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TMI Blog1996 (9) TMI 611X X X X Extracts X X X X X X X X Extracts X X X X ..... se, Misc. Application Nos. E/Misc./296/93-C and E/Misc./34 were taken up along with Misc. Application No. E/Misc./35/96-C. By Misc. Application No. E/Misc. Petition/296/93C, it was prayed by the department that the opinion of CCCN Brussels circulated under Circular No. 1/93-CX. 3 (F. No. 103/3/91-CX. 3), dated 17-3-1993 may be taken on record as additional evidence. The Counsel for the respondents [M/s. Muller & Phipps (India) Ltd.] does not object to taking on record the opinion of CCCN, Brussels. In the result, we allow the Misc. Application No. E/296/93C. 3. M/s. Muller & Phipps (India) Ltd. have filed Misc. Application No. E/34/96C. By this Misc. Application, the respondents requested for taking the following on record : (i) Copy of the certificate dated 29-7-1991 of the Drugs Controller (India); (ii) Copy of the letter dated 12th April, 1993, addressed by Mr. R.D. Shinde, Asstt. Collector of Central Excise, Division K-II Bombay to the head of the Pharmacology Department, Sir J.J. Group of Hospitals, Bombay. (iii) Copy of the reply dated 21st April, 1993 addressed by Professor and Head of Department of Pharmacology, Grant Medical College, Bombay to Mr. R.D. Shinde, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals), Bombay set aside the appeal filed by the department on the ground that the ingredients contained in Johnson's prickly heat powder are similar to those in nycil manufactured by M/s. Glaxo Laboratories and therefore, there is no reason to give separate treatment to Johnson's prickly heat powder in comparison with Glaxo's nycil powder. Against this order of ld. Collector (Appeals), the Commissioner, Central Excise, Bombay has preferred these four appeals before the Tribunal. 6. Appeal No. E/3710/87C : The facts of the case, in brief, are that M/s. Muller & Phipps (India) Ltd. (hereinafter referred to as appellants) submitted a C/List No. 4/85-86 effective from 25-3-1985 for the product 'Phipps processed talc' 150 gms. claiming the classification for the product under Tariff Item 14E and claiming its dutiability at a rate of 15% ad valorem. They had filed this classification list as there was a change of Central Excise duty for Tariff Item No. 14E. Some changes were made in the tariff description of Tariff Entry No. 14F by the Finance Bill/Act of 1985-86, dated 17-3-1985. A show cause notice was issued to the appellants asking them to explain as to why their product in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s-ses Ap-peal] 8. Shri R.G. Sheth, the ld. Advocate appeared for M/s. Muller & Phipps (India) Ltd. in Appeal No. E/3710/87C. Shri J.M. Sharma, the ld. JDR appeared for the Revenue and Shri Aspi Chinoy, Senior Advocate with Shri D.B. Shroff, Advocate appeared for the assessees. It was argued before us that the entire dispute arose on account of budgetary changes effected on 17-3-1985, that the dispute was whether Johnson's prickly heat powder was classifiable under Heading No. 33.04 or 30.04. For the sake of clarity, Heading Nos. 33.04 and 30.04 are reproduced below :- Heading No. Sub-heading No. Description of goods 33.04 3304.00 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. 30.04 3004.00 Wadding, gauze, bandages and similar articles (for example, dressings, adhesive plasters, poultics), impregnated or coated with pharmaceutical substances or put up in forms or packings for medical surgical, dents or veterinary purposes. In the case of other appeals, the dispute was whether the product was classifiable under Tariff Item 14E or 14F(i). T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... containing soap or organic surface active agents. (iii) Shaving creams, whether or not containing soap or organic surface active agents. Eplanation I - "Alcohol, "Opium" , "Indian hemp", "Narcotic Drug" and "Narcotics" have the meanings respectively assigned to them in Section 2 of the Medicinal and Toilet Preparation (Excise Duties) Act, 1955. Explanation II - This item includes cosmetics and toilet preparations whether or not they contain subsidiary pharmaceutical or antiseptic constituents, or are held out as having subsidiary curative or prophylactic value. Explanation III - This item includes unmixed products only when they are in packing of a kind sold to the consumer and put up with labels, literature or other indications that they are for use as cosmetics or toilet preparations or put up in a form clearly specialised such use." 9. The Explanation II of Item No. 14F reads "This item includes cosmetics and toilet preparations whether or not they contain subsidiary pharmaceutical or antiseptic constituents, or are held out as having subsidiary curative or prophylactic value" The Public Accounts Committee was of the view that according to this Explanation to Item 14F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which excludes