IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 4480 OF 2005
|COMMISSIONER OF CENTRAL EXCISE, HYDERABAD |.....APPELLANT(S) |
|VERSUS | |
|M/S SARVOTHAM CARE LIMITED |.....RESPONDENT(S) |
W I T H
CIVIL APPEAL NO. 5752 OF 2015
(arising out of SLP (C) No. 1531 of 2015)
J U D G M E N T
A.K. SIKRI, J.
Civil Appeal No. 4480 of 2005
Respondent herein is the manufacture of 'Ketoconazole
Shampoo' and 'Nizral Shampoo' which are sold in the bottles of 50 ml and 5
ml. Dispute is about the classification of the aforesaid product for the
purposes of payment of central excise duty. The respondent had filed the
declaration classifying the said product under CSH 3003.10 of the Central
Excise Tariff Act, 1985 on the ground that it is basically a medicine.
However, as per the appellant/Revenue, the appropriate classification of
this product is under CSH 3305.99 as it perceives the product as
'preparation for use on on hair'.
Chapter 30 under which CSH 3003.10 falls deals with Pharmaceuticals
products and the aforesaid entry thereof reads as under:
“Patent or proprietary medicaments, other than those medicaments which are
exclusively Ayurvedic, Unani, Siddha, Homoeopathic or Bio-chemic.”
On the other hand, Chapter 33 deals with the products
which fall under the nomenclature 'Essential Oils and Resinoids; Perfumery,
Cosmetic or Toilet Preparation'. The entry CSH 3305.99 thereof is as
under:
“Preparations for use on the hair
-Perfumed hair oils
-Other :
--Hair fixer
--Other”
It becomes clear from the reading of the aforesaid two entries that the
respondent claims that the product in question belongs to the specie of
Pharmaceutical products i.e. medicinal product and is covered by the
expression 'patent or proprietary medicaments'. On the other hand, the case
of the Revenue is that it is simply a shampoo which is to be used for
cleaning hair and is nothing but a 'toilet preparation'. If the product is
to be treated as Pharmaceutical product covered by Entry 3003.10, excise
duty prescribed is 16%. The excise duty of goods covered by Entry 3305.99
is 24%.
The Revenue issued show cause notice demanding differential duty amounting
to Rs.8,12,194. After the reply was given by the respondent along with the
material placed by it before the Adjudicating Authority, the Adjudicating
Authority passed the Order-in-Original dated 18.11.1999 for the period
December, 1998 to April, 1999 confirming the differential duty of
Rs.8,12,194 under Section 4A read with Section 11A of the Central Excise
Act, 1944. In appeal preferred by the respondent, the aforesaid demand was
upheld by the Commissioner (Appeals) vide order in original dated
13.02.2002, resulting in the dismissal of the appeal of the respondent.
Next level appeal filed by the respondent before the CESTAT, Bangalore,
however, yielded results favourable to the respondent, as this appeal is
allowed by the Tribunal vide final Orders dated 18.01.2005 with
consequential reliefs, if any. It was held that there is enormous evidence
to show that the product in question was used for treatment of several
disorders/diseases and it has also been sold by Chemists under the
prescription issued by the Registered Medical Practitioners or the
Hospitals. Therefore, it is a medicinal product and not simply a shampoo
for use of hair. Naturally, the Revenue is not satisfied with the
aforesaid view of the Tribunal and, therefore, has preferred the instant
appeal in this Court.
