Rajasthan High Court - Jaipur
Commercial Taxes Officer vs M/S Cipla Ltd on 4 July, 2023
Author: Sameer Jain
Bench: Sameer Jain
[2023:RJ-JP:13177]
HIGH COURT OF JUDICATURE FOR RAJASTHAN
BENCH AT JAIPUR
S.B. Sales Tax Revision / Reference No. 56/2020
Commercial Taxes Officer, Anti-Evasion, Zone-III, Jaipur
----Petitioner
Versus
M/s Cipla Ltd., 10, Gopinath Marg, Purohitji Ka Bagh, Jaipur
----Respondent
Connected With S.B. Sales Tax Revision / Reference No. 55/2020 Commercial Taxes Officer, Anti-Evasion, Zone-III, Jaipur
----Petitioner Versus M/s Cipla Ltd., 10, Gopinath Marg, Purohitji Ka Bagh, Jaipur
----Respondent S.B. Sales Tax Revision / Reference No. 57/2020 Commercial Taxes Officer, Anti-Evasion, Zone-III, Jaipur
----Petitioner Versus M/s Cipla Ltd., 10, Gopinath Marg, Purohitji Ka Bagh, Jaipur
----Respondent S.B. Sales Tax Revision / Reference No. 58/2020 Commercial Taxes Officer, Anti-Evasion, Zone-III, Jaipur
----Petitioner Versus M/s Cipla Ltd., 10, Gopinath Marg, Purohitji Ka Bagh, Jaipur
----Respondent S.B. Sales Tax Revision / Reference No. 59/2020 Commercial Taxes Officer, Anti-Evasion, Zone-III, Jaipur
----Petitioner Versus M/s Cipla Ltd., 10, Gopinath Marg, Purohitji Ka Bagh, Jaipur
----Respondent S.B. Sales Tax Revision / Reference No. 79/2020 (Downloaded on 11/11/2023 at 06:06:46 PM) [2023:RJ-JP:13177] (2 of 9) [STR-56/2020] Commercial Taxes Officer, Anti-Evasion, Zone-III, Jaipur
----Petitioner Versus M/s Cipla Ltd., 10, Gopinath Marg, Purohitji Ka Bagh, Jaipur
----Respondent For Petitioner(s) : Mr. Punit Singhvi with Mr. Ayush Singh For Respondent(s) : Mr. Alkesh Sharma with Mr. Ayush Sharma & Mr. Himanshu Morwal HON'BLE MR. JUSTICE SAMEER JAIN Judgment 04/07/2023
1. The present Sales Tax Revisions / References (for short "STRs") were admitted on following question of law:
"Whether in the facts and circumstances of the case the Rajasthan Tax Board was justified in law in holding nicotex/nicogum as medicine despite of the fact such goods are tobacco goods?"
2. Learned counsel for the revenue contends that all the authorities below have erroneously held the product in question, i.e. nicotex/nicogum, as medicine/drugs to be taxed as per Entry No. 43 of Schedule IV to the Rajasthan Value Added Tax, 2003 (for short "RVAT Act"), whereas the product in question would have to be classified and taxed as 'Tobacco and its products'. In support of his contention, learned counsel for the revenue submits that the main ingredient in the product in question is Nicotine, which is extracted from tobacco leaves and which is used as a substitute to smoking cigarettes / chewing tobacco. The admitted purpose of nicotine is to help get rid of the habit of smoking, which is not a disease and therefore the product in question has no medicinal (Downloaded on 11/11/2023 at 06:06:46 PM) [2023:RJ-JP:13177] (3 of 9) [STR-56/2020] value. The product in question are also sold without any prescription and is readily available in common grocery shops also. Learned counsel for the revenue has further relied on Apex Court order dated 19.09.2018 in CTO vs M/s Johnson and Johnson & Ors., wherein the Apex Court had set aside the order of Co-
ordinate Bench of this Court, dated 13.01.2016 in S.B. STR No. 3/2013 and other connected matters.
3. Per contra, learned counsel for the respondent-
assessee, at the outset, submits that the Revenue had not discharged its onus in establishing that the product in question would fall under Schedule V/VI to the RVAT Act. Learned counsel for the respondent-assessee submits that addiction to tobacco is a well recognized disease worldwide, the leading treatment of which is Nicotine Replacement Therapy (for short "NRT"). In this regard, learned counsel for the respondent-assessee has placed reliance on 'Tobacco Dependence Treatment Guidelines' issued by Ministry of Health & family Welfare, Government of India and the WHO Model List of Essential Medicines (18 th list), first published in April 2013. Learned counsel for the respondent-assessee has also relied upon Apex Court judgment of Muller and Phipps (India) Ltd.
vs. The Collector of Central Excise, Bombay-I: (2004) 4 SCC 787 wherein the Apex Court held that once the Drug Controller has held the goods in questions to be drugs, inevitably the products in question must be treated as medicinal preparations.
