Introduction:

In a significant ruling, the Telangana High Court has determined that Himani Navaratan Oil and Himani Gold Turmeric Ayurvedic Cream should be classified as ayurvedic medicines rather than cosmetics, thus subjecting them to a lower duty rate of 10%. This decision emerged from a series of tax revision cases filed by the petitioner, challenging an order by the Sales Tax Appellate Tribunal, Hyderabad (STAT), which had classified these products as cosmetics or toiletry products, liable for a higher tax rate.

The petitioner filed eleven tax revision cases against the common order of the STAT, which categorized six products manufactured and marketed by the petitioner as either cosmetics or toiletry products. These products included Navaratan Oil, Gold Turmeric Ayurvedic Cream, Nirog Dant Power Lal, Boroplus Antiseptic Cream, Boroplus Prickly Heat Powder, and Sonachandi Chyawanprash. The primary issue was whether these products fell under Entry 36 or Entry 37 of the CGST Act and TGST Act. Classification as cosmetics would result in a 20% GST, whereas classification as drugs under Entry 37 would result in a 10% duty.

Arguments:

The petitioner contended that Himani Navaratan Oil and Gold Turmeric Ayurvedic Cream were medicinal products prescribed for various health benefits. For instance, Navaratan Oil is used to keep the head cool, relieve headaches, improve sleep quality, act as a memory aid, tone muscles, reduce tiredness, treat minor burns and cuts, and prevent premature hair fall. The petitioner argued that none of these uses fit the definition of a cosmetic or toiletry product.

Additionally, the petitioner emphasized that these products were licensed as ayurvedic medicines by the Drug Controller after thorough scrutiny of their compositions, which are rooted in Ayurvedic texts. The petitioner argued that these products were marketed strictly for their medicinal properties and not for cosmetic purposes.

The respondents, represented by Government Advocates Swaroop Oorilla, maintained that the STAT had correctly classified the products as cosmetics or toiletry products under Entry 36. They argued that the packaging and marketing of these products could mislead consumers into believing they were intended for cosmetic use. The respondents contended that despite the medicinal claims, the overall presentation of the products suggested their use as cosmetics. They asserted that the primary purpose of the products appeared to be enhancing physical appearance rather than addressing medical conditions.

Court’s Judgment:

The bench, consisting of Justice P. Sam Koshy and Justice N. Tukaramji, ruled in favor of the petitioner. The court observed that the packaging of the Gold Turmeric Ayurvedic Cream explicitly highlighted its status as an ayurvedic medicine, effective for treating skin conditions like cracked skin, pimples, boils, and other blemishes. Nowhere on the packaging was it claimed to be a cosmetic product designed to enhance complexion or fairness.

The court noted that the licensing authority had granted the product a license as an ayurvedic drug, which solidified its classification as a medicinal product. The court stated, “The wrapper in which the cream is sold very emphatically highlights it as an ayurvedic medicine. The licensing authority having granted a license for the product as an ayurvedic drug, the manufacture, sale, and distribution of the product as a drug and not a cosmetic are established.”