In his endeavour to demonstrate that the product 'Nizral Shampoo' was
simply a toilet preparation to be used on the hair and could not be
classified as a product belonging to the family of Pharmaceutical products,
Mr. Panda, learned senior counsel appearing for the Revenue, drew our
attention to the orders passed by the Commissioner (Appeals) wherein
findings in respect of this product are arrived at after discussing the
ingredients/properties of the said product. On that basis, it was argued
(as reasoned by the Commissioner (Appeals) as well) that there was no
dispute raised even by the assessee that the product 'Nizral' was basically
a shampoo preparation. Even if it was coupled with therapeutic or
prophylactic properties imparted to it with the presence of an anti-fungal
agent known as 'Ketoconazole', this would not change the basic character of
the product viz. shampoo, which is meant for the use of cleaning hair. It
was argued that such a classification was in conformity with Chapter Note
(6) to Chapter 33 which specified 'shampoos' whether or not containing soap
or organic surface active agent. He further submitted that as per the
packings, labels, leaflet literature, it was apparent that the product in
question was held out commercially as having subsidiary curative or
prophylactic value with main purpose and the main purpose of the produce
was cleaning of scalp and hair. Therefore, Chapter Note (2) of Chapter 33
also got attracted as per which how the product is explained and marketed
by the manufacturer itself becomes the determining factor. It was also
submitted that HSC of Chapter 33 also includes not only shampoos containing
soap and OSAC, but 'other shampoos' as well which would imply that those
products which are essentially shampoos would still be treated as shampoos
even if the subsidiary benefits of using such a shampoo would be curative
in nature. On that basis, submission was that presence of 'Ketoconazole'
which was hardly 2% W/V in the said shampoo making it anti-fungal agent,
would not change the pre-dominant character of the product as shampoo and
turn it into a patent or proprietary medicament classifiable under Chapter
sub-heading 3003.10. The learned senior counsel, in this behalf, drew our
attention to the following justification given by the Commissioner (Appeal)
in his order reflecting that mere 2% of presence of 'Ketoconazole' would
not make any difference:
“It is rather unassailable that active ingredient 'Ketoconazole' is
considered to prophylactic in nature for it to treat the cause of dandruff.
Admitting that the active ingredient 'Ketoconazole' is for prophylactic
for dandruff, it is clear that the product 'Nizral Shampoo' shall stand
excluded from the purview of Chapter 30, in view of Chapter Note 1(d) to
Chapter 30 which lays down that 'Preparation of Chapter 33 even if they
have therapeutic or prophylactic properties' are not covered. On careful
reading of the above Chapter Notes, which are statutory in nature and
binding, a clear finding emerges that the impugned goods have a specific
entry under Chapter 33 in terms of Chapter (6) to Chapter 33. The heading
which provides the most specific description, shall be preferred to
headings providing a more general description as per Rule 3(a) of Rules for
the interpretations of the Schedule. Hence, by all the above statutory
accounts the impugned goods would not permit classification under Chapter
30 of Central Excise Tariff Act, 1985 as medicament, but only as a
'preparation for use on hair”.
It was further argued by Mr. Panda that merely because the respondent was
manufacturing this product on loan/licence basis from Johnson & Johnson
Ltd., with the express permission/ licence of Drug Controller of India and
Food & Drug Administration, would be of no avail to the respondent.
Likewise, even if it was sold by the Chemist would be of no significance as
the claim of the respondent that it could be sold only on specific
prescription of the registered medical practitioner was clearly wrong as
the respondent was widely publishing the product through advertisements
clearly conveying to the users that the same was available with leading
Chemists. Mr. Panda referred to those portions of the order of the
Commissioner (Appeals) where the aforesaid arguments of the respondent were
discussed and discarded. He pleaded that what was to be seen was the pre-
dominant use of the product in question; that is to say whether the product
'Nizral Shampoo' was primarily used as a shampoo or as a medicinal product
and argued that the dominant purpose of the product was to use it as a
shampoo with ancillary/added advantage being prevention of scalp related
infection i.e. dandruff.
To buttress the aforesaid submissions, Mr. Panda took the aid of certain
judgments of this Court. First judgment on which he relied is in the case
of Collector of Central Excise, Shillong v. Wood Crafts Products Ltd.[1],
wherein this Court emphasized that the criteria/classification laid down by
Harmonised System Committee (HSC), established under Article 6 of the
International Convention on Harmonised System, is to be acted upon while
deciding the cases of classification inasmuch as it was an expert body
which was assigned the main function of preparing explanatory notes,
classification opinions or other advice as guides to the interpretation of
the Harmonised System and to secure uniformity in the interpretation and
application of the Harmonised System. It was so held by this Court in the
said judgment in the following manner:
“11. The Statement of Objects and Reasons of the Central Excise Tariff
Bill, 1985 which led to the enactment of the Central Excise Tariff Act,
1985 is indicative of the pattern of the structure of the Central excise
tariff enacted therein. It reads as under:
1. Central Excise duty is now levied at the rates specified in the First
Schedule to the Central Excises and Salt Act, 1944. The Central Excises and
Salt Act, 1944 originally provided for only 11 items. The number of Items
has since increased to 137. The levy, which was selective in nature, to
start with, acquired a comprehensive coverage in 1975, when the residuary
Item 68 was introduced. Thus, barring a few Items like opium, alcohol,
etc., all other manufactured goods now come under the scope of this levy.
