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Commissioner of Central Excise, Chennai-IV Versus Hindustan Lever Ltd.

2015 (8) TMI 1012 - SUPREME COURT

Classification of Vaseline - Classification under Chapter Heading 3304.00 or under Chapter Heading 3003.10 - whether Vaseline Intensive Care Heel Guard is to be treated as merely a skin care preparation or it is a medicament having curing properties - Held that:- if a particular product is substantially for the care of skin and simply because it contains subsidiary pharmaceutical or antiseptic constituents or is having subsidiary curative or prophylactic value, it would not become medicament and .....

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t curative or prophylactic value is only subsidiary in nature or that the product is covered by the description under chapter notes 5, namely, either it is chiropody or barrier cream to give protection against skin irritants. If the Department fails to discharge this onus, the product has to be treated as medicament and would be covered under Chapter 30.

Tribunal, while deciding that the aforesaid product is a medicament, pointed out that the product was formulated and essentially use .....

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ances added. Thus, the effect of mitigation of an external condition is primary effect and the effect of smoothing the skin was secondary in nature and, therefore, it was to be treated as a medicament and classified under Chapter 30. - , all the aforesaid features of the product are accepted by the Department. However, only on the ground that salicylic acid contained in the product is marginal, the Department took the view that it was a subsidiary substance. Having regard to the exposition of la .....

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lant : Mr. B. Krishna Prasad, Adv. For the Respondent : Mr. Rajan Narain, Adv. JUDGMENT A. K. Sikri, J. The issue involved in the present appeal is as to whether Vaseline Intensive Care Heel Guard (for short, 'VHG') is to be treated as merely a skin care preparation or it is a medicament having curing properties. Based on the answer to the aforesaid question, classification of this product will be determined. If it is only a skin care preparation then VHG is classifiable under Chapter He .....

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s paid. Entry 33.04 thereof, which is specifically sought to be attracted by the Revenue, reads as under: 33.04 Beauty or make-up preparations and preparations for the care of the skin (other than medicaments), including sunscreen and suntan preparations; manicure or pedicure preparations 3) If a particular product is to be covered under the aforesaid Entry, the basic trait of the said product is that it is beauty or make-up preparations and preparations for the care of the skin. Some products l .....

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2 and 5 and we reproduce the same as under: 2. Heading Nos. 33.03 to 33.07 apply, inter alia, to products, whether or not mixed (other than aqueous distillates and aqueous solutions of essential oils), suitable for use as goods of these headings and put up in packings with labels, literature or other indications that they are for use as cosmetics or toilet preparations or put up in a form clearly specialized to such use and includes products whether or not they contain subsidiary pharmaceutical .....

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rrier creams to give protection against skin irritants. 4) On the other hand, as per the assessee VHG is a medicament and, therefor, it should be covered by Chapter 30. Chapter 30 deals with 'pharmaceutical products'. Entry 30.03, within which the assessee seeks to cover this product, reads as under: 30.03 Medicaments (including veterinary medicaments 3003.10 - Patent or proprietary medicaments, other than those medicaments which are exclusively Ayurvedic, Unani, Siddha, Homoeopathic or .....

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dia or the United States of America or the United Kingdom or the German Homoeopathic Pharmacopoeia, as the case may be, and sold under the name as specified in such book or pharmacopoeia. 3003.32 - Medicaments (including veterinary medicaments) used in bio-chemic system and not bearing a brand name. 3003.39 - Other 5) The position which is taken by the assessee is that VHG is patent or proprietary medicament and is, therefore, classifiable under Chapter Heading 3003.10 and only 15% duty is paid. .....

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; (d) Preparations of Chapter 33 even if they have therapeutic or prophylactic properties; (e) Soap or other products of Chapter 34 containing added medicaments; (f) Preparations with a basis of plaster for use in dentistry (Chapter 34); (g) Blood albumin not prepared for therapeutic or for prophylactic uses (Chapter 35). 2. For the purposes of heading No. 30.03- (i) 'medicaments' means goods (other than foods or beverages such as dietetic, diabetic or fortified foods, tonic beverages) n .....

