1993 (10) TMI 165 - AT - Central Excise

Tribunal Rules 'Selenium Sulphide Lotion' as Cosmetic, Overturns Confiscation & Penalty

The Tribunal upheld the classification of 'Selenium Sulphide Lotion USP (SELSUN)' as a cosmetic under sub-heading 3305.90. The confiscation of 17,950 ... Classification of goods Issues Involved:1. Classification of 'Selenium Sulphide Lotion USP (SELSUN)' as a cosmetic or a medicine.2. Confiscation of 17,950 bottles of the product.3. Imposition of a penalty on the appellants.Issue-Wise Detailed Analysis:1. Classification of 'Selenium Sulphide Lotion USP (SELSUN)' as a Cosmetic or a Medicine:The primary issue in both appeals is the classification of 'Selenium Sulphide Lotion USP (SELSUN)' under the Central Excise Tariff. The Department classified it as a cosmetic under sub-heading 3305.90, while the appellants argued it should be classified as a medicine under sub-heading 3003.19.Arguments by the Appellants:- The product has been prescribed and sold as 'Selsun Suspension' for treating skin diseases like tinea versicolor and seborrheic dermatitis.- Trade literature is provided only to registered medical practitioners, indicating the product is to be used under medical supervision.- It is marketed for its medicinal properties and not for hair care or beautification.- The product is manufactured under a drug license and classified as a drug by the Food and Drug Administration (FDA), Maharashtra State.- Historical classification by the Central Board of Excise and Customs treated it as a medicine based on its therapeutic properties and inclusion in standard pharmaceutical references like the U.S. Pharmacopoeia and Merck Index.Arguments by the Department:- Similar products are licensed as cosmetics.- The product contains only 2.5% Selenium Sulfide, with the remaining composition being foaming agents, flavoring agents, etc., making it a shampoo.- In common parlance, the product is known and sold as 'Selsun Shampoo.'- The product's packaging and advertising suggest it is a shampoo, not a medicinal preparation.Tribunal's Analysis:- The Tribunal noted that the product has properties of both a drug and a cosmetic.- Martindale's 'Extra Pharmacopeia' and Kirk-Othemer's 'Encyclopaedia of Chemical Technology' describe Selenium Sulfide as used in anti-dandruff shampoos.- The product has a pleasant odor and is packaged attractively, indicating its use as a cosmetic.- As per Rule 3(a) of the interpretative rules, the heading providing the most specific description should be preferred. In this case, sub-heading 3305.90 for 'preparations for use on the hair' is more specific than the general heading for pharmaceuticals under Chapter 30.- Chapter Note 2 of Chapter 33 and Note 1(d) of Chapter 30 exclude preparations of Chapter 33 from being classified as pharmaceuticals, even if they have therapeutic properties.Conclusion:The Tribunal upheld the classification of 'Selenium Sulphide Lotion USP (SELSUN)' as a cosmetic under sub-heading 3305.90.2. Confiscation of 17,950 Bottles of the Product:The Additional Collector confiscated 17,950 bottles of 'Selsun' for not being accounted for in the Record of Production (RG.1).Arguments by the Appellants:- The bottles were not fully manufactured as they lacked batch numbers and other markings required under the Drugs and Cosmetics Rules.Tribunal's Analysis:- The Tribunal found merit in the appellants' argument that the products were not fully manufactured.Conclusion:The confiscation of the 17,950 bottles was set aside.3. Imposition of a Penalty on the Appellants:The Additional Collector imposed a penalty of Rs. 25,000 on the appellants.Arguments by the Appellants:- The incomplete manufacturing status of the bottles should exempt them from penalties.Tribunal's Analysis:- Given the finding that the products were not fully manufactured, the penalty was deemed inappropriate.Conclusion:The penalty imposed on the appellants was set aside.Final Judgment:- The classification of 'Selenium Sulphide Lotion USP (SELSUN)' as a cosmetic under sub-heading 3305.90 was upheld.- The confiscation of 17,950 bottles and the penalty of Rs. 25,000 were set aside.- Appeal No. E/610/88-C was rejected except for the modification regarding confiscation and penalty.- The Department's Appeal No. E/1935/89-C was allowed.