1995 (5) TMI 98 - SC - Central Excise

Product with 2.5% selenium sulfide classified as medicine under tariff sub-heading 3003.19, not cosmetic 3305.90

SC allowed the appeals and held the product is classifiable as a medicine under tariff sub-heading 3003.19, not as a cosmetic under 3305.90. The Court ... Classification of the product 'Selsun' - Chapter notes and the Rules for the interpretation of the Schedule - “Selsun” is classifiable as `medicine’ under sub-heading 3003.19 as contended by the appellant Or is classifiable as `cosmetic’ under sub-heading 3305.90 as claimed by the respondent? It is an admitted fact that this product prior to 28-2-1986 (i.e. before the coming into force of the Central Excise Tariff Act, 1985) was classified as a drug under Item 14E of the First Schedule to the Central Excises and Salt Act, 1944. Held that:- According to the Authorities the product contains only subsidiary pharmeceutical value and, therefore, notwithstanding the product having a medicinal value will fall under Chapter 33. We have already set out Note 2 to Chapter 33. In order to attract Note 2 to Chapter 33 the product must first be a cosmetic, that the product should be suitable for use as goods of Headings 33.03 to 33.08 and they must be put in packing as labels, literature and other indications showing that they are for use as cosmetic or toilet preparation. Contrary to the above in the present case none of the requirements are fulfilled. Therefore, Note 2 to Chapter 33 is not attracted. Again it is without substance the reason given by the Authorities that the product contains 2.5% w/v of Selenium Sulfide which is only a subsidiary curative or prophylactic value. The position is that therapeutic quantity permitted as per technical references including U.S. Pharmacopoeia is 2.5%. Anything in excess is likely to harm or result in adverse effect. Once the therapeutic quantity of the ingredient used, is accepted, thereafter it is not possible to hold that the constituent is subsidiary. The important factor is that this constituent (Selenium Sulfide) is the main ingredient and is the only active ingredient. As rightly contended by the learned senior counsel for the appellants that merely because there is some difference in the tariff entries, the product will not change its character. Something more is required for changing the classification especially when the product remains the same. We have noticed that the Excise Authorities have accepted the decision of the Central Board of Excise and Customs treating the product in question as patent and proprietary medicine by not challenging the same or by allowing the same to become final. We have also seen that the Central Board of Excise and Customs has given numerous points in support of its conclusions for holding the product in question as patent and proprietary medicine. Principal among them at the risk of repetition can be recalled. The Tribunal forgets that the product in question is intended as a medicine for curing the disease `Tinea Versicolor’ and as such applied to the skin wherever necessary apart from curing dandruff by applying on the scalp. It is also an admitted fact that even bald person suffers from dandruff and that being the position the view taken by CEGAT that the product will fall under the heading preparation for use on the hair is not sustainable. We have already noted the contents of labels and literature and a perusal of the same will show that the appellants have nowhere indicated that the product is to be used as a cosmetic or toilet preparation nor they have held out the product to be a cosmetic. On a perusal of the entire material we are satisfied that the product in question, having regard to the preparation, label, literature, character, common and commercial parlance understanding and the earlier decisions of the Central Board of Excise and Customs, would fall under sub-heading 3003.19 and there is no justifiable reason for changing the classification. As we have reached the above conclusion with reference to the materials placed before us on facts, we do not think it necessary to go into other decisions cited at the Bar. In the result the appeals are allowed holding that the product `Selsun’ will fall under Tariff Item 3003.19. In favour of assessee. Issues Involved:1. Classification of the product 'Selsun' under the Central Excise Tariff.2. Applicability of Chapter Notes and Rules of Interpretation.3. Reliance on previous classifications and commercial parlance.4. Consideration of the product as a drug or cosmetic.Issue-wise Detailed Analysis:1. Classification of the product 'Selsun' under the Central Excise Tariff:The primary issue was whether 'Selsun' should be classified as a 'medicine' under sub-heading 3003.19 or as a 'cosmetic' under sub-heading 3305.90. The product 'Selsun' is manufactured under a Drug license and is used for treating skin diseases like dandruff and Tinea Versicolor. The Assistant Collector and Additional Collector of Central Excise initially classified it under sub-heading 3305.90, considering it a cosmetic due to its subsidiary curative value and the presence of other ingredients. However, the First Appellate Authority reversed this decision, classifying it under Chapter 30 as a drug, emphasizing that Selenium Sulphide is the only active ingredient used in therapeutic quantity.2. Applicability of Chapter Notes and Rules of Interpretation:The Tribunal's decision was based on the interpretation of Chapter Notes and the Rules of Interpretation. Chapter Note 2 to Chapter 33 states that products with subsidiary pharmaceutical constituents or curative value should be classified under Chapter 33. However, the Supreme Court found that for Note 2 to apply, the product must first be a cosmetic, suitable for use as a cosmetic, and labeled as such. The product 'Selsun' did not fulfill these criteria. The Court noted that the therapeutic quantity of Selenium Sulphide (2.5%) is the permitted amount, and anything in excess could be harmful, thus it cannot be considered subsidiary.3. Reliance on previous classifications and commercial parlance:The Court emphasized that the product had been classified as a patent and proprietary medicine under the old tariff item 14E, and there was no substantial reason to change this classification under the new tariff. The Central Board of Excise and Customs had previously classified 'Selsun' as a drug based on its therapeutic use, manufacturing under a Drug license, certification by the Food and Drugs Administration, and its inclusion in various pharmacopoeias. The Court also considered affidavits and letters from chemists, doctors, and customers, which supported the classification of 'Selsun' as a drug.4. Consideration of the product as a drug or cosmetic:The Court distinguished between cosmetics and drugs based on their intended use. Cosmetics are intended for cleansing, beautifying, or altering appearance, while drugs are used for treating or preventing diseases. 'Selsun' is intended for treating dandruff and other skin conditions, not for beautifying or altering appearance. The product's label and literature indicated its use as a medical treatment, with warnings and directions for use, further supporting its classification as a drug. The Court also rejected the argument that the product's pleasant odor and attractive packaging made it a cosmetic, noting that these factors do not change its medicinal character.Conclusion:The Supreme Court concluded that 'Selsun' should be classified under sub-heading 3003.19 as a medicine, not under sub-heading 3305.90 as a cosmetic. The appeals were allowed, and the product's classification as a drug was upheld. The Court found no justifiable reason to change the classification based on the new Central Excise Tariff Act, 1985, and emphasized that the product's true nature and intended use should determine its classification.