TMI Blog1996 (9) TMI 611X X X X Extracts X X X X X X X X Extracts X X X X ..... isc./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, Asstt. Collector of Central Excise, Div ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 question should not be classified under T.I. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce each other without altering the end properties. SKM-570/90-BI dated 26-4-90 (CL approved u/s.h. 3003.19) E-3036/ 90-C, dated 22-8- 1990 5. Classificati- on dispute of Phipps Processed Talc for Prickly Heat under old tariff Order No. KII/38 /ch/85 dt. 31-10-85 Order-in-appeal No. PPM-561-562/BI- 254-255/87 dt. 20-7-87 [period involved No. 185-86] old tariff E/3710/87-C [Asses-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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1955. 14F. Cosmetics and toilet preparations not containing alcohol or opium, Indian hemp or other narcotic drugs or narcotics, namely :- (i) Preparations for the care of the skin, beauty or make-up preparations manicure or pedicure preparations, such as, beauty creams, vanishing creams, cold creams, make-up creams, cleansing creams, skin foods and skin tonics, face powders and grease paints lipsticks, eye-shadow and eye-brow pencils, nail polishes and varnishes, cuticle removers and other preparations for use in manicure or chiropody, sun-burn, oreventive (sic) preparations and subtan preparations, barrier creams to give protection against skin irritants, persona1 (body) deodorants, depilatories. (ii) Preparations for the care of the hair, such as a brilliantines, perfumed hair oils, hair lotions, pomades and creams, hair dyes, shampoos whether or not containing soap or organic surface active agents. (iii) Shaving creams, whether or not containing soap or organic surface active ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mild bacteriostatic and fungistatic while salicylic acid is a keratolytic agent which soften keraters and loosens confined pitehlium. Both are weak antiseptics and provide relief from the burning sensation and prevent colonisation of bacteria. Because of high concentration of boric acid, the product cannot be used as talcum powder. It was therefore, opined that shower to shower may be treated as a drug. C.C. Council Secretariat in their letter dated 19th June, 1992 replied that they were not aware of the classification practice with regard to prickly heat powder in other countries : that they had examined `Dakosan prickly heat powder ; that this. powder contained two pharmaceutically active ingredients, namely, zinc oxide (10%) and salicylic acid (.75%); that the product was recommended for use against prickly heat and was advertised as giving quick relief to prickly heat irritation and destroying fungi; that after careful consideration of the facts and circumstances of the case, the Secretariat opined that Dakosan should be classified in Heading 33.07 (sub-heading 3307.90) of the Harmonized System since the product had the essential character of a toilet preparation. The Secreta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g that such levels are impossible to fix since they vary widely over the huge range of products in commerce. 11. The Secretariat also commented 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 that such preparations, according to examples cited in the Martindale Extra Pharmacopoeia, the level of active ingredients is rather high that for example, the 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 (35%); that another cited preparation - zinc and salicylic acid dusting powder contains zinc oxide (20%), salicylic acid (5%) and starch (75%) but no boric acid; that chlorphenesin, an ingredient of nycil prickly heat powder is described as having antibacterial, antifungal and antitrichomonal properties and is used mainly for the prophylactic and treatment of dermatophytoses of the feet and other sites : that according to Martindale (Page 1714), the Council of the European Communities has issued a directive relating to cosmetic products indica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r had opined that because of high conc. of boric acid, the product cannot be used as talc powder. The ld. Counsel submitted that up to 17-3-1985, there was no dispute between the Department and the respondents herein as the department was accepting the classification of Johnson s prickly heat powder under T.I. 14E as patent or proprietary medicine; that there was no change in the process of manufacture so as to attract the Explanation II to T.I. 14F; that the product was being manufactured under drug licence issued to the respondents herein; that the product was being marketed by traders holding a licence under Drug and Cosmetics Act; that Rule 95 of the Drugs and Cosmetics Rules, 1944 reads 95. Prohibition of sale of distribution unless labelled that subject of the other provisions of these Rules, no person shall sell or distribute any drug (including a patent or proprietary medicine) unless it is labelled in accordance with these rules . That Rule 96 prescribed the manner of labelling. Sub-rule (B) (ii) provided for a correct statement of the net content in terms of weight, measure, volume, number of units of contents, number of units of capacity, as the case may be and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in case of minor cuts and minor skin injuries : that it was held that boroline contains certain medicine and therefore, is a drug. The newly introduced Explanation II to Item 14F cannot have any bearing on the question whether boroline is a drug or cosmetic product. In support of this contention, the ld. Counsel cited and relied upon the decision of the Hon ble Calcutta High Court in the case of G.D. Pharmaceuticals Ltd. v. U.O.I. reported in 1992 (60) E.L.T. 205. 