2. The Technical Study Group on Central Excise Tariff, which was set up by
the Government in 1984 to conduct a comprehensive inquiry into the
structure of the Central excise tariff has suggested the adoption of a
detailed Central excise tariff based broadly on the system of
classification derived from the International Convention on the Harmonised
Commodity Description and Coding System (Harmonised system) with such
contractions or modifications thereto as are necessary to fall within the
scope of the levy of Central excise duty. The Group has also suggested that
the new tariff should be provided for by a separate Act to be called the
Central Excise Tariff Act.
3. The tariff suggested by the Study Group is based on an internationally
accepted nomenclature, in the formulation of which all considerations,
technical and legal, have been taken into account. It should, therefore,
reduce disputes on account of tariff classification. Besides, since the
tariff would be on the lines of the Harmonised System, it would bring about
considerable alignment between the customs and Central excise tariffs and
thus facilitate charging of additional customs duty on imports equivalent
to excise duty. Accordingly, it is proposed to specify the Central excise
tariff suggested by the Study Group by a separate tariff Act instead of the
present system of the tariff being governed by the First Schedule to the
Central Excises and Salt Act, 1944.
4. The main features of the Bill are as follows:
(i) The tariff included in the Schedule to the Bill has been made more
detailed and comprehensive, thus obviating the need for having a residuary
tariff Item. Goods of the same class have been grouped together to enable
parity in treatment.
xx xx xx
5. The Bill seeks to achieve the above objects.(emphasis supplied)
12. It is significant, as expressly stated, in the Statement of Objects and
Reasons, that the Central excise tariffs are based on the HSN and the
internationally accepted nomenclature was taken into account to "reduce
disputes on account of tariff classification". Accordingly, for resolving
any dispute relating to tariff classification, a safe guide is the
internationally accepted nomenclature emerging from the HSN. This being the
expressly acknowledged basis of the structure of Central excise tariff in
the Act and the tariff classification made therein, in case of any doubt
the HSN is a safe guide for ascertaining the true meaning of any expression
used in the Act. The ISI Glossary of Terms has a different purpose and,
therefore, the specific purpose of tariff classification for which the
internationally accepted nomenclature in HSN has been adopted, for enacting
the Central Excise Tariff Act, 1985, must be preferred, in case of any
difference between the meaning of the expression given in the HSN and the
meaning of that term given in the Glossary of Terms of the ISI.”
He also pointed out that the aforesaid principle contained in Wood Crafts
Products was reiterated in CCE, Hyderabad v. Bakelite Hylam[2] as follows:
“17. Hence for the interpretation of the New Tariff harmonised system of
nomenclature and its explanatory notes are relevant. In the case of
Collector of Central Excise, Shillong v. Wood Crafts Products Ltd. 1995 (3)
SCC 454, this Court, while considering the Central Excise Tariff Act of
1985, has held that looking to the Statement of Objects and Reasons the
Central Excise Tariff under the 1985 Act is based on the Harmonised System
of Nomenclature (HSN) and the internationally accepted nomenclature has
been adopted to reduce disputes on account of tariff classification.
Accordingly, for resolving any dispute relating to tariff classification,
the internationally accepted nomenclature emerging from the HSN is a safe
guide, this being the expressly acknowledged basis of the structure of the
Central Excise Tariff in the 1985 Act and the tariff classification made
therein. In case of any doubt, the HSN is a safe guide for ascertaining
the true meaning of any expression used in the Act.”
9) Mr. Panda also referred to certain decisions of the Tribunals wherein
such shampoos with 2% anti-fungal agents were still treated as shampoos and
not a medicinal product. Notably, among these decisions are (i) Amit
Ayurvedic & Cosmetic Products v. Commissioner[3] and (ii) CCE Vapi v. Beta
Cosmetics[4].
10) Mr. Bagaria, learned senior counsel, appearing for the
respondent/assessee stoutly refuted the aforesaid arguments of the Revenue
laying great emphasis on the plea that the product in question was
basically a medicine which was pre-dominant use. In order to demonstrate
that the product 'Nizral Shampoo' could only be used as medicine and not
like any other general/ordinary shampoo, he pointed out the following
features which stood established on record in the form of plethora of
materials/evidence placed before the authorities below:
(i) The medicinal properties of the product were adequately
emphasized and the product was sold by the assessee on that basis in the
market.
(ii) There was a warning to the patients about the adverse reaction
of the use of this shampoo, if used for a long period.
(iii) The product was essentially described as 'medicine' only and
not as a shampoo meant for cleaning the hair.
