1993(08)LCX0028

BEFORE THE CEGAT, SPECIAL BENCH ‘C’, NEW DELHI

S/Shri G.P. Agarwal, Member (J) and P.K. Kapoor, Member (T)

FREZCO CORPORATION

Versus

COLLECTOR OF CENTRAL EXCISE

Order No. 273/93-C, dated 17-8-1993 in E/Appeal No. 5765/92-C

Advocated By : Shri K.V. Naik, Advocate, for the Appellants.

Shri Somesh Arora, JDR, for the Respondents.

[Order per : P.K. Kapoor, Member (T)]. - This is an appeal against the order passed by the Collector of Central Excise (Appeals), Bombay. Briefly stated the facts of the case are that the appellants filed classification list No. Nil/90-91 dated 1-4-1990 in which they claimed classification of “Calamine I.P. and Calamine B.P.” under Heading 3005.90 as pharmaceutical products. They claimed that the Calamine was a mixture of Zinc Carbonate or Zinc Oxide with Iron Oxide and was specified in Indian and British Pharmacopoeia. They also claimed that it was being supplied only in bulk in 50 kgs. packings for the manufacture of preparations for the care of skin. On the grounds that Note 5 of Chapter 33 provides that Heading 33.04 applies inter alia to skin foods, skin tonics and other preparations for the beautification or protection of the skin and in terms of the notes on page 436 of the HSN medicinal preparations even if listed in the official pharmacopoeia do not necessarily fall under Chapter 30 the Assistant Collector held that ‘Calamine I.P. and Calamine B.P.’ manufactured by the appellants were classifiable under Heading 33.04. Being aggrieved by the order passed by the Assistant Collector the appellants preferred an appeal before the Collector (Appeals) on the ground that Calamine having ‘Ferric Oxide’ content of only 1% was composed almost entirely of either ‘Zinc Oxide’ or ‘Zinc Carbonate’ and therefore, in terms of Interpretative Rule 3(b) it was either classifiable under Heading 28.17 or 28.36 depending upon the nature of the predominant component of the mixture or in the alternative being a pharmacopieal product and in bulk packings of 50 kgs. it was classifiable under Heading 3005.90. However, while rejecting the appellants’ contention in the impugned order the Collector (Appeals) confirmed the Assistant Collector’s findings that ‘Calamine IP and BP’ were classifiable under Heading 3304.00.

2. On behalf of the appellants the learned advocate Shri K.V. Naik appeared before us. He stated that ‘Calamine I.P.’ is. Zinc Oxide 98% mixed with 1% Ferric Oxide and Calamine B.P. is Zinc Carbonate 99% with 1% Ferric Oxide. He added that even though sold under the names of Calamine I.P. and Calamine B.P. these products were essentially Zinc Oxide and Zinc Carbonate respectively since addition of 1% Ferric Oxide in each case is only to impart colour. He contended that under these circumstances there was no force in the Collector’s argument that Calamine I.P. and Calamine B.P. were not classifiable under Chapter 28 which in terms of Note 1(a) to Chapter 28 applies only to separate chemically denned compounds. He stated that addition of 1% Ferric Oxide to duty paid Zinc Oxide classifiable under sub-heading 2817.10 and Zinc Carbonate falling under sub-heading 2836.90 procured from the market does not constitute manufacture and in terms of Interpretative Rules 3(a) and 3(b) Calamine I.P. and Calamine B.P. would also be classifiable under sub-heading 2817.10 and 2836.90 respectively. He contended that Calamine was being cleared in bulk with quantities of 50 kgs. packed in bags bearing only details such as Calamine I.P. or Calamine B.P, batch no., weight, manufacturing date and drug licence number. He stated that the packages do not bear the details regarding the qualities of the material or the method of use. He argued that under these circumstances the item was classifiable under sub-heading 33.04 which covers only those cosmetics and toilet preparations which are ready for use. He stated that in the event of his claim that Calamine I.P. and Calamine B.P. are classifiable as bulk drugs under sub-headings 2817.10 and 2836.90 respectively, is not found acceptable then alternatively he would like to submit that the items would be appropriately classifiable under sub-heading 3003.10 and 3005.90 respectively since in accordance with both Indian and British Pharmacopoeia Calamine is recognised as having therapeutic value and appellants were manufacturing these items in accordance with the drug licence issued by the Drug Controller under the Drugs and Cosmetics Act, 1940. As regards the invokation of Rule 2 of Chapter 33 by the Collector (Appeals) he submitted that in order to be covered under Heading 33.03 to 33.07 the item has to be presented in retail packing and the labels should bear instructions regarding use. As regards the Collector (Appeals) contention that conversion from bulk quantity to retail packing amounts to manufacture Shri Naik reiterated his stand that the appellants were selling the product only in bulk in 50 kg. bags and they were not repacking the items in smaller packs for retail sale.

3. On behalf of the respondent the learned JDR Shri Somesh Arora reiterated the findings of the Collector (Appeals) in the impugned order.

