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TMI Blog1992 (9) TMI 326X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Act, 1954, and manufactures and sells a cream under the brand-name "Boroline". In the course of making an assessment order dated April 10, 1984, in respect of respondent No. 2 for the period of 12 months ending Chaitra, 1386 B.S. under the 1954 Act, the then Commercial Tax Officer held that "Boroline" was a cosmetic as notified by Notification No. 3123 F.T. dated July 15, 1975, issued under section 25 of the 1954 Act and should, therefore, be exigible to tax at 15 per cent. The assessee preferred an appeal before the Assistant Commissioner of Commercial Taxes, claiming "Boroline" to be a patent and proprietary medicine within the meaning of Notification No. 1658 F.T. dated August 1, 1956, issued under section 25 of the said Act of 1954. Although the Assistant Commissioner set aside the assessment order on another ground and directed a fresh assessment, he confirmed the view taken by the assessing Commercial Tax Officer to the effect that "Boroline" was a cosmetic and should be exigible to sales tax as such. That order was passed on October 16, 1985. The assessee preferred a revision therefrom before the Tribunal below and succeeded there. By the impugned order dated May 2, 1988, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of taxation. 3.. The respondent No. 2, G.D. Pharmaceuticals Ltd. (in short, "the company"), filed two affidavits-in-opposition, one dated September 25, 1989 and another dated November 22, 1989. Its case in the second affidavit is that the definition of "cosmetic" in Notification No. 3123 F.T. dated July 15, 1975, is independent of the definition of "cosmetic" given in clause (aaa) of section 3 of the Drugs and Cosmetics Act, 1940. Definitions of "drugs" and "patent or proprietary medicine" are dependent on the definitions given in clauses (b) and (h) of section 3 of the said Act of 1940. In view of the Calcutta High Court's decision in C.R. No. 651 (W) of 1969 in the case of Company v. Director of Drugs Control, West Bengal, the issue raised in this application is said to be academic. 4.. In the first affidavit dated September 25, 1989, the company's further case is that in a judgment dated May 2, 1988, the Tribunal below, namely, the West Bengal Commercial Taxes Tribunal, had rightly held that "Boroline" was a commodity notified by Notification No. 1658 F.T. dated August 1, 1956, issued under section 25 of the West Bengal Sales Tax Act, 1954 and the judgment was report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iety called Drug Action Forum, West Bengal, for leave to join as a party-intervener on the ground of public interest. Arguments of the rival parties were heard on the admissibility of that application. At this stage Mr. Somen Bose, learned advocate appeared for the company. By an order dated April 2, 1992, the application of Drug Action Forum was rejected, although the reasons for rejection were not unanimous. While the honourable Chairman and the honourable Technical Member gave certain reasons, I gave different ones for rejection. However, the main contention of Drug Action Forum was that "Boroline" is not a drug. Of course, the Forum went on to say that it was not even a cosmetic. In any case, among other authorities, the Forum relied on the recent [1990] Edition of Goodman and Gilman's "The Pharmacological Basis of Therapeutics". All of us unanimously decided by the order dated April 2, 1992, that the parties should produce a copy of the relevant portion of the said book and to further argue the matter in that context. Thereafter a photo copy of the relevant portion of the [1990] Edition of the said book by Goodman and Gilman was produced on April 20, 1992, together with photo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "'Patent or proprietary medicine' as defined in clause (h) of section 3 of the Drugs and Cosmetics Act, 1940 (23 of 1940)." Clauses (b) and (h) of section 3 of the Drugs and Cosmetics Act, 1940, are reproduced below: "(b) 'drug' includes,- (i) all medicines for internal or external use of human beings or animals and all substances intended to be used for or in the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings or animals, including preparations applied on human body for the purpose of repelling insects like mosquitoes; (ii) such substances (other than food) intended to affect the structure or any function of the human body or intended to be used for the destruction of vermin or insects which cause disease in human beings or animals as may be specified from time to time by the Central Government by notification in the Official Gazette; (iii) all substances intended for use as components of a drug including empty gelatin capsules; and (iv) such device intended for internal or external use in the diagnosis, treatment, mitigation or prevention of disease or disorder in human beings or animals, as may be specified from time to time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a simple distinction between the two descriptions given in the two aforesaid Notification Nos. 1658 F.T. dated August 1, 1956, and 3123 F.T. dated July 15, 1975. In the first notification, "drug" and "patent or proprietary medicine" are mainly described by reference to the definitions of similar expressions given in the Drugs and Cosmetics Act, 1940, in short, "the 1940 Act". But in the case of cosmetic, no reference is made at all to the definition of "cosmetic" given in the 1940 Act. Had it been intended that the expression "cosmetic" should be understood according to the definition in the 1940 Act, Notification No. 3123 F.T. dated July 15, 1975 would have referred to it, as done in the case of