(iv) The literature along with the product sold specifically stated
the diseases which could be cured by the use of this shampoo.
(v) Limited period use of the product was suggested, unlike a normal
shampoo which could be used regularly for infinite period.
11) Mr. Bagaria argued that matter needed to be examined keeping in view
the aforesaid essential attributes/characteristics of the product and in
this context, the fact that the product was held out by the respondent to
the public at large as medicine; availability of the said product with the
Chemists; sale of the product on the prescription of a Doctor; assume much
relevancy in treating the product as medicament having therapeutic value
and not as ordinary shampoo.
12) Mr. Bagaria also pointed out that presence of 2% 'Ketoconazole' in
the said shampoo could not be treated as something insignificant. On the
contrary, it was the maximum percentage required to treate the dandruff
inasmuch as presence of more 'Ketoconazole' could be harmful. He further
submitted that if it is less than that, then it may lose its therapeutic
value and for this reason, in those shampoos where the assessee was earlier
putting 1% to 1½% of 'Ketoconazole', the assessee was itself treating the
said product as shampoo only and not as Pharmaceutical product. He
concluded his arguments by submitting that the judgment of this Court in
B.P.L. Pharmaceuticals Ltd. v. CCE, Vadodra[5] squarely covered the issue
involved in this case.
13) We have considered the submissions of counsel for the parties and
find ourselves in agreement with the view taken by the Tribunal holding
that the product in question 'Nizral Shampoo' is classifiable under CSH
3003.10 and not CSH 3305.99.
14) At the outset, we may mention that the product known as 'Nizral
Shampoo' gives the nomenclature of the product as shampoo. However, the
respondent claim that it is a patent or proprietary medicament as it's
essential characteristics is therapeutic in nature. It is the common case
of the counsel for the parties the pre-dominant use of the product in
question is to be taken into consideration while deciding the
classification issue. Therefore, it is to be determined as to whether the
product in question is primarily used as a shampoo or it is used as a
medicament. To find answer to this question, it is necessary to keep in
mind the essential characteristics of the product. When the matter is
examined from the aforesaid perspective we come to the conclusion that the
respondent is correct in submitting that the essential properties of the
product are medicinal in nature. It is clear from the following
description:
“Pharmacodynamics
Ketoconazole, a synthetic imidazole dioxolane derivative ha a potent anti-
fungal activity against dermatophytes, such as Trichophyton sp.
Epidermophyton sp. Microsporum sp. and yeasts, such as candida sp. and
Malassezia furfur (Pityrosporum ovale). Ketoconazole shampoo rapidly
relieves scaling and pruritus, which are usually associated with pityriasis
versicolor seborrhoeic dermatitis and pityriasis capitis (dandruff).
Pharmacokinetics
Percutaneous absorption of Ketoconazole shampoo is negligible since blood
levels cannot be detected, even after chronic use. Systematic effects,
therefore, are not expected.
Indications
Treatment and prophylaxis of infections in which the yeast pityrosporum is
involved, such as Pityriasis versicolor (localized), seborrhoeic dermatitis
and pityriasis capitis (dandruff).
Contra-indications
Known hypersensitivity to Ketoconazole or the excipient.”
The manufacturer has given clear warning and precautions
for the use of this product which are follows:
“Warnings and Precautions
To prevent a rebound effect after stopping a prolonged treatment with
topical corticosteroid it is recommended to continue applying the topical
corticosteroid together with Nizral Shampoo 2% and to subsequently and
gradually withdraw the steroid therapy over a period of 2-3 weeks.
Seborrhoeic dermatitis and dandruff are often associated with increased
hair shedding, and this has also been reported although rarely, with the
use of Nizral Shampoo 2%.”
It is further mentioned as to how the treatment should be
given to a person suffering from various kinds of dandruffs:
“Treatment:
-Pityriasis versicolor; once daily for maximum 5 days.
-Seborrhoeic dermatitis and pityriasis capitis; twice weekly for 2 to 4
weeks.
Prophylaxis:
-Pityriasis versicolor: once daily for a maximum 3 days during a single
treatment course before the summer.
-Seborrhoeic dermatitis and pityriasis capitis: once every one or two
weeks.”
Even the adverse reaction of the treatment are mentioned
by the manufacturers with specific advice that overdoses of this shampoo is
not expected, as is clear from the following:
“Adverse reactions
Topical treatment with Nizral Shampoo 2% is generally well tolerated. As
with other Shampoos, a local burning sensation, itching, irritation and
oily/dry hair may occur, but are rare, during the period of use of Nizral
Shampoo 2%.
