Madras High Court
The State Of Tamil Nadu vs Tvl. Sri.Ramtirth International on 17 April, 2012
Bench: Chitra Venkataraman, K.Ravichandra Baabu
In the High Court of Judicature at Madras Dated: 17.04.2012 Coram The Honourable Mrs.JUSTICE CHITRA VENKATARAMAN and The Honourable Mr.JUSTICE K.RAVICHANDRA BAABU Tax Case (Revision) No.1767 of 2006 The State of Tamil Nadu represented by the Deputy Commissioner of Commercial Taxes, Coimbatore Division, Coimbatore 18. ... Petitioner Vs. Tvl. Sri.Ramtirth International Pollachi. .... Respondent REVISION filed before the Tamil Nadu Taxation Special Tribunal, Chennai to revise the order dated 18.1.2000 made in C.T.A.No.214 of 1998 on the file of the Sales Tax Appellate Tribunal (Additional Bench), Coimbatore for the assessment year 1995-96. For Petitioner : Mr.R.Sivaraman, Spl.G.P.(T) For Respondent: Mr.S.Sivanandam O R D E R
(Order of the Court was made by CHITRA VENKATARAMAN,J.) The Revenue is on appeal against the order of the Tribunal made in C.T.A.No.214 of 1998 dated 18.1.2000 raising the following substantial question of law:
Whether on the facts and in the circumstances, the Tribunal is legally correct in holding that Ramthirth Brhmi Oil is taxable at 5% under Entry 20 Part C 1st Schedule as ayurvedic medicine and not falling under Entry 1(ii) of Part F of 1st Schedule ?
2. The assessment year relates to 1995-96. During the relevant point of time, there were two entries one dealing with medicine and the other dealing with hair oil. The entries as they appear in the statute read as under:-
Sl.No. Description of the Goods Point of levy Rate of Tax Item No.
the Pre.Sch.
1 2 3 4 5
20 (A) Medicines conforming to the
following description:-
Any medicinal formulation or preparation At the point 5 95
ready for use internally of externally of first sale in
or treatment or mitigation or the State
prevention of disorders in human beings or animals (excluding products capable of being used as creams, hair oils, toothpastes tooth powders, cosmetics, toilet articles, soaps and shampoos) but including:
i) Allopathic medicine.
ii) Other medicines and drugs including ayurvedic, homepathic, siddha and Unani preparations.
iii) Medical mixtures or compounds the compounents of which have not already suffered tax.
iv) Surgical dressing which expression shall include adhestive Plasters, adhesive Plaster if paris and eangages, velrocoop Eangages, elastro crape handages, zauze, Wadding gauz, lint and cotton woll poultices And similar articles impregated or coated with Pharmaxetidal substances put up informs or packings for surgical purposes which have been sterlised and confirm to the accepted Standard of the medical profession.
v) Pharmaceutical and surgical products of plastic and rubber including gloves aprons caps.
(B) Instruments and appliances used in medical, surgical, dental, veterinary sciemes, including scientific apparatus other electromedical apparatus and sight testing instruments including opthalmoscopoe, Otoscope, Laryago Scope, rationscopoe, Binoular loupe, parts and Accessories thereor (Other than those specified Elsewhere in this schedule)
(i) Heart Pacemaker (Pulsde generator)
(ii) Intra-ocular lenses) Sl.No. Description of the Goods Point of levy Rate of Tax Item No. in the Pre.Sch.1 2 3 4 5
1. (1) Scents and perfumes in any form At the point 16% 51 excluding doop and agarpathis but of first sale including aragaja jab javvadu and in the State punuupu.
(ii) Hair oils, hair creams, hair dyes, hair darkeners, Hair tonicsm Orillisantiners, pomades and Veselines.
(iii) Lipstics, Lipselve, nail polishes, nail varnished, nail brushes, beauty boxes fact powders, toilet powders, baby powders talcum powders, powder pads and puffs, toilet sets made of all materials (with or without contents, toilet sponges, scent spray, depilatoories, blemish removers, eye liners all sorts, , eye shadow, eye brow pencils, eye lash brushers, eaudecolone, solid colognes, Lavender water, snows, face creams, all purpose creams, cold creams, cleaning creams, make up creams, beauty creams, beauty milk, cleanif milk, hair foods, skin tonics complexion rouge, nail cuttars, sanitary towels andnapkins astringent lotions, pre-shave and after shave lotions and creams moistuisers of all sorts and personal (body) deodorants.
