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REPORTABLE  

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 8656 OF 2015 (@ S.L.P. (C) No. 21106 of 2014)

State of Madhya Pradesh         Appellant (s)

VERSUS

Marico Industries Ltd Respondent(s)

J U D G M E N T

Dipak Misra, J.

In  this  appeal,  by  special  leave,  the  State  of  Madhya

Pradesh and its functionaries have called in question the legal

acceptability  of  the  judgment  and  order  dated  19.08.2013

passed  by  the  Division  Bench  of  High  Court  of  Madhya

Pradesh, Indore Bench in W.P. No. 1198 of 2004 whereby the

order  dated  05.01.2004  passed  by  the  Additional

Commissioner,  Commercial  Tax  in  Review  case

No.80/03/Ind/Entry Tax imposing entry tax on the products,

namely, Mediker and Starch (Revive) after declining to entertain

the stance of the assessee that “Mediker” being a drug Starch

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(Revive) being not a chemical, are not liable to levy of entry tax

under the Madhya Pradesh Entry Tax Act, 1976, (for short “the

E.T. Act”), has been dislodged and both the products have been

held not to be within the ambit of entry tax.  

2. The  facts  giving  rise  to  the  present  appeal  are  the

respondent is a manufacturer of  hair oil,  edible oil,  Mediker

and  Starch  (Revive)  and  other  products  and  is  a  registered

dealer under the Madhya Pradesh Commercial Tax Act, 1994,

as  well  as  a  dealer  under  the  E.T.  Act.   The  Assistant

Commissioner, Commissioner Tax Division II, Indore vide order

dated 28.04.2003 imposed entry tax on Mediker treating it as a

hair shampoo and “Revive Instant Starch” as a chemical; and

as the tax was not paid, interest and penalty were also levied.

Being grieved by the aforesaid order the respondent-company

preferred  Review  case  No.  80/2003  before  the  Additional

Commissioner,  Commercial  Tax,  Indore.   It  was  contended

before the  said authority  that  the entry  tax imposed on the

assessee on Mediker,  which is meant for anti-lice treatment,

was  illegal  being  not  permissible  under  any  of  the  entries

mentioned in Schedule  II  of  the  E.T.  Act  and there  was no

material on record to treat starch as a chemical.   It was also

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urged that Mediker  is a medicine and hence, it did not attract

entry tax.   The said submissions were repelled and tax was

imposed  and  on  that  basis  penalty  and  interest  were  also

levied.   Aggrieved  by  the  order  passed  by  the  Additional

Commissioner,  Commercial  Tax,  Indore,  the  assessee

approached the High Court in Writ Petition No. 1198 of 2004

and the Division Bench referring to the charging Section and

the Entries, came to hold that Mediker is basically a medicinal

product  and  starch  being  not  meant  for  sale  but  used  in

production  of  other  articles,  could  not  have  been  made

amenable to entry tax, more so, in the absence of its mention

in the Schedule.  It was also held that starch is not a chemical.

3. Criticising the order passed by the High Court, Mr. C.D.

Singh, learned counsel appearing for the State would contend

that Mediker, in common parlance, is considered as shampoo

and not as a medicine because it is nowhere mentioned in the

label of the product that after removal of the lice, it cannot be

used again or cannot be used as other shampoos for hair wash.

Relying on the decision in Deputy Commissioner v. G.S. Pai1

learned  counsel  for  the  State  would  contend  that  while

1

 (1980) 1 SCC 142

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interpreting entries in sales tax legislation, it is to be borne in

mind that the words used in the entries must not be construed

in any technical sense nor from a scientific point of view. They

should be understood in their popular sense and in the sense

which  the  people  conversant  with  the  subject  matter  with

which the statute is dealing, would attribute to it.   For the said

purpose,  learned  counsel  has  also  drawn  inspiration  from

United  Offset  Process  Pvt.  Ltd.  v.  Asst.  Collector  of

Customs, Bombay & Ors2.   Submission of Mr. Singh is that

just  because  the  product  contains  D-Phenothrin  EP  and  is

used for treating lice, it cannot be termed as medicament in

view of the principles stated in Sunny Industries Pvt. Ltd. v.

