All these revisions both by the assessee dealers and the revenue are directed against the order of the Commercial Tax Tribunal Kanpur Bench -3 dated 29.12.2009.
The tribunal by the impugned order has classified Himani Boroplus Antiseptic Cream, Himani Gold Turmeric Cream and many other similar items as cosmetics whereas Himani Hair Oil and such other products as medicament and directed for levy of tax accordingly.
It may be worth noting that under the provisions of the U.P. Trade Tax Act items of medicament are taxable at a lower rate and cosmetics at a higher rate. It is for this reason the classification has acquired importance.
Learned counsel for the parties have advanced their submissions by taking revision no.99 of 2010 as the leading case. I, therefore, state in brief the facts of the aforesaid case only which may be sufficient for understanding the background leading to the passing of the impugned order in connection with all items involved.
In the above revision the tax liability of the assessee-dealer in respect of only two items, namely, Himani Boroplus Antiseptic Cream and Himani Gold Turmeric Cream for the assessment year 1994-95 is involved. The department by the assessment order dated 28.12.1995 subjected the above items to tax at the rate of 7.5% by classifying them as Ayurvedic medicament. Lateron, proceedings under Section 21 of the Act were initiated by issuance of a show cause notice dated 6.2.1998 in view of a decision of this Court in the case of Balaji Agency Vs. Commissioner of Sales Tax, 1994 UPTC 184 and a reassessment order was passed on 19/21.9.1998 classifying the above two items as items of cosmetic taxable at the rate of 15%. The appeal of the assessee before the Deputy Commissioner was dismissed on 31.3.1999. However, further appeal to the tribunal was allowed vide order dated 21.10.1999 whereby the above products were held to be medicaments taxable at a lower rate. Aggrieved by the said order of the tribunal, revenue preferred T.T.R.No.400 of 2000 which was decided vide judgment and order dated 13.11.2007 and the matter was remanded to the tribunal for passing a fresh order after applying the "twin test" as laid down in the case of Puma Ayurvedic Herbal (P) Ltd. Vs. Commissioner of Central Excise (2006) 3 SCC 266.
It is on remand that the impugned order has been passed by the tribunal upholding the orders of the two authorities below taxing the above goods on a higher rate as items of cosmetics.
I have heard with pleasure Sri Bharatji Agarwal, Senior Advocate ably assisted by Sri Ashok Kumar and Sri Narendra Sharma, counsel for the assessee-dealers and Sri B.K.Pandey, learned Standing Counsel for the revenue and with their consent proceed to decide the matter finally.
All these revisions raise a common question of law as to whether the above referred products are taxable as cosmetics or as medicaments.
The answer to the question as to whether the above referred goods are medicaments or cosmetics depends much upon the common meaning of the above two words.
The word 'medicament' has not been defined either in the concerned statute or anywhere else. However, according to the dictionary meaning 'medicament' means anything which is used for healing which in common parlance refers to a medicine.
Medical is a term used for the art of healing diseases and something intended to promote study of medicine i.e. science and art of mitigation, prevention, cure and alleviation of disease whereas medicine means anything applied for the cure or lessening of disease or pain whether single or compound (made up of more than one ingredient). Medicine as such is any substance liquid or solid that has the property of curing or mitigating disease or which is administered in a treatment of disease and it may be a combination of drugs in largely varying proportions. Anything related to medicine is medicinal and anything mixed with medicine is medicated. The process of such mixing of medicinal substances having the power to cure or to heal is medication.
The word cosmetic has been defined under Section 3(aaa) of the Drugs and Cosmetics Act, 1940 as under:
'Cosmetic' means any article intended to be rubbed, poured, sprinkled or sprayed on, or introduced into, or otherwise applied to, the human body or any part thereof for cleansing, beautifying, promoting attractiveness, or altering the appearance, and includes any article intended for use as a component of cosmetic.
Its dictionary meaning is, substances used for improving beauty especially that of the complexion or for beautifying skin and hair.
