Commnr. of Central
Excise Vs. M/S. Wockhardt Life Sciences Ltd.
Jurisdiction Civil Appeal Nos.783-803 of 2004]
O R D E R
appeals are directed against the judgment and order passed by the Customs, Excise
and Gold (Control) Appellate Tribunal, West Zonal Bench at Mumbai in Appeal
Nos.E-1252-1271/02-MUM and E/3630-01-MUM dated 18.6.2003. By the impugned judgment
and order, the Tribunal has reversed the findings and conclusions reached both by
the Adjudicating Authority and the appellate authority.
primary issue that falls for our consideration in these appeals is the classification
of two products viz. `Povidone Iodine Cleansing Solution USP and Wokadine
Surgical Scrub for the purpose of levy of duty under the provisions of Central
Excise Tariff Act, 1985 (`The Tariff Act' for short).
assessee is the manufacturer of Povidone Iodine Cleansing Solution USP and Wokadine
Surgical Scrub. These two products have identical composition. The only
difference between these two products is that Wokadine is a branded product whereas
Povidone Iodine Cleansing Solution is a generic name. The assessees' claim
before the authorities and also before the Tribunal is that the aforesaid
products are medicaments and, therefore, require to be classified under Chapter
sub-heading 3003 of the Tariff Act, 1985, whereas the revenue's stand was that
the products in question are detergents and, therefore, to be classified under
chapter sub-heading 3402.90.
Adjudicating Authority had issued nearly 20 show cause notices to the assessee for
the period commencing from September, 1992 to December, 1999. In the show cause
notices, it is alleged that the assessee has mis-classified the product under chapter
sub-heading 3003.10/20, instead of chapter sub-heading 3402.90 of the Act with an
intent to evade the payment of the duty by suppressing vital facts regarding usage
of the product and the same amounts to contravention of Rule 173B of the Central
Excise Rules, 1944 (for short "Rules").
It is further stated in
the show cause notices that the products in question are mainly used for the purpose
of detergents rather than medicaments. Accordingly, the assessee was directed
to show cause why the products in question should not be classified under chapter
sub-heading 3402.90 and why the duty should not be demanded under Rule 9(2)
read with proviso to section 11A (1) of the Central Excise Act, 1944 (for Short
"the Act of 1944") along with interest thereon under Section 11AB of
the Act of 1944 and penalty under Section 11 AC of the Act of 1944 read with
Rule 173 Q of the Rules for short payment of excise duty.
receipt of the show cause notices, the assessee had filed its detailed reply, inter
alia, bringing to the notice of the adjudicating authority the contents of the
products in question, their labeling on the commodity and the user to which the
products are put. The assessee had also relied on the various shades of meaning
that is attributed to the medicaments, in particular the expressions
`therapeutic and prophylactic' and had contended that those medicines are used
for external treatment of a human-being.
The assessee 3had
also placed reliance on the Indian Pharmacopoeia, the United States Pharmacopoeia
and the International Pharmacopoeia. The assessee had also contended that the
`Neutronix and Superamide' are other two products with which Povidone Iodine is
mixed to contend that they are in the nature of vehiculars for the spreading of
receipt of the reply so filed, the adjudicating authority has proceeded to conclude,
that, since the contents of Neutronix and Superamide are more than the
medicament, namely; Povidone Iodine, the product in question requires to be
classified as detergent and thereby, would fall under chapter sub-heading 3402.90
and it has also observed in its order that the product in question is primarily
used as a cleansing solution and, therefore, cannot fall in the description of the
medicament. Accordingly, had confirmed the show cause notices issued earlier and,
thereby, had directed the assessee to pay the difference in duty and also the
by the aforesaid order passed by the 4adjudicating authority, the assessee had
carried the matter in appeal before the First Appellate Authority, who by his
order dated 29.11.2001 had sustained the order passed by the adjudicating authority.
