities. The Tribunal upheld the contention taken by the assessee by applying utility test and also relying on letter of approval issued by the Government of India, Ministry of Petroleum and Chemicals regulating the prices of drugs where item No. 4 has been mentioned as prickly heat powder. In the revision by the Revenue the High Court of Andhra Pradesh upheld the view taken by the Tribunal and also observed that the Tribunal was justified in relying on the letter of approval by the Government of India, Ministry of Petroleum and Chemicals. It was therefore held that Johnson prickly heat powder would fall under entry 37 (drugs) and not under entry 36 of the First Schedule to the Andhra Pradesh General Sales Tax Act.
8. After considering the materials supplied, contentions raised and decisions relied on by both sides, we are inclined to agree with the view taken by the Karnataka High Court in [1997] 104 STC 182 (United Trading Agency v. Additional Commissioner of Commercial Taxes) that vicco turmeric cannot be treated as a cosmetic item coming under entry 80 but it would come under entry 75 as an ayurvedic medicine or drug. We do not propose to discuss all the different materials produced by the assessee in support of its contention that vicco turmeric and vicco vajradanti (paste and powder) are ayurvedic medicinal preparations, since these very same materials had been referred to and relied on elaborately in the two decisions [1997] 104 STC 182 (Kar) (United Trading Agency v. Additional Commissioner of Commercial Taxes) and First Appeal No, 613 of 1982 dated April 27, 1988 of the Bombay High Court. It is relevant to note that as against the varied materials produced by the assessee in support of its contentions including opinions of technical experts, the department had not placed any material to show that the products would not fall under the item, ayurvedic medicine or drug.
9. In Commissioner of Sales Tax v. Vicco Laboratories [1968] 22 STC 169, High Court of Bombay had taken the view that dentifrice in the form of powder used for cleaning teeth, is a toilet article and therefore vicco vajradanti (powder) would come under the entry relating to toilet articles. But it has to be noted that in the above decision there was no question of considering the effect of inclusion of the item as an ayurvedic drug under the Drugs and Cosmetics Act, since prior to 1971 provisions of the Drugs and Cosmetics Act were not enforcible in Maharashtra in relation to ayurvedic drugs. The question that arose for consideration before the Supreme Court in Sarin Chemical Laboratory v. Commissioner of Sales Tax [1970] 26 STC 339 was only whether "sarin tooth powder" is a cosmetic or toilet requisite or an unspecified commodity liable to sales tax at all points of sale as per the provisions contained under the U.P. Sales Tax Act. Referring to the dictionary meaning as well as the use of the word in common parlance the Supreme Court took the view that tooth powder is considered as toilet. The decision of the Bombay High Court in Commissioner of Sales Tax v. Vicco Laboratories [1968] 22 STC 169 was then referred to with approval. It can be seen that in the above decision of the Supreme Court also the question whether a particular tooth powder can be treated as a drug coming under the Drugs and Cosmetics Act was not an issue. Therefore, by applying the test laid down by the Supreme Court in B.P.L. Pharmaceuticals Ltd. v. Collector of Central Excise, Vadodara [1997] 104 STC 164, we have no hesitation to come to the conclusion that the Tribunal was justified in classifying the product of the assessee under item 75. Then the only other question to be considered is whether a different view can be taken in the case of vicco vajradanti tooth paste and tooth powder, in the light of the specific entry under item 79, tooth powder and tooth paste. It is true that when there is a specific entry it shall be given preference to a general entry but that principle cannot be applied in the present case. Vicco vajradanti is also manufactured under an ayurvedic licence issued under the Drugs and Cosmetics Act. The Indian Standards Institution had also taken the view that vicco vajradanti is an ayurvedic medicinal preparation and not a cosmetic. The assessee had placed materials before the Tribunal that vicco vajradanti paste or powder are used as medicine for tooth decay, pyorrhoea, swollen gums, bleeding gums and periodontal disorders. The finding of the Tribunal is that it is sold in the market not as tooth paste or tooth powder, but as ayurvedic medicine. If that be so, it cannot be brought under entry 79. We are of the view that in the case of vicco vajradanti also the product shall come under item 75.
10. In the result, we hold that the Tribunal was right in holding that vicco vajradanti and vicco turmeric vanishing cream sold by the assessee arc ayurvedic medicines falling under entry 95/116 of the First Schedule to the Kerala General Sales Tax Act. The tax revision cases therefore stand dismissed.