preparations of Headings 33.03 to 33.07 even if they have therapeutic or prophylactic properties. It was also recommended that the three products namely, nycil, shower to shower and Johnson's prickly heat powder are described as prickly heat powder, therefore, they may be classified under sub-heading 3307.90. It was also suggested that in case India Government disagreed with this recommendation the Secretariat was prepared to re-examine the matter on the basis of additional information. The Additional information was supplied by the Govt. of India. C.C. Council Secretariat commented that by virtue of Note 1(d) to Chapter 30 preparations of Headings 33.03 to 33.07 are excluded from Chapter 30 even if they have therapeutic or prophylactic properties, that General Explanatory Note to Chapter 33 on page 471 indicate that the products of Headings 33.03 to 33.07 remain in these headings whether or not they contain subsidiary pharmaceutical or disinfectant constituents, or are held out as having subsidiary therapeutic or prophylactic value, that exclusion (b) on page 471 to the General Explanatory Note to Chapter 33 and exclusion (a) on page 476 to the Explanatory Note to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in specified maximum concentrations; that for example the concentration of boric acid in talcs is limited to 5%. The Secretariat therefore opined that in view of this information, it would appear that the quantity of 5% boric acid contained in the products at issue would not require their classification as medicaments nor prevent their classifications as preparations of Chapter 33. The Secretariat also invited Committee's attention to the classification decisions taken at the Committee's 4th Session with respect to two products ('EAU Precieuse' lotion and listerine antiseptic' mouth wash) containing boric acid which were classified in Chapter 33 in view of the subsidiary nature of their pharmaceutical ingredients. 12. The Secretariat also commented whether shower to shower and Johnson's prickly heat powders containing only boric acid, salicylic acid or zinc oxide on a talc base, have the essential character of medicaments of Chapter 30 in view of the low quantities of pharmaceutical substances present. Based on their use and composition, the Secretariat would lean towards classification of these two products as preparations for the care of the skin in Heading 33.04. However f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic system; that their product 'Johnson's prickly heat powder' conformed to these requirements and other requirements of the Drugs and Pharmaceuticals Act and Rules framed thereunder. 14. From the above submissions, we find that two issues have arisen. The first was that there was no special occasion to change the practice of classification all of a sudden and the second issue was that the product was drug as it was manufactured and sold under a drug licence. A lot of case-law was cited and relied upon by both sides on these 2 issues. 15. Commenting on the recommendation of the Harmonized System Committee, the ld. Senior Counsel submitted that Dakosan did not contain boric acid and therefore, the classification of Dakosan prickly heat powder was based on different issue; that C.C.C.N. Secretariat recommended that the classification of the products depends upon the quantities of active ingredients in the product but the Secretariat could not disclose as to what quantities they had in mind; that Secretariat commented that in such preparation according to the example cited (Martindale - The Extra Pharmacoepia by A. Wade) that active ingredient is rather high; that the Secre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to change the classification even if the Budget brought in a new explanation. This argument appears to be attractive at first sight but when we look into it a little deeper we find that there was substantial change brought into effect for classification of products under 14E & 14F of the erstwhile Central Excise Tariff as the provisions of subsidiary effect or subsidiary product was introduced for the first time w.e.f. 17-3-1985. This explanation required re-examination of certain products which had the curative or prophylactic properties. It was to be examined in respect of such products whether the curative or prophylactic agents were subsidiary. For deciding this issue we had to consider whether boric acid, salicylic acid and zinc oxide used as ingredients provided the product the main effect as a curative and prophylactic agent. We are of the view that with the introduction of Explanation (ii) under T.I. 14F of the erstwhile, Central Excise Tariff, the re-classification of such products became necessary and hold accordingly. 