# MIS. PONDS INDIA L TD.(MERGED WITH H.L. LTD.) v. COMMISSIONER OF TRADE TAX, LUCKNOW

- **Citation:** [2008] 9 S.C.R. 496
- **Court:** Supreme Court of India
- **Decided:** 2008-05-16
- **Case number:** Civil Appeal No. 3644 of 2008
- **Bench:** S.B. Sinha, V.S. Sirpurkar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/mis-ponds-india-l-td-merged-with-h-l-ltd-v-commissioner-of-trade-tax-lucknow-24877
- **Pages:** 39

## Headnote

UP Trade Tax Act, 1948 -
Vaseline White Petroleum
...
;elly - Drug or cosmetic - Determination of - Held: Is a drug -
c It protects the skin from the effects of weather and exposure -
It is accepted that if used as a preventive measure, it would
have a curative value - In any event having regard to the definition of drugs, any product which prevents a disorder of human function would also come within the purview of drug - On
D facts, from 1981 to 1989, taxing Authorities themselves held
white petroleum jelly of I. P grade (non-perfumed) to be a pharmaceutical preparation - There was no material change after
the said period - Burden as regards classification was on the
Authorities which they failed to discharge - Revenue could
E
not depart therefrom, unless there was any material change -
Drugs and Cosmetics Act, 1940 - s.3 (aaa) and (b) - Drugs
and Cosmetics Rules, 1945 - r 123.
The question which arose for consideration in these
appeals was whether petroleum jelly is a 'drug' or a 'cosF metic' within the meaning of the provisions of U.P. Tirade
r,
Tax Act, 1948.
Appellant-assessee was a producer of Vaseline White
Petroleum Jelly. He was granted license under the Drugs
and Cosmetics Act, 1940. With regard to assessment year
G 1981-1982, the Sales Tax Tribunal accepted the notification of the said product as falling under Entry No.5 being
pharmaceutical preparation, thus, was not classified as
cosmetic and toilet preparation. The Government analyst
also gave report in favour of the appellant. The responH
496
PONDS I. LTD. (MER WITH H.L.L.) V COMM. OF
497
TRADE TAX, LUCKNOW
~
dent-revenue did not challenge the order. For the assessA
ment year 1984-85 to 1986-87, similar assessment order
was passed; Thereafter, the respondent filed revision application. It prayed for re-opening of the assessment for
the years 1986-1987 to 1988-1989 relying on MIS Balaji
Agency's case. The application was dismissed. However, B
relying on MIS Balaji Agency's case authorities changed
the basis of assessment from assessment year 1989 to
;)/'
1990 onwards without producing any new material or
proof to establish that the product was not medicinal
preparation and should be classified as cosmetics. With c
regard to assessment year 1990-91, 1991-92, 1992-93, the
appellate tribunal held that the product Vaseline white
petroleum jelly should be taxed @ 12% as cosmetic and
toilet preparation. Appellant filed revision petition. High
Court dismissed the same. Henc~. the present ·appeal.
D
~
Appellant-Assessee contended that from 1990 onwards the product was held to be pharmaceutical/medicine, and there having been no change in the subsequent
period, the purported order of classification of goods is
illegal; that the burden as regards classification of goods E
was on the Revenue and the Revenue did not place any
-
material on record to discharge the burden; that the product is a pharmaceutical preparation falling under Entry
29 as it is used for cure and treatment of various skin dis-
••
orders; that Entry 5 relating to cosmetics and toilet prepa- · F
rations cannot have any application; that the State of U.P.
having issued the notification pated 7 .9.1981 whereby
Vaseline was deleted from Entry 5, hence, could not have
been assessed as a cosmetic and toilet preparation; that
commercial meaning or meaning in common parlance G
must prevail over the dictionary meaning or technical
"I
meanings; that the appellant having filed a large number
of affidavits in support of its case and the deponents
thereof having not been cross-examined, the averments
contained therein must have been held to have been ac- · H
'
498
SUPREME COURT REPORTS
[2008] 9 S.C.R.
A cepted; that if an entry is capable of two meanings, the
·~
meaning which has been accepted continuously should
be held to be valid, unless it is held to be an implausible
view; and that Mis. Balaji Agency's case being not ex-facie
applicable, the tribunal and the High Court erred in relyB ing thereupon despite the a

## Text

_Characters 0–39,983 of 73,179. This is a partial read: ask again with offset=39983 for what follows._

[2008] 9 S.C.R. 496
......
A
MIS. PONDS INDIA L TD.(MERGED WITH H.L. LTD.)
..
v.
COMMISSIONER OF TRADE TAX, LUCKNOW
(Civil Appeal No. 3644 of 2008)
B
MAY 16, 2008
[S.B. SINHA AND V.S. SIRPURKAR, JJ.]
UP Trade Tax Act, 1948 -
Vaseline White Petroleum
...
;elly - Drug or cosmetic - Determination of - Held: Is a drug -
c It protects the skin from the effects of weather and exposure -
It is accepted that if used as a preventive measure, it would
have a curative value - In any event having regard to the definition of drugs, any product which prevents a disorder of human function would also come within the purview of drug - On
D facts, from 1981 to 1989, taxing Authorities themselves held
white petroleum jelly of I. P grade (non-perfumed) to be a pharmaceutical preparation - There was no material change after
the said period - Burden as regards classification was on the
Authorities which they failed to discharge - Revenue could
E
not depart therefrom, unless there was any material change -
Drugs and Cosmetics Act, 1940 - s.3 (aaa) and (b) - Drugs
and Cosmetics Rules, 1945 - r 123.
