2024 (7) TMI 1106 - HC - GST

Classification of goods - cosmetics or drugs? - Navaratan Oil - Gold Turmeric Ayurvedic Cream - Nirog Dant Power Lal - Boroplus Antiseptic Cream - Boroplus Prickly Heat Powder - Sonachandi Chavanprash - whether the aforementioned products would fall under Entry 36 or Entry 37 of the CGST Act and TGST Act? Himani Sonachandi Chavanprash - HELD THAT - A plain reading of the definition of drugs would clearly indicate that it is a product which can be internally and externally used. Hence, Himani Sonachandi Chavanprash is one product which is only edible and is not a product which can be used externally - In view of the aforesaid factual aspect of the case and the specific finding of fact given by the STAT, no strong case has been made out by the learned Standing Counsel for the respondent/Department to interdict the finding so far as the product Himani Sonachandi Chavanprash is concerned. The challenge to the said finding thus stands answered in the negative affirming the finding given by the STAT. Himani Boroplus Antiseptic Cream - HELD THAT - The said cream under no circumstances can be brought or treated as a cosmetic. It can only be used for the medicinal value that it has and it cannot be used as an ordinary facial or a body cream except for the purpose for which it has been manufactured and sold. It also is not a product which is otherwise capable of being used as a cosmetic or a toiletry product. Neither can it be brought within the purview of medicated goods as the medicated goods are those which are used otherwise than as medicines with its added incidental medicinal properties, for example medicated shampoo, soap, hand wash etc. etc. - the finding given by the STAT is a well-reasoned finding which does not warrant interference as no substantial material could be brought on record either before the authorities concerned or before this Court so as to disprove the findings given by the STAT. Himani Boroplus Prickly Heat Powder - HELD THAT - This product, unlike Nycil Prickly Heat Powder has predominant medicinal elements which has a soothing and protective effect on the skin, which can be attributed to its cosmetic nature. It only contains medicinal ingredients such as Zinc Oxide, Boric Acid and Salicylic Acid, which gives it therapeutic and prophylactic properties, making it more than just a cosmetic product - Himani Boroplus Prickly Heat Powder has been rightly classified under Entry 37 in Schedule 1st of the APGST Act. This classification acknowledges the product's medicinal properties and its role in health and healing. Conversely, the product should not be classified under Entry 36 as 'Cosmetics or Toilet Preparations' in the same schedule of the Act. This is because such a classification would downplay the product's medicinal attributes and potentially misrepresent its purpose and use to the public. Himani Navaratan Oil - HELD THAT - Medicated goods are those where incidental medicinal properties are incorporated in small quantity and the product needs to be otherwise sold for the very same purpose for which it was otherwise manufactured and sold. Thus the finding of the STAT so far as Navaratan Oil being a cosmetic and not a Drug is liable to be set aside and it is ordered accordingly. Himani Gold Turmeric Ayurvedic Cream - HELD THAT - What is necessary to be appreciated at this juncture is that, from the rapper in which the cream is sold, very emphatically highlights it as an ayurvedic medicine. The rapper also clearly indicates that the cream is highly effective for cracked skins, pimples, boils and numerous other skin blemishes. Nowhere did they in the rapper claim it to be a cosmetic product or a product which could enhance the complexion or fairness. The licensing authority having granted license for the said product as an ayurvedic drug, the manufacture, sale and distribution of the product as a drug and not a cosmetic is established and it is being marketed only as a drug and not as a cosmetic. Application disposed off.

Summary

Issues Involved:
1. Classification of products as cosmetics or drugs under the APGST Act, 1957.
2. Tax implications based on the classification under Entry 36 or Entry 37 of the CGST Act and TGST Act.
3. Specific products in dispute: Navaratan Oil, Gold Turmeric Ayurvedic Cream, Nirog Dant Power Lal, Boroplus Antiseptic Cream, Boroplus Prickly Heat Powder, and Sonachandi Chavanprash.

Detailed Analysis:

1. Classification of Products as Cosmetics or Drugs:
The primary issue was whether the products manufactured by M/s. Himani Limited and M/s. Emami Limited fall under the category of cosmetics or drugs under the APGST Act, 1957. This classification affects the applicable tax rate: 20% for cosmetics (Entry 36) and 10% for drugs (Entry 37).

2. Tax Implications Based on Classification:
The dispute was centered on the tax rate applicable to the products. If classified as cosmetics, the products would be taxed at 20%, whereas if classified as drugs, the tax rate would be 10%.

3. Specific Products in Dispute:
- Navaratan Oil, Gold Turmeric Ayurvedic Cream, and Nirog Dant Power Lal: The Sales Tax Appellate Tribunal (STAT) classified these products as cosmetics or toiletry products, which was challenged by the assessee.
- Boroplus Antiseptic Cream, Boroplus Prickly Heat Powder, and Sonachandi Chavanprash: STAT classified these products as drugs, which was contested by the Department.

Issue-wise Analysis:

A. Department's Tax Revision Cases:
- Sonachandi Chavanprash:
- The STAT concluded that Sonachandi Chavanprash is a drug based on its composition and benefits, such as improving eyesight, building immunity, and strengthening teeth and bones.
- The definition of cosmetics under Section 3(aaa) of the Drugs and Cosmetics Act, 1940, which includes articles applied externally, was contrasted with the definition of drugs under Section 3(b), which includes substances for internal or external use.
- The Department's contention that the product is a cosmetic due to its saffron content was not supported by documentary evidence.
- The court upheld STAT's finding that Sonachandi Chavanprash is a drug.

- Boroplus Antiseptic Cream:
- The STAT classified this product as a drug due to its antiseptic composition and medicinal value.
- The product's composition, including ayurvedic ingredients with medicinal properties, was provided as evidence.
- The court agreed with STAT's classification, noting that the product is not a cosmetic but a medicinal cream.

- Boroplus Prickly Heat Powder:
- STAT classified this product as a drug based on its ingredients and medicinal properties.
- The court noted that the product contains medicinal ingredients like zinc oxide, boric acid, and salicylic acid, which give it therapeutic properties.
- The court upheld STAT's classification, rejecting the Department's contention that it is a cosmetic.

B. Assessee's Tax Revision Cases:
- Navaratan Oil:
- The assessee argued that Navaratan Oil is a medicinal product used for relieving headaches, improving memory, and preventing hair fall, among other benefits.
- The product's composition and reference to ayurvedic texts were provided as evidence.
- The court found that the product is an ayurvedic medicine and not a cosmetic, setting aside STAT's classification.

- Gold Turmeric Ayurvedic Cream:
- The assessee claimed that this product is effective for curing skin conditions like cracked skin, pimples, and boils.
- The product's composition and references to ayurvedic texts were provided as evidence.
- The court found that the product is marketed as an ayurvedic medicine and not a cosmetic, setting aside STAT's classification.

- Nirog Dant Power Lal:
- The assessee did not challenge the classification of this product as a cosmetic.

Conclusion:
- The court rejected the Department's Tax Revision Cases (Nos. 155, 156, 166, 169, and 211 of 2004).
- The court allowed the assessee's Tax Revision Cases (Nos. 193, 188, 187, 182, 183, and 192 of 2004), reclassifying Navaratan Oil and Gold Turmeric Ayurvedic Cream as drugs under Entry 37 of the 1st Schedule of the Act.
- The order of the STAT was set aside, and the products were classified based on their medicinal properties and usage.