1996 (2) TMI 509 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of Nycil as a drug or cosmetic.
2. Applicability of Entry Tax under the Act of 1972.
3. Legality of the entry tax imposition under constitutional provisions.

Detailed Analysis:

1. Classification of Nycil as a drug or cosmetic:

The petitioner argued that Nycil, a product with anti-bacterial and anti-fungal properties, should be classified as a drug. The composition includes Chlorphenesin, Boric acid, Zinc oxide, Starch, and Talc purified, all of which are recognized pharmaceutical substances. The petitioner emphasized that Nycil is not a cosmetic or toilet article but a protective, curative medicated powder. The product is regulated under the Drugs and Cosmetics Act, 1940, and is assessed to duty as "p. and p. medicines" under the Central Excise Tariff. The petitioner cited the Gujarat High Court decision in B. Shah & Co. v. State of Gujarat, which classified Nycil as medicine under the Bombay Sales Tax Act, 1959.

The respondents contended that Nycil is commonly available in grocery shops without a drug license, indicating it is not treated as a drug in commercial parlance. They argued that Nycil should be classified under Sl. No. 41(e) of the Schedule to the Act of 1972, which includes medicated powders for skin care.

The Tribunal concluded that Nycil, being a medicated powder for the care of skin, falls under the specified goods in Sl. No. 41(e) of the Schedule to the Act of 1972.

2. Applicability of Entry Tax under the Act of 1972:

The petitioner claimed that Nycil, being a drug, should not be subject to entry tax under the Act of 1972. However, if any tax is applicable, it should be under Sl. No. 60(b) of the Schedule to the Act of 1972. The petitioner argued that the imposition of entry tax on Nycil violated articles 301, 265, and 300A of the Constitution of India.

The respondents maintained that Nycil is taxable under Sl. No. 41(e) of the Schedule to the Act of 1972, which covers all sorts of cosmetics and other preparations, whether medicated or not, for the care of skin. The Tribunal upheld this classification, noting that Nycil is a medicated powder preparation for prickly heat and skin care, thus falling under the specified goods in Sl. No. 41(e).

3. Legality of the entry tax imposition under constitutional provisions:

The petitioner argued that the imposition of entry tax on Nycil impeded free trade and commerce, violating article 301 of the Constitution. They also contended that the tax was against articles 265 and 300A of the Constitution, which pertain to the imposition of taxes and the right to property.

The Tribunal did not find these constitutional arguments persuasive in the context of the Act of 1972. It emphasized that the primary issue was whether Nycil could be classified as specified goods under Sl. No. 41(e) of the Schedule to the Act of 1972. Given that both parties agreed Nycil is a medicated preparation for skin care, the Tribunal concluded that the respondents correctly levied the tax.

Conclusion:

The Tribunal dismissed the writ petition, affirming that Nycil is taxable under Sl. No. 41(e) of the Schedule to the Act of 1972 at a rate of three percent ad valorem. The classification of Nycil as a medicated powder for skin care was upheld, and the imposition of entry tax was deemed lawful. The petition was dismissed without costs.