The question which arose for consideration in these
appeals was whether petroleum jelly is a 'drug' or a 'cosF metic' within the meaning of the provisions of U.P. Tirade
r,
Tax Act, 1948.
Appellant-assessee was a producer of Vaseline White
Petroleum Jelly. He was granted license under the Drugs
and Cosmetics Act, 1940. With regard to assessment year
G 1981-1982, the Sales Tax Tribunal accepted the notification of the said product as falling under Entry No.5 being
pharmaceutical preparation, thus, was not classified as
cosmetic and toilet preparation. The Government analyst
also gave report in favour of the appellant. The responH
496
PONDS I. LTD. (MER WITH H.L.L.) V COMM. OF
497
TRADE TAX, LUCKNOW
~
dent-revenue did not challenge the order. For the assessA
ment year 1984-85 to 1986-87, similar assessment order
was passed; Thereafter, the respondent filed revision application. It prayed for re-opening of the assessment for
the years 1986-1987 to 1988-1989 relying on MIS Balaji
Agency's case. The application was dismissed. However, B
relying on MIS Balaji Agency's case authorities changed
the basis of assessment from assessment year 1989 to
;)/'
1990 onwards without producing any new material or
proof to establish that the product was not medicinal
preparation and should be classified as cosmetics. With c
regard to assessment year 1990-91, 1991-92, 1992-93, the
appellate tribunal held that the product Vaseline white
petroleum jelly should be taxed @ 12% as cosmetic and
toilet preparation. Appellant filed revision petition. High
Court dismissed the same. Henc~. the present ·appeal.
D
~
Appellant-Assessee contended that from 1990 onwards the product was held to be pharmaceutical/medicine, and there having been no change in the subsequent
period, the purported order of classification of goods is
illegal; that the burden as regards classification of goods E
was on the Revenue and the Revenue did not place any
-
material on record to discharge the burden; that the product is a pharmaceutical preparation falling under Entry
29 as it is used for cure and treatment of various skin dis-
••
orders; that Entry 5 relating to cosmetics and toilet prepa- · F
rations cannot have any application; that the State of U.P.
having issued the notification pated 7 .9.1981 whereby
Vaseline was deleted from Entry 5, hence, could not have
been assessed as a cosmetic and toilet preparation; that
commercial meaning or meaning in common parlance G
must prevail over the dictionary meaning or technical
"I
meanings; that the appellant having filed a large number
of affidavits in support of its case and the deponents
thereof having not been cross-examined, the averments
contained therein must have been held to have been ac- · H
'
498
SUPREME COURT REPORTS
[2008] 9 S.C.R.
A cepted; that if an entry is capable of two meanings, the
·~
meaning which has been accepted continuously should
be held to be valid, unless it is held to be an implausible
view; and that Mis. Balaji Agency's case being not ex-facie
applicable, the tribunal and the High Court erred in relyB ing thereupon despite the amendment made by the notification dated 7 .9.1981.
Respondent-Revenue contended that as Entry 5 con-
..,.
tains an elusive definition, it cannot be said to have a fixed
meaning but an extended meaning; that the product bec ing applied for care of skin, it comes within the purview of
the definition of "cosmetics" and not within the definition
of "medicine"; that Entry 5, as inserted in 1981 would
clearly show that all drugs and cosmetics would come
within the purview thereof except those which are speD cifically excluded, and in that view of the matter, Vaseline
manufactured by the appellant in a cosmetic; and that
>-
Vaseline having no curative value and merely being used
for taking care of one's skin, it cannot be a drug within
the meaning of the provisions of the U.P. Trade Tax Act.
E
Allowing the appeals, the Court
HELD: 1.1. A license has been granted to the appel- -
lant under the provisions of the Drugs and Cosmetics Act,
1940. A drug as defined in s. 3(b) of the Act, thereof would
F not only include a medicine which is used for external
"I.
use of human beings, but if used for prevention of any
disease or disorder in human being, shall also come
within the purview thereof. The said definition is an extensive one. It even applies to preparations applied on
G human body for the purpose of killing insects like mosquitoes, which per se does not have any medicinal or any
value for curing any disease or disorder in human beings.
--{
Parliament consciously used a restrictive meaning while
defining the term "cosmetic" but an extensive meaning
H has been given to the word, "drug". The effect of such
PONDS I. LTD. (MER. WITH H.L.L.) V. COMM. OF
499
TRADE TAX, LUCKNOW .
...
inclusive definition vis-a-vis restrictive definition is well A
known. [Para 15] [512-8,C,D,E]
1.2. Each question posed in each case has to be determined having regard to the purport and object for which
the same had been enacted. [Para 17] [515-F]
B
Hamdard (Wakf) Laboratories Vs. Dy. Labour Commissioner and Others (2007) 5 SCC 281; N.D.P Namboodripad
(Dead) by Lrs. Vs. Union of India and Others (2007) 4 SCC
502; Bharat Coop. Bank (Mumbai) Ltd. Vs. Coop. Bank Employees Union (2007) 4 SCC 685; Commercial Taxation Of- c
ficer, Udaipur Vs. Rajasthan Taxchem Ltd. (2007) 3 SCC 124;
Associated lndem Mechanical (P) Ltd. Vs. WB. Small Industries Development Corporation Ltd. and Others (2007) 3 SCC
607; Mis. Mahalakshmi Oil Mills Vs. State of Andhra Pradesh
AIR 1989 SC 335 - referred to
D
Carter v. Bradbeer (1975) 3 All ER 158 - referred to.
