1989(12)LCX0064
BEFORE THE CEGAT, SPECIAL BENCH ‘C’, NEW DELHI
S/Shri I.J. Rao, Member (T), D.C. Mandal, Member (T) and Ms. S.V. Maruthi, Member (J)
COLLECTOR OF CENTRAL EXCISE
Versus
PHARMASIA (P) LTD.
Order No. 680/89-C, dated 28-12-1989 in Appeal No. E/2347/88-C with C/Cross/381/88-C
CASES CITED
SUNNY INDUSTRIES v. COLLECTOR - 1988(10)LCX0060 Eq 1989 (039) ELT 0468 (TRIBUNAL) [PARAS 7 & 12]
STAMAC PRODUCTS v. COLLECTOR - 1985(07)LCX0019 Eq 1985 (022) ELT 0096 (TRIBUNAL). [PARA 7]
COMMISSIONER OF SALES TAX v. CIBA OF INDIA LTD - 1984(11)LCX0029 Eq 1986 (023) ELT 0343 (BOM.) [PARA 7]
MS.C.O PVT. LTD. v. U.O.I. - 1984(10)LCX0003 Eq 1985 (019) ELT 0015 (S.C.) [PARA 7]
MODI RUBBER LTD. v. UNION OF INDIA - 1982(08)LCX0005 Eq 1983 (012) ELT 0024 (DEL.) [PARA 7]
Advocated By : Shri A.S. Sunder Rajan, DR, for the Appellant.
Shri V. Lakshmikumaran, Advocate, for the Respondents.
[Order per : I.J. Rao]. - The question that arises in this appeal is whether the product namely “mediker” manufactured by the respondents is used as a shampoo or even as a medicated soap or whether it is used as treatment for lice. Answer to all these will decide on the classification of the product. Both sides produced before us extensive literature to which we will be referring later on. We also witnessed a film shown to us by the respondents.
2. Very briefly the background of the matter is that the Assistant Collector of Central Excise passed an order classifying Mediker under sub-heading 3005.90 considering it as a preparation for use on the hair. The respondents filed an appeal before the Collector of Central Excise (Appeals) who ordered the classification under 3003.10. The Revenue thereafter filed this appeal before us.
3. Shri Sunder Rajan, the learned DR after referring entries in the tariff submitted that the product Mediker is a preparation for use on the hair. He drew our attention to the label appearing on every bottle of Mediker. This label is reproduced below:
“Mediker
ANTI-LICE TREATMENT
DIRECTION FOR USE
Shampoo hair with one capful of Mediker, Massage scalp for 3 minutes Rinse, Repeat. This usually eliminates Lice. For best results repeat shampooing 2 days later.
WARNING
The product is toxic if swallowed. Store far from food and drinking water. Keep away from children and pets. If it gets into the eyes wash affected area immediately with clean water
COMPOSITION
D-Phenothrin EP 0.23% W/V
Triclosan E.P. 0.05% W/V base q.s.
MEDIKER is the registered trade mark of Richardson - Vicks Inc.
Manufactured by
PROCTER & GAMBLE INDIA LIMITED BOMBAY 400011
Licenced Users of the Trademark
Contents 45ml Mfg. Lic No. 526/A/AP
Retail price not to exceed Rs. 9.60
(Local Tax extra)
FOR EXTERNAL USE ONLY
MADE IN INDIA
Expiry date 2 years from the date of Mfg. Batch No. 8969 Date of Mfg. 12/88"
The learned DR further submitted that the active ingredient in Mediker namely D-Phenothrin EP is not mentioned in any pharmacopea or chemical dictionaries. He submitted that the label on the product itself clearly says that one should shampoo the hair with mediker for eliminating lice. Therefore, prima facie it is a shampoo. He further submitted that according to the Chemical Examiner’s opinion, the product consisted predominantly of surface active agent and a very small quantity of D-Phenothrin. Thereafter he invited our attention to Chapter Note 2 to Chapter 33 of the first Schedule to emphasise that the Headings 33.03 to 33.07 cover all the products which are suitable for the use, as goods of these headings whether or not they contain subsidiary pharmaceutical or antiseptic constituents or held out as having subsidiary curative or prophylatic values. The learned DR relied on Chapter Note No. 6 to Chapter 33 to argue that the Heading 33.05 covers the following products namely: brilliantines, perfumed hair oils, hair lotions, pomades and creams, hair dyes, and shampoos, whether or not containing soap or organic surface active agents. In addition he also relied on Chapter Note 1(d) to Chapter 30 to argue that the preparations of Chapter 33 even if they have therapeutic or prophylatic properties are to be excluded from Chapter 30. He gave the example of medicated soap and submitted that the product was not classifiable under Chapter 30 even though it had some medicinal value.
