1992 (9) TMI 326 - AT - VAT and Sales Tax

Issues Involved:
1. Whether "Boroline" is taxable as a "drug" or "patent or proprietary medicine" or as a "cosmetic" under the West Bengal Sales Tax Act, 1954.

Detailed Analysis:

1. Nature of Boroline for Taxation Purposes:
The central issue was whether "Boroline," a product manufactured by G.D. Pharmaceuticals Ltd., should be classified and taxed as a "drug," "patent or proprietary medicine," or "cosmetic" under the West Bengal Sales Tax Act, 1954. The applicants argued that Boroline should be taxed as a cosmetic at 15%, while the respondent claimed it should be taxed as a drug or patent or proprietary medicine at a lower rate.

2. Contentions of the Parties:
The applicants contended that Boroline was a cosmetic, emphasizing its use for skin care and its promotion as such in advertisements. They argued that none of its ingredients, such as boric acid and zinc oxide, possessed significant antiseptic properties. The respondent countered that Boroline was a drug, supported by a drug license issued under the Drugs and Cosmetics Act, 1940, and its therapeutic value.

3. Relevant Notifications and Definitions:
The tribunal examined Notification No. 1658 F.T. dated August 1, 1956, which defined "drug" and "patent or proprietary medicine" by reference to the Drugs and Cosmetics Act, 1940, and Notification No. 3123 F.T. dated July 15, 1975, which listed "cosmetics of all varieties including... (ii) snow and creams of all descriptions and varieties."

4. Common Parlance Test:
The tribunal noted that where an item is not defined in a taxing statute, its popular meaning or the meaning ascribed to it in common parlance should be followed. It found that Boroline was commonly used and marketed as a cosmetic cream, especially for skin care during winter, and thus should be classified as a cosmetic.

5. Drug License and Its Implications:
The tribunal considered the drug license issued to the respondent for Boroline. It concluded that the issuance of a drug license was not conclusive proof that Boroline was a drug for taxation purposes. The licensing authority did not conduct tests to ascertain whether Boroline was a drug, and the license was issued based on the manufacturer's claim.

6. Judicial Precedents and Expert Opinions:
The tribunal reviewed various judicial precedents and expert opinions. It found that previous judgments, including those from the Calcutta High Court and the Allahabad High Court, did not conclusively determine Boroline's classification for sales tax purposes. The tribunal also considered expert opinions from authoritative texts on pharmacology, which indicated that Boroline's ingredients had minimal therapeutic value.

7. Tribunal's Conclusion:
The tribunal concluded that Boroline should be classified and taxed as a cosmetic under Notification No. 3123 F.T. dated July 15, 1975. It held that Boroline was not a drug or patent or proprietary medicine within the meaning of the relevant notifications and definitions.

8. Separate Judgment by Technical Member:
The Technical Member dissented, arguing that Boroline should be classified as a drug based on its composition and therapeutic properties. He emphasized the expert opinions and the drug license issued for Boroline, concluding that it had more properties of a drug than a cosmetic.

9. Final Order:
The majority judgment quashed the revisional order dated May 2, 1988, of the West Bengal Commercial Taxes Tribunal and restored the appellate order dated October 16, 1985, which classified Boroline as a cosmetic for taxation purposes. The application was allowed with no order for costs.

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