All webapp-specific runtime dependencies need to go in /WEB-INF/lib
folder.
However, for some unclear reason you named that folder /WEB-INF/libs
. This is obviously wrong.
Rename it back to /WEB-INF/lib
and then it should end up correctly in webapp's runtime classpath. It's already the default folder name when you create a Dynamic Web Project from scratch. You're not supposed to rename those generated folders.
Also make sure that you don't touch anything in project's Build Path property, otherwise things may still possibly fail. Just dropping the JAR in /WEB-INF/lib
folder ought to be sufficient.