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Vasu Pharmaceuticals Pvt. Ltd. Vs. Commissioner of C. Ex. - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Mumbai
Decided On
Reported in(1999)(65)ECC559
AppellantVasu Pharmaceuticals Pvt. Ltd.
RespondentCommissioner of C. Ex.
.....appellant that the commissioner failed to appreciate that the oils are used as vehicles to carry ayurvedic ingredients to the root of the hair so that the ingredients effectively cure the dandruff and other diseases of the hair. the ayurvedic p or p medicaments are sold at higher prices than any other cosmetic ayurvedic preparations. it is also contended by the consultant on behalf of the appellant that the oil is manufactured out of ingredients which have medicinal value as described in ayurvedic standard books. the product is used as a combined therapy with trichup capsules for use in oral administration and they are used in treatment for prevention and cure of diseases like alopecia, dandruff, etc. it is further contended that the product is sold in chemist stores and it is not sold.....
1. The question for consideration in this appeal is whether product described as 'TRICHUP' is classifiable as ayurvedic medicament under Heading 30.03 or as a preparation used as a hair oil falling under Heading 33.05.

2. The appellant is engaged in the manufacture of ayurvedic medicines falling under Chapter 30 of the Central Excise Tariff Act, 1985. One of the products manufactured by the appellant is known as TRICHUP OIL. The said product is manufactured under licence duly issued by the State Drug Control Authorities and the Joint Commissioner, Food and Drug (Control) Administration, Gujarat who have certified the product as an ayurvedic formulation. The appellant filed classification list for the year 1994-95 and thereafter declaration for the years 1995-96, 1996-97 classifying the same under sub-heading 30.03 and they were duly approved by the department without any objection. All the ingredients used in the TRICHUP OIL are ayurvedic in nature and are specified in "ARYABHISHAK" which is a standard ayurvedic book.

3. A show cause notice dated 1-8-1987 was issued to the appellant by the Range Superintendent seeking to classify the product under sub-heading 33.05 on the ground that TRICHUP OIL is nothing but hair oil and it is marketed as herbal hair tonic. It was also stated in the show cause notice that though the product may have therapeutic and prophylactic properties, these are subsidiary products as the product was being marketed as herbal hair tonic. A reply dated 23-8-1987 was filed inter alia mentioning that the oil has found the characteristics, namely preventive, protective, curative and nutritive. The medicament was used as a combined therapy basically for treatment of diseases of human hair. The medicament is generally prescribed by physicians and medical practitioners and generally available with chemists in medical stores. It has got prevention and curative value, and therefore the same cannot be treated as cosmetics. The Assistant Commissioner had held in the Order-in-Original that the medicinal properties claimed in the product was very minor and in common and trade parlance the product was not known, recognised, bought and sold as medicine for prevention and cure of diseases but it was meant for cure of the hair. Hence he had held that the product should be classified under sub-heading 3305.99 and confirmed the duty. On appeal the Commissioner (Appeals) had confirmed the order passed by the Assistant Commissioner. Hence the present appeal.

4. The learned Consultant Shri K.M. Mondal appeared on behalf of the appellant. It is contended that the drug and cosmetics have to be judged according to the definition of the Drugs and Cosmetics Act. The product is not used or recommended for cleansing, beautifying, promoting attractiveness or altering the personality of the human body.

The printed labels and literature supplied to medical practitioners and chemists indicate the use of the product for treatment of skin diseases such as dandruff, premature greying of hair, fungal and bacterial infection, itching during and post radiation therapy. It is challenged by the appellant of the reliance placed by the Commissioner of 80% til oil and 20% coconut oil used in the product. It is also challenged by the appellant that the Commissioner failed to appreciate that the oils are used as vehicles to carry ayurvedic ingredients to the root of the hair so that the ingredients effectively cure the dandruff and other diseases of the hair. The ayurvedic P or P medicaments are sold at higher prices than any other cosmetic ayurvedic preparations. It is also contended by the consultant on behalf of the appellant that the oil is manufactured out of ingredients which have medicinal value as described in Ayurvedic Standard Books. The product is used as a combined therapy with TRICHUP capsules for use in oral administration and they are used in treatment for prevention and cure of diseases like alopecia, dandruff, etc. It is further contended that the product is sold in chemist stores and it is not sold as cosmetics which may attract Chapter Note l(d) of Chapter 30 or Chapter Note 2 to ChapterB.P.L.

