WP(C) 3500/2008 BEFORE HON’BLE MR. JUSTICE K. SREEDHAR RAO, THE CHIEF JUSTICE (ACTNG.) AND HON’BLE MR. JUSTICE P. K. SAIKIA 1. Since all these proceedings involve common question of law and facts, we propose to dispose of all these proceedings by a common order. 2. We have heard Dr. A. K. Saraf, learned Senior counsel, assisted by Mr. R .L. Yadav learned counsel for the petitioners and also heard Mr. M. Nath, learne d Standing counsel for the respondents. 3. The facts in WP(C) No. 3023/2008, in short, are that petitioner herein, namely Emami Ltd., is a company incorporated under the provisions of Companies A ct 1956 (herein after referred to as petitioner No. 1) and filed the aforesaid p roceeding questioning the order No. CTS- 78/ 2007/137 passed by the Commissioner of Taxes on 31.05.2008 whereby goods, mentioned therein were classified as cosm etics and toilet preparations treating such goods to be goods , not covered unde r the Entry 21 of the 4th schedule to the Assam Value Added Tax 2003 (in short, the said Act or the Act of 2003) further holding such goods are liable to be t axed at the rate of 12.5% in terms of Entry 1 of 5th schedule of the said Act . 4. Being aggrieved by such classification, the petitioner had approached th is court by way of WP(C) No. 3023/2008 contending that the articles, so mentione d in the impugned order ,being Ayurbedic medicines, fall within the purview of Entry 21 of 4th schedule of the Act of 2003 and as such, they were to be classif ied as drugs and medicines and therefore , taxes on such goods are to be colle cted @ 4% at first point of sale. 5. In support of such contention, it has been contended that said goods are primarily used as drugs and medicines for preventive and curative purposes. It h as also been stated that in common parlance too, such goods are treated as drugs and medicines. When goods are basically used medicines and when in common parla nce too, such goods are treated as medicines and drugs , the Entry 1 of 5th sche dule of the said Act cannot be made applicable to those goods to collect tax on such goods at the rate of 12.5 as held by respondent No. 2 in the impugned orde r. 6. It is also the case of the petitioner that the explanation to the Entry 21 of the 4th schedule of the Act is designed to exclude goods which are drugs a nd medicines having characteristics and ingredients of cosmetics and toilet prep arations and are also capable of being used as cosmetics and toilet preparations . But then, said explanation did not exclude goods which are basically drugs and medicines inasmuch as the Entry 21 of the 4th schedule to the Act of 2003 itsel f relates to drugs and medicines. 7. In that connection, it has been argued that only for some drugs and medi cines capable of being as cosmetics and toilet preparations , it cannot be concl uded that such products cease to become Drugs and Medicines as contemplated unde r the law since decisive test is what is main use of such products. According to Dr. Saraf, learned senior counsel, the aforesaid articles are basically used for medicinal purpose. 8. In support of such contention, the decision of Puma Ayurvedic Herbal (P ) Ltd., Vs. Commissioner of Central Excise, Nagpur reported in (2006) 3 SCC 266 as well as the decision of V.C. Ramalingam and Sons and Another Vs. State of Tam il Nadu and Others reported in (2002) 127 STC 382 (MAD) were relied on . 9. It has also been contended that percentage of medicinal components in su ch drugs and medicines is immaterial. The fact that percentage of medicament in a product is less does not ipso facto mean that the product is not medicament. I n support of such contention, the decision of Apex Court in the case of Commissi oner of Central Excise, Calcutta Vs. Sharma Chemical Works reported in (2003) 5 SCC 60 is relied on. 10. On the other hand, Mr. M. Nath, learned Standing counsel for the Tax Dep artment/ State respondent submits that by applying two tests, recognised under t he law, namely, users test and common parlance test to the items in the impugned order one would find that the goods in question are not drugs and medicines as contemplated under the law. The fact that those articles are capable of being us ed as cosmetics and toilet preparations, make such a conclusion inevitable. In s upport of such contention, the decisions in C.C.E. vs. Richardson Hindustan Ltd. , (2004) 9 SCC 156 is relied on. Therefore, the claim of the petitioner No. 1 th at tax on the items in question are to be collected @ 4% is found to be without any substance ----argues Standing counsel for the Tax Department. 