In rare instances, mainly in patients with chemically damaged hair or grey
hair, a discolouration of the hair has been observed.
Overdosage
Not expected as Nizral Shampoo 2% is intended for external use only. In
the event of accident ingestion, only supportive measures should be carried
out. In order to avoid aspiration, neither emesis nor gastric lavage
should be performed.”
15) Thus, not only limited period use is stated, another important
feature that appears in the literature supplied by the respondent is the
information for the 'patient', describing the user of the product as a
'patient'. It is as under:
“Patient information
Ketoconazole Shampoo 2%
Nizral Shampoo 2%
You have been advised by your doctor to use this shampoo to treat dandruff.
This leaflet gives you some information that you should keep in mine while
using Nizral Shampoo. It also gives some background information on
dandruff, which is important for you to deal with it. Please read this
leaflet carefully to get the best results from this treatment. Remember
that it cannot answer all your questions, and that you should check with
your doctor for any further information you may require.”
16) The use is suggested only on the advice of a Doctor and there is a
suggestion that Doctor should be consulted for any further information.
The respondent has also provided the literature/material showing that
dandruff is a disorder which affects the hairy scalp. It is generally
triggered by a single celled organism which is kind of fungus, with
scientific name 'Pityrosporum Ovale'. For treatment of this disease,
Nizral Shampoo 2% (i.e. shampoo containing 2% 'Ketoconazole') is shown as
'a new medicine' use whereof cures clears a dandruff. It is suggested that
it should be used once a week and on other days, normal shampoos may be
used which clearly shows that 'Nizral Shampoo' is to be used like a
medicine, unlike other normal Shampoos.
17) We also find that in order to show that the product was used only as
a medicament for curing dandruff and not for using the same for the purpose
of cleaning hair, the assessee filed affidavits of various Doctors.
18) Having regard to the aforesaid material on record, we find that the
case is directly covered by the ratio of this Court's judgment in B.P.L.
Pharmaceuticals Ltd. (supra). That was a case where the assessee was
engaged in manufacture of Selenium Sulfide Lotion which contained 2.5%
selenium sulfide W/V. The assessee was manufacturing this product under a
loan licence from Abbott Laboratories in accordance with Abbott's
specifications, raw materials, packing materials and quality control. It
was sold under the private name 'Selsun'. The assessee in that case
claimed that this product was used in the therapeutic quantity i.e. 2.5%
W/V which was the only active ingredient and other ingredient merely served
the purpose of a bare medium. It was also claimed that the product is
manufactured under a drug licence issued by the Food and Drug
Administration. The assessee, thus, wanted the product to be classified
under heading 3003.19 as Pharmaceutical Product under Chapter 30. However,
the Revenue took the plea that it would fall under sub-heading 3305.90 i.e.
under Chapter 33. Thus, the respective contentions of the Department as
well as the assessee were almost on the same lines as in the present case,
namely, whether the said product was Pharmaceutical product or it was a
cosmetic/toiletry preparation. The only difference was of sub-headings
under those Chapters. This Court went into the essential characteristics
of the product and found it that dominant use of the product was medicinal,
as it was sold only on medical prescription as a medicine for treatment of
disease known as Seborrhoeic Dermatitis, commonly known as Dandruff. It
was manufactured under a Drug Licence; the Food and Drug Administration had
certified it as a Drug; and the Drug Controller had categorically opined
that Selenium Sulfide present in Selsun was in a therapeutic concentration
etc. The relevant passages from the said judgment throwing light on these
aspects are reproduced below:
“19. So far as medicinal properties of the product are concerned it can be
gathered from the technical and/or pharmaceutical references that Selenium
Sulfide has anti-fungal and anti-seborrhoeic properties and is used in a
detergent medium for the treatment of dandruff on the scalp which is milder
form of Seborrhoeic Dermatitis and Tinea Versicolour 2.5% of this compound
is the therapeutic quantity.
xx xx xx
24. Elaborating the above submissions, the learned counsel for the
respondents invited our attention to chapter notes of Chapter 30 and
Chapter 33 and also the rules of interpretation. According to the learned
counsel a careful reading of chapter notes of Chapter 30 would show that
preparations of Chapter 33 even if they have therapeutic or prophylactic
properties would not fall under Chapter 30. However, he fairly admitted
that ‘medicaments’ are those that have therapeutic or prophylactic uses.
