1993(10)LCX0088
BEFORE THE CEGAT, SPECIAL BENCH ‘C’, NEW DELHI
S/Shri G.P. Agarwal, Member (J) and S.D. Mohile, Member (T)
BPL PHARMACEUTICALS PVT. LTD.
Versus
COLLECTOR OF C. EXCISE, BARODA
Final Order Nos. 336 & 337/93-C, dated 29-10-1993 in A. Nos. E/610/88-C and E/1935/89-C
Advocated By : Shri D.B. Shroff, Advocate, for the Appellants.
Shri Somesh Arora, JDR, for the Respondents.
[Order per : S.D. Mohile, Member (T)]. - The appeal No. E/610/88-C (hereinafter called appeal No. 1) has been filed by M/s. BPL Pharmaceuticals Pvt. Ltd. against Order dated 21-12-1987 passed by Additional Collector Central Excise, Vadodara (i) classifying the product “Selenium Sulphide Lotion USP” manufactured by the appellants on behalf of their Principals Abbot Laboratories, Bombay and marketed under the brand name “Selsun”, as a cosmetic under sub-heading 3305.90, as against Patent and Proprietary Medicine falling under sub-heading 3003.19 as claimed by the appellants; (ii) confiscating 17950 bottles of the said product which were not accounted for in the Record of Production (RG.1) and (iii) imposing a penalty of Rs. 25,000/- on the said appellants.
2. The appeal No. E/1935/89-C (hereinafter called appeal No. 2) has been filed by the Revenue against the order-in-appeal dated 22-2-1989 passed by Collector (Appeals), Bombay setting aside the Order-in-Original dated 30-12-1987 passed by the Asstt. Collector of Central Excise, Bulsar classifying the said product ‘Selsun’ as a cosmetic, - as also done by the Additional Collector of Central Excise, Vadodara vide his order dated 21-12-1987.
3. The main issue involved in both these appeals is thus regarding the classification of the product ‘Selenium Sulfide Lotion USP (SELSUN)” as a cosmetic under sub-heading 3305.90 as held by the Department, or under sub-heading No. 3003.19 as a medicine as contended by the appellants in Appeal No. 1 (E/610/88-C).
4. We have heard both sides and have considered their pleas both oral and written. Main pleas for classifying the said product as a medicine adduced on behalf of the appellants in appeal No. 1 are as follows :
(a) that the product is described and has consistently, for a long period of time in the past, been prescribed and sold as Selsun Suspension and not as a Shampoo.
(b) that the Trade literature is sent only to registered medical practitioners and not to the lay public at all, the said literature also makes it absolutely clear that the said product is to be taken only as per the directions or instructions of Doctors and registered medical practitioners and not by a lay person on his own.
(c) Further, the said product is sold only for its property of being able to cure two important skin diseases that is tinca versicular and seborrheic dermatitis.
(d) The said literature also states that scientific and technical studies establish that the said Selsun has an extremely high success rate in curing the said two diseases of the skin.
(e) That it is nowhere suggested or indicated that any person should use Selsun for the care or beautification of the hair, or for making it silky or smooth or soft, as in the case of advertisements for other shampoos, that even if, at some point of time in the past, the product might have been described as a shampoo that does not make any difference whatsoever to the position that the said Selsun is only a drug or medicinal preparation and is not a cosmetic. Chapter Note 2 in Chapter 33 would apply only if a product is sold as a cosmetic or is described as or held out to be a cosmetic. The said Chapter Note 2 would be applicable in the present case only if at any point of time the said Selsun has held out or commended for use by a person for beautifying his hair or do make it soft or silky or smooth. At no point of time has the said Selsun ever been held out to be such a product. On the contrary at all points of time the said Selsun has been sold and held out to be a product which is useful only for preventing or curing the said two diseases (1) tinca versicular and (2) soborrhoetic dormatitis. Consequently, even if the label on the said Selsun may, at some time in the past have used the word shampoo, that cannot possibly be construed to mean that it is a cosmetic or that it was held out to be a cosmetic. Consequently, the said Note 2 of Chapter 33 and the said note 1(d) in Chapter 30 have no application whatsoever to the present case.