Pharmaceuticals Ltd. v. C.C.E. - 1995 (77) E.L.T. 485 and the judgment of the Tribunal in C.C.E. v. Pharmasia (P) Ltd. - 1990 (47) E.L.T. 658 para 21.

5. As against this, learned DR G.B. Yadav, while reiterating the grounds mentioned in the impugned orders, states that the product literature or the pamphlet containing the literature does not enhance the case of the appellants. The literature says that it should be wash dry hair to apply the TRICHUP OIL and massage it for a minute.

6. We have considered the rival submissions. The question involved in this case-is whether the product is P or P medicines or cosmetics. The product is TRICHUP OIL which consists of the following ingredients :Name of Ingredient Reference Qty.Sesame indicum (til) oil AryabhishakEdn.18 P.No.252 80%Cocos nucifera (tranraj) oil Aryabhishak Edn.18 P.No.285 20%MADE SIDDHI WITH Aryabhishak Edn.18 P.No.325 1%Eclipta alba (Bhringraj)(Vrushya) Aryabhishak Edn.18 P.No.100 1%Indigofera tinctoria Aryabhishak Edn.18 P.No.202 1%(Nilpushpa)Contella asiatica Aryabhishak Edn. 18 P.322 1%(Mandukparni)(Nagarmotha) Aryabhishak Edn.18 P.351 1%Jasminum officinale(Jatichetika) Aryabhishak Edn.18 P.224 1%Abrus precatorius(Gunja) Aryabhishak Edn.18 P.222 1%Glycyrrhiza glabra(Yashtimadhu) Aryabhishak Edn.18 P.237 0.5%Crateva murvala(Varunbark) Aryabhishak Edn.18 P.394 0.5%Pongamia Pinnata(Karanja Beej) Aryabhishak Edn.18 P.134 0.5%Solanum indicum(Bruhati Aryabhishak Edn.18 P.333 0.5%Laxmana)Citrullus colocynthis Aryabhishak Edn.18 P.I 11 0.5%(Indravaruni) We find that both til oil and tranraj oil are 100%. Others are beyond that in addition to 100% only, it is quite intriguing.B.P.L. Pharmaceuticals Ltd. v.C.C.E., Vadodara -1995 (77) E.L.T. 485 (S.C.) which is worth considering the same. In that case the question arose was whether SELSUN an anti-dandruff preparation was cosmetics falling under Heading 3305.99 or medicament falling under Chapter sub-heading 3003.19. In that case also like the present one the licence was given by the Food and Drugs Administration as a drug within the meaning of the Drugs and Cosmetics Act. It was the case of the manufacturer in that case that SELSUN was not available in the departmental stores but only with chemists who have licence under the Drugs and Cosmetics Act to sell the same. In that case they filed affidavit of chemists stating the drugs to be the patent and proprietary product and that the chemist require a valid drug licence to buy and sell the same. What are the reasons which normally hold a product within Chapter 30 or 33 as reflected in para 32 of the judgment, as under :- "(a) It was used for the treatment of a disease known as Saborhhoetic Der-matics, commonly known as dandruff. It was manufactured under a Drug Licence.

(d) That the Drug Controller had categorically opined that Selenium.

Sulphide present in Selsun was in a therapeutic concentration.

(e) It was included as a drug in the National formulary, U.S. Pharmacopoeia and the Merck Index.

(f) It fulfilled the requirements of a drug as understood in common parlance.

(g) Selenium sulphide was sold only on medical prescription and used as a medicine.

(h) Selsun was not a medicated shampoo, which was recommended as conditioners . with subsidiary medicinal effect. Selsun was on the contrary being recommended by physicians.

(i) Various standard books and treaties such as (i) The pharmacological Basis of therapeutics by Goodman and Gilman (ii) Harry's Cosmeticology referred to Selsun as a drug.

(j) It was being marketed as a Patent or Proprietary medicine through Registered Pharmacists who hold valid drug licence, and not by any dealer, like other shampoos.

(k) Abbott's literature referred to it as a drug and such literature was addressed to physicians, also the label on the container mentioned that the product was to be used as directed by physicians.

(l) Affidavits of leading doctors established that Selsun was being manufactured for use as a drug.