Explanations Any of the items listed above even if medicated or as defined in section 3 of the drugs and cosmetics Act, 1949, (Central Act XXII of 1940) or manufactured on the license issued under the said Act will fall under this item.:
3. The assessee is a manufacturer cum dealer of Ramthirth Brahmi Oil. On the rate of tax to be applied in this case, the assessee contended that the item in question would fall under Entry 20 Part C 1st Schedule as medicinal formulation or preparation attracting the tax liability at 5%. The claim of the assessee was however rejected by the assessing authority, placing reliance on the explanation in Entry I Part F of the Act that Ramthirth Brahmi Oil is a hair oil even after medication and hence a drug as defined under Section 3(b) of the Drugs and Cosmetics Act and therefore, the same would fall under Entry 1 of Part F to 1st Schedule. Aggrieved by the said order, the assessee went on appeal before the Appellate Assistant Commissioner, who agreed with the Assessing Authority. Thus the assessee went on further appeal before the Sales Tax Appellate Tribunal. On the materials furnished by the assessee, the Tribunal held that Ramthirth Brahmi Oil is not only usable on the head but could also be used as oil for body massaging. The literature shows that it is a nervine stimulent and further it has a cooling effect on the body. Referring to the decision reported in 104 STC 198 (Debur India Limited Vs. Commissioner of Sales Tax, Orissa and others), the Tribunal held that the evidence produced at the time of hearing pointed out that the item in question would fall under Entry 20 of Part C of the First Schedule. Thus the appeal was allowed. Aggrieved by the same, the Revenue is on appeal before us.
4. Learned Special Government Pleader appearing for the Revenue placed reliance on an unreported decision in Tax Case (Revision) Nos. 742 of 2006 and 301 of 2011 (State of Tamil Nadu Vs. Tvl.Glaxo India Limited) dated 1.3.2012 and submitted that as in the case of Nycil Prickly Heat Powder attracting levy of tax at 16% as falling under Entry 1(iii) of Part F of the First Schedule, Ramthirth Brahmi Oil is essentially a hair oil and even if medicated it is only a hair oil, by reason of Explanation to Part F of Schedule I and the item in question is liable to be taxed at 16% only.
5. Countering the said submission of the Revenue, learned counsel appearing for the respondent assessee pointed out to various orders passed by different States in dealing with the same item, holding that what is marketed by the assessee was not a hair oil simpliciter but a medicinal preparation useful for the prevention and cure of several disorders like disorder of scalp, skin, muscle as well as certain diseases of hair. Pointing out to the need for consistency in the tax treatment on the self same product sold, learned counsel contended that no exception could be taken to the view of the Tribunal. Learned counsel appearing for the respondent pointed out that as seen from the literature of Ramthirth Brahmi Oil, the said oil has multifarious applications and not a simple hair oil. Countering the stand of the Revenue that Ramthirth Brahmi Oil has a coconut oil base, learned counsel submitted that the mere presence of coconut oil, per se, would not make a simple hair oil. What is to be seen is the multifarious applications of the said oil. In the circumstances, placing reliance on the unreported decisions of the various States on the very same product, learned counsel submitted that on the voluminous materials placed before the Tribunal, the Tribunal held that the item in question is taxable under Entry 20 of Part C of 1st Schedule and not under Entry 1(ii) of Part F of 1st Schedule.
6. It is seen from the literature placed before this Court that Ramtirth Brahmi Oil has application not only over the head but also over the body. It is stated that Ramtirth Brahmi Oil is made scientifically from health giving Ayurvedic herbs and it helps in removing excess body heat, headaches, dandruff, hair complaints, sleeplessness and for body massage too. In the order passed under Section 52(1) of the Bombay Sales Tax Act, 1959, the Commissioner referred to the letter written by the Director of Ayurved, Bombay, Maharashtra State, that the oil is marketed as an Ayurvedic medicine and is an excellent medicated oil. It is recommended for lustrous and black hair, containing dandruff, inducing sound sleep and body massage to all during all seasons. Accepting the case of the assessee that Ramtirth Brahmi Oil marketed by them is not just hair oil simpliciter, the Commissioner, Bombay General Sales Tax, held that Ramtirth Brahmi Oil would be liable to tax at 3%. The view of the Appellate Assistant Commissioner, Palakkad as well as the Deputy Commissioner of Commercial Taxes, Karnataka are all on similar lines as has been held by the Commissioner of Bombay General Sales Tax. It is also relevant to note herein that the Commissioner of Central Excise, Coimbatore has certified that 'Brahmi Oil' manufactured by M/s. Ramthirth International is an Ayurvedic Medicine classifiable under Heading No.3003 and is entitled to exemption under Notification No.75/94 dated 29.3.1994 as amended. In the face of these voluminous materials as available, rightly the Tribunal came to the conclusion that the item in question is not a hair oil simpliciter or scented hair oil with medication attracting Explanation to Entry 1(ii) of Part F of First Schedule.
