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TMI Blog1998 (2) TMI 564X X X X Extracts X X X X X X X X Extracts X X X X ..... cture of homoeopathic medicines and such application was approved by the Director of Drugs Control, West Bengal. Homoeopathic medicine manufacturing licence No. HL-534M was granted by the Director of Drugs Control, West Bengal, on August 14, 1984 under rule 85(B) of the Drugs and Cosmetics Rules, 1945, after he was satisfied about the medicinal and homoeopathic property as well as efficacy of the said products within the meaning of the words "homoeopathic medicine" as given in rule 2(dd) of the Drugs and Cosmetics Rules, 1945. 3.. The applicant-company was granted certificate of registration under the West Bengal Sales Tax Act, 1954 by the prescribed authority on April 23, 1986. The applicant-company was also granted eligibility certificate under Notification No. 1177-F.T. dated March 31, 1983 on April 30, 1988 for the period from December 19, 1985 to August 7, 1988 for manufacturing "homoeopathic medicine" and "bio-chemic medicine". Assessment for the period of validity of the E.C. was made according to that eligibility certificate allowing complete exemption. For the periods from August 8, 1988 to March 31, 1992, the applicant-company's assessment was completed in accordance w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch 31, 1983, no occasion arose for determination of the class or character of Arnika plus hair vitalizer or Arnika plus hair oil. In their returns for the month ended December 31, 1988 the applicants disclosed also the turnover of sales of goods taxable at higher rate in addition to sales of homoeopathic medicines taxable at 4 per cent. The turnover of sales of goods up to August 7, 1988 was exempt from sales tax in terms of the notification and the eligibility certificate issued thereunder with validity up to August 7, 1988. The turnover of the applicants for the period from August 8, 1988 to December 31, 1988 comprised sales of homoeopathic medicines liable to tax at 4 per cent and the sales of goods other than homoeopathic medicines of Rs. 81,050 liable to tax at 15 per cent. The assessment of tax for the periods (i) from January 1, 1989 to March 31, 1989 and (ii) from April 1, 1989 to March 31, 1992 were deemed to have been made under section 9A of the 1954 Act as per returns furnished by the applicants. It is denied that it was for the first time for the period of 12 months ended March 31, 1993 that homoeopathic medicines were assessed to tax as cosmetics. In their appeal befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chedule to the Constitution of India. It is also submitted that provisions of the Drugs and Cosmetics Act, 1940 are not in conflict with the legislation made by the West Bengal State Legislature for the purpose of levy of sales tax. Triofer which is claimed to be a homoeopathic medicine loses its individual existence as separate items of goods when sold together with Arnika plus hair vitalizer and Arnika plus hair oil because supply of Triofer is for boosting the sale of Arnika plus hair vitalizer and hair oil. The mere supply of Triofer tablets with Arnika plus hair vitalizer free of cost does not change the character of Arnika plus hair vitalizer and Arnika plus hair oil from cosmetics to drugs. In view of the facts and circumstances recorded in the assessment order after hearing the applicant, it was concluded that Arnika plus hair vitalizer and Arnika plus hair oil with Triofer tablets were cosmetics as specified in serial No. 21 of Notification No. 3123-F.T. dated July 15, 1975. Accordingly, the assessment order for the period of 12 months ending on the last day of March, 1993 was made and this was confirmed by the appellate order dated October 12, 1995. 6.. The various requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was a homoeopathic medicine manufacturing licence and not a licence for manufacture of cosmetics. He further submitted that not only was a homoeopathic medicine licence issued to the applicant-company but the productions took place in the factory of the company in strict conformity with the provisions of the Drugs and Cosmetics Act, 1940 and the Drugs and Cosmetics Rules, 1945. He mentioned that the Drugs and Cosmetics Act lays down stringent standards of quality. In this connection, he referred to item 4-A of Schedule II to the Drugs and Cosmetics Act, 1940 where the standards to be complied with by homoeopathic medicines have been indicated. In the case of drugs not included in the Homoeopathic Pharmacopoeia of India or the United States of America or the United Kingdom or the German Homoeopathic Pharmacopoeia the standard to be complied with shows that the formula or list of ingredients is to be displayed in the prescribed manner on the label of the container. In the case of Arnika plus hair vitalizer as well as in the case of Triofer tablets such list of ingredients has been displayed on the label of the container. He also referred to the definition of homoeopathic medicine con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w as the registration certificate granted to the applicantcompany merely shows that the business of the company consists of manufacturing/ processing homoeopathic medicines, bio-chemic medicines. Similarly, the certificate of eligibility granted to the company shows that the industrial unit was set up to manufacture homoeopathic medicine, bio-chemic medicine. When the R.C. and E.C. categorically mention homoeopathic medicines as being covered by them, the question of individual homoeopathic medicines being