When a product in addition to having cleansing properties also keeps diseases and harmful bacteria at bay, it qualifies as medicine even if the medical component in the product is minuscule in terms of quantity or value or both, said the Supreme Court.
detergent or medicament
In the case of Commissioner of Central Excise vs. Wockhardt Life Sciences Ltd, the issue was whether the product manufactured by the respondent was detergent or medicament.
The Revenue's contention was that it was detergent on the basis of ‘common parlance test' and ‘commercial usage test' as bolstered by the fact that the medicinal properties in it were miniscule and incidental, with its predominant use being cleansing.
Pigeonholing its product into ayurvedic begot the manufacturer nil tax status whereas as detergent, it attracted an 18 per cent excise duty.
The Supreme Court, while holding the cleanser in question a medicament, pointed out that the common parlance test and commercial usage test are not sacrosanct and infallible.
It was also not necessary, the Court added, that a product must have curative properties to be labelled a medicine; even preventive properties would do.
(The author is a NewDelhi-based chartered accountant.)