2013 (4) TMI 22 - HC - VAT and Sales Tax

Classification - Duties payable as per Entry 41 and 49 of Part-III of Schedule II ( @12% )or as per Entry no.11 of Part-IV of Schedule II (@8%) - Held that - The Supreme Court in Puma Ayurvedic Harbal (P) Ltd. vs. Commissioner, Central Excise 2006 (3) TMI 141 - SUPREME COURT OF INDIA cited the case reported which was a case of Nycil Prickly Heat Powder (1999 (5) TMI 33 - HIGH COURT OF DELHI ) which was also held not to be an ordinary powder but falling in the category of medicament - We are also of the view that dermicool powder which is described as a prickly heat powder is also commonly understood to be of use in treating prickly problem and not as an ordinary talcum powder. Considering the all over facts and circumstances of the case, we are of the opinion that the item dermicool powder must be held to be a medicine taxable under Entry 11, and not a medicinal preparation of a cosmetic within the meaning of those words as used in Entry 41 or 49 quoted above.

Summary

Issues:
Interpretation of tax entries in the M.P. Commercial Tax Act 1994 - Classification of specific manufactured items under relevant tax entries.

Analysis:
The judgment concerns the interpretation of tax entries in the M.P. Commercial Tax Act 1994 and the classification of specific manufactured items under the relevant tax entries. The entries in question are Entry 41 and 49 of Part-III of Schedule II, which attract Commercial Tax at the rate of 12%. These entries include cosmetic items and items with medicinal preparations. Additionally, Entry 11 of Part-IV of Schedule II attracts only 8% Commercial Tax or Sales Tax and pertains to drugs and medicines excluding those specified elsewhere in the Schedule.

The petitioners manufactured five items, namely Boro Natural, Borosoft Cream, Borosoft Lotion, Dermicool Powder, and Itch Guard Cream. The Commercial Tax Department contended that these items are taxable under Entry 41 or alternatively under Entry 49, while the petitioners argued that they should be taxed under Entry 11. During the proceedings, the petitioners abandoned the claim regarding Borosoft Lotion as its manufacturing had ceased.

The court considered the nature and usage of each item to determine their classification. The petitioners conceded that Boro Natural and Borosoft Cream could be used for medical conditions and cosmetic purposes, falling under Entry 41. Itch Guard Cream, primarily used for medical purposes, was deemed to fall under Entry 11. The item Dermicool Powder, used for prickly heat, was analyzed to ascertain its classification. The court emphasized the importance of interpreting the entries to prevent tax evasion and noted the distinction between cosmetic and medicinal items.

Referring to precedents, the court highlighted the difference between cosmetic and medicinal preparations, emphasizing the intended usage of the products. Considering the common understanding and purpose of Dermicool Powder as a treatment for prickly heat, the court held it to be a medicine taxable under Entry 11, not a medicinal preparation of a cosmetic under Entry 41 or 49. Consequently, the assessment orders were modified for Dermicool Powder and Itch Guard Cream, directing the Assessing Officer to make necessary changes.

In conclusion, the court disposed of the petitions with the provided directions, ensuring proper classification and taxation of the manufactured items in accordance with the M.P. Commercial Tax Act 1994.