drug and patent or proprietary medicine. In the notification dated July 15, 1975, no definition of cosmetics has been given. It is simply stated as cosmetics of all varieties, followed by the word "including" and then followed by certain specific items like talcum powder, snow and cream, etc. It is now well-settled that where an item is not defined in a taxing statute, its popular meaning or the meaning ascribed to it in the common parlance should be followed, rather than its scientific me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first examine whether Boroline is a "drug". Apart from anything else, respondent No. 2 company founds its claim on the fact that a drug licence under the Drugs and Cosmetics Act, 1940, was granted for the manufacture of Boroline. It appears from annexure A to the affidavit-inopposition affirmed on behalf of respondent No. 2 on November 22, 1989, that drug licence No. DL-36M dated July 22, 1948, was issued under the Bengal Drugs Rules, 1946, but that licence did not specify Boroline. It was a licence to manufacture drugs other than drugs specified in Schedules C and C(1) to the Drugs Rules, 1946. The licence was for a period of two years from the date of issue and further, it was subject to certain conditions stated in the licence and also subject to such other conditions as might be specified in the Rules for the time being in force under the Drugs Act, 1940. Annexure A, at page 2, is the renewal of drug licence No. DL-36M dated July 5, 1976, granted to respondent No. 2 on January 31, 1985, under Drugs and Cosmetics Rules, 1945 for the manufacture of drugs, namely, certain drugs under categories of suspension and ointments, i.e., 2A and solution, i.e., 2B as per approved list attac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any application of mind and without any scientific test. At this stage it is perhaps necessary to consider the notification dated August 1, 1956, issued under section 25 of the 1954 Act in respect of drug. There, drug was neither defined, nor left undefined. The definition in clause (b) of section 3 of the Drugs and Cosmetics Act, 1940, was mainly adopted as the definition of "drug" with the exception that certain drugs were excluded from that definition and certain other drugs were included in the expression "drug". None of the items of drug which were included or excluded is relevant for our purpose. None of those drugs which were included in or excluded from the definition is a component of Boroline. Therefore, for our present purpose, the notification dated August 1, 1956 defined "drug" as defined in clause (b) of section 3 of the 1940 Act. We have already reproduced the definition of "drug" in section 3(b) of the 1940 Act. There, drug has been given an inclusive definition. In other words, ordinarily drug will bear the plain meaning of the expression and that meaning will be extended to the medicines or substances which have been specified in several sub-clauses after the wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osition of the company is a letter addressed to the company by a physician, Dr. Hari Sankar Sharma, MBBS., showing that he was dispensing Boroline at his clinic regularly since 1980 and he used it for dressing purpose and he prescribed it to patients for the last couple of years. The letter is dated February 3, 1986. It may be noted that the impugned assessment order for the period of 12 months ending Chaitra, 1386 B.S. was dated April 10, 1984. The Appellate Assistant Commissioner confirmed the assessment by an order dated October 16, 1985. Then the company preferred a revision before the Tribunal below which passed its order on May 2, 1988. Thus, the letter dated February 3, 1986, written by Dr. H.S. Sharma came into existence after the appeal was disposed of by the Assistant Commissioner. This solitary letter cannot determine the common parlance meaning of a particular item. As already stated, respondent No. 2 has failed to produce any dependable material to show that in the common parlance Boroline is considered to be a drug, vis-a-vis, the first part of the definition of "drug". Mr. S.K. Roy, learned advocate for the applicants, referred to certain statements in the affidavit- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 16 of the main application, but while doing so, did not deny or contradict the statement that in its advertisement of Boroline, it was emphasising its cosmetic value. In a simplistic manner respondent No. 2 stated in paragraph 9 of its opposition that the issue stated in paragraph 16 is "academic" in view of the Calcutta High Court's decision in C.R. 651 (W) of 1969 (Company v. Director of Drugs Control, West Bengal) wherein it was held by the learned Judge that whether a particular product is a drug or a cosmetic or a patent or proprietary medicine is to be decided on the basis of the definitions given in the Act itself; and the company's claim that a product is a drug or a cosmetic or a patent or proprietary medicine should not be the criterion. At this stage, we are not considering whether Boroline is a cosmetic. We are now considering whether it is a drug. In view of non-denial of the statement in paragraph 16 of the main application, the company accepts the position that it lays emphasis in its advertisements on the cosmetic value of Boroline, thereby not attaching importance to medicinal or curative value, if any, of Boroline as a drug. From the above discussion, I am of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als, as specified from time to time by the Central Government by a Gazette notification. It is nobody's case that Boroline or any of the ingredients of Boroline is such a substance. Therefore, the second and fourth sub-clauses are not