Holding

Nycil Prickly Heat Powder is to be classified as a cosmetic under the specific entries for medicated talcum powder, not as a medicine or drug.

Summary

Heinz India Ltd. challenged the classification of its product, Nycil Prickly Heat Powder, under state sales tax statutes. The Kerala High Court and the Madras High Court had held the product to be a "medicated talcum powder" and thus a cosmetic, subject to a lower tax rate, rejecting the revenue's view that it was a medicine or drug. The Supreme Court examined whether the product fell under the specific entries for medicated talcum powder (Entry 127 of the Kerala General Sales Tax Act) or under the medicine entry (Entry 20(A) of the Tamil Nadu General Sales Tax Act). Applying the plain‑meaning rule and interpreting the word "includes" in the entries, the Court concluded that the legislature intended all talcum powders, even when medicated, to be treated as cosmetics. Consequently, the product is taxable as a cosmetic under the respective state statutes. Both appeals were dismissed.

Issues considered

Whether Nycil Prickly Heat Powder qualifies as a medicine/drug under the Kerala General Sales Tax Act, 1963.
Whether the product qualifies as a medicine under Entry 20(A) of the Tamil Nadu General Sales Tax Act, 1959.
Interpretation of the term "includes" in Entry 127 of the Kerala Act and the explanation to Entry 1(iii) of the Tamil Nadu Act.
Application of the plain‑meaning rule to fiscal statutes for tax classification.

Legislation cited

Drugs and Cosmetics Act, 1940s. s.3(aaa), s. s.3(b)
Kerala General Sales Tax Act, 1963s. Entry 127, s. Entry 79
Tamil Nadu General Sales Tax Act, 1959s. Entry 1(iii), s. Entry 20(A)

Subjects

tax classificationmedicated talcum powdercosmeticsmedicinestatutory interpretationplain meaning ruleKerala General Sales Tax ActTamil Nadu General Sales Tax ActDrugs and Cosmetics Act

Judgment

[2023] 6 S.C.R. 425 425

HEINZ INDIA LIMITED A
v.
THE STATE OF KERALA
(Civil Appeal No(s). 2338-2339 of 2010)
MAY 04, 2023 B
[S. RAVINDRA BHAT AND DIPANKAR DATTA, JJ.]
Kerala General Sales Tax Act, 1963 – Entry 79, 127 – Tamil
Nadu General Sales Tax Act, 1959 – s. 3, Entry 20-(A) of Part C of
First Schedule; Entry 1(iii) of Part-F of First Schedule – Drugs and
C
Cosmetics Act, 1940 – s. 3(aaa), 3(b) – Whether medicated talcum
powder is medicine or drug, or a cosmetic, or in terms of the statutes
in question, medicated talcum powder – In the first set of appeals,
the revisional authority was of the view that the order of assessment
passed by the assessing authority (levying tax at 8% on ‘Prickly
heat powder’) was prejudicial to the interest of revenue by treating D
it as a medicine and tax at 20% was to be applied as applicable to
“Medicated talcum powder” – Kerala High Court concurred with
the view adopted by the Revenue – In the second set of appeals, the
Madras High Court relied on the decision of the Kerala High Court
holding that medicated talcum powder includes prickly heat powder
E
and answered the issue in favour of the Revenue and against the
assessee – Before the Supreme Court, the Revenue contended that
in the Kerala case, that Nycil prickly heat powder is “medicated
talcum powder” since there is separate entry for medicated talcum
powder (Entry 127), it has to be classified under Entry 127 of the
first schedule to the KGST Act – In the Tamil Nadu case, it is F
contended that the exclusion of products capable of being used as
cosmetics from Entry 20 in Part C, on the one hand, and the inclusion
of talcum powder, in Entry 1 of Part F, as cosmetics, read with
explanation to Entry 1, is decisive that the proper classification of
the product is as a cosmetic – Held: The court has to, as a principle,
G
interpret the concerned statutes, in the light of their plain words,
and having regard to their internal guides or aids – In Kerala case,
the use of the term “includes” after talcum powder, followed by
“medicated talcum powder” in the 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 H
425
426 SUPREME COURT REPORTS [2023] 6 S.C.R.

A of the proportion, or at any rate, not containing predominant
proportions) should necessarily be treated as cosmetics, falling
under Entry 127 – 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
B
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 – In the Tamil 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,
C 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.
Interpretation of Statutes – A salutary rule for fiscal legislation
interpretation is that words used in the statute must be given their
D plain meaning and the court’s function is not to give a strained and
unnatural meaning to the provision.
Dismissing the appeals, the Court
HELD: 1. According to the literature made available to the
court, there are medicinal ingredients in Nycil prickly powder,
E which is also manufactured under a Drug License. Yet, the State
Legislature, in Entry 127, thought it fit to include, while dealing
with cosmetics, such as shampoos, “talcum Powder including
medicated talcum powder.” There can be no two opinions that
talcum powder ipso facto is classifiable as a cosmetic. Yet, the
F expression “including” used in Entry 127 has the effect of bringing
in [or “pulling in”] an entirely different product, which ordinarily
may not have been in the same class, i.e. medicated powder. To
rule out any ambiguity, the legislature specifically referred to a
sub class of medicated powders, i.e. medicated talcum powder.
Such specific entries have not come up for consideration, before
G this court; as noticed, predominantly, the courts have ruled that
in the context of broad descriptions such as cosmetics or
medications, if there are medical ingredients, in a product, which
is meant as a curative or prophylactic product, it would be
classifiable as drugs or medicines. However, the specificity
H employed by the legislature in this case, rules out that possibility.
HEINZ INDIA LIMITED v. THE STATE OF KERALA 427

Besides, “includes” has been construed as broadening the sweep A
of a provision, and at the same time restricting its amplitude to
the meanings ascribed in the statute. [Para 47][452-B-E]
2. 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 B
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 C
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 D
legislature, manifested in plain words, must be accepted. [Para
48][453-D-F]
3. 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 E
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.
The TNGST was consciously amended to include talcum powder, F
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. [Paras 49, 53][454-B-C; 455-F-G] G
A.V. Fernandez v. State of Kerala [1957] 1 SCR 837 –
followed.

H
428 SUPREME COURT REPORTS [2023] 6 S.C.R.

A Oblum Electrical Industries Pvt. Ltd., Hyderabad v
Collector of Customs, Bombay [1997] 3 Supp SCR 68;
Union of India (UOI) and Ors. v. Godfrey Philips India
Ltd. [1985] 3 Supp SCR 123; Hamdard (Wakf)
Laboratories v. Deputy Commissioner [2007] 5 SCR
873 – relied on.
B
Collector of Central Excise v. CIENS Laboratories
[2013] 14 SCR 38; Puma Ayurvedic Herbal Pvt. Ltd. v.
Collector of Central Excise (2006) 2 SCR 1120; Ponds
India Ltd. v. Commissioner of Trade Tax [2008] 9 SCR
496; Muller & Phipps (India) Ltd v. Collector of Central
C Excise [2004] 2 Supp SCR 39; B.P.L Pharmaceuticals
v. Collector of Central Excise [1995] 3 SCR 1235;
Union of India v. Vicco Laboratories [2007] 12 SCR
534; Commissioner of Central Excise v. Hindustan Lever
Ltd (2015) 10 SCC 742; Collector of Central Excise v.
D Wockhardt Life Sciences Ltd. (2012) 5 SCC 585;
S. Sundaram Pillai v. V. R. Pattabiraman [1985] 2 SCR
643; Share Medical Care v. Union of India [2007] 3
SCR 44; Pappu Sweets and Biscuits v. Commr. of Trade
Tax, U.P [1998] 2 Suppl. SCR 119; Collector of Excise
v. M/s Parle Exports (P) Ltd. [1988] 3 Suppl. SCR 933;
E Union of India (UOI) & Ors. v. Leukoplast Private
Limited & Ors. [1994] 1 SCR 343; Dattatraya Govind
Mahajan & Ors. v. State of Maharashtra & Anr. [1977]
2 SCR 790; Mrs. Zakiya Begum & Ors v. Mrs. Shanaz
Ali & Ors. [2010] 9 SCR 692; Collector of Central
F Excise v. Wood Crafts Products Ltd. (1995) 3 SCC 454
: [1995] 2 SCR 797; Meghdoot Gramodyog Sewa
Sansthan, UP. v. Commissioner of Central Excise,
Lucknow [2005] 4 SCC 15; Amrutanjan Ltd. v. Collector
Central Excise [1996] 9 SCC 413; N.D.P.
Namboodripad (Dead) by LRs. v. Union of India [2007]
G 3 SCR 769 – referred to.
B. Shah & Company v. State of Gujarat (1971) 28 STC
5 (Guj) – referred to.