4. Shri Sunder Rajan further submitted that though before the Collector (Appeals) the respondents took the plea that the Assistant Collector did not convey to them the Chemical Examiner’s opinion, they gave up the plea and sought a decision on merits. Therefore, he argued, the respondents cannot plead violation of the principles of natural justice in the course of their arguments in this appeal.
5. Referring to the alternative plea of the respondents for classification of the product under Heading 38.08 as “insecticides”, the learned DR submitted that insecticides are applied and used on inanimate objects and not on human beings. Referring to the impugned order passed by the Collector of Central Excise (Appeals) he submitted that the Collector did not call for the Chemical Examiner’s opinion but passed an order allowing the appeal. This was, according to him incorrect.
6. Shri Sunder Rajan submitted that the mere indication of a warning on the label of the product would not mean that the product is not a cosmetic. He referred to Rule 148 of the Drugs and Cosmetics Rules in support of his argument.
7. The learned DR then took up the paper book filed by the respondents and dealt with each of the documents therein. He submitted that the affidavits filed by the people concerned are additional evidence filed before the Collector and, therefore, they should not be taken into account. He further argued that none of these books mention mediker as a cure for disease. Thereafter he referred to the publication “Manufacture of Beauty Products” (pages 110 to 112, SBP) and argued that anti-bacterial and anti-dandruff shampoos were considered as shampoos only. In this context the learned DR referred to an earlier decision of the Tribunal in the case of Sunny Industries v. Collector of Central Excise [1989 (039) ELT 468] and submitted that the perfumed bath oils were therein held not to be medicaments. He also placed reliance on some other decisions:
1. Stamac Products, Calcutta v. Collector of Central Excise, Calcutta [1985(07)LCX0019 Eq 1985 (022) ELT 0096 (Tribunal)]
2. Commissioner of Sales Tax v. CIBA of India Ltd. [1984(11)LCX0029 Eq 1986 (023) ELT 0343 (Bom.)]
3. MS.C.O Pvt. Ltd. v. Union of India and Others [1984(10)LCX0003 Eq 1985 (019) ELT 0015 (S.C.)]
4. Modi Rubber Ltd. v. Union of India and Others [1982(08)LCX0005 Eq 1983 (012) ELT 0024 (Del.)]
8. It was during the course of arguments that Shri Lakshmikumaran, the learned Advocate for the respondents submitted that a video film has been produced depicting the efficacy of Mediker in the treatment of lice and sought the permission of the Tribunal to play the video tape so that the nature of the product is appreciated by the Bench. Shri Sunder Rajan in reply submitted that he would like to see the video film before giving consent for viewing by the Bench. After viewing it the learned DR submitted that he would have no objection if the video tape is played before the Tribunal and thereafter the film was placed and viewed by the Bench. Shri Sunder Rajan thereafter argued that from the video film also it could be seen that Mediker is used like a shampoo.