18. The ld. Counsel submitted that Johnson's prickly heat powder and other prickly heat powders are used for treatment of prickly heat which is a d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction was to act as anti-lice where as in the case of prickly heat powders, the active function of the medical ingredients is only a subsidiary function to prevent prickly heat as the proportion of ingredients present in the product was not significant enough to provide it the essential character of a medicament and thus the two are clearly distinguishable. 22. The ld. Counsel also submitted that this Tribunal in the case of C.C.E., Bombay-I v. Pharmaceutical Capsules Laboratories reported in 1986 (25) E.L.T. 211 in para 4 of its order had held "We have also a very clear pronouncement of the Madhya Pradesh High Court in the case of Ramesh Chemical Industries v. U.O.I. and Others reported in 1980 (6) E.L.T. 598 holding that although there is no definition of drugs contained in the Central Excises and Salt Act, 1944 or the Central Excise Tariff yet the definition of drug in Section 3(b) of the Drugs and Cosmetics Act should guide the interpretation of the Central Excise Tariff. The Bombay High Court decision in the case of Glaxo Laboratories (India) Ltd. v. U.O.I. and others reported in 1985 (21) E.L.T. 72 (Bom.) has successfully been differentiated by the respondents as relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f drugs unless certain things are contained in the labels of such drugs. Therefore, it appears to me that the definition of the Drugs Act is relevant even prior to the introduction of sub-clause (iii) of S. 2(f) of the Central Excises and Salt Act, 1944. In the case of Mayor of Portsmouth v. Smith (1885) 10 AC 364 (HL) at p. 371 Lord Blackburn had observed: "Where a single section of an Act is introduced into other subsequent Act, it must be read in this sense which it bore in the original Act from which it was taken, and consequently it is perfectly legitimate to refer to all the rest of that Act in order to ascertain what the section meant, though those other sections are not incorporated into the new Act. I do not mean that if there was in the original Act a section not incorporated, which came by way of a proviso or exception on that which was incorporated, that should be referred to but all others, including the interpretation clause, if there be one, may be referred to." Therefore, in my opinion it is not possible to rule out the definition provided in the Drugs Act, 1940, in construing what is manufacture of patent and proprietary medicine. In that view of the matter I a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rugs such transmission fluids, under a licence to manufacture drugs issued by the Drug Control Authority of the State under the Drugs and Cosmetics Rules, 1945. Appellants have never manufactured any cosmetics or toilet preparations and have no licence for their manufacture. It is claimed that the impugned products are basically drugs or medicinal preparations for use in external treatment or for prevention of ailment. It is submitted that Patent or proprietary medicines can be differentiated from cosmetics on the basis of therapeutic value, intended users, identification of the products in the trade and commercial users of the product. 7. It is submitted that in the literature which is distributed by the manufacturers to the medical profession, the products are not identified as meant for skin care or for use as a cosmetic for cleansing, beautification or promoting attractiveness of the body. Further, the products are identified and marketed as drugs and sold through the registered licensed druggists. 8. It is also submitted that the appellants are making bulk supply of the impugned products to various hospitals and that the medical profession recognizes the items as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tial character as a medicament. We find that the facts are different. We also observe that there is nothing in the label affixed to the containers of the prickly heat powder to show that it was a medicine to be used under a doctor's advice or under a doctor's prescription. We also observe that the product is not known as a prominent medicine but only as an aid to prevent prickly heat. We respectfully agree that a classification of a product depends on the true nature of the product. 27. Quoting extensively from the Drugs and Cosmetics Act, 1940 and Drugs and Cosmetics Rules, 1940, the ld. Counsel submitted that the admitted position was that the appellants held a licence for manufacture of drugs; that the sale of the product in dispute requires a licence; that the admitted position was that before 17-3-1985, the product was recognized as P.P. medicine; that there was no change in the process of manufacture or composition of the product; that their product was not for preparation for care of skin or of beautification, of skin or a beauty or make-up preparation etc.; that their product was medicament for cure or prevention of prickly heat; that the label on the containers clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I. 14F may have subsidiary curative or prophylactic value. Therefore, the decision in the Sales Tax case is clearly distinguishable. 