H
HEINZ INDIA LIMITED v. THE STATE OF KERALA 429

Case Law Reference A
[2006] 2 SCR 1120 referred to para 4
[2007] 5 SCR 873 relied on para 4
[2008] 9 SCR 496 referred to para 4
[2004] 2 Suppl. SCR 39 referred to para 4 B
[1995] 3 SCR 1235 referred to para 15
[2007] 12 SCR 534 referred to para 16
(2015) 10 SCC 742 referred to para 17
C
(2012) 5 SCC 585 referred to para 18
[1985] 2 SCR 643 referred to para 20
[2007] 3 SCR 44 referred to para 21
[1998] 2 Suppl. SCR 119 referred to para 21
D
[1988] 3 Suppl. SCR 933 referred to para 21
[2013] 14 SCR 38 relied on para 22
[1994] 1 SCR 343 referred to para 23
[2007] 3 SCR 769 referred to para 26
E
[1977] 2 SCR 790 referred to para 28
[2010] 9 SCR 692 referred to para 28
[1995] 2 SCR 797 referred to para 39
(2005) 4 SCC 15 referred to para 41 F
(1996) 9 SCC 413 referred to para 41
[2007] 3 SCR 769 referred to para 47
[1957] 1 SCR 837 followed para 48
[1997] 3 Suppl. SCR 68 relied on para 51 G
[1985] 3 Suppl. SCR 123 relied on para 52
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 2338-
2339 of 2010.

H
430 SUPREME COURT REPORTS [2023] 6 S.C.R.

A From the Judgment and Order dated 29.09.2008 of the High Court
of Kerala at Ernakulam in STR No. 164 of 2007 and 172 of 2008.
With
Civil Appeal Nos. 6633 and 6635 of 2012.
B S. K. Bagaria, Sr. Adv., E. R. Kumar, D. P. Mohanty, Ms. Tanya
Chaudhry, Ms. Pratyusha Priyadarshini, Kumar Ajit Singh, M/s. Parekh
& Co., Ms. Charanya Lakshmikumaran, Ms. Apeksha Mehta, Ms. F.
Gupta, Pranav Mundra, Advs. for the Appellant.
Pallav Sisodia, K. Radhakrishnan, Sr. Advs., C. K. Sasi, Abdulla
C Naseeh V T, Ms. Meena K Poulose, Sabarish Subramanian, Vishnu
Unnikrishnan, Ms. Shivani Jena, Naman Dwivedi, P. Shankar, Advs. for
the Respondent.
The Judgment of the Court was delivered by
S. RAVINDRA BHAT, J.
D
1. The issue which this court has to deal with had placed the
courts in a prickly pickle, on several occasions- whether medicated talcum
powder is medicine or drug, or a cosmetic, or in terms of the statutes in
question, medicated talcum powder? The present appeals, by special
leave, concern two sets of appeals: one, from the State of Kerala and
E the other from the State of Tamil Nadu. The Kerala High Court, by its
judgment1 rejected the revisions filed by the appellant/assessee (hereafter
“Heinz”) aggrieved by the Kerela Sales Tax Appellate Tribunal’s orders
holding that its product “Nycil Prickly Heat Powder” was classifiable
not under Entry 79 of the First Schedule to Kerala General Sales Tax
Act, 1963 (hereafter “KGST Act”) [as “medicine” but as “Medicated
F
Talcum Powder”].
2. In the second set of appeals, M/s Glaxo Smithkline
Pharmaceuticals Ltd (“GSK” hereafter) is aggrieved by the judgment
of the Madras High Court2 where the court rejected its contention that
the prickly heat powder was “medicinal formulation or preparation
G ready for use internally or externally for treatment or mitigation or
prevention of diseases or disorders in human being or animals”
[under Entry 20-(A) of Part C of First Schedule to the Tamil Nadu

1
Dated 29 September 2008 in S.T. Rev. Nos. 164/ 2007 and 172/ 2008
H 2
By judgment dated 01.03.2012, in Tax Case (Revision) Nos. 742/ 2006 and 301/ 2011
HEINZ INDIA LIMITED v. THE STATE OF KERALA 431
[S. RAVINDRA BHAT, J.]

General Sales Tax Act, 1959 - hereafter “TNGST Act”] and held it to be A
toilet powder [under Entry 1(iii) of Part-F of First Schedule of the
TNGST Act]. The High Court so held because the Explanation to the
said entry stated that:
“Any of the items listed above even if medicated or as defined
in Section 3 of the Drugs and Cosmetics Act, 1940 (Central B
Act XXIII of 1940) or manufactured on the license issued
under the said Act will fall under this item.”
I
3. Heinz’s appeal from the Kerala High Court is concerned with
assessment years 1999-2000 and 2000-2001. For the assessment year C
1999-2000, Heinz filed its annual return which was accepted by the
assessing officer; the tax payable on the taxable turnover was 8%, and
the treatment on the sale of Nycil prickly heat powder was accepted to
be an item falling under Entry 79 of the First Schedule to KGST Act, by
order dated 18-11-2005. The revisional authoritywas of the view that D
the order of assessment passed by the assessing authority was prejudicial
to the interest of the revenue;it initiated proceedings under Section 35 of
the KGST Act, proposing to set aside the assessment of the assessing
authority on the premise that levy of tax at 8% on ‘Prickly heat powder’
by treating it as medicine by the assessing authority was prejudicial to
the interest of the revenue and the rate of tax at 20% was to be applied E
as applicable to “Medicated Talcum Powder”. Heinz objected to this.
However, the revisional authorityby order dated 16-2-2006 set aside the
assessment order for the assessment year 1999-2000 and remanded the
matter to the assessing authority to pass fresh assessment order by levying
tax at 20%. Aggrieved, Heinz carried the matter before the Appellate F
Tribunal, whichaffirmed the revisional order and rejected its appeal.3
The High Court, on further revision, concurred with the classification
adopted by the revenue.
4. The Kerala High Court noticed the judgment of this court Puma
Ayurvedic Herbal Pvt Ltd v Collector of Central Excise4 (hereafter G
“Puma Ayurvedic Herbal”);Hamdard (Wakf) Laboratories v. Deputy
Commissioner5 (hereafter “Hamdard (Wakf) Laboratories”); Ponds

3
Order dated 14.11.2006 in IA No 311/2006
4
(2006) 2 SCR 1120
5
2007 (5) SCR 873 H
432 SUPREME COURT REPORTS [2023] 6 S.C.R.