mentioned by name in the R.C. or E.C. does not arise. The Board, Mr. Ghosh argued, has come to the conclusion that these two items are advertised as a cosmetic. The Board has held that in the advertisements by the applicant in T.V., newspapers and journals emphasis has been given to the fact that it nurses the hair, helps the growth of the hair and has a cosmetic value. Therefore, the Board held, the predominant object of the products in question is to act as hair tonic, hair conditioner and hair lotion and its medicinal quality, if there be any, is a secondary factor. It is not clear, Mr. Ghosh submitted, where the Board got such information from. No such evidence was laid eithe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner of Sales Tax v. Western India Chemical Co. [1985] 59 STC 313. The Bombay High Court held in that case that "it is not for us to judge the scientific validity of the claim being made in respect of this Kajal. We are only concerned with the reasons for which this particular variety of Kajal is said to be used by the public. From the material on record it would seem that this particular variety of Kajal is predominantly used for its alleged therapeutic qualities rather than for its cosmetic effect". He also referred to the judgment of the Gujarat High Court in the case of B. Shah & Co., Surat v. State of Gujarat [1971] 28 STC 5 where it was held the Nycil medicated powder, with its special qualities and attributes, its character and composition and its recommended or intended use as advertised by the manufacturers is a medicine. Mr. Ghosh also referred to the judgment in the case of Transelektra Domestic Products Limited v. Inspector of Commercial Taxes, Bhowanipore Charge [1992] 86 STC 497 (WBTT) where this Tribunal has held that in trade circles mosquito mats are understood as an insecticide in view of the existence of the label on the package "d-Allethrin 4 per cent mosqui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isease or disorder in human beings or animals, including preparations applied on human body for the purpose of repelling insects like mosquitoes. Therefore, "drug" includes all medicines for internal and external use of human beings or animals. The other limbs of section 3(b), i.e., 3(b)(ii), 3(b)(iii) and 3(b)(iv) obviously do not apply to the articles in question. Hence, according to Mr. Mitra, we have to examine whether they fall under the definition of "drug" as given in section 3(b), in particular, section 3(b)(i). The word "medicine" has not been defined in the statute and hence we have to take into account the common parlance meaning of the word and also look for clues to the correct meaning of the term in other portions of the Act and Rules. The applicant has claimed that the articles in dispute are homoeopathic medicines which have been defined in rule 2(dd) of the Drugs and Cosmetics Rules, 1945. It would be seen from that definition that homoeopathic medicines include any drug which is recorded in homoeopathic provings or the therapeutic efficacy of which has been established through long clinical experience as recorded in authoritative Homoeopathic Literature of India a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on human beings or animals which after being prepared according to the principle and techniques peculiar to homoeopathic pharmacy are administered to a sick person according to the law of similars. It would, therefore, be seen that in order to qualify as homoeopathic medicines, substances must have curative property and such curative property should be subject to provings. In the instant case, it is admitted that Arnika plus and Triofer are not items mentioned in any authoritative Homoeopathic literature. If it is argued that it is merely a brand name for a combination of homoeopathic medicines, the situation does not improve. The therapeutic efficacy of the combination also is to be established according to the methods of homoeopathic provings. Mr. Mitra argued that if a contrary view is held the whole objective of the Act would be negated because the object and reason of the Act is to control manufacture of drugs and to prevent manufacture and sale of adulterated or spurious drugs. Mr. Mitra further argued that the substances manufactured by the applicant allegedly prevent falling of hair. It is to be considered whether falling of hair is a disease or disorder which needs to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at all produced before the Drugs Controller. Under the circumstances, Mr. Mitra argued, there is no way in which the items in question, i.e., Arnika plus hair vitalizer and Triofer could be considered to be homoeopathic medicine in terms of section 3(b)(i) of the Drugs and Cosmetics Act, 1940. Mr. Mitra distinguished the Kajal case [1985] 59 STC 313 (Bom.) (Commissioner of Sales Tax v. Western India Chemical Co.) and stated that the point under examination in that case was completely different from the point being examined in this case. In that case the question that was posed before the court is whether Jay Kajal can be treated as a cosmetic falling under entry No. 19 of Schedule E. If not, it was the accepted position that it would fall under the residuary entry No. 22 of Schedule E. In fact, the High Court categorically held in that case that they were not examining whether Jay Kajal was a medicine. The relevant part of the judgment is at page 314 and is as follows: "There are of course, a number of cosmetics which are advertised as possessing almost magical qualities of transforming an ugly duckling into a swan. But whether they can therefore be