Learned counsel for the respondent-assessee has also highlighted that for the relevant period, the product in question was specifically included at Serial No. 33 of Schedule K to Drugs and (Downloaded on 11/11/2023 at 06:06:46 PM) [2023:RJ-JP:13177] (4 of 9) [STR-56/2020] Cosmetic Rules, 1945 and a specific license was required to manufacture such medicines/drugs.
4. Heard and considered.
5. The limited issue pertains to classification of nicotex/nicogum. The Revenue wants to classify the same as "Tobacco and its products", as contained in Entry 4 of Schedule VI to the RVAT Act, as against the Entry 43 of Schedule IV to the RVAT Act, which reads as "Drugs and medicines including vaccines, syringe and dressing medicated ointment produced under drugs licence, light liquid paraffin of IP grade."
6. It is undisputed that the product in question were duly manufactured and sold under the licence issued as per the Drugs and Cosmetics Rules, 1945, as required under the Schedule K Entry 33. It is also undisputed that Apex Court judgment in M/s Muller & Phipps (India) Limited (supra) has held that once the product is licensed and is manufactured under the statutory provisions of the Drugs and Cosmetics Rules 1945, it will not cease to be a drug and its medicinal value cannot be questioned.
It is also undisputed that product in question is used in Nicotine Replacement Therapy. The learned Tax Board, after taking into consideration all these aspects as well as judgments of different Courts on the subject, observed and held as under:
"6- mHk;i{kksa dh cgl ij euu fd;k x;k rFkk vfHkys[k dk ifj'khyu fd;k x;kA lqlaxr U;kf;d -"VkUrksa dk llEeku v/;;u fd;k x;kA çdj.k esa vUroZfyr rF;ksa ,oa fof/kd çko/kkuksa ds vkyksd esa fookfnr fcUnqvksa ij foospu o fu"d"kZ fuEukuqlkj gS& ¼I½ "Nicotex 2mg/4mg o Nicogum 2mg/4mg" MªXl ,.M d‚LesfVDl ,DV] 1940 ds vUrxZr tkjh Mªx ykbZlsal ds vUrxZr fufeZr gksus ls çR;FkhZ O;ogkjh }kjk vf/kfu;e dh vuqlwph& IV dh çfof"B la[;k 43 "Drugs and medicines including vaccines, syringe and dressing, medicated ointment produced under (Downloaded on 11/11/2023 at 06:06:46 PM) [2023:RJ-JP:13177] (5 of 9) [STR-56/2020] drugs licence, light liquid paraffin of IP grade." ds vUrxZr Mªx ,.M esfMflu ds :i esa @4% o 5% ls dj nkf;Ro Lohdkj fd;k tkdj dj pqdk;k x;k gSA dj fu/kkZj.k vf/kdkjh }kjk fookfnr vkbVEl dk mi;ksx rEckdw mRiknksa dh yr NqM+kus esa gksus] buds fuekZ.k esa fudksfVu dk mi;ksx gksus] fudksfVu rEckdw dh ifÙk;ksa ls çkIr gksus] M‚DVj dh iphZ ds fcuk Hkh ^vksoj fn dkmaVj* miyC/k gksus vkfn vk/kkjksa ij bu vkbVEl dks rEckdw mRikn ¼Tobacco product½ ekurs gq, vkns'k ikfjr fd;s x;s gSaA ¼II½ dj nj ds ç;kstu ls dsoy mUgha ^Mªx ,.M esfMflu* dks vuqlwph&IV dh çfof"V la[;k 43 esa 'kkfey fd;k x;k gS tks Mªx ,.M d‚LesfVDl ,DV] 1940 ds vUrxZr tkjh ^Mªx ykbZlsal* ds vUrxZr fufeZr gSaA fookfnr eky "Nicotex 2mg/4mg o Nicogum 2mg/4mg"
dk Mªx ykbZlsal ds vUrxZr fufeZr gksus ds rF; dks dj fu/kkZj.k vf/kdkjh }kjk fookfnr ugha fd;k x;k gSA vr% fof'k"V dkuwu ds vUrxZr vf/k--r o fo'ks"kK çkf/kdkfj;ksa }kjk dkuwuh çfØ;k dk ikyu dj çR;FkhZ dks "Nicotex 2mg/4mg o Nicogum 2mg/4mg" dk mRiknu nokbZ :i djus gsrq Mªx ykbZlsal la[;k ND/80&A o ND/86&A tkjh fd;k tkus ls dj fu/kkZj.k vf/kdkjh dks ;g vf/kdkj ugha jg tkrk fd og çR;FkhZ ds mRikn dks Mªx ,oa esfMflu' ls fHkUu ekusA ¼III½ fnukad 26-11-2014 rd Mªx ykbZlsal ds vUrxZr ^Mªx o esfMflu* ds :i esa fufeZr leLr