Nevertheless those medicaments, if they are classifiable under Chapter 33
or Chapter 34 will not fall under Chapter 30, according to him, if they are
more specifically preparations falling under Chapter 33 or Chapter 34. In
other words, he wants to equate the product in question to ‘shampoo’
enumerated under Heading No. 33.05. He also invited our attention to the
fact that the appellants before the coming into force of the new Tariff Act
described the product as shampoo and they have omitted the word ‘shampoo’
deliberately only to claim that the product would fall under Chapter 30.
25. We do not think that we can accept all the contentions of the learned
counsel for the respondents except certain obvious admitted positions. The
submission that the product in question must be equated to shampoo falling
under Chapter 33 is not at all correct.
26. It is true that the learned counsel for the appellants have placed
reliance on the definition of the words “cosmetic and drug” as defined in
the Drugs and Cosmetics Act, 1940. On a perusal of the definitions, we can
broadly distinguish cosmetic and drug as follows:
“A ‘cosmetic’ means any article intended to be rubbed, poured, sprinkled or
sprayed on, or introduced into, or otherwise applied to, the human body or
any part thereof for cleansing, beautifying, promoting attractiveness, or
altering the appearance, and includes any article intended for use as a
component of cosmetic.”
and
“A ‘drug’ includes all medicines for internal or external use of human
beings or animals and all substances intended to be used for or in the
diagnosis, treatment, mitigation or prevention of any disease or disorder
in human beings or animals, including preparations applied on human body
for the purpose of repelling insects.”
27. We cannot ignore the above broad classification while considering the
character of the product in question. Certainly, the product in question is
not intended for cleansing, beautifying, promoting attractiveness or
altering appearance. On the other hand it is intended to cure certain
diseases as mentioned supra.
28. The fact that the appellants have previously described the product as
“Selsun Shampoo” will not conclude the controversy when the true nature of
the product falls for determination. In fact, notwithstanding the fact that
the [pic]appellants have described the product as Selsun Shampoo, the
Central Board of Excise and Customs, as noticed earlier, has classified the
same as patent and proprietary medicine. The respondents have accepted the
same. Therefore, there is no force in the submission of the learned counsel
for the respondents that the product must be equated with shampoo.
29. The contention based on chapter notes is also not correct. One of the
reasons given by the authorities below for holding that Selsun would fall
under Chapter 33 was that having regard to the composition, the product
will come within the purview of Note 2 to Chapter 33 of the Schedule to
Central Excise Tariff Act, 1985 is without substance. According to the
authorities the product contains only subsidiary pharmaceutical value and,
therefore, notwithstanding the product having a medicinal value will fall
under Chapter 33. We have already set out Note 2 to Chapter 33. In order to
attract Note 2 to Chapter 33 the product must first be a cosmetic, that the
product should be suitable for use as goods under Headings Nos. 33.03 to
33.08 and they must be put in packing as labels, literature and other
indications showing that they are for use as cosmetic or toilet
preparation. Contrary to the above in the present case none of the
requirements are fulfilled. Therefore, Note 2 to Chapter 33 is not
attracted. Again it is without substance the reason given by the
authorities that the product contains 2.5% w/v of Selenium Sulfide which is
only of a subsidiary curative or prophylactic value. The position is that
therapeutic quantity permitted as per technical references including US
Pharmacopoeia is 2.5%. Anything in excess is likely to harm or result in
adverse effect. Once the therapeutic quantity of the ingredient used, is
accepted, thereafter it is not possible to hold that the constituent is
subsidiary. The important factor is that this constituent (Selenium
Sulfide) is the main ingredient and is the only active ingredient.
xx xx xx
33. The labels which give the warning, precaution and directions for use do
make a difference from that of ordinary shampoo which will not contain such
warning or precautions for use. Further no individual would be prepared to
say in a social gathering that he or she is using Selsun to get rid of
dandruff or other similar diseases whereas nobody would hesitate to state
in a similar gathering that he or she is using a particular brand of
shampoo for beautifying his or her [pic]hair. Thus there are lot of
favourable materials to treat the product in question as a medicine rather
than cosmetic. In this connection the reliance placed by the learned
counsel for the appellants on a decision of this Court reported in case
Indian Metals & Ferro Alloys Ltd. v. CCE can be usefully referred to. In
that case this Court held:
“It (the Tribunal) seems to say that, even if the goods manufactured by the
appellant had been rightly classified under Item 26-AA before 1-3-1975, the
introduction of Item 68 makes a difference to the interpretation of Item 26-
AA. This is not correct. Item 68 was only intended as a residuary item. It
covers goods not expressly mentioned in any of the earlier items. If, as
assumed by the Tribunal, the poles manufactured were rightly classified
under Item 26-AA, the question of revising the classification cannot arise
merely because Item 68 is introduced to bring into the tax net items not
covered by the various items set out in the Schedule. It does not and
cannot affect the interpretation of the items enumerated in the Schedule.