According to the appellate authority, since the product in question is mainly
used as a cleansing solution, the proper classification would be as a detergent
and would fall under tariff entry 3402.90.
assessee, being aggrieved by the order so passed, had carried the matter in
appeal before the Tribunal. Even before the Tribunal, the assessee had produced
copious material in the form of product literature and also the dictionary meaning
of the expression "medicaments". The Tribunal, while appreciating the
rival contentions of the revenue and the assessee, has considered the wide
range of literature on the above products, their composition and user and accordingly
has concluded that the `Povidone Iodine Cleansing Solution USP' is used as an antiseptic
The Tribunal has further
observed that the main contention of the revenue is that the addition of
surface active agent and other substances would result in a product in which
`Prophylactic' qualities of Povidone Iodine 5would become subsidiary to its primary
use as a washing solution. The Tribunal, while rejecting the revenue's
contentions and accepting the assesse's stand, has observed that the presence of
the surface active agent and other substances is only to ensure appropriate
dispersible to the product and not to render its use as a washing or cleansing
The Tribunal, while relying
on the Affidavit dated 9.8.2002 filed by the Senior President (Marketing) of
the assessee in order to show sale pattern of the goods, has observed that the
product is not used as a general cleansing solution similar to medicated soaps used
by ordinary persons, but it is only used in places where practice of surgery
and medicine is being carried out.
The Tribunal has
further observed that the products are packed in opaque brown thick plastic bottles
with plain labels, unlike, soaps and other products which are packed in bright attractive
colors as used by ordinary household consumers. It has also observed that the
labeling of the product shows that it is intended for preoperative use by the surgeon
and his team or on the patient.
The Tribunal after referring
to the Explanatory Notes under heading 30.04 of the Harmonized System of Nomenclature
relating to medicament, which 6covers Povidone Iodine as Polyvinyl Povidone
Iodine and, the test laid down for classification of the product as medicament:
has concluded that the product is purchased primarily for its therapeutic or prophylactic
qualities and not for its qualities as organic surface active preparation.
In conclusion, the Tribunal,
while allowing the appeal, has held that the product in question is, primarily
intended and also actually, used for its antiseptic properties, therefore, it is
classifiable as medicament under Chapter 30 of the Schedule to the Act. It is
the correctness or otherwise of the findings and conclusions reached by the Tribunal
is the subject matter of these appeals before us.
have heard Shri R.P. Bhatt, learned senior counsel appearing for the Revenue
and Shri Ajay Aggarwal, learned counsel appearing for the Assessee. Both the learned
counsel have dealt with the matter in detail and have also relied upon some of
the decisions of this Court to buttress their submissions.
R.P. Bhatt, learned senior counsel for revenue would submit that the product in
dispute, namely; Povidone Iodine Solution or its patent and proprietary equivalent
Wokadine surgical scrub, contains only 80 kg of Povidone Iodine and 250 kg of Neutronix
in 1000 litres of demineralised water and is essentially used as a medicated
detergent. He would contend that the said product predominantly contain surface
active agents which are primarily used as a medicated cleaning agent for removal
of dirt, bacteria, fungi etc. In this regard, he would further submit that the said
product is admittedly used as an antiseptic agent for washing hands of surgeons
and is also applied on the skin of the patients before operation.
He would further contend
that the said product is not a medicament in terms of Chapter Note 2(i) of the
Tariff Act as it neither has "Prophylactic" nor "Therapeutic"
usage. He would contend that in order to qualify as a medicament, the goods
must be capable of curing or preventing some disease or ailment. Therefore the
said products cannot be classified under Chapter Heading 3003 of Tariff Act.
Bhatt would further submit that Chapter Note 1(e) of Chapter 30 clearly excludes
soap or other products of Chapter 34, containing added medicament, from their 8classification
under Chapter 30. He would, therefore, submit that the product is more appropriately
classifiable under the Chapter 3402 as an organic surface active
agent/preparation, or cleansing preparation, irrespective of the fact that it
contains certain percentage of medicaments.
In other words, he
would contend that even if said products have added prophylactic effectiveness,
they would be considered as cleansing agent and not medicaments for the purpose
of classification in view of their primary and essential use which is cleansing
and their prophylactic or therapeutic quality, by virtue of added medicament, is
secondary in nature.
He has placed reliance
on some decisions of this Court in support of his submission that it is the
primary functional properties and composition of the goods that would decide its
classification under particular Chapter. We will refer to the decisions on
which reliance is placed by learned counsel at an appropriate time.
