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Synopsis

The Supreme Court recently upheld the decisions of the Kerala and Madras High Courts that Nycil Prickly Heat Powder cannot fall within the ambit of the category of “medicine”.

The Top Court said that a salutary rule for fiscal legislation interpretation is that words used in the statute must be given their plain meaning and the intention of the legislature must be accepted as it is not the court’s function to give a strained and unnatural meaning to the provision. 

A bench of Justices S Ravindra Bhat and Dipankar Datta dismissed the appeals filed by Heinz India Ltd and another against the Madras and Kerala High Court judgments, holding the manufacturer of medicated prickly heat talcum powder “Nycil” as liable to pay higher tax.

The court said the pointed phraseology in fact concluded 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.

Citing the Tamil Nadu General Sales Tax Act, the court pointed out the law 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,” the apex court said.

Heinz India Ltd had challenged the Kerala government’s decision to impose a higher 20% sales tax rate on Nycil against 8% that was charged for medicines and drugs.

Glaxo Smithkline Pharmaceuticals, which took over Heinz during 1993-95 also raised questions against the Tamil Nadu Government’s similar decision of levying sales tax at a 16% rate against 5% on Nycil under the Tamil Nadu General Sales Tax Act. 

The bench said there was a clear legislative intent 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, thus leaving no scope for the court to any other interpretation.

"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 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 bench said. 

Senior advocate Pallav Sisodia appeared on behalf of the State of Kerala, and senior advocate K Radhakrishna for Tamil Nadu. Senior advocate S K Bagaria argued for Heinz India Ltd.

Case Title: HEINZ INDIA LIMITED v. THE STATE OF KERELA and Connected matters