relevant for our consideration. As regards the third sub-clause, only those substances can be said to be drug which are intended for use as components of a drug. Thus, even if the third sub-clause may attract components of Boroline, it does not apply to a preparation like Boroline; and here we are simply concerned with Boroline, not its components. Moreover, in order to apply the third sub-clause Boroline itself should be shown to be a drug, which has not been shown. Now, the first subclause has three parts. The first part consists of all medicines for internal and external use of human beings or animals. No definition of medicine is given either in the West Bengal Sales Tax Act, 1954 or in the relevant notification dated August 1, 1956, or in the Drugs and Cosmetics Act, 1940. In the 1940 Act, of course, definition of "patent or proprietary medicine" has been given. In my view, that definition is not a definition of "Medicine" simpliciter. The dictio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore us on boric acid as the main ingredient which allegedly brings Boroline into the category of a drug. Zinc oxide was weakly referred to. So the question is whether Boroline can be said to be a substance, intended to be used for or in the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings or animals. We have already seen that Boroline is not treated in the common parlance as a drug or medicine, and therefore, as a substance intended to be used for or in the diagnosis, treatment, mitigation or prevention of any disease or disorder. No pharmacopoeia mentions Boroline as such. There is no claim that boric acid and zinc oxide are used for diagnosis. But it is claimed by the company that these are substances used for treatment, mitigation or prevention of any disease or disorder and therefore Boroline is also such a substance. The applicants contended that boric acid and zinc oxide have no medicinal value for the treatment, mitigation or prevention of any disease or disorder and therefore use of these ingredients does not bring Boroline into the category of a drug or medicine. Both the Revenue and the company have relied on certain authoritativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tigation or prevention of any disease or disorder, Boroline cannot be said for that reason to be such a substance. Apart from other things, one simple reason why Boroline and zinc oxide cannot be treated as the same substance or as substances having the same therapeutic value is that the therapeutic qualities or properties of zinc oxide are not attributable to the remaining ingredients of Boroline. Let us recall that zinc oxide is used in Boroline at only 3 per cent w/w. Thus, 97 per cent w/w of Boroline is other than zinc oxide and that 97 per cent comprises other substances possessing different properties. It is significant that the second part of sub-clause (i) of section 3(b) of the 1940 Act speaks of "all substances"; but it does not speak of preparations made out of or with the help of those substances. It is further significant that although the third part of the first sub-clause of section 3(b) mentions "preparations", it does not apply to all kinds of preparations. It is limited to preparations for the specific purpose of repelling insects like mosquitoes. It is, therefore, clear that the second part of sub-clause (i) of section 3(b) of the Drugs and Cosmetics Act, 1940, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confusing it with dextrose when compounding milk formulas for infants. Fatal accidents have occurred. For this reason boric acid in bulk is colored, so that it cannot be confused with dextrose. It is used to prevent discoloration of physostigmine solutions. Dose-Topically, as required." According to Remington, it is thus a buffer and a very weak germicide. It is absorbed from damaged skin, and, therefore, fatal poisoning, particularly in infants, occurs. In fact according to Remington, the kidney may be injured and death may result. Considering the opinion of Remington and also considering the absence of recommended action and use in the British Pharmacopoeia (1988) relied on by the company, the harmful effects of boric acid far outweigh the little anti-infective property. So, it is difficult to hold that boric acid can be considered to be a substance intended to be used for or in the treatment, mitigation or prevention of any disease or disorder. On behalf of the applicants (Revenue) reliance has been placed regarding the therapeutic value, if any, and uses thereof, on such authorities as Goodman and Gilman's "The Pharmacological Basis of Therapeutics", Eighth Edition and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity" means, in relation to a drug, that the drug complies with the standard set out in the Second Schedule to the Act. In other words, the expression "standard quality", when applied to a drug, means that the particular drug complied with the standard set out in the Second Schedule to the Act. If, we apply this to the case of Boroline, in order to be a drug, apart from fulfilment of other conditions, it must comply with the standard set out in the Second Schedule to the Act. The object of the Act of 1940 is to regulate the import, manufacture, distribution and sale of drugs and cosmetics. The provision for complying with a certain standard quality is appropriate in the context of the object of the Act. Section 33 of the 1940 Act empowers the Central Government to make rules by following a certain procedure. Sub-section (2) of section 33 specifically empowers the Central Government to frame rules to prescribe the methods of tests or analysis to be employed in determining whether a drug or cosmetic is of standard quality. Section 27 of the 1940 