2009 NTN 40) [KERALA HIGH COURT AT ERNAKULAM]

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1 2009 NTN (Vol. 40) [KERALA HIGH COURT AT ERNAKULAM] Hon'ble Mr. H.L.Dattu, C.J. & Hon'ble Mr. A.K. Basheer, J. ST.Rev..No. 164 of 2007 & 172 of 2008 M/s. Heinz India Ltd. vs. State of Kerala Date of Decision : 29th September, 2008 For the Petitioner : Sri A. Kumar, advocate For the Respondent : Government Pleader Entries in Schedule - Classification of goods - Nycil prickly heat powder - Kerala General Sales Tax Act - Kerala High Court adopted the Principle of harmonious construction while interpreting the words 'medicine', 'drug' etc. and High Court held that Nycil prickly heat powder was not a medicine, though the same was manufactured under a drug licence - The product in question was held to be a talcum powder covered by Entry 127 of the First Schedule relating to perfumeries, cosmetic, shampoo etc - The High Court also held that the item was not covered by entry 79 of the First Schedule relating to drugs and medicines. We sum up the whole issue by observing that when the legislature has treated Medicated Talcum Powder as different from Medicine for the purpose of taxation, it is not the province of the courts to question the policy of the legislature underlying it. We are, therefore, of the opinion that the Appellate Tribunal has applied the correct principles in concluding that the product in question cannot be classified under a general entry but requires to be classified under special entry, namely entry 127 of first schedule to the KGST Act. We are in agreement with the reasoning and conclusions reached by the Tribunal. We see no reason to interfere with the conclusion reached by the Tribunal and therefore, we dismiss these revision cases, but make no order as to costs. Cases referred : Hindustan Ferodo vs. C.C.E., Bombay 1997 (2) SCC 677 Goodyear India Ltd. vs. Union of India AIR 1997 SC 2038 Puma Ayurvedic Herbal (P) Ltd. vs. C.C.E., Nagpur 2006 (145) STC 200 Muller Phipps (India) Ltd. vs. C.C.E., Bombay 2004 (4) SCC 787 Berry vs. Henderson 1870 (5) QB 296 Rashra Deep Laboratory, Firozabad 1983 (53) STC 419 (All) B.Shah and Companay vs. State of Gujarat 28 STC 5 I.T.O., A.P. vs. Taj Mahal Hotel 1971 (3) SCC 550

2 Godfrey Phillips India Ltd. vs. State of U.P (139) STC 537 Hamdard (Wakf) Laboratories vs. D.C (5) SCC 281 Ponds India Ltd. vs. C.T.T (15) VST 156 (SC) Ramavatan Budhia Prasad vs. A.S.T.O (12) STC 286 State of Goa & Ors. vs. Leukoplast (India) Ltd (4) SCC 82 C. & E.C. vs. Beecham Foods Ltd (1) All. E.R.498 Puma Ayurvedic Herbal Pvt. Ltd (145) STC 200 Reliance Trading Co. vs. State of Kerala 119 STC 321 B.Shah and Co. vs. State of Gujarat 28 STC 5 Manisha Pharma Plasto Pvt. Ltd. vs. Union of India 1999 (112) ELT 22 Glaxo India Ltd. vs. State of W.B. & Ors. 107 STC 106 State of A.P. vs. Koduri Satyanarayana and Co. 68 STC 233 B.P.L. Pharmaceuticals Ltd. vs. C.C.E (77) ELT 485 (SC) Hindustan Ferodo Ltd. vs. C.C.E (106) STC 214 (SC) V.G.Ramalingam and Sons vs. State of T.N. & Ors. 127 STC 382 Muller and Phipps (India) Ltd. vs. C.C.E (167) ELT 374 United Trading Agency vs. A.C.C.T. 104 STC 182 State of Kerala vs. Tips & Toes Cosmetics India Ltd (11) VST 74 Roop kala Industries vs. the State of Bombay 1956 (007) STC 0557 C.I.T. vs. Shahzada Nand & Sons AIR 1966 SC 1342 (Hon'ble Mr. H.L.Dattu, C.J.) JUDGMENT Since the facts and the legal issues are common in these two revision petitions, they are clubbed, heard and disposed of by this common order. 2. The petitioner is a dealer registered both under Kerala General Sales Tax Act and Central Sales Tax Act. The petitioner is engaged in the manufacture of 'Nycil Prickly Heat Powder'. According to the petitioner, the said product is manufactured under a Drug Licence issued under the provisions of the Drugs and Cosmetics Act. The

