1980 (7) TMI 244 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of bhimsaini kajal, nagjyoti, and baljyoti as either cosmetics or medicines.
2. Determination of applicable tax rate under the relevant notification.

Detailed Analysis:

1. Classification of bhimsaini kajal, nagjyoti, and baljyoti:
The primary issue is whether the products bhimsaini kajal, nagjyoti, and baljyoti, manufactured and sold by the assessee, are classified as cosmetics or medicines. The Assistant Commercial Taxes Officer initially classified these items under entry 59 (cosmetics and toilet articles) of the notification dated 2nd March, 1963, imposing a 10% tax rate. The Deputy Commissioner (Appeals) later reclassified them under entry 65 (goods not covered by other entries), reducing the tax rate to 6%. The Board of Revenue, however, reverted to the original classification under entry 59.

The assessee argued that these items are medicinal preparations made according to Ayurvedic formulas, intended for daily use to keep the eyes healthy and prevent diseases. Certificates from the Government Ayurvedic College Laboratory and other sources were presented to support this claim, asserting the products' preventive medicinal value. However, the court noted that these products were not prescribed by medical practitioners and were used as daily cleansing agents rather than curative medicines for specific ailments.

The court emphasized that the classification should be based on how the products are commonly understood and used by the general public. It referred to several precedents where products with Ayurvedic or medicinal properties were classified as toilet articles or cosmetics based on their common use and commercial understanding.

2. Determination of applicable tax rate:
The court had to decide whether the products fell under entry 59 (10% tax rate) or entry 65 (6% tax rate) of the notification. The court observed that the products were used as daily cleansing agents for the eyes, contributing to their health and attractiveness, but lacked specific medicinal or curative properties. The court applied the principle that words in a taxing statute should be construed in their popular sense, as understood by common buyers and sellers, rather than in a technical or scientific sense.

The court concluded that the products were not medicines but toilet articles. It cited several cases where similar products were classified as toilet articles despite their Ayurvedic or preventive properties. The court found that the products were used for grooming and cleansing rather than for treating specific diseases, aligning them with the definition of toilet articles.

Conclusion:
The court reframed the question to focus on whether the products were covered by entry 59 or entry 65 of the notification. It ultimately held that the three varieties of kajal manufactured and sold by the assessee fell within entry 59 of the notification dated 2nd March, 1963, and were therefore subject to a 10% tax rate. The reference was decided against the assessee and in favor of the revenue, with each party bearing its own costs.