This logic of the Tribunal is, therefore, clearly wrong.”
34. This judgment supports the case of the appellant when it is contended
that there is no good reason to change the classification merely on the
ground of coming into force of the new Central Excise Tariff Act, 1985
without showing more that the product has changed its character.
35. The learned counsel also placed reliance on a number of judgments to
support his argument that in common and commercial parlance the product is
known as medicine rather than cosmetic. As pointed out already and in
support of that submission, affidavits and letters from chemists, doctors
and customers are filed to show that the product is sold under prescription
only in chemists’ shops unlike shampoos sold in any shop including
provision shops. This conclusion, namely, that the product is understood in
the common and commercial parlance as a patent and proprietary medicine was
also found by the Central Board of Excise and Customs as early as in 1981
and accepted by the Excise authorities and in the absence of any new
material on the side of the respondents there is no difficulty in accepting
this contention without referring to decision cited by the counsel for the
appellants.
36. Yet another reason given by the CEGAT for not accepting the case of the
appellants was that the product is sold with a pleasant odour and,
therefore, it must be treated as a cosmetic. Selenium Sulfide has an
unpleasant odour and to get rid of it insignificant amount of perfume is
used and make it acceptable to the consumers. A medicine, for example,
sugar-coated pill will nevertheless be medicine notwithstanding the sugar-
coating. Likewise the addition of insignificant quantity of perfume to
suppress the smell will not take away the character of the product as a
drug or medicine. Again one other reason given by the Tribunal is regarding
the packing. The Tribunal has held that the product is cosmetic because it
is packed in an attractive plastic bottle. This by itself will not change
the character, as cosmetic is put up for sale with some indication on the
bottle or label that it is to be used as cosmetic or it is held out to be
used as a cosmetic. As already noted the label here gives warnings. The
fact that it is packed in a plastic bottle is a wholly irrelevant
criteria.”
19) The aforesaid judgment not only provides a complete answer to the
issue at hand, it also suitably answers the various arguments of the
Revenue and the manner in which those arguments were rebutted by the Court
in the said case. The Tribunal has summed up the entire legal proposition
in para 5 of its judgment with which we entirely agree. This para reads as
under:
“5. We have carefully considered the submissions made by the learned
Counsel and the learned DR. We find from the extracted literature that the
item comprises of 20 mg Ketoconazole in one ml and the pamphlet clearly
indicates that it is for the use only of a Registered Medical Practitioner
or a Hospital or a Laboratory. The pamphlet claims that the item is used
for treatment and prophlaxis of infections in which the yeast pityrosporum
is involved such as pityriasis versicolor (localized), seborrhoeic
dermatitis and pityriasis capitis(dandruff). The procedure for treatment
and the adverse reactions on such treatment due to overdose is also stated
in the pamphlet. The Apex court, in the case of Muller & Phipps (India)
Ltd. v. CCE, 2004 (167) ELT 347 (SC) has clearly held that once the item
has been manufactured under a Drug licence and the Department has treated
the item as a Drug, it would not cease to be one notwithstanding the fact
that new Tariff Act has come into force. The Apex Court again held in the
case of CCE v. Pandit D.P. Sharma, 2003 (154) ELT 324 (SC) that once in the
common parlance the item is treated as a medicament and manufactured under
drug licence and the evidence is produced by the party with regard to the
item being a medicament, then it should be treated as such and should not
treat 'Himtaj Oil' as 'perfumed hair oil'. The Apex Court's ruling in the
case of B.P.L. Pharmaceuticals Ltd. v. CCE, 1995 (77) ELT 485 has held that
'Selsun' and anti-dandruff preparation containing 2.5% selenium sulphide
which is full therapeutic limit permissible as per pharmacopoeia and
manufactured under Drug Licence and certified by Food and Drugs
Administration as a medicine, and the same is put up as a medicine to be
used under Doctor's advise in accompanying literature and sold through
chemist shops under doctor's prescription should be considered as a
medicament under Sub-Heading 3003.19 of CE Act and not as a cosmetics. In
the present case also, same evidence is relied which are identical to the
facts of B.P.L. Pharmaceuticals Ltd. The item also acts as an anti-dandruff
preparation with 2% Ketoconazole. The same is sold on doctor's prescription
and by the chemists and understood as a medicine in common parlance as per
the enormous literature and affidavit produced. Therefore, there was no
necessity for the Commissioner to have distinguished this Apex Court
judgment which applies on all fours to the facts of the present case. We
also find that the judgment of the Apex Court rendered in the case of CCE
v. Vicco Laboratories, 2005 (179) ELT 17 (SC) also applies to the facts of
the case. In this case, the Apex Court has clearly noted that the common
parlance test should be applied for determining whether a product is
classificable as a pharmaceutical product under Chapter 30 of CET Act or as
a cosmetics under Chapter 33 ibid as laid down by the Supreme Court in the
case of Shree Baidyanath Ayurved Bhavan Ltd., 1996 (83) ELT 492 (SC). As
there is enormous evidence produced by the appellants with regard to the
use of Ketoconazole Shampoo for treatment of several disorders and diseases
mentioned in the pamphlet and the same is sold by a chemist under a
prescription issued by a Registered medical Practitioner or a Hospital or a
Laboratory, therefore, the appeal is required to be allowed with
consequential relief, if any.”
