TMI Blog1995 (5) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... P.B. Sawant and K. Venkataswami, JJ. REPRESENTED BY : Mr. Ravinder Narain, Mr. S. Shroff, Ms. Amrita Mitra, Mr. Nitinbhai, Mr. Ranjan Narain and Mr. Sonu Bhatnagar, Advocates, for the Appellant. Mr. M. Gaurishankar Murthy, Mr. S.D. Sharma and Mr. V.K. Verma, Advocates, for the Respondent. [Judgment per : K. Venkataswami, J.]. These two appeals preferred under Section 35L of the Central Excises and Salt Act, 1944 are directed against the orders of the Customs, Excise and Gold (Control) Appellate Tribunal (hereinafter referred to as the `CEGAT for short) in Order Nos. 336 and 337/93-C, dated 29-10-1993. By the orders impugned, the CEGAT has upheld the classification of the product manufactured by the appellants on behalf of their Principals, Abbott Laboratories (India) Limited, Bombay and marketed under the brand name `Selsun (hereinafter called as the `Product ) as a cosmetic under sub-heading 3305.99. 2. Brief facts are the following : The appellants have a factory at 39 G.I.D.C. Vapi, Bulsar and are engaged in the manufacture of `Selenium Sulfide Lotion U.S.P. containing 2.5% Selenium Sulfide w/v. The said product was manufactured by the appellants under a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act that this product prior to 28-2-1986 (i.e. before the coming into force of the Central Excise Tariff Act, 1985) was classified as a drug under Item 14E of the First Schedule to the Central Excises and Salt Act, 1944. As a matter of fact an issue was once raised whether the product in question would fall under the head of `medicine or `cosmetic and the Central Board of Excise and Customs by its detailed and exhaustive order dated 17-1-1981 held that the product was a drug or a medicine and the reasons for coming to that conclusion as given by the Board will be referred to later on while discussing the issue. 5. After the coming into force of the Central Excise Tariff Act, 1985, the appellants filed a classification list dated 10-3-1986 before the Assistant Collector, Central Excise, Bulsar classifying the product falling under sub-heading 3003.19. The Assistant Collector provisionally accepted the same subject to the result of chemical test for which the product was sent. After receiving the report and after hearing the appellants the Assistant Collector by order dated 30-12-1987 held that the product in question will fall under sub-heading 3305.90 and not under 3003.19 as c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ading No. 3305.90. Further, considering the question why `Selsun suspension is not classifiable as medicament under Chapter 30, it will be interesting to refer to Note No. 1(d) of Chapter 30 of Central Excise Tariff Act, 1985 which inter alia provides that Chapter 30 does not cover of preparation of Chapter 33 even if they have therapeutic or prophylactic properties. Further more Rule 3(c) of Interpretation of Schedule of Central Excise Tariff Act, 1985 states that when goods are not classifiable by reference to 3(a) or 3(b) they shall be classified under the sub-heading which occurs last in numerical order among those which equally merit consideration." 6. The officers of the department during a check of the premises of the appellants on or about 7-11-1986 found that a quantity of 17950 bottles of 60 ml each were offending goods liable to confiscation under the Central Excise law as the goods were found to have been not accounted for in the statutory RG-1 Register though in fully manufactured and marketable condition. A show cause notice was issued on that ground. The matter was heard by the Additional Collector, Central Excise before whom the appellants contended that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Director, Shri J.T. Shah, in his statement dated 27-11-1986. As such the seizure effected is correct and the plea that the goods placed under seizure remains to be rubber stamped with date of manufacturing, both number and date of expiry is not acceptable." 8. Aggrieved by the orders of the Assistant Collector and the Additional Collector of Central Excise, the appellants preferred Appeals to the Collector of Central Excise (Appeal) and CEGAT respectively. 9. The First Appellate Authority by order dated 20-2-1989 found that the product in question will fall under Chapter 30 and not under Chapter 33 as held by the Assistant Collector, Central Excise. He gave the following reasons : The Assistant Collector arrived at his conclusion that Selsun has subsidiary value on the proportion of the ingredients of Selsun which are as under :- Selenium disulphide 2.5% Surfactant 17.0% Inert stabilizer 2.5% Water 75.3% He further observed that the other ingredients will have the substantial effect. On the contrary it is seen that the selenium sulphide is the only active ingredient in the preparation and that the other i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the confiscation as bad. Therefore, the only issue which is common in both these appeals is whether the product `Selenium Sulfide Lotion U.S.P. - Selsun is classifiable as `medicine under sub-heading 3003.19 as contended by the appellant or is classifiable as `cosmetic under sub-heading 3305.90 as claimed by the respondent. 12. Mr. Ashok Desai, learned Senior counsel appearing for the appellants took us through the orders of the authorities below including the Tribunal and also the earlier order of the Central Board of Excise and Customs dated 17-1-1981. According to the learned counsel the Tribunal has misdirected itself in construing the scope of Chapters 30 and 33 in general and in particular in understanding the Chapter notes and also the interpretation clause. The learned counsel reiterated as his submission the reasoning given by the Central Board of Excise and Customs in its order dated 17-1-1981. He also invited our attention to the numerous affidavits and letters filed by the Chemists, Doctors and the Customers. He contended that except advancing arguments that those affidavits and letters should not be relied upon as they are stereotyped, no other concrete mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oth, a name which is not specified in a monograph, in a Pharmacopoeia, Formulary or other publications, namely :- (a)The Indian Pharmacopoeia; (b)The International Pharmacopoeia; (c)The National Formulary of India; (d)The British Pharmacopoeia; (e)The British Pharmaceutical Codex; (f)The British Veterinary Codex; (g)The United States