2009 (9) TMI 938 - AAR - Customs

Classification of Skincare Products for Customs Duty: Cosmetics vs. Medicaments, Valuation Rules Explained

The ruling classified the products as follows: Revitalizing Toner as a cosmetic, Renewing Cleanser and Repairing Lotion as medicaments, and Refining Mask ... What is the classification of the four individual products namely Proactiv Solution Revitalizing Toner, Proactiv Solution Renewing Cleanser, Proactiv Solution Repairing Lotion and Proactiv Solution Refining Mask? Whether CVD is required to be paid at the time of import of the Category-I products on a value determined under Section 4 or Section 4A of the Central Excise Act, 1944? Whether CVD is required to be paid at the time of import of Category-II Products on a value determined under Section 4 or Section 4A of the Central Excise Act, 1944? Issues Involved:1. Classification of the four individual products under the Customs Tariff Act.2. Determination of the method of valuation for the purpose of levy of additional customs duty (CVD) on Category-I products.3. Determination of the method of valuation for the purpose of levy of additional customs duty (CVD) on Category-II products.Issue-wise Detailed Analysis:Issue 1: Classification of the Four Individual ProductsThe applicant sought the classification of four products: Proactiv Solution Revitalizing Toner, Proactiv Solution Renewing Cleanser, Proactiv Solution Repairing Lotion, and Proactiv Solution Refining Mask. The applicant argued that these products should be classified under Chapter 30 as medicaments due to their therapeutic properties.The ruling noted that:- Revitalizing Toner: This product is used for cleansing the skin and does not contain active ingredients for acne treatment. It was classified under heading 3304 as a cosmetic product.- Renewing Cleanser and Repairing Lotion: Both contain 2.5% Benzoyl Peroxide, recognized for its therapeutic value in treating acne. These were classified under heading 3004 as medicaments.- Refining Mask: Contains 6% Sulphur, which also has therapeutic value for acne treatment. It was classified under heading 3004 as a medicament.The ruling emphasized that products with substantial therapeutic or prophylactic effects should be classified under Chapter 30, whereas those with incidental therapeutic properties should remain under Chapter 33.Issue 2: Valuation of Category-I Products for Additional Customs Duty (CVD)Category-I products are those sold individually with the maximum retail price (MRP) printed on the packages. The applicant argued that the additional duty should be based on the MRP.The ruling confirmed that:- The additional duty under Section 3(1) of the Customs Tariff Act should be paid based on the MRP declared on the package, as per the proviso to Section 3(2) of the Customs Tariff Act.- The applicant is entitled to a 35% abatement in terms of Notification No. 49/2008-C.E., dated 24-12-2008.Issue 3: Valuation of Category-II Products for Additional Customs Duty (CVD)Category-II products are those packed into kits after import and sold as a kit with MRP printed on it. The applicant contended that these products should be valued based on the transaction value as they are not sold individually.The ruling held that:- Each product imported, even if packed into a kit, is intended for sale and should have the MRP printed on the package.- The products should be valued based on the MRP declared on the package, as per the proviso to Section 3(2) of the Customs Tariff Act.- The applicant's contention that the transaction value should be adopted was rejected.The ruling concluded that both Category-I and Category-II products should be valued based on the MRP declared on the package for the purpose of levying additional customs duty. The products imported during the pendency of the application and hereafter will be assessed to duty accordingly.