Collector  of  Central  Excise,  Calcutta3.   According  to  the

learned counsel for the State, Mediker is a kind of shampoo

and hence, it is covered under Schedule II of the E.T. Act which

incorporates the heading “shampoo of all variant and forms”.

As far as the Revive starch is  concerned, it  is  urged by Mr.

Singh that it is a chemical covered by Entry 55 of Schedule II

and consequently it is chargeable to entry tax.   

2  (1989) Supp. 1 SCC 131 3  (2003) 4 SCC 280

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4. Mr.  Bagaria,  learned  senior  counsel  appearing  for  the

assessee, in his turn, would argue that Mediker is a product

meant for curing hair lice infection in hairs and the product is

marketed as “Mediker anti-lice treatment”.  It is urged by him

that  Mediker  anti-lice  treatment  is  manufactured  after

obtaining the drug licence under the Drugs and Cosmetics Act,

1940 (for short, “the 1940 Act”) wherein it has been classified

as  a  drug falling  under  Section 3(b)  of  the  1940 Act.   It  is

contended  by  him  that  that  “Mediker  anti-lice  treatment”

satisfies the definition of the drug and after due scrutiny, the

drug  control  authorities  have  granted  licence  for  the  said

product as a drug.  Mr. Bagaria would submit that period of

treatment is four weeks and shampooing is only a method to

apply  the  medicine.   In  essence,  the  submission  of  learned

senior counsel is that the medium cannot determine the nature

of the product.  He has commended us to certain authorities of

this Court as well as CESTAT which have been approved by

this Court to bolster his stand, and we shall refer to them at

the appropriate stage.  It  is canvassed by him that it  is the

admitted position that drugs are not covered under the E.T. Act

and  do  not  find  any  mention  either  in  the  Schedule  I  or

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Schedule II and are not liable to levy of entry tax. Incrementing

the submission learned senior counsel would contend that the

revenue has charged entry tax under Entry 32 of Schedule II

which really relates to different cosmetics, depilatories, etc. and

hair  shampoo  is  one  of  such  items,  but  “Mediker  anti-lice

treatment” is not a hair shampoo but is a medicine/drug.  As

far as  the Revive instant starch is concerned, learned senior

counsel has propounded that starch is manufactured by using

the  Tapioca  roots  and  even  on  the  packets,  it  is  clearly

mentioned Revive instant starch and, therefore, by no stretch

of imagination it can be treated as a chemical to be covered

under Schedule II of the Act.   He has also addressed us with

regard to the burden of proof which rests on the revenue when

it intends to classify a product differently than that as claimed

by  the  assessee  and  according  to  him,  it  has  not  been

discharged in the case at hand.  

5. Section 3 of the E.T. Act deals with incidence of taxation.

Section 3(1)(a) reads as follows:-

“There shall be levied an entry tax:

(a) on the  entry  in  the  course  of  business  of  a dealer  of  goods specified in Schedule  II,  into

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each local  area for  consumption,  use or sale therein; and

(b) ……..”

6. In the case at hand, we are concerned with certain entries

in Schedule II.  Entry 32 which has been sought to be used to

justify the imposition of entry tax on Mediker, reads as follows:-

“Scents,  perfumes,  hair  tonics,  hair  cream,  hair shampoo, depilatories and cosmetics including face creams, snows, lipstics, rougue and nail polish”

7. As  noted  earlier,  submission  of  Mr.  Singh,  learned

counsel for the revenue is that the Mediker is nothing but a

hair shampoo and, therefore, it squarely falls under Entry 32.