mRikn djk/kku ds fy;s çfof"B la[;k 43 esa 'kkfey Fks fdUrq fnukad 27-11-2014 ls bu mRiknksa esa ls vuqlwph& V dh çfof"V la[;k 67 esa of.kZr mRiknksa dks vof'k"V njksa ls dj olwyh ds ç;kstu ls ckgj ¼exclude½ dj fn;k x;kA ;g rF; la'kksf/kr çfof"V la[;k 43 "Drugs and medicines including vaccines, syringe and dressing medicated ointment produced under drugs licence, light liquid paraffin of IP grade excluding goods specified in entry No- 67" ds voyksdu ek= ls çekf.kr gSA ;fn iwoZ esa ¼fookjk/khu vof/k esa½ Mªx ykbZlsal ds vUrxZr fufeZr leLr mRikn çfof"V la[;k 43 esa 'kkfey gh u gksrs rks ckgj djus dh vko';drk Hkh ugha gksrhA vr% çR;FkhZ dk mRikn "Nicotex 2mg / 4mg o Nicogum 2mg/4mg" vuqlwph&IV dh çfof"B la[;k 43 ls vioftZr ¼exclude½ u gksus ls fopkjk/khu vof/k esa @4% o 5% ls dj ;ksX; gSA ¼IV½ fnukad 26-11-2014 rd f'kMîwy&IV dh çfof"V la[;k 43 drugs and medicines ds laca/k esa fof'k"V çfof"V ¼ specific entry½ rFkk f'kMîwy&v dh çfof"V la[;k&1 "Goods not covered in any other schedule under the Act or under any notification issued under section-4 of the Act." ,d vof'k"V ¼residuary½ çfof"V jgh gSA fof/k (Downloaded on 11/11/2023 at 06:06:46 PM) [2023:RJ-JP:13177] (6 of 9) [STR-56/2020] dk ;g lqLFkkfir fl)kar gS fd fdlh oLrq ds oxhZdj.k ij fookn dh fLFkfr esa ml oLrq dks fof'k"V çfof"V esa 'kkfey djus ds mnkjrkiwoZd ç;kl ds mijkUr Hkh ^fof'k"V çfof"V* esa 'kkfey djuk lEHko ugha gksus ij gh vof'k"V çfof"V ds vUrxZr oxhZdj.k fd;k tk ldrk gSA ¼V½ f'kMîwy&IV dh çfof"V la[;k 43 dh 'kCnkoyh "drugs and medicines..." dks 'kCnkoyh "...produced under drug licence..." } kjk fo'ksf"kr@lhfer ¼qualify½ fd;k x;k gSA vr% ,dkf/kd U;kf;d
-"Vkarksa esa fuf.kZr vuqlkj fookfnr vkbZVe "Nicotex 2mg/4mg o Nicogum 2mg/4mg" dk Mªx ykblsal ds varxZr fufeZr gksuk mUgsa ^Mªx o esfMflu* Bgjkus ds fy, flQZ fopkj.kh; gh ugha gS cfYd fu.kkZ;d Hkh gSA fdlh vkbVe ds esfMflu gksus ds fy, fpfdRldh; lykg iwoZ 'krZ ugha gSA vr% çdj.k esa fookfnr vkbVEl Mªx ykblsal ds varxZr fufeZr gksus ls "Drugs and medicines" esa 'kkfey gSaA ¼VI½ çR;FkhZ }kjk çLrqr ,oa vihyh; çkf/kdkjh dh i=koyh ij miyC/k ^fo'o LokLF; laxBu* ¼WHO½ }kjk tkjh 'WHO Model List of Essential Medicines' esa rEckdw ij fuHkZjrk dks chekjh ekuk x;k gSA blds bZykt ds fy, 'Nicotine Replacement Therapy (NRT) ,oa Nicotine Polacritex Gum (2mg / 4mg) dk nokvksa ds :i esa mYys[k fd;k x;k gSA blh çdkj Hkkjr ljdkj ds LokLF; ,oa ifjokj dY;k.k ea=ky; }kjk tkjh 'Tobacco Dependence Treatment Guidelines' esa /kweziku@ rEckdw pckus vkfn dh yr o bl ij fuHkZjrk dks chekjh crkdj bZykt dh fof/k;ka] nokbZ;ka ,oa vU; funsZ'kksa dks 'kkfey fd;k x;k gSA vr% /kweziku o rEckdw pckus dks dsoy vknr ;k yr crkdj chekjh ugha ekuus ,oa bl chekjh ds bZykt esa ç;qä çR;FkhZ }kjk csps x;s mRiknksa dks ^Mªx ,oa esfMflu* esa 'kkfey ugha djus dk jktLo dk rdZ vLohdkj fd;k tkrk gSA 7- ekuuh; U;k;ky;ksa }kjk dj nj gsrq vkbVEl ds oxhZdj.k rFkk fdlh vkbVe ds ^Mªx o esfMflu* gksus ds lEcU/k esa le;≤ ij fopkj djrs gq, dfri; fl)kUrks fodkl fd;k x;k gSA dqN pqfuUnk mnkgj.k fuEuçdkj gSa %& "(i) it has been noted that resort can be made to a residuary heading only when by liberal construction of the specific Entry cannot cover the goods in question." [State of Maharashtra vs. Bradma of India Ltd. (2005) 2 see 669]