5. It is added that under the old Central Excise Tariff, Central Board of Excise and Customs had classified the product as a medicine on the following grounds :-
(a) That Selsun was and is being used as a medicinal preparation for the treatment of the disease known as Seborrheic Dermatitis, commonly known as “Dandruff”.
(b) That Selsun was being manufactured under a drug licence (No. 1/22/423/71CH III dated 20-9-1971) issued by the F.D.A. Maharashtra State, Bombay to the manufacturer.
(c) That the Food and Drug Administration, Maharashtra State had issued a certificate dated 12-11-1976 certifying that Selsun is a “drug”, within the meaning of Section 3(b) of the Drugs and Cosmetics Act, 1940.
(d) That the brand name “Selsun” was derived from the name of the drug “Selenium Sulphide Suspension”.
(e) That the said drug had been included in the National Formulary (XIII Edition) published by American Pharmaceutical Association Washington D.C. as well as in the United States Pharmacopoeia 19th Edition.
(f) That the U.S. Pharmacopoeia mentioned Selenium Sulfide lotion as a drug. The U.S. Pharmacopoeia has been a standard and authentic work for the last 154 years in the U.S.A. for the selection, naming and standardisation of drugs. The drug Selenium Sulfide figures in monograph 360 under the category of “Antiseborrheic”. The said drug also features in preface to the National Formulary. The preface to the National Formulary indicates that the work is recognised as an official compendium of Drug Standards and Specifications under the term of the federal as well as the State drug laws in the U.S.A. Further, the preface to the National Formulary stated specifically that therapeutic value was the sole criterion for considering the admissibility of the articles in the National Formulary for medicinal purposes.
(g) That Selenium Sulfides were included at Serial No. 8187 in the Merck Index (Ninth Edition) 1976 which is an Encyclopaedia of Chemicals and Drugs published by Merck and Company Inc. Rahway N.J. U.S.A. In this work, “Selsun” has been specifically mentioned by name. The relevant extract is as below :
“81 87 - Selenium Sulfides.
Selenium Sulfide detergent preparation, Exsel, Selenux, Solo-Rinso, Selsun preparation :
Baldwin Young U.S. Pat. 2,694.669 (1954 to Abott)”.
(h) It was also noted by the Central Board of Excise and Customs that apart from inclusion in various standard Technical words relating to drugs, the said product also fulfilled the requirements of a drug, as understood in common parlance.
(i) The Board also noted that Selenium Sulfides were being sold only on medical prescription and that, as such, it is used as a medicine for relieving severe itching and dandruff.
(j) That Selsun is not a medicated shampoo because, whereas medicated shampoos are recommended mainly for the conditioning of the hair with subsidiary medicinal effect, Selsun is being recommended by physicians, only for its medical effects and value. The Board also relied on extracts from various standard books and treatise including the following :-
“The Pharmacological Basis of Therapeutics” (Fifth Edition) edited by Louis G. Goodman and Alfred Gilman wherein Selenium Sulfides are enumerated as a surface acting drug, and Selsun is specifically mentioned therein. The Board relied on the following extracts from the said publication :-
“Antiseborrheics”
Drugs prepared in pharmaceutical forms specially designed for treatment of Seborrheic dermatitis are considered here XX XXX” Selenium sulphide is employed as Selenium sulfide Lotion U.S.P. (SELSUN SULFIDE SUSPENSION) a therapeutic in a detergent vehicle. XXXXX” when prescribing Selenium Sulfide Shampoo, one should caution the patient to keep the preparation out of reach of children. Weekly or Twice-weekly applications successfully control 95% of cases of seborrheasice (dandruff), it has also been found useful in the treatment of Seborrheic dermatitis of the scalp and tinca versicular.
The Board also relied on Harry’s “Cosmeticolog (revised by J. Wilkinson) published by George Godwin Limited in which the following extracts appear :-
“Dandruff Therapy XXXXX” one major difficulty with Selenium Compounds is that although they are effective they are not cosmetical attractive. Thus products containing Selenium oxide or Sulphide are invariably dark brown in colour and are not pleasant to use. Product containing Selenium are considered to be mere ethical products for use in severe cases of dandruff, rather than general toiletries, and should be used mainly under advice."