Act is important in this connection. It makes a person, who manufactures for sale or for distribution or who sells or stocks or offers for sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scribed. It is not the case of the company that Boroline is a drug included in the Indian Pharmacopoeia vide item 5(a) of the Second Schedule to the 1940 Act. Nor is it the company's case that Boroline is a drug not included in the Indian Pharmacopoeia, but included in a pharmacopoeia of any other country. It has not also been shown by the company that the preparation which is called Boroline is in conformity with the standards specified in the Indian Pharmacopoeia or in any other relevant pharmacopoeia or in conformity with any standards which might have been prescribed. I do not say that for this case the name Boroline is important, but the preparation, which is called Boroline, containing its declared ingredients has not been shown to be a drug conforming to standards either specified in any edition of the Indian Pharmacopoeia or any official pharmacopoeia of any other country or as per the standards prescribed under the 1940 Act. That being the position, it is difficult to maintain that Boroline, containing the disclosed ingredients, is a drug according to the Drugs and Cosmetics Act, 1940. 18.. At this stage we should revert to the question, what is the effect of the drug li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be observed, shall issue a certificate of renewal in form 26. Rule 70 is to the effect that licences for manufacture of drugs shall be granted in form 25. Rule 71 lays down the conditions for the grant or renewal of a licence in form 25. These conditions shall be complied with by an applicant before a licence in form 25 is granted. Sub-rule (6) of rule 71 deals with licences for manufacturing patent or proprietary medicines. Subrules (1) to (5) of rule 71 relate to grant of licence in form 25. None of the conditions stated in rule 71 regarding licence in form 25 requires that the licensing authority should determine by a test whether the preparation for which the licence is applied is a drug or is a drug of standard quality and not a misbranded or spurious drug. None of the aforesaid sub-rules requires that before granting a licence, the licensing authority should be satisfied that there is a therapeutic justification for manufacture of the relevant preparation as a drug for sale. But section 18 of the Drugs and Cosmetics Act, 1940, prohibits manufacture for sale of any drug which is not of a standard quality or is misbranded, adulterated or spurious. Therefore, there is substa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead with section 18(a)(iv) of the same Act and under rule 71(6). This definition has been adopted in the impugned notification under section 25 of the West Bengal Sales Tax Act, 1954. Therefore, in the absence of any appropriate licence for manufacture of a patent or proprietary medicine in respect of Boroline, respondent No. 2 company cannot derive any assistance from the licences made annexures to the affidavit-in-opposition. Otherwise also, the company has not been able to show that Boroline is a patent or proprietary medicine. It has merely taken such an alternative case. According to the definition in section 3(h)(ii) of the 1940 Act, a patent or proprietary medicine must be a drug being a remedy or prescription presented in a form ready for use. No such case or proof has been presented by the respondent No. 2. 21.. We have already extracted the definition of "patent or proprietary medicine" in section 3(h) of the 1940 Act, as adopted in the impugned notification dated August 1, 1956. According to sub-clause (ii) of section 3(h), a patent or proprietary medicine is a drug, being a remedy or prescription for internal or external administration of human beings or animals, pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g "snow and creams of all descriptions and varieties". It is common ground that Boroline is a cream. According to the Revenue, therefore, Boroline is a cosmetic. But according to respondent No. 2 company, it may be a cream, but not a cosmetic. The word "cosmetics" has not been defined. Nor has a reference been made to the definition of "cosmetics" given in the Drugs and Cosmetics Act, 1940, or in any other statute. Therefore, the expression "cosmetics" should be understood in the manner attributed to it in the commercial parlance. By submitting that no prescription by a registered medical practitioner is required to purchase Boroline and that Boroline is available for purchase in various kinds of shops including roadside stalls, Mr. S.K. Roy, learned advocate for the Revenue contended that Boroline is treated in the commercial parlance as a cosmetic. He further submitted on the basis of the averments in the main application that respondent No. 2 itself emphasised the cosmetic value of Boroline in the advertisements issued by it. It is further stated in the main application that common people use Boroline as a cream at bed-time and after shaves and for skin care particularly during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3123 F.T. dated July 15, 1975, which states "cosmeties of all varieties". The meaning of "cosmetic" is, according to Twentieth Century Chambers Dictionary, "purporting to improve beauty, especially that of the complexion: correcting defects of the face, etc., or supplying deficiencies". Not only that the company failed to deny the assertions of the Revenue that Boroline is treated by the common people as a cosmetic, but it also did not produce any material either before us or at any lower stage to the effect that Boroline is not treated as a cosmetic in the common parlance. The expression "all varieties" is wide enough to include any preparation which can be used for cosmetic purposes. Therefore, I am of the opinion that Boroline comes within the ambit of cosmetics of all varieties, as mentioned in the first part of the Notification No. 3123 F.T. dated July 15, 1975. 