1979 (11) TMI 249 - HC - VAT and Sales Tax

Summary

Issues:
Whether hair-oil is considered a cosmetic or merely an article of toilet.

Analysis:
The judgment of the Delhi High Court revolved around the classification of hair-oil as either a cosmetic or an article of toilet for tax purposes. The cases involved the taxation of hair-oil sales at different rates based on its classification. The petitioners and applicants argued that circulars issued by the department should have a binding effect, and revision of tax contrary to those circulars is against the law. They contended that beneficial circulars should be held binding and even have a retrospective effect. However, the court held that circulars do not have the force of law under the Bengal Finance (Sales Tax) Act, unlike in the Income-tax Act, and cannot affect the operation of the law, especially retrospectively. The court cited precedents to support this stance.

Regarding the main issue of whether hair-oil should be classified as a cosmetic, the court analyzed the definitions of cosmetics and toilet articles. The court emphasized that the relevant entry in the tax schedule referred to all cosmetics, excluding specific items like kum kum and soap. The court rejected the argument that cosmetics are used only by a wealthier section of society for beautification, while items of toilet are used by everyone. The court referred to various definitions of cosmetics from dictionaries and encyclopedias, highlighting that cosmetics include articles intended to beautify, adorn, protect, or improve the skin or hair. The court concluded that hair-oil, used for both beautification and preservation of hair, falls under the category of cosmetics based on these definitions.

The court also addressed the absence of the term "toilet" in the tax schedules and discussed the meanings of "toilet articles" and "toiletry." It concluded that toiletry and cosmetics are synonymous terms, and what are commonly known as toilet articles can be considered cosmetics. The court clarified that the question was not whether hair-oil is a toilet article but whether it qualifies as an article of cosmetics. Ultimately, the court ruled in favor of the revenue, stating that in the absence of specific inclusion of "toilet" or "toiletry" in the tax schedules, cosmetics encompass items like hair-oil. The court dismissed the writ petition and discharged the rule, with no order as to costs.

In conclusion, the judgment clarified the classification of hair-oil as a cosmetic for taxation purposes based on the definitions and interpretations of cosmetics and toilet articles. The court's decision favored the revenue, emphasizing that hair-oil falls under the category of cosmetics, as defined by various sources, and upheld the taxation at the higher rate of 8 percent.