3 product is also covered by the Drugs (Price Control) Order, 1970 and price of the product is regulated, approved and is capable of being fixed by the government and the product is stored under a Drug licence. 3. The petitioner further states, that, the key factor which distinguishes the product, "Nycil Prickly Heat Powder" from Talcum Powder is the constituent Chlorphenesin I.P., base zinc oxide I.P., Starch I.P., and Talcum Purified I.P. The content of Chlorphenesin is maintained at 1%, since this was established as the optimum concentration effective against fungal infection. The other ingredients like zinc oxide, starch and talc are used as a base for dispersing Medicament Chlorphenesin. Chlorphenesin is the local anti fungal agent and used in tropical preparations for the treatment of beautification and smoothening the human skin. In fact, the presence of starch in the preparation makes the powder coarse and rough in texture for the purpose of effective adherence to the skin affected by indications like prickly heat, sores, dhobi itch, athlete foot etc. 4. These cases relate to the assessment years and For the assessment year , the assessee had filed its annual return and in that had conceded the tax payable on the taxable turnover at 8%, treating the sale of Nycil Prickly Heat Powder as an item falling under Entry 79 of the First Schedule to KGST Act. The assessing authority had completed the assessment by accepting the returns filed, by its order dated The Deputy Commissioner, being of the view, that the order of assessment passed by the assessing authority is prejudicial to the interest of the revenue had initiated the proceedings under Section 35 of the Act, proposing to set aside the assessment of the assessing authority on the premise that levy of tax at 8% on 'Prickly Heat Powder' by treating the same as medicine by the assessing authority is prejudicial to the interest of the Revenue and the rate of tax at 20% has to be applied as applicable to "Medicated Talcum Powder". Though this was objected to by the assessee, the Deputy Commissioner by his order dated has set aside the assessment order for the assessment year and has remanded the matter to the assessing authority to pass fresh assessment order by levying tax at 20%. 6. The assessee had carried the mater before the Appellate Tribunal, being aggrieved by the order passed by the revisional authority dated The Tribunal by its order dated has rejected the appeal and thereby has confirmed the order passed by the revisional authority. We will refer to the reasons and conclusions reached by the Tribunal while discussing the legal issue canvassed by the assessee's learned counsel. 7. The correctness or otherwise of the order passed by the Tribunal is called in question by the assessee in S.T.Rev. Case No.164 of For the assessment year , the assessing authority has completed the assessment proceedings by treating the product in

4 question as "Medicated Talcum Powder" and has levied tax at 20% as an item falling under Entry 127 of First Schedule to KGST Act. The assessment order so passed is confirmed both by the first appellate authority and the Appellate Tribunal. It is the correctness or otherwise of this order, is called in question by the assessee, in S.T.Rev. Case No.172 of The assessee has raised identical questions of law in both these revision petitions for our consideration and consequent decision. They are:- "a. Whether the Tribunal failed to see that Sl.No.127 of the Schedule to the KGST Act should be read as whole cosmetics? b. Whether the Tribunal committed an error in law in misconstruing Sl.No.127 by failing to note that the said entry applied only if the goods in question were essentially cosmetics? c. Whether the Tribunal applied the incorrect test of placing emphasis on the percentage of chlorophenesin while failing to take note that the relevant test to be applied was whether an ingredient was an active ingredient? d. Whether the Tribunal brushed aside relevant evidence by merely observing that it was "difficult to see" how Nycil was a medicine when in fact there was abundant material to prove the same? e. Whether the Tribunal committed a grave error of law in failing to note that the burden of proof in matters involving classification was on the revenue and the revenue not having laid any evidence, the appellants had to succeed on the principles laid down by the Hon'ble Supreme Court reported in (1997) 2 SCC 677 in the case of Hindustan Ferodo vs. Collector of Central Excise, Bombay? f. Whether the Tribunal committed an error of law while referring to Sl.NO.127 as a specific entry? g. Whether the Tribunal committed an error of law in placing emphasis on the form in which the product was delivered? h. Whether the Tribunal committed an error of law by deciding against the petitioner by observing that Nycil fell within Sl. No.127 since Nycil could also be used as a cosmetic? i. Whether the Tribunal committed an error of law by failing to note that the Hon'ble Supreme Court in its judgment in Goodyear India Ltd. vs. Union of India reported in AIR 1997 SC 2038 applied the test of whether an ingredient was an active ingredient while refusing to go by the percentage of the ingredient? j. Whether the Tribunal committed an error of law by merely observing that the orders of the Hon'ble Delhi High Court and the Hon'ble Supreme Court in matter of classification of Nycil Prickly Heat Powder were irrelevant since they pertained to classification under Central Excise Tariff Act, 1985?

5 k. Whether the Tribunal committed an error of law in failing to note that the Central Excise adjudication was to be given full faith and credit as a public act under Article 261 of the Constitution of India and was not be brushed aside? l. Whether the Tribunal committed an error of law by failing to note the judgments of the Hon'ble Supreme Court of India in Puma Ayurvedic Herbal (P) Ltd. vs. Commissioner, Central Excise, Nagpur, (2006) 145 STC 200 and Muller Phipps (India) Ltd. vs. The Collector of Central Excise, Bombay, (2004) 4 SCC 787 where prickly heat powder were held as medicaments?". 10. The core issue that falls for our consideration and decision is, whether the Nycil Prickly Heat Powder manufactured by the petitioner is a medicine or drug coming under Entry 79 or Medicated Talcum Powder falling under Entry 127 of the First Schedule to KGST Act. 11. The controversy has to be decided with reference to entries in the Schedule to the Act. Therefore, they are extracted. 12. Entry 79 reads as under:- "Medicines and Drugs including allopathic, ayurvedic, homeopathic, sidha and unani preparations and glucose I.P." 13. Entry 127 of the First Schedule to the Act reads as under:- "Shampoo, Talcum Powder including medicated talcum powder, Sandalwood Oil, Ramacham Oil, Cinnamon Oil, other perfurmeries and cosmetics not falling under any other entry in this Schedule". 14. The answer to the question will turn on proper interpretation of Entry 79 and Entry 127 of First Schedule to KGST Act. 15. Entry 79 of the First Schedule speaks of Medicine and drugs including ayurvedic medicine etc. In the instant case, we are concerned only with medicine and drugs and not ayurvedic medicine. Therefore, we need to know only what is a medicine and drug? 16. The word "Medicine" is not statutorily defined and as such, the meaning given in common parlance has to be attributed to it. A medicine is a substance or preparation used in the treatment of diseases. The substance must have curative power so as to make it effective for treatment of ailments. A substance which has a curative power need not be used in the very form in which it naturally occurs. It will retain its character as a medicine even though some processing is required before it becomes fit for use by human beings or other living creatures. In Webster's Dictionary, 3rd Edn., medicine has been defined to mean, substance or preparation used in treating diseases; the science and art dealing with the maintenance of health and the prevention, alleviation or cure of disease; sometimes, the branch of this field concerned with the non-surgical treatment of disease distinguished from obstetrics and surgery. In Stedman's Medical Dictionary, the term medicine is defined to mean: a drug; (ii) the art of preventing or curing disease, the science that treats diseases in all its relations; (iii) the study and

