Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: articles on VAT and GST in India :: ACCOUNTING STANDARDS :: VAT Audit :: TAX RATES - GOODS TAXABLE @ 4% :: ACCOUNTING STANDARD :: ARTICLES ON INPUT TAX CREDIT IN VAT :: VAT RATES :: list of goods taxed at 4% :: due date for vat payment :: Central Excise rule to resale the machines to a new company :: TDS :: form 3cd :: cpt :: empanelment :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes
Customs and Excise »
 Ensure transparency in excise department working: Bizmen to government
 It is time to review the customs duty on essential food imports
 Migration to GST of existing Central Excise / Service Tax Assessees
 Rate of exchange of conversion of the foreign currency with effect from 3rd February, 2017
 Budgetary Changes In Customs
 Customs and excise officials upset with GST administration deal with states
 Higher petro excise props up govt tax kitty
 Seeks to further amend notification No. 02/2011-Central Excise dated 1st March, 2011.
  Rate of exchange of conversion of the foreign currency with effect from 21st October, 2016
 Rate of exchange of conversion of the foreign currency with effect from 21st October, 2016
 Seeks to amend Notification No. 27/2014-Central Excise

M J Antony: Begging the question
May, 28th 2008

The Supreme Court often grapples with semantics where indirect taxes are involved.

A man buys a lotion to treat the receding hair on his pate. It works. His looks improve. Did he use a medicine or a cosmetic? A woman uses vaseline to protect her skin. Is it a cosmetic or a medicine? These are legal conundrums, answers to which could bring crores of rupees to the exchequer in indirect taxes. The legal profession gets richer either way and they delight in arguing these questions till their jawbones ache.

The courts give different responses to these questions, and the judgments just get longer. Earlier this month, the Supreme Court dealt with such a problem in Ponds India vs Commissioner of Trade Tax. The verdict is that vaseline is a medicine, which was against the view of the Allahabad high court.

"Whether a product would be a drug or a cosmetic sometimes poses a difficult question and, thus, the answer thereto may not be easy," the judgment conceded. "For the said purpose, the court may not only be required to consider the contents thereof, but also the history of the entry (in the Act), the purpose for which the product is used, the manner in which it has been dealt with under the relevant statute as also the interpretation thereof by the implementing authorities."

Last year, another bench tried to set some parameters on this recurring question. In the context of Ayurvedic products, the court stated in Puma Ayurvedic Herbal Ltd vs Commissioner, Central Excise: "Cosmetic products are meant to improve the appearance of a person, that is, they enhance beauty, whereas a medicinal product or a medicament is meant to treat some medical condition. It may happen that while treating a particular medical problem, after the problem is cured, the appearance of the person concerned may improve. What is to be seen is the primary use of the product."

However, it is a difficult exercise in practice. Different tests are laid down for interpretation of an entry in a taxing statute, namely dictionary meaning, technical meaning, users' point of view, popular meaning and the like. The crunch comes in the application of the principles to the facts of each case and the statute involved.

In the case of vaseline, the classification was rather easy. It is listed in the Indian pharmacopoeia and requires a licence to manufacture it. A cosmetic ordinarily would contain some perfume. On these factors, the Supreme Court decided it was a medicine under the Drugs and Cosmetics Act. But the court came to this conclusion after poring over several earlier decisions and even Wikipedia. There is an interesting discussion on the reliability of Wikipedia in this context. It is significant because judgments in India have begun to rely on information provided in this online information bank to decide issues of semantics and law as in this case.

As a source of authority, Wikipedia is frequently cited by judges around the world. This is not restricted to India alone. The Ponds judgment said that according to The New York Times, more than 100 decisions in the US have cited Wikipedia since 2004, including 13 from federal appeals courts. Is this a good thing? Jurists are not unanimous on this point.

Says Harvard Professor Cass Sunstein: "I love Wikipedia, but I don't think it is yet time to cite it in judicial decisions. . .it doesn't have quality control. If judges use Wikipedia you might introduce opportunistic editing to influence the outcome of cases."

The problem of classification of products for excise, customs and sales tax is not confined to the Drugs and Cosmetics Act. In Chamanlal Jagjivandas vs State of Maharashtra, the Supreme Court dealt with sales tax on tobacco thus: "Tobacco means any form of tobacco, whether cured or uncured and whether manufactured or not, and includes the leaf, stalks and stems of the tobacco plant, but does not include any part of a tobacco plant while still attached to the earth."

In Commissioner of Sales Tax, Madhya Pradesh vs Jaswant Singh, the court said that only because "charcoal" contains the word coal', the same would not mean to be a species of coal. Some other products which teased the judicial brains are Lip Salve', a cream used by soldiers stationed at high altitudes and after shave lotions. Another laborious decision held that "neither salted peanuts nor cashews, or nuts of any sort, are generally known as either fruits or vegetables." Lay persons like us can only add, "Elementary, Watson!"

Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Our Vision

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions