The Allahabad High Court has upheld the finding of the Commercial Tax Tribunal, Lucknow that Boro Plus Ayurvedic Cream is a “medicinal ointment” and not an “antiseptic cream”. Boro Plus Ayurvedic Cream was found to be taxed at the rate of 5% under Entry 41 of the Uttar Pradesh Value Added Tax Act, 2008.
Entry 41 heading “Narcotics and medicines” entered into force on October 11, 2012 excludes medicated soap, shampoo, antiseptic cream, face cream, massage cream, eye gel and hair oil, but contains vaccines, syringes and dressings, medicinal ointments, IP-class light liquid paraffin; Chooran; sugar pills for medical use in homeopathy; human blood components; CAPD fluid; Cyclosporine.
Justice Shekhar B. Saraf found that “although antiseptic creams are omitted from entry 41, medicated ointments are included because of the use of the word “but”. The word “but” clearly indicates that the legislature intended to cover medicated ointments as an exception, although certain medicated ointments may be classified under antiseptic creams. If the product is more than just an antiseptic cream and qualifies as a medicated ointment, entry 41 is added.
Case background and arguments
The Assessing Authority assessed Boroplus Antiseptic Cream (BPAC) at the rate of 14%, classifying it as unclassified goods. Defendant M/s Emami Ltd. filed an appeal against the order of the assessing authority which was dismissed. An appeal was then filed with the Commercial Tax Tribunal where it was held that Boroplus Antiseptic Cream is a ‘medicinal ointment’ and is subject to 5% tax under Entry II 41 ‘drugs and medicines’.
Challenging the tribunal’s order, the department argued that BPAC has been recognized as a cosmetic product for a very long time and was valued accordingly. However, the court had previously considered it a remedy. It was noted that since antiseptic cream was omitted from entry 11 of list II of entry 41 “medicines and drugs”th October 2012, BPAC is taxable as an unclassified item.
It was submitted that although the respondent tries to rate the product as a medicated ointment, it advertises BPAC as “India’s number one antiseptic cream.” Counsel for the department argued that BPAC was purchased without a prescription, while medicated ointments required a doctor’s prescription. Accordingly, it was contended that BPAC is an antiseptic cream liable to be taxed at 14% as ‘unclassified goods’.
Defendant-M/s Emami Ltd. counsel submitted that BPAC is an Ayurvedic medicinal ointment issued by the Drug Licensing Authority under the provisions of the Drugs and Cosmetics Act, 1940 and the Drugs Rules, 1945. that the entry changed on the 11thth October 2012 did not contain an antiseptic cream, but did contain a medicated ointment that is BPAC.
Decision of the Supreme Court
The court found that entry 41 classifies products based on their medicinal properties and uses and provides tax incentives for products with medicinal properties. It was thought that the word
The word “but” in the Entry has been deliberately used to include entries that were not previously included in the Entry.
“But” in entry 41 parallels terms such as “expect,” “nevertheless,” and “however,” which indicate an exception to the preceding one from the list of exceptions..”
The Court held that the Tribunal had correctly held that BPAC is a ‘medicinal ointment’ because the legislature had specifically chosen to include ‘medicinal ointments’ under entry 41. The addition of medicated soaps, shampoos, face creams and massage creams were all found to be cosmetic products under heading 41, which clearly shows the exclusion of antiseptic creams from heading 41.
The court noted that although the tribunal’s technical consultant labeled BPAC as an antiseptic cream, a close examination of BPAC’s ingredients revealed that it has more properties than just an antiseptic cream and is more closely related to the properties of a medicinal substance. ointment.
“BPAC’s ability to soothe, heal and protect the skin from various ailments indicates that its composition is intended for more than just antiseptic purposes. By moisturizing, reducing inflammation and promoting healing, BPAC works similar to medicated salves to address chronic skin problems and overall skin health..”
The court took the view that the relevant person had clearly proved before the Public Service Court that BPAC is a medicine cabinet and falls under entry 41 in terms of taxation. It was held that the onus was on the Department to refute the claim of the Assessee, which it had failed to discharge. It was held that the department did not produce any material contrary to the material produced by the assessee to show that BPAC is an ‘antiseptic cream’ and has been excluded from entry 41.
The court held that when a department seeks reclassification of goods, it must present specific evidence, including expert opinions, industry standards, etc., to justify the reclassification. It was held that because the department failed to provide evidence, the reclassification was bad in law.
Noting that the Tribunal is the final fact-finding authority and the High Court’s interference with post-revisional jurisdiction is limited, Justice Saraf upheld the Tribunal’s order classifying Boro Plus Antiseptic Cream as Medicinal Ointment II. Uttar Pradesh Value Added Tax Act, 2008.
Case Title: Commissioner of Commercial Tax V. M/S Emami Ltd. 2024 LiveLaw (AB) 523 [SALES/TRADE TAX REVISION No. – 274 of 2018]
Quote: 2024 LiveLaw (AB) 523
Revisionist advisor: Manish Goyal, Additional Solicitor General assisted by Bipin Kumar Pandey
Counsel for the assessee: SK Bagaria, Senior Advocate assisted by Kumar Ajit Singh and Rahul Agarwal
Click here to read/download the order
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