Important Points
When an interpretation clause uses the word “includes”, it is prima facie extensive.
White Jelly IP (non-perfumed) is a drug.
A medicinal preparation may not be one which has the effect of curing a disease.
Where a statute merely provides for different rates of tax, application of the principles of strict construction may not be appropriate.

Headnote:(a)Interpretation of statutes – When an interpretation clause uses the word “includes”, it is prima facie extensive. (Para 15)
       (2007) 5 SCC 281; (2007)4 SCC 502; (2007) 4 SCC 685; (2007) 3 SCC 124; (2007)3 SCC 607; AIR 1989 SC 335 – Relied upon.
       (1975) 3 All ER 158 – Distinguished.
       (b)Drugs and Cosmetics Rules, 1945 – Rule 123 – White Jelly IP (non-perfumed) is a drug – The provisions of the Act and the Rules framed thereunder do not provide that non-perfumed white jelly IP would also be a cosmetic – The product, in question, however, is treated to be a “drug”-For its production, a license is required – It finds place in Indian Pharmacopeia; and it does not contain any perfume which a cosmetic ordinarily contains. (Paras 19 and 30)
       (2003) 3 SCC 111 – Distinguished.
       (c)Drugs and Cosmetics Rules, 1945 – Rule 123 – Entry 5, Notification dated 7.9.1981 –To attract the applicability of the notification, the product 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 – The contention that a medicinal preparation must be one which has the effect of curing a disease cannot be accepted. (Paras 20 and 21)
       (1962) 1 SCR 279; (1963) Supp. 1 SCR 344 – Relied upon.
       (1997) 4 SCC 82; (1997) 4 SCC 82; JT 2003 8 SC 203 – Distinguished.
        (d)Interpretation of statutes – An exemption notification may require strict construction, but where a statute merely provides for different rates of tax, application of the principles of strict construction may not be appropriate. (Para 21)
       (e)Interpretation of statutes – Where an express statutory definition of a word exists, a Wikipedia definition cannot be preferred-It cannot normally be used for the purpose of interpreting a taxing statute or classification of a product vis-à-vis an entry in statute. (Para 24)
       (f)Drugs and Cosmetics Rules, 1945 – Rule 123 – Entry 5, Notification dated 7.9.1981 – When a word is defined by the legislature itself, the same meaning may be attributed to it – Besides, in determining the nature of the product, the common parlance test or the commercial meaning test or the meaning in common parlance test should necessarily be applied – The common parlance test stood satisfied in present case – Further, an expert had also opined in favour of the appellant and the respondents had not discharged their burden of proof to refute the claims. (Paras 39, 42, 43)
       1951 CLR (Ex) 122; (1988)2 SCC 470; 1992 Supp. (1) SCC 298; (2006)9 SCC 559; (1997)2 SCC 677; (1996) 10 SCC 413 – Relied upon.
       1994 UPTC-184 – Not applicable.
       (g)Interpretation of statutes – Aspect theory – 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 depart therefrom, unless there is any material change. (Para 44)
       (2006) 3 SCC 1; 1989 Supp.(1) SCC 131; (2008) 2 SCC 614; Civil Appeal No. 5210 of 006 – Relied upon.
       Facts of the case :
       1.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.
       2.In respect of the assessment 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”.
       3.The revision petition filed by the petitioner thereagainst before the Allahabad High Court has been dismissed by reason of the impugned judgment dated 28.10.2005.
       Findings of the Court :
       By definition, common parlance test and usage, the product in question is a drug.
       Result : Appeals allowed with cost.

Judgment

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. 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-II-1233/X - 10(1)-1974 dated 14.04.1974 includes petroleum jelly for the purpose of levy of sales tax. It was however, substituted by notification dated 7.9.1981. We would deal with effect thereof on the issue involved 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 39(aaa) defines “cosmetic” as:-

“Section 3(aaa) “cosmetic” means any article intended to 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 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 -

[(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 on human body for the purpose of repelling insects like mosquitoes;

(ii)such substances (other than food) intended to affect the structure or any function of the human body or intended to be used for the destruction of vermin or 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 the diagnosis, treatment, mitigation or prevention of disease or disOrder in human beings or animals, as 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 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 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 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 amended accordingly.

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 : - Standards of identity, purity and strength specified in

(a)Drugs included in the the edition of the Indian Indian Pharmacopoeia 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 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.

(b)Drugs not included in the Standards of identity, purity Indian Pharmacopoeia but and strength specified for which are included in the

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2008 Supreme(SC) 921

Cases Referred (21)