7. We have perused the order of this Court made in T.C.(R) Nos. 742 of 2006 and 301 of 2011. A reading of the said decision would point out that what has been considered therein was Nycil Prickly Heat Powder, which is a medicated preparation for care of skin and it has application on the body. This Court pointed out that Nycil Prickly Heat Powder is used only to absorb sweat and moisture from the body and to keep away rashes in the human beings and it could only be considered as a talcum powder. Thus applying the Explanation to Entry 1 of Part F of the First Schedule, this Court held that the item in question viz., Nycil Prickly Heat Powder, would attract 16% rate of tax falling under Entry 1(iii) of Part F of the First Schedule. As already pointed out, as far as the sale of Ramtirth Brahmi Oil is concerned, there is no material placed by the Revenue to show that the extensive use of Ramtirth Brahmi Oil is only as hair oil and not for any other purpose. Given the fact that the assessee had produced materials to the effect that Ramtirth Brahmi Oil has multifarious applications and not confined to hair oil, we have no hesitation in rejecting the plea of the Revenue that the item in question is only a hair oil.
8. Learned Special Government Pleader placed before this Court the decision reported in 14 STC 813 (MP) (Commissioner of Sales Tax Vs. Shri Sadhna Aushadhalaya) considering a question as to whether Maha Bhringraj Oil is a toilet article coming under item No.11 of Part I of Schedule I to the C.P. and Berar Sales Tax Act or a medicinal oil and consequently liable to tax under Section 5(1)(c) of the said Act. A reading of the said decision shows that what was considered therein was a Hair oil branded as "Maha Bhringraj Hair Oil" manufactured and sold by the assessee and in the context of the character of the products sold, the Assessing Authority overruled the contention of the assessee that it was a medicinal preparation. The High Court held that the Hair Oil manufactured by the assessee is a "toilet article" falling under Entry No.II of Schedule I Part I of the said Act. In such circumstances, there was no justification for treating it as a medicinal preparation. The mere fact that it is prepared by following the formula given in Ayurvedic medicinal books would not make it as anything other than a hair oil. The said decision has no bearing on the issue herein.
9. As already pointed out, the Revenue has not produced any material or has disputed the materials produced by the assessee to support its contention that Ramtirth Brahmi Oil was ever sold as a hair oil and not as medicament.
10. It is a settled principle of law that the onus to prove that a particular product falls under a particular head of the Schedule is on the Revenue. It is for the Revenue to show and establish that the goods in question is not a medicament or that the common man did not treat it as a medicament. - Refer (2003) 5 SCC 60 (Commissioner of Central Excise Vs. Sharma Chemical Works).
11. In (1996) 9 SCC 402 (Shree Baidyanath Ayurved Bhavan Ltd. Vs. Commissioner of Central Excise), the Apex Court held that the entries in a statute like Excise Act should be understood according to the popular meaning as understood by the users and not by the scientific or technical meaning. Referring to the decision reported in 14 STC 813 (MP) ( Commissioner of Sales Tax Vs. Shri Sadhna Aushadhalaya) dealing with the question as to whether Maha Bhringaraj Oil is a toilet article or a medicinal preparation, in the decision reported in (2003) 5 SCC 60 (Commissioner of Central Excise Vs. Sharma Chemical Works), the Apex Court pointed out:
12. ... It is settled law that the onus or burden to show that a product falls within a particular tariff item is always on the Revenue. Mere fact that a product is sold across the counters and not under a doctor's prescription, does not by itself lead to the conclusion that it is not a medicament. We are also in agreement with the submission of Mr.Lakshmikumaran that merely because the percentage of medicament in a product is less, does not ipso facto mean that the product is not a medicament. Generally the percentage or dosage of the medicament will be such as can be absorbed by the human body. ... The main criterion for determining classification is normally the use it is put to by the customers who use it. The burden of proving the Banphool Oil is understood by the customers as a hair oil was on the Revenue. "
12. The above view was reiterated in the decision reported in (2006) 3 SCC 266 (Puma Ayurvedic Herbal (P) Ltd. Vs. Commissioner, Central Excise, Nagpur). The Apex Court pointed out that in order to be a medicinal preparation or a medicament, it is not necessary that the item must be sold under a doctor's prescription. Similarly, availability of of the products across the counter in shops is not relevant as it makes no difference either way. Referring to the opinion of the Directorate of Ayurveda, the Apex Court held that the opinion being one from a competent and authorised source, it is of great relevance in deciding the issue. The word "medicament" is not defined anywhere while the word "cosmetic" is defined in the Drugs and Cosmetics Act, 1940. That definition shows that the cosmetic products are meant to improve appearance of a person, that is, they enhance beauty, whereas a medicinal product or a medicament is meant to treat some medical condition. It may happen that while treating a particular medical problem, after the problem is cured, the appearance of the person concerned may improve. What is to be seen is the primary use of the product.