A India Ltd. v. Commissioner of Trade Tax6 (hereafter “Ponds India”);
Muller & Phipps (India) Ltd v. Collector of Central Excise7 (hereafter
“Muller & Phillips (India) Ltd”) and several other decisions cited by
the parties. The court was of the opinion that the product was not of
common use by consumers as a daily use talcum powder, but normally
used for the “specific purpose of treating prickly heat” and its use
B
discontinued after the ailment ceased. This meant it has ingredients
containing preventive and curative effects making it effective for the
treatment of ailments. The court observed that:
“We would definitely say that ‘Nycil Powder’ is not an ordinary
talcum powder as understood in common or commercial
C parlance, but has a medicinal value and is used for treatment
of prickly heat and other skin ailments. But then, under which
entry we should classify the commodity in question. In our
view, if not for the inclusive definition under Entry 127 of the
first schedule to the KGST Act, we would not had any
D hesitation in classifying the commodity in question as a
medicine. In our view, the legislature consciously immediately
after the expression talcum powder, by employing the
expression ‘including’ has thought it fit to include “medicated
talcum powder” under Entry 127 of first schedule to the Act.
In view of this inclusive definition, though the nycil powder
E has all the qualities and ingredients of medicines and since
the same is basically a talcum powder which has preventive
and curative power, the same requires to be brought under
the special entry rather than the general entry.”
5. The High Court further held that Entry 127 of the First Schedule
F immediately after the expression talcum powder has used the word
‘including’. The word includes/including, “is used in interpretation
clause to enlarge the meaning of the word in the statute. When such
word is used in an interpretation clause, it must be construed as
comprehending, not only such things as they signify according to
G their natural import, but also those things which the interpretation
clause declares that they shall include.”It was, therefore held that
since Entry 127 is a specific entry in a fiscal statute, the general entry

6
2008 (9) SCR 496
H 7
2004 Supp(2)SCR 39
HEINZ INDIA LIMITED v. THE STATE OF KERALA 433
[S. RAVINDRA BHAT, J.]

(Entry 79) had to give way to the specific entry. The court observed A
that:
“though the Nycil Prickly Heat Powder is used for the care
of the skin and not cure of the skin and though it contains a
small quantity of Chlorphenesin, which has curative effect;
in view of the specific entry, it has to be classified only under B
Entry 127 of First Schedule to the KGST Act and not under
Entry 79 of the Act which speaks of medicines and drugs.
Heinz is aggrieved by these findings.
II
C
6. GSK appeals against the judgment of the Madras High Court.
They are in relation to two assessment years, i.e., 1993-94 and 1994-95.
In both these cases, the assessing officer levied tax at the rate of 16 %
under Entry 1(iii) of Part F of the First Schedule to the TNGST Act,
rejecting the assessee’s(which was Heinz, initially) claim to levy tax at
the rate of 5 % for the first sale of Nycil prickly heat powder on the D
ground that it is a medicine or drug under Entry 20-A of Part C of the
First Schedule to the TNGST. The Appellate Assistant Commissioner
affirmed the view of the assessing officer. 8 Heinz approached the
Appellate Tribunal, which accepted its plea, and held that the product
was a medicine or drug, and classifiable as such.9 The revenue’s appeal E
to the Madras High Court succeeded. Heinz’s unit was during the
interregnum, taken over by GSK.
7. The High Court, by its impugned judgment, noted that the product
is subject to license under the Drugs and Cosmetics Act, 1940 [hereafter
“Drugs Act”]. The court also noticed the Kerala judgment and remarked F
that the difference between the two enactments (KSGST Act and
TNGST Act) is that in the latter, itis the explanation which clarifies that
any of the items even if medicated or as defined in Section 3 of the
Drugs and Cosmetics Act will fall under the Entry I(iii) of Part ‘F’
of the First Schedule. The Madras High Court was of the opinion that
the wording of the two enactments did not make any difference, even G
though one had an inclusive definition and another includes the
product,through explanation. The Madras High Court, therefore held
that Nycil prickly heat powder “is a toilet powder”though the
8
Vide order dated 19.02.2001
9
Vide order dated 30.08.2001 in STA No 616/99 H
434 SUPREME COURT REPORTS [2023] 6 S.C.R.

A manufacturer held a license under the Drugs Act and that such a
circumstance fell within the mischief of the Explanation to Entry I (iii) to
Part F of the First Schedule.
8. The impugned judgment of the Madras High Court relied on
the decision of the Kerala High Court which had considered medicated
B talcum powder after going through the various definitions of “drug”,
“medicine”, “cosmetic” and “talc”, and ultimately holding that medicated
talcum powder includes prickly heat powder. The Kerela High Court
had observed that:
“34. The ingredients of Nycil powder are chlorphenesin B.P.
C one percent, zinc oxide I.P. 16 per cent, boric acid I.P. 16 per
cent, starch I.P. 51 per cent, talc 100 per cent. Chlorphenesin
is contained in Nycil powder to the extent of only one per
cent and the other antiseptic medicinal agents are comprised
to the extent of 32 per cent and the rest of the materials which
go into the making of Nycil powder are composed of starch
D and talc. Nycil prickly heat powder contains chlorphenesin,
a product specifically meant for treatment of skin disease.
The inclusion of this medicine in the composition makes all
the difference. It is this addition of medicine which changes
its basic character. Therefore, the product in question is not
E merely talcum powder in view of the presence of chlorphenesin,
though in a small quantity, though the base was purified talc.
Relying upon the findings of the Kerela High Court, Madras High
Court further observed that:
16. The Kerala High Court rejected the contention as to the
F theory of medicine and also after considering the basic
ingredients of prickly heat powder, came to the conclusion
that the base product is only a purified talc. We are also of
the view that after considering the explanation to the main
entry, it is only a medicated talcum powder and it certainly
G includes prickly heat powder also. We agree with the reasoning
of the Kerala High Court and hold that the nycil prickly heat
powder is not a “drug” and it is only a medicated talcum
powder. We are also informed that M/s Heinz India Limited,
the petitioner-assessee before the Kerala High Court, had
purchased the manufacturing unit of the respondent- assessee
H
HEINZ INDIA LIMITED v. THE STATE OF KERALA 435
[S. RAVINDRA BHAT, J.]

before us in respect of prickly heat powder. Accordingly, we A
answer the issue in favor of the Revenue and against the
assessee. Even though number of judgments were cited by
both the counsel in support of their contentions, it is seen
that the Kerala High Court has considered all those judgments
in detail under the various enactments like Central Excise
B
Act and the various State Sales Tax Act enactments. Therefore,
it is not necessary to once again consider all those judgments
cited by both the learned counsel, since the issue is already
settled by the judgment of the Kerala High Court in the case
of Heinz India Limited. Under these circumstances, we set
aside the orders of the Tribunal and restore the orders of the C
assessing authority. The tax case revisions are allowed.”
III
9. On behalf of Heinz, Mr. S.K. Bagaria, learned senior counsel,
argued that “Nycil” is the trade name under which the manufacturer
markets the substance known as ‘Chlorphenesin’. The Nycil powder D
contains zinc oxide and boric acid and they form 32% of the total contents
of Nycil powder. The rest of the material is starch and talc. Nycil powder
is devised so as to retain skin cleanliness in order to protect it against
prickly heat and infection. It also gives freshness and comfort. It
consequently falls under Entry 79 of the first schedule to KGST Act. E
10. Learned senior counsel relied on B.Shah & Company v State
of Gujarat10 (hereafter “Shah & Co”), and urged that Chlorphenesin
is a potent antifungal, antibacterial and trichomonicidal substance of low
toxicity. It is effective against common dermatophytes causing tinea pedis
(Athelet’s foot) and other dematomycoses, epidermophyton, floccosum F
and the various trichophyton, species such bacteria as streptococci,
staphyloccocci, coliform organisms and clostridii. Nycil is effective in
eliminating pruritus ani and pruritus vulvae. Pruritus ani and pruritus vulvae
are frequently of bacterial or fungal origins, or the lesions may become
infected with bacterial or fungi, and Nycil is effective in eliminating such
organisms. G
11. In Shah & Co (supra), it was held thatNycilas powder or
ointment is recommended for the treatment of prickly heat and dhobie

10
(1971) 28 STC 5 (Guj) H
436 SUPREME COURT REPORTS [2023] 6 S.C.R.