(ii) "....Applying the principles enunciated in BPL Pharmaceuticals Ltd. case and taking into consideration various circumstances as to the manner in which the goods had been treated on the earlier occasions by the (Downloaded on 11/11/2023 at 06:06:46 PM) [2023:RJ-JP:13177] (7 of 9) [STR-56/2020] department and the products having been utilised with reference to the commercial parlance and understanding, that it had been treated as a drug it would not cease to be one. [MIS Muller & Phipps (India) Ltd. Vs. The Collector of Central Excise, Bombay-I (2004) 9 TUD 223 (SC)]
(iii) " Burden of proof - Classification of goods - Burden of proof is on the taxing authority to demonstrate that a particular class of goods or item in question is taxable in the manner claimed by them. Mere assertion in that regard based on pamphlet of the product is of no avail." [Commissioner of Central Excise, Chennai Vs. Hindustan Lever Ltd. 24 Vat Reporter 153(SC)]
(iv) "If such goods could also be obtained in shops of ordinary merchandise or in chemists shops also but nevertheless if they are medicines or medicinal preparation, they would not cease to be so. The necessity of obtaining a prescription for selling such goods by a chemist would arise in case of any goods as such have harmful effects on the system of the human body. In other cases, there will be no such restrictions placed at all. In these cases, the goods could be sold either in a pharmacy or a druggist shop or any other shop. Therefore, that test may not be a clinching one in a case of this nature. ....... " [United Trading Agency Vs. Additional Commissioner Banglore (Karnataka HC)]
(v) " ....In the instant case, entry 79 is a general entry which prescribes the rate of tax applicable to sale of medicine and drugs, whereas entry 127 is a of tax applicable to sale of special entry, which prescribes the rate of tax on talcum powder, including medicated talcum powder. Law is well-settled that if there are two entries-one. general and the other special, the special entry should be applied for the purpose of levying tax. The general entry should give way to the special entry ....... " [Heinz India Ltd. Vs. State of Kerala, (2009) 19 VST (Ker)]
(vi) " ....... The Drug and Cosmetics Act covers Ayurvedic medicines as well and the license is required to be obtained for manufacture of Ayurvedic drugs and medicines as well. The liquid potable in the form of "Gulab, Chandan or Badam Sharbats" having medicinal value can, therefore, clearly fall within the definition of "drugs and medicines".The proposition of law that where a commodity can fall under a specific entry, the taxing authority cannot tax it-as general or residuary (Downloaded on 11/11/2023 at 06:06:46 PM) [2023:RJ-JP:13177] (8 of 9) [STR-56/2020] entry." [Asstt. mercial, Jaipur Vs. MIS Shri Ayurved, Jaipur. SBSTR No. 159/2005 (Raj.HC)]
(vii) " ...... In my view, merely because it is available in a tea stall or a betel shop or other various places where confectionery items are sold, does not change the character of an item. There is no evidence on record or authoritative material put on record by the AO so that it can be said to be a confectionery item and not a drug "[Asstt. Commissioner, Jaipur Vs. MIS Khandelwal Drug Agencies, Jaipur SB STR No. 15112005 (Raj. HC)]
(viii) "Thus viewed, the term "medicine" cannot be confined within the traditional concept of an article which, by itself, is enough to cure a human ailment"
[Rashtra Deep Laboratory Vs. Commissioner of Sales Tax UP (1983) 53 STC 419 (All.)]