classified as 'medicines' is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (dd) is exhaustive and the word "includes" should be read as "means". He cited the case of South Gujarat Roofing Tiles Manufacturers Association v. State of Gujarat AIR 1977 SC 90. He also referred to the observation of the Supreme Court in Seventilal Maneklal Sheth v. Commissioner of Income-tax (Central) Bombay AIR 1968 SC 697 where it was held that a statute should be interpreted to preserve the object/purpose of the Act to advance the remedy or to prevent the mischief for which the statute was enacted. In the instant case the Act and the Rules seek to prevent the public being exposed to ineffective or injurious substances and to prevent such mischief various provisions have been prescribed in the Drugs and Cosmetics Rules. Rule 2(dd), rule 30AA, rule 85C and Schedule Y relating to new drugs are different provisions and standards prescribed by the Drugs and Cosmetics Rules, 1945 for determining the character of a drug under the Drugs and Cosmetics Act. It would not be correct to hold that a mere claim by the manufacturer that something manufactured and sold by him is a drug will bring the article under the definition of drug. 13.. In his arguments-in-reply Mr. Ghosh, learned adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the intention of the manufacturer is enough and whether the product is effective or not is not relevant. If the claim is false or misleading then adequate punishment is provided under section 27. Similarly, section 26A provides for prohibition of manufacture of any drug if use of such drug or cosmetic is likely to involve any risk to human being or animals or if any drug does not have the therapeutic value claimed or purported to be claimed for it. The scheme of the Act also does not provide for any test that the drug has therapeutic value before giving licence. He also submitted that Keokarpin hair vitalizer has been treated as a drug as would be clear from a perusal of the Commodity Digest. The case of Selsun shampoo [1997] 104 STC 164 (SC) (B.P.L. Pharmaceuticals Ltd. v. Collector of Central Excise, Vadodara) was cited by Mr. Ghosh on the point that intention of the manufacturer should be the determining factor in deciding upon the status of an item. Mr. Ghosh also stated that the claim by the applicant is that Arnika plus hair vitalizer is effective in preventing premature baldness or premature grey hairs or dandruff. He submitted that while baldness can be a genetic condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quasi judicial function and each year's assessment is a separate quasi judicial proceeding. The assessing authority is not bound by his predecessors' decision and may come to a finding which is different from the decisions arrived at on earlier occasions. But, irrespective of the earlier decisions, he has to record his reasons clearly so that the basis of his determination is clearly spelt out. In the instant case such reasons have been given by the assessing officer in his order of assessment for the period of 12 months ending on March 31, 1993. Whether such reasons are valid or not is the subject-matter of this application but it cannot be said that reasons have not been given by the assessing officer or that he should have merely followed the previous orders of assessment. 16.. The Board in its revisional judgment has referred to the properties of the preparations in question and has observed that from the indications given on the carton, it appears that the preparation in question is meant for hair growth and hair vitalizer. The Board has observed that the products in question are easily available in the market and even in a grocer's shop. It can be purchased without any presc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e laid no evidence. The Tribunal held that the samples of the rings which were shown to the Tribunal were neither elementary nor crude but fully manufactured, that they were neither brittle nor fragile. The Supreme Court held in that case that "as to the brittleness of the said rings, it was for the Revenue to demonstrate that the appellants' averment in this behalf was incorrect and not for the Tribunal to assess their brittleness for itself. The articles in question in the appeal were shown to the Tribunal to enable the Tribunal to comprehend what they were dealing with. It was not an invitation to the Tribunal to give its opinion thereon, brushing aside the evidence before it. The technical knowledge of the Members of the Tribunal made for better appreciation of the record, but not its substitution". It will be clear that in that case there were important technical points for examination and there were affidavits filed on behalf of the appellants while the Revenue had not laid any evidence whatsoever. The members of the Tribunal had given their own opinion on the technical issues involved. It is in this context that the Supreme Court had held that the technical knowledge of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an beings intended to be used in the diagnosis, treatment, mitigation or prevention of any disorder or disease in human beings. Mr. Ghosh has argued that if the articles are intended to be used for or in the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings, they will come under the definition of "drug". He has also argued that the applicant has always claimed that the items sold by them have such medicinal properties. He has also argued that the question of efficacy of the items in curing or ameliorating the disease is not really relevant as far as the commercial tax authorities are concerned. The decisive point for consideration, according to him, is the claim which has been made in respect of the commodities by the manufacturer. If the claims show that the products are expected to be used in the diagnosis, treatment or prevention of any disease then they are to be considered to be drugs for the purpose of taxation. In case, the effectiveness of the items as drugs is non-existent, it may invite action from the Drugs Controller under the Drugs and Cosmetics Act but the commercial tax authorities cannot take such facts into consideration. 