The Supreme Court while dealing with a batch of appeals preferred by Heinz India Limited and others has held that all kinds of talcum powders containing medications are treated as cosmetics as per the Kerala General Sales Tax Act, 1963 (KGST Act) and hence fall under the category of “medicated talcum powder” i.e., Entry 127 of the First Schedule to the said Act.

The Court while upholding the decision of the High Court said that such talcum powders cannot come within the ambit of the category of “medicine” i.e., Entry 79 of the KGST Act.

The two-Judge Bench comprising Justice S. Ravindra Bhat and Justice Dipankar Datta held, “The use of the term “includes” after talcum powder, followed by “medicated talcum powder” in this court’s opinion can lead to only one inference, which is that the clear legislative intent was that all kinds of talcum powders, which contained medications (irrespective of the proportion, or at any rate, not containing predominant proportions) should necessarily be treated as cosmetics, falling under Entry 127. The pointed phraseology in fact concludes the issue, leaving no scope for the court to interpret the Entry as including any class of goods, other than such as Nycil prickly heat powder, which is a talcum powder that is also medicated.”

The Bench further observed that its function is not to give a strained and unnatural meaning to the provision and that the intention of the legislature manifested in plain words must be accepted.

Senior Advocate S.K. Bagaria appeared on behalf of Heinz while Senior Advocates Pallav Sisodia and K. Radhakrishna appeared on behalf of the State and Revenue respectively.

In this case, as per the first set of appeals, the Kerala High Court by its judgment had rejected the revisions filed by the appellant/assessee i.e., Heinz who was aggrieved by the Kerala Sales Tax Appellate Tribunal’s orders holding that its product “Nycil Prickly Heat Powder” was classifiable not under Entry 79 of the KGST Act. In the second set of appeals, M/s Glaxo Smithkline Pharmaceuticals Ltd (GSK) was aggrieved by the judgment of the Madras High Court whereby it rejected its contention that the prickly heat powder was “medicinal formulation or preparation ready for use internally or externally for treatment or mitigation or prevention of diseases or disorders in human being or animals” [under Entry 20-(A) of Part C of First Schedule to the Tamil Nadu General Sales Tax Act, 1959 (TNGST Act)] and held it to be toilet powder [under Entry 1(iii) of Part-F of TNGST Act].

The Supreme Court after hearing the arguments of the counsel noted, “According to the literature made available to the court, there are medicinal ingredients in Nycil prickly powder, which is also manufactured under a Drug License. Yet, the State Legislature, in Entry 127, thought it fit to include, while dealing with cosmetics, such as shampoos, “talcum Powder including medicated talcum powder.” There can be no two opinions that talcum powder ipso facto is classifiable as a cosmetic. Yet, the expression “including” used in Entry 127 has the effect of bringing in [or “pulling in”] an entirely different product, which ordinarily may not have been in the same class, i.e. medicated powder.”

The Court further asserted that it cannot fault the High Court for drawing the conclusion that it did.

“In the present case, the clear legislative intent, of inserting a carefully worded entry, which was a “hybrid” one, i.e. describing an article that contained medicinal ingredients, as well as those used for cosmetics, and yet placing such a creature (“neither beast nor fowl” so to say) in the category of cosmetics, ruled out altogether any interpretive scope of classifying it as a medicinal preparation, or drug or medicine”, said the Court.

While turning to the Tamil Nadu case, the Court noted that talcum powder, lipsticks, lip salve, nail polish, nail varnishes, nail brushes, toilet powders, baby powders, talcum powders, powder pads, etc. clearly showed that all manner of talcum powder fell within Entry, i.e., Item 1.

“The pointed reference to toilet powders, baby powders, talcum powders, powder pads, along with the additional words “even if medicated” again, like in the Kerala case, is decisive. … In the present case, the TNGST was consciously amended to include talcum powder, whether or not medicated in the specific entry or class of entries, enumerating cosmetics. Hence, like in the Kerala case, the plain meaning of that taxation head or entry had to be given, as there was no ambiguity. Consequently, the findings recorded by the High Courts are justified”, concluded the Court.

Accordingly, the Apex Court dismissed the appeals.

Cause Title- Heinz India Limited v. The State of Kerala

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