Principles of Statutory Interpretation by Justice G.P.Singh
- referred to.
1.3. Having regard to the provisions contained in Rule
E
123 of the Drugs and Cosmetics Rules, 1945 white Jelly
IP (non-perfumed) is a drug. The Act and the Rules framed
thereunder do not provide that non-perfumed white jelly
IP would also be a cosmetic. Entry 5 of the notification
;·i"
dated 7.9.1981 is to be interpreted. While doing so, it is F
necessary to consider that with a view to attract the applicability thereof, it must not only be a kind of cosmetic
but also be the one which is used for the care of the face,
skin, nails, eyes or brows.[Para 19 and 20) [517-8,C]
Ramavatar Budhaiprasad Etc. Vs. Assistant Sales Tax G
Officer, Ako/a (1962) 1 SCR 279 - referred to.
1.4. While interpreting an entry in a taxing statute, the
Court's role would be to consider the effect thereof, upon
considering the same from different angles. Different tests H
500
SUPREME COURT REPORTS
[2008] 9 S.C.R.
.... --
A are laid down for interpretation of an entry in a taxing statute namely dictionary meaning, technical meaning, users
point of view, popular meaning etc.[Para 21] [518-B,C]
1.5. It is true that the Court must bear in mind the preB
cise purpose for which the statute has been enacted,
namely, for the purpose of collection of tax, but the same
by itself would not mean that an assessee would be made
to pay tax although he is not liable therefor, or to pay
higher rate of tax when is liable to pay at a lower rate. An
exemption notification may require strict construction, but
c where a statute merely provides for different rates of tax,
application of the principles of strict construction may not
be appropriate. [Para 21] [518-C,D,E]
1.6. Whether a product would be a drug or a cosmetic
D sometimes poses a difficult question and, thus, answer
thereto may not be easy. For the said purpose, the Court
may not only be required to consider the contents thereof,
~
but also the history of the entry, the purpose for which the
product is used, the manner in which it has been dealt with
E under the relevant statute as also the interpretation thereof
by the implementing authorities. [Para 21] [518-E,F,G]
Pharmacopeia of India, Third Edition, Volume -1, p 362;
Wikipedia - referred to.
F
1.7. The product itself shows that it helps keep the
-t,.
outside world out and it protects the skin from the effects
of weather and exposure. Secondly, it acts like a sealant
to keep the inside world in. It is accepted that if used as a
preventive measure, of course, it would have a curative
value. In any event having regard to the definition of drugs,
G any product which prevents a disorder of human function would also come within the purview of drug. [Paras
24 and 25] [520-H, 521-A,B]
1.8. For the purpose of finding out the definition of
H 'drug', within the meaning of the Sales Tax Act, the refer-
PONDS I. LTD. (MER WITH H.L.L} V. COMM. OF
501
TRADE TAX, LUCKNOW
'
>-.
ence to the statutory meaning contained in the Act would A
,
be permissible. However, if the definition contained
therein does not fit in with the object and purport for which
an entry had been introduced under the local Sales Tax
Act, tlle matter would be different. It has not been suggested.nor could it be that even the ordinary meaning of B
'medicine' cannot be read into the taxing statute while in-
)r
terpretin'g an Entry made therein. [Para 28] [523-A,B] .
State of Goa and Others Vs. Lei.Jkoplast (India) Ltd (1997)
4 SCC 82; Shree Baidyanath Ayurved Bhavan Ltd. Vs. Collector of Central Excise, Nagpur etc. (1996) 9 SCC 402; Al- c
pine Industries Vs. Collector of Central Excise, New Delhi
(2003) 3 sec 111 - distinguished.
Chamanlal Jagjivandas Sheth Vs. State of Maharashtra
(1963) Supp. 1 SCR 344; State of Goa & Anr. Vs. Mis. Colfax 0
Laboratories Ltd. & Anr. JT (2003) 8 SC 203; Puma Ayurvedic
Herbal (P) Ltd. Vs. Commissioner, Central Excise, Nagpur
(2006) 3 sec 266 - referred to.
1.9. The product, is treated to be a "drug". It finds
place in Indian Pharmacopeia; and it does not contain any E
perfume. A cosmetic ordinarily would contain some perfume. [Para 29] [525-8]
1.10. The Revenue itself thought 100 per cent pure
~
white petroleum jelly of l.P. grade (non-perfumed) to be a
... '
F
pharmaceutical preparation from 1981 to 1989. No material change has occurred after the said period. The submission that in Balaji's case common parlance test was
also applied to Vaseline, is to be rejected. Vaseline is dealt
with in paragraph 5 of the judgment which was on the
premise that it was included in the entry in question. Only G
in view of the said decision, an application was filed in
terms of s. 22 of the Act. The tribunal and the High Court
took a different view only having regard to Balaji's case,
without noticing the distinctive features thereof. [Paras
36 and 37] [527-F, 528-A,B]
H
502
SUPREME COURT REPORTS
[2008) 9 S.C.R.
