Boro Plus Ayurvedic Cream Is Medicated Ointment, Taxable At 5% Under Entry 41 Schedule II UPVAT Act: Allahabad High Court

Heading “Drugs and Medicines” in Entry 41, with effective from October 11, 2012, excludes medicated soap, shampoo, antiseptic cream, face cream, massage cream, eye jel and hair oil but includes vaccines, syringes and dressings, medicated ointments, light liquid paraffin of IP grade; Chooran; sugar pills for medicinal use in homeopathy; human blood components; C.A.P.D. Fluid; Cyclosporin.

Justice Shekhar B. Saraf held that “even though antiseptic creams are excluded from Entry 41, medicated ointments would be included due to the use of the word “but”. The word “but” is a clear indication that the legislature intended to include, as an exception, medical ointment, even though certain medicated ointments may be categorised as antiseptic creams. If a product is more than just an antiseptic cream and qualifies as a medicated ointment, it will be included in Entry 41.”

Case Background and Arguments

Boroplus Antiseptic Cream (BPAC) was assessed at the rate of 14% by the Assessing Authority by categorizing it as an 'unclassified item'. Respondent, M/s Emami Ltd., filed an appeal against the order of the assessing authority which was dismissed. Subsequently, an appeal was filed before the Commercial Tax Tribunal where it was held that Boroplus Antiseptic Cream is a 'medicated ointmnet' and was liable to be taxed at 5% under 'drugs and medicines' in Entry 41 Schedule II.

Challenging the order of the Tribunal, the Department argued that for a very long time BPAC has been recognized as a cosmetic and was assessed accordingly. However, the Court had earlier held it to be a medicament. It was stated that since antiseptic cream has been excluded from the entry of 'drug and medicines' in Entry 41 Schedule II w.e.f. 11^th October 2012, BPAC is liable to be taxed as an unclassified item.

It was argued that even though the respondent-assesee if trying to get the product assessed as a medicated ointment, it advertises BPAC as “India's number one antiseptic cream.” Counsel for Department argued that BPAC was being purchased without any prescription whereas for medicated ointments, a doctor prescription was required. Accordingly, it was argued that BPAC is an antiseptic cream liable to be taxed at 14% as an 'unclassified item'.

Counsel for respondent-M/s Emami Ltd. argued that BPAC is an ayurvedic medicine- ointment under the drug license issued by the Drug Licensing Authority under the provisions of the Drugs and Cosmetics Act, 1940 and the Drugs Rules, 1945. It was argued that change in entry on 11^th October 2012 excluded antiseptic cream but included medicated ointment which BPAC is.

High Court Verdict

The Court held that Entry 41 classifies products based on their medical properties and usages, and gives tax benefits on the products with medicinal properties. It was held that the word

“but” in the Entry has been deliberately used to include items previously not a part of the Entry.

““But”, in Entry 41, is parallel with terms like “expect”, “nevertheless”, and “however,” which indicate an exception to the list of exclusions preceding the same.”

The Court held that the Tribunal had rightly held classified BPAC as “medicated ointment” as the Legislature has specifically chosen to include “medicated ointments” within Entry 41. It was held that inclusion of medicated soaps, shampoos, face creams, and massage creams which are all cosmetic products under Entry 41 clearly shows the exclusion of antiseptic creams from Entry 41.

The Court observed that though BPAC was marked as an antiseptic cream by the technical consultant of the Tribunal, a close look of the ingredients of BPAC revealed that it contained more properties than just being an antiseptic cream and more closely associated with the properties of a medicated ointment.

“BPAC's ability to soothe, heal, and protect the skin from various ailments indicates its formulation is intended for more than just antiseptic purposes. By providing hydration, reducing inflammation, and promoting healing, BPAC functions similarly to medicated ointments that deal with chronic skin issues and overall skin health.”

The Court held that the Assesee had clearly demonstrated before the Tribunal that BPAC is a medicated ointment and would come under Entry 41 for taxation. It was held that the burden to disprove the claim of the Assesee was on the Department which it had failed to discharge. It was held that the Department produced no material contrary to that produced by the Assesee to show that BPAC is an 'antiseptic cream' and is excluded from Entry 41.

The Court held that when the Department seeks reclassification of goods, it must show specific evidence including expert opinions, industry standards, etc. to justify the reclassification. It was held that in absence of any evidence being produced by the Department, the reclassification was bad in law.

Observing that the Tribunal is the last fact-finding authority and there is limited scope of interference by the High Court in revisional jurisdiction, Justice Saraf upheld the order of the Tribunal classifying the Boro Plus Antiseptic Cream as a medicated ointment under Entry 41 Schedule II of the Uttar Pradesh Value Added Tax Act, 2008.

Case Title: The Commissioner, Commercial Tax V. M/S Emami Ltd. 2024 LiveLaw (AB) 523 [SALES/TRADE TAX REVISION No. – 274 of 2018]

Citation: 2024 LiveLaw (AB) 523

Counsel for Revisionist: Manish Goyal, Additional Advocate General assisted by Bipin Kumar Pandey

Counsel for Assesee: S.K. Bagaria, Senior Advocate assisted by Kumar Ajit Singh and Rahul Agarwal

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