(k) The Board also took note of the fact that Selsun was being marketed as a Patent or Proprietary medicine through Registered Pharmacist holding valid drug licence, whereas the other general shampoos can be sold by any dealer in the market.
(l) The Board also referred to 2 pamphlets issued by Abbott Laboratories to advertise the product “Selsun” wherein the product has been recommended because; “Extensive studies show that Selsun is effective in upto 65% of cases of mild soborrheic dormatitis. The Board also refer to the literature addressed to the physicians for prescribing Selsun to their patients in appropriate cases. The Board also refer to the note on the reverse of the containers, which mentioned that the product was to be used as directed by the physician, which established that the product was normally used on the advice of a physician only.
(m) The Board also referred to affidavits of leading doctors and wholesale dealers from Bombay, Delhi and Madras, that establish that Selsun is being prescribed by them for the treatment of dandruff and also that dealers who are holding valid drug licences are usually selling selsun to consumer under doctor’s prescriptions.
(n) The Board also relied on the fact that the sales tax authorities were treating the said Selsun as a medicine and classifying the same under Schedule Entry 71 of the Bombay Sales Tax Act, 1959.
(o) The Board also referred to the fact that Selsun had always been treated and accepted by the Central Excise authorities as a patent or proprietary medicine, and that, repeatedly, orders had been passed by the Central Excise authorities holding that Selsun was not a cosmetic and toilet preparation assessable under T.I. 14F and that the same is appropriately classifiable as a patent or proprietary medicine under T.I. 14E of the Central Excise Tariff. The Board also specifically stated that Johnson’s Baby Powder and Nycil Powder had been accepted as medicines and that the said Selsun stood on a far stronger ground for being treated as a patent and proprietary medicine than Johnson’s Baby Powder or Nycil Powder.
(p) The Board also stated that the Excise Department had made enquiries from the trade independent in 1978 and that it had been found that whereas other shampoos like Clinic, Tate, Halo, Tiara and Palmolive were almost in the same price range, Selsun was much cheaper and was in a different price range altogether. The Board also noted the averments issued in respect of other shampoos emphasised the fact that they leave the hair silky soft and healthy, whereas there were no such advertisement in respect of Selsun. The Board was also struck by cautions in the advertisement for Selsun i.e. “For external use only ...... keep out of eyes ...... keep away from children,” which normally occur only in relation to medicines.
(q) Further, the Board also took note of the fact that the matter had been referred to the Drugs Controller (India) in the Directorate General of Health Services to intimate whether Selenium Sulfide present in Selsun in therapeutical and prophylactic quantities. The Drugs Controller (India) stated categorically on 27-3-1978 that Selenium Sulfide was present in Selsun in a therapeutically effective concentration.
6. The appellants have produced the following documents and “evidence” to establish “without doubt” that their product is a medicine.
(a) Certificate issued by the Food and Drugs Administration, Maharashtra State along with an English translation thereof.
(b) Other test and analysis certificates issued by Government and other authorities.
(c) Drug Licence covering manufacture of Selsun.
(d) U.S.P. Pharmacopoeia Official Monographs - Extracts from pages 721 and 958, covering Selsun lotion.
(e) Extracts from “Martindale” “Goodman and Gilmen”, “Merck Index” etc.
(f) Trade literature in respect of other shampoos and also Selsun, in order to contrast them with Selsun.
(g) Affidavits/letters and certificates of various doctors and medical practitioners, to show that Selsun has always been regarded as a drug and medicinal preparation.
7. They have also claimed that the bottles were not fully manufactured as batch no. etc. were not stamped on the bottles as required under the Drugs and Cosmetics Rules and hence, the same were not liable for confiscation and the appellants were not liable to penalty.
8. The Additional Collector has rejected these pleas for the following reasons given in his order.
“(a) That the other manufacturers of similar type of product (i.e. Selsun Suspension of M/s. B.P.L. Pharmaceuticals Pvt. Ltd., Vapi) are in possession of licence for ‘Cosmetics’ and evidently mentioned on the respective bottles.