9. In reply Shri Lakshmikumaran, the learned Advocate submitted that Mediker was manufactured by the respondents under a drug licence issued by the Drugs Controller, Andhra Pradesh. The respondents filed a classification list classifying Mediker as medicament under 30.03 in September, 1986 and the classification list was duly approved. They again filed a classification list on 1-3-1988 as there was some amendment to the tariff and the Assistant Collector instead of approving the same as he did earlier passed an order without giving any opportunity to the respondents, holding that Medikar was classifiable under Heading 3305.90. The main contention of the learned Advocate for the respondents was that Mediker which is an “anti lice treatment” cannot be considered as a shampoo. He submitted that the essential character of the product is derived from the active ingredient namely D-Phenothrin EP. This ingredient is described in “Extra Pharmacopea” (Martindale’s) and in the “Merck Index” both of which were read out from the paper book. He urged that Phenothrin is described as insecticide and was mentioned as such in both the books. He submitted that Mediker is not a preparation for use on hair but a preparation for use on the lice. In this context elucidating on the nature of life and death of lice, Shri Lakshmikumaran explained that the louse is a wingless insect and Phenothrin is an active ingredient which is used to paralyse the insect thereby killing the same. He explained that the louse always lodges itself on the scalp near the root of the shaft of the hair and with claw-like legs clamps itself on the scalp and thereafter sucks the blood. Application of water with force or with soap or shampoo does not yield the result of the removal of the lice from the head. Phenothrin alone can make the lice fall off from the head because of its paralysing effect. He submitted that since the skin (cuticulam) of the louse is similar to the structure of the human nail it has first to be made porous so that the active ingredient can penetrate and enter the louse and paralyse it. For this purpose a wetting agent is needed and this wetting agent is the surface active agent used in Mediker. Shri Lakshmikumaran explained that this would show that the surface active agent is nothing but a medium or a vehicle to convey the active ingredient phenothrin on to the louse.
10. D-Phenothrin being an insecticide, has to be effective on the louse but at the same time it must be safe to the human host of lice. Therefore, the learned Advocate explained, any insecticide preparation would contain only infinite or extremely small quantity of the active ingredient and the other part of the preparation which is merely a vehicle to convey or carry on the insecticide on to the insects. The learned Advocate submitted that for these reasons the product can never be considered as a shampoo or a preparation for use on the hair. Shri Lakshmikumaran submitted that as the product Mediker contained a toxic chemical, a statutory warning is printed on the label itself. He further submitted that mediker is not supposed to be used frequently nor is it supposed to be used by a person who is not affected by lice unlike a shampoo which can be freely used by any one and as often as one likes in order to keep their hair clean. The learned Advocate emphasised that the use of the shampoo is for the removal of the dirt from hair and make it lustrous and manageable. The purpose of Mediker, on the other hand, is not the upkeep of the hair or to improve its appearance but to get rid of the lice. He also submitted that a person who wants to buy a shampoo would not buy Mediker as a substitute.
11. Shri Lakshmikumaran, the learned Advocate advanced the example of medicines for treatment of worms or insects inside the body and submitted that the medicaments of such nature contain wormicides, to remove the worms from the body. Such preparations are considered as medicaments only. The learned Advocate submitted that in the instant matter, the insect happens to be on the head and not inside the body. He stated that the infestation of the lice on the human head is a disease called pediculosis. A preparation to kill the lice is a medicament containing wormicide consumed by human beings for removal of worms. He drew our attention to the Drug Licence, the certificate from the Department of Dermatology, Merck Manual and reference from various books like, ‘Tropical and Geographical Magazine’, Physicians’ Desk Reference (41st Edition 1987 page 801).
12. Referring to the reliance by the learned DR on the judgment in Sunny Industries (supra) the learned Advocate submitted that in that judgment the Tribunal came to the said conclusion, to the effect that the vitamin oil was not a medicine, because it was not proved by the appellants that the vitamin present in the oil had any curative or prophylatic action on the skin and that such vitamins were to be absorbed through the skin. He submitted that in the case of Mediker it has been proved beyond doubt that it was most effective for treatment of pediculosis-meaning - infestation of lice.