24.. The second is the inclusive part of the aforesaid notification. Generally, the purpose is to extend the meaning of cosmetics to the enumerated items or classes of items of products which follow the word, "including". The controversy regarding Boroline is confined to item (ii) of the enumeration after the word, " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at both the State and Central drugs control authorities have been treating 'Boroline' as a drug all along. So whatever be the deficiency of 'Boroline' as a therapeutic agent this Tribunal is bound by the judgment of the Calcutta High Court..........." It will appear from the above that the learned Tribunal below held that Boroline was a drug on the basis of a judgment of the Calcutta High Court supported by a judgment of the same High Court in an entry tax matter and a judgment of the Allahabad High Court in a criminal revision. As the Tribunal found itself bound by that judgment, it held that Boroline was a drug. This takes us to the history of treatment of Boroline under the Central excise tariff as narrated by the Tribunal below in paragraphs 6 to 8 of its judgment dated May 2, 1988. In a dispute as to what rate of excise tariff would be applicable to Boroline it was decided by the Central excise authorities within the ambit of the Central Excises and Salt Act, 1944, after consulting the Drugs Controller of India, the chief chemist and the Law Ministry, that Boroline, for the purpose of excise tariff, should be classified as a patent and proprietary medicine, not as a drug. Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout following the provisions of rule 85 of the Rules framed under the Drugs and Cosmetics Act, 1940. The finding of the learned Judge was as follows: "In my opinion, whether a particular product is a drug or a cosmetic or a patent or proprietary medicine is to be decided on the basis of the definitions given in the Act itself by the competent authority and the petitioner's saying that a particular product is a drug or a cosmetic or a patent or proprietary medicine should not be the criterion for holding the said as such for the purpose of the grant or renewal of licence as a drug or cosmetic or a patent or proprietary medicine. It is nowhere stated before me that the licensing authorities were satisfied that it was a cosmetic......... The renewal of a licence in my opinion under the Act and the Rules framed thereunder is more or less a routine matter. If the petitioner satisfied the conditions laid down in rule 71 of the Rules, the licensing authority has no option but to renew the same. " The learned Judge was also pleased to hold that the fact that the company was advertising Boroline as a perfumed cream, as a cosmetic was not to be considered for the purpose of renewal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent No. 2 in a proceeding of this nature which is of the nature of one under article 226 of the Constitution. According to him, the law is settled that a judgment in a criminal matter can be taken cognizance of only with regard to the result thereof, namely, whether there was a conviction and sentence or an acquittal, but no cognizance can be taken of the findings and reasons therefor. I think, it is not necessary to express any opinion on this question, because the case did not involve the provisions of any taxing law, and because I cannot persuade myself to agree with the finding given in the said judgment. The entire arguments of the parties revolved round the declaration by the manufacturing company (respondent No. 2) in the leaflet accompanying a tube of Boroline, stating that it could be used to cure minor sores on the ears and between toes and for relieving minor skin injuries and guarding against possibilities of infection in cuts. It could be used also to soothe dry skin and as a protective against sun burns. The arguments of the learned counsel of the rival parties were based on these declarations alone. There was no attempt in that case to find out whether Boroline a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended on behalf of the company that Boroline would not come within the purview of serial No. 14(e). The stand of the entry tax authorities was that in spite of the fact that Boroline contained certain drugs, it would come within serial No. 14(e) and not within serial No. 60, item (b)(i), namely "drugs and drug intermediaries of I.P., B.P. or U.S.P. prescribed grade (chemical based)". The learned Judge of the Calcutta High Court held that Boroline would not come under serial No. 14(e), but would come under serial No. 60(b)(i) of the Schedule to the said Act of 1972. This decision is clearly distinguishable on two grounds: (i) the High Court was deciding the dispute under a different Act in relation to entries or items under that Act quite differently worded, and (ii) it is difficult for me to agree that even if Boroline comprised ingredients of I.P. standard, the preparation as such could be considered to be a drug or drug intermediary of I.P. Learned advocate for respondent No. 2 also referred to the appellate judgment dated December 5, 1988, delivered by a Division Bench, annexure "Q" to the affidavit-in-opposition. Having regard to the definition of "cosmetic" in section 3(a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned Judge of the Allahabad High Court arrived at a "prima facie" or tentative finding. These are the reasons for which the ratio of the Allahabad