K P NAMBOODIRIS AYURVEDICS Vs. STATE OF KERALA

JUDGEMENT

(1.) The connected revision cases are filed, one by the manufacturer and other by the dealer raising same question i.e., about the classification and the rate of tax on tooth powder marketed under the name "Danthadhavanachoornam". Overruling the claim of the petitioners that the item is a medicament, the Kerala VAT Appellate Tribunal, Ernakulam held that the item is rightly assessed as tooth powder (medicated or not) falling under Entry No.92 of Notification S.R.O. No.82/06 issued under S.6(l)(d) of the Kerala Value Added Tax Act, 2003 (for short 'the KVAT Act'), It is against this order of the Tribunal, the petitioners have filed these revisions for a declaration by this Court that the item is a medicament and not tooth powder as held by the Tribunal.

(2.) We have heard counsel appearing for both the petitioners in both the revision cases and the Government Pleader appearing for the respondent.

(3.) Since the name of the product is in Sanskrit, we have referred to it's meaning in the English Learners Dictionary. It's translation in English as found in the dictionary on which the petitioners have no controversy is given under, 'aciroo' means tooth,' cdoojcd' means cleaning and means powder. Therefore, the product can be described in English language as 'tooth cleaning powder'. The interesting question raised by the petitioners is that the item is a medicament prepared under the Ayurvedic system and therefore, falls under Entry 36(7)(e) of the 3rd Schedule to the KVAT Act and since it is a medicament, the petitioners are entitled to payment of tax under S.8(e) of the KVAT Act, which provides for payment of tax on medicine under the Compounding Scheme at the rate of 4% on it's Maximum Retail Price (MRP). In the assessment, the assessing officer held that item is not a medicament, but a medicated tooth powder squarely covered by Entry 92 of Notification S.R.O. No.82/06. Since the controversy is with regard to the classification of item, we extract herein Entry 92 of S.R.O. No.82/06 and Entry 36 (7)(e)(i) as follows: - <IMG>JUDGEMENT_686_KERLT1_2010Image1.jpg</IMG> <IMG>JUDGEMENT_686_KERLT1_2010Image2.jpg</IMG> The contention of the petitioners is that the product with the above ingredients are manufactured under the licence issued under the Drugs and Cosmetics Act, 1940 and therefore, should be treated as a medicament. However, in the advertisement, the manufacturers have stated that the product can be used for cleaning tooth with brush or with fingers. The claim in the advertisement is that the product will help to prevent and cure decay of tooth, swelling of gum, shaking of the tooth, bleeding and infection in the gum, ulcers and cavity. The further claim is that it can prevent retention of the enamel of the tooth and prevent" erosion of tooth and foul smell in the mouth. With specific reference to Entry 36(7)(e)(i) which has an HSN Code 3003.90.11, the petitioners contended that the item, being an Ayurvedic Medicament, would squarely fall under the said entry. The petitioners have also relied on the decision of the Supreme Court reported in Puma Ayurvedic Herbal Private Ltd. v. Commissioner of Central Excise (2006 (2) KLT SN 25 (C.No.36) SC= 145 STC 200) and the Karnataka High Court's decision reported in United Trading Agency v. Addl.Commissionerof Commercial Taxes, Zone-II, Banqalore (104 STC 182) and the decision of the Madhya Pradesh High Court reported in Commissioner of Commercial Taxes, M.P. v. Dawar Brothers (111 STC 319) and contended that going by the drug licence issued for manufacturing of product and its effectiveness to prevent and cure various problems related to tooth and gum, the item is a 'medicament'.