(m) That the Excise Department had made inquiries from the trade and, found that other shampoos like Clinic, Tata, Halo etc. were much cheaper and that their advertisement campaigns were "to leave the hair silky, soft and healthy" whereas Selsun was not so advertised. On the contrary there are precautions in use mentioned." This paragraph has been relied to by Shri Mondal in his argument. He also relied on paragraph 38 of the said judgment, which is as follows :- "Yet another reason given by the CEGAT for not accepting the case of the appellants was that the product is sold with a pleasant odour and, therefore, it must be treated as a cosmetic. Selenium Sulphide has an unpleasant odour and to get rid of it insignificant amount of perfume is used and make it acceptable to the consumers. A medicine, for example, sugar-coated pill will nevertheless be medicine notwithstanding the sugar-coating. Likewise the addition of insignificant quantity of perfume to suppress the smell will not take away the character of the product as a drug or medicine. Again one other reason given by the Tribunal is regarding the packing. The Tribunal has held that the product is cosmetic because it is packed in an attractive plastic bottle. This by itself will not change the character, as cosmetic is put up for sale with some indication on the bottle or label that it is to be used as cosmetic or it is held out to be used as a cosmetic. As already noted the label here gives warnings. The fact that it is packed in a plastic bottle is wholly irrelevant criteria." In the present case Shri Mondal has given a wrapper containing the bottle which states that it should be massaged on dry hair ONLY, whereas the product literature says that it should be massaged on scalp for a minute. If we compare the case, of B.P.L. Pharmaceuticals Ltd. supra, in the instant case the wrapper contains a lady with long hair making certain applications, brushing her hairs ONLY not the body. We shall deal with this in a detailed fashion as mentioned below.

8. The appeal before the Tribunal contained an Exhibit "M". This consists of printed piece of paper. It contains on one side of it a picture of a woman with long, flowing hair and the sentence "In hairfall premature greying Trichup oil/capsule gets to the root of the problem." 9. On the other side are some claims about the product; that it "nourishing the root of the hair shaft; stimulates the hair follicles for new hair growth; controls fungal infections of the scalp; prevents premature greying of hair and balding". There is a claim that one of the ingredients, Eclipta alba "Exerts mild tranquilising effect and prevents premature greying" and another "emblica officinalis" in the "Richest natural source of vitamin C." This page contains in addition indications with regard to use and composition. The literature is stated to be "for medical professionals use only". Ground nine in the grounds of appeal relies upon this pamphlets as evidence that the product is used for scalp infections and other disorders. There is a reference in paragraph 7(2) of the reply to the show cause notice to literature indicating the use of this preparation on the scalp which are stated to have been enclosed in the annexure. However, the annexures to the notice have not been enclosed in the appeal. It is therefore not possible to say that this particular piece of paper was produced before the Assistant Commissioner. The appeal to the Commissioner (Appeals) says in ground (e) and (g) that the product is applied in the scalp. However, there is no reference to any such literature.

10. Now there is an inconsistency between what is stated in this brochure, and the carton in which the product is packed. The carton directs "gentle massage on dry hair". It does not say a word about the application on the scalp. The document at Exhibit M stated to be for use by medical professionals. It does not indicate what category of medical professional it has been circulated to. From its general composition and layout, it cannot be said to be a document imparting technical information on the use of the product, its side effects etc.

which would facilitate or regulate its prescription. At the same time, it is professedly only for the medical profession. This document therefore is of no assistance in concluding that the product is to be for scalp or it is to be prescribed.

11. It is significant that in addition from the instruction, on the carton for massage on hair, there are no indication whatsoever with regard to its duration or frequency of application. A medicament of whatever origin reasonably be expected to have an optimum frequency and duration of use. Consumption or application of a medicament more frequently or for longer periods than required would at the very least be wasteful and can quite often lead to undesirable side effects. The total absence of any indication of any such limits of this is a stronger pointer to the product not being a medicament. There is in fact nothing to show that the product is a medicament. It may be true, as is claimed, that its ingredients figure in the ayurvedic text books cited as ayurvedic medicament. However, there is absence of material to show that in the quantities in which these ingredients are present, they have any medicinal effect. The product is supposed to consist of 80% Til oil and 20% Tranraj oil, "made sidhhi" with various other ingredients. The meaning of the term "made sidhhi" was not clearly explained. It however appears that these are ingredients that give the product its medical properties. With the exception of dhatura (15%), other ingredients consist of 1% or 0.5%. There is no material to show that, in these proportions, each of the ingredients or all the ingredients, acting in combination, confer on the other oils any therapeutic or a prophylactic properties. There is therefore total absence of support for the claim that the product has any therapeutic or prophylactic properties.