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tion 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, namely:- (a) The Indian Pharmacopoeia: (b) The International Pharmacopoeia; (c) The British Pharmacopoeia; (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 D .....

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proprietor or otherwise to use the name or mark with or without any indication of the identity of that person. 6) While contrasting the two Entries, namely, Entry 3304.00 on the one hand and 3003.10 on the other, it can be discerned that if it is a product for care of the skin, then it would fall under Chapter Heading 3304.00 but if it is for the cure of skin disease then the product in-question would be medicament; meaning thereby the inquiry has to be whether it is a care product or a product .....

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g of this Entry along with chapter notes 2 and 5, already extracted above, would indicate that if pharmaceutical or antiseptic constituents contained in the product are only subsidiary in nature, or having subsidiary curative or prophylactic value, then that would not make the product as medicament. Again, certain preparation for skin like preparations for use in manicure or chiropody and barrier creams which give protection against skin irritants are still to be treated as preparations for care .....

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33 or not (or gets excluded from Chapter 30), such therapeutic or prophylactic properties have to be subsidiary in nature. Further, medicaments are specifically defined in note 2 of Chapter 30 and the attributes of this definition are to be kept in mind in order to decide whether a particular product is a medicament or not. To put it in a nutshell, if a particular product is substantially for the care of skin and simply because it contains subsidiary pharmaceutical or antiseptic constituents or .....

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th, namely, skin care as well as cure of skin diseases. In such cases, the necessary exercise requires to be undertaken. Whenever product has curative or prophylactic value as well, but the Department still wants the said product to be brought under Chapter Heading 3304.00, onus is on the Department to show that it is not medicament. For this, it will have to demonstrate that curative or prophylactic value is only subsidiary in nature or that the product is covered by the description under chapt .....

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re 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 an .....

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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 D .....

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erties 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 prep .....

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oo 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 equate .....

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eansing, 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 a .....

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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 .....

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s highlighted, is to see whether in common and commercial parlance the product is known as medicine or cosmetic/skin care product. If the product is registered as medicament by the Drug Controller, that would be a strong factor to consider it as having curative or prophylactic value and it is not for the care of the skin per se. 9) This Court in Muller & Phipps (India) Ltd. v. Collector of Central Excise, Bombay-I 2004 (167) ELT 374 (SC) was called upon to decide as to whether prickly heat p .....

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ence issued under the Drug and Cosmetics Act, 1940 and have been treated as a drug and not a cosmetic by the authorities under the Drugs Act. On a reference made by the Finance Ministry, the Drug Controller of India has opined that due to the high content of 5% boric acid in a prickly heat powder, it would be classifiable as a drug or medicament and not as a cosmetic. From 1970 till 1985, prickly heat powders have been classified and assessed under Tariff Item 14E of the old tariff as 'Paten .....

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res ordinary talk for the purposes of beautifying her or himself would use the said products which contain the aforesaid active therapeutic ingredients. These products are known as, as already mentioned above, prickly heat/ Milaria Rubra. The sale of these products is much higher in hot summer months when this disease frequently erupts. 10) Accepting the aforesaid case set up by the assessee therein, the Court held that the said prickly heat power was a medicament for treatment of red rashes, it .....

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t only by the department itself but also by other departments like Drug Controller and Central Sales Tax authorities is that the product in question is a medicinal preparation should be accepted. 12. Applying the principles enunciated in BPL Pharmaceuticals Ltd. case and taking into consideration various circumstances as to the manner in which the goods had been treated on the earlier occasions by the department and the product having been utilised with reference to the commercial parlance and u .....

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is-a-vis Chapter 34 (which deals with detergent products) came up for consideration in Commissioner of Central Excise v. Wockhardt Life Sciences Limited (2012) 5 SCC 585. In that case, the Court again emphasized 'common parlance test' or the 'commercial usage test' as the mot common test for determining the classification in such cases. After taking note of number of earlier decisions, this aspect was highlighted as under: 33. There is no fixed test for classification of a taxabl .....