Ajay Aggarwal, learned counsel for the assessee, has meticulously taken us through
the judgment of the Tribunal and supported its reasoning. He contended that the
revenue in their show cause notices has admitted that 9the products in issue
are antiseptic. He further submits that the products are medicament in which some
carriers are added and therefore, it will fall under Chapter Sub-heading 3003
and not under Chapter 34.
order to resolve the controversy that is raised before us, we need to notice
first the entries which the revenue and the assessee relies upon to drive home their
point of view. The Tariff Items under Chapter sub-heading 3003 and chapter sub-heading
3402.90, at the relevant time, are extracted. The same reads as under:
Description of goods
Rate of duty
(including veterinary medicaments) Patent or proprietary medicaments, other than
those medicaments which are exclusively Ayurvedic, Unani, 15% Siddha, Homeopathic
or Bio- chemic.
(other than patent or proprietary) other than those which exclusively used in
Ayurvedic, Unani, Siddha, Homeopathic or Bio-chemic systems Medicaments, including
those in Ayurvedic, Unani, Siddha, Homeopathic or Bio- chemic systems.
Surface active agents (other than soap): surface-active preparations, washing
preparations (including auxiliary washing preparations and cleaning
preparations, whether or not containing soap.
Surface active agents (other than soap): surface-active preparations, washing
preparations (including auxiliary washing preparations and cleaning
preparations, whether or not containing soap.
14. The chapter note 2
(i) of Chapter 30 to the schedule of Tariff Act pertaining to pharmaceutical
products, define the meaning of the expression "medicament". It is as
under : Medicament" means goods (other than foods or beverages such as
dietetic, diabetic or fortified foods, tonic beverages) not falling within heading
No. 30.02 or 30.04 which are either:
(a) products comprising
two or more constituents which have been mixed or compounded together for
therapeutic or prophylactic uses; or
suitable for such uses put up in measured doses or in packings for retail sale or
for use in hospitals.
note makes it clear that the products, comprising two or more constituents which
have been compounded together either for therapeutic or prophylactic uses, would
fall within the meaning of the expression Medicaments. In the present case, it
is not in dispute that along with the medicament, namely; Povidone Iodine, the
assessee while manufacturing the products in question uses three other constituents,
namely; Neutronix, Superamide and Sodium Hydroxide as a preservative.
is also relevant to explore the meaning of the word `prophylactic' in medical
parlance as well, in order to resolve the controversy before us. The word `prophylactic'
derives from Greek word `prophylaktikos' which means "to take precautions against"
or "to keep guard before". Dorland's Medical Dictionary 1364 (28th ed.
1994) defines "prophylactic" as "an agent that tends to ward off
disease". Merriam-Webster's Medical Desk Dictionary 579 (1993) defines it as
"guarding from or preventing the spread or occurrence of disease or
infection"; Mosby's Dictionary 1284 (4th ed. 1994) defines it as a biologic,
chemical, or mechanical agent that prevents the spread of disease.
is relevant to notice the composition, label and usage of the products whose
classification is in dispute before us. The label of the products would stipulate
its formula and describe its usage. However, the labels of both the products
are identical. Therefore, we would consider `Povidone Iodine Cleansing Solution
USP' which is presented in a maroon coloured bottle of 500ml capacity on which
a label has been pasted which read as thus:
Cleansing Solution USP "Providence Iodine Cleansing Solution USP to be
used as a surgical scrub. Broad Spectrum topical micro-bicidal effective against
bacteria, fungi, protozoa, yeasts and viruses. Formula: Povidone-Iodine I.P.
7.5. w/v (Available Iodine 0.75% w/v) Phosphate Free" Store in a cool
place For External use only Usage: 1. For preoperative cleansing and degerming
of surgeon's and operating team's hands
a) Wet hands and
forearms with water. Pour about 5 ml of surgical scrub with the help of the `elbow
dispenser' on the palm and spread over both hands and forearms scrubbing thoroughly
over all areas for about 5 minutes. Add little water to develop copious suds.
Rinse thoroughly under running water.
b) Complete the cleansing
with another 5 ml of surgical scrub in the same way.2. For preoperative uses on
Patients. After the skin area is shaved, wet it with water. Apply Povidone
Iodine surgical scrub on the skin and scrub, thoroughly for about 5 minutes. Rinse
off by aid of sterile gauze saturated with water. Now paint the skin with
Povidone-Iodine solution and allow to dry before incision."
