2003 (5) TMI 496 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of Keo Karpin brand hair vitaliser and baby oil as medicines or cosmetics.
2. Classification of Keo Karpin brand antiseptic cream and massage oil as medicines or cosmetics.
3. Entitlement to interest on excess tax deposits.

Detailed Analysis:

Issue 1: Classification of Keo Karpin Hair Vitaliser and Baby Oil

The primary question was whether Keo Karpin hair vitaliser and baby oil should be classified as medicines or cosmetics. The applicants contended that these products are medicines, while the department argued they are cosmetics and taxable as such. The court examined the relevant notifications under the U.P. Trade Tax Act, 1981, which categorizes cosmetics and medicines separately. The definitions of "drug" and "cosmetics" under the Drugs and Cosmetics Act, 1940, were considered, where 'cosmetics' are defined as articles intended for beautification, and 'drugs' include substances used for diagnosis, treatment, or prevention of diseases.

The court analyzed the ingredients of the products and noted that the compositions contained medicinal substances as per the Indian Pharmacopia (I.P.) or British Pharmacopia (B.P.). The court referenced the Supreme Court ruling in B.P.L. Pharmaceuticals Ltd. v. Collector of Central Excise, which held that the presence of medicinal properties and use for treatment classified a product as a medicine, despite any cosmetic characteristics. The court concluded that Keo Karpin hair vitaliser, used to prevent hair fall and dandruff, and baby oil, used for strengthening bones, possess medicinal properties and are thus medicines.

Issue 2: Classification of Keo Karpin Antiseptic Cream and Massage Oil

Similarly, the classification of Keo Karpin antiseptic cream and massage oil was scrutinized. The court noted that the antiseptic cream is formulated for treating skin conditions, and the massage oil contains ingredients like olive oil, which is recognized as a medicinal substance. The court referenced multiple precedents where products with medicinal properties were classified as medicines, such as Vicco products and Dettol antiseptic cream. The court held that both the antiseptic cream and massage oil are medicines due to their medicinal formulations and intended uses.

Issue 3: Entitlement to Interest on Excess Tax Deposits

The applicants sought interest on excess tax deposits. The court referenced the decision in Anuj Bricks v. State of U.P., which mandated interest on excess deposits. The court directed that the applicants be refunded the deposited amounts with interest at 12% per annum within three months.

Conclusion:

All seven revisions were allowed, and it was held that Keo Karpin hair vitaliser, massage oil, baby oil, and antiseptic cream are medicines and taxable as such. The Trade Tax Tribunal was directed to pass orders in accordance with this judgment. The applicants were also entitled to a refund of the deposited amounts with interest at 12% per annum.