A
1.11. There cannot be any doubt whatsoever that ar-
~
tificial definition of a term under a statute is permissible in '
law, but when goods which were included in one notification is consciously taken out in the latter, the same
meaning cannot be attributed thereto simply on the basis
8 of judicial interpretation. [Para 38] (528-C]
1.12. When a case of obvious intent on the part of
the Legislature is made out, a meaning which subserves
the legislative intent must be given effect to. It is however
also well known that when a word is defined by the legisc lature itself, the same meaning may be attributed even in
the changed situation. [Para 39] [528-D,E]
1.13. Entry 5 relates to "cosmetics" and "toilet preparation". If the common parlance test is to be applied,
D vaseline must come within the purview of cosmetic or
toilet preparation. With a view to satisfy the requirements
of the said definition, it must be held to be used for beautification or care of the skin in the normal circumstances.
If the product, in question does not satisfy the aforemenE tioned twin tests, it is difficult to presume any legislative
intention in this behalf despite the fact that Vaseline had
been deleted from the entry relating to cosmetic and toilet preparation. [Para 39] [528-E,F,G]
1.14. Even if the Tribunal or the High Court did not
apply the common parlance test, what should necessar-
'T
F
"'
ily be applied is the commercial meaning test or the meaning in common parlance test. [Para 40) [529-8)
The Commissioner of Sales Tax, Madhya Pradesh,
Indore Vs. Mis. Jaswant Singh Charan Singh AIR 1967 SC
G 1454 ;Mis. Asian Paints India Ltd. Vs. Collector of Central Excise (1988) 2 SCC 470; Shri Bharuch Coconut Trading Co.
and Others Vs. Municipal Corporation of the City of
Ahmedabad and Others 1992 Supp. (1) SCC 298 - referred
to.
H
PONDS I. LTD. (MER. WITH H.L.L.) V. COMM. OF 503
>-
TRADE TAX, LUCKNOW
His Majesty the King v. Planters Nut and Chocolate Co.
A
Ltd. 1951 CLR (Ex) 122 - referred to.
1.15. The assessee had filed a large number of affidavits. The deponents of the said affidavits have not been
cross-examined. It is even from that point of view the apB
plication of common parlance test stood satisfied in the
,,,,..
instant case. Furthermore, an expert in the field has also
given his opinion in favour of the appellant. [Paras 42 and
43] [531-A,B]
Quinn India Ltd. Vs. Commissioner of Central Excise, c
Hyderabad (2006) 9 SCC 559 - referred to.
1.16. In a case of this nature, where the revenue itself has been holding the assessee to be a producer of a
pharmaceutical product, the burden would be on the Revenue to establish that the goods cease to fall under a D
given entry. For the said purpose, no material was placed
by the Revenue which was imperative. [Para 43] [531-G]
Hindustan Ferodo Ltd. Vs. Collector of Central Excise,
Bombay (1997) 2 SCC 677; Union of India and Others Vs.
E
Garware Nylons Ltd. and Others (1996) 10 SCC 413-referred
to.
1.17. If an entry had been interpreted consistently in
..-~
a particular manner for several assessment years, ordinarily it would not be permissible for the Revenue to deF
part therefrom, unless there is any material change. [Para
44] [532-G, 533-A]
Bharat Sanchar Nigam Ltd. and Another Vs. Union of
India and Others (2006) 3 SCC 1; M/s. United Offset Process
Pvt. Ltd. Vs. Asst. Collector of Customs, Bombay and Others G
1989 Supp.(1) SCC 131; /magic Creative Pvt. Ltd. v. The
Commissioner of Commercial Taxes and Ors. (2008) 2 SCC
614; Mis Deepak Agro Solution Ltd. v. Commissioner of Customs, Maharashtra Civil Appeal No. 5210 of 2006 dated
8.5.2008 - referred to.
H
..
•
504
SUPREME COURT REPORTS
(2008] 9 S.C.R.
_.
~
A
1.18. The meaning of "drug" is very wide. Ba/aji's case
was not applicable whereupon reliance has been placed
by the High Court and/or the Tribunal. The impugned judgments cannot be sustained and are set aside. [Para 47]
[534-C,D]
B
Mis. Balaji Agency, Gorakhpur Vs. Commissioner of
Sales Tax 1994 UPTC 184 - distinguished.
CIVILAPPELLATE JURISDICTION : Civil Appeal No. 3644
of 2008
c
From the Judgment and Order dated 16.5.2006 of the Trade
Tax Tribunal, Ghaziabad-Bench-First, Ghaziabad, U.P. in Second Appeal Nos. 85, 86 , of 2001, 454 of 2001 and 844 of 1999
WITH
D
C.A. Nos. 3645, 3646 and 3647 of 2008
Ashok H. Desai, Pallav Sishodia, Ravinder Narain, Sonu
Bhatnagar, Ajay Aggarwal, Nupur Singh and Rajan Narain for
the AppeJlant.
E
Shail Kumar Dwivedi, Dinesh Dwivedi, Abhishek
Chaudhary, G. Venkateswara Rao, Manish Shankar, Prateek
Dwivedi and Manoj Dwivedi for the Respondents.
'l•
The Judgment of the Court was delivered by
•
--r ..
~
F
S.B. SINHA, J. 1. Leave granted.
}
~
2. Whether petroleum jelly is a 'drug' or a 'cosmetic' within
the meaning of the provisions of U.P. Trade Tax Act, 1948 is the
'"
question involved herein.
G
The factual matrix of the matter is undisputed.
