Heinz India Limited Vs State of Kerela (Supreme Court of India)
Supreme Court held that medicated talcum powder is not a medicinal preparation, drug or medicine, the same is classifiable in the category of cosmetics.
Facts- The issue which this court has to deal with had placed the courts in a prickly pickle, on several occasions- whether medicated talcum powder is medicine or drug, or a cosmetic, or in terms of the statutes in question, medicated talcum powder?
Conclusion- In the present case, the clear legislative intent, of inserting a carefully worded entry, which was a “hybrid” one, i.e. describing an article that contained medicinal ingredients, as well as those used for cosmetics, and yet placing such a creature (“neither beast nor fowl” so to say) in the category of cosmetics, ruled out altogether any interpretive scope of classifying it as a medicinal preparation, drug or medicine. Therefore, this court cannot fault the High Court for drawing the conclusion that it did.
In the present case, the TNGST was consciously amended to include talcum powder, whether or not medicated in the specific entry or class of entries, enumerating cosmetics. Hence, like in the Kerala case, the plain meaning of that taxation head or entry had to be given, as there was no Consequently, the findings recorded by the High Courts are justified.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1. The issue which this court has to deal with had placed the courts in a prickly pickle, on several occasions- whether medicated talcum powder is medicine or drug, or a cosmetic, or in terms of the statutes in question, medicated talcum powder? The present appeals, by special leave, concern two sets of appeals: one, from the State of Kerala and the other from the State of Tamil Nadu. The Kerala High Court, by its judgment1 rejected the revisions filed by the appellant/assessee (hereafter “Heinz”) aggrieved by the Kerela Sales Tax Appellate Tribunal’s orders holding that its product “Nycil Prickly Heat Powder” was classifiable not under Entry 79 of the First Schedule to Kerala General Sales Tax Act, 1963 (hereafter “KGST Act”) [as “medicine” but as “Medicated Talcum Powder”].
2. In the second set of appeals, M/s Glaxo Smithkline Pharmaceuticals Ltd (“GSK” hereafter) is aggrieved by the judgment of the Madras High Court2 where the court rejected its contention that the prickly heat powder was “medicinal formulation or preparation ready for use internally or externally for treatment or mitigation or prevention of diseases or disorders in human being or animals” [under Entry 20-(A) of Part C of First Schedule to the Tamil Nadu General Sales Tax Act, 1959 – hereafter “TNGST Act”] and held it to be toilet powder [under Entry 1 (iii) of Part-F of First Schedule of the TNGST Act]. The High Court so held because the Explanation to the said entry stated that:
“Any of the items listed above even if medicated or as defined in Section 3 of the Drugs and Cosmetics Act, 1940 (Central Act XXIII of 1940) or manufactured on the license issued under the said Act will fall under this item.”
I
3. Heinz’s appeal from the Kerala High Court is concerned with assessment years 1999-2000 and 2000-2001. For the assessment year 1999-2000, Heinz filed its annual return which was accepted by the assessing officer; the tax payable on the taxable turnover was 8%, and the treatment on the sale of Nycil prickly heat powder was accepted to be an item falling under Entry 79 of the First Schedule to KGST Act, by order dated 18-11-2005. The revisional authority was of the view that the order of assessment passed by the assessing authority was prejudicial to the interest of the revenue; it initiated proceedings under Section 35 of the KGST Act, proposing to set aside the assessment of the assessing authority on the premise that levy of tax at 8% on ‘Prickly heat powder’ by treating it as medicine by the assessing authority was prejudicial to the interest of the revenue and the rate of tax at 20% was to be applied as applicable to “Medicated Talcum Powder”. Heinz objected to this. However, the revisional authority by order dated 16-2-2006 set aside the assessment order for the assessment year 1999-2000 and remanded the matter to the assessing authority to pass fresh assessment order by levying tax at 20%. Aggrieved, Heinz carried the matter before the Appellate Tribunal, which affirmed the revisional order and rejected its appeal.3 The High Court, on further revision, concurred with the classification adopted by the revenue.