Learned counsel appearing for the assessee has controverted

the  same  on  many  an  aspect.   The  High  Court,  as  the

impugned  order  would  show,  has  returned  certain  findings

which are to the effect that Mediker contains active Permethrin

which is used to paralyse the insect lice, thereby killing it; that

Mediker  is  basically  a  medicinal  product,  since  the  skin

(cuticulam) of the louse is similar to the structure of human

nail it has first to be made porous so that the active ingredient

can penetrate and enter the louse and paralyse it; that for the

purpose  of  treatment  a  wetting  agent  is  needed  and  this

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wetting agent is the surface active agent used in Mediker; that

the surface agent is nothing but a medium to convey the active

ingredient on to the louse; and that the period of treatment is

four weeks and the product is not used generally for washing

the hair.  

8. We shall  presently consider the authorities cited at the

Bar to appreciate the actual background.  In G.S. Pai (supra),

the Court was considering what meaning is  to be placed on

“Bullion and Specie” in the light of the provisions of the Kerala

General  Sales  Tax  Act,  1963.  In  that  context,  the  Court

observed that:-

 “… Now there is one cardinal rule of interpretation which  has  always  to  be  borne  in  mind  while interpreting entries in sales tax legislation and it is that  the  words  used  in  the  entries  must  be construed not in any technical sense nor from the scientific  point  of  view  but  as  understood  in common parlance. We must give the words used by the  legislature  their  popular-sense  meaning  “that sense  which  people  conversant  with  the subject-matter  with  which  the  statute  is  dealing would  attribute  to  it”.  The  word  “bullion”  must, therefore,  be  interpreted  according  to  ordinary parlance and must be given a meaning which people conversant with this commodity would ascribe to it. Now it is obvious that “bullion” in its popular sense cannot include ornaments or other articles of gold. “Bullion”  according  to  its  plain  ordinary  meaning means gold or silver in the mass. It connotes gold or

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silver regarded as raw material and it may be either in the form of raw gold or silver or ingots or bars of gold or silver. …”

Learned counsel  for the State has heavily relied on the

said passage.  It is well settled in law that ratio of a judgment is

to be appreciated in the factual backdrop of the case.  In the

said case, as we find, the factual background was absolutely

different and, therefore, we have no hesitation in holding that

the  said  authority  remotely  does  not  assist  the  revenue  for

buttressing the contention that Mediker is a shampoo.  

9. In  Commissioner of Central Excise, Nagpur v. Shree

Baidyanath Ayurved Bhavan Limited4 [Shree Baidyanath

Ayurved  Bhavan  Limited-II]  the  issue  pertained  to

classification  of  “Dant  Manjan  Lal”  (DML)  manufactured  by

M/s Baidyanath Ayurved Bhavan Limited. The Court took note

of the earlier decision in Shree Baidyanath Ayurved Bhavan

Ltd.  v.  CCE5  [Shree  Baidyanath Ayurved Bhavan Ltd.-I]

wherein  it  had  been  held  that  DML  was  not  known  as  an

ayurvedic medicine and the finding of the tribunal that DML

4

(2009) 12 SCC 419 5

(1996) 9 SCC 402

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was toilet requisite was upheld.  During the pendency of the

appeals before this Court, the Central Excise Tariff Act, 1985

was enacted which replaced the Schedule to the Central Excise

and Salt Act, 1944.  The 1985 Act, as the Court noticed, dealt

with pharmaceutical  products and there was a Sub-Heading

3003.30  which  provided  for  no  excise  duty  leviable  on

medicaments,  including  those  used  in  ayurvedic,  unani,

siddha,  homeopathic  or  bio-chemic  system.   The Court  also

noticed that in 1987 the First Schedule to the 1940 Act was

amended and the book Ayurveda Sara Samgraha  was included

therein.   On  25.09.1991,  the  Central  Board  of  Excise  and

Customs issued a circular in respect of DML and advised its

classification as an ayurvedic medicine. But the said circular

was  withdrawn  after  the  decision  in  Shree  Baidyanath

Ayurved Bhavan Ltd.-I (supra). The assessee approached the

Board  regard  being  had  to  the  amendment  to  decide  the

classification of the product.  Thereafter the dispute arose with

regard to the classification.  Mr. Singh has drawn our attention

to paragraph 46 of the decision in Shree Baidyanath Ayurved

Bhavan  Limited-II (supra)  to  emphasise  on  the  common

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parlance test.  We think it appropriate to reproduce the entire