composition of the product per 1000 litres has been produced below:
S-60(Anionic Detergent) (active content 58%)
L-9 (foaming agent)
said product contains- Povidone Iodine: The 7.5% w/v of Povidone Iodine provides
0.75% w/v of available iodine which is functions as disinfectant. Neutronix: The
25% of composition of the product is Neutronix which is Anionics and used as detergents,
wetting, emulsifying and dispersing agents. Further the content of Superamide
is just 1.2% in the said product which serves as an excellent booster and stabilizer,
viscosity builder and detergent with wetting and soil suspending properties.
assessee has relied on various pharmacopeias to throw light on the essential
composition of Povidone Iodine Solution including surface active agents and
their respective functions. It is relevant to refer to these pharmacopeias in
order to appreciate and analyze the functions of various ingredients contained
in a Povidone Iodine Solution.
to the US Pharmacopeia, Povidone Iodine is a complex of Iodine with Povidone.
It contains not less than 9.0% and not more than 12.0% of available iodine
calculated on the dried basis. Povidone Iodine cleansing solution is a solution
of Povidone Iodine with one or more suitable surface active agents. It contains
not less than 85% and not more than 120% of the labelled amount of the iodine.
It may contain a small amount of alcohol. The only difference between the two is
that while the first product has a suitable surface active agent, the second
product does not have surface active agent.
Japan Pharmaceutical Reference notes that Iodine Surgical Scrub is a
disinfectant containing povidone-iodine with a foaming agent and a surfactant -
which exerts disinfecting action by releasing iodine, which shows disinfecting effect
against broad range of micro-organisms including bacteria, fungi and viruses.
& Gilman's book titled `The Pharmacological Basis of Therapeutics'
reads:"The most widely used iodophor is povidone iodine, in which the carrier
molecule is povidone...... A standard surgical scrub with a 10% solution (1%
available iodine) will decrease the usual cutaneous bacterial population by about
85%...... When the hands are contaminated by gram-negative bacteria, povidone-iodine
is more effective scrubbing disinfectant."
Pharmaceutical Sciences records that Povidone Iodine USP is a virtually non-stinging,
film forming, water soluble iodine compound used as a topical antiseptic that essentially
retains the non-selective broad range microbicidal activity of iodine. Povidone
Iodine will rapidly kill bacteria (both Gram positive and Gram negative as well
as antibiotic resistant organisms), fungi, viruses, protozoa and yeasts, to
cause a substantial reduction of the microorganisms on the skin. Preoperatively,
or as a post surgical antiseptic scrub, its microbicidal action is fast acting and
is effective for a period of 6 to 8 hours. It is further stated that povidone-iodine
antiseptic preparations are clinically indicated for the prevention and treatment
of surface infections as well as to degerm the skin prior to injection and hyperalimentation
procedures, for pre and post operative scrubbing and washing of hospital
operating room personnel and for pre-operative skin preparation of the patient
Martindale's The Extra Pharmacopoeia, states that Povidone-Iodine is an iodophore
which is used as a disinfectant and antiseptic mainly for the treatment of
contaminated wounds and pre-operative preparation of the skin and mucous
membranes. It is stated that solutions of Povidone-Iodine gradually release iodine
to exert an effect against bacteria, fungi, viruses, protozoa, cysts and
Satoskar and Bhandarkar's Pharmacology & Pharmaco Therapeutics, it reads: "Iodophors
are developed by complexing iodine with surfactants like non-ionic detergents. The
detergents act as solubilizers and carriers, combining detergent property with anti-bacterial
activity. They owe their germicidal activity to the slowly released elemental
expression "therapeutic" or "prophylactic" is not defined under
the tariff entry. Therefore, useful reference can be made to the dictionary
meaning to these expressions. In fact the assessee, in his reply to the show
cause notices issued, had relied upon the meaning of the expression
"therapeutic" and "prophylactic" from Webster's New 20th 18Century
Dictionary, Chambers English Dictionary, Websters New 20th Century Dictionary.