decision and the decision dated February 12, 1992, of the Calcutta High Court in C.O. No. 14000(W) of 1985 cannot be applied to the present case. 28.. Mr. Roy appearing for the applicants relied on the case of Commissioner of Sales Tax v. Ciba of India Ltd. [1985] 59 STC 242 (Bom). The question in that case was whether Forbina powder was covered by any entry in Schedule E to the Bombay Sales Tax Act, 1959 and was also eligible to the benefit of entry 38 of the notification issued under section 41 of the said Act. In that case the learned counsel for the dealer submitted that the powder contained certain ingredients of medicinal qualities and as such it should be regarded as a medicine rather than a toilet article. Under entry 38 of the relevant notification dated August 14, 1965, issued under section 41 of the Bombay Sales Tax Act, 1959, sales of medicine used or intended to be used, whether internal or external, for or in the diagnosis, treatment, mitigation or prevention of disease in human beings or animals, other than certai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ading of this advertisement shows that the respondent advertised to their consumers that Forbina powder was a deodorant and talc with mild anti-septic properties and the use of it would result in a feeling of freshness. The main emphasis is on freshness which would be induced by the use of Forbina powder............ Although the advertisement cannot be regarded as at all decisive in the proper classification of Forbina powder, it does lend support to our view that Forbina powder is really a toilet article." I agree with Mr. Roy, learned advocate for the applicants, that this is a decision, the ratio of which is well applicable to the present case. As already pointed out, it was also a case of treating the item either as a drug or medicine or a toilet preparation. Significantly, the two ingredients which were involved in that case are also involved in the present case, namely, boric acid and zinc powder. In that case, the percentage of these two components was 5.5 per cent, while in the present case the percentage is less than that, namely, only four per cent. Here also, admittedly there was advertisement by the respondent No. 2 (manufacturer), highlighting the use of Boroline as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Lucky Bakery v. Commercial Tax Officer, Case No. RN-147(T) of 1990 reported in [1992] 85 STC 159, in which it was held by this Tribunal that issuance of a licence by a different authority was not conclusive in a taxation matter, where the competent quasi-judicial authority arrived at his own decision under the provisions of the particular taxing statute, of course taking into account a licence issued by another competent authority in the relevant statute. Mr. Roy contended that neither the drug licence nor the views of the Central excise authorities in respect of Boroline were conclusive so as to pre-empt a proper exercise of power by the assessing authority under the West Bengal Sales Tax Act, 1954. We cannot but agree with these submissions. 31.. Mr. Roy, learned advocate for the applicants, rightly submitted that the decisions relied on by the learned Tribunal below in paragraph 9 at page 7 of its judgment dated May 2, 1988 should not have been relied on, because precedent cases cannot be mechanically followed without finding out the ratio. He relied on the observation of the Supreme Court in the case of Ambica Quarry Works v. State of Gujarat AIR 1987 SC 1073 at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treated as a drug for the purpose of sales tax over a certain period of time. Relying on the decision in the case of Senior Electric Inspector v. Laxminarayan Chopra AIR 1962 SC 159, Mr. Roy, learned advocate for the applicants, argued that past assessments would not operate either as an estoppel or res judicata in the matter of taxation, since each year's assessment is separate. He also contended that the doctrine of contemporanea expositio does not apply to modern statutes. I agree with Mr. Roy and hold that there is no substance in the contention of Mr. Mukherjee that Boroline cannot be assessed as a cosmetic, merely because it was otherwise assessed for a certain period of time. In paragraph 27 of the main application before us, the Revenue rightly drew support from the case of Murari Brothers, decided by a Division Bench of the Rajasthan High Court, reported in [1981] 48 STC 286. From the above discussion it is clear that the Tribunal below arrived at a wrong conclusion on the basis of certain High Court decisions which has no application whatsoever to the present case. 34.. At the cost of repetition, it may be said that the question before us is whether Boroline as a commod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filled before obtaining a drug licence are of different nature and those conditions have nothing to do with the question whether a particular commodity is actually a drug or not. Since the licence was issued by an authority under a statute, a lot of arguments was made to the effect that Boroline should be treated as a drug on the basis of the licence. But, in my opinion, such licence cannot be taken to be conclusive in the matter of sales tax, nor any real evidence of the fact that Boroline itself is a drug. The provisions of the Drugs and Cosmetics Act, 1940 and the Rules thereunder as well as the therapeutic value and ancillary issues have been dealt with by the Commercial Tax Officer, the Appellate Assistant Commissioner and also to a certain extent by the learned Tribunal below. Therefore, in my opinion, this Tribunal was required to undertake a thorough examination of all these issues. We have, however, not upset any finding of fact by the authorities below, nor have we undertaken fresh examination of facts, which are mostly undisputed. Respondent No. 2 company relied on the proceedings of the Public Accounts Committee of the Lok Sabha. What is done in that committee is that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following paragraphs, clarifying my approach to the contentious issue. 