The Drugs and Cosmetics Act, 1940 also defines 'drug' under Section 3(b) of the Act to include:
"(i) all medicines for internal or external use of human beings or animals and all substances intended to be used for or in the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings or animals, including preparations applied on human body for the purpose of repelling insects like mosquitoes;
(ii) such substances (other than food) intended to affect the structure or any function of the human body or intended to be used for the destruction of vermin or insects which cause disease in human being or animals, as may be specified from time to time by the Central Government by notification in the Official Gazette;
(iii) all substances intended for use as components of a drug including empty gelatin capsules; and
(iv) such devices intended for internal or external use in the diagnosis, treatment, mitigation or prevention of disease or disorder in human beings or animals, as may be specified from time to time by the Central Government by notification in the Official Gazette, after consultation with the Board;"
Drugs may vary under different medical systems such as Ayurvedic, Siddha or Unani, Allopathy and Homoeopathy.
"Ayurvedic, Siddha or Unani drugs" has been defined in Section 3(a) of the Drugs and Cosmetics Act, 1940 as under:
"(a) "Ayurvedic, Siddha or Unani drug" includes all medicines intended for internal or external use for or in the diagnosis, treatment, mitigation or prevention of disease or disorder in human beings or animals, and manufactured exclusively in accordance with the formulae described in, the authoritative books of Ayurvedic, Siddha and Unani Tibb systems of medicine, specified in the First Schedule;"
Now from the above definition of 'cosmetic' as distinguished from 'drug' or 'medicament', it may be seen that cosmetics are meant to improve appearance of a person by enhancing beauty specially through treatment of skin and hair; whereas a medicinal product or a medicament is meant to treat, prevent, cure or reduce a disease or an ailment.
Many a times, a medicament may also contain properties of a cosmetic item and in curing or healing a disease may also ultimately result in enhancing the beauty of a person using it.
This can be illustrated by the following few illustrations.
Generally, a soap is used for cleansing and hygienic purposes only. It is commonly called a toilet soap but at times dermatologist may prescribe use of medicated soap for remedial or preventive purposes concerning skin related problems. Thus, a soap may, in a given case, be a medicament. Similarly, a toothpaste in common use may be recognised as a toilet product but when a special toothpaste with medicinal properties is prescribed by a dentist it is a medicament as distinguished from ordinary toilet toothpaste. In the same way, liquor is ordinarily used for intoxication but at times it may be used for medical purposes. A particular Ayurvedic product may be used for the treatment of baldness which is a hair related disease. The use of such Ayurvedic product may not only cure baldness to some extent but may enhance the general appearance of the person using it as with the cure of the disease hairs may grow.
In such cases and circumstances it becomes difficult to classify the product either strictly as medicament or cosmetics. In such a situation the primary role and the purpose of use of the product becomes the determining factor for its classification.
Law is well settled through various pronouncements of the Supreme Court that the burden/onus probondi to prove the classification of a particular product is upon the revenue.
In Union of India and others vs Garware Nylons Ltd. etc. AIR 1996 Supreme Court 3509, it has been held that the burden to prove that a particular item is taxable in the manner claimed is upon the taxing authorities and mere assertion that it falls under a particular clause alone is of no avail. This is particularly necessary when the claim of the assessee is supported by material and affidavits of the person dealing in those goods.
In CCE vs. Sharma Chemical Works 2003(5) SCC 60, it has been held that 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. The mere fact that a product is sold across the counters and not under the doctor's prescription, does not by itself lead to a conclusion that it is not a medicament.
In Dabur India Ltd. Vs. CCE, Jamshedpur (2005) 4 SCC 9 the three Judges of the Supreme Court following Sharma Chemical Works (supra) and (1996) 9 SCC 402 Shree Baidyanath Ayurved Bhawan Ltd. Vs. CCE reiterated and reaffirmed the above principle that the burden of proof that a product as classified under a particular tariff is on the revenue and must be discharged by proving that it is so understood by the consumer of the product or in common parlance.
In the instant case admittedly the products in question were earlier treated as medicaments and were subjected to tax accordingly. Lateron, the revenue had started assessing them as cosmetics therefore, the burden to prove that they are taxable as cosmetics lies heavily upon the revenue only.
It is not in dispute that the assessee-dealers produced enormous evidence in the form of the affidavits of the persons dealing with almost all of the aforesaid products, namely dealers, consumers, doctors and research persons. Even authentic Ayurvedic texts recognised under the Drugs and Cosmetics Act 1940 were produced to establish that the aforesaid products have medicinal properties and value and are not actually used as pure cosmetics.
On the other hand it is admitted on record that the revenue had done nothing to discharge the aforesaid burden. It had not adduced any evidence whatsoever to establish that the aforesaid products are of cosmetic nature and cannot be classified as medicaments. None of the affidavits or the other evidence adduced by the assessee-dealers were rebutted either by filing counter to any of the said affidavits or by adducing contra evidence.
Now in the above background, I proceed to examine the nature of the above products for the purposes of their classification on the anvil of the twin test i.e. common parlance test and the use of ingredients based upon authoritative Ayurvedic text books.
In order to determine whether a product is an item of cosmetic or a medicament a twin test as aforesaid had always found favour with the courts. The Apex Court approved the application of the twin test for the first time probably in the case of CCE vs. Richardson Hindustan Ltd. (2004) 9 SCC 156 and held that the above two tests to be determinative for classifying the goods for taxation purposes. The above two twin tests, at the cost of repetition are (i) common parlance test i.e. to see and find out how the product in common parlance is understood and accepted; and (ii) whether the ingredients used for making the product find mentioned in the authoritative text books on Aayurved.
The aforesaid twin test finds the approval of the Supreme Court in the case of Pumma Ayurvedic Herbal (P) Ltd. vs. Commissioner, Central Excise Nagpur 2006 (3) SCC 266.
The assessee/dealers have adduced enough uncontrovered evidence in the form of affidavits of the following persons:
(i) Dr. Hari Shanker Sharma dt 21.7.1996;
(ii) Dr. (Smt.) Shashi Bundel dt. 6.8.1996;
(iii) Dr. Anand Rai dt. 17.8.1996;
(iv) Dr. S.K. Jaswasi dt. 6.8.1996;
(v) Dr. D.K. Jain dt. 26.8.1996;
(vi) Dr. D. Sohne dt. 6.8.1996;
(vii) Dr. Chitranjan Rai dt. 17.8.1996;
(viii) Dr. Kailash Singh Tomar dt. 19.8.1996;
(ix) Dr. Abhay Shanker Ojha dt. 19.8.1996;
(x) Dr. Mragank Mohan dt. 19.8.1996; and
(xi) Dr. P.K.Devnath dt. 16.8.1996 Apart from the above, certificates issued by (i) Dr. Sree Niwas Shastri (Aayurvedacharya) dated 20.10.90, (ii) Dr. Smita Pharsole dated 28.8.1989; and (iii) Dr Niranjan Prasad Sharma dated 8.10.1991 etc. were also brought on record.
All the above affidavits and the certificates apart from the other evidence such as prescriptions, certificates of the hospitals, certificates of medicine dealers and certificates of the consumers goes on the show that the aforesaid products are generally used as medicaments to treat minor cuts and wounds and that the results have been satisfactory.
The Tribunal by the impugned order brushed aside the aforesaid evidence even though there was no contra evidence on record. One of the reasons for ignoring the above evidence was that four of the affidavits namely that of Dr. Abhay Shankar Ojha, Dr Mrgang Mohan, Dr. Anand Rai and that of Dr. P.K. Devnath happened to be type written on one common machine and appeared to be more or less identical in language and therefore even if they have not been countered it does not make them admissible in evidence.
Similarly, three other affidavits of Dr. D. Sohne, Dr. Chitranjan Rai and Dr. Kailash Singh Tomar dated 6.6.96, 17.8.96 and 19.8.96 respectively were also discarded.