4. We have examined the records of the case and considered the submissions made on behalf of both sides. It is seen that the main point that arises for consideration in this case is whether “Calamine IP and Calamine BP” when cleared in bulk 50 kgs. packages are classifiable under sub-heading 3304.00 as held in the impugned order or as claimed by the appellants or their correct classification will be under Headings 28.17/28.36 or alternatively under Headings 30.03/30.05 as claimed by the appellants. In arriving at the finding that ‘Calamine IP and Calamine BP’ in bulk packing of 50 kgs. would be classifiable under sub-heading 3304.00 the Collector (Appeals) relied mainly on Note 1(d) of Chapter 30 and Notes 2 and 4 of Chapter 33 which are reproduced below :-

“CHAPTER 30

PHARMACEUTICAL PRODUCTS

Notes :-

1. This Chapter does not cover :

(a) .........

(b) .........

(c) .........

(d) Preparations of Chapter 33 even if they have therapeutic prophylactic properties:

CHAPTER 33

ESSENTIAL OILS AND RESINOIDS; PERFUMERY,

COSMETIC OR TOILET PREPARATIONS

Notes

1. ....................

2. Heading Nos. 33.03 to 33.07 apply, inter alia, to products, whether or not mixed (other than aqueous distillates and aqueous solutions of essential oils), suitable for use as goods of these headings and 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 pharmaceutical or antiseptic constituents, or held out as having subsidiary, curative or prophylactic value.

3. ...................

4. In relation to products of Heading Nos. 33.03, 33.04 and 33.05, conversion of powder into tablets labelling or relabelling of containers intended for consumers or repacking from bulk packs to retail packs or the adoption of any other treatment to render the products marketable to the consumer, shall be construed ‘manufacture’."

On a plain reading of these notes it follows that Heading Nos. 33.03 to 33.07 apply inter alia only to such products which are put in packings with labels, literature or other indications that they are for use as cosmetics or toilet preparations. In the appellants case the products being ‘Calamine IP and BP’ in bulk packings of 50 kgs. it is evidently they are not classifiable under Headings 33.03 to 33.07 since they are not put up with labels, literature etc. indicating their use as cosmetics or toilet preparations. In our view Note 4 to Chapter 33 which has been referred to by the Collector (Appeals) is not relevant since it provides that conversion from bulk quantity to retail packs amounts to manufacture. In the appellants’ case no such conversion from bulk quantity to retail packings was being undertaken. Under these circumstances we are not inclined to agree with the finding in the impugned order that ‘Calamine IP and BP’ in bulk packings of 50 kgs. were classifiable under sub-heading 3304.00.

5. The product ‘Calamine IP’ consists of 99% Zinc Oxide and 1% Ferric Oxide. Similarly ‘Calamine BF’ is composed of 99% Zinc Carbonate and 1% Ferric Oxide. Being mixtures and note pure chemically defined inorganic compounds, in terms of Note 1(a) to Chapter 28 the classification of these products under Chapter 28 has also to be ruled out.

6. The next question to be examined is whether ‘Calamine IP and Calamine BP’ would be classifiable under Heading 30.03. For this purpose we consider it desirable to refer to Note 2 of Chapter 30 and Heading 30.03 of the tariff which are reproduced below :-

“Notes:

2. For the purposes of Heading No. 30.03 :

(i) ‘Medicaments’ means goods (other than foods or beverages such as dietetic, diabetic or fortified foods, tonic beverages) not falling within Heading No. 30.02 to 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

(b) unmixed products suitable for such uses put up in measured doses or in packings for retail sale or for use in hospitals. Medicaments, including those used in Ayurvedic, Unani, Siddha, Homoeopathic or Bio-chemic systems.

We find that according to the Condensed Chemical Dictionary, Tenth Edition (Revised by G. Hawley) ‘Calamine is :

“(1) A hydrated zinc silicate containing 67.5% zinc oxide, Sp. gr. 3.5; Mohs hardness 4.5 to 5. Pyroelectric. Occurs in U.S. and Europe. Source of metallic zinc.

(2) Zinc Oxide with low percentage of ferric oxide; ZnO must be 98%. Soluble in mineral acids; insoluble in water. Pharmaceutical preparation (U.S.P.)".

The appellants clear their products ‘Calamine IP’ and Calamine BP’ in bulk packing of 50 kgs. Calamine is Pharmacopoeal and is recognised as having therapeutic value in the treatment of skin diseases. The appellants manufacture Calamine IP and Calamine BP which have therapeutic or prophylactic uses in accordance with the licence issued to them by the Drugs Controller under the Drugs and Cosmetic Act, 1940 and supply them in bulk to parties who either pack them in smaller retail packings for sale to hospitals or subject it to further processing in order to manufacture different preparations such as ointments and lotions for treatment of skin ailments or for the care of the skin. Under these circumstances we hold that the appellants’ products viz. ‘Calamine IP and Calamine BP’ having more than one constituent and supplied in bulk packing of 50 kgs. have to be treated as ‘Medicaments’ falling under Heading 30.03. Further on account of the fact that Zinc Oxide or Zinc Carbonate the major constituents of ‘Calamine IP and Calamine BP’ are used in the treatment of skin disorders, in our view the disputed ‘Calamine IP and BP’ in bulk packings of 50 Kgs. will be appropriately classifiable under sub-heading 3003.30.

7. In view of the above discussion the impugned order is set aside and the appeal is disposed of in the above terms.

Equivalent 1993 (68) ELT 219 (Tribunal)