A itch and active skin protection during ringworms and other fungicidal
infections. It was submitted that Nycil powder is suitable for the initial
treatment of acute mycotic infection since it is an absorbant, in addition
to exercising its fungicidal action. It was argued that the ingredients of
Nycil powder are Chlorphenesin B.P. 1%; Zinc Oxide I.P. 16%; Boric
Acid 16% Starch I.P. 51% and Talc. Thus, about one-third (33%) of its
B
ingredients are medicinal products.It was pointed out that the face of
the container, in which the product is sold, contains the following
description:
“Nycil contains chlorphenesin the antibacterial and
antifungal agent. It actively prevents prickly heat and protects
C the skin from sores, dhobie itch, and athlete’s foot.”
12. It was argued that under Section 3(b) of the Drugs Act, “drug”is
defined as “including all medicines used for internal or external
use of human beings or animals intended to be used for mitigation
or prevention of any disease or disorder”. “Cosmetics” under Section
D 3(aaa) of the said Act means, “any article intended to be sprinkled
or sprayed or introduced or otherwise applied to a human body for
cleansing, beautifying, promoting attractiveness or altering the
appearance”, which also includes any article intended for use as a
component of cosmetic. To bring or classify an article under Entry 79 of
E the First Schedule, the article must be a medicinal formulation or
preparation which is ready for use either internally or externally for
treatment or mitigation or prevention of diseases or disorders in human
beings or animals. “Treatment” relates to diseases or disorders. Though
medicinal formulations or preparation,can be used internally or externally,
unless such use is by way of treatment of a disease or disorder in human
F beings or animals, it cannot be brought under the category of medicine.
Clearly, in this case, Nycil powder is used to treat several dermatological
conditions, including prickly heat. In fact, there is no medical treatment
for that condition other than the use of Nycil.
13. It was argued that having regard to the above circumstances,
G Nycil prickly heat powder, which is used only to absorb sweat and moisture
from the body and to keep away rashes in human beings, should be
considered to be either a “drug” or “medicine”-in view of the composition,
it is nothing but a medicinal preparation used as such and for the purpose
for which talcum powder is used.
H
HEINZ INDIA LIMITED v. THE STATE OF KERALA 437
[S. RAVINDRA BHAT, J.]

14. Learned senior counsel urged this court to follow the decision A
in Puma Ayurvedic Herbal (supra) where the assessee’s claim that its
various products, including herbal powders, were medicaments, was
considered. The court adopted a twin test to consider whether any item
is a drug, or medicament, or cosmetic. The first is whether, the item is
commonly understood as a medicament i.e. the common parlance test.
B
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
is crucial. The second is, whether the ingredients are described in the
medical literature, as necessary for healing.
15. Learned senior counsel submitted that in B.P.L C
Pharmaceuticals v. Collector of Central Excise11 (hereafter “B.P.L
Pharmaceuticals Ltd.”),”Selsun Shampoo” was under consideration
for purposes of Central Excise classification. The manufacturers claimed
that the shampoo was a medicated one, meant to treat dandruff, a scalp
disease. This court took note of the preparation, label, literature, character, D
common and commercial parlance and held the product was classifiable
as a medicament, asit was not an ordinary shampoo of common use but
was meant to cure a particular scalp or hair disease.After the cure, it
was not meant to be used in the ordinary course. Muller & Phipps
(India) Ltd (supra) was next relied on to urge that similar to this case,
“Johnson Prickly Heat Powder” was held to be a medicament as it E
was “not an ordinary talcum powder but a powder to be used to get
rid of the problem of prickly heat”.
16. In Ponds India (supra), the court had to consider whether
white or yellow petroleum jelly (non-perfumed) sold as “Vaseline” was
a “drug” or a “cosmetic”. It was urged that the court took note of the F
fact that the assessee was a licensee under the Drugs Act and that
cosmetics within the meaning of the provisions were not covered in the
Schedule to the exemption notification. It was pointed out that this court
had held that while interpreting an entry in a taxing statute, the court’s
role is to consider the effect of the law, upon considering it from different G
angles. Different tests are laid down for the interpretation of an entry in
a taxing statute namely dictionary meaning, technical meaning, users
point of view, popular meaning etc. While the purpose of a statute i.e. of

11
(1995)3 SCR 1235 H
438 SUPREME COURT REPORTS [2023] 6 S.C.R.

A collection of tax is important, yet that itself would not mean that an
assessee would be made to pay tax although he is not liable therefor, or
to pay a higher rate of tax when he is liable to pay at a lower rate. The
court held that Vaseline was a drug, in that case. Learned senior counsel
also relied on Union of India v Vicco Laboratories12 where the claim
was that ‘ViccoVajrudanti’ and ‘ViccoTermeric’ (dental powder and
B
turmeric powder) were ‘ayurvedic medicines’. The issue had been
decided by the Supreme Court in favour of the assessee, initially, which
was sought to be re-opened. The court held that to be impermissible, as
the goods had been declared as drugs.
17. Learned senior counsel relied heavily on Commissioner of
C Central Excise v Hindustan Lever Ltd 13 (hereafter “Hindustan
Lever”) and urged that merely because a particular product is
substantially for the care of skin and simply because it contains subsidiary
pharmaceutical or antiseptic constituents or is having subsidiary curative
or prophylactic value, it would not become medicament and would still
D qualify as the product for the care of the skin. It was stressed that the
onus is on the revenue that the classification sought by it (if it claims the
product not to be a drug or medication, but a cosmetic), to discharge it
with proof.
18. It was urged, lastly by relying on Collector of Central Excise
E v Wockhardt Life Sciences Ltd14., (hereafter “Wockhardt Life Sciences
Ltd”) that the “common parlance test” or the “commercial usage
test” is most appropriate. Learned counsel relied on the following
observations:
“33. There is no fixed test for classification of a taxable
F commodity. This is probably the reason why the ‘common
parlance test’ or the ‘commercial usage test’ are the most
common (see A. Nagaraju Bros. v. State of A.P. [1994 Supp
(3) SCC 122] ). Whether a particular article will fall within a
particular tariff heading or not has to be decided on the basis
of the tangible material or evidence to determine how such
G an article is understood in ‘common parlance’ or in
‘commercial world’ or in ‘trade circle’ or in its popular sense
meaning. It is they who are concerned with it and it is the
12
2007 (12) SCR 534
13
2015 (10) SCC 742
H 14
(2012) 5 SCC 585
HEINZ INDIA LIMITED v. THE STATE OF KERALA 439
[S. RAVINDRA BHAT, J.]