30. Summing up the arguments, the ld. Counsels submitted that (a) since uptil now prickly heat powder had been assessed under T.I. 14E it should continue to be assessed under T.I. 14E as there was no change in composition or process of manufacture. (b) prickly heat powder is expressly meant for alleviation and treatment of `Miliaria rubra' or prickly heat and hence it is a medicament. (c) that the directions on the containers reading as `New improved Johnson's prickly heat powder contains proven fungistatic and bacteriostatic agents. Regular use of this powder aids effective prevention of prickly heat and helps relieve burning, itching and heat rash. (d) that the product is sold to the customers as a medicament for treatment of prickly heat. (e) that the technical literature and literature prepared by the assessee clearly shows that prickly heat powder is sold for prevention and cure of prickly heat. (f) that prickly heat powder is manufactured and sold under a drug licence and is covered by the definition of drugs as per Section 3(b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed as talcum powder. Against this, we find that Secretariat of the C.C.C.N. in their note in para 28 opined that "In researching the question of the classification of the prickly heat powders of concern to the Indian Administration, the Secretariat has determined that certain `dusting powders' containing boric acid and zinc oxide or salicylic acid are used for their therapeutic value in the treatment of certain skin diseases. However, in such preparations, according to examples cited in the Martindale Extra Pharmacopoeia, the level of active ingredients is rather high. For example, `compound zinc dusting powder' specified in the section on dermatological agents on page 460, contains zinc oxide (25%), boric acid (5%) sterilised purified talc (35%) and starch (3%). Another cited preparation - zinc and salicylic acid dusting powder - containing zinc oxide (20%), salicylic acid (5%) and starch (75%) but no boric acid." Then again in para 30, the Secretariat had opined that the conc. of boric acid in talc is limited to 5%. Regarding salicylic acid, the Secretariat opined that they would lean towards classification of shower to shower and Johnson's prickly heat powder as preparations fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prophylactic value. Now reading the instructions on the container we find that it is holding out that prickly heat powder aids effective prevention of prickly heat. It is inferred from the fact that it nowhere says that should be taken under the doctor's advice or prescription nor is there any warning about the dosage or the damage that may occur because of excess use or any other factor. We may therefore, safely infer and hold that the curative and prophylactic value is only subsidiary and it does not assume the essential character of a medicine. 32. We find that Central Excise Tariff is now based on HSN. The Harmonized System Committee is the high power body to ascertain international practice of classification of a particular product referred to it and recommends to the Member Nations the most appropriate classification of the product under HSN. The opinion and recommendation of the Committee cannot just be brushed aside simply because similar products are manufactured under drug licence or sold under drug licence. We find that the Harmonized System Committee after considering the various aspects of the practice of similar goods in the international market and studying th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Abbott's literature referred to it as a drug and such literature was addressed to physicians, also the label on the container mentioned that the product was to be use as directed by Physicians. (m) Affidavits of leading doctors established that Selsun was being manufactured for use as a drug. (n) The Sales Tax authorities taxed Selsun as a drug. (o) Selsun was repeatedly held by the Excise Authorities as a drug. (p) Johnson's Prickly Heat Powder and Nycil have been recognised as drug and Selsun stood on a stronger ground". 34. We find that concentration of boric acid, salicylic acid and zinc oxide in the product before us are not significant and medical ingredients in these concentration are feeble fungicide or bacteriostatic and, therefore, the curative and prophylactic value is subsidiary in the product. We also observe that the product is available in the market, does not require any prescription of the Doctor, does not contain any warning, there is no prescribed dosage and that people generally use it to prevent prickly heat and therefore, in the circumstances, we can say that the curative and prophylactic use is subsidiary. 35. Now coming to the common pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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