Pharmacopoeia; (h)The National Formulary of the U.S.A.; (i)The Dental Formulary of the U.S.A., and (j)The State Pharmacopoeia of the U.S.S.R. or which is a brand name, that is, a name or a registered trade mark under the Trade and Merchandise Marks Act, 1958 (43 of 1958), or any other mark such as a symbol, monogram, label, signature or invented words or any writing which is used in relation to that medicine for the purpose of indicating or so as to indicate a connection in the course of trade between the medicine and some person, having the right either as proprietor or otherwise to use the name or mark with or without any indication of the identity of that person." HEADING NO. 30.03 Medicaments (including veterinary medicaments)Patent or proprietary medicaments, other than those medicaments which are exclusively Ay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion." 17. It is also necessary to set out the corresponding previous tariff items as they stood prior to 1-3-1986, namely, 14E and 14F relating to patent or proprietary medicines and cosmetics and toilet preparations respectively. They read as follows :- Tariff Item 14E - Patent or Proprietary Medicines: 14E. Patent or proprietary medicines not containing alcohol, opium, Indian hemp or other narcotic drugs or other narcotics other than those medicines which are exclusively Ayurvedic, Unani, Siddha or Homeopathic. Explanation I. - Patent or Proprietary Medicines means any drug or medicinal preparation, in whatever form, for use in the internal or external treatment of, or for the prevention of ailments in human beings or animals which bears either on itself or on its container or both, a name which is not specified in a monograph, in a pharmacopoeia, formulary or other publications notified in this behalf by the Central Government in the Official Gazette, or which is a brand name, that is, a name or a registered trade mark under the Trade and Merchandise Marks Act, 1958 (43 of 1958), or any other mark such as symbol, monogram, label, signature or invented words or any writ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Customs to hold that the product in question is a drug or medicine, of course under the old tariff entry namely, 14E. These reasons given by the Board are the following :- (a) It was used for the treatment of a disease known as Saborrhoetic Dermatitis, commonly known as Dandruff. (b) It was manufactured under a Drug licence. (c) The Food and Drugs Administration had certified it as a drug. (d) That the Drug Controller had categorically opined that Selenium Sulphide present in Selsun was in a therapeutic concentration. (e) The brand name Selsun was derived from the name of the drug Selenium Sulfide. (f) It was included as a drug in the National Formulary, U.S. Pharmacoepia and the Merck Index. (g) It fulfilled the requirements of a drug as understood in common parlance. (h) Selenium Sulfide was sold only on medical prescription and used as a medicine. (i) Selsun was not a medicated shampoo which was recommended as conditioners with subsidiary medicinal effect. Selsun was on the contrary being recommended by physicians. (j) Various standard books and treaties such as (i) The Pharmacological Basis of Therapeutics by Goodman and Gilman (ii) Harry s Cosmetico ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e treatment for the disease Tinea Versicolor and Pityriasis Versicolour which are an infection of the skin and appears frequently on the trunk, neck, face and prominal portions of the arms and legs. (4) The literature also informs physicians of the results of various studies relating to the effectiveness of Selsun for curing the above diseases. (5) The literature states that if neglected, Dandruff can lead to itching, scaling, falling of hair, acne and blepharitis. (6) Physicians are also informed regarding the directions of use and it is suggested that the scalp should be rinsed for 3 to 4 changes of water and after `treatment the hands should be washed thoroughly, specially under finger nails . 21. 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 Versicolor. 2.5% of this compound is the Therapeutic quantity. 22. At the risk of repetition, it must be pointed out that on the side of the res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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 of Chapter 33 or Chapter 34. In other words, he wants to equate the product in question to `shampoo enumerated under Heading 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. 27. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of Headings 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 a subsidiary curative or prophylactic value. The position is that therapeutic quantity permitted as per technical references including U.S. 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. 32. As rightly contended by the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aigns were to leave the hair silky, soft and healthy whereas Selsun was not so advertised. On the contrary there are precautions in use mentioned." 33. The above conclusions of the Central Board of Excise and Customs were reached on the basis of materials produced before it. The same materials are also placed before us and we have gone through them. We find no good reason to differ from the above conclusions of the Central Board of Excise and Customs especially in the absence of any other materials produced by the respondents to persuade us to take a different view. Certain contrary findings of the Authorities below such as that `Selsun is only a medicated shampoo without any acceptable supporting material cannot be sustained. 34. Another reason given by the CEGAT is that Heading 33.05 uses the word Preparation for use on the hair and therefore the product in question can be brought under the said heading. The Tribunal forgets that the product in question is intended as a medicine for curing the disease `Tinea Versicolor and as such applied to the skin wherever necessary apart from curing dandruff by applying on the scalp. It is also an admitted fact that even bald person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounsel 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. 38. 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 Sulphide has an unpleasant odour and to get rid of it insignificant amount of perfume is used and make it acceptable to the con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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