11. In WP(C) No. 3599/2008, the petitioners are GD Pharmaceuticals Pvt. Ltd ., and its Director, Sri Ambika Prassanna Basu (herein after collectively referr ed to as the Petitioner No. 2) had questioned the order No. CTS 78/2007/147 pass ed by the Commissioner of Tax on 03.07.2008 whereby product ’Boroline’ manufactu red by petitioners company had been classified as cosmetic failing outside the s cope of Entry 21 of the 4th schedule of the Act of 2003 and is, therefore, liabl e to be taxed @ 12.5% in terms of Entry 1 of 5th schedule of the said Act. 12. In WP(C) No. 5622/2008, the petitioners are M/S Sharma Ayurvedic Pvt. Lt d., (a Pvt. Ltd. Co.) Ms MP Agencies (a Partnership Firm), Ms. Champalal Bhanwar lal (a Partnership Firm) , (herein after collectively referred to as petitioner No. 3) had also questioned the order dated 03.07.2008 passed by Commissioner of Tax whereby product Cool ’Banphool Oil’ manufactured by petitioners company has been classified as cosmetic and as such, fall outside the scope of Entry 21 of t he 4th schedule of the Act of 2003 and is, therefore, liable to be taxed @ 12.5% in terms of Entry 1 of 5th schedule of the said Act. 13. In WP(C) No. 4330/2008, the petitioners are Assam Chemical and Pharmaceu ticals Pvt. Ltd. and its officer, (herein after collectively referred to as the petitioner No. 4) questioned the order No. CTS 78/2007/146 passed by Commissione r of Tax on 03.07.2008 whereby product ’Aspoline’ manufactured by petitioners co mpany had been classified as cosmetic failing outside the scope of Entry 21 of t he 4th schedule of the Act of 2003 and as such, liable to be taxed @ 12.5%. in terms of Entry 1 of 5th schedule of the said Act. 14. In WP(C) No. 3500/2008, the petitioner is Shalimar Chemical Works Pvt. Ltd., (hereinafter referred to as petitioner No. 5), questioned the order dated 01.12.2008, clarification dated 31.05.2008 and 03.07.2007 , passed by Commission er of Tax whereby product ’Navaratna Ayurvedic oil’ manufactured by petitioner c ompany had been classified as cosmetic failing outside the scope of Entry 21 of the 4th schedule of the Act of 2003 and as such, is liable to be taxed @ 12.5% i n terms of Entry 1 of 5th schedule of the said Act. 15. Dr. Saraf, learned Senior counsel in all those proceeding being a counse l for the petitioners, advanced arguments, similar to the arguments in WP(C) No . 3023/2008 to contend that the products in all those proceedings cannot be asse ssed at 12.5% in terms of Entry No. 1 to the 5th Schedule to the Act of 2003. R ather, tax on such goods were to be collected @ 4% in terms of Entry 21 of the 4 th schedule of the Act of 2003 (the goods involved in all those proceedings woul d be hereinafter referred to as impugned goods.) Being so, the impugned order, l etter and clarification in so far they relate to the impugned goods are liable to be quashed and set aside. 16. Such contention was resisted by Mr. M. Nath, contending that Commissione r of Taxes had committed no wrong whatsoever in applying provisions of Entry 1 t o the 5th Schedule of the Act so as to collect tax on those goods @ 12.5 % in te rms of Entry No. 1 to the 5th Schedule of the Act of 2003. 17. Before addressing competing arguments, we find it necessary to have a lo ok at the provisions of Entry No. 21 of the 4th schedule as well as Entry No. 1 to the 5th Schedule of the Act of 2003. For ready reference those provisions ar e reproduced below :- SI No. Description Rate of Tax paise in the Rupee 21 Drug & Medicine including vaccines, disposable hypodermic syringes, hypo dermic needles, catguts, sutures, surgical dressings but excluding anti-malaria drugs mentioned in the entry at serial 65 of the First Schedule (On Maximum Reta il Price basis) Explanation :- The expressions Drugs and medicine shall not i nclude products capable of being used as cosmetics, toilet preparations includin g tooth paste, tooth powder, cosmetics, toilet articles and soap 4 SL No.DescriptionRate of Tax paise in the rupee 1 All other goods not covered by First, Second, Third and Fourth Schedule. 