6 treatment of general diseases or those affecting the internal parts of the body distinguished from surgery. In Berry vs. Henderson (1870) 5 QB 296, it has been observed, the word medicine is comprehensive enough to include everything which is to be applied for the purpose of healing, whether externally or internally. In Rashra Deep Laboratory, Firozabad, [1983] 53 STC 419 (All), it was observed: "The concept of Medicine is not static. It is changing concept linked with the advancing human knowledge and its endeavour to alleviate human suffering. It is also changing with the change in social thinking of a community with a view to solve its problems. Thus viewed, the term 'medicine' cannot be confined within the traditional concept of an article, which, by itself, is enough to cure a human ailment". 17. Now, what is a 'drug'? Even this expression is not statutorily defined. In common and commercial parlance, it is understood as a substance which is understood ordinarily as having a physiological action in a living body. But a substance which does not react physiologically at all is not a drug. Hence, even an ingredient in any pharmaceutical preparation which does not have any therapeutic effect on the human body at all, either beneficial or harmful, cannot be classified as a drug. 18. The assessee's contention is that the Nycil Powder is the trade name under which the manufacturer markets the substance known as 'Chlorphenesin'. The Nycil powder contains zinc oxide and boric acid and they form 32 per cent of the total contents of Nycil powder, and the rest of the material is starch and the talc. The Nycil Powder is designed to keep the skin clean so as to offer protection against prickly heat and infection besides giving comfort and freshness. Therefore, it would fall under entry 79 of first schedule to KGST Act. 19. As regards the nature, composition and property of Nycil Powder, we can do no better than to set out the composition noticed by the Gujarat High Court in the case of B.Shah and Companay vs. State of Gujarat, 28 STC 5. "Nycil Powder has the following features and attributes: (1) Chlorphenesin, being a medical substance was introduced as a result of original work in the British Drug House Research Laboratories. "Nycil" is the trade name under which the British Drug House product of chlorphenesin is manufactured and marketed. (2) Chlorphenesin is a potent antifungal, antibacterial and trichomonicidal substance of low toxicity. Organisms against which it is effective include the common dermatophytes causing tinea pedis (Athelet's foot) and other dematomycoses, epidermophyton, floccosum and the various trichophyton species such bacteria as streptococci, staphyloccocci, coliform organisms and clostridii. Nycil is effective in eliminating

7 pruritus ani and pruritus vulvae. Pruritus ani and pruritus vulvae are frequently of bacterial or fungal origins, or the lesions may become infected with bacterial or fungi, and Nycil is effective in eliminating such organisms. (3) Nycil in the form of powder or ointment is recommended for the treatment of prickly heat and dhobie itch and active skin protection during ringworms and other fungicidal infections. Nycil powder is particularly suitable for the initial treatment of acute mycotic infection as it absorbs in addition to exercising its fungicidal action. (4) The ingredients of Nycial powder are as under: (i) Chlorphenesin B.P. 1% (ii) Zinc Oxide I.P. 16% (iii) Boric Acid 16% (iv) Starch I.P. 51% (v) Talc 100% The above composition of Nycil powder shows that it contains medicinal articles to the extent of 33 per cent. (5) On the sample bottle of Nycil powder, produced before the lower authorities, on its one side the following was found printed: "nycil for Prickly Head and Active Skin Protection". On the other side, the following was found to have been printed: "Nycil contains chlorphenesin the antibacterial and antifungal agent. It actively prevents prickly heat and protects the skin from sores, dhobie itch, and athlete's foot." The formula of Nycil powder is also printed on the container. The Tribunal has made the following pertinent observations as regards the container of the Nycil powder: "It will be noticed that the article is not called medicated or talcum powder or powder. No name is given except 'Nycil' which as stated above is only a trade name of the different products manufactured by British Drug House. The article manufactured is packed in a long and round container of plastic. It has a separate cover of plastic. The contents are also covered by a small plastic cover which contains spaces for making holes. The powder is white in colour and perfumed and in general appearance is not different from the white talcum or such other powders." (6) The medical substances used as ingredients in the manufacture of Nycil powder are Indian Pharmaceutical or British Pharmaceutical articles for the use of which licence is necessary. Licence is also necessary under the Indian Drugs Control Act for manufacturing, stocking or selling Nycil powder and the licence has accordingly been issued. The Government of India, Ministry of Finance, has held and directed that Nycil powder should be assessed to duty as "P. and P.Medicines" under item No.14E of the Central Excise Tariff.".