4. The Kerala High Court noticed the judgment of this court Puma Ayurvedic Herbal Pvt Ltd v Collector of Central Excise4 (hereafter “Puma Ayurvedic Herbal”); Hamdard (Wakf) Laboratories v. Deputy Commissioner5 (hereafter “Hamdard (Wakf) Laboratories”); Ponds India Ltd. v. Commissioner of Trade Tax6 (hereafter “Ponds India”); Muller & Phipps (India) Ltd v. Collector of Central Excise7 (hereafter “Muller & Phillips (India) Ltd”) and several other decisions cited by the parties. The court was of the opinion that the product was not of common use by consumers as a daily use talcum powder, but normally used for the “specific purpose of treating prickly heat” and its use discontinued after the ailment ceased. This meant it has ingredients containing preventive and curative effects making it effective for the treatment of ailments. The court observed that:
“We would definitely say that ‘Nycil Powder’ is not an ordinary talcum powder as understood in common or commercial parlance, but has a medicinal value and is used for treatment of prickly heat and other skin ailments. But then, under which entry we should classify the commodity in question. In our view, if not for the inclusive definition under Entry 127 of the first schedule to the KGST Act, we would not had any hesitation in classifying the commodity in question as a medicine. In our view, the legislature consciously immediately after the expression talcum powder, by employing the expression ‘including’ has thought it fit to include “medicated talcum powder” under Entry 127 of first schedule to the Act. In view of this inclusive definition, though the nycil powder has all the qualities and ingredients of medicines and since the same is basically a talcum powder which has preventive and curative power, the same requires to be brought under the special entry rather than the general entry.”
5. The High Court further held that Entry 127 of the First Schedule immediately after the expression talcum powder has used the word ‘including’. The word includes/including, “is used in interpretation clause to enlarge the meaning of the word in the statute. When such word is used in an interpretation clause, it must be construed as comprehending, not only such things as they signify according to their natural import, but also those things which the interpretation clause declares that they shall include.” It was, therefore held that since Entry 127 is a specific entry in a fiscal statute, the general entry (Entry 79) had to give way to the specific entry. The court observed that:
“though the Nycil Prickly Heat Powder is used for the care of the skin and not cure of the skin and though it contains a small quantity of Chlorphenesin, which has curative effect; in view of the specific entry, it has to be classified only under Entry 127 of First Schedule to the KGST Act and not under Entry 79 of the Act which speaks of medicines and drugs.
Heinz is aggrieved by these findings.
II
6. GSK appeals against the judgment of the Madras High Court. They are in relation to two assessment years, i.e., 1993-94 and 1994-95. In both these cases, the assessing officer levied tax at the rate of 16 % under Entry 1 (iii) of Part F of the First Schedule to the TNGST Act, rejecting the assessee’s (which was Heinz, initially) claim to levy tax at the rate of 5 % for the first sale of Nycil prickly heat powder on the ground that it is a medicine or drug under Entry 20- A of Part C of the First Schedule to the TNGST. The Appellate Assistant Commissioner affirmed the view of the assessing officer.8 Heinz approached the Appellate Tribunal, which accepted its plea, and held that the product was a medicine or drug, and classifiable as such.9 The revenue’s appeal to the Madras High Court succeeded. Heinz’s unit was during the interregnum, taken over by GSK.
7. The High Court, by its impugned judgment, noted that the product is subject to license under the Drugs and Cosmetics Act, 1940 [hereafter “Drugs Act”]. The court also noticed the Kerala judgment and remarked that the difference between the two enactments (KSGST Act and TNGST Act) is that in the latter, it is the explanation which clarifies that any of the items even if medicated or as defined in Section 3 of the Drugs and Cosmetics Act will fall under the Entry I(iii) of Part ‘F’ of the First Schedule. The Madras High Court was of the opinion that the wording of the two enactments did not make any difference, even though one had an inclusive definition and another includes the product, through explanation. The Madras High Court, therefore held that Nycil prickly heat powder “is a toilet powder” though the manufacturer held a license under the Drugs Act and that such a circumstance fell within the mischief of the Explanation to Entry I (iii) to Part F of the First Schedule.
8. The impugned judgment of the Madras High Court relied on the decision of the Kerala High Court which had considered medicated talcum powder after going through the various definitions of “drug”, “medicine”, “cosmetic” and “talc”, and ultimately holding that medicated talcum powder includes prickly heat powder. The Kerela High Court had observed that:
“34. The ingredients of Nycil powder are chlorphenesin B.P. one percent, zinc oxide I.P. 16 per cent, boric acid I.P. 16 per cent, starch I.P. 51 per cent, talc 100 per cent. Chlorphenesin is contained in Nycil powder to the extent of only one per cent and the other antiseptic medicinal agents are comprised to the extent of 32 per cent and the rest of the materials which go into the making of Nycil powder are composed of starch and talc. Nycil prickly heat powder contains chlorphenesin, a product specifically meant for treatment of skin disease. The inclusion of this medicine in the composition makes all the difference. It is this addition of medicine which changes its basic character. Therefore, the product in question is not merely talcum powder in view of the presence of chlorphenesin, though in a small quantity, though the base was purified talc.