13. Shri Lakshmikumaran further submitted that Chapter Note 1(d) to Chapter 30 excluded preparations of Chapter 33 even if they have therapeutic or prophylatic properties. Thus for application of Chapter 1(d) the product has to be classified under Chapter 33. Chapter Note 2 of Chapter 33, as pointed out by the learned Advocate simply states that the Headings 33.03 to 33.07 would apply to products suitable for use of goods of these goods of these headings put in packings with labels, literatures or other indications that they are for use as cosmetics or toilet preparations or put up in a form clearly intended for such use and includes products whether or not they contain subsidiary pharmaceutical antiseptic constituencies or held to be having subsidiary curative or prophylatic values. He submitted that it is not the case of the respondents that the product was known as cosmetics or toilet preparations. The product is known and supposed to be sold as anti-lice treatment only. D-Phenothrin is an active ingredient present in the product and its function is not a subsidiary to any other main function but is the only function. The learned Advocate submitted that the subsidiary preparation contained in the product viz. surface active agent is merely a vehicle to enable the active ingredient (Phenothrin) to penetrate the lice. The product is not to be used as a shampoo but only as a medicine for use on lice. Thus Chapter Note 6 of the Chapter 33 does not affect the classification of the product under Chapter 30.
14. Shri Lakshmikumaran then proceeded to argue that if the Department felt that the classification of the product under Chapter 30 was not correct then the product should be considered to merit classification under Chapter 38 more appropriately. He referred to Note 1(00c) of Chapter 38 and submitted that this Note excluded medicaments falling under Heading 30.03 from Chapter 38. In other words, according to the learned Advocate, it does not include products falling under Chapter 33 to Chapter 38. Heading 38.08 specifically covers insecticides and lice being insects and mediker is an insecticide and correctly classifiable under Heading 38.08. Shri Lakshmikumaran pointed out that though the respondents claimed alternate classification of the product under Chapter 38, and Collector (Appeals) decided the classification under Chapter 30, the respondents did not file an appeal. He submitted that only when the Department filed an appeal to upset the classification of the product under Chapter 30, the respondents filed the cross appeal.
15. He drew our attention to Heading 27.10 which basically covers petroleum oil and oil obtained from bituminous material. He urged that the said heading would cover preparations containing more than 70% of petroleum products provided that the oil is the basic constituent of the preparation. He particularly drew the attention of page 218 of the Explanatory Notes to HSN under Heading 27.10 wherein preparations containing more than 70% petroleum oils but used as insecticidal or fungicidal preparation would be covered under Heading 38.08. By this argument the learned Advocate emphasised that the active ingredient of the insecticides present in mediker maybe extremely small quantity. But petroleum oil in such preparation is used merely as a vehicle and not as basic constituent. The learned Advocate further submitted that under Heading 34.02 HSN (page 486) clearly stated that the Heading 34.02 excludes preparations containing surface active agents where the surface active function is either not required or is only subsidiary to the main function of the preparation (Headings 34.03,34.05,38.08, 38.09 and 38.23 as the case may be). The learned Advocate urged that all these analogies prove that the product should be considered as an insecticide if it is not considered to be a medicament. He submitted that in this case the competing entries would be 33.05, 34.02 and 38.08. The learned Advocate submitted that if 30.03 is ruled out, the product will undoubtedly merit classification only under Heading 38.08 on first principles as also according to the interpretative Rule 3(a) or 3(b) or 3(c) of the Rules of Interpretation of the Schedule.
16. We have considered the arguments of both sides. The question to be considered in this appeal is whether Mediker is used as a shampoo or even as medicated shampoo or whether it is used as treatment for lice. After going through the literatures on the subject placed before us (we shall be referring to it later) and after seeing the video film there is no doubt in our mind that the product Mediker is considered by all concerned as an anti-lice treatment and that it is recommended for those people who are infested with lice. We note that the product label does not specifically state that the product should not be used repeatedly but we note the arguments of the learned Advocate that the label itself recommends the repeated treatment after two days to obtain better results. Therefore, it appears that Mediker should not be used on a regular basis. However, this is only one of the aspects of the matters and not the decisive one.