In our view, reference
to all other dictionary meanings may not be necessary. We intend to confine
ourselves only to the aforesaid three dictionaries. In that the meaning of the expression
"therapeutic" and "prophylactic" is stated as under: "To
prevent, to guard against it, before, in medicine, preventive protecting against
disease."; "Guarding against disease, a preventive of disease; a condom;
preventive treatment against diseases." and; "Serving to cure or
heal, Curative concerned in discovering and applying remedies for
we discuss the issue posed before us, it would be useful to make reference to observation
made by this Court in the case of ICPA Health Products (P) Ltd. Vs. Commissioner
of Central Excise, Vadodara, (2004) 4 SCC 481, wherein this Court, after referring
to the meaning of the expression "prophylactic" from the Concise Oxford
Dictionary, 9th Edn., has noted that the expression "prophylactic" means
a medicament intended to prevent diseases, a preventive medicine or course of
is the specific case of the assessee before the adjudicating authority that the
products in question are primarily used for external treatment of the human-beings
for the purpose of the prevention of the disease. This is not disputed by the
revenue, but their stand appears to be since the products in question are primarily
used as detergents/cleansing preparation, they cannot be brought under the definition
As we have already
noticed, medicaments are products which can be used either for therapeutic or prophylactic
usage. Since the product in question is basically and primarily used for the prophylactic
uses, in our view the Tribunal was justified in coming to a conclusion that the
adjudicating authority and the first appellate authority were not right in
classifying the products under chapter sub-heading 3402.90 and, therefore, had
classified those products under chapter sub-heading 3003.
is no fixed test for classification of a taxable commodity. This is probably the
reason why the `common parlance test' or the `commercial usage test' are the most
common [see A. Nagaraju Bors. v. State of A.P., 1994 Supp 20(3) SCC 122].
Whether a particular article will fall within a particular Tariff heading or not
has to be decided on the basis of the tangible material or evidence to
determine how such an article is understood in `common parlance' or in `commercial
world' or in `trade circle' or in its popular sense meaning.
It is they who are
concerned with it and it is the sense in which they understand it that constitutes
the definitive index of the legislative intention, when the statute was enacted
[see D.C.M. v. State of Rajasthan, (1980) 4 SCC 71]. One of the essential
factors for determining whether a product falls within Chapter 30 or not is whether
the product is understood as a pharmaceutical product in common parlance [see CCE
v. Shree Baidyanath Ayurved, (2009) 12 SCC 413;
Central Excise, Delhi v. Ishaan Research Lab (P) Ltd. (2008) 13 SCC 349].
Further, the quantity of medicament used in a particular product will also not
be a relevant factor for, normally, the extent of use of medicinal ingredients is
very low because a larger use may be harmful for the human body. [Puma Ayurvedic
Herbal (P) Ltd. v. CEE, Nagpur (2006) 3 SCC 266; State of Goa v. Colfoax Laboratories
(2004) 9 SCC 83 ; B.P.L Pharmaceuticals v. CCE, 1995 Supp (3) SCC1]
there cannot be a static parameter for the correct classification of a
commodity. This Court in the case of Indian Aluminium Cables Ltd. v. Union of India,
(1985) 3 SCC 284, has culled out this principle in the following words: "13.
To sum up the true position, the process of manufacture of a product and the
end use to which it is put, cannot necessarily be determinative of the classification
of that product under a fiscal schedule like the Central Excise Tariff. What is
more important is whether the broad description of the article fits in with the
expression used in the Tariff..."
the functional utility and predominant or primary usage of the commodity which is
being classified must be taken into account, apart from the understanding in common
parlance [see O.K. Play (India) Ltd. v. CCE, (2005) 2 SCC 460; Alpine Industries
v. CEE, New Delhi (1995) Supp. (3) SCC 1; Sujanil Chemo Industries v. CEE &
Customs (2005) 4 SCC 189; ICPA Health Products (P) Ltd v. CEE (2004) 4 SCC 481;
Puma Ayurvedic Herbal (Supra); Ishaan Research Lab (P) Ltd.(Supra) ; CCE v. Uni
Products India Ltd., (2009) 9 SCC 295].
commodity cannot be classified in a residuary entry, in the presence of a specific
entry, even if such specific entry requires the product to be understood in the
technical sense [see Akbar Badrudin v. Collector of Customs, (1990) 2 SCC 203; Commissioner
of Customs v. G.C. Jain, (2011) 12 SCC 713]. A residuary entry can be taken
refuge of only in the absence of a specific entry; that is to say, the latter
will always prevail over the former [see CCE v. Jayant Oil Mills, (1989) 3 SCC 343;
HPL Chemicals v. CCE, (2006) 5 SCC 208; Western India Plywoods v. Collector of
Customs, (2005) 12 SCC 731; CCE v. Carrier Aircon, (2006) 5 SCC 596]. In CCE v.