Relying upon the findings of the Kerela High Court, Madras High Court further observed that:
16. The Kerala High Court rejected the contention as to the theory of medicine and also after considering the basic ingredients of prickly heat powder, came to the conclusion that the base product is only a purified talc. We are also of the view that after considering the explanation to the main entry, it is only a medicated talcum powder and it certainly includes prickly heat powder also. We agree with the reasoning of the Kerala High Court and hold that the nycil prickly heat powder is not a “drug” and it is only a medicated talcum powder. We are also informed that M/s Heinz India Limited, the petitioner-assessee before the Kerala High Court, had purchased the manufacturing unit of the respondent- assessee before us in respect of prickly heat powder. Accordingly, we answer the issue in favor of the Revenue and against the assessee. Even though number of judgments were cited by both the counsel in support of their contentions, it is seen that the Kerala High Court has considered all those judgments in detail under the various enactments like Central Excise Act and the various State Sales Tax Act enactments. Therefore, it is not necessary to once again consider all those judgments cited by both the learned counsel, since the issue is already settled by the judgment of the Kerala High Court in the case of Heinz India Limited. Under these circumstances, we set aside the orders of the Tribunal and restore the orders of the assessing authority. The tax case revisions are allowed.”
III
9. On behalf of Heinz, Mr. S.K. Bagaria, learned senior counsel, argued that “Nycil” is the trade name under which the manufacturer markets the substance known as ‘Chlorphenesin’. The Nycil powder contains zinc oxide and boric acid and they form 32% of the total contents of Nycil powder. The rest of the material is starch and talc. Nycil powder is devised so as to retain skin cleanliness in order to protect it against prickly heat and infection. It also gives freshness and comfort. It consequently falls under Entry 79 of the first schedule to KGST Act.
10. Learned senior counsel relied on Shah & Company v State of Gujarat10 (hereafter “Shah & Co ”), and urged that Chlorphenesin is a potent antifungal, antibacterial and trichomonicidal substance of low toxicity. It is effective against common dermatophytes causing tinea pedis (Athelet’s foot) and other dematomycoses, epidermophyton, floccosum and the various trichophyton, species such bacteria as streptococci, staphyloccocci, coliform organisms and clostridii. Nycil is effective in eliminating pruritus ani and pruritus vulvae. Pruritus ani and pruritus vulvae are frequently of bacterial or fungal origins, or the lesions may become infected with bacterial or fungi, and Nycil is effective in eliminating such organisms.
11. In Shah & Co (supra), it was held that Nycil as powder or ointment is recommended for the treatment of prickly heat and dhobie itch and active skin protection during ringworms and other fungicidal infections. It was submitted that Nycil powder is suitable for the initial treatment of acute mycotic infection since it is an absorbant, in addition to exercising its fungicidal action. It was argued that the ingredients of Nycil powder are Chlorphenesin B.P. 1%; Zinc Oxide I.P. 16%; Boric Acid 16% Starch I.P. 51% and Talc. Thus, about one-third (33%) of its ingredients are medicinal products. It was pointed out that the face of the container, in which the product is sold, contains the following description:
“Nycil contains chlorphenesin the antibacterial and antifungal agent. It actively prevents prickly heat and protects the skin from sores, dhobie itch, and athlete’s foot.”
12. It was argued that under Section 3(b) of the Drugs Act, “drug” is defined as “including all medicines used for internal or external use of human beings or animals intended to be used for mitigation or prevention of any disease or disorder”. “Cosmetics” under Section 3(aaa) of the said Act means, “any article intended to be sprinkled or sprayed or introduced or otherwise applied to a human body for cleansing, beautifying, promoting attractiveness or altering the appearance”, which also includes any article intended for use as a component of cosmetic. To bring or classify an article under Entry 79 of the First Schedule, the article must be a medicinal formulation or preparation which is ready for use either internally or externally for treatment or mitigation or prevention of diseases or disorders in human beings or animals. “Treatment” relates to diseases or disorders. Though medicinal formulations or preparation, can be used internally or externally, unless such use is by way of treatment of a disease or disorder in human beings or animals, it cannot be brought under the category of medicine. Clearly, in this case, Nycil powder is used to treat several dermatological conditions, including prickly heat. In fact, there is no medical treatment for that condition other than the use of Nycil.