17. We find that this decision was given having regard to the essential ingredient of boroline and its character. The Hon ble Allahabad High Court in the case of Abdul Moid and others reported in 1977 Cr. L. J-1325 had held from the formula as mentioned on the carton, it prima facie appears that boroline contains certain medicines and therefore, it was a drug. Now examining the composition of the prickly heat powders in the present case we find that they contain boric acid 5%, zinc oxide 10% to 16% and salicylic acid 0.8% to 1.5% in addition to processed talc. It was argued that all through prickly heat powders were being assessed to duty as P.P. Medicines; that there was no change in the ingredients nor in the proces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondarily have curative or prophylactic use, cannot be classified as drugs or medicines. At the same time, it is equally true that drugs and medicines, which incidentally may be useful also in the protection or care of the skin can hardly because of their latter attribute, be classifiable as cosmetics or toilet preparations. On the question of popular understanding, the ld. Counsel submitted that prickly heat powder is not used for the purpose of beautifying or for the purpose of skin care but is used only for preventing/curing prickly heat. He submitted that in the case of C.C.E. v. Pharmasia (P) Ltd. reported in 1990 (47) E.L.T. 658 the Tribunal held that there is no doubt that the product Mediker is considered as anti-lice treatment and it is recommended for those people who are infected with lice. It was also held by the Tribunal that anti-lice treatment is not subsidiary to the cosmetics function but is the main function and therefore, held that the product was classifiable under Heading 30.03 as medicament. 21. On analysis of the ratio of this judgment, we find that the issue boils down to what is the essential function and the subsidiary function of the product. In the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondents that hard gelatine capsules serve a medicinal purpose ensuring where required, the release of the drugs carried in a controlled manner over a period of time and ensuring also that the drug goes to the digestive system without going to the blood stream. The ld. Counsel also placed reliance on the judgment of the Calcutta High Court in the case of Calcutta Clinical Research Association Ltd. v. U.O.I. and Others reported in 1971 L.R. 1073 wherein, the Hon ble High Court in para 7 had held as under :- 7. The manufacturer or producer had to comply with the requirements of Drugs Act because Mr. Roy Chowdhury contended that no patent medicine could come into the market unless it had so complied and these goods would not be marketable without such compliance. Mr. Roy Chowdhury drew my attention to certain observations in Crales on Statute Law, Sixth Edition, at page 145. It appears to me that manufacture of patent and proprietary medicine can only be completed when it is in accordance with the provisions of Drugs Act. There cannot be manufacture of patent and proprietary medicines unless they are in accordance with Drugs Act. Indeed Section 18 of the Drugs Act prohibit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and such labelling is therefore, manufacture. Quite apart from that question independent of the Drugs Act and independent of sub-clause (iii) of S.2 (f) of the Central Excises Act, 1944. I am of the opinion that in view of the peculiar nature of the patent and proprietary medicine labelling in a process incidental to or ancillary in the completion of manufacture of that product. From that point of view in my opinion the imposition of levy in this case was valid. Unlabelled medicines are not and cannot be described as patent and proprietary medicines Mr. Dutta s second contention therefore fails. 23. On scrutiny of the aforesaid judgments we find that these judgments are in respect of items prior to the introduction of the explanation under T.I. 14F of the erstwhile Central Excise Tariff and hence not very relevant. 