8 20. The Revenue's contention appears to be that 'Nycil Prickly Heat Powder' is Medicated Talcum Powder and since there is separate entry for the Medicated Talcum Powder, the same requires to be classified under Entry 127 of the First Schedule to KGST Act. 21. Entry 127 of the First Schedule, apart from others speaks of Talcum Powder including Medicated Talcum Powder. The word 'includes' is to indicate that the particular so defined by the use of the word 'includes' not only continues to have its ordinary meaning, its natural import, but it also includes within its ambit all those things which the definition says that it shall include. The Supreme Court in the case of Income Tax Officer, Andhra Pradesh vs. Taj Mahal Hotel, (1971) 3 SCC 550 has held, that, the word "includes" is often used in interpretation clauses in order to enlarge the meaning of the words or phrases occurring in the body of the Statute, and when it is used, the words and phrases must be construed as comprehending not only such things as they signify according to their nature and import, but also those things which the interpretation clause declares that they shall include. 22. The Apex Court in Godfrey Phillips India Ltd. vs. State of U.P. [2005] 139 STC 537 has stated, the word "including" must be given some meaning. In ordinary parlance it indicates that what follows the word "including" comprises or is contained in or is part of the whole of the word preceding. The nature of the included items would not only partake of the character of the whole, but may be construed as clarificatory of the whole. The effect of inclusive definition is explained by Apex Court in Hamdard (Wakf) Laboratories vs. Deputy Commissioner (2007) 5 SCC 281, wherein the court has observed that when an interpretation clause uses the word 'includes' it is prima facie extensive. 23. An extensive definition by using the word 'includes' extends the normal and natural meaning of the word by including within its scope what would otherwise be not comprehended within it. The things so included by extending the definition are however not by way of illustrations. When a definition is an extensive one, all that it amounts is that the word carries in addition to its ordinary meaning, the extended meaning given to it by the statute. Such extended meaning cannot be further extended by saying that the extended part of the definition is merely illustrative. The following passage from Maxwell on the Interpretation of Statutes, 12th edn. p.270, may usefully be reproduced as setting out the principle of interpretation recognised by courts" "Sometimes it is provided that a word shall 'mean' what the definition section says it shall mean: in this case the word is restricted to the scope indicated in the definition section. Sometimes however the word "include" is used in order to enlarge the meaning of the words or phrases occurring in the body of the statute; and when it is so used, these words or phrases must be construed as comprehending, not only such things as they signify according to their natural import, but also those things which the interpretation clause declares that they shall include. In other

9 words, the word in respect of which "includes" is used, bears both its extended statutory meaning and its ordinary, popular and natural sense whenever that would be properly applicable". 24. The following passage in G.P. Singh's Principles of Statutory Interpretation, 2nd edn. p.108, highlights as to how an inclusive definition is to be construed:- "The definition of a word in the definition section may either be restrictive of its ordinary meaning or it may be extensive of the same. when a word is defined to 'mean' such and such, the definition is prima facie restrictive and exhaustive, whereas when the word defined is declared to 'include' such and such, the definition is prima facie extensive. When by an amending Act, the word 'includes' was substituted for the word 'means' in a definition section, it was held that the intention was to make it more extensive. Further a definition may be in the form of 'means and includes' where again the definition is exhaustive; on the other hand, if a word is defined 'to apply to and include', the definition is understood as extensive. 25. Again on the same subject, Bindras Interpretation of Statutes, 6th edn. states: "It is a well known rule of interpretation that the word 'include' is used as a word of enlargement and ordinarily implies that something else has been given beyond the general language which precedes it: to add to the general clause a species which does not naturally belong to it." 26. The learned counsel for the petitioner Sri.Prasad submits that the petitioner has been granted a licence to manufacture 'Nycil Prickly Heat Powder' by the drug controller as a Medicine; the definition of 'drug' and 'cosmetic' is given in the Drugs and Cosmetics Act, 1940; the said commodities are used either for cure or prevention of diseases. The learned counsel would also submit, that, the composition of the powder is also relevant to decide the issue whether the product in question is a medicine or mere powder. It was also pointed out that, both under Indian Pharmacopoeia and British Pharmacopoeia, the chlorphenesin is present in the talcum powder, it should be treated as medicine. The learned counsel would further submit that a 'drug' includes 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. The learned counsel would further contend that the product is covered by the Drugs (Price Control) Order, 1970 and the product can be manufactured only under a drug licence and the price of the product is regulated and capable of being fixed by the Government of India. It is further contended that perusal of the sales chart of the commodity with reference to the turnover for a year will indicate the high volume of sale during summer season and virtually negligible during other seasons, and that only indicates the usage of the

