Talcum powder whether or not medicated, a cosmetics and not medicine: High Tax Rate applicable; SC
Supreme Court in the matter of Heinz India Limited vs The State of Kerela the Supreme Court has pronounced that talcum powder, whether or not medicated falls under the heading of cosmetics and not medicine or drug. Thus it shall apply High Tax Rate.
48. 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. A salutary rule for fiscal legislation interpretation is that words used in the statute must be given their plain meaning. The court’s function is not to give a strained and unnatural meaning to the provision. The intention of the legislature, manifested in plain words, must be accepted. In the decision of A.V. Fernandez v. State of Kerala29, the Constitution Bench stated the principle of strict interpretation in construing a taxing statute, in the following manner:
“[..] In construing fiscal statutes and in determining the liability of a subject to tax one must have regard to the strict letter of the law. If the revenue satisfies the court that the case falls strictly within the provisions of the law, the subject can be taxed. If, on the other hand, the case of not covered within the four corners of the provisions of the taxing statue, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the Legislature and by considering what was the substance of the matter.[..]”
49. 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. Therefore, this court cannot fault the High Court for drawing the conclusion that it did.
50. Turning next to the Tamil Nadu case, the legislative history of the entry is telling. 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. After the amendment, with effect from 01.04.1994, the explanation was added. The explanation specifically stated that items “listed above” “even if medicated or as defined in Section 3” (of the Drugs Act) “or manufactured on the license issued under the said Act will fall under this item”. The explanation included, in Item 1, Part F medicated talcum powder, regardless that the license to manufacture it, was under the Drugs Act. 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.
51. In a decision of this court, Oblum Electrical Industries Pvt. Ltd., Hyderabad v Collector of Customs, Bombay30 the function of an explanation was stated to be thus:
“It is a well settled principle of statutory construction that the Explanation must be read so as to harmonise with and clear up any ambiguity in the main provision.”
52. In Union of India (UOI) and Ors. vs. Godfrey Philips India Ltd.31 this court had to deal with an explanation that expanded the meaning of “packing”. The court observed that explanations are also used to widen terms:
“[..] The Explanation to Section 4(4)(d)(i) provides an exclusive definition of the term “packing” and it includes not only outer packing but also what may be called inner packing. Ordinarily bobbin, pirl, spool, reel and warp beam on which yarn is wound would not be regarded as packing of such yarn, but they are brought within the definition of “packing” by the Explanation. The Explanation thus extends the meaning of the word “packing” to cover items which would not ordinarily be regarded as forming part of packing. The Explanation then proceeds to say that “packing” means wrapper, container or any other thing in which the excisable goods are wrapped or contained. It is apparent from the wide language of the Explanation that every kind of container in which it can be said that the excisable goods are contained would be “packing” within the meaning of the Explanation and this would necessarily include a fortiori corrugated fibre board containers in which the cigarettes are contained. When Bombay Tyre International case was argued before us, it was at one stage sought to be contended, though rather faintly, that it is only the immediate packing in which the excisable goods are contained, that is primary packing alone, which would be liable to be regarded as “packing” within the meaning of the Explanation. But this argument was given up when it was pointed out that even secondary packing would be within the terms of the Explanation, because such secondary packing would also constitute a wrapper or a container in which the excisable goods are wrapped or contained. [..]”
53. 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.
54. For these reasons, this court is of the view that both sets of appeals have to fail. They are dismissed, but in the circumstances, without order on costs.
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