1998 (2) TMI 544 - HC - VAT and Sales Tax

Summary

Issues:
1. Classification of Vicco Vajradanti toothpaste, powder, and turmeric cream as medicine for tax purposes under the Madhya Pradesh General Sales Tax Act, 1958.

Detailed Analysis:

1. Classification of Vicco Products:
The primary issue in this case revolved around determining whether Vicco Vajradanti toothpaste, powder, and turmeric cream should be classified as medicines for tax assessment under the Madhya Pradesh General Sales Tax Act, 1958. The Revenue filed an application under section 44(2) of the Act, questioning the classification of these products as 'ayurvedic medicines' by the Tribunal. The key question was whether these products fell under the category of 'drugs and medicines' in entry No. 16 of Part IV of Schedule II to the Act, thereby attracting a lower tax rate.

2. Background and Assessment:
The assessee, engaged in various goods including hosiery articles, machinery goods, and cosmetic items, imported Vicco products and was initially assessed at different tax rates. The Appellate Deputy Commissioner upheld the assessment, but the Board of Revenue allowed the second appeal, considering the products as 'drugs and medicines' covered under entry No. 16 of Schedule II. Subsequently, the Revenue made a reference application under section 44(1) of the Sales Tax Act, which was rejected by the Board based on previous judgments and the definition of 'drugs and medicines.'

3. Revenue's Arguments:
The Revenue contended that the disputed products should not be classified as 'drugs and medicines' as they lacked curative properties and were sold as cosmetic items by the assessee. Additionally, the Revenue argued that obtaining a license under the Drugs and Cosmetics Act did not automatically confer medicinal properties to the products. The Revenue also distinguished the judgments of the Karnataka and Bombay High Courts cited by the Board.

4. Judicial Analysis and Conclusion:
The High Court noted that previous judgments had classified similar products as 'drugs and medicines' based on expert opinions and statutory provisions. The Court emphasized that once a competent authority declared a product as a 'drug or medicine,' it could not be reclassified without strong counter proof. The Court rejected the Revenue's arguments regarding trade names and sales forms, asserting that the true nature of a product is determined by competent authorities. Ultimately, the Court held that Vicco products qualified as 'medicine and drugs' as long as they were classified and sold under the Drugs and Cosmetics Act.

5. Final Decision:
In conclusion, the High Court upheld the classification of Vicco Vajradanti toothpaste, powder, and turmeric cream as 'medicine and drugs' for tax purposes. The Court emphasized that the issue was no longer open for debate and did not give rise to any legal question. Consequently, the reference application of the Revenue was rightfully rejected, affirming the classification of the products and dismissing the Revenue's contentions.

This detailed analysis highlights the legal intricacies involved in the classification of products for tax assessment purposes and underscores the significance of statutory definitions and expert opinions in determining the nature of goods under relevant laws.