13. In the decision reported in (2008) 13 SCC 349 (Commissioner of Central Excise, Delhi v. Ishaan Research Lab (P) Ltd.), a question arose as to whether bio-aloe vera, bio-bhringraj, bio-cucumber, bio-coconut, bio-kelp, bio-milk, bio-margosa, bio-peach, bio-pro, bio-quince, bio-saffron, bio-soya, bio-wheat, bio-wintergreen and bio-walnut are ayurvedic medicines or would fall under cosmetics and toilet preparation, attracting 40% duty. In laying down the principles, for classification, the Apex Court considered the decisions of the Apex Court reported in 1995 Supp (3) SCC 1 (B.P.L. Pharmaceuticals Ltd. v. CCE), (1996) 9 SCC 402 (Shree Baidyanath Ayurved Bhavan Ltd. v. CCE), (2006) 3 SCC 266 (Puma Ayurvedic Herbal (P) Ltd. Vs. Commissioner, Central Excise, Nagpur), (2003) 3 SCC 111 (Alpine Industries Vs. Collector of Central Excise, New Delhi), (2005) 10 SCC 573 (Calcutta Chemicals Co. Ltd. Vs. Commissioner of Central Excise, Chennai) and a series of other decisions and pointed out that the extent of a small percentage of ingredients having therapeutic or prophylactic value and use of the product for beautification, would not, ipso facto, make a product a cosmetic preparation. The Apex Court pointed out that the common parlance test is not be all and end all of the matter and merely because a product could be put to cosmetic use, that would not, by itself, make it a cosmetic product. The claim that it is an ayurvedic product must be substantiated on factual basis. However, the minuscule percentage use of medicinal element in the product is not a deciding factor and it does not change the nature of the product from medicament to cosmetic product.
14. Going by the above-said decisions, as far as the present case is concerned, in the matter of understanding a product as falling under medicinal preparation or as an item of toiletry, the same has to be decided by the application of the product, the preparation of the product and the use to which it is put to by the customers. Ultimately, the burden of proving that Ramtirth Brahmi Oil is understood by the customers as a hair oil, rests on the Revenue.
15. The consistent case of the assessee herein is that Ramtirth Brahmi Oil is not just plain hair oil/medicated hair oil, but it is an oil which has multifarious applications over the body.
16. The assessee placed before the authorities concerned, the proceedings before the Bombay Commissioner, accepting the case of the assessee that Ramtirth Brahmi Oil is a medicinal preparation, useful for prevention and cure of some disorders of skull, skin, muscle and certain diseases of hair. The proceedings of the Commissioner also referred to the certificate issued by the Director of Ayurveda, Maharashtra State, who had also certified that Ramtirth Brahmi Oil is an ayurvedic preparation and is not marketed as a hair oil and that it may be classified as an ayurvedic medicinal preparation. The Bombay Commissioner's order refers to the letter of the Director of Ayurveda dated 20.10.1972, wherein, the said authority had referred to his personal visit to Ramtirth Yogashram and that he had gone through the procedure of preparation of Ramtirth Brahmi Oil. He pointed out that the ingredients used in the preparation are ayurvedic and the procedure followed were in conformity with the method prescribed in Ayurvedic Granthas, which is known as "Neha Pak Vidhi". Apart from this, the assessee had also produced the decisions of the Sales Tax Appellate Authorities under the Kerala General Sales Tax Act and under the Karnataka General Sales Tax Act, wherein, a consistent view had been taken that Ramtirth Brahmi Oil is an ayurvedic medicine and is not a toilet article. The Indian Medicine and Homeopathy Department had also certified Ramtirth Brahmi Oil as an ayurvedic product. The Commissioner (Central Excise), Coimbatore, had also issued a certificate, treating the product as an ayurveda medicine, classifiable under Heading 3003 and exempt under Notification 75/94. In the background of the voluminous materials thus produced before this Court, which were, in fact, relied on before the hierarchy of authorities, we have no hesitation in accepting the case of the assessee that Ramtirth Brahmi Oil is to be assessed as medicine under Entry 20 Part C I Schedule as an ayurvedic medicine and not falling under Entry 1(ii) of Part F of the I Schedule as a hair oil, read with Explanation therein.