sense in which they understand it that constitutes the definitive A
index of the legislative intention, when the statute was enacted.
19. The submissions of learned senior counsel, in Heinz were
substantially adopted on behalf of GSK, in the Tamil Nadu case. In
addition, Ms. CharanyaLaxmikumaran, learned counsel urged that the
statute in TGST Act is different, because in the Entry, relied on by the B
revenue, is dependant solely on the Explanation [to Entry I (iii) of Part F
of the First Schedule]. However, the product, by its description, purpose,
and application of the common parlance test, squarely fell within Entry
20A of Part C of the First Schedule, which were medical preparations,
to be used internally or meant for external use or application “for
treatment of diseases or disorders”. It was underlined that the C
exclusion from this entry was of products capable of use as creams,
hair oils, tooth pastes,tooth powders, cosmetics, toilet articles, soaps
and shampoos. Learned counsel submitted that the specific mention of
one class of powders, i.e. tooth powder, and use of “cosmetic” with
other expressions, clarifying that if the use of the product was only or D
predominantly as cosmetic, would it not fall under Entry 20A. It was
submitted that having regard to the literature and the essential purpose
of Nycil powder, it did not fit the description as a cosmetic [which is
excluded], even if the Explanation to Entry I (iii) of Part F were taken
into account. Thus, it has to be treated as a medicine.
E
20. Learned counsel relied on S. Sundaram Pillai v V. R.
Pattabiraman15 and urged that the Explanation, to Entry I (iii) has to be
considered in the context of the established rule that while a proviso
excepts something out of the enactment which would otherwise be within
its purview yet, if the text, context or purpose so require a different rule
may apply. Likewise, an explanation is to explain the meaning of words F
of the section but if the language or purpose so require, the explanation
can be so interpreted. All that the explanation did was to say that if the
exclusion of cosmetic articles from Entry 20 per se did not result in its
falling within the Entry relating to cosmetics, i.e. Entry I of Part F. It
continued to be essentially a medicine, for prickly heat. G
16
21. Next, Share Medical Care v Union of India was relied
upon, to urge that if two interpretations are possible, that favouring the
assessee should be adopted. Pappu Sweets and Biscuits v. Commr. Of
15
[1985] 2 SCR 643
16
2007 (3) SCR 44 H
440 SUPREME COURT REPORTS [2023] 6 S.C.R.

A Trade Tax, U.P 17 (hereafter “Pappu Sweets and Biscuits”) and
Collector of Excise v. M/s Parle Exports (P) Ltd18 were cited for the
argument that the words used in the provision, imposing taxes or granting
exemption should be understood in the same way for which they are
understood in ordinary parlance in the area in which the law is in force
or by the people who ordinarily deal with them.
B
IV
22. Mr. Pallav Sisodia, learned senior counsel appearing on behalf
of the State of Kerala, urged that the correct test to be applied is whether
the product is capable of use as a medication. He relied on Collector
C of Central Excise v CIENS Laboratories 19 (hereafter “CIENS
Laboratories”) to say that this court had elaborately considered all
relevant factors, and devised the following test:
“19. Thus, the following guiding principles emerge from the
above discussion. Firstly, when a product contains
D pharmaceutical ingredients that have therapeutic or
prophylactic or curative properties, the proportion of such
ingredients is not invariably decisive. What is of importance
is the curative attributes of such ingredients that render the
product a medicament and not a cosmetic. Secondly, though
a product is sold without a prescription of a medical
E practitioner, it does not lead to the immediate conclusion that
all products that are sold over across the counter are
cosmetics. There are several products that are sold over-the-
counter and are yet, medicaments. Thirdly, prior to
adjudicating upon whether a product is a medicament or not,
F Courts have to see what the people who actually use the
product understand the product to be. If a product’s primary
function is “care” and not “cure”, it is not a medicament.
Cosmetic products are used in enhancing or improving a
person’s appearance or beauty, whereas medicinal products
are used to treat or cure some medical condition. A product
G that is used mainly in curing or treating ailments or diseases
and contains curative ingredients even in small quantities, is
to be branded as a medicament.”
17
1998 (Suppl)(2) SCR 119
18
1988 (Suppl)(3) SCR 933
H 19
2013 (14) SCR 38
HEINZ INDIA LIMITED v. THE STATE OF KERALA 441
[S. RAVINDRA BHAT, J.]

23. It was submitted that the expression “medicated” has great A
significance, because it implies that a substance is filled with, or covered
in medicine, or medication. Learned counsel relied on the judgment of
this court, in Union of India (UOI) &Ors v Leukoplast Private Limited
&Ors20 where the assessee’s contention that a surgical pad medicated
with Nitrofurozone was not a patent or proprietary medicine, was
B
rejected. The court noted that the addition of a small quantity of
Nitrofurozone after rendering the pad sterile, made it a medicine.
24. It was submitted that the intention of the legislature was to
ensure that the article fell within the cosmetic class of products while
classifying it. Therefore, the expression “medicated” was used, in
conjunction with “talcum powder”. When consciously the law classified C
the goods and grouped them together as part of one entry, the court has
to give effect to their plain intendment. Thus, the inclusion of “talcum
powder” and “medicated talcum powder” under the same entry, i.e.
Entry 127 was by design, to ensure that the product was not classified
elsewhere. It was submitted that mere use of “powder” or “talcum D
powder” would not have covered Nycil powder as a cosmetic, because
it had certain ingredients that could be preventive and curative. However,
pre-fixing “medicated” to “talcum powder” rendered the issue, beyond
debate.
25. It was submitted that products which are sold over the counter E
are sometimes hybrid in nature, such as lozenges, cough drops, which
double up both as curative of certain ailments, as well as sweets or
eatables. Likewise, Nycil powder has dual use: it can be used as a
cosmetic,but has a medicinal use as well. However, the statute in this
case, clearly requires its classification as a cosmetic, along with others,
in view of the specific and unambiguous use of the term “medicated F
talcum powder”.
26. Learned counsel for the revenue relied on Hamdard (Wakf)
Laboratories (supra) and N.D.P. Namboodripad (Dead) by LRs. v.
Union of India21 and submitted that when an interpretation clause uses
the word “includes”, it is meant to be extensive. The term ‘and includes’ G
is intended to rope in items which would not be part of the meaning, but
for the definition the words ‘includes’ thus, means ‘comprises’ or ‘consists
of’.
20
1994 (1) SCR 343
21
2007 (3) SCR 769 H
442 SUPREME COURT REPORTS [2023] 6 S.C.R.

