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2015 (8) TMI 250 - SUPREME COURT

2015 (8) TMI 250 - SUPREME COURT - 2015 (322) E.L.T. 575 (SC) - Classification of Nizral as shampoo or hair medicament - Classification CSH 3003.10 or under CSH 3305.99 - Held that:- the product in question 'Nizral Shampoo' is classifiable under CSH 3003.10 and not CSH 3305.99 - 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. .....

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erature/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 Sham .....

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cals Ltd. v. CCE, Vadodra [1995 (5) TMI 98 - SUPREME COURT OF INDIA] followed - Decided against Revenue. - Civil Appeal No.4480 of 2005, Civil Appeal No.5752 of 2015 (arising out of SLP (C) No. 1531 of 2015) - Dated:- 14-5-2015 - A K Sikri And Rohinton Fali Nariman, JJ. For the Appellant : 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. and Mr Harish Pand .....

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d 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'. 2) 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 ar .....

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tion 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%. 4) The Re .....

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d 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 se .....

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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 pr .....

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anic 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 su .....

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r 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 .....

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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 .....

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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 .....

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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 Sy .....

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ct, 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 .....

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e 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 add .....

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iff 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 tarif .....

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pted 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." 8) He also pointed out that the aforesaid principle contained in Wood Crafts Products was reiterated in CCE, Hyderabad v. Bakelite Hylam 2 1997 (91) ELT 13 as follows: "17. Hence for the interpretation of the New Tariff harm .....

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riff 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 th .....

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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 w .....

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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 presen .....

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aid 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 1995 Supp. (3) SCC 1 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 .....

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her 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 imidaz .....

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etected, 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 .....

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ent 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 manuf .....

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sage 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 unde .....

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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, Nizr .....

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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 s .....

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d 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 .....

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aid 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 .....

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eless 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 th .....

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t; 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 'dr .....

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eansing, 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 appellants have described the product as Selsun Shampoo, the Central Board of Excise and Customs, as noticed ear .....

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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 .....

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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 .....

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onnection 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 inte .....

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refore, 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. A .....

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se 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 an .....

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hange 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 .....

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ory. 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 manu .....

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uld 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 a .....

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ous 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 clas .....

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