paragraph:-

“As  a  matter  of  fact,  this  Court  has  consistently applied  common  parlance  test  as  one  of  the well-recognised  tests  to  find  out  whether  the product falls under Chapter 30 or Chapter 33. In a recent decision in Puma Ayurvedic Herbal (P) Ltd. v. CCE6 this Court observed that in order to determine whether a product is a cosmetic or medicament, a twin test (common parlance test being one of them) has found favour with the courts. This is what this Court observed: (SCC pp. 269-70, para 2) “2. … In order to determine whether a product is a cosmetic  or  a  medicament  a  twin  test  has  found favour with the courts. The test has approval of this Court also vide  CCE v.  Richardson Hindustan Ltd.7 There is no dispute about this as even the Revenue accepts that the test is determinative for the issue involved. The tests are: I.  Whether the item is commonly understood as a medicament which is called the common parlance test. For this test it will have to be seen whether in common  parlance  the  item  is  accepted  as  a medicament.  If  a  product  falls  in  the  category  of medicament it will not be an item of common use. A user will use it only for treating a particular ailment and will stop its use after the ailment is cured. The approach of the consumer towards the product is very  material.  One  may  buy  any  of  the  ordinary soaps available in the market. But if one has a skin problem,  he  may  have  to  buy  a  medicated  soap. Such a soap will not be an ordinary cosmetic. It will be medicament falling in Chapter 30 of  the Tariff Act.

6

(2006) 3 SCC 266 7

(2004) 9 SCC 156

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II.  Are  the  ingredients  used  in  the  product mentioned  in  the  authoritative  textbooks  on ayurveda?”

The  two-Judge  Bench  agreed  with  the  view  taken  in

Puma  Ayurvedic  Herbal  (P)  Ltd. (supra)  and  applied  the

common parlance  test  and accepted  the  submissions  of  the

revenue.  

10. There can be no dispute over the proposition of law laid

down in the aforesaid authority.  The thrust of the matter is

how  the  courts  have  treated  a  particular  product  for  the

purpose of classification under the excise law and what status

is  to  be  given.   The  issue  of  anti-lice  treatment  arose  in

Collector  of  Central  Excise  v.  Pharmasia  (P)  Ltd.8.   The

tribunal  reproduced  the  label  appearing  on  every  bottle  of

Mediker. The label is reproduced below:-

"Mediker

ANTI-LICE TREATMENT

DIRECTION FOR USE

Shampoo  hair  with  one  capful  of  Mediker, Massage  scalp  for  3  minutes  Rinse,  Repeat.  This

8

1990 (47) E.L.T. 658 (Tribunal)

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usually  eliminates  Lice.  For  best  results  repeat shampooing 2 days later.

WARNING  

The  product  is  toxic  if  swallowed.  Store  far from  food  and  drinking  water.  Keep  away  from children  and  pets.  If  it  gets  into  the  eyes  wash affected area immediately with clean water  

COMPOSITION

D-Phenothrin EP 0.23% W/V  

Triclosan E.P. 0.05% W/V base q.s.

MEDIKER  is  the  registered  trade  mark  of Richardson - Vicks Inc.  

Manufactured by  

PROCTER  &  GAMBLE  INDIA  LIMITED  BOMBAY 400011  

Licenced Users of the Trademark  

Contents 45ml Mfg. Lic No. 526/A/AP  

Retail price not to exceed Rs. 9.60

(Local Tax extra)

FOR EXTERNAL USE ONLY  

MADE IN INDIA  

Expiry date 2 years from the date of Mfg. Batch No. 8969 Date of Mfg. 12/88."