A 27. Mr. K. Radhakrishna, learned senior counsel appearing for
the revenue, in the Tamil Nadu case, contended that the history of the
legislation is a decisive factor to be taken into account, while determining
the proper classification of a product. It was pointed out that two factors
are important: one, that the entry (entry 20, Part C of the First Schedule
which deals with “medicines”) was amended in 1994. Before amendment
B
(on 01.04.1994), the entry clearly stated that preparations or formulations
that were “capable of being used as creams, hair oils, tooth pastes,
tooth powders, cosmetics, toilet articles, soaps and shampoos” were
to be “excluded”. For the same period, cosmetics (described as scents,
hair oils etc, and falling in Entry 1 of Part F of the First Schedule) included
C talcum powder. Two, the placement of talcum powder, with lipsticks, lip
salve, nail polish, nail varnishes, nail brushes, toilet powders, baby powders,
talcum powders, powder pads, etc. clearly established that all manner of
talcum powder fell within the entry, i.e. Entry 1(iii). After amendment,
with effect from 01.04.1994, the matter was placed beyond any
controversy, by the explanation, which was added. The explanation
D
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 clearly brought within the fold of Entry 1, Part F medicated
talcum powder, regardless that the license to manufacture it, was under
E the Drugs Act.
28. Learned senior counsel highlighted that the Madras High Court,
in the impugned judgment, had considered the meaning of the expressions
“drug” and “cosmetic” under the Drugs Act, and also taken note of the
dictionary meanings of those terms. Learned senior counsel relied on
F Dattatraya Govind Mahajan &Ors v. State of Maharashtra &Anr22
and Mrs. Zakiya Begum &Ors v. Mrs. Shanaz Ali &Ors23 and urged
that though a provision may be termed as an explanation, the court must
construe it according to its plain language, to give effect to legislative
intent. Learned senior counsel’s submission was that the impugned
judgment correctly inferred and found that the product, Nycil prickly
G heat powder, on the plain terms of the statute, was a cosmetic, especially
in view of the Explanation which particularly referred to whether the
product “is medicated” or not, and irrespective of whether it is under a
license issued under the Drugs Act.
22
1977 (2) SCR 790
H 23
2010 (9) SCR 692
HEINZ INDIA LIMITED v. THE STATE OF KERALA 443
[S. RAVINDRA BHAT, J.]

V A
The Provisions: KGST Act
29. In terms of Section 5 (c) of the KGST Act, goods specified in
the First Schedule, were subject to sale at first point. The revenue alleged
that Nycil prickly heat powder, the article in question is subject to levy as
a cosmetic. Heinz, on the other hand, contended that it is a drug, or B
medication.
30. Entry 79 of the First schedule to the KGST Act reads as
under:
“Medicines and Drugs including allopathic, ayurvedic, C
homeopathic, siddha and unani preparations and glucose IP.”
31. Entry 127 of the First Schedule to the KGST Act reads thus:
“Shampoo, Talcum Powder including medicated talcum
powder, Sandalwood Oil, Ramacham Oil, Cinnamon Oil, other
perfurmeries and cosmetics not falling under any other entry D
in this Schedule”.
The Provisions: TNGST Act
32. In terms of Section 3 of the TNGST Act, every dealer [other
than the dealer, casual trader or agent of a non- resident dealer
referred to in clause (ii)], whose total turnover for a year exceeds E
` 3 lakhs is subjected to sales tax levy.
33. GSK, the assessee, contends that the product, Nycil prickly
heat powder is a medication or drug, classifiable under Entry 20 of Part
C, which reads as follows:
F
“Part C of the First Schedule.
“Entry 20(A)
(A) Medicines conforming to the following description:
Any medicinal formulation or preparation ready for use
G
internally or externally for treatment or mitigation or
prevention of diseases or disorders in human being or animals
(excluding products capable of being used as creams, hair
oils, tooth pastes, tooth powders, cosmetics, toilet articles,
soaps and shampoos), but including
H
444 SUPREME COURT REPORTS [2023] 6 S.C.R.

A (i) Allopathic medicine.
(ii) Other medicines and drugs including ayurvedic,
homeopathic, siddha and unani preparations.
(iii) Medicinal mixtures or compounds, the components of
which have not already suffered tax.
B
(iv) Surgical dressing which expression shall include adhesive
plasters, adhesive plaster dressing, gypsona plaster of paris
and bandages, velroc pop bandages, elastro crape bandages,
gauze, wadding gauze, lint and cotton wool poultices and
similar articles impregnated or coated with pharmaceutical
C substances put up in forms or packing for surgical purposes
which have been sterilized and conform to the accepted
standards of the medical profession.
(v) Pharmaceutical and surgical products of plastic and rubber
including gloves, aprons and caps.”
D
Cosmetics fall in Entry 1 of Part F of First Schedule:
“Part F
1 (i) Scents and perfumes in any forms excluding doop and
agarbathis but including aragaja, javvadu and punugu.
E (ii) Hair oils, hair creams, hair dyes, hair darkeners, hair
tonics, brilliantines, pomades and vaselines and all hair
applicants other than shampoos mentioned in item 4 of the
Sixth Schedule.
(iii) Lipsticks, lip-salve, nail polishes, nail varnishes, nail
F brushes, beauty boxes, face powders, toilet powders, baby
powders, talcum powders, powder compacts, powder pads
and puffs, toilet sets made of all materials (with or without
contents) toilet sponges, scent spray, depilatories, blemish
removers, eye liners all sorts, eye shadow, eyebrow pencils,
G eyelash brushes, eau de cologne, solid colognes, lavender
water, snows, face creams, all purpose creams, cold creams,
cleaning creams, make-up creams, beauty creams, beauty milk,
cleaning milk, hair foods, skin tonics, complexion rouge, nail
cutters, sanitary towels and napkins, astringent lotions, pre-
shave and aftershave lotions and creams, moisturisers of all
H sorts and personal (body) deodorant.”
HEINZ INDIA LIMITED v. THE STATE OF KERALA 445
[S. RAVINDRA BHAT, J.]

By amendment to the TNGST Act, in 1994, the following A
explanation was added, below Item I (iii), Part F, of the First Schedule:
“Explanation- Any of the items listed above even if medicated
or as defined in section 3 of the Drugs and Cosmetics Act,
1940 (Central Act XXIII of 1940) or manufactured on the
licence issued under the said Act will fall under this item.” B
VI
34. The assessees contends that the product is sold under the
trade name Nycil powder.They market the substance known as
‘Chlorphenesin’. Nycil powder contains zinc oxide and boric acid. They
constitute 32% of the total contents of Nycil.The rest is starch and talc. C
Nycilpowder, it is said, is designed to keep the skin clean and offer
protection against prickly heat and infection besides giving comfort and
freshness. Therefore, it would fall under Entry 79 of the First Schedule
to the KGST Act. The nature, composition and property of Nycilpowder,
was set out by the Gujarat High Court in the case of Shah & Co(supra): D
“Nycil Powder has the following features and attributes:
(1) Chlorphenesin, being a medical substance was introduced
as a result of original work in the British Drug House Research
Laboratories. “Nycil” is the trade name under which the British
Drug House product of chlorphenesin is manufactured and E
marketed.
(2) Chlorphenesin is a potent antifungal, antibacterial and
trichomonicidal substance of low toxicity. Organisms against
which it is effective include the common dermatophytes causing
tinea pedis (Athelct’s foot) and other dematomycoses, F
epidermophyton, floccosum and the various trichophyton
species such bacteria as streptococci, staphyloccocci, coliform
organisms and clostridii. Nycil is effective in eliminating
pruritus ani and pruritus vulvae. Pruritus ani and pruritus
vulvae are frequently of bacterial or fungal origins, or the
G
lesions may become infected with bacterial or fungi, and Nycil
is effective in eliminating such organisms.
(3) Nycil in the form of powder or ointment is recommended
for the treatment of prickly heat and dhobie itch and active
skin protection during ringworms and other fungicidal
H
446 SUPREME COURT REPORTS [2023] 6 S.C.R.