The Legislature of the State of U .P. enacted U .P. Sales
.,,
Tax Act, 1948. Entry 26(a) as inserted in the Schedule appended
thereto by notification No.ST-11-1233/X - 10(1 )-1974 dated
14.04.1974 includes petroleum jelly for the purpose of levy of
H sales tax. It was however, substituted by notification dated
PONDS I. l TD. (MER WITH H.L.L.) V. COMM. OF
505
TRADE TAX, LUCKNOW [S.B. SINHA, J.]
7.9.1981. Wewould deal with effect thereof on the issue inA
valved herein a little later.
3. We may at the outset notice the provisions of the Drugs
and Cosmetics Act, 1940 (for short, "the Act"). Section 3(aaa)
defines "cosmetic" as:-
"Section 3(aaa) "cosmetic" means any article intended to
B
be rubbed, poured, sprinkled or sprayed on, or introduced
into, or otherwise applied to, the human body or any part
thereof for cleansing,
beautifying,
promoting
attractiveness, or altering the appearance, and includes c
any article intended for use as a component of cosmetic."
'Drug' has been defined in Section 3(b) in the following
terms;
"Section 3(b) "drug" includes -
D
[(i)
all medicines for internal or external use of human
beings or animals and all substances intended to be
used for or in the diagnosis, treatment, mitigation or
prevention of any disease or disorder in human
beings or animals, including preparations applied
E
on human body for the purpose of repelling insects
like mosquitoes;
(ii)
such substances (other than food) intended to affect
th.e structure or any function of the human body or
intended to be used for the destruction of vermin or
F
insects which cause disease in human beings or
. animals, as may be specified from time to time by
the Central Government by notification in the Official
Gazette;
(iii) all substances intended for use as components of a
drug including empty gelatin capsules; and
(iv)
such devices intended for internal or external use in
G
. the.diagnosis, treatment, mitigation or prevention of
disease or disorder in human beings or animals, as
H
506
A
SUPREME COURT REPORTS
[2008] 9 SCR
may be specified from time to time by the Central
Government by notification in the Official Gazette.
after consultation with the Board;"
4. Chapter 4 of the Act provides for manufacture, sale and
distribution of drugs and cosmetics. Section 16 provides for
8
the standards of quality in the following terms:
"16. Standards of quality - (1) For the purpose of this
Chapter, the expression "standard quality" means -
(a)
in relation to a drug, that the drug complies with the
C
standard set out in the Second Schedule, and
(b)
in relation to a cosmetic, that the cosmetic complies
with such standard as may be prescribed.
(2) The Central Government, after consultation with the
D
Board and after giving by notification in the Official Gazette
not less than three months' notice of its intention so to do,
may by a like notification add to or otherwise amend the
Second Schedule for the purposes of this Chapter, and
thereupon the Second Schedule shall be deemed to be
E
amended accordingly.
F
G
H
5. Entry 5 of the second schedule appended thereto lays
down the standard in respect of other drugs in the following
terms;
"5.
Other drugs : -
(a)
Drugs included in the
Indian Pharmacopoeia
Standards of identity, purity and strength specified
in the edition of the Indian
Pharmacopoeia for the
time being in force and
such other standards as
may be prescribed.
In case the standards of
identity, purity and strength
for drugs are not specified
in the edition of the Indian
,,. •
(b)
..,
.,
PONDS I. LTD. (MER WITH H.L.l.) V COMM. OF
507
TRADE TAX, LUCKNOW [S.B. SINHA, J.]
Pharmacopoeia for the
time being in force but are
specified in the edition of
the Indian Pharmacopoeia
immediately preceding the
standards of identity, purity
and strength shall be those
occurring in such immediately preceding edition of
the Indian Pharmacopoeia
and such other standards
as may be prescribed.
Drugs not included in the
Standards of identity, puIndian Pharmacopoeia
rity and strength specified
but which are included
for drugs in the edition of
in
the
officia I such official PharmacoPharmacopoeia of any
poeia of any other country
other country.
for the time being in force
and such other standards
as may be prescribed.
In case the standards of
identity, purity and strength
for drugs are not specified
in the edition of such official Pharmacopoeia for
the time being in force, but
are specified in the edition
immediately preceding
the standards of identity,
purity and strength shall be
those occurring in such immediately preceding edition of such official Pharmacopoeia and such other
standards as may be prescribed."
A
B
c
D
E
F
G
H
508
SUPREME COURT REPORTS
[2008] 9 S.C.R
A
6. The Central Government, in exercise of the power conferred upon it under Sections 6(2), 12, 33 and 33(N) of the Act,
made Rules, known as the Drugs and Cosmetics Rules, 1945
(for short, "the Rules").
Rule 123 of the Rules provides for exemption from ChapB ter IV of the Act stating;
"123. The drugs specified in Schedule K shall be exempted
from the provisions of Chapter IV of the Act and the rules
made thereunder to the extent and subject to the conditions
c
specified in that Schedule.
7. Schedule "K" as specified in Rule 123 specifies the
drugs and lays down the conditions under which such exemptions are to be granted. White or Yellow Petroleum Jelly 1.P. (Nonperfumed) has been specified in item No. 28 in the following
D terms:
E
"28. White or Yellow
Petroleum Jelly I. P.
(Non-perfumed)
The Provisions of Chapter IV of the
Act and the rules made thereunder
which require them to be covered by
a sale licence subject to the conditions that such a product has been
manufactured under a valid drug
manufacturing licence."
