2015 (8) TMI 250 - SC - Central Excise

Classification of Nizral as shampoo or hair medicament - Classification CSH 3003.10 or under CSH 3305.99 - Held that - the product in question Nizral Shampoo is classifiable under CSH 3003.10 and not CSH 3305.99 - product known as Nizral Shampoo gives the nomenclature of the product as shampoo. However, the respondent claim that it is a patent or proprietary medicament as it s essential characteristics is therapeutic in nature. It is the common case of the counsel for the parties the pre-dominant use of the product in question is to be taken into consideration while deciding the classification issue. Therefore, it is to be determined as to whether the product in question is primarily used as a shampoo or it is used as a medicament. The use is suggested only on the advice of a Doctor and there is a suggestion that Doctor should be consulted for any further information. The respondent has also provided the literature/material showing that dandruff is a disorder which affects the hairy scalp. It is generally triggered by a single celled organism which is kind of fungus, with scientific name Pityrosporum Ovale . For treatