2008 (9) TMI 845 - HC - Indian Laws

Whether the Nycil Prickly Heat Powder manufactured by the petitioner is a medicine or drug coming under Entry 79 or Medicated Talcum Powder falling under Entry 127 of the First Schedule to KGST Act? Held that - None of the decisions would assessee in any manner whatsoever, since those decisions were either rendered while construing entries under different enactments or under different facts and circumstances. We sum up the whole issue by observing that when the legislature has treated Medicated Talcum Powder as different from Medicine for the purpose of taxation, it is not the province of the courts to question the policy of the legislature underlying it. We are, therefore, of the opinion that the Appellate Tribunal has applied the correct principles in concluding that the product in question cannot be classified under a general entry but requires to be classified under special entry, namely entry 127 of the the First Schedule to the KGST Act. We are in agreement with the reasoning and conclusions reached by the Tribunal. Revision cases dismissed.

Summary

Issues Involved:
1. Classification of Nycil Prickly Heat Powder under the Kerala General Sales Tax Act (KGST Act).
2. Interpretation of Entries 79 and 127 of the First Schedule to the KGST Act.
3. Determination of whether Nycil Prickly Heat Powder is a medicine or a medicated talcum powder.

Issue-wise Detailed Analysis:

1. Classification of Nycil Prickly Heat Powder under the KGST Act:
The petitioner, a registered dealer under the KGST Act and the Central Sales Tax Act, manufactures Nycil Prickly Heat Powder under a Drug Licence. The product contains Chlorphenesin I.P., zinc oxide I.P., Starch I.P., and Talcum Purified IP. The petitioner argues that the product is a medicine due to its antifungal and antibacterial properties and should be taxed at 8% under Entry 79 of the First Schedule to the KGST Act. The Deputy Commissioner, however, contends that it should be taxed at 20% as a "Medicated Talcum Powder" under Entry 127.

2. Interpretation of Entries 79 and 127 of the First Schedule to the KGST Act:
Entry 79 pertains to "Medicines and Drugs," while Entry 127 includes "Shampoo, Talcum Powder including medicated talcum powder, Sandalwood Oil, Ramacham Oil, Cinnamon Oil, other perfumeries and cosmetics not falling under any other entry in this Schedule." The court emphasized that the word "includes" in Entry 127 is extensive, meaning it covers not only the ordinary meaning of talcum powder but also medicated talcum powder.

3. Determination of whether Nycil Prickly Heat Powder is a medicine or a medicated talcum powder:
The court examined the composition and use of Nycil Powder, noting its antifungal and antibacterial properties. Despite its medicinal ingredients, the court concluded that the product is primarily a talcum powder with added medicinal properties. The court referenced several legal precedents and definitions, including the Supreme Court's interpretation of "medicament" and "cosmetic." The court concluded that Nycil Prickly Heat Powder, while having medicinal properties, falls under the specific entry of "Medicated Talcum Powder" in Entry 127 rather than the general entry of "Medicines and Drugs" in Entry 79.

Conclusion:
The court upheld the classification of Nycil Prickly Heat Powder under Entry 127 of the First Schedule to the KGST Act, subjecting it to a 20% tax rate. The court dismissed the revision petitions, agreeing with the Tribunal's reasoning that the product should be classified as a medicated talcum powder rather than a medicine. The court emphasized that legislative intent and specific entries in tax statutes should guide the classification of products for tax purposes.