10 product for prickly heat or skin ailments commonly found large in summer season. The learned counsel would further contend even in common parlance 'Nycil' is known as drug to mitigate the prickly heat and itching etc. and it is not like an ordinary talcum powder. It is further contended that the product 'Nycil' is not a talcum powder and hence it cannot be considered as a medicated talcum powder. It is further submitted even the Central Excise Department is treating Nycil as Medicine. The learned counsel would also contend that the intention of the legislature in including Medicated talcum powder in Entry 127 of First Schedule is to classify talcum powders which are having medicinal effect. Such item is commercially identified as a talcum powder and used as a face powder or body powder for beautification. Nycil is not a talcum powder used for beautification. Lastly, it is contended that the Hon'ble Supreme Court in several decisions has held that Nycil Powder is a medicine. 27. The learned counsel for the revenue would submit that, it is well established that in interpreting entries in a taxing statute, where the primary object is to raise revenue and for that purpose, various products are differently classified, the entries are not to be understood in its scientific and technical meaning. The terms and the expressions used in the Schedules have to be understood by their popular meaning, that is the meaning attached to them by those using the product. The chemical ingredients of the product are not decisive on the question of classification of the product for levy of sales tax. 28. The learned counsel for the revenue would further submit, that, the law is well settled, that, if there are two entries - one general and the other special, the special entry should be applied for the purpose of levying tax and the general entry will give way to the special entry. In the present case, the legislature has included medicated talcum powder along with talcum powder. The entry when construed in its proper perspective, the talcum powder includes Medicated talcum powder and necessarily should fall under separate entry other than drugs and medicine. The learned counsel for the Revenue emphasised at the time of hearing that, Nycil Powder is a talcum powder and the mere fact that some medicine are added to it will not make any difference and the basic character of the product remains the same, i.e. talcum powder. 29. In these tax revision cases, we are asked to find out, whether Nycil Talcum Powder is a medicine as suggested by the assessee or Medicated Talcum Powder as suggested by the Revenue. Entry 127 of the First Schedule to KGST Act apart from others speaks of Talcum Powder including Medicated Talcum Powder. For the purpose of the interpretation of the Entry, we need not have to go into scientific details. That may be necessary only if the entry in the Schedule can be interpreted in two different ways or if there is any ambiguity. Otherwise, it is enough to know how the trade, the buyer, the seller, the consumer understands the issue. (See Ponds India Ltd. vs. Commissioner of Trade Tax (2008) 15 VST 156 (SC). The Supreme Court in the case of Ramavatan Budhia Prasad vs. Assistant Sales

11 Tax Officer [1961] 12 STC 286, has observed that, the entries in the schedule in a fiscal enactment should be construed with reference to common parlance, that is in the popular sense, meaning the sense in which the people conversant with the subject matter with which the statute is dealing would attribute to it. 30. In the instant case, entry 79 is a general entry which prescribes the rate of tax applicable to sale of medicine and drugs, whereas entry 127 is a special entry, which prescribes the rate of tax on talcum powder, including medicated talcum powder. Law is well settled that if there are two entries - one general and the other special, the special entry should be applied for the purpose of levying tax. The general entry should give way to the special entry. 31. The expression 'talcum powder' has been considered by various courts and consistent thinking is that it is cosmetic and not a medicine. The legislature while enumerating the articles in entry 127 of First Schedule to the Act has used the expression talcum powder including medicated talcum powder. When the entry uses the expression 'include' it is prima facie extensive. That only means even the medicated talcum powder is brought under entry 127 of the first schedule to the Act. The word 'Medicated" has a wide import. In the Dictionary of Medicine by Peter Hodgson Collion, the word Medicated is defined as a product which contains medicinal drug - talcum powder which contains a medicinal drug. 32. In State of Goa and others vs. Leukoplast (India) Ltd. [1997] 4 SCC 82, the Apex Court was asked to decide whether plaster, dressings and bandages produced by the assessee under licence from Drugs Controller, whether fell within the expression "Drugs and Medicine", one the contentions raised therein was, that it has got a licence to manufacture these products under the Drugs and Cosmetics Act and its production is controlled at every stage by the Drugs Control authorities. This is also one of the contention raised by Sri.Prasad, learned counsel for the petitioner that since the Nycil Powder is manufactured only under a licence issued under the Drugs and Cosmetics Act, the product requires to be classified as Medicine/Drug. The Apex Court while repelling this contention has observed that, merely because the product is manufactured under a drug licence, it does not conclude the matter. In view of the observations made by the Apex Court, we need not have to labour much to answer the contention canvassed by learned counsel for the petitioner. The mere fact that Nycil is a medicated powder and that it required a drug licence for its manufacture is not sufficient to hold that it is a medicine. 33. The Supreme Court in Leukoplast's case has noticed the difficulty in defining what are drugs and medicines, since there is no definition given in the Sales Tax Act. Therefore, after taking note of the observations made in the case of Customs and Excise Commissioner vs. Beecham Foods Ltd., (1972) 1 All.E.R.498, in order to find out whether a particular commodity could be treated as drugs or medicine, the following tests requires to be answered. They are, medicinal contents of the products, if any has to be ascertained; its