12.5 18. In that connection, we also find it necessary to have a look at the deci sions, rendered by the Apex Court of the Country in the case of Puma Ayurvedic H erbal (supra). It may be stated that Puma Ayurvedic Herbal (P) Ltd., was a man ufacturer of Ayurvedic products. It had licence to manufacture those and other p roducts from the Drugs Controllers under the Drugs & Cosmetic Act. A question h ad arose whether its products were classifiable under the Central Excise Tarif f Act 1985 as Cosmetics under Chapter 33 or as medicaments under section 30 ther eof. 19. Relying on the opinion of Directorate of Ayurveda and some other evidenc e including the licence granted by the Drugs Controller, the Collector of Appea ls decided in favour of aforesaid company. However, CEGAT reversed the decision for which appellant preferred an appeal before the Apex Court of the Country whi ch is decided in favour of the company in the following manner: 19. The word Medicament is not defined anywhere while the word cosmetic is defined in the Drugs and Cosmetics Act, 1940 as under : 3.(aaa) 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 p art thereof for cleansing, beautifying, promoting attractiveness, or altering th e appearance, and includes any article intended for use as a component of cosmet ic. 20. It will be seen from the above definition of cosmetic that the cosmeti c products are meant to improve appearance of a person, that is, they enhance be auty, whereas a medicinal product or a medicament is meant to treat some medical condition. It may happen that while treating a particular medical problem, afte r the problem is cured, the appearance of the person concerned may improve. What is to be seen is the primary use of the product. To illustrate, a particular Ay urvedic product may be used for treating baldness. Baldness is a medical problem . By use of the product if a person is able to grow hair on his head, his ailmen t of baldness is cured and the person’s appearance may improve. The product used for the purpose cannot be described as cosmetic simply because it has ultimatel y led to improvement in the appearance of the person. The primary role of the pr oduct was to grow hair on his head and cure his baldness. 21. The extent or the quantity of medicament used in a particular product wi ll also not be a relevant factor. Normally, the extent of use of medicinal ingre dients is very low because a larger use may be harmful for the human body The .m edical ingredients are mixed with what is in the trade parlance called fillers o r vehicles in order to make the medicament useful. To illustrate an example of V icks vaporub is given in which 98% is said to be paraffin wax, while the medicin al part, i.e. menthol is only 2%. Vicks vaporub has been held to be medicament b y this Court in CCE Vs Richardson Hindustan Ltd. Therefore, the fact that use of medicinal element in a particular product was minimal does not detract from it being classified as a medicament, 20. Similar decision has been rendered in the case of Commissioner of Centra l Excise (supra) as well as V.C. Ramalingam (supra). 21. On reading of above Entry No. 21 alongside the decisions, referred to a bove, it would appear clear that drugs and medicines clearly falls within the pu rview of Entry 21 of the 4th Schedule of the Act of 2003 and as such, taxable @ 4% on MRP basis. The explanation which was added to aforesaid Entry No. 21 by n otification dated 29.07.2005 states that expression drugs and medicines should not include products capable of being use as cosmetic and toilet preparation in cluding toothpaste, toothpowder, cosmetic and toilet articles and soaps. 22. The said explanation, however, lays emphasis on the term shall not incl ude and same is designed to exclude the goods which are primarily cosmetic in use but have a subsidiary use as drugs and medicines. However, when some goods which are drugs and medicines in their primary use but have cosmetic use as well cannot be treated as product covered by Entry 1 of the 5th schedule. 23. We have also found that when a product in common parlance and on user p erception is found to be a drug, same needs to be concluded as drug although it can be used in ancillary measure as cosmetic product as well. The decisions refe rred to above make such position clear. 24. Coming back to our case ,we have found that products which are involved in the proceedings before us are basically treated as drugs and medicines althou gh they have ancillary use as cosmetics and toilet products, and as such, the r espondent authorities herein were not right in treating those articles as cosmet ics and toilet products for the purpose of levy of tax @ 12.5% in terms of Entry No. 1 to the 5th Schedule of the Act of 2003. Rather, tax on those products were to be levied @ 4 % in terms of Entry No. 21 of the 4th schedule aforesaid Act. 25. In the result, the notification/letters/orders classification in so far they relate to the impugned goods, so specified in the writ petitions aforesaid are hereby quashed and set aside. 26. Interim order passed earlier is made absolute.