13. It was argued that having regard to the above circumstances, Nycil prickly heat powder, which is used only to absorb sweat and moisture from the body and to keep away rashes in human beings, should be considered to be either a “drug” or “medicine” -in view of the composition, it is nothing but a medicinal preparation used as such and for the purpose for which talcum powder is used.
14. Learned senior counsel urged this court to follow the decision in Puma Ayurvedic Herbal (supra) where the assessee’s claim that its various products, including herbal powders, were medicaments, was considered. The court adopted a twin test to consider whether any item is a drug, or medicament, or cosmetic. The first is whether, the item is commonly understood as a medicament e. the common parlance test. If a product falls in the category of medicament it will not be an item of common use. A user will use it only for treating a particular ailment and will stop its use after the ailment is cured. The approach of the consumer is crucial. The second is, whether the ingredients are described in the medical literature, as necessary for healing.
15. Learned senior counsel submitted that in B.P.L Pharmaceuticals v. Collector of Central Excise11 (hereafter “B.P.L Pharmaceuticals Ltd.”), “Selsun Shampoo” was under consideration for purposes of Central Excise classification. The manufacturers claimed that the shampoo was a medicated one, meant to treat dandruff, a scalp disease. This court took note of the preparation, label, literature, character, common and commercial parlance and held the product was classifiable as a medicament, as it was not an ordinary shampoo of common use but was meant to cure a particular scalp or hair disease. After the cure, it was not meant to be used in the ordinary course. Muller & Phipps (India) Ltd (supra) was next relied on to urge that similar to this case, “Johnson Prickly Heat Powder” was held to be a medicament as it was “not an ordinary talcum powder but a powder to be used to get rid of the problem of prickly heat”.
16. In Ponds India (supra), the court had to consider whether white or yellow petroleum jelly (non-perfumed) sold as “Vaseline” was a “drug” or a “cosmetic”. It was urged that the court took note of the fact that the assessee was a licensee under the Drugs Act and that cosmetics within the meaning of the provisions were not covered in the Schedule to the exemption notification. It was pointed out that this court had held that while interpreting an entry in a taxing statute, the court’s role is to consider the effect of the law, upon considering it from different angles. Different tests are laid down for the interpretation of an entry in a taxing statute namely dictionary meaning, technical meaning, users point of view, popular meaning etc. While the purpose of a statute i.e. of collection of tax is important, yet that itself would not mean that an assessee would be made to pay tax although he is not liable therefor, or to pay a higher rate of tax when he is liable to pay at a lower rate. The court held that Vaseline was a drug, in that case. Learned senior counsel also relied on Union of India v Vicco Laboratories12 where the claim was that ‘Vicco Vajrudanti’ and ‘Vicco Termeric’ (dental powder and turmeric powder) were ‘ayurvedic medicines’. The issue had been decided by the Supreme Court in favour of the assessee, initially, which was sought to be re-opened. The court held that to be impermissible, as the goods had been declared as drugs.
17. Learned senior counsel relied heavily on Commissioner of Central Excise v Hindustan Lever Ltd13 (hereafter “Hindustan Lever”) and urged that merely because a particular product is substantially for the care of skin and simply because it contains subsidiary pharmaceutical or antiseptic constituents or is having subsidiary curative or prophylactic value, it would not become medicament and would still qualify as the product for the care of the skin. It was stressed that the onus is on the revenue that the classification sought by it (if it claims the product not to be a drug or medication, but a cosmetic), to discharge it with proof.
18. It was urged, lastly by relying on Collector of Central Excise v Wockhardt Life Sciences Ltd14., (hereafter “Wockhardt Life Sciences Ltd”) that the “common parlance test” or the “commercial usage test” is most Learned counsel relied on the following observations:
“33. There is no fixed test for classification of a taxable commodity. This is probably the reason why the ‘common parlance test’ or the ‘commercial usage test’ are the most common (see A. Nagaraju Bros. v. State of A.P. [1994 Supp (3) SCC 122] ). Whether a particular article will fall within a particular tariff heading or not has to be decided on the basis of the tangible material or evidence to determine how such an article is understood in ‘common parlance’ or in ‘commercial world’ or in ‘trade circle’ or in its popular sense meaning. It is they who are concerned with it and it is the sense in which they understand it that constitutes the definitive index of the legislative intention, when the statute was enacted.
