TaxTMI 
TaxTMI 
1995 (5) TMI 98
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....einafter called as the `Product') as a cosmetic under sub-heading 3305.99. 2. Brief facts are the following : The appellants have a factory at 39 G.I.D.C. Vapi, Bulsar and are engaged in the manufacture of `Selenium Sulfide Lotion U.S.P.' containing 2.5% Selenium Sulfide w/v. The said product was manufactured by the appellants under a loan licence from the Abbott Laboratories in accordance with Abbott's specifications, raw materials and packing materials and quality control. The said product was sold under the Abbott Laboratory's brand name `Selsun'. It is claimed that `Selenium Sulfide' is the only active ingredient and it is used in the required therapeutic quantity, i.e. 2.5% w/v and the other ingredients merely serve the purpose of a bare medium. It is not seriously disputed that the product namely, `Selsun' is prescribed by physicians for the treatment of skin diseases known as `Seborrhoeic Dermatitis' commonly known as `dandruff' and `Tinea Versicolour' which is caused by an organism known as `pytyriasis versicolour'. This product has been described and held out to be a drug or a medicinal product and is not held out to be a cosmetic or toilet preparation. In support of....
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.... sub-heading 3003.19. The Assistant Collector provisionally accepted the same subject to the result of chemical test for which the product was sent. After receiving the report and after hearing the appellants the Assistant Collector by order dated 30-12-1987 held that the product in question will fall under sub-heading 3305.90 and not under 3003.19 as claimed by the appellants. The reasons for coming to that conclusion by the Assistant Collector were the following : "As per the arguments put forth by the party at the time of personal hearing I also referred the technical/chemical literature of the product and as per the information on the container of the product the selenium sulfide USP is 2.5% which is very small proportion looking to the following other ingredients : Surfactant 17.0% Inter stabilizer 5.2% and water 75.3% and thus as a whole selenium sulfide has got very subsidiary curative or prophylactic value as to other ingredients have in proportion of 97.5% will have the substantial effect. It is also further revealed from the Cosmetics-Science and Technology edited by Edward Sangairal at page 647. The most recently developed preparation of this type is the d....
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....l Excise law as the goods were found to have been not accounted for in the statutory RG-1 Register though in fully manufactured and marketable condition. A show cause notice was issued on that ground. The matter was heard by the Additional Collector, Central Excise before whom the appellants contended that the goods subjected for confiscation were not fully prepared ones and therefore there was no violation of any of the provisions of the Central Excise Law and the goods in question were classifiable under Chapter 30 as a drug/medicine and they will not fall under Chapter 33 and claimed by the Department. 7. The Additional Collector by order dated 21-12-1987 held that the product will fall under Chapter 33 and the goods were found in a fully prepared manner and, therefore, the confiscation was proper and a fine of Rs. 35,000/- was imposed in lieu of confiscation. A penalty of Rs. 25,000/- was also imposed on the appellant. The Additional Collector, Central Excise gave the following reasons in support of his conclusion that the product would fall under sub-heading 3305.90 :- "(a) That the other manufacturers of similar type of product (i.e. Selsun suspension of M/s. ....
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....lsun which are as under :- Selenium disulphide 2.5% Surfactant 17.0% Inert stabilizer 2.5% Water 75.3% He further observed that the other ingredients will have the substantial effect. On the contrary it is seen that the selenium sulphide is the only active ingredient in the preparation and that the other ingredients merely serve the purpose of base, medium and the dispersing agent. As per Chapter Note 2 to Chapter 33 those items or products which contain only subsidiary pharmaceutical or antiseptic constituents or have only subsidiary curative or prophylactic value will only be covered under Chapter 33. In the instant case the appellant adduced evidence contained in the standard technical works on the subject, the opinion of the technical experts and the fact that the product is known among the people who deal in it, to show that selsun is essentially a medicine only and, therefore, it cannot be classified in Chapter 33 as a cosmetic. It is rightly classifiable as medicine falling under Chapter Heading 3003.19." 10. Aggrieved by the abovesaid order of the first Appellate Authority, the respondent preferred an appeal to the CEGAT. The appellants....
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....g given by the Central Board of Excise and Customs in its order dated 17-1-1981. He also invited our attention to the numerous affidavits and letters filed by the Chemists, Doctors and the Customers. He contended that except advancing arguments that those affidavits and letters should not be relied upon as they are stereotyped, no other concrete material was placed before the Court by the respondent to discredit them. According to the learned counsel, in the common as well as commercial parlance the product will not be considered as a shampoo to be brought under Chapter 33. The learned counsel also cited decisions in support of his arguments which will be referred to at the appropriate place. 13. Learned counsel appearing for the Department contending contra submitted that the Tribunal was right in understanding the scope of the Chapters as well as the Chapter notes and the interpretation clause. Merely because under the earlier tariff item, the product was classified as a drug, the same cannot be pressed into service notwithstanding the new classification brought in by the Central Excise Tariff Act, 1985. He also criticised the stereo-typed affidavits and letters filed by ....
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....to indicate a connection in the course of trade between the medicine and some person, having the right either as proprietor or otherwise to use the name or mark with or without any indication of the identity of that person." HEADING NO. 30.03 Medicaments (including veterinary medicaments)Patent or proprietary medicaments, other than those medicaments which are exclusively Ayurvedic, Unani, Siddha, Homoeopathic or Bio-chemic; Sub-heading No. Other    - 3003.19 15.Relevant portions in  Chapter 33 are set out below : "ESSENTIAL OILS AND RESINOIDS : PERFUMERY, COSMETIC OR TOILET PREPARATIONS NOTES 1.This Chapter does not cover : (a)Soap or other products of Heading No. 34.01; (bGum, wood or sulphate turpentine or other products of Chapter 38; or (c) Perfumery, cosmetics and toilet preparations containing alcohol or opium, Indian hemp or other narcotics and for this purpose these expressions have the meanings respectively assigned to them in Section 2 of the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 (16 of 1955). 2. Heading Nos. 33.03 to 33.08 apply, inter alia, to products, whether or not mix....
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....iner or both, a name which is not specified in a monograph, in a pharmacopoeia, formulary or other publications notified in this behalf by the Central Government in the Official Gazette, or which is a brand name, that is, a name or a registered trade mark under the Trade and Merchandise Marks Act, 1958 (43 of 1958), or any other mark such as symbol, monogram, label, signature or invented words or any writing which is used in relation to that medicine for the purpose of indicating or so as to indicate a connection in the course of trade between the medicine and some person, having the right either as proprietor or otherwise to use the name or mark with or without any indication of the identity of that person. Explanation II. - `Alcohol', `Opium', `Indian hemp', `Narcotic Drugs' and `Narcotics' have the meanings respectively assigned to them in Section 2 of the Medicinal and Toilet Preparations (Excise Duties) Act, 1955. Item No. 14F - Cosmetics and Toilet Preparations : 14F. Cosmetics and toilets 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 ....
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.... the requirements of a drug as understood in common parlance. (h) Selenium Sulfide 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 Patent or Proprietary medicine through Registered Pharmacists who hold valid drug licence, and not by any dealer like other shampoos. (l) 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 used 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 recognise....
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....`treatment' the hands should be washed thoroughly, specially under finger nails'. 21. So far as medicinal properties of the product are concerned it can be gathered from the technical and/or pharmaceutical references that Selenium Sulfide has anti-fungal and anti-seborrhoeic properties and is used in a detergent medium for the treatment of Dandruff on the scalp which is milder form of Seborrhoeic dermatitis and Tinea Versicolor. 2.5% of this compound is the Therapeutic quantity. 22. At the risk of repetition, it must be pointed out that on the side of the respondents, no other material is produced to discredit the affidavits and letters filed by the appellant before the CEGAT. As a matter of fact, it is seen from the order of the Central Board of Excise that such affidavits and letters were also produced in the year 1981 and they were taken note of by the Central Board of Excise. Nonetheless, the learned counsel appearing for the respondent, as pointed out earlier, criticised the affidavits as `manufactured evidence'. We would like to comment on this that it is not fair to call the affidavits and other letters as `manufactured evidence' as they were not produced bef....
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....ore specifically preparations of Chapter 33 or Chapter 34. In other words, he wants to equate the product in question to `shampoo' enumerated under Heading 33.05. He also invited our attention to the fact that the appellants before the coming into force of the new Tariff Act described the product as shampoo and they have omitted the word `shampoo' deliberately only to claim that the product would fall under Chapter 30. 27. We do not think that we can accept all the contentions of the learned counsel for the respondents except certain obvious admitted positions. The submission that the product in question must be equated to shampoo falling under Chapter 33 is not at all correct. 28. It is true that the learned counsel for the appellants have placed reliance on the definition of the words `cosmetic and drug' as defined in the Drugs and Cosmetics Act, 1940. On a perusal of the definitions, we can broadly distinguish cosmetic and drug as follows :- "A "Cosmetic" means any article intended to be rubbed, poured, sprinkled or sprayed on, or introduced into, or otherwise applied to the human body or any part thereof for cleansing, beautifying, promoting attractivene....
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....ubstance 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. 32. 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 ....
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....other materials produced by the respondents to persuade us to take a different view. Certain contrary findings of the Authorities below such as that `Selsun' is only a medicated shampoo without any acceptable supporting material cannot be sustained. 34. Another reason given by the CEGAT is that Heading 33.05 uses the word "Preparation for use on the hair" and therefore the product in question can be brought under the said heading. 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. 35. The labels which give the warning, precauti....