24. The ld. Counsel also referred to this Tribunal s decision in the case of Pasteur Laboratories (P) Ltd. v. C.C.E., Calcutta reported in 1987 (37) E.L.T. 192 in paras 5, 7, 8, 20, 27 and 31 had held as under : 5. It is submitted by the learned Advocates that the appellant company are manufacturing different drugs and medicinal preparations, in including injec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as and how are they treated in the medical profession. We have noted that the products are being prescribed by doctors for specific ailments and diseases and supplied for use in various hospitals. Considering all the facts and evidence produced before us, it is clear that these are not items which are bought and sold in the market or used as items of toilet preparations or cosmetics. 25. The ld. Counsel also cited and relied upon the judgment of the Apex Court in the case of BPL Pharmaceuticals Ltd. v. C.C.E., Vadodara reported in 1995 (77) E.L.T. 485 specially he referred to paras 2, 4, 18, 19, 20, 22, 29, 31, 32, 35 and 38 of the order. 26. We find that the facts in the case before us and the one decided by the Apex Court are different. In the case of BPL Pharmaceutical, the product selsun an anti-dandruff preparation containing 2.5% selenium sulphide which is full therapeutic limit permissible as per pharmacopoeia whereas in the case before us the product contained boric acid 5% and salicylic acid 0.8% to 1.5% which according to the opinion of the Harmonised Systems Committee of CCCN our Apex body on the subject opined that these quantities were not significant for givi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l under the category of cosmetics but is held to be a medicine. Face powders which can be used and are intended to be used at all times for the purpose of beautifying are cosmetics but products which are intended for curing or giving relief to be affected parts of the skin would not come under the category of cosmetics. It was held that prickly heat powder is a medicinal preparation which would not fall under the category of cosmetics. 29. We find that the above decision is in Sales Tax case. Sales Tax is levied and collected under Sales Tax Act whereas we are dealing with a case under the Central Excises and Salt Act, 1944. The parameters for levy and collection of the two cases may be different. Nothing has been produced before us to prove that the relevant provisions of the two Acts are pari materia. Further we find that Explanation II under T.I. 14F reads : Explanation II. - This item includes cosmetics and toilet preparations whether or not contain subsidiary pharmaceutical or antiseptic constituents or are held out as having subsidiary curative or prophylactic value. This explanation assumes importance inasmuch as that cosmetics and toilet preparations classifiable under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m No. 14F. Explanation No. II is important for our purpose which 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 issue for determination for purpose of this explanation is whether the preparation before us contains subsidiary pharmaceuticals or antiseptic constituents and the second issue is whether the preparation is held out as having subsidiary curative or prophylactic value. Now examining the product before us, we find that the composition of the product `prickly heat powder is salicylic acid 0.8% to 1.5%, boric acid 5%, zinc oxide 10% to 16%, talc base of hydrate Magnesium silicate. Now the question is whether salicylic acid .8% to 1.5% boric acid 5% and zinc oxide 10% to 16% are subsidiary pharmaceutical or antiseptic constituents. The assessees represented that these ingredients were not subsidiary but were significant ingredients. In support of their contention, they cited and relied upon the Drug Controller s opinion wherein the Drug Controller in the case of shower to shower had opined that because of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... smetics in specified maximum concentrations. For example, the concentration of boric acid in talcs is limited to 5%. Based on the above 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. 32. As concerns the classification of the products at issue, the Secretariat would question 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 pharamaceutical 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. In this connexion, it would be noted that, upon further reflection, the Secretariat also believes that `Dakosan Prickly heat powder should be classified in Heading 33.04. 31. We also observe that Explanation II to T.I. 14F of the erstwhile C.Ex. Tariff provides that this item includes cosmetics and toilet prepara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es as under : (a) It was used for the treatment of a disease known as Soborrhoetic Dermatitis, commonly known as Dandruff. (b) It was manufactured under 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 sulphide. (f) It was included as a drug in the National Formulary, U.S. Pharmacopoeia and the Merck Index. (g) It fulfilled the requirements of a drug as understood in common parlance. (h) Selenium Sulphide 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 Cosmeticology referred to Selsun as a drug. (k) It was being marketed as a Paten ..... X X X X Extracts X X X X X X X X Extracts X X X X
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