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .5 per cent and anything in excess was likely to harm or result in adverse effect. As selenium sulphide was present in the product in the permitted therapeutic quantity, it could not be held that this constituent was a subsidiary one, and the medicinal properties of the product were clearly established. It would be seen from this judgment that in considering whether Selsun shampoo was a "drug" or not, the presence of the active ingredient in therapeutic quantity was considered to be a determining factor. In the case of Espi Industries and Chemicals Pvt. Ltd. (1994) Supp 3 SCC 210 it was held that oil of Olay was a barrier cream which according to the extra pharmacopoeia was applied to prevent damage to the skin by mechanical, chemical or bacteriological action. It was held that although it was described in advertisement as a beauty cream that did not necessarily exclude it from being a barrier cream. From this judgment also it is clear that it is not only the question of the claim made by an advertiser; the substance was held to be a barrier cream because it had the property of a barrier cream. 19.. The substances manufactured by the applicant are claimed to be homoeopathic medici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and other evidences as may be required by the licensing authority for assessing the therapeutic efficacy of the medicine including the minimum provings carried out with it. It is obvious that the products manufactured by the applicant are not medicines which are referred to in authoritative homoeopathic literature of this country or other countries. It can be considered to be a new homoeopathic medicine invented by the applicant but in such case there must be categorical evidence to show that its therapeutic efficacy has been established. Unfortunately, in the instant case, there is no such evidence. 21.. The Director, Drugs Control, West Bengal, was directed to produce the applications submitted by the applicant for the grant of licence to manufacture homoeopathic medicines and all connected papers. On going through the same it is found that the licence was not issued after considering the therapeutic efficacy of the product items in any way. The licensing authority did not ask for any data to establish the therapeutic efficacy of the products sought to be manufactured and the applicant also did not mention at any stage that these items are new homoeopathic medicines whose therap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es are understood and treated in the market. In the present case we do not find any reason to interfere with the Board's findings of fact. 23.. The applicant in a supplementary affidavit has submitted a number of affidavits from the dealers selling homoeopathic medicines under proper drug licences and some opinions and affidavits from medical practitioners who have been prescribing these products as medicines for their patients. These opinions were obtained in the year 1997, i.e., during the pendency of the litigation before us. Under the circumstances, their credibility is not beyond doubt. The affidavits of the different dealers also were affirmed during the same period, viz., July, 1997 and their credibility also is not beyond doubt. A bunch of allegedly unsolicited letters from different customers have been enclosed. These tend to show that the patients have been benefited by using Arnika plus and Triofer. The period over which such letters have been received ranged from 1990 to 1996. It is interesting to note that in the case of some of the letters, replies have been sent by a public relation assistant of the applicant's firm who has suggested to them that they might continu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y affidavit. On going through Dr. Chakraborty's opinion, we find that the applicant Dr. G.P. Sarkar requested him to give his opinion whether his company's products, Arnika plus hair vitalizer or Triofer tablet, are homoeopathic medicines or cosmetics. Dr. Chakraborty has categorically stated that he did not want to place his opinion in this case but he has mentioned that both in India as well as in U.S.A. the Government opinion is in favour of accepting of combinations of homoeopathic drugs as homoeopathic medicine and not cosmetic. In this Dr. Chakraborty has really reiterated whatever has been stated in rule 2(dd) of the Drugs and Cosmetics Rules, 1945 but the significant point in this opinion is that apart from the general statement, Dr. Chakraborty has not been willing to place his own opinion on whether Arnika plus hair vitalizer or Triofer tablet are homoeopathic medicines or cosmetics. Such unwillingness on his part to certify these two items as homoeopathic medicines (although this was requested by the applicant Dr. G.P. Sarkar specifically as per the certificate) clearly indicates that while Dr. Chakraborty was of the opinion that combinations of homoeopathic drugs can be ..... 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