It was no ones case that the aforesaid affidavits were false or incorrect or that they do not reflect the true state-of-affairs. The fact that they were typed out on the same machine or were more or less identical in nature can not first of all be a relevant criteria to discard them in evidence when there veracity is not being disputed. Moreover, even if some of the aforesaid affidavits are ignored, sufficient other evidence in the form of other affidavits and certificates of the recognised authorities remain and there is no reason whatsoever to ignore them and to take a view that the products in question fail to qualify the twin test for classifying them as medicaments.
One of the affidavits of Dr. Hari Shanker Sharma who happen to be in medical profession for the last 45 years on the date of the affidavit i.e. 21.8.1996, clearly states that Himani Boroplus Antiseptic Cream is an Ayurvedic medicine which was prescribed by him to various patients suffering from skin diseases such as minor cuts, burns wounds, chopped skin, scratches etc. and the results were satisfactory and he is regularly prescribing it for cure of skin diseases. To the same effect he has also filed affidavit dated 14.10.1996 in respect of Himani Gold Turmeric Cream. The above affidavits and similar other affidavits of qualified medical practitioners have neither been controverted nor have otherwise been discarded by the tribunal.
Besides the above evidence, Drug Licences, authorised texts of Ayurvedic books and labels used on the products were also produced All the aforesaid evidence actually proves that they satisfy the twin test laid down for classifying the goods. The said evidence sufficiently proves that people in general use the above products for curing and treating burns, minor cuts and wounds and not for improving their general appearance. In common parlance these products are treated as medicaments. Above all, they are made of ingredients which found reference in Ayurvedic text books as prescribed under the Durgs and Cosmetics Act, 1940.
The other ground on which the Tribunal non suited the assessee-dealers is that though the above products have been manufactured from the ingredients which are mentioned in the authoritative Ayurvedic text, nonetheless as there use in the said products is nominal, they cannot be classified as medicaments.
In Sharma Chemical Works (supra) the Supreme Court held that where all the ingredients used for manufacturing a product were found in Ayurvedic text, merely because the percentage of medicaments is less does not mean that the product is not a medicament. Generally, the percentage/dosage of the medicament will be such as can be absorbed by human body and the use of medicament would necessarily be covered by fillers/vehicles in order to make the product usable.
In the case of Amritanjan Ltd. vs. CCE 1996 (9) SCC 413 it has been held that the mere use of the ingredients or that they are purified or added with some preservative does not alter their character so long as the ingredients used therein were known to both Ayurvedic and Western Sciences.
In Richardson Hindustan Ltd. (supra) Vicks Vaporub was held to be Medicament by the Supreme Court even though it contained only 2% menthol and 98% was paraffin wax.
In Puma Ayurvedic Herbal (P) Ltd. (supra), the Supreme Court explained and laid down that the extent or the quantity of the medicament used in a particular product is not a relevant factor for its classification. The extent of use of medicinal ingredients in a product is sometime very low because excess or large use of them may be harmful for human body and as such they are required to be mixed up with what is in trade parlance called fillers and vehicles in order to make the medicament useful. It was illustrated by an example of vicks vapourub which has been referred to above. Thus, it was held the fact that use of medicinal elements in a product was minimal does not detract it from being classified as a medicament. It was also held 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 and it makes no difference if it is available across the counter in shops.
It is common knowledge that paraffin wax is a filler or a vehicle in which Ayurvedic contents are mixed for making a medicine. Therefore, non-mention of paraffin wax in any Ayurvedic text makes no difference and the tribunal manifestly erred in returning a finding that as paraffin wax is not an Ayurvedic material the product made by using it can not be a medicament.
In Union of India and others Vs. G.D. Pharmaceuticals Ltd. and another (2001) 9 SCC 759 Boroline antiseptic cream containing boric acid and zink oxide was held to be a medicament. However, this authority of the Supreme Court has been distinguished by the Tribunal on the ground that Boroline comprises of certain IP (Indian Pharmacopoeia) drugs whereas in the products in question there are no such drugs. The distinction made is not tenable in view of the admitted position that the ingredients used for their preparation have medicinal properties and are contained in the authoritative Ayurvedic texts notwithstanding the fillers used not being Ayurvedic products.