40.. This is an application under section 8 of the West Bengal Taxation Tribunal Act, 1987, filed by the sales tax authorities. It is the revisional order of the West Bengal Commercial Taxes Tribunal dated May 2, 1988, in respect of assessment of M/s. G.D. Pharmaceuticals Ltd., for the period of 12 months ending Chaitra 1386 B.S. under the 1954 Act, which is under challenge here. In the said order the said Tribunal held that Boroline, a product of the said company, is a drug or patent or proprietary medicine and taxable at the rate of 4 per cent. The sales tax authorities have challenged this order stating that the product was a cosmetic, taxable at the rate of 15 per cent. 41.. The main question to be decided is whether Boroline is a drug or patent or proprietary medicine under Notification No. 1658 F.T. dated August 1, 1956, or a cosmetic under Notification No. 3123 F.T. dated July 15, 1975. 42.. It is the case of the sales tax authorities that Boroline is a cosmetic and covered by the item "snow and creams of all descriptions and varieties" in Notification No. 3123 F.T. dated July 15, 1975. Accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer to the two notifications mentioned above. In Notification No. 1658 F.T. dated August 1, 1956, "drug" and "patent or proprietary medicine" have been defined in the following manner: "drug" as defined in clause (b) of section 3 of the Drugs and Cosmetics Act, 1940 (23 of 1940), including dicophane (dichloro diphenyl trichloroethane), pyrethrum, benzene hexachloride, dieldrin and other preparations, but excluding condoms (a contraceptive device) and chloroquine phosphate tablets. Patent or proprietary medicine as defined in clause (h) of section 3 of the Drugs and Cosmetics Act, 1940 (23 of 1940). 45. It is to be noted that "drugh" and "patent or proprietary medicine" have been mainly defined by reference to their definitions in the Drugs and Cosmetics Act, 1940. In other words, their definitions in the said Act have been adopted for the purpose of the notification and whatever is a drug or a medicine under the said Act is a drug or medicine under the said notification. The case of cosmetics is, however, different. Though cosmetic is defined in the Drugs and Cosmetics Act, 1940, but that definition was not adopted. Here the notification was self-contained and described cosme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales tax authorities. 49.. The case of South Gujarat Roofing Tiles Manufacturers Association v. State of Gujarat AIR 1977 SC 90 decided by the Supreme Court furnishes an illustration of similar use. Gujarat Government added entry 22 to Part I of the Schedule to the Minimum Wages Act, 1948. The entry refers to "employment in potteries industries" and is followed by an explanation which reads: "For the purpose of this entry potteries industry includes the manufacture of the following articles of pottery, namely(a) crockery, (b) sanitary appliances, (c) refractories, (d) jars, (e) electrical accessories, (f) hospital wares, (g) textile accessories, (h) toys, (i) glazed tiles". Construing the explanation, the Supreme Court held that the items included in it were plainly compressed in the expression potteries industry which showed that the word "includes" was not used to extend the normal meaning of the expression. For the same reason, it was clear that the explanation was not added to indicate by way of abundant caution that the items included in it were comprised in potteries industry. The conclusion was reached that the word "includes" was used in the explanation in the sense of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent Department, which is expected to have expert knowledge in the matter, may be relied on. (State of Orissa v. Dinabandhu Sahu AIR 1976 SC 1561). Drug Controller, Directorate General of Health Services, Government of India, stated in his letter No. L.V. /85/K-DDC(I) dated June 14, 1985, that the Director of Drug Control, West Bengal, has renewed the licence granted on May 5, 1976 to the company for manufacture of drugs from January 1, 1984 to December 31, 1985 and in that it has been mentioned clearly that Boroline is a "drug". The Directorate of Drug Control, West Bengal, in its letter No. DCWB/D-47-83/4576 dated December 7, 1983, to the Commissioner, Commercial Taxes, West Bengal also stated that "Boroline and Boroplus are "drugs" within the meaning as defined under the Drugs and Cosmetics Act, 1940". Moreover, the opinion of the Drug Controller of India as recorded in the 280th Report of the Public Accounts Committee (1983-84), Ministry of Finance (Department of Revenue), presented to Seventh Lok Sabha on April 24, 1984, is reproduced below: "So far as Boroline is concerned, this is a preparation in an ointment form containing 1 per cent boric acid. On its label, an indicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also the necessary organisation to discharge its functions efficiently. No other organisation or authority can possibly claim to have similar infrastructure and expertise in this regard. The decisions or results arrived at by it have to be given due weight and importance in an issue involving whether a commodity is a drug or a patent or proprietary medicine or not under the Drug Act. In fact, the said decisions should be treated as almost conclusive unless those are overturned by any judicial pronouncement or have the taint of collusiveness or there are other compelling reasons to take a different view. Of course it is true that it is for the taxing officers as quasi-judicial authority to decide in this case whether Boroline is a drug in terms of the relevant notification. So far as taxation is concerned, they are the arbiters and it is their satisfaction on a proper application of the mind that counts. But while deciding the issue they cannot but consider the abovementioned factors in their right perspective. This is what we had decided in Lucky Bakery [1992] 85 STC 159. 