1998 (2) TMI 564 - AT - VAT and Sales Tax

Issues Involved:

1. Classification of Arnika plus hair vitalizer and Triofer tablets as homoeopathic medicines or cosmetics.
2. Validity of drug license issued by the Director of Drugs Control, West Bengal.
3. Implications of previous tax assessments on the current classification.
4. Relevance of advertisements and market availability in determining product classification.
5. Legal interpretation of "drug" under section 3(b) of the Drugs and Cosmetics Act, 1940.
6. Impact of affidavits and opinions submitted by the applicants.

Detailed Analysis:

1. Classification of Arnika plus hair vitalizer and Triofer tablets as homoeopathic medicines or cosmetics:

The applicants argued that Arnika plus and Triofer tablets should be classified as homoeopathic medicines, citing their drug license and previous tax assessments. However, the respondents contended that these products were cosmetics, as they were used as hair oil and hair tonic, and lacked medicinal properties. The Tribunal concluded that Arnika plus hair vitalizer and Triofer tablets were cosmetics, not drugs, as they did not meet the criteria for homoeopathic medicines under the Drugs and Cosmetics Act, 1940, and were advertised and sold as cosmetics.

2. Validity of drug license issued by the Director of Drugs Control, West Bengal:

The applicants relied on their drug license to manufacture homoeopathic medicines. However, the Tribunal held that the issuance of a drug license did not prevent the sales tax authorities from independently determining the nature of the goods. The Tribunal emphasized that the drug license was not a judicial determination and did not conclusively establish the products as homoeopathic medicines.

3. Implications of previous tax assessments on the current classification:

The applicants argued that their products had been previously taxed as homoeopathic medicines, and the onus was on the Revenue to justify the change in classification. The Tribunal rejected this argument, stating that each year's assessment was a separate quasi-judicial proceeding, and the assessing authority was not bound by previous decisions. The Tribunal found that the assessing officer had provided reasons for the reclassification, which were subject to judicial review.

4. Relevance of advertisements and market availability in determining product classification:

The Tribunal considered the advertisements and market availability of the products. It noted that the products were widely advertised as hair tonics and conditioners, emphasizing their cosmetic value. The Tribunal also observed that the products were available in grocery shops without a prescription, reinforcing their classification as cosmetics. The Tribunal held that it was competent to take judicial notice of such advertisements and market practices.

5. Legal interpretation of "drug" under section 3(b) of the Drugs and Cosmetics Act, 1940:

The applicants argued that their products were drugs under section 3(b) of the Drugs and Cosmetics Act, 1940, as they were intended for the treatment of hair-related disorders. The Tribunal held that the mere intention or claim by the manufacturer was insufficient to classify a product as a drug. It emphasized that the therapeutic efficacy of the products must be established through authoritative homoeopathic literature or clinical provings, which was not the case for Arnika plus and Triofer tablets.

6. Impact of affidavits and opinions submitted by the applicants:

The applicants submitted affidavits from dealers and opinions from medical practitioners to support their claim. The Tribunal found these affidavits and opinions to be of doubtful credibility, as they were obtained during the litigation. The Tribunal also noted that the opinions did not provide conclusive evidence of the therapeutic efficacy of the products. The opinion of Dr. B.N. Chakraborty, Honorary Physician to the President of India, was particularly significant, as he refrained from certifying the products as homoeopathic medicines.

Conclusion:

The Tribunal dismissed the application, holding that Arnika plus hair vitalizer and Triofer tablets were cosmetics and not homoeopathic medicines. The assessment order was to be modified accordingly, treating Triofer tablets as general goods. The Tribunal directed the respondents to adjust the cash security and encash the bank guarantees furnished by the applicants towards the assessed taxes. The prayer for a stay of the judgment was rejected.

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