Classification of Boro Soft cream- whether cosmetic or medicament?

PJ/CASE LAW/2015-16/2688

Case:- PARAS PHARMACEUTICALS LTD.VERSUSCOMMR. OF TRADE TAX, LUCKNOW

Citation:- 2015 (315) E.L.T. 199 (All.)

Brief facts:-This trade tax revision under Section 11 of U.P. Trade Tax Act arose out of order of Trade Tax Tribunal, dated 2-1-2007 by which the second appeal Nos. 941 of 2003 for the assessment year 1998-99; 193 of 2003 for the assessment year 1999-2000 and 593 of 2003 for the assessment year 2000-01, were allowed with the findings that ‘Boro Soft’ cream manufactured by the assessee at Gujarat and sold in Uttar Pradesh after receiving by stock transfer was to be taxed under the entry ‘All Kinds of Cosmetics’ at 15% and not as ‘Ayurvedic Medicine’ at 8%.
The assessing authority on remand found that ‘Boro Soft’ was a cosmetic and will fall within the entry of ‘All Kinds of Cosmetics and preparation’ under notification, dated 7-9-1991. The Joint Commissioner (Appeals), however, found that ‘Boro Soft’ was used as medicine and that the Joint Commissioner (Drugs) Foods and Drugs Control Administration Gujarat had certified that the ‘Boro Soft’ cream is an ayurvedic drug. The Tribunal allowed the second appeals filed by the department.
In fact, the matter was squarely covered by judgment of this Court in M/s. Balaji Agencies, Gorakhpur v. Commissioner of Sales Tax - 1994 U.P.T.C. 1984 in which it was held in para 6 as follows :-
“6. Every cosmetic usually has some medicinal properties for the care of the skin, teeth, hair etc. and simply because they have some medicinal properties, they cannot be treated as medicines. Whether a thing is cosmetic or medicine has to depend on its general use and such creams are generally used for skin care and not for treatment of any disease of skin. I, therefore, do not find any force in the contention that the Tribunal, was in error in holding these items to be cosmetics.”

Appellant’s contention:-It was submitted by the appellant that “Boro Soft” Ayurvedic Antiseptic Cream was manufactured under the Mfg. Licence No. GA/551, dated 11-12-1996 and was certified as an ‘Ayurvedic Product’ by the Joint Commission (Drugs), Food & Drugs Control Administration. The Certificate of Registration of Trade Marks registers ‘Boro Soft’ as Antiseptic Cream for Soft Smooth Skin and it was used for treatment of chapped skin, cuts, wounds, minor bums, and dry skin diseases. The wrapper gives the composition as cream as follows : -
“Composition : each 100 g contains

Aloe Vera Ex	-	AB 1.00
Tankan Amla	-	AB 1.50
Sasai Bhasma	-	AB 1.80
Cocobutter	-	1.00
Surasar (Alcohol)	-	70
Cream Base	-	.05”

The wrapper further declared that the cream was an ayurvedic medicine for external use only. Learned counsel for the applicant had relied upon judgments in Commissioner of Central Excise v. Sharma Chemical Works - 2004 NTN (Vol. 24) 28 (S.C.) = 2003 (154)E.L.T.328 (S.C.); Union of India v. G.D. Pharmaceutical Ltd. - 118 STC 19 (S.C.) = 1999 (108) E.L.T. A56 (S.C.),and a judgment of Madhya Pradesh High Court in Commissioner of Commercial Taxes, M.P. v. Dawar Brothers, Indore - 1998 UPTC 1211 in support of his submission.
The learned counsel for the appellant had argued that the products of the appellant satisfy both the tests and, therefore, the CEGAT was wrong in classifying them under Chapter 33 as cosmetics. According to the learned counsel the products in question had a special use. They were not items of common use. Only those who want to treat a particular ailment will go for the particular product of the appellant. The use of a product by the customers i.e. how the consumers take to a product was a very useful method of determining the classification of products. What was to be seen is whether the products were likely to be in common use by normal consumers. Common parlance meaning and understanding was a strong factor in the determination of classification of products. Once need not resort to scientific or technical meaning of the terms used.
So far as the other test was concerned, the learned counsel for the appellant has placed on record material from the Ayurvedic texts or pharmacopoeia in support of each product which was subject-manner of the present appeal to show that the ingredients of each product were independently mentioned in the Ayurvedic texts. The ingredients were natural Ayurvedic product like shrubs, herbs, leaves, fruits, nuts, flowers, wood and bark of particular trees. In support of his contention the learned counsel for the appellant placed before the departmental authorities lot of material in the shape of certificates and letters from documents. Ayurvedic practitioners, experts and above all from the users of the products in question.”
The assessee had produced (a) the licence to manufacture Boro Soft; (b) certificate of Joint Commissioner, (Drugs) Food & Drugs Control Administration; (c) the registration of the trade mark under the Trade Marks Act 1999; (d) the certificate given by Superintendent, Prohibition and Excise Mehsana and (e) some letters given by Stockists and Distributors that ‘Boro Soft’ cream is used for dry skin, cuts skin etc. before the assessing authority to establish that ‘Boro Soft’ cream was an ayurvedic medicine and was used by consumers as medicine to fall in the entry.