(b) That the medicinal properties (i.e. Selenium Sulfide) meant for preventing “Dandruff” comes from 2.5% of Selenium Sulfide which is a minor constituent as against the total composition of the product and the remaining percentage are of foaming agent, flavouring agent, thickening agent and buffer etc.;
(c) That the “Selsun Suspension” is an “Anti-Dandruff” and is properly formulated “Shampoo”;
(d) That the usage of the said “Selsun Suspension” is equivalent to other shampoos available in the market;
(e) That in common parlance the said Selsun Suspension is commonly known, bought and sold as “Selsun Shampoo” and not as “Selsun Suspension” or “Lotion”;
(f) That if the said product is P. & P. Medicines then naturally the said product could have been sold by owner of the medical shop on presentation of a valid Doctor’s prescription;
(g) That with intention to evade Central Excise duty, the said M/s. Abbott Laboratories (India) Ltd., Bombay have deleted/removed the words “Dandruff Treatment Shampoo” in the old bottles as mentioned in new bottles “Selenium Sulfide Lotion U.S.P.” Selsun the medical treatment for Dandruff".
(h) That the goods in question were filled in the respective bottles of 60 ml on 31-10-1986 at 14.00 hrs. hence the goods have been completely manufactured in all respect and as per the contents of the panchnama which has been agreed by the Director, Shri J.T. Shah, in his statement dated 27-11-1986. As such the seizure effected is correct and the plea that the goods placed under seizure remains to be rubber stamped with date of manufacturing, batch number and date of expiry is not acceptable.
In view of above, and the decisions passed by the CEGAT, New Delhi in respect of BOROLINE, it is crystal clear that the product manufactured by M/s. B.P.L. Pharmaceuticals Pvt. Ltd., Vapi attracts Central Excise duty under Chapter 33.”
9. The Asstt. Collector of Central Excise, Bulsar in his order dated 30-12-1987 regarding the classification of the said product has also classified it as a cosmetic for the following reasons extracted from his order dated 30-12-1987.
“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 seleniun sulfide USP is 2.5% which is very small proportion looking to the following other ingredients.
| Surfactant Inert stabilizer and water | 17.0% 5.2% 75.3% |
and thus as a whole selenium sulphide 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 Sagarin at page 647. The most recently developed preparation of this type is the detergent suspension ‘Selsun’ which is used in conjunction with the hair cleaning process to counteract seborrheic scalp condition. The suspension itself is an effective germistatic agent but the prime reason for its success may be that each use of selsun demands a 5 to 10 minutes cleaning massage. Such a scalp cleaning routine is a very effective ‘antidandruff’ or antibacterial treatment. The preparation of selsun suspension is shown in formula :
| Selenium disulphide - | 2.5% |
| Surfactant - | 17.0% |
| Inert stabilizer - | 5.2% |
| Water - | 75.3% |
and also Seleniun sulfide lotion also figures in U.S.P. XX Page-721 wherein, it is shown to contain a suitable buffer, detergent and dispersing agent. It is further stated on page 5 of Cosmetic Science and Technology that ‘Undoubtedly, many products conform to the definitions of both drugs and cosmetics under the Act, such as complex remedies, acne remedies, hormone preparations, antiperspirants and many other preparations which can logically be called both drugs and cosmetics.
Now as per Chaper Note No. 2 of Chapter 33 of Central Excise Tariff Act, 1985 Heading Nos. 33.03 to 33.08 inter alia apply and includes products. Whether or not they contain subsidiary Pharmaceutical or antiseptic constituents or are held out as having subsidiary curative Prophylactic value, thus as discussed in the foregoing paras. The product under question having subsidiary curative and prophylactic value is classifiable under sub-heading No. 3305.90.
Further, considering the question why ‘Selsun suspension’ is not classifiable as medicament under Chapter 30, it will be interesting to refer to Note No. 1(d) of Chapter 30 of Central Excise Tariff Act, 1985 which inter alia provides that Chapter 30 does not cover of preparation of Chapter 33 even if they have therapeutic or prophylactic properties.
Furthermore Rule 3(c) of Interpretation of Schedule of Central Excise Tariff Act, 1985 states that when goods are not classifiable by reference to 3(a) or 3(b) they shall be classify under the sub-heading which occurs last numerical order among those which equally merit consideration.”