In Muller and Phipps (India) Ltd. Vs. CCE (2004) 4 SCC 787 the apex court treated Johnson prickly heat powder to be a medicament and not an ordinary talcum powder as it is known for curing problem of prickly head. Similarly, in the cases of medicated shampoo meant to treat dandruff, a disease of hair, the Supreme Court held the shampoo to be a medicament vide 1995 Supp. (3) SCC 1 BPL Pharmaceuticals Ltd. Vs. CCE.
Apart from the above, the assessee-dealers had produced respective licences for the manufacture, sale and distribution of drugs which have not been denied. According to the plain reading of the definition of 'drug' given under Section 3(b) of the Drugs and Cosmetics Act, 1940 it includes within its fold all medicines for internal and external use of humans/animals. Items of cosmetics are not covered within the definition of 'drugs'. It may be noted that separate licences for dealing in drugs and in cosmetics are to be taken out under the Drugs and Cosmetics Rules, 1945 framed under the Act. Now when the licensing authority under the above Act has granted the assessee dealers licenses either for the manufacture, sale or distribution of drugs and not for cosmetics, it means they can not deal with cosmetics unless a separate license to that effect is produced. In the absence of evidence that the assessee dealers are also dealing in cosmetics the presumption is that they are only dealing in drugs i.e. medicines and the products manufactured or sold or distributed by them fall in the same category.
The above discussion leads me to an inevitable conclusion that the products in question of the assessee dealers do satisfy the twin criteria laid down for the classification to prove them to be medicaments and at the same time the revenue has utterly failed to prove that they ought to be classified as cosmetics for the purposes of taxation. Accordingly, the tribunal and the other subordinate taxing authorities committed a gross error in classifying them as cosmetics and in levying tax accordingly.
There are some revisions of the revenue clubbed with this bunch of revisions of the assessee-dealers. All the revisions of the revenue are beyond time. The delay is not much and its condonation is not being seriously opposed. Sufficient explanation for the delay in filing the revisions also exists. Therefore, I treat the revision to be within time.
Learned Standing Counsel in support of the revisions preferred by the revenue, all of which pertain to classification of Himani Navratan Oil contended that the tribunal has erred in treating the aforesaid product as an Ayurvedic medicine without applying the twin test and despite the fact that it contains 67% liquid paraffin.
The submission of learned Standing Counsel is totally misplaced and devoid of any substance. As earlier stated, the burden to prove the classification of any product is upon the revenue. The revenue in connection with Himani Navratan Oil has not produced any evidence to show that it is not an Ayurvedic medicine but an ordinary oil with no medicinal value. On the contrary, again evidence adduced by the assessee-dealers proved that in common parlance people take the above oil for its medicinal value and that it is made out of ingredients mentioned in the authoritative Ayurvedic texts as laid down under the Drugs and Cosmetics Act. Thus, the twin test as laid down in Puma Ayurvedic Herbal (P) Ltd. (supra) stands satisfied.
The tribunal in holding Himani Navratan Oil to be an Ayurvedic medicament recorded that the liquid paraffin used for making it is also an Ayurvedic ingredient which finds mention in the Ayurvedic book "Bhav Prakash" and, as such, all the ingredients of the oil are Ayurvedic substances. Moreover, even otherwise the use of liquid paraffin as a filler or vehicle would not have effect of altering the character or the nature of the product.
In the end before parting a reference may also be made to the report no.626 dated 3.3.3009 of the trade tax department which has been accepted by the Commissioner to the effect that on a survey conducted the products Boroplus Antiseptic Cream and Himani Navratan Oil are understood by the public to be Ayurvedic products in the general and, as such, fulfils the common parlance test. The said survey itself prove that the common parlance test stands duly satisfied in respect of the above items.
Accordingly, the revisions preferred by the revenue are devoid of merit and are dismissed and those of the assessee-dealers are allowed and the impugned order dated 29.12.2009 passed by the Commercial Tax Tribunal, Kanpur is set aside to the extent it classifies the products in question as items of cosmetics and directs for levying tax accordingly.
Parties are directed to bear their own costs.
Dt: October 25, 2010 brijesh