A infections. Nycil powder is particularly suitable for the initial
treatment of acute mycotic infection as it absorbs in addition
to exercising its fungicidal action.
(4) The ingredients of Nycial powder are as under:
(i) Chlorphenesin B.P. 1%
B
(ii) Zinc Oxide I.P 16%
(iii) Boric Acid 16%
(iv) Starch I.P. 51%
(v) Talc 100%
C
The above composition of Nycil powder shows that it contains
medicinal articles to the extent of 33 per cent.
(5) On the sample bottle of Nycil powder, produced before
the lower au thorities, on its one side the following was found
printed: “nycil for Prickly Head and Active Skin Protection”.
D
On the other side, the following was found to have been
printed: “Nycil contains chlorphenesin the antibacterial and
antifungal agent. It actively prevents prickly heat and protects
the skin from sores, dhobie itch, and athlete’s foot.” The
formula of Nycil powder is also printed on the container. The
E Tribunal has made the following pertinent observations as
regards the container of the Nycil powder:
“It will be noticed that the article is not called medicated
or talcum powder or powder. No name is given except
‘Nycil’ which as stated above is only a trade name of the
F different products manufactured by British Drug House.
The article manufactured is packed in a long and round
container of plastic. It has a separate cover of plastic.
The contents are also covered by a small plastic cover which
contains spaces for making holes. The powder is white in
colour and perfumed and in general appearance is not
G different from the white talcum or such other powders.”
(6) The medical substances used as ingredients in the
manufacture of Nycil powder are Indian Pharmaceutical or
British Pharmaceutical articles for the use of which licence
is necessary. Licence is also necessary under the Indian Drugs
H
HEINZ INDIA LIMITED v. THE STATE OF KERALA 447
[S. RAVINDRA BHAT, J.]

Control Act for manufacturing, stocking or selling Nycil A
powder and the licence has accordingly been issued. The
Government of India, Ministry of Finance, has held and
directed that Nycil powder should be assessed to duty as “P.
and P. Medicines” under item No. 14E of the Central Excise
Tariff.”
B
35. The revenue contends- in the Kerala case, that Nycil prickly
heat powder is “medicated talcum powder” since there is a separate
entry for medicated talcum powder (Entry 127). It, therefore,has to be
classified under Entry 127 of the First Schedule to the KGST Act. In the
Tamil Nadu case, it is contended that the exclusion of products capable
of being used as cosmetics from Entry 20 in Part C, on the one hand, C
and the inclusion of talcum powder, in Entry 1 of Part F, as cosmetics,
read with the explanation to Entry 1, is decisive that the proper
classification of the product is as a cosmetic.
36. In Hindustan Lever (supra) the product, Vaseline Intensive
Care Heel Guard, was held to be a medicament under Chapter 30 of D
Central Excise Tariff Act, 1985 (“CETA”) (Item 3003.10, as a patent or
proprietary medicine).The court took note of the definition of medicament
(Note 2(i) to Chapter 30) which were goods “other than foods or
beverages such as diabetic, or fortified foods or beverages” not
falling in Chapter heading 30.03 or 30.04 comprising of two or more E
constituents for “therapeutic or prophylactic uses” or “unmixed
products” suitable for such uses. The court also noticed that “patent or
proprietary medicaments” were drug or medicinal preparations in any
form to prevent, or treat ailments which bears a name on the container
a name “note specified in a monograph” in a pharmacopoeia,
formulator or other publications or whose brand name is registered as a F
medicine. The court took note of a number of previous judgments,
especially CIENS Laboratories (supra),Muller and Phipps (India) Ltd
(supra); Puma Ayurvedic Herbal (supra) and B.P.L Pharmaceuticals
(supra) and, after considering that the product in question was developed
specially to treat fungal infection, having antifungal properties, held it to G
be classifiable as medicinal, meant for therapeutic use, to treat cracked
heels.
37. In CIENS Laboratories(supra) too, the proper classification
of a moisturising cream – whether it was a drug, a medicament, under
Chapter 30, CETA, or a beauty or skin care product under Chapter 34 H
448 SUPREME COURT REPORTS [2023] 6 S.C.R.

A was involved. The court concluded that having regard to the product’s
ingredients, it was not a mere skin care product, but meant to treat skin
complaints like “fissure feet, dry scaly skin conditions, ichthyosis
etc”, and that it had therapeutic or prophylactic values. The court had
followed B.P.L Laboratories (supra).
B 38. The context of B.P.L. Laboratories (supra) was again whether
the Selenium Sulphide lotion was a medicament under Chapter 30 CETA
(sub heading 3003.19) or a cosmetic (Chapter 33, sub heading 3305.90).
The court rejected the revenue’s contentions, holding that the article
was a medicament used to treat Seborrheic dermatitis (dandruff);
manufactured under drug license, the drug controller had held its
C ingredient, i.e., Selenium Sulphide to be in therapeutic concentration and
that it was included as a drug in the National Formulatory, USA.The
court resolved the issue of interpretation, having regard to the Chapter
Notes and General Rules of Interpretation, as well as the language of
the specific entries in question. Other factors, such as that it was
D manufactured under a drug licence; the Food and Drugs Administration
had certified it as a drug; that the Drug Controller had categorically
opined that Selenium Sulphide present in Selsun was in a therapeutic
concentration; that the brand name “Selsun” was derived from the name
of the drug Selenium Sulfide, all weighed into the conclusion recorded
by the court.
E
39. In Muller & Phipps (India) Ltd (supra),the dispute was with
respect to prickly heat powder sold under the brand “Johnson’s Prickly
Heat Powder” – whether it was medicament covered under Chapter 30
CETA, or beauty and skin care item.This Court noted the previous ruling
in B.P.L. Pharmaceuticals Ltd. (supra) and after noting the ingredients
F of the product as well as the Harmonised System of Nomenclature
(HSN) concluded that as to the manner in which the goods had been
treated earlier - as medicament on the basis of commercial parlance and
understanding, - it had to be classified as such. This court also noticed
the judgment in Collector of Central Excise v. Wood Crafts Products
G Ltd.24 and held that Central Excise Tariffs are based on internationally
accepted nomenclature in HSN; consequently, disputes relating to
classification had to, as far as possible, accord with the nomenclatures
in HSN.

24
H (1995) 3 SCC 454
HEINZ INDIA LIMITED v. THE STATE OF KERALA 449
[S. RAVINDRA BHAT, J.]

40. The decisions relied on have substantially been on the basis of A
classification under the CETA. Central Excise classifications are
elaborate; the General notes, and Chapter notes, together with the
exclusions, [and further explanations] are developed interpretive tools.
Plus, this court has striven, to the extent possible, to interpret such entries,
in line with HSN classification. In the present case, the distinguishing
B
feature of both the KGST Act and TGST Act, is that neither have general
or chapter notes. This sets the statutes apart from decisions based on
CETA, to a large extent. The court has to, as a principle, interpret the
concerned statutes, in the light of their plain words, and having regard to
their internal guides or aids.
41. In CIENS Laboratories (supra), the court had indicated a C
three-step test to determine, if a product were a medicament or not.
Other tests have been indicated in different judgments. All these may be
summarized as follows:
(i) When a product contains pharmaceutical ingredients with
therapeutic/ prophylactic or curative properties, the proportion of D
the ingredients is not decisive. The curative attributes of the
ingredients render it a medicament and not a cosmetic. (CIENS
Laboratories)
(ii) A product can be sold without a prescription from a medical
practitioner. Yet it does not lead to the conclusion that the sale of E
over-the-counter products are cosmetics. Several products are
sold over-the-counter and are yet, medicaments.(CIENS
Laboratories)
(iii) Before adjudicating whether a product is a medicament or
not, courts have to consider what the people who use the product F
understand it to be. If a product’s primary function is “care” and
not “cure”, it is not a medicament. Cosmetic products are used in
enhancing or improving a person’s appearance or beauty, whereas
medicinal products are used to treat or cure some medical
condition. A product that is used mainly in curing or treating ailments G
or diseases and contains curative ingredients even in small
quantities, is to be branded as a medicament. (CIENS
Laboratories)

H
450 SUPREME COURT REPORTS [2023] 6 S.C.R.