Respondent’s contention:- Shri B.K. Pandey, learned standing counsel for the department, however, had relied upon Puma Ayurvedic Herbal (P) Ltd. v. Commissioner of C. Ex., Nagpur - 2006 (196)E.L.T.3 (S.C.)in which the twin determination tests were reiterated to find out, whether the item was medicament or cosmetic product. These twin tests laid down in Collector v. Richardson Hindustan Ltd. - 2004 (9) SCC 156 provide :-
“I. Whether the item is commonly understood as a medicament which is called the common parlance test. For this test it will have to be seen whether in common parlance the item is accepted as a medicament. If a product falls in the category of medicament it will not be an item of common use. A user will use it only for treating a particular ailment and will stop its use after the ailment is cured. The approach of the consumer towards the product is very material? One may buy any of the ordinary soaps available in the market. But if one has a skin problem, he may have to buy a medicated soap. Such a soap will not be an ordinary cosmetic. It will be medicament falling in Chapter 30 of the Tariff Act.
II. Are the ingredients used in the product mentioned in the authoritative text books on Ayurveda?
The two tests were recognised even by the Central Board of Excise and Customs and the Board had vide its letters dated 3rd October, 1991 and 5th December, 1991 directed the Assistant Collector to decide the classification of the products in question by applying the aforesaid two tests.

Reasoning of judgment:-After going through the submissions and judgments cited at the bar it was held that the twin tests of determination of the product were conclusive in the matter. The cosmetic under (The) Drugs Cosmetic Act, 1940 is defined as follows : -
“A ‘cosmetic’ means any article intended to be rubbed, poured, sprinkled or sprayed on, or introduced into, or otherwise applied to, the human body or any part thereof, for cleansing, beautifying, promoting attractiveness, or altering the appearance, and includes any article intended for use as a component of cosmetic.”
In Puma Ayurvedic Herbal (Pvt.) Ltd., the Supreme Court held that in order to find out whether the item is a medicament, it is not necessary that the item may be sold only under the doctor’s prescription. A medicinal preparation may be purchased across the counter. The common parlance test however had to be applied along with the other test namely, whether the ingredients used in the product are mentioned in the authoritative text books of Ayurveda.
The presence of organic ingredient mentioned in the wrapper by itself will not make a cosmetic as an ayurvedic medicine. Every cosmetic has some or other medicinal value and that by itself do not convert every cosmetic into a medicine. The assessee had not produced any authority or text book to show that the ingredients of the cream manufactured by them have any medicinal value; it was prescribed as medicine and that its use was limited to the cure of the ailments claimed to be cured by it.
He did not find that the Tribunal has erred in law in recording finding that ‘Boro Soft’ cream was not a medicinal preparation. It did not certify either of the tests. There was no material on record to show that ‘Boro Soft’ was purchased and used as an ayurvedic medicine. The certificates given by the Joint Commissioner (Drugs), Food and Drugs Controller Administration were based on the ingredients of the cream as indicated on the wrapper and not of its use. The opinion of the Joint Commissioner of Drugs was not supported by any authoritative text books on ayurvedic medicines.
The revision was accordingly dismissed.

Decision:-Appeal dismissed.

Comment:- The gist of this case is that every cosmetic has some or the other medicinal value and that by itself does not convert every cosmetic into a medicine. The presence of organic ingredient mentioned in the wrapper by itself will not make a cosmetic as an ayurvedic medicine. Accordingly, it was concluded that the boro soft cream will be more appropriately classifiable as cosmetic rather than medicament.

Prepared by:- Prayushi Jain

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PJ/CASE LAW/2015-16/2688

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