20) We, thus, are of the view that the judgment of the Tribunal does not
call for any interference and the appeal is dismissed with cost.
CIVIL APPEAL NO. 5752 OF 2015
(arising out of SLP (C) No. 1531 of 2015)
21) Leave granted.
22) This appeal is preferred by the assessee and the issue arises is the
same as discussed in Civil Appeal No. 4480 of 2005. Here, respondent No.2
has passed an order directing the appellant to pay differential duty,
treating the product as Shampoo and not Medicaments. Challenging that
order, appellant had filed the writ petition, which has been dismissed by
the High Court vide impugned judgment primarily on the ground the matter
had left to the concerned authority to decide the classification on the
basis of technical evaluation and it could not be decided by the High
Court. For the reasons recorded in Civil Appeal No. 4480 of 2005, this
appeal stands allowed hereby quashing the order of the High Court as well
as respondent No.2 dated 28.12.2001 demanding differential duty.
.............................................J.
(A.K. SIKRI)
.............................................J.
(ROHINTON FALI NARIMAN)
NEW DELHI;
MAY 14, 2015.
ITEM NO.101 COURT NO.12 SECTION III
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
Civil Appeal No(s). 4480/2005
COMMISSIONER OF CENTRAL EXCISE HYDERABAD Appellant(s)
VERSUS
M/S SARVOTHAM CARE LIMITED Respondent(s)
WITH
SLP(C) No. 1531/2015
(With Interim Relief and Office Report)
Date : 14/05/2015 These matters were called on for hearing today.
CORAM :
HON'BLE MR. JUSTICE A.K. SIKRI
HON'BLE MR. JUSTICE ROHINTON FALI NARIMAN
For Appellant(s) Mr. A.K.Panda,Sr.Adv.
Mr. Rajiv Nanda,Adv.
Mr. T.M.Singh,Adv.
Mr. B. Krishna Prasad,Adv.
Mr. S.K.Bagaria,Sr.Adv.
Mr. Alok Yadav,Adv.
Mr. Anuj B.,Adv.
Mr. Udit Jain,Adv.
Mr. Ajit,Adv.
Mr. Harish Pandey,Adv.
For Respondent(s) Mr. S.K.Bagaria,Sr.Adv.
Mr. Alok Yadav,Adv.
Mr. Anuj B.,Adv.
Mr. Udit Jain,Adv.
Mr. Ajit,Adv.
Mr. Rajan Narain,Adv.
UPON hearing the counsel the Court made the following
O R D E R
The Civil Appeal No. 4480 of 2005 is dismissed with cost.
Leave granted.
The Civil Appeal No. 5752 of 2015 arising out of SLP(C)NO.
1531 of 2015 stands allowed hereby quashing the order of the High Court as
well as respondent No.2 dated 28.12.2001 demanding differential duty.
| (SUMAN WADHWA) | (SUMAN JAIN) |
|AR-cum-PS |COURT MASTER |
Signed Reportable judgment is placed on the file.
-----------------------
[1] (1995) 3 SCC 454
[2] 1997 (91) ELT 13
[3] 2004 (168) ELT 354
[4] 2004 (173) ELT 255
[5] 1995 Supp. (3) SCC 1