11. The  tribunal,  as  the  judgment  would  show,  analysed

many an aspect and opined that:-

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“17. Considering the arguments advanced before us, we are convinced that  a person infested with lice does not get relief by merely washing his or her hair with water or various types of shampoo which are available in the market. The life and habits of the louse seem to call for more drastic steps in orders to get rid of the lice. On the label it is claimed that if the hair is shampooed with Mediker and left for 3 minutes  and  the  process  is  repeated,  lice  are eliminated.  The  label  also  shows  that  Madiker consists of D-Phenothrin and other ingredients. The penetrating  power  of  D-Phenothrin  whereby  it paralyses the lice was established before us during the course of hearing. The label itself immediately after  the name of  the product (Mediker)  mentions "anti-lice treatment". These show that "Mediker" is a special product made for the treatment of lice. The submissions made by the learned Advocate that the anti-lice treatment is not subsidiary to the cosmetic function but is in the main function is borne out by the details given in the label and the explanations placed before us.”

12. The  tribunal  posed  a  question:  Can  Mediker  cure  and

prevent a disease?  On the basis  of  material  on record,  the

tribunal came to hold thus:-

“20. … Our perusal of these documents shows that the  infestation of  lice  on the head causes several diseases  and  a  product  which  is  to  treat  such diseases has to be considered to be a medicament. Merck  Index  of  Chemicals  and  Drugs,  Biological, Tenth  Edition  describes  D-phenothrin,  its  various isomers  and  its  use  as  insecticides.  Extra pharmacopea  (Martindale)  also  mentions phenothrin as being used in drugs as insecticides. In this connection we find that the certificate from the  Drug  Control  Administration,  Government  of

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Andhra Pradesh dated 22-6-1987 is  relevant.  The following  extract  supports  the  case  of  the respondents :

"As D-phenothrin is used on human body for topical use  and  has  medicinal  properties  on  scalp  for antilice treatment as per the Notification from Drugs Controller,  India  bearing  No.  15-95/80-DC,  dated 2-1-1982  D-phenothrin  is  to  be  considered  as  a drug under the Drug and Cosmetic Act, 1940."

21. A disease may affect the outside or inside of a person's body. Causes for diseases may vary; these can  be  micro-macro  organism,  insects,  worms, bacteria,  etc.  Any  preparation  containing  active ingredients to remove the root causes, whether they are  used  for  internal  consumption  or  external application has to be considered as a medicament. Therefore,  we  conclude  that  Mediker  is  a medicament. We further observe that the medicinal use of the product is not its subsidiary function but is the only function.”

Be it noted, the order passed by the tribunal was assailed  

in Civil Appeal No. 3220 of 1990 and this Court had dismissed  

the Civil Appeal in Collector of Central Excise, Hyderabad v.

M/s Pharmsia Pvt. Ltd.9

9

1996 (83) ELT A178 (SC)

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13. In Sujanil Chemo Industries v. Commissioner of C. Ex.

& Cus., Pune10  a three-Judge Bench of  this  Court  approved

the decision of the tribunal by holding thus:-

“6.  In this case it has fairly not been denied that the  only  use  of  the  product  is  for  killing  lice  in human  hair.   We  are  unable  to  accept  the submission that killing lice does not amount to a therapeutic or prophylactic use.  Any medicine or substance which treats disease or is a palliative or curative is therapeutic.  Licel cures the infection or infestation  of  lice  in  human  hair.   It  is  thus therapeutic. It is also prophylactic inasmuch as it prevents disease which will  follow from infestation of lice.  Thus, this is a product which is used for therapeutic  and  prophylactic  purposes.  It  would thus be a Medicament  within the  meaning of  the term  “Medicament”  in  Note  2  of  Chapter  30.   It therefore gets excluded from Chapter 38.

7. This  view has also  been taken by  us  in  the case  of  ICPA  Health  Products  (P)  Ltd.  v. Commissioner of C. Ex., Vadodara reported in 2004 (167) ELT 20.  We are also in agreement with the opinion expressed by the Tribunal in  Pharmasia’s case  (supra)  wherein  in  respect  of  an  identical product it has been set out that such product would fall under Chapter 30 under Tariff Heading 30.03.”