10. Collector (Appeals) has set aside the Order-in-Original of the Asstt. Collector on the grounds that :
(i) The Asstt. Collector has erred in holding that as Selsun contained only 2.5% Selenium Sulfide, other ingredients will have only subsidiary curative and prophylactic value and that other 97.5% will have a substantial effect;
(ii) The product ‘Selenium Sulphide Suspension’ was mentioned in National Formulary XII Edition/USP;
(iii) It was used for treatment of dandruff (seborrheic dermatitis);
(iv) By reading the note No. 2 of Chapter 33 and note 1(d) of Chapter 30 the product was classifiable as a medicine;
11. At the outset it may be pointed out that the classification of the subject goods as a medicine under the old tariff (T.I. 14E) will not be conclusive of classification of the said goods under the new tariff (3305.90) since the earlier tariff heading covered, inter alia, “Preparation for the care of the hair ...... including shampoos whether or not containing soap or organic surface active agents” and the corresponding heading of the new tariff reads “Preparation for use on the hair” including shampoos whether or not containing surface active agent.
Further, the new tariff incorporates the rules of interpretation which were not there under the old tariff.
12. The main pleas on behalf of the appellants for classifying their product as a medicine are that it is a preparation for the treatment of dandruff which is manufactured under a Drugs Licence and is generally prescribed on the advice of a physician and further it is not advertised as a shampoo or cosmetic.
13. The appellants have furnished various affidavits and extracts from technical books in support of their above pleas. One of them is Martindale’s ‘Extra Pharmacopeia’. Relevant extracts from these publications produced by them are reproduced below :
“Selenium Sulfide (BAN) ....... uses and Administration.”
Selenium Sulfide is Anti-fungal and Anti-seborrheic properties.
It is used as shampoo in the treatment of dandruff. (Emphasis supplied)
“Dandruff”
Selenium Sulfide is a 2.5% suspension in a detergent vehicle can reduce scaling. In controlled trials it reduced dandruff better than a non-medicated shampoo .........(Emphasis supplied).
14. From the above it is seen that the claim that Selenium Sulfide suspension lotion is not a shampoo, it appears to be only a medicated shampoo. This is further confirmed from the extracts relating to “hair preparation” from Kirk-Othemer’s Encyclopaedia of Chemical Technology 3rd Edition - which is an authoritative book relating to Chemical Technology. The said extracts are reproduced below :
“Hair Preparations .............................
...........................................................
Dandruff Shampoos
Dandruff shampoos contained ingredients that effectively control dandruff by allowing a normal turnover rate of epidermal cells. Ingredients used in some anti-dandruff shampoos are coaltar, quarternary ammonium compounds .......
Selenium Sulphide”
This also shows that Selenium sulphide is used in dandruff shampoos for prevention and control of dandruff as has been claimed for the product Selsun (Selenium Sulphide lotion). It is pertinent to add that the heading “hair preparation” occurs under the Chapter “cosmetics” in the said Book.
15. As observed above, the Tariff Heading 3305.90 covers “Preparation for use on hair” which the product certainly is, irrespective of whether it is in effect a “shampoo” - albeit medicated - which are also specifically mentioned under the said sub-heading.
16. As seen from Chemical Examiner’s report referred to in the Order dated 21-12-1987 by the Additional Collector which is the subject-matter of Appeal No. E/610/88-C, the product Selsun has a pleasant odour which would not be necessary if it were not to be used as a cosmetic. Further, as seen from the Order-in-Original passed by Asstt. Collector of Central Excise, Bulsar which has been set aside by the Collector (Appeals) and which is the subject matter of Appeal No. E/1985/89-C - page 5 of Cosmetics Science and Technology edited by Edward Sagarin mentions - “Undoubtedly many products conform to the definitions of both Drugs and Cosmetics under the Act, such as complex acne remedies, hormone preparations, anti-perspirants and many other preparations which can logically be called both Drugs and Cosmetics. (emphasis supplied.)
17. In this situation vide Rule 3(a) of interpretative rules, “The heading which provides the most specific description shall be preferred to heading providing a more general description”. Here Chapter 30 covers pharmaceutical products and sub-heading 30.19 claimed by the appellants covers P. & P. Medicines other than those which are excluded and those which are specified under other sub-heading. As against this, sub-heading 3305.90 covers preparations for the use on the hair including shampoos.
