The Telangana High Court recently addressed the classification of six products: Himani Navratna oil, Boroplus antiseptic cream, Boroplus prickly heat powder, Himani Nirog Dant Powder, Lala, and Sona Chandi Chavanprash, determining whether they should be categorized as cosmetics or drugs.

A division bench comprising Justice P. Sam Koshy and Justice N. Tukaramji recently ruled that Himani Nirog Dant Powder qualifies as a cosmetic. However, Sona Chandi Chavanprash, Navaratan hair Oil, Himani Gold Turmeric Ayurvedic Cream, Boroplus Antiseptic Cream, and Boroplus Prickly Heat Powder are classified under the category of drugs.

The court delivered its verdict in the context of a case concerning the classification of products under the Andhra Pradesh General Sales Tax (APGST) Act, 1957. The case centered on six products manufactured by two sister concerns. The Sales Tax Appellate Tribunal (STAT) and the assessee, Himani Ltd., filed Tax Revision Cases against each other, prompting the court's ruling on whether these products should be categorized as cosmetics or drugs.

The STAT, Hyderabad, had initially classified three products—Navaratan Oil, Gold Turmeric Ayurvedic Cream, and Nirog Dant Powder Lal—as cosmetics, while categorizing Boroplus Antiseptic Cream, Boroplus Prickly Heat Powder, and Sonachandi Chavanprash as drugs. This classification was challenged, particularly regarding the latter three products, which the STAT argued should be taxed under Entry 36 of the CGST Act and TGST Act at a higher rate of 20%. The assessee, on the other hand, contested the exclusion of the first three products as drugs, which would have subjected them to a lower duty rate of 10%.

During the proceedings, the court thoroughly examined the characteristics and compositions of each product. For instance, Himani Sonachandi Chavanprash was noted for its formulation with 52 rare herbs and minerals, including gold and silver, and its medicinal benefits were underscored with references to ayurvedic texts like Charaka Samhita and Bhava Prakasha. The petitioner had obtained a license under the Drugs and Cosmetics Act, 1940, asserting the product's classification under Entry 37 of the 1st Schedule. The court acknowledged that cosmetics, defined under Section 3(aaa) of the act, are for external application, while drugs under Section 3(b) encompass substances for internal or external use in diagnosing, treating, mitigating, or preventing diseases or disorders.

Addressing Himani Boroplus Antiseptic Cream, the court highlighted its medicinal nature, supported by its name and label descriptions, which indicated therapeutic properties suitable for treating various skin conditions. This characterization placed it under Entry 35 of the 1st Schedule, distinguishing it from typical cosmetic creams.

Similarly, Himani Boroplus Prickly Heat Powder was recognized not as a cosmetic or toiletry preparation but as a medicated product fulfilling the criteria under Section 3 of the Drugs and Cosmetics Act, warranting classification under Entry 37 rather than Entry 36.

Regarding Himani Navaratan Oil and Himani Gold Turmeric Ayurvedic Cream, the court disagreed with the STAT's classification under Entry 36 as cosmetics. Despite arguments from the Department's counsel, insufficient evidence supported this classification, leading the court to reclassify these products under Entry 37 as drugs.

Finally, Nirog Dant Powder Lal was affirmed as a cosmetic product, a decision that remained unchallenged.

In conclusion, the Telangana High Court's ruling clarified the classification of these products under the APGST Act, providing detailed reasoning based on their compositions and intended uses as cosmetics or drugs.