12 curative function has to be found out; can the product be called a medicament; is it used to cure or alleviate or to prevent disease or to restore health or to preserve health; and lastly whether the products are treated as drugs or medicine in common parlance. 34. The ingredients of Nycil Powder are Chlorphenesin B.P.1%, Zinc Oxide I.P. 16%, Boric Acid I.P. 16%, Starch I.P.51% Talc 100%. Chlorphenesin is contained in Nycil powder to the extent of only one per cent and the other antiseptic medicinal agents are comprised to the extent of 32 per cent and the rest of the material which goes into the making of the nycil powder is composed of starch and talc. Nycil prickly heat powder contains Chlorphenesin, a product specifically meant for treatment of skin disease. The inclusion of this medicine in the composition makes all the difference. It is this addition of medicine which changes its basic character. Therefore, the product in question is not mere talcum powder in view of the presence of chlorphenesin though in a small quantity, though base being purified talc. 35. The product literature and advertised use would show that Nycil Powder is used for prickly heat and active skin protection. It is further stated that since Nycil powder contains Chlorphenesin, the antibacterial and antifungal agent, and it actively prevents prickly heat and protects the skin from sores, dhobie itch and athelet foot. The Nycil Powder is designed to keep the skin clean so as to offer protection against prickly heat and infections, besides giving comfort and freshness. It is clear from the composition of Nycil Powder that it is primarily and essentially an article recommended for use to cure a person of certain skin ailments. 36. Nycil Prickly Heat Powder is in the nature of 'medicament'. What is "medicament" came up for interpretation before the Apex Court in the case of Puma Ayurvedic Herbal Pvt. Ltd. (2006) 145 STC 200. In the said decision, the court has observed, whether the item is commonly understood as a medicament, which is called common parlance test. For this test, it will have to be seen whether in common parlance 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 use after ailment is cured. The extent or quantity of medicament used in a particular product is not a relevant factor. The medicinal ingredients are mixed with what is in trade parlance called fillers or vehicles, in order to make the medicament useful. Therefore, the fact that use of medicinal element in a product was minimal does not detract from it being classified as a medicament. The court has further observed that it order to be a medicinal preparation or medicament, it is not necessary that the item must be sold under a doctor's prescription. Similarly availability of the product across the counter of shops is not a relevant factor as it make no difference either way. 37. The next question is, whether Nycil Powder is used to cure or alleviate or to prevent disease; or to restore health or preserve health. The product is not used by consumers as a daily use talcum powder. It is a product normally used for specific purpose of treating prickly

13 heat and as soon as the ailment is treated, the use of the product is discontinued. That only means it has some ingredients which has preventive and curative effect so as to make it effective for treatment of ailment. 38. All this discussion would lead us to draw a distinction whether Nycil Powder is mere talcum powder which is normally used for the purpose of smoothening and giving a fair look to the skin or has the qualities of preventive or curative effect for ailment of skin. We would definitely say that 'Nycil Powder' is not an ordinary talcum powder as understood in common or commercial parlance, but has a medicinal value and is used for treatment of prickly heat and other skin ailments. But then, under which entry we should classify the commodity in question. In our view, if not for the inclusive definition under entry 127 of the first schedule to the KGST Act, we would not had any hesitation in classifying the commodity in question as a medicine. In our view, the legislature consciously immediately after the expression talcum powder, by employing the expression 'including' has thought it fit to include "medicated talcum powder" under Entry 127 of first schedule to the Act. In view of this inclusive definition, though the nycil powder has all the qualities and ingredients of medicines and since the same is basically a talcum powder which has preventive and curative power, the same requires to be brought under the special entry rather than the general entry. 39. The Apex Court in Ponds India Ltd.'s case, 15 VST 156, has stated, that, it is true that the court must bear in mind the precise purpose for which the statute has been enacted, namely herein for the purpose of collection of tax, but the same by itself would not mean that an assessee would be made to pay tax although he is not liable therefor, or to pay higher rate of tax when he is liable to pay at a lower rate. 40. The legislative entry 127 of first schedule immediately after the expression talcum powder has used the word 'including'. The word include/including, as we have already stated, is used in interpretation clause to enlarge the meaning of the word in the statute. When such word is used in an interpretation clause, it must be construed as comprehending, not only such things as they signify according to their natural import, but also those things which the interpretation clause declares that they shall include. A court of law in construing a statute with an interpretation clause using the expression 'includes' is bound to give effect to the direction in the statute itself, unless it can be shown that the context of that particular passage where the expression is used shows clearly that the meaning is not in this place to be given effect to. The courts have to resort to such interpretation and construction which is reasonable and purposive with the object sought to be achieved by the Act enacted by the legislature, where the primary object is to raise revenue and for that purpose, various products are differently classified, the entries are not to be understood in its scientific and technical meaning, but the terms and expressions used in entries

14 have to be understood by their popular meaning, i.e., the meaning that is attached to them by those using the product. 41. Entry 127 of the first schedule provides a more specific description of the goods than under entry 79 of the first schedule. When there is a particular or specific entry in a fiscal statute, the general entry has to give way to the specific entry. This court in the case of Reliance Trading Company vs. State of Kerala, 119 STC 321 has observed, if there are two entries, one general and the other specific, the ordinary rule of construction that a general entry must give way to a specific entry is to be followed. The authority is to see that if two entries are apparently in conflict with one another, an attempt must be made to construe them harmoniously and not to treat them repugnant to each other. A commodity falling under the general entry as also a specific entry has to be taxed in terms of special entry as the same is to prevail over the general entry. Therefore, in our considered opinion, though the Nycil Prickly Heat Powder is used for the care of the skin and not cure of the skin and though it contains a small quantity of Chlorphenesin, which has curative effect; in view of the specific entry, it has to be classified only under Entry 127 of First Schedule to the KGST Act and not under Entry 79 of the Act which speaks of Medicines and drugs. 42. Now we come to the decisions on which the learned counsel for the assessee has placed reliance in support of his case. The learned counsel would submit that in view of the decision of Gujarat High Court in the case of B.Shah and Co. vs. State of Gujarat, 28 STC 5, the product in question requires to be treated only as Medicine. 43. In the aforesaid decision, the assessee firm was a dealer carrying on business in drugs and medicine. The question which arose for consideration and determination was, whether Nycil Medicated powder is a "toilet article" within the meaning of Entry 21A of Schedule E or is a "Medicine" within the meaning of Entry 13 of Schedule C or is it covered by the residuary Entry 22 of Schedule E to the Bombay Sales Tax Act, The court after detailed consideration of the issue has observed that 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 within the meaning of the word in Entry 13 of Schedule C of Bombay Sales Tax Act, 1959 and not a toilet article within the meaning of Entry 21A of Schedule E to the Act. 44. In the aforesaid decision, the assessee firm was carrying on business in "drugs and medicine' and was also a distributor of Nycil Medicated Powder manufactured by the British Drug House (India) Pvt. Ltd., Bombay. The firm had made an application under Section 52 of the Act to the Commissioner of Sales Tax for determination of the question as to the rate of tax payable on the Sales of Nycil Powder. In the application, it was specially stated that Nycil Powder is used as a "Medicated Powder" for many external skin and other diseases and therefore not a toilet article. That only means even according to the assessee firm, it is a medicated powder used to keep