The said heading is more specific than the general headings ‘Pharmaceuticals products/medicaments’ covered by Chapter 30.
18. Even if it is held that both the Chapter headings are equally specific then as per Rule 3(c) of the interpretative rules, the heading which occurs the last among those with equally merit consideration would prevail.
19. Even considering the Chapter 33 by itself vide Chapter Note 2 Heading Nos. 33.03 to 33.08 apply, inter alia, to products, put up in packings with labels, literature or other indications that they are for use as cosmetics or toilet preparations or put up in a form clearly specialised to such use and includes products whether or not they contain subsidiary pharmaceuticals or antiseptic constituents or held out as having subsidiary curative or prophylactic value.
20. In view of this if the products are put up in packings which are normally used for cosmetics and there are other indications that these are for cosmetic application then the product will be classified under Chapter 33 even if it is held out as having subsidiary curative or prophylactic value (vide Chapter Note 2 to Chapter 33 read with note 1(d) to Chapter 30 Pharmaceutical Products, which lays down that Chapter 30 does not cover “Preparations of Chapter 33 even if they have therapeutic or prophylactic properties”. It is significant that as per note 1(d) to Chapter 30 - Pharmaceuticals products excludes all preparations of Chapter 33 even if they have therapeutic or prophylactic properties irrespective of such whether these properties are “subsidiary” or not.
21. Further, it is seen from the report of the Chemical Examiner referred to in Order-in-Original of the Additional Collector of Central Excise, Vadodara that the product has a pleasant odour which would give an indication of its use as a cosmetic rather than as a medicine.
22. The product is also bottled in a cosmetically attractive plastic bottle which is similar to bottles of other shampoos like Clinic Special - which are also intended for control of dandruff, and which like another product Ban Dan manufactured by M/s. J.K. Helene Curtiss are being assessed as Cosmetics as seen from the impugned order of the Additional Collector of Central Excise, Vadodara.
23. The Collector (Appeals) has mainly dealt with the observation of the Asstt. Collector of Central Excise, Bulsar that as the product “Selsun” contains only 2.5% Selenium Sulfide which can, therefore, have only subsidiary effect and the rest 97.5% will have a substantial effect; but he has not dealt with the other points made by the learned Adjudicating Authority dealt with referred to at paras 16 to 19 above, namely, that the Book of Science and Technology edited by Edward Sagarin says that there are many products which conform to the definitions of both drugs and cosmetics, and further that in view of Rule 3(a) and 3(c) of interpretative rules, the classification under Chapter 33 which occurs later and provides a more specific description will prevail over the earlier Chapter 30 which is of a more general nature.
24. Much emphasis has been laid on the fact that the product ‘Selsun’ is manufactured under a drug licence given by FDA authorities and that it is classified as a drug by the State Govt. Now, different enactments will have different considerations/tariffs, for classifying various products and a classification under each enactment has to be determined according to the provisions of the particular tariff. Secondly, it is seen that the product selsun is manufactured by the Principals of the present appellants under the provision of ‘Drugs and Cosmetics Act 1940’ and not merely under a Drugs Licence as claimed and hence this fact is not conclusive of its classification either way.
25. As discussed above, many products conform to the definition of both drugs and cosmetics, and as per the rules of interpretation the classification under Chapter 33 as a cosmetic viz. preparation for use on hair, will prevail, being more specific and also as it occurs later than Chapter 30 which covers drugs.
26. Considering all the facts and circumstances of the case, both the original Adjudicating Authorities, namely, Additional Collector of Central Excise, Vadodara and Asstt. Collector of Central Excise, Bulsar have rightly classified the product ‘Selsun’ as a cosmetic under 3305.90.
27. However, as regards, the finding of the Additional Collector of Central Excise, Vadodara regarding confiscating 17,950 bottles of Selsun and imposing a penalty on the appellants, there appears to be a lot of force in the arguments of the appellants in A. No. E/610/88-C that the products were not fully manufactured as they did not have Batch No. etc. stamped on them. Hence, the confiscation of the said bottles and the penalty imposed upon the appellants is set aside. But for the modification the Appeal No. E/610/88-C is rejected and the Department’s Appeal No. E/1935/89-C is allowed.
Equivalent 1994 (69) ELT 798 (Tribunal)