17. Considering the arguments advanced before us, we are convinced that a person infested with lice does not get relief by merely washing his or her hair with water or various types of shampoo which are available in the market. The life and habits of the louse seem to call for more drastic steps in order to get rid of the lice. On the label it is claimed that if the hair is shampooed with Mediker and left for 3 minutes and the process is repeated, lice are eliminated. The label also shows that Madiker consists of D-Phenothrin and other ingredients. The penetrating power of D-Phenothrin whereby it paralyses the lice was established before us during the course of hearing. The label itself immediately after the name of the product (Mediker) mentions “anti-lice treatment”. These show that “Mediker” is a special product made for the treatment of lice. The sub missions made by the learned Advocate that the anti-lice treatment is not subsidiary to the cosmetic function but is in the main function is borne out by the details given in the label and the explanations placed before us.
18. We examined Shri Sunder Rajan’s argument that Mediker should be considered to be similar to medicated shampoo like the ones which are used for treatment of dandruff. In respect of such shampoos there is a claim that they remove dandruff. However, shampoos are not sold as dandruff treatment. They remain basically shampoos and dandruff treatment is a subsidiary action unlike here where lice treatment is the only action. Therefore, these two (medicated shampoo and lice treatment) cannot be compared.
19. Before proceeding further, we take note of the arguments of the respondents that they would be happy if the product is classified as medicament under Heading 30.03 and only if this is not granted they want classification under 38.08. This is a curious situation as under 30.03 they pay more duty than under Heading 38.08. Before passing on, we would like to observe that the respondents having filed a cross appeal, they have a right to take up this argument. The learned DR’s arguments to the contrary are not sustainable.
20. Can Mediker cure or prevent a disease? Only if it can do so it can be classified as a medicament. Much evidence has been placed before us by the respondents to prove that infestation of the lice on one’s head is a disease and is given the name pediculosis. In this context we persued the following:
1. Merck Manual of Diagnosis and Therapy - 14th Edition at page 2045 specifically deals with a disease known as pediculosis.
2. “Physicians Desk Reference” 1987 edition, at page 801 describes the disease pediculosis, warnings, cure and treatment.
3. A certificate dated 22-6-1987 given by Drug Control Administration, Government of Andhra Pradesh makes it very clear that the product is used for the treatment of disease and thus is a medicament.
4. Handbook Non-Prescription Drugs, 8th Edition at page 509 describes the problem of pediculosis, infestation of head lice and problems relating thereto.
5. Andrew’s “Disease of the Skin”, Clinical Dermatology, Seventh Edition at page 554 describes the condition of pediculosis and the treatment.
6. A research paper on Lice by D.E. Weidhass and N.C. Gratz published through World Health Organization describes the problem of infestation on human lice, disease that are caused and treatment.
Our perusal of these documents shows that the infestation of lice on the head causes several diseases and a product which is to treat such diseases has to be considered to be a medicament. Merck Index of Chemicals and Drugs, Biological, Tenth Edition describes D-’phenothrin, its various isomers and its use as insecticides. Extra pharmacopea (Martindale) also mentions phenothrin as being used in drugs as insecticides. In this connection we find that the certificate from the Drug Control Administration, Government of Andhra Pradesh dated 22-6-1987 is relevant. The following extract supports the case of the respondents:
“As D-phenothrin is used on human body for topical use and has medicinal properties on scalp for antilice treatment as per the Notification from Drugs Controller, India bearing No. 15-95/80-DC, dated 2-1-1982, D-phenothrin is to be considered as a drug under the Drug and Cosmetic Act, 1940.”
21. A disease may affect the outside or inside of a person’s body. Causes for diseases may vary; these can be micro-macro organism, insects, worms, bacteria, etc. Any preparation containing active ingredients to remove the root causes, whether they are used for internal consumption or external application has to be considered as a medicament. Therefore, we conclude that Mediker is a medicament. We further observe that the medicinal use of the product is not its subsidiary function but is the only function. Therefore, the classification of the product under 33.05 is ruled out. Since we have already held that the product is classifiable as medicament under 30.03 by virtue of note 1(c) to Chapter 38 the product cannot be classified under Chapter 38.
22. We, therefore, dismiss the appeal and for the reasons stated above dismiss the cross-appeal also.
Equivalent 1990 (47) ELT 658 (Tribunal)