A (iv) Products cannot be classified as cosmetics solely on the basis
oftheir outward packing. (Meghdoot Gramodyog Sewa
Sansthan, UP. v. Commissioner of Central Excise, Lucknow25)
(v) Mixing medical ingredients with other products, or preservatives,
does not alter its character as a medicament (Amrutanjan Ltd. v.
B Collector Central Excise26)
(vi) That a license under the Drugs Act is necessary is not a
determinative or decisive factor always.
42. The formulation of the tests, in all the above decisions was
specific to the products involved and the rival or competing revenue
C entries (and in some cases, exemption notifications).
43. In CIENS Laboratories (supra), the product was a cream
prescribed by dermatologiststotreat dry skin conditions and was also
available in pharmaceutical shops in the market and not primarily intended
for the protection of the skin. Its pharmaceutical ingredients showed
D that it was used for prophylactic and therapeutic purposes. The court
noted that Heading 33.04 of CETA (dealing with beauty or make-up
preparations and preparations for skin care) specifically excluded
medicaments and medicinal preparations used to treat certain complaints,
meant to be under Heading 30.03 (medicaments) or 30.04 (products
E containing pharmaceutical substances used for the medical, surgical, dental
or veterinary purpose). This court held that the product is a medicament
classifiable under Heading 30.03 (medicament) and not a cosmetic
preparation.
44. In Wockhardt Life Sciences Ltd (supra) the products were
F an “Iodine Cleansing Solution USP” and “Wokadine Surgical
Scrub”. This court rejected the revenue’s argument that they were
cosmetics, and held that products, comprising two or more constituents
which were compounded together either for therapeutic or prophylactic
uses, were”Medicaments”. The products in question were primarily used
for the external treatment of human-beings for the purpose of prevention
G of disease. The court said that Medicaments are products which can
be used either for therapeutic or prophylactic usage. As the
productswerebasically and primarily used for prophylactic uses, their

25
[2005] 4 SCC 15
26
H [1996] 9 SCC 413
HEINZ INDIA LIMITED v. THE STATE OF KERALA 451
[S. RAVINDRA BHAT, J.]

classification was proper under chapter sub-heading 3402.90 and, the A
classification under chapter sub-heading 3003 was not correct.
45. In Pappu Sweets and Biscuits (supra), the issue was whether
“toffees” were “sweetmeats” in the context of an exemption notification.
The court ruled that having regard to the object of the notification and
the application of the common parlance test, the term “sweetmeats” B
had to be seen in the context, as confections available in sweetmeat
shops and that toffees were not products to be found in such premises,
as they were produced on an industrial scale.InPuma Ayurvedic
Herbal,several products were considered, of which neem facial pack
(Neemal), anti-pimple herbal powder (Pimplex), herbal facial pack
(Herbaucare), herbal remedy for facial blemishes, hair tonic powder C
(Sukeshi), anti-dandruff oil (Dandika), shishurakshantelandneem tulsiwere
held to be medicinal whereas other products were cosmetic.InMuller
& Phipps (India) Ltd (supra), the product was Johnson’s prickly heat
powder. The revenue contended that it was a cosmetic falling under
Chapter 33, CETA; the assessee contended that it was a drug or D
medication, under Chapter 30. This court went by the official opinion of
the drug administration (“when throughout the meaning given to
products in question not only by the department itself but also by
other departments like Drug Controller and the Central Sales Tax
authorities is that the product in question is a medicinal preparation
should be accepted”). Also, the HSN classification was largely influential E
in the outcome of the case.
46. In Ponds India Ltd.(supra), the question was whether
petroleum jelly, under the brand “Vaseline” was held to be a drug, as it
was used for various skin disorders, and not a cosmetic, as contended
by the state. This court noted the previous litigation history and ruled F
that the consistent classification of the same product, for a number of
years, was as a drug, and not a cosmetic, and the revenue’s conduct in
trying to change the classification without any reason, was unjustified.
47. In all the cases cited, the contest, by and large was whether
the product was a cosmetic, or a drug, under Chapters 30 and 33, CETA. G
The phraseology of the articles grouped together, in one chapter differs
from the phraseology of the other chapters, in that statute. Moreover, to
avoid ambiguity, General Rules of Interpretation, besides chapter notes
have been prescribed. The court went by those rules, and also adopted
the common parlance test. A noteworthy feature is that the court had no H
452 SUPREME COURT REPORTS [2023] 6 S.C.R.

A occasion to consider an entry which was as specific as “medicated
Talcum Powder”. Undeniably, talcum powder is made from talc27, which
is a “common silicate material that is distinguished from almost all
other minerals by its extreme softness” According to the literature
made available to the court, there are medicinal ingredients in Nycil
prickly powder, which is also manufactured under a Drug License. Yet,
B
the State Legislature, in Entry 127, thought it fit to include, while dealing
with cosmetics, such as shampoos, “talcum Powder including
medicated talcum powder.” There can be no two opinions that talcum
powder ipso facto is classifiable as a cosmetic. Yet, the expression
“including” used in Entry 127 has the effect of bringing in [or “pulling
C in”] an entirely different product, which ordinarily may not have been in
the same class, i.e. medicated powder. To rule out any ambiguity, the
legislature specifically referred to a sub class of medicated powders, i.e.
medicated talcum powder. Such specific entries have not come up for
consideration, before this court; as noticed, predominantly, the courts
have ruled that in the context of broad descriptions such as cosmetics or
D
medications, if there are medical ingredients, in a product, which is meant
as a curative or prophylactic product, it would be classifiable as drugs or
medicines. However, the specificity employed by the legislature in this
case, rules out that possibility. Besides, “includes” has been construed
as broadening the sweep of a provision, and at the same time restricting
E its amplitude to the meanings ascribed in the statute. This proposition
was enunciated in Hamdard (Wakf) Laboratories (supra), where it
was held that:
“34. When an interpretation clause uses the word “includes”,
it is prima facie extensive. When it uses the word “means and
F 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.”
The court, in Hamdard (Wakf) Laboratories relied on N.D.P.
Namboodripad (Dead) by LRs. v. Union of India &Ors.28:
G “15. The word “includes” has different meanings in different
contexts. Standard dictionaries assign more than one meaning
to the word “include”. Webster’s Dictionary defines the word
“include” as synonymous with “comprise” or “contain”.
27
https://www.britannica.com/science/talc(last accessed on 02 May 2023 at 9.30 PM)
28
H 2007 (3) SCR769
HEINZ INDIA LIMITED v. THE STATE OF KERALA 453
[S. RAVINDRA BHAT, J.]

Illustrated Oxford Dictionary defines the word “include” as: A
(i) comprise or reckon in as a part of a whole; (ii) treat or
regard as so included. Collins Dictionary of English
Language defines the word “includes” as: (i) to 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,
B
group or a category; (iii) 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 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 includes” C
or “comprises” or “consists of.”
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 D
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 E
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 F
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 G
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

29
1957 (1) SCR 837 H
454 SUPREME COURT REPORTS [2023] 6 S.C.R.

A 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
B 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.
C 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
D 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
E 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
F 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
G 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:

30
1997 Supp (3) SCR 68
31
H 1985Supp (3) SCR123
HEINZ INDIA LIMITED v. THE STATE OF KERALA 455
[S. RAVINDRA BHAT, J.]

“[..] The Explanation to Section 4(4)(d)(i) provides an A
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”
B
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 C
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
D
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 E
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. [..]”
F
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. G
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.

Ankit Gyan Appeals dismissed.
H