8. The exemption granted is subject to the condition that
F such a product has been manufactured under a valid drug manufacturing license.
It is not denied or disputed that the appellants herein are
licensees under the said Act. It is also not in dispute that cosmetics within the meaning of the provisions thereof are not inG eluded in the Schedule.
9. These cases relate to the assessment years 1981-1982
to 1988-1989.
Indisputably again, the Sales Tax Tribunal by an Order
H dated 30.3.1990 in respect of assessment year 1981-1982
PONDS I. LTD. (MER. WITH H.L.L.) V. COMM. OF
509
TRADE TAX, LUCKNOW [S.B. SINHA, J.]
accepted the notification of the said product as falling under A
Entry No. 5 being pharmaceutical preparation and, it was therefore, not classified as a cosmetic and toilet preparation. The
said order has not been questioned. A similar order was passed
by the Sales Tax Tribunal, Ghaziabad on 21.3.1991 relying on
its earlier judgment dated 30.3.1990.
B
A report of the Government Analyst is also in favour of the
appellant.
10. The said decision of the Tribunal has also not been
questioned by the Revenue. Similar orders of assessment had
been passed for the assessment years 1984-1985 to 1986- c
1987.
The Allahabad High Court refused to interfere with the said
orders of Tribunal on a· revision application filed by the respondents herein.
D
11. The Revenue prayed for re-opening of the assessment
for the years 1986-1987 to 1988-1989 which was denied, despite its attention having been drawn to a decision of the learned
Single Judge of the Allahabad High Court in Mis. BalajiAgency,
E
Gorakhpur Vs. CST [1994 UPTC-184], stating;
"Therefore, inthe above circumstances since against all
the above three years judgments have been passed in the
..,
Appeals. Therefore; after the aforesaid judgment, the tax
~
assessing officer has no jurisdiction to make amendment
F
in the tax assessment order and in such cases only the
appellate authority, who has passed the last judgment has
jurisdiction to make amendments. In the light of aforesaid
facts in all the above three years the action taken by the
Tax Assessing Officer under Section-22 is not just and
G
proper in the eye of law cannot be supported. Therefore,
orders passed under Section 22 in all the above three
years are set aside."
The said judgment of the Tribunal has been affirmed by
the Allahabad High Court.
H
510
SUPREME COURT REPORTS
[2008] 9 S.C.R.
A
However, relying on Ba!aji (supra}, the authorities
...
changed the basis of the assessment from the assessment year
1989-90 onwards without producing any new material or proof
to establish that the product was not a medicinal preparation
and should be classified as a cosmetic. In respect of the asB sessment years 1990-91, 1991-92, 1992-93 when the matter
reached the appellate tribunal, it however opined that the product of the petitioner being 'Vaseline White Petroleum Jelly'
should be taxed at the rate of 12 per cent as "cosmetics and
toilet preparation". The revision petition filed by the petitioner
c thereagainst before the Allahabad High Court has been dismissed by reason of the impugned judgment dated 28.10.2005.
12. We may place on record that in Civil Appeals arising
out of SLP(C} No. 11726 of 2006 and SLP(C) No. 3637 of 2007,
the appellant did not move the Allahabad High Court in revision
D and have filed the special leave petition directly before this Court.
13. Mr. Ashok Desai, learned senior counsel appearing
on behalf of the appellant would contend:
(i)
The product, having consistently being held to be
E
pharmaceutical/medicine from 1990 onwards, and
there having been no change in the subsequent
period, the purported order of classification of goods
is illegal.
(ii)
The burden as regards classification of goods being
.., ,.
F
on the Revenue and no material has been placed on
record by it to discharge the burden.
(iii) The product is a pharmaceutical preparation falling
under Entry 29 as it is used for cure and treatment of
G
various skin disorders.
(iv)
Entry 5 relating to cosmetics and toilet preparations
cannot have any application in the instant case as
the said goods are not used for beautification or
care of the skin in the normal circumstances.
H
PONDS I. LTD. (MER WITH H.L.L.) V COMM. OF
511
TRADE TAX, LUCKNOW [S.B. SINHA, J.]
..
(v)
Furthermore, the State of U.P. having issued the A
notification dated 7.9.1981 whereby vaseline was
deleted from Entry 5, hence, the same could not have
been assessed as a cosmetic and toilet preparation.
(vi)
As commercial meaning or meaning in common
B
parlance must prevail over the dictionary meaning or
technical meanings,
(vii) The Appellant having filed a large number of affidavits
in support of its case and the deponents thereof
having not been cross-examined, the averments c
contained therein must have been held to have been
accepted.
(viii) In any event, if an entry is capable of two meanings,
the meaning which has been accepted continuously
should be held to be valid, unless it is held to be an
D
implausible view.
(ix)
Ba/aji Agency (supra) being not ex-facie applicable,
the Tribunal and the High Court committed an error
in relying thereupon despite the amendment made
E
by reason of the notification dated 7.9.1981.
14. Mr. Dinesh Dwivedi, learned senior counsel appearing on behalf of the respondent, on the other hand, would contend:
.,
.,.
(i)
As Entry 5 contains an elusive definition, it cannot be
F
said to have a fixed meaning but an extended
meaning.
(ii)
The product being applied for care of skin, it comes
within the purview of the definition of "cosmetics" G
and not within the definition of "medicine".