19. The submissions of learned senior counsel, in Heinz were substantially adopted on behalf of GSK, in the Tamil Nadu case. In addition, Ms. Charanya Laxmikumaran, learned counsel urged that the statute in TGST Act is different, because in the Entry, relied on by the revenue, is dependant solely on the Explanation [to Entry I (iii) of Part F of the First Schedule]. However, the product, by its description, purpose, and application of the common parlance test, squarely fell within Entry 20A of Part C of the First Schedule, which were medical preparations, to be used internally or meant for external use or application “for treatment of diseases or disorders”. It was underlined that the exclusion from this entry was of products capable of use as creams, hair oils, tooth pastes, tooth powders, cosmetics, toilet articles, soaps and shampoos. Learned counsel submitted that the specific mention of one class of powders, i.e. tooth powder, and use of “cosmetic” with other expressions, clarifying that if the use of the product was only or predominantly as cosmetic, would it not fall under Entry 20A. It was submitted that having regard to the literature and the essential purpose of Nycil powder, it did not fit the description as a cosmetic [which is excluded], even if the Explanation to Entry I (iii) of Part F were taken into account. Thus, it has to be treated as a medicine.
20. Learned counsel relied on Sundaram Pillai v V. R. Pattabiraman15 and urged that the Explanation, to Entry I (iii) has to be considered in the context of the established rule that while a proviso excepts something out of the enactment which would otherwise be within its purview yet, if the text, context or purpose so require a different rule may apply. Likewise, an explanation is to explain the meaning of words of the section but if the language or purpose so require, the explanation can be so interpreted. All that the explanation did was to say that if the exclusion of cosmetic articles from Entry 20 per se did not result in its falling within the Entry relating to cosmetics, i.e. Entry I of Part F. It continued to be essentially a medicine, for prickly heat.
21. Next, Share Medical Care v Union of India16 was relied upon, to urge that if two interpretations are possible, that favouring the assessee should be Pappu Sweets and Biscuits v. Commr. Of Trade Tax, U.P17 (hereafter “Pappu Sweets and Biscuits”) and Collector of Excise v. M/s Parle Exports (P) Ltd18 were cited for the argument that the words used in the provision, imposing taxes or granting exemption should be understood in the same way for which they are understood in ordinary parlance in the area in which the law is in force or by the people who ordinarily deal with them.
IV
22. Pallav Sisodia, learned senior counsel appearing on behalf of the State of Kerala, urged that the correct test to be applied is whether the product is capable of use as a medication. He relied on Collector of Central Excise v CIENS Laboratories19 (hereafter “CIENS Laboratories”) to say that this court had elaborately considered all relevant factors, and devised the following test:
“19. Thus, the following guiding principles emerge from the above discussion. Firstly, when a product contains pharmaceutical ingredients that have therapeutic or prophylactic or curative properties, the proportion of such ingredients is not invariably decisive. What is of importance is the curative attributes of such ingredients that render the product a medicament and not a cosmetic. Secondly, though a product is sold without a prescription of a medical practitioner, it does not lead to the immediate conclusion that all products that are sold over across the counter are cosmetics. There are several products that are sold over-the-counter and are yet, medicaments. Thirdly, prior to adjudicating upon whether a product is a medicament or not, Courts have to see what the people who actually use the product understand the product to be. If a product’s primary function is “care” and not “cure”, it is not a medicament. Cosmetic products are used in enhancing or improving a person’s appearance or beauty, whereas medicinal products are used to treat or cure some medical condition. 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.”
23. It was submitted that the expression “medicated” has great significance, because it implies that a substance is filled with, or covered in medicine, or medication. Learned counsel relied on the judgment of this court, in Union of India (UOI) & Ors v Leukoplast Private Limited & Ors20 where the assessee’s contention that a surgical pad medicated with Nitrofurozone was not a patent or proprietary medicine, was rejected. The court noted that the addition of a small quantity of Nitrofurozone after rendering the pad sterile, made it a medicine.