17. It is no doubt true that the decisions of the Apex Court referred to above arise under the excise law and the entries may not be in identical wording as in the sales tax enactment. Nevertheless, the answer to the question as to whether a particular product is a medicinal product or not was considered in the above-said decisions, wherein, the Revenue sought to treat the items in question either as toilet preparation or as cosmetic. Thus, even with the difference in the entries, if a product could be classified only as a medicament or a medical product, it cannot lose its character as such merely because the entries under the sales tax enactment are differently worded. As far as the present case is concerned, Entry 1(ii) of Part F of the I Schedule deals with hair oils, hair creams, hair dyes, etc., and the Explanation to the said entry stated that any of the items, even if medicated, or as defined under Section 3 of the Drugs and Cosmetics Act, or manufactured on the licence issued under the said Act, will fall under this item. Thus, if an item has to fall under Part F Entry 1, even going by the Explanation, a medicated oil has to be a hair oil simpliciter. However, if medicated oil is not sold just as a hair oil, but, as already pointed out in the preceding paragraqph and as certified by the Director of Ayurveda that it has multifarious functions and one of which happens to be for the scalp or for the hair, it would not make the oil sold by the assessee, a pure and simple hair oil. The Revenue placed heavy reliance on the decision of the Madhya Pradesh High Court reported in 14 STC 813 (MP) (Commissioner of Sales Tax Vs. Shri Sadhna Aushadhalaya), wherein, the Madhya Pradesh High Court held that Maha Bhringraj Hair Oil is a toilet article. The Madhya Pradesh High Court held that the hair oil manufactured by the assessee, even though manufactured following the formula given in ayurvedic treatise, is a toilet article; hence, to be assessed as a toilet article. The High Court held that the words "cosmetic" and "toilet" being words of every day use, must be understood in common parlance and in commercial language. The said product was also considered in the decision reported in (2005) 4 SCC 15 (Meghdoot Gramodyog Sewa Sansthan Vs. Commissioner of Central Excise, Lucknow) with reference to the excise classification. The Apex Court pointed out that a product could be medicinal without having been prescribed by a medical practitioner and even if items are sold under the name bearing a cosmetic connotation, they would remain medicines based on the composition of the items. Thus, the Apex Court held, following the decisions reported in 1995 Supp (3) SCC 1 (B.P.L. Pharmaceuticals Ltd. v. CCE), (2003) 5 SCC 288 (Commissioner of Central Excise, Calcutta-IV v. Pandit D.P. Sharma) and (2003) 5 SCC 290 (Commissioner of Central Excise, Allahabad Vs. Himtaj Ayurvedic Udyog Kendra) that Bhringraj Tail is to be classified as medicament under Tariff Sub-Heading 3003.30 and not as perfumed hair oil or other preparation for use on the hair. The decision of the Madhya Pradesh High Court has to be read in the context of the entry therein under the Madhya Pradesh General Sales Tax Act. In the background of the decision of the Apex Court reported in (2005) 4 SCC 15 (Meghdoot Gramodyog Sewa Sansthan Vs. Commissioner of Central Excise, Lucknow) and the contemporaneous treatment given to the item Ramtirth Brahmi Oil by the other States, we have no hesitation in confirming the order of the Tribunal, thereby rejecting the Revenue's appeal. In the result, the Tax Case Revision is dismissed and the order of the Tribunal is confirmed. No costs.
To
1. The Sales Tax Appellate Tribunal (Additional Bench), Coimbatore
2. The Appellate Assistant Commissioner, (CT),Pollachi.
3. The Deputy Commercial Tax Officer, Pollachi (Rural) krr