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ed with it and it is the sense in which they understand it that constitutes the definitive index of the legislative intention, when the statute was enacted (see Delhi Cloth and General Mills Co. Ltd. v. State of Rajasthan, (1980) 4 SCC 71). 34. One of the essential factors for determining whether a product falls within Chapter 30 or not is whether the product is understood as a pharmaceutical product in common parlance (see CCE v. Shree Baidyanath Ayurved Bhavan Ltd., (2009) 12 SCC 419, and CCE .....

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eter for the correct classification of a commodity. This Court in Indian Aluminium Cables Ltd. v. Union of India, (1985) 3 SCC 284, has culled out this principle in the following words: (SCC p. 291, para 13): 13. To sum up the true position, the process of manufacture of a product and the end use to which it is put, cannot necessarily be determinative of the classification of that product under a fiscal schedule like the Central Excise Tariff. What is more important is whether the broad descript .....

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2006) 3 SCC 266, CCE v. Ishaan Research Lab (P) Ltd., (2008) 13 SCC 349, and CCE v. Uni Products India Ltd., (2009) 9 SCC 295]. 37. A commodity cannot be classified in a residuary entry, in the presence of a specific entry, even if such specific entry requires the product to be understood in the technical sense (see Akbar Badrudin Giwani v. Collector of Customs, (1990) 2 SCC 203 and Commnr. Of Customs v. G.C. Jain, (2011) 12 SCC 713). A residuary entry can be taken refuge of only in the absence .....

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lassification of a product. For the purposes of classification, the relevant factors inter alia are statutory fiscal entry, the basic character, function and use of the goods. When a commodity falls within a tariff entry by virtue of the purpose for which it is put to (sic produced), the end use to which the product is put to, cannot determine the classification of that product. 39. In our view, as we have already stated, the combined factors that require to be taken note of for the purpose of t .....

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ection or disease. Therefore, the product in question can be safely classified as a medicament which would fall under Chapter Sub-Heading 3003 which is a specific entry and not under Chapter Sub-Heading 3402.90 which is a residuary entry. 12) It is required to be noted that in para 36 quoted above, the Court also laid importance to the functional utility and predominant or primary usage of the commodity that is to be taken into account while classifying the product. Another important aspect whic .....

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133. In that case, a moisturising cream sold under the brand name 'Moisturex' was the product and it was to be determined as to whether it was used simply for care of the skin or was intended for treating or curing dry skin complaints like fissure feet, dry scaly skin conditions, ichthyosis etc. and, therefore, was a medicament. The argument of the Revenue that this cream was used merely for softening the skin was rejected in the following manner: 15. The contention that Moisturex is a .....

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at use of urea or lactic acid or propylene glycon, etc. is only as subsidiary pharmaceutical constituents and, hence, they cannot be held out as having curative, therapeutic or prophylactic value, cannot also be appreciated. It is the presence of the ingredients of the pharmaceutical constituents which makes the difference and not the percentage of the ingredients as held by this Court in Meghdoot Gramodyog Sewa Sansthan v. CCE, (2005) 4 SCC 15... 14) Main feature which needs to be taken note of .....

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nd while determining the classification. These principles are formulated in the following manner: 22. Thus, the following guiding principles emerge from the above discussion: 22.1. Firstly, when a product contains pharmaceutical ingredients that have therapeutic or prophylactic or curative properties, the proportion of such ingredients is not invariably decisive. What is of importance is the curative attributes of such ingredients that render the product a medicament and not a cosmetic. 22.2. Se .....

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is care and not cure , it is not a medicament. Cosmetic products are used in enhancing or improving a person's appearance or beauty, whereas medicinal products are used to treat or cure some medical condition. A product that is used mainly in curing or treating ailments or diseases and contains curative ingredients even in small quantities, is to be branded as a medicament. 15) After straitening the position in law, we now proceed to apply this principles to the present case. 16) As pointed .....

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in. The Tribunal, while deciding that the aforesaid product is a medicament, pointed out that the product was formulated and essentially used for treatment of 'cracked heels', protection from further cracks in the human heels due to extreme climatic conditions and low humidity, constant exposure of feet to water and due to absence of shoe or other protection while walking. It also found that this product was manufactured under a drug licence as drug authorities had treated the same as a .....

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