15 the skin clean so as to offer protection against prickly heat and infection, besides giving comfort and fairness. 45. We are in agreement with the decision of the Gujarat High Court in so far as its conclusion that Nycil Powder is a Medicated Powder. The legislature which has freedom to classify the commodities for the purpose of taxation, has classified it under Entry 127 of First Schedule to the Act by using the expression Talcum Powder including Medicated talcum powder unlike under Bombay Sales Tax Act. Therefore, in our view, the decision of Gujarat High Court will not assist the petitioner's learned counsel. The mere fact that Nycil is a Medicated Powder and that it required a drug licence for its manufacture is not sufficient to hold that it is a medicine within the meaning of Entry 79 of First Schedule to KGST Act. 46. Reference is made to the decision of the Delhi High Court in the case of Manisha Pharma Plasto Private Ltd. vs. Union of India, 1999 (112) ELT.22. In the said decision, the question for consideration before the Court was the classification of Nycil Prickly Heat Powder, i.e. whether it falls under Heading or does it fall under Heading of Central Excise Tariff. Heading 33.03/subheading , which includes patent or proprietary medicines. Heading covers "body or make up preparations and preparations for the cure of the skin (other than medicaments) including sun screen or sun tan preparations, manicure or pedicure preparations". The Delhi High Court applying common parlance or popular meaning test has held, that, Nycil Powder is liable to be classified under Tariff Heading and not under the Heading dealing with cosmetics. The court has also stated, that, the product in question satisfies the common parlance or popular meaning test, i.e. popular meaning attached to a product by a consumer. The product is not consumed by consumers as daily use talcum powder. It is a product normally used for specific purpose of treating prickly heat and as soon as the ailment is treated, the use of the product is discontinued. The court has further observed that the product in question contains a particular medicine namely Chlorphenesin I.P.. The inclusion of this medicine in the composition makes all the difference as found by HSC. It was because of use of this medicine in Nycil Prickly Heat Powder that the HSC classified it differently as compared to Johnson Prickly Heat Powder and Shower to Shower Powder. The Court has also observed that the submission of the Revenue that the product is basically a powder and will always retain as its basic character as talcum powder even if some medicine is added to it, the base being purified talc. It is the additional of medicines which changes its basic character. 47. In the aforesaid decision the question before the court was whether 'Nycil' is a patent or proprietary medicine or body or make up preparations for cure of the skin. The court applying common parlance test has come to the conclusion, it is a medicine since the product is specifically used for treating heat. In our view, this decision would not assist the case of the petitioner, for the reason, the Schedule to KGST Act has two entries - one General and the other

16 special. The general entry speaks of 'Medicine and drugs' and special entry speaks of 'Medicated Talcum Powder". The expression 'medicament' came up for consideration before the apex court in Puma Ayurvedic Herbal Pvt. Ltd. 145 STC 200. In the said decision, the court has explained the tests that requires to be applied to find out what is medicament. They are, whether the item is commonly understood as 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 the product falls in the category of medicament, it will not be an item of common use. In our view, if for any reason, the question before the court was whether Nycil Powder is a medicine or cosmetic article such as Talcum Powder, our answer would have been, keeping in view the ingredients of Nycil Powder, that it would fall under the category, Medicine. However, the legislature while enumerating the commodities that would fall under entry 127 of the First Schedule to the Act, has specifically included 'Medicated talcum powder' along with Talcum Powder. In the absence of special entry, it would have been possible to bring it under the general entry, medicine or drugs. Law is well settled, that, if there are two entries - one general and other special, the special entry should be applied for the purpose of levying tax. The general entry should give way to the special entry. 48. The learned counsel has referred to the decision of West Bengal Taxation Tribunal in the case of Glaxo India Ltd. vs. State of West Bengal and Others, 107 STC 106. In the said decision, the question before the Tribunal was whether Nycil Powder was exigible to Taxes on Entry of Goods into Calcutta Metropolitan Area Act on the ground that the Nycil Powder being a drug is not exigible to entry tax. The court in this decision has not decided whether Nycil Powder is a drug or a cosmetic. 49. In, the State of Andhra Pradesh vs. Koduri Satyanarayana and Co., 68 STC 233, the issue before the court was, whether Nycil Powder is a Medicinal Product or a cosmetic. The court applying the utility test had observed that prickly heat is a disease of the skin which needs treatment and as a remedial measure it is usual practice to use prickly heat powder as a medicinal product and not a cosmetic. 50. In B.P.L. Pharmaceuticals Ltd. vs. Collector of Central Excise, 1995 (77) ELT 485(SC), the issue before the Apex Court was, whether "Selenium Sulfide Lotion" is classifiable as medicine under subheading or classifiable as cosmetic under sub-heading This decision was relied on by the learned counsel for the assessee, for the purpose, firstly, since the respondents had not controverted the affidavits filed by the petitioner, the Appellate Tribunal should have allowed the assessee's appeal. Secondly, for the purpose the product is not a cosmetic, but medicine. This decision is also referred by the Apex Court in the case of Hindustan Ferodo Ltd. vs. Collector of Central Excise, (1997) 106 STC 214 (SC), wherein it is stated, that, it is not in dispute before us, as it cannot be, that, the onus of establishing that the said rings fell within item 22-F lay upon