14. In  Puma  Ayurvedic  Herbal  (P)  Ltd. (supra)  the

distinction  between  “medicament”  and  “cosmetic”  was

highlighted in the following words:-  

10

2005 (181) ELT 206 (SC)

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“It  will  be  seen  from  the  above  definition  of “cosmetic” that the cosmetic products are meant to improve  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.  To  illustrate,  a  particular  Ayurvedic product  may  be  used  for  treating  baldness. Baldness  is  a  medical  problem.  By  use  of  the product if a person is able to grow hair on his head, his ailment of  baldness is cured and the person’s appearance may improve. The product used for the purpose  cannot  be  described  as  cosmetic  simply because it has ultimately led to improvement in the appearance of the person. The primary role of the product was to grow hair on his head and cure his baldness.”

15. In Commissioner of Central Excise v. Wockhardt Life

Sciences  Limited11 the  Court  treated  the  two  products,

namely, povidone iodine cleansing solution USP and wokadine

surgical  scrub  as  medicaments  after  appreciating  the  facts

that the products are used by the surgeons for the purpose of

cleaning or degerming their hands and scrubbing the surface

of the skin of the patient before that portion is operated upon.

Thereafter the Court observed thus:-

“The purpose is to prevent the infection or disease. Therefore,  the  product  in  question  can  be  safely

11

(2012) 5 SCC 585

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classified as a “medicament” which would fall under Chapter Sub-Heading 3003 which is a specific entry and not under Chapter Sub-Heading 3402.90 which is a residuary entry.”

16. The  aforesaid  analysis  makes  it  absolutely  clear  that

Mediker  which  is  used  for  anti-lice  treatment  is  a  drug

because  of  its  medicinal  affect.  This  position  has  been

accepted by  this  Court.   Once it  is  a  drug,  it  cannot  be a

shampoo. As a natural corollary, it will not invite the liability

of levy of entry tax.

17. The second product is Revive instant starch. The revenue

claimed it to be a chemical. An endeavour has been made to

put it under Entry 55 Schedule II. Entry 55 Schedule II reads

as follows:-

“55. All kinds of chemicals and acids, sulpher and bleaching power.”

18. The stand of the assessee before the authorities was that

it is not a chemical. It is not sold or used for that purpose. It is

a starch manufactured by using Tapioca roots. The revenue,

per contra, without any material brought on record, put it in

the  category  of  a  chemical.  In  Union of  India  v.  Garware

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Nylons Ltd.12 it has been held that the burden of proof is on

the taxing authorities to show that the particular case or item

in  question   is  taxable  in  the  manner  claimed  by  them.

Elucidating further, the Court has held that there should be

material  to  enter  appropriate  finding in  that  regard and the

material  may  be  either  oral  or  documents  and  it  is  for  the

taxing authority to lay evidence in that behalf even before the

first adjudicating authority. Revive instant starch is used while

washing the clothes.  In common parlance it is not regarded

and treated as a chemical or a bleaching powder. If the very

substance or product would have a chemical composition, then

only it would make the said substance a chemical within the

meaning of Entry 55. Needless to say, the purpose and use are

to be taken note of. Common parlance test has to be applied. If

the  revenue  desired  to  establish  it  as  a  chemical,  it  was

obligatory on its part to adduce the evidence. As is manifest, no

evidence has been brought on record by the revenue that it is a

chemical.  Therefore, it can safely be concluded that it is not a

chemical.   

12

(1996) 10 SCC 413

Page 20

20

19. In  view  of  the  aforesaid  analysis,  the  inevitable

conclusion is that the appeal is devoid of any substance and

deserves  to  be  dismissed  and,  accordingly,  we  so  direct.

However,  in  the  facts  and circumstances  of  the  case,  there

shall be no order as to costs.

………………………….J.  (Dipak Misra)

New Delhi. …………………………..J. July 22, 2016 (Prafulla C. Pant)