(iii) Entry 5, as inserted in 1981 would clearly show that
all drugs and cosmetics would come within the
purview thereof except those which are specifically
excluded, and in that view of the matter, Vaseline
H
A
B
512
SUPREME COURT REPORTS
[2008] 9 S.C.R
manufactured by the appellant in a cosmetic.
(iv)
Vaseline having no curative value and merely being
used for taking care of one's skin, it cannot be a
drug within the meaning of the provisions of the U.P.
Trade Tax Act.
15. Indisputably, a license has been granted to the appellant under the provisions of the Act.
A drug as defined in Section 3(b) thereof would not only
include a medicine which is used for external use of human
C beings, but if used for prevention of any disease or disorder in
human being, shall also come within the purview thereof. The
said definition is an extensive one. It even applies to preparations applied on human body for the purpose of killing insects
like mosquitoes, which per se does not have any medicinal or
D any value for curing any disease or disorder in human beings.
We may furthermore notice that Parliament consciously
used a restrictive meaning while defining the term "cosmetic"
but an extensive meaning has been given to the word "drug".
E
The effect of such inclusive definition vis-a-vis restrictive
F
G
H
definition is well known. In Hamdard (Wakf) Laboratories Vs.
Dy Labour Commissioner and Others [(2007) 5 SCC 281],
this Court held;
"33. When an interpretation clause uses the word
"includes", it is prima facie extensive. When it uses the
word "means and includes", it will afford an exhaustive
explanation to the meaning which for the purposes of the
Act must invariably be attached to the word or expression."
Almost to the same effect is the decision of this Court in
N.D.P Namboodripad (Dead) by Lrs. Vs. Union of India and
Others [(2007) 4 SCC 502], wherein the law was stated in the
following terms:
"18. The word "includes" has different meanings in different
contexts. Standard dictionaries assign more than one
PONDS I. LTD. (MER. WITH H.L.L.) V. COMM. OF
513
TRADE TAX, LUCKNOW [S.B. SINHA, J.]
meaning to the word "include". Webster's Dictionary A
defines the word "include" as synonymous with "comprise"
or "contain". Illustrated Oxford Dictionary defines the word
"include" as: (i) comprise or reckon in as a part of a whole;
(ii) treat or regard as so included. Collins Dicti6hary of
English Language defines the word "includes" as: (i) to
B
have as contents or part of the contents; be made up of
or contain; (ii) to add as part of something else; put in as
part of a set, group or a category; (iit) to contain as a
secondary or minor ingredient or element. It is no doubt
true that generally when the word "include" is used in a c
definition clause, it is used as a word of enlargement, that
.. is to make the definition extensive and not restrictive. But
the word "includes" is also used to connote a specific
meaning, that is, as "means and inclt,Jdes" or "comprises"
or "consists of."
Yet again in Bharat Coop. Bank (Mumbai) Ltd. Vs. Coop.
Bank Employees Union [(2007) 4 SCC 685], it was held;
" ..... It is trite to say that when in th~ definition clause given
D
in any statute the word "means" is used, what follows is
intended to speak exhaustively. When the wor.d "means"
E
is used in the definition, to borrow the words of Lord Esher,
M.R. in Gough v~ Gough it is a "hard-and~fast" definition
and no meaning other than that which is put in the definition
can be assigned to the same. (Also see P Kasilingam v.
PS.G College of Technology.) On the other hand, when
F
the word "includes" is used in the definition, the legislature
does not intend to restrict the definition: it makes the
definition enumerative but not exhaustive. That is to say,
the term defined will retain its ordinary meaning but its
scope would be extended to bring within it matters, which
G
in its ordinary meaning may or may not comprise.
Therefore, the use of the word "means" followed by the
word "includes" in Section 2( bb ) of the ID Act is clearly
indicative of the legislative intent to make the definition
exhaustive and would cover only those banking companies
H
514
SUPREME COURT REPORTS
[2008] 9 S.C.R.
A
which fall within the purview of the definition and no other."
B
c
D
E
Yet again in Commercial Taxation Officer, Udaipur Vs.
Rajasthan Taxchem Ltd. [(2007) 3 SCC 124], it was held;
"22. We have already extracted the definition of raw
material under Section 2(34) which specifically includes
fuel required for the purpose of manufacture as raw
material. The word includes gives a wider meaning to the
words or phrases in the statute. The word includes is usually
used in the interpretation clause in order to enlarge the
meaning of the words in the statute. When the word include
is used in the words or phrases, it must be construed as
comprehending not only such things as they signify
according to their nature and impact but also those things
which the interpretation clause declares they shall include.
There is no dispute in the instant case that the diesel and
lubricant is used to generate electricity through DG sets
which is admittedly used for the purpose of manufacturing
yarn. Thus, it is seen that as diesel is specifically and
intentionally included in the definition of raw material by
the legislature. the question that whether it is directly or
indirectly used in the process of manufacture is irrelevant
as argued by Mr Sushi! Kumar Jain."
In Associated lndem Mechanical (P) Ltd. Vs. WB. Small
Industries Development Corporation Ltd. and Others [(2007)
F 3 SCC 607], this Court held;
"13. As the language shows, the definition of the word
"premises" as given in Section 2( c ) of the Act is a very
comprehensive one and it not only means any building or
hut or part of a building or hut and a seat in a room, let
G
separately, but also includes godowns, gardens and
outhouses appurtenant thereto and also any fur~iture
supplied or any fittings or fixtures affixed for the use of the
tenant in such building, hut or seat in a room, as the case
may be."