24. It was submitted that the intention of the legislature was to ensure that the article fell within the cosmetic class of products while classifying it. Therefore, the expression “medicated” was used, in conjunction with “talcum powder”. When consciously the law classified the goods and grouped them together as part of one entry, the court has to give effect to their plain intendment. Thus, the inclusion of “talcum powder” and “medicated talcum powder” under the same entry, i.e. Entry 127 was by design, to ensure that the product was not classified It was submitted that mere use of “powder” or “talcum powder” would not have covered Nycil powder as a cosmetic, because it had certain ingredients that could be preventive and curative. However, pre-fixing “medicated” to “talcum powder” rendered the issue, beyond debate.
25. It was submitted that products which are sold over the counter are sometimes hybrid in nature, such as lozenges, cough drops, which double up both as curative of certain ailments, as well as sweets or eatables. Likewise, Nycil powder has dual use: it can be used as a cosmetic, but has a medicinal use as well. However, the statute in this case, clearly requires its classification as a cosmetic, along with others, in view of the specific and unambiguous use of the term “medicated talcum powder”.
26. Learned counsel for the revenue relied on Hamdard (Wakf) Laboratories (supra) and D.P. Namboodripad (Dead) by LRs. v. Union of India21 and submitted that when an interpretation clause uses the word “includes”, it is meant to be extensive. The term ‘and includes’ is intended to rope in items which would not be part of the meaning, but for the definition the words ‘includes’ thus, means ‘comprises’ or ‘consists of’.
27. Mr. K. Radhakrishna, learned senior counsel appearing for the revenue, in the Tamil Nadu case, contended that the history of the legislation is a decisive factor to be taken into account, while determining the proper classification of a product. It was pointed out that two factors are important: one, that the entry (entry 20, Part C of the First Schedule which deals with “medicines”) was amended in 1994. Before amendment (on 01 .04.1994), the entry clearly stated that preparations or formulations that were “capable of being used as creams, hair oils, tooth pastes, tooth powders, cosmetics, toilet articles, soaps and shampoos” were to be “excluded”. For the same period, cosmetics (described as scents, hair oils etc, and falling in Entry 1 of Part F of the First Schedule) included talcum powder. Two, the placement of talcum powder, with lipsticks, lip salve, nail polish, nail varnishes, nail brushes, toilet powders, baby powders, talcum powders, powder pads, etc. clearly established that all manner of talcum powder fell within the entry, i.e. Entry 1(iii). After amendment, with effect from 01.04.1994, the matter was placed beyond any controversy, by the explanation, which was added. The explanation specifically stated that items “listed above” “even if medicated or as defined in Section 3” (of the Drugs Act) “or manufactured on the license issued under the said Act will fall under this item”. The explanation clearly brought within the fold of Entry 1, Part F medicated talcum powder, regardless that the license to manufacture it, was under the Drugs Act.
28. Learned senior counsel highlighted that the Madras High Court, in the impugned judgment, had considered the meaning of the expressions “drug” and “cosmetic” under the Drugs Act, and also taken note of the dictionary meanings of those terms. Learned senior counsel relied on Dattatraya Govind Mahajan & Ors v. State of Maharashtra & Anr22 and Mrs. Zakiya Begum & Ors v. Mrs. Shanaz Ali & Ors23 and urged that though a provision may be termed as an explanation, the court must construe it according to its plain language, to give effect to legislative intent. Learned senior counsel’s submission was that the impugned judgment correctly inferred and found that the product, Nycil prickly heat powder, on the plain terms of the statute, was a cosmetic, especially in view of the Explanation which particularly referred to whether the product “is medicated” or not, and irrespective of whether it is under a license issued under the Drugs Act.
V
The Provisions: KGST Act
29. In terms of Section 5 (c) of the KGST Act, goods specified in the First Schedule, were subject to sale at first point. The revenue alleged that Nycil prickly heat powder, the article in question is subject to levy as a cosmetic. Heinz, on the other hand, contended that it is a drug, or medication.
30. Entry 79 of the First schedule to the KGST Act reads as under:
“Medicines and Drugs including allopathic, ayurvedic, homeopathic, siddha and unani preparations and glucose IP.”
31. Entry 127 of the First Schedule to the KGST Act reads thus:
“Shampoo, Talcum Powder including medicated talcum powder, Sandalwood Oil, Ramacham Oil, Cinnamon Oil, other perfurmeries and cosmetics not falling under any other entry in this Schedule”.
The Provisions: TNGST Act
32. In terms of Section 3 of the TNGST Act, every dealer [other than the dealer, casual trader or agent of a non- resident dealer referred to in clause (ii)], whose total turnover for a year exceeds ₹ 3 lakhs is subjected to sales tax levy.
