1993 (10) TMI 165 - AT - Central Excise

Issues Involved:
1. Classification of "Selenium Sulphide Lotion USP (SELSUN)" as a cosmetic or a medicine.
2. Confiscation of 17,950 bottles of the product.
3. Imposition of a penalty on the appellants.

Issue-Wise Detailed Analysis:

1. Classification of "Selenium Sulphide Lotion USP (SELSUN)" as a Cosmetic or a Medicine:
The primary issue in both appeals is the classification of "Selenium Sulphide Lotion USP (SELSUN)" under the Central Excise Tariff. The Department classified it as a cosmetic under sub-heading 3305.90, while the appellants argued it should be classified as a medicine under sub-heading 3003.19.

Arguments by the Appellants:
- The product has been prescribed and sold as "Selsun Suspension" for treating skin diseases like tinea versicolor and seborrheic dermatitis.
- Trade literature is provided only to registered medical practitioners, indicating the product is to be used under medical supervision.
- It is marketed for its medicinal properties and not for hair care or beautification.
- The product is manufactured under a drug license and classified as a drug by the Food and Drug Administration (FDA), Maharashtra State.
- Historical classification by the Central Board of Excise and Customs treated it as a medicine based on its therapeutic properties and inclusion in standard pharmaceutical references like the U.S. Pharmacopoeia and Merck Index.

Arguments by the Department:
- Similar products are licensed as cosmetics.
- The product contains only 2.5% Selenium Sulfide, with the remaining composition being foaming agents, flavoring agents, etc., making it a shampoo.
- In common parlance, the product is known and sold as "Selsun Shampoo."
- The product's packaging and advertising suggest it is a shampoo, not a medicinal preparation.

Tribunal's Analysis:
- The Tribunal noted that the product has properties of both a drug and a cosmetic.
- Martindale's "Extra Pharmacopeia" and Kirk-Othemer's "Encyclopaedia of Chemical Technology" describe Selenium Sulfide as used in anti-dandruff shampoos.
- The product has a pleasant odor and is packaged attractively, indicating its use as a cosmetic.
- As per Rule 3(a) of the interpretative rules, the heading providing the most specific description should be preferred. In this case, sub-heading 3305.90 for "preparations for use on the hair" is more specific than the general heading for pharmaceuticals under Chapter 30.
- Chapter Note 2 of Chapter 33 and Note 1(d) of Chapter 30 exclude preparations of Chapter 33 from being classified as pharmaceuticals, even if they have therapeutic properties.

Conclusion:
The Tribunal upheld the classification of "Selenium Sulphide Lotion USP (SELSUN)" as a cosmetic under sub-heading 3305.90.

2. Confiscation of 17,950 Bottles of the Product:
The Additional Collector confiscated 17,950 bottles of "Selsun" for not being accounted for in the Record of Production (RG.1).

Arguments by the Appellants:
- The bottles were not fully manufactured as they lacked batch numbers and other markings required under the Drugs and Cosmetics Rules.

Tribunal's Analysis:
- The Tribunal found merit in the appellants' argument that the products were not fully manufactured.

Conclusion:
The confiscation of the 17,950 bottles was set aside.

3. Imposition of a Penalty on the Appellants:
The Additional Collector imposed a penalty of Rs. 25,000 on the appellants.

Arguments by the Appellants:
- The incomplete manufacturing status of the bottles should exempt them from penalties.

Tribunal's Analysis:
- Given the finding that the products were not fully manufactured, the penalty was deemed inappropriate.

Conclusion:
The penalty imposed on the appellants was set aside.

Final Judgment:
- The classification of "Selenium Sulphide Lotion USP (SELSUN)" as a cosmetic under sub-heading 3305.90 was upheld.
- The confiscation of 17,950 bottles and the penalty of Rs. 25,000 were set aside.
- Appeal No. E/610/88-C was rejected except for the modification regarding confiscation and penalty.
- The Department's Appeal No. E/1935/89-C was allowed.

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