H
PONDS I. LTD. (MER WITH H.L.L.) V COMM. OF
515
~
TRADE TAX, LUCKNOW [S.B. SINHA, J]
16. In Mis. Mahalakshmi Oil Mills Vs. State of Andhra A
Pradesh [AIR 1989 SC 335], under the provisions of Section 8
of the A.P. General Sales Tax Act, the "tobacco" is defined in
the following term:
"Tobacco means any form of tobacco, whether cured or
B
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."
It was held that the same consists of two separate parts c
which specify what the expression means and also what it ineludes is obviously meant to be exhaustive.
17. Mr. Dwivedi placed strong reliance on the following
observations occurring in the well known treatise of Justice
G.P.Singh titled "Principles of Statutory Interpretation":
D
....
" ... But the word 'include' is susceptible of another
construction, which may become imperative, ifthe context
of the Act is sufficient to show that it was not merely
employed for the purpose of adding to the natural
E
significance of the words or expressions used. It may be
equivalent to 'mean and include' and in that case it may
afford an exhaustive explanation of the meaning which for
the purposes of the Act must invariably be attached to
> '1
those words or expressions". Thus, the word include may
in certain contexts be a word of limitation."
F
There cannot be any dispute with regard to the bare principles of law stated therein. Each question posed in each case
has to be determined having regard to the purport and object
for which the same had been enacted.
G
-+
18. Reference to Carter v. Bradbeer [(1975) 3 All ER 158),
has been made in the aforementioned treatise. The House of
Lords was dealing therein with a case where one word "bar"
had more than one meaning and in that context, it was opined:
H
516
SUPREME COURT REPORTS
[2008] 9 S.C.R.
A
"It may well be that the contention advanced on behalf of
the appellant sought to derive from the interpretation section
a measure of support which that section does not yield.
By s. 201 (1) of the 1964 Act it is provided that in the Act,
unless the context otherwise requires, "'bar" includes any
B
place exclusively or mainly used for the sale and
consumption of intoxicating liquor'. It is important to note
the word 'includes'. As used ins. 201, I regard the word
.....
'includes' as denoting that the word 'bar' may refer to and
may comprehend not only what would ordinarily and in
c
common parlance be spoken of as a bar but also some
place (such as a bar-room) which is exclusively or mainly
used for the sale and consumption of intoxicating liquor."
It was noticed;
D
"I feel not the slightest doubt that anyone asked if the sales
took place at a bar would unhesitatingly answer Yes.
~
Parliament must be assumed to use the English language
in its ordinary natural sense unless the context shows a
contrary intention. If no contrary intention is shown, then
E
one is driven to the conclusion that Parliament intended in
s 76(5) the word 'bar' to include counters such as were
present in this case, and to prohibit the use of such counters
during the substituted permitted hours.
Sometimes a room is called a bar, for instance, a saloon
'f ..
F
bar or a lounge bar. Such a room, it is not disputed, is a
bar within s. 76(5). Ordinarily a saloon bar will have a
counter in it over which drinks are supplied, but the definition
in s 201 extends the meaning of 'bar' to include any place
exclusively or mainly used for the sale and consumption of
G
intoxicating liquor. So, for the purpose of s 76(5), a place
can be a bar even though it has not within it any bar counter.
+-
It is to be noted that the definition in s 201 does not say
that 'bar' means something but that 'bar' included
something. That is appropriate where it is sought to apply
H
a word in a sense which it does not normally bear. or to
PONDS I. LTD. (MER WITH H.LL.) V COMM. OF
517
TRADE TAX, LUCKNOW [S.B. SINHA, J]
~
make it clear that the word has a meaning about which
A
otherwise some doubt might be felt."
Such a question does not arise herein for our
consideration.
19. Indisputably, having regard to the provisions contained
B
in Rule 123 of the Rules, while Jelly IP (non-perfumed) is a drug.
....
The Act and the Rules framed thereunder do not provide that
non-perfumed white jelly IP would also be a cosmetic.
20. This Court is called upon lo interpret Entry 5 of the
notification dated 7 .9.1981. While doing so, ii is necessary to c
consider that with a view to attract the applicability thereof, it
must not only be a kind of cosmetic but also be the one which is
used for the care of the face, skin, nails, eyes or brows.
What would be the effect of such a provision came up for D
consideration before this Court in Ramavatar Budhaiprasad
'1
Etc. Vs. Assistant Sa/es Tax Officer, Ako/a [1962 1 SCR 279],
wherein it was held;
"Thus under the Act all articles mentioned in the Schedule
were exempt from Sales Tax and articles not so specified
E
were taxable. In the Schedule applicable there were
originally two items which are relevant for the purposes of
the case. They were items Nos. 6 and 36.
¥"(
Item 6 Vegetables -
Except when sold in sealed
F
containers.
Item 36 Betel leaves.
The Schedule was amended by the C.P. & Berar Sales
Tax Amendment Act (Act XVI of.1948) by which item No.
36 was omitted. It is contended that in spite of this omission G
they were exempt from Sales Tax as they are vegetables.
~
The intention of the legislature in regard to what is
"vegetables" is shown by its specifying vegetables and
betel leaves as separate items in the Schedule exempting
articles from Sales Tax. Subsequently betel leaves were
H
518
SUPREME COURT REPORTS
[2008j 9 S.C.R
A
removed from the Schedule which is indicative of the
legislature's intention of not exempting betel leaves from
the imposition of the tax.