33. GSK, the assessee, contends that the product, Nycil prickly heat powder is a medication or drug, classifiable under Entry 20 of Part C, which reads as follows:
“Part C of the First Schedule.
“Entry 20(A)
(A) Medicines conforming to the following description:
Any medicinal formulation or preparation ready for use internally or externally for treatment or mitigation or prevention of diseases or disorders in human being or animals (excluding products capable of being used as creams, hair oils, tooth pastes, tooth powders, cosmetics, toilet articles, soaps and shampoos), but including
(i) Allopathic medicine.
(ii) Other medicines and drugs including ayurvedic, homeopathic, siddha and unani preparations.
(iii) Medicinal mixtures or compounds, the components of which have not already suffered tax.
(iv) Surgical dressing which expression shall include adhesive plasters, adhesive plaster dressing, gypsona plaster of paris and bandages, velroc pop bandages, elastro crape bandages, gauze, wadding gauze, lint and cotton wool poultices and similar articles impregnated or coated with pharmaceutical substances put up in forms or packing for surgical purposes which have been sterilized and conform to the accepted standards of the medical profession.
(v) Pharmaceutical and surgical products of plastic and rubber including gloves, aprons and caps.”
Cosmetics fall in Entry 1 of Part F of First Schedule:
“Part F
1 (i) Scents and perfumes in any forms excluding doop and agarbathis but including aragaja, javvadu and punugu.
(ii) Hair oils, hair creams, hair dyes, hair darkeners, hair tonics, brilliantines, pomades and vaselines and all hair applicants other than shampoos mentioned in item 4 of the Sixth Schedule.
(iii) Lipsticks, lip-salve, nail polishes, nail varnishes, nail brushes, beauty boxes, face powders, toilet powders, baby powders, talcum powders, powder compacts, powder pads and puffs, toilet sets made of all materials (with or without contents) toilet sponges, scent spray, depilatories, blemish removers, eye liners all sorts, eye shadow, eyebrow pencils, eyelash brushes, eau de cologne, solid colognes, lavender water, snows, face creams, all purpose creams, cold creams, cleaning creams, make-up creams, beauty creams, beauty milk, cleaning milk, hair foods, skin tonics, complexion rouge, nail cutters, sanitary towels and napkins, astringent lotions, pre-shave and aftershave lotions and creams, moisturisers of all sorts and personal (body) deodorant.”
By amendment to the TNGST Act, in 1994, the following explanation was added, below Item I (iii), Part F, of the First Schedule:
“Explanation- Any of the items listed above even if medicated or as defined in section 3 of the Drugs and Cosmetics Act, 1940 (Central Act XXIII of 1940) or manufactured on the licence issued under the said Act will fall under this item.”
VI
34. The assessees contends that the product is sold under the trade name Nycil powder. They market the substance known as ‘Chlorphenesin’. Nycil powder contains zinc oxide and boric acid. They constitute 32% of the total contents of Nycil. The rest is starch and talc. Nycil powder, it is said, is designed to keep the skin clean and offer protection against prickly heat and infection besides giving comfort and freshness. Therefore, it would fall under Entry 79 of the First Schedule to the KGST Act. The nature, composition and property of Nycil powder, was set out by the Gujarat High Court in the case of Shah & Co (supra):
“Nycil Powder has the following features and attributes:
(1) Chlorphenesin, being a medical substance was introduced as a result of original work in the British Drug House Research “Nycil” is the trade name under which the British Drug House product of chlorphenesin is manufactured and marketed.
(2) Chlorphenesin is a potent antifungal, antibacterial and trichomonicidal substance of low toxicity. Organisms against which it is effective include the common dermatophytes causing tinea pedis (Athelct’s foot) and other dematomycoses, epidermophyton, floccosum and the various trichophyton species such bacteria as streptococci, staphyloccocci, coliform organisms and clostridii. Nycil is effective in eliminating pruritus ani and pruritus vulvae. Pruritus ani and pruritus vulvae are frequently of bacterial or fungal origins, or the lesions may become infected with bacterial or fungi, and Nycil is effective in eliminating such organisms.
(3) Nycil in the form of powder or ointment is recommended for the treatment of prickly heat and dhobie itch and active skin protection during ringworms and other fungicidal infections. Nycil powder is particularly suitable for the initial treatment of acute mycotic infection as it absorbs in addition to exercising its fungicidal action.
(4) The ingredients of Nycial powder are as under:
