2014 (6) TMI 861 - HC - VAT and Sales Tax

Classification of RA THERMOSEAL and THERMOSEAL - medicine or toothpaste - Interpretation of Schedule Entry C-I-24 of the BST Act - whether the products of assessee are excluded from Schedule Entry C-I-24 by virtue of the fact that they are products capable of being used as a toothpaste - Held that - On a comparison of Schedule Entry C-I-24 (before amendment) and C-II-37 (after amendment), it is clear that with effect from 01-10-1995, the exclusions appearing in the medicines Entry C-I-24 at (a), (b) & (c) were deleted from the new medicines Entry C-II-37, thereby expanding the scope of the Entry relating to medicines - products used by people as a toothpaste with a view to clean the teeth as part of one s daily exercise, is commonly understood as a toothpaste. Similarly, if such products besides cleaning the teeth also serve as a preventive measure by virtue of some medicinal contents therein, then it can be called as a medicated toothpaste . From the advertising material, it is clear that the Applicant itself claims that the said products have been specifically formulated with a pleasant fresh taste and low abrasive formula for cleaning the teeth and leaving the mouth tingling fresh. Even the said products are marketed as No.1 toothpaste for sensitive teeth . To our mind therefore, it is clear that though the said products of the Applicant are medicines , that would fall under Schedule Entry C-I-24, the same would be excluded from the said Entry by virtue of the exclusion clause therein viz. Products capable of being used as toothpaste, tooth powders, cosmetics, toilet articles and soaps . Even applying the common parlance test, we have no hesitation in holding that though the said products of the Applicant fall within the medicines Schedule Entry C-I-24, they are products capable of being used as a toothpaste and would therefore be excluded from the said Entry. Even if one were to apply the common parlance test to the said products of the Applicant, they would be products capable of being used as toothpaste and therefore, excluded from Schedule Entry CI- 24. In this regard, the reliance placed by Mr Sonpal, on the judgment of the Supreme Court in the case of Commissioner of Central Excise, New Delhi v/s M/s Connaught Plaza Restaurant (P) Ltd., New Delhi, 2012 (12) TMI 149 - SUPREME COURT is well founded. This being the position, the MSTT was fully justified in coming to the conclusion in its order dated 12th January 2001 that the said products of the Applicant were capable of being used as a toothpaste which was specifically excluded from the medicines Schedule Entry C-I-24. The said products of the Applicant, despite having the basic character of medicines , did not fall in the medicines Entry C-I-24 because of the exclusion contained therein - Decided against assessee.

Summary

Issues Involved:
1. Classification of "RA THERMOSEAL" and "THERMOSEAL" as toothpaste or medicine.
2. Interpretation of Schedule Entries C-I-24 and C-II-36 under the Bombay Sales Tax Act, 1959.
3. Justification of the Tribunal's decision based on the exclusion clause in Schedule Entry C-I-24.

Detailed Analysis:

Issue 1: Classification of "RA THERMOSEAL" and "THERMOSEAL" as toothpaste or medicine
The primary contention was whether "RA THERMOSEAL" and "THERMOSEAL" should be classified as toothpaste or medicine. The Applicant argued that these products were formulated to treat teeth sensitivity and thus should be classified as medicines. However, the Commissioner and later the MSTT concluded that these products, despite their medicinal properties, were capable of being used as toothpaste and thus fell under the exclusion clause of Schedule Entry C-I-24.

Issue 2: Interpretation of Schedule Entries C-I-24 and C-II-36 under the Bombay Sales Tax Act, 1959
The court examined Schedule Entry C-I-24, which described "medicines" and excluded products capable of being used as toothpaste. The MSTT initially determined that the products were medicines but excluded them from C-I-24 due to their capability of being used as toothpaste. The court noted that subsequent amendments to the BST Act, which replaced C-I-24 with C-II-37, expanded the scope of "medicines" by removing specific exclusions, but the products still fell under the toothpaste category due to their dual purpose.

Issue 3: Justification of the Tribunal's decision based on the exclusion clause in Schedule Entry C-I-24
The MSTT's decision was based on the exclusion clause in Schedule Entry C-I-24, which excluded products capable of being used as toothpaste. The court agreed with the MSTT's interpretation, emphasizing that the products served a dual purpose of cleaning teeth and treating sensitivity. The court applied the common parlance test, concluding that the products were understood as toothpaste in everyday use, despite their medicinal properties. This interpretation was supported by advertising material and the practical usage of the products by consumers.

Conclusion:
The court upheld the MSTT's decision, affirming that "RA THERMOSEAL" and "THERMOSEAL" were excluded from Schedule Entry C-I-24 due to their capability of being used as toothpaste. The products were classified under Schedule Entry C-II-36 as toothpaste, and the questions of law were answered in the affirmative and against the Applicant. The Sales Tax Reference was disposed of with no order as to costs.