Carrier Aircon, (2006) 5 SCC 596, this Court held:"14... There are a
number of factors which have to be taken into consideration for determining the
classification of a product. For the purposes of classification, the relevant factors
inter alia are statutory fiscal entry, the basic character, function and use of
the goods. When a commodity falls within a tariff entry by virtue of the
purpose for which it is put to (sic. produced), the end use to which the
product is put to, cannot determine the classification of that product."
our view, as we have already stated, the combined factor that requires to be taken
note of for the purpose of the classification of the goods are the composition,
the product literature, the label, the character of the product and the user to
which the product is put. However, the miniscule quantity of the prophylactic ingredient
is not a relevant factor. In the instant case, it is not in dispute that this
is used by the surgeons for the purpose of cleaning or degerming their hands and
scrubbing the surface of the skin of the patient before that portion is
operated upon. The purpose is to prevent the infection or disease. Therefore,
the product in question can be safely classified as a "medicament" which
would fall under chapter sub-heading 3003 which is a specific entry and not
under chapter sub-heading 3402.90 which is a residuary entry.
learned senior counsel for the revenue has placed reliance on several decisions
of this Court in support of his argument that the products requires to be classified
as medicament only when they are intended or meant to cure a disease or prevent
the occurrence of disease. He further 24submits that the disease can only be
prevented when there are some symptoms of disease. We intend to refer to those decisions
relied by learned senior counsel Shri Bhatt to sustain the submissions made
before the Court.
B.P.L. Pharmaceuticals Ltd. v. CCE, (Supra), the issue before this Court was regarding
the classification of the "Selenium Sulfide Lotion USP" manufactured and
sold by assessee under the brand name "Selsun shampoo". According to the
manufacturers this shampoo was a medicated shampoo containing 2.5% Selenium
Sulfide' w/v as the only active ingredient which was meant to treat a disease of
the hair, namely; dandruff, and the rest of the ingredients of the shampoo merely
serve the purpose of a bare medium.
The revenue contended
that the product contains 2.5% w/v of Selenium Sulfide which is only of a subsidiary
curative or prophylactic value and therefore, notwithstanding the product having
a medicinal value will fall under Chapter 33. This Court held that having
regard to the preparation, label, literature, character, common and commercial
parlance, the product was liable to be classified as a medicament under Chapter
This decision would not
assist the revenue because this Court held after considering various factors
that selsun shampoo is a medicament as it has therapeutic property to treat
dandruff unlike ordinary shampoo which could be of common use by common people.
Alpine Industries v. CCE, New Delhi (Supra), the issue which arose for the consideration
of this Court was whether the product `Lip salve' is classifiable as a
medicament under Chapter Sub- Heading 30.03 or as `preparation for care of skin'
under Chapter Sub-heading 33.04. The stand of the assessee was that the product
in question was supplied exclusively to the military for use while serving at high
altitude. They claimed, by relying on various literatures based on the
composition of the product that it was used as "medicament" and therefore,
sought classification under Chapter Sub- Heading 30.03.
The stand of the revenue
was that it was used as "a preparation for care of skin" to protect
the skin on the lips against damage by natural factors. This Court after
considering the various medical and pharmaceutical literatures held that the
Entries are not to be understood in their scientific or technical sense, but by
their popular meaning for the purpose of interpretation. This court had
observed that for the purpose of classification, the commercial parlance theory
has to be applied and the chemical ingredients of the product are not decisive.
This Court after considering
the nature of the product and the use to which it is put had observed that the `Lip
salve' is used for "care of skin" and not "cure of skin" and
just because it has some curative effect, its primary use is not curative, therefore
it is not medicament and also needs no prescription from a doctor. This Court also
held that it is neither prescribed by any doctor nor obtainable from the chemist
or pharmaceutical shops in the market. This decision would not assist revenue
as this Court had arrived at a conclusion that the product is not medicament but
cosmetic after considering the commercial parlance test and primary user of the
ICPA Health Products (P) Ltd. v. CCE (Supra), this Court has considered the issue
of classification of surgical scrubs, namely' Hexiprep, Hexiscrub (Surgiscrub) and
Hexiaque, manufactured by the assessee which was used as a skin disinfectant to
paint the skin before surgery and as a wound disinfectant. It was admitted that
Hexiprep is used to paint the skin as required to disinfect the skin before
surgery. Hexiaque is used as a skin disinfectant to paint the skin before surgery
and as a wound, abrasions and minor cuts disinfectant. Hexiscrub is used on
hands and forearms of surgeons for rapid hand disinfection prior to surgery.