12. It is not the case of the appellant that the product could be sold only by means of a prescription to be given by a registered medical practitioner. The ingredients of the product by way of totalling the same exceed 100%, namely as it will be indicating composition about 100% is concerned by sesamum oil and tanraj oil. If that were to be so, how the other ingredients are having any effect on the final product.

In the B.P.L. Pharmaceuticals Ltd. case at para 34 it has been held as follows :- "Another reason given by CEGAT is that Heading 33.05 uses the word "Preparation for use on the hair" and therefore the product in question can be brought under the said heading. The Tribunal forgets that the product in question is intended as a medicine for curing the disease 'Tinea Versicolor' and as such applied to the skin wherever necessary apart from curing dandruff by applying on the scalp." In this case the product cover shows application as gentle massage on dry hair and does not speak anything of application on the scalp or on skin which is the case in B.P.L. Pharmaceuticals Ltd. case. Apart from that, in the said case it has been found in para 3 of the judgment that the literature is sent only to physicians for their recommendations to their patients and the product is not available in the departmental stores and only with chemists who have licence under the Drug and Cosmetics Act to sell the same. In our view this is not the case here.

Nowhere our attention was brought as to the product being sold ONLY at chemists whereas it is the case of the appellants that medicament is generally prescribed by the physician and medical practitioner and is generally available with the chemists in medical stores. The assertion of the appellant cannot be accepted that the product is curative and protective because it is not applied to the body but ONLY on hair as is revealed in the wrapper of the cover. This is therefore distinguishable from the B.P.L. Pharmaceuticals Ltd. case decided by the Hon'ble Supreme Court.

13. In the Order-in-Original there is a reference to the case of Collector v. Pharmasia (P) Ltd. -1990 (47) E.L.T. 658 case. That was a case of infestation of lice on the head in relation to product called MEDIKAR. Here nowhere the application of the medicine is recommended for application to the body but only to apply to the hair which is a very important distinguishing feature. The Assistant Commissioner at pages 13 and 14 of his order has held as follows :- "The issue for my consideration is whether Trichup oil claimed as Ayurvedic Medicaments by the assessee, can be classified under Chapter 30, Heading 30.03 or under chapter 33, Heading 33.05 and if so, whether it would appropriately fall under sub-heading 3305.99 of the Schedule of CET, 1985.

The product is manufactured by the assessee under the authority of drug licence issued by Drug Control Authority of the State Govt. It is, as printed on the label, held out to be ayurvedic ingredients as listed on the label. The assessee therefore vehemently claims this product to be an ayurvedic medicine. The product is advertised, held out and sold as Trichup oil which is said to have some pharmaceutical constituents. It is noteworthy that the assessee does not consider the same to be hair oil, much less the perfumed hair oil. When the product is claimed and offered to be providing nourishment to the hair, it cannot certainly be treated as merely made for routine type of perfumed hair oil but would fall in the category of products illustrated in Note 6 of Chapter 33 of the said Schedule.

Because Trichup oil is manufactured under the licence issued by the drug control authority of the State Govt, it cannot be straight way considered as ayurvedic medicaments. The licence under the Drugs and Cosmetics Act is not determining factor for classification under C. Ex. Act as held by the Tribunal in the case of Alpine Inds. v. C.C.E., Delhi - 1997 (92) E.L.T. 53 (T). The medical properties claimed are very minor and in common and trade parlance the product is neither known, recognised, bought and sold as medicine for prevention/cure of diseases but it is meant for cure of the hair.

From the evidence on record, I find that Trichup oil cannot be considered as ayurvedic medicament. It is admittedly a product meant for use on the hair. However, it is neither a perfumed hair oil nor hair fixture and therefore it appropriately gets covered in the category of "other" under sub-heading 3305.99 of the Schedule. The classification, proposed in the SCN is appropriate and therefore I hold that Trichup oil is classifiable under Chapter 33 Heading 33.05 and sub-heading 3305.99.1 therefore pass order accordingly." As found in the earlier portion of this judgment the product is advertised and sold out to be nourishment only to the hair and it is not advertised for application on the body only. Moreover the appellants have not proved by any positive evidence that medical practitioners have prescribed the products and some patients have used this product and got cured the diseases. Therefore, in our view it is rightly the lower authorities have held that the product TRICHUP OIL as hair oil falling under Chapter 33.

14. We are therefore of the view that the appellant has not made out any case and hence we dismiss the appeal and confirm the orders passed by the lower authorities.

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