54.. It is admitted that the pharmaceutical company has been holding a drug manufacturing licence since 1948 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have found the product to be a drug requiring a manufacturing licence. It is open to the licensing authority to reject the application if the product was not a drug in terms of the definition. There is provision for appeal to the State Government by a party whose licence has not been granted or renewed. There is also provision for cancellation of the licence after giving the licencee an opportunity to show cause, if the licencee fails to comply with any of the conditions of the licence or with any provision of the Act or the Rules. 56.. There has been no lack of application of mind on the part of the drug control authorities with regard to the issue whether Boroline is a drug or not. This will be evident from the discussions recorded in 280th Report of the Public Accounts Committee (1983-84) enclosed with the affidavit-inopposition filed by the respondents. It appears that the drug authorities examined the question of Boroline being a drug in all its aspects including the relevant technical details relating to its composition, therapeutic value and efficacy in specific skin disorders. 57.. The case of the applicants is primarily based on the contention that Boroline is neither ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fants, has occurred. Serious poisoning can also result from oral ingestion. It is pertinent to note that the concentration of boric acid in talcs is limited in the U.K. to 5 per cent. Its concentration in Boroline at 1 per cent cannot possibly have any deleterious effect on chapped skin or dry skin disorders. 61.. There is no doubt that because of its composition Boroline has mild anti-septic properties, i.e., it can counter sepsis to some extent by destroying or inhibiting growth of pathogenic organism on living tissues. An anti-septic is obviously a drug and this has also been confirmed by the Drug Controller (India). Boroline has, therefore, more of the properties of a drug than that of a cosmetic. 62.. To decide whether a particular substance is a drug one has to examine its composition, its end-use and efficacy in diagnosing, treating, preventing or mitigating a particular disease or disorder according to its claim. The composition of Boroline indicates that it has mild anti-septic protective and astringent properties because of the existence of boric acid and zinc oxide. The efficacy of a substance in this regard has to be judged by the ingredients composing it. Substance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntentions. Civil Rule No. 651(w) of 1969 (Company v. Director of Drugs Control, West Bengal) of the Calcutta High Court was cited by the respondents. This case was against the refusal of the Drug Controller to renew the drug licence in respect of manufacture of Boroline. It was the admitted case of both the parties that if it was a drug, rule 71 would apply. It was decided in the said case that the renewal of licence under the Drugs and Cosmetics Act was more or less a routine matter and if an applicant satisfies the conditions laid down in rule 71, the licensing authority has no option but to renew the same. On the facts before the court, it did not consider it necessary to decide whether Boroline comes within the definitions of "drug" or "cosmetic" or "patent or proprietary medicine". The learned Judge negatived the contention that the conditions of renewal of licence were violated on the ground that the petitioner advertised Boroline as a cosmetic. He observed that whether the particular product is a drug or cosmetic or patent or proprietary medicine is to be decided by the competent authority on the basis of the definition given in the Act itself and the petitioner's saying tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conviction. 70.. It was contended by the learned advocate for applicant that this was a criminal matter and the decision in the said case should not be relied on by a writ court, as the issue whether Boroline was a drug or not was not considered in all its aspects by the said court. The well-settled principle of law that the decisions of the civil courts are binding on the criminal courts and that the converse is not true is to be understood in its proper perspective and context. Since the crucial issue in that case was whether Boroline was a drug and as that issue was decided by the highest court of a State after considering relevant issues and materials, the decision certainly has value as a persuasive precedent. 71.. It may be pertinent to note that this decision of the Allahabad High Court was followed by a single Bench of the Calcutta High Court in Civil Order No. 14000(W) of 1985. There the decision of the Superintendent, Central Excise, Calcutta to the effect that Boroline be classified for the purpose of excise duty as cosmetics and toilet preparation under tariff 14-F(1) was under challenge. The learned Judge accepted the decision of the Allahabad High Court and, allo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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