17 the revenue. The revenue had led no evidence. The onus was not discharged. Assuming therefore, that the Tribunal was right in rejecting the evidence that was produced on behalf of the appellants, the appeal should, nonetheless have been allowed. In the instant case, the case of the revenue is that the commodity in question is a medicated talcum powder and therefore it should be classified under special entry. Therefore, these two decisions would not assist the learned counsel for the assessee. 51. In V.G.Ramalingam and Sons vs. State of Tamilnadu and others, 127 STC 382, the question before the Court was whether "Vicco Vajradanti" tooth paste and Vicco Turmeric face cream are ayurvedic products and ayurvedic drugs properly classifiable under Entry 20 of Part C of First Schedule to Tamil Nadu General Sales Tax Act, The revenue had classified "Vicco Vajradanti" tooth paste as an item falling under Serial No.7 of Part E of First Schedule and Vicco Turmeric face cream as an item falling Entry I of Part E of First Schedule to the Act. The court after considering the relevant entries has come to the conclusion that they are not medicines. 52. In Puma Ayurvedic Herbal (P) Ltd. vs. Commissioner, Central Excise, Nagpur, 145 STC 200, the question before the court was whether the Ayurvedic Products manufactured by the appellants fall within the category of medicaments under Chapter 30 or cosmetics, under Chapter 33 of Central Excise Tariff Act, The court has observed that, in order to determine whether a product is a cosmetic or medicament a twin test which has found favour with the courts have been reiterated. They are (i) whether the item is commonly understood as a medicament; and (ii) are the ingredients used in the product mentioned in authoritative text books on ayurveda. For the former test, it has to be seen whether in common parlance the item is accepted as a Medicament. If the 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 court has also stated that the extent or quantity of medicament used in particular product is also not a relevant factor. Normally, the extent of use of medicinal ingredients is very low because a larger use may be harmful for the human body. The medicinal ingredients are mixed with what is in the trade parlance called fillers or vehicles in order to make the medicament useful. Therefore, the fact that the use of Medicinal element in a product was minimal does not detract from being it classified as a medicament. In order to be a medicinal preparation or a Medicament, it is not necessary that the item must be sold under a doctor's prescription. Similarly the availability of the product across the counter in shops is not relevant as it makes no difference either way. 53. In Muller and Phipps (India) Ltd. vs. Collector of Central Excise, [2004] 167 ELT 374, the court has concluded that, Johnson Prickly Heat Powder is a medicament because it was not an ordinary talcum powder to be used to get rid of problem of prickly heat. The question before the court was whether Johnson's Prickly Heat Powder and Phipps processed talc are patent or proprietary medicines classifiable

18 for the purpose of Excise duty as claimed by the appellants or cosmetics or toilet preparations as claimed by the revenue. In the appeal it was contended that prickly heat powder not only relieves prickly heat faster but actually helps to prevent it; that when a person perspires profusely the sweat stays on the skin too long and the persons potential victim of prickly heat; that specially formulated prickly heat powder absorbs the sweat better and faster and prevents the build up of bacteria on the skin; that, therefore, the person avoids getting a red rash, itching and burning; that no person who requires ordinary talc for the purpose of beautifying herself or himself would use the said products, which contain the aforesaid active therapeutic ingredients. One of the pertinent observations made by the court in the course of its order is, what is required to be considered in the matters of this nature where commodity taxation is taken up by the State authorities, the court should be guided by the manner of classification of the goods which are brought to tax rather than the etymological meaning of the product in question or experts opinion thereto. In conclusion, the court was pleased to observe: "Applying the principles enunciated in BPL Pharmaceuticals Ltd. case, and taking into consideration various circumstances as to the manner in which the goods had been treated on the earlier occasions by the department and the product having been utilised with reference to the commercial parlance and understanding, that it had been treated as a drug would not cease to be one notwithstanding the fact that new tariff act has come into force. What is to be seen in such cases is when in the common parlance, for the purpose of the Drug Act, for purpose of Sales Tax Act and in various findings recorded on earlier occasions by the department itself having been noticed, the conclusion is inevitable that the products in question must be treated as medicinal preparations". 54. A Division Bench of the Karnataka High Court in the case of United Trading Agency vs. Additional Commissioner of Commercial Taxes, 104 STC 182, while considering whether Vicco products - tooth powder, tooth paste are taxable as medicinal preparations or as toiletry articles has stated as under: "The question before the court was whether the products dealt in by the appellant namely, "Vicco" products, tooth powder, toothpaste and cream, were taxable at 10 per cent under entry 5, Part M of the Second Schedule to the Karnataka Sales Tax Act, 1957, as medicinal and pharmaceutical preparations, or at 15 per cent under entry 10 of Part T of the Second Schedule to the Act as toiletry articles: Held, that having regard to the nature of the article, the ingredients thereof, the use to which they were put, with specific reference to the extra information as to how the goods were treated in the market as such, particularly, the circumstances that the