The Supreme Court on Monday admitted Heinz India Ltd’s plea against the Kerala government?s decision to impose a higher sales tax rate on the firm?s medicated prickly heat powder Nycil.
The company contends that it was liable to pay sales tax of 20% on Nycil against 8% charged for medicines and drugs, a stand disputed by the state government.
Earlier, the court had issued notice to the state government asking for explanation on why Heinz should pay higher tax on its prickly heat powder rather than 8% charged for medicines and drugs. Heinz has challenged the Kerala High Court?s September 2008 ruling, which held Nycil taxable at 20% as medicated talcum powder rather than at 8% as medicines and drugs. According to the petitioner, Nycil was manufactured under a drug licence issued under the Drugs and Cosmetics Act, 1940, and its active ingredient Chlorphenesin IP was meant to treat, cure and prevent fungus infection, prickly heat sores, etc. The firm said its prickly heat powder should be taxed at 8%, as supplies to drugs and medicines, rather than 20%, as demanded by the state government under the Kerala General Sales Tax Act, 1963.
Heinz also said that it had paid 8% sales tax on its sales of the powder as per the consistent practice throughout the country.
It said Nycil powder was not like an ordinary talcum powder, but a prickly heat powder recommended as a drug for treatment and, therefore, was a medicine. The state government had opposed Heinz’s plea saying Nycil powder was a talcum powder and that some medicines were added to it would not make any difference as the basic character remained the same. The state said the drug licence issued by the authority was only a licence to use chlorphenesin in Heinz’s product and merely the product was manufactured under a drug licence does not mean that the product was a medicine.