(ix) . " ..... Gulab Jal"is manufactured under a licence issued under the Drugs and Cosmetics Act.· It may not be a commonly used Ayurvedic medicine, but so long as it figures as such in the statute it cannot be derecognised by the revenue on no basis."
[Commissioner of Commercial Tax Vs. Dabar India Ltd. (2000) 119 STC 37 (MP)]
(x) " Therefore sale of I.V. set which is treated as drug under the Drug and Cosmetics Act. 1940 by Central Government notification must be held to be a sale of drug for the purposes of Raj. Sales Tax Act. also. The Rajasthan Tax Board was right in holding the LV. sets as drug to fall within the entry governing sale of medicines " [Additional Commissioner, Commercial Taxes Vs. Life Guard Distributors' (2000) 121 STC 102 (Raj.)]
(xi) "The products "Keo Karpin Hair Vitalizer" as well as "Keo Karpin Baby Oil," are being manufactured by the respondent No.1 after obtaining requisite permission and licence under the Drug and Cosmetics Act, 1940 as a medicinal preparation. The Supreme Court held that- mere fact that a product is sold across the counter and not under a Doctor's prescription, does not by itself lead to the conclusion that it is not a medicament, and ..... " [The State of Rajasthan & Another Vs. MIS Deys Medical Stores Ltd. Jaipur & Another (2007) 19 TUD 97 (Raj.)]
(xii) " It is seen from the above that for the purposes of classification under the sales tax law the fact that commodity was produced under license under the Drug (Downloaded on 11/11/2023 at 06:06:46 PM) [2023:RJ-JP:13177] (9 of 9) [STR-56/2020] Act. and fell within the definition of drugs/medicines under the Drugs Act was taken to be not just relevant but also a determining factor. " [Deys Medical Store Ltd. Vs. CTO, Jaipur (1998) 1 Sales Tax Today 196 (RTT)]
(xiii) " ..... Hon'ble Rajasthan Taxation Tribunal has laid down that for the purposes of classification under sales tax the fact that commodity was produced under the Drug Act and fell within the definition of drugs/medicines under the Drugs Act was taken to be not just relevant but also a determining factor.." Further Hon'ble MP High Curt reported at (119 STC 37) laid down "Once a product figured in its (Drug Act) Schedule as a drug/medicine it should not be treated otherwise ....[lgk;d vk;qDr] fo'ks"k o`r&izFke] t;iqj cuke eSllZ fLeFk Dyhu chpe dUT;wej gSYFk ds;j fy- t;iqjA (2002) Sales Tax Today 147 (RTB)]"
8- mi;qZä foospu] fu"d"kZ o U;kf;d -"VkUrksa esa çfrikfnr oxhZdj.k lacaf/kr fl)kUrksa dh jks'kuh esa fookfnr eky "Nicotex 2mg/4mg o Nicogum 2mg/4mg" 'Mªx ,oa esfMflu* ds :i esa vuqlwph&IV dh çfof"V la[;k 43 ds vUrxZr fuEurj nj ¼4@5 çfr'kr½ ls dj ;ksX; gSA vr% vUrj dj] C;kt o 'kkfLr ds lEcU/k esa jktLo dh vihysa vLohdkj dh tkrh gS"
7. In the opinion of this Court, learned Tax Board, after due consideration of material aspects, has passed a well reasoned speaking order. This Court is in complete agreement with the reasoning and findings given by the learned Tax Board and is not inclined to interfere with the order of the Tax Board.
8. Consequently, all these STRs are dismissed. Pending application(s), if any, shall stand disposed of.
(SAMEER JAIN),J Pooja/17-22 (Downloaded on 11/11/2023 at 06:06:46 PM) Powered by TCPDF (www.tcpdf.org)