The assessee claimed the
classification of these products as medicament under Chapter sub-heading
3003.10. Whereas, the revenue contended that these products should be
classified as disinfectants under Chapter sub-heading 38.08. This Court had
considered the report of the Chemical examiner who opined that the products therein
contained `chlorhexidine gluconate solution BP' which had therapeutic
properties. However, he also opined that they were used as disinfectant, therefore
should be classified under Chapter sub-heading 38.08.
This Court after considering
the label and usage of products therein and dictionary meaning of the word `prophylactic'
had observed that the products therein were used to disinfect the skin prior to
surgery, to clean the wound and minor cuts, and therefore, they have prophylactic
usage and classifiable under Chapter sub-heading 3003.10.
State of Goa v. Colfax Laboratories (Supra), the issue before this Court was that
whether the After Shave Lotion (ASL) known as "Old Spice" and "Blue
Stratos" are classifiable as toilet preparations or medical preparations.
The assessee relying on various pharmacopoeia took the stand that the product was
"medicinal preparation" due to the high percentage of alcohol content
(above 60%). The revenue contended that the use of after shave lotion was in the
form of "toilet preparations" and not "medicinal
The revenue also pointed
that the assessee had obtained the license for manufacture of ASL as a cosmetic
product and not as a medicinal product. This Court while rejecting the assessee's
contention held that the high composition of alcohol in the product is not a
relevant factor for ASL to be considered a medicament. This Court further observed
that in order to come within the ambit of "medicinal preparations", the
article must be used for the purpose of either curing or mitigating the disease
after its symptoms have appeared or in prevention of any disease and therefore,
on a plain interpretation ASL cannot be considered to be within the ambit of "medicinal
Thus, in that case,
this Court did not rely on the composition of the product but relied on the principal
use and the common understanding of the product in the market as the test for classification,
in other words, the classification of commodity does not depend on the
incidental character that the commodity takes but on its primary character.
CCE, Nagpur v. Vicco Laboratories, (2005) 4 SCC 17, the point in consideration before
this Court was that whether the products, namely; Turmeric skin cream,
vajradanti toothpaste and tooth powder manufactured by the assessee would be classifiable
as Pharmaceutical products under Chapter 30 or cosmetics under Chapter 33 of
the Tariff Act. In that case, the assessee's products were classifiable as
pharmaceutical products before and after the enactment of the Tariff Act. However,
the revenue issued show cause notices on the basis of the decision of this
Court in Shree Baidyanath, (1996) 9 SCC 402 alleging that the products are
understood as cosmetics in common parlance.
The revenue further contended
before this Court that the product was classifiable under Chapter 33 as a
cosmetic as there was no need for a medical practitioner's prescription and the
same was sold in general/departmental store. The assessee took the stand that products
were classifiable under Chapter 30 as being pharmaceutical product. This Court
held that mere decision of a court of law without more cannot be a justification
enough for changing the classification without a change in the nature of a
product or a change in the use of the product, or a fresh interpretation of the
tariff heading by such decision.
This Court has held
that the Show cause notices having issued on the misapprehension of the tests
laid down in Shree Baidyanath cannot be sustained, even though, the adjudicating
authority had found from the market survey that the products are understood as
cosmetics in common parlance. This Court also held that the product cannot be
treated as cosmetic only because it was not sold by chemists or under doctor's prescription.
We are afraid that decision would assist the revenue as the show cause notices in
that case were issued on the misapprehension of the test laid down in the Shree
Baidyanath and this Court further observed that the decision in Shree Baidyanath
was based on its peculiar facts.
Sujanil Chemo Industries v. CCE & Customs (Supra), the question of classification
of the product "licel", manufactured by the assessee, was raised
before this Court. The assessee claimed, on the basis of the reports of
chemical examiners and the Department of Dermatology and Venereology, that the product
is an insecticide and is classifiable under Chapter Sub-heading 3808.10 whereas
the Department contended that the product is classifiable as medicament under Chapter
This Court after referring
to Chapter Note 1(d) of Chapter 38 which excludes "medicaments under Heading
30.03 or 30.04" from its ambit and considering the definition of
`medicament' in terms of Chapter Heading 2(i) of Chapter 30, had observed that
in normal parlance, a product may be considered to be an insecticide but if
that product has any therapeutic and prophylactic use then for purposes of
classification that product would fall under Chapter 30 instead of Chapter 38.
