2005 (10) TMI 506 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of white petroleum jelly (commonly known as Vaseline) under the U.P. Trade Tax Act, 1948.
2. Determination of whether Vaseline is taxable as a cosmetic or as a medicine.

Issue-wise Detailed Analysis:

1. Classification of White Petroleum Jelly under the U.P. Trade Tax Act, 1948:

The primary issue revolves around the classification of white petroleum jelly (Vaseline) under the U.P. Trade Tax Act, 1948. The applicant contended that Vaseline should be classified as a medicine due to its requirement for a drug license in its manufacturing process. Conversely, the assessing authority classified it as a cosmetic under Notification No. S.T.-2-5784/X-10(1)-80-U.P. Act 15/48-Order-81, dated September 7, 1981, and taxed it at 12%. The Tribunal upheld the assessing authority's decision, leading to the applicant's revisions.

2. Determination of Whether Vaseline is Taxable as a Cosmetic or as a Medicine:

The applicant's argument was based on the premise that Vaseline is used to heal cuts and fissures of the skin, thus qualifying it as a medicine. They cited various judicial decisions to support their claim, including Deys Medical Stores Limited v. Commissioner, Trade Tax, and Union of India v. G.D. Pharmaceuticals Limited, among others.

The learned Standing Counsel countered that Vaseline is primarily used for skin care and is commonly available in cosmetic shops, not medicine shops. They argued that the requirement for a drug license in manufacturing does not change its classification from a cosmetic to a medicine.

Relevant Legal Precedents and Definitions:

- Cosmetic Definitions:
- Collins Advanced Learners Dictionary: "Cosmetic are substances such as lipstick or powder, which people put on their face to make themselves look more attractive."
- The Concise Oxford Dictionary: "Intended to beautify hair, skin or complexion, etc.; imitating or restoring normal appearance; intended to improve appearances."

- Medicine Definitions:
- Random House Dictionary: "'Medicine'-1. Any substance or substances used in treating disease or illness; medicament; remedy."
- Corpus Juris Secundum: "'Medicine'. A technical and generic term, derived from 'mederi'."

Judicial Interpretations:

- Common Parlance Test: The Supreme Court in Ramavatar Budhaiprasad v. Assistant Sales Tax Officer emphasized that terms not defined in statutes should be construed as understood in common parlance.
- Trade Understanding: In Collector of Customs, Bombay v. Swastic Woollens (P) Ltd., the Court held that trade understanding is the safest guide for classification.
- Toothpaste and Tooth Powder Cases: In Commissioner, Sales Tax v. Sarin Chemical Laboratory, the Court classified toothpaste and tooth powder as toilet requisites despite their medicinal claims.

Tribunal's Findings:

The Tribunal found that Vaseline is used for skin care, aligning it with the entry "All kinds of cosmetics and toilet preparations for beautification or care of the face, skin, hair, nails, eyes or brows" under the relevant notification. The Tribunal noted that the product is generally available in cosmetic shops and not in medicine shops, reinforcing its classification as a cosmetic.

Conclusion:

The High Court upheld the Tribunal's decision, concluding that Vaseline is primarily used for skin care and falls under the category of cosmetics. The Court emphasized that the mere presence of some medicinal properties or the requirement of a drug license does not alter its classification. The product is not intended for the treatment, mitigation, or prevention of disease, which are key characteristics of a medicine. Consequently, the revisions were dismissed, affirming the classification of Vaseline as a cosmetic subject to tax under the specified notification.