This Court observed
that Licel cures the infection or infestation of lice in human hair which is a
disease; therefore, it is thus therapeutic. This Court further observed that Licel
is also prophylactic inasmuch as it 32prevents disease which will follow from infestation
of lice. This Court referring to its earlier decision in ICPA Health Products (P)
Ltd. v. CCE (Supra) has concluded that this product for its therapeutic and prophylactic
usages would be classified as medicament under Chapter Sub-heading 3003.10. We are
of the opinion that decision would not come to rescue of the revenue as this
Court in that decision has clearly observed that the licel prevents as well as
cures the infection or infestation of the lice.
Puma Ayurvedic Herbal (P) Ltd. v. Commissioner of Central Excise, Nagpur (Supra),
the issue before this Court was that whether the ayurvedic goods manufactured
by the assessee are classifiable under the Central Excise Tariff Act, 1985 as cosmetics
under Chapter 33 or as medicaments under Chapter 30. The assessee contended that
their products are manufactured as per the Ayurveda pharmacopoeia and other text
books and have curative, therapeutic or prophylactic value which are meant to give
relief in body ailments and they are not items of cosmetics. The assessee further
relied on the twin test:
Whether the product is
used as medicament in common parlance; and whether the ingredients used in the
product are mentioned in the authoritative ayurvedic textbooks. The assessee
further contended that the use of the product by the customers should be taken
into account for determining the classification of products as these as the products
which have special and distinct use for treating a particular ailment and are not
items of common use. The revenue argued that even if a product had some curative
or prophylactic value, it will still be cosmetic on the basis of Note 2 of
Chapter 33 of the Central Excise Tariff Act which excludes cosmetics and toilet
preparation having subsidiary curative and prophylactic value.
This Court while
appreciating the assessee's contention observed that revenue has miserably failed
to prove that the products in dispute are not medicament and not understood as
medicament by the common man. This Court had upheld the twin test for classification
of ayurvedic products relied by the assessee and observed that the primary role
or use of the product has to be taken into account for the purpose of
classification, even though, it may happen that while treating a particular medical
problem, after the problem is cured, the appearance of the person concerned may
This Court further
held that it is not necessary for the medicament to be sold only under doctor's
prescription and its availability across the counter in shops is not relevant for
its classification as medicament. This Court held that, therefore, the fact
that use of medicinal element in a product was minimal does not detract from it
being classified as a medicament. This Court concluded that the products in dispute
are medicinal products which are intended to treat certain medical conditions of
the human body and improvement in appearance is subsidiary, therefore, are liable
to be classified as medicaments falling under Chapter 30. This case would not assist
revenue as this Court had applied a primary user test of the products in
question which has certain medicinal ingredient.
Commissioner of Central Excise, Delhi v. Ishaan Research Lab (P) Ltd. (Supra), the
issue before this Court was whether the products manufactured by the assessee
would fall under Sub-Heading 3003.30 as medicament or under Chapter 33 as cosmetics.
The assessee contended that each of the products was having ayurvedic medicinal
herbs in it and even the labels on these products claim specifically the medicinal
properties of the product. The assessee further urged that even if the user of
product leads to improvement in appearance of a person that by itself cannot
bring it into the category of "cosmetics" if otherwise the product is
having a medicinal value and is marketed as such.
According to the revenue,
all these products were understood to be the "cosmetics" in common parlance
and not actually the "ayurvedic medicines" for various reasons, the said
products should have been held to be covered under Chapter 33. This Court after
inspecting the labels of the product has held that the assessee had claimed in
each of the label regarding its medicinal properties and, the product is not a
This Court also
observed that the common parlance test is not "be all and end all",
and held that the miniscule percentage used is also not a deciding factor. This
Court concluded that the products in question are medicinal products and, therefore,
are covered by Chapter 30 and not under Chapter 33. That case would not assist revenue
as this Court after taking into account the labels on the products observed that
these products have medicinal ingredients and are marketed as ayurvedic
medicines not cosmetics, however it incidentally improve the appearance, and also
held that the common parlance test by itself is not conclusive.
view of the above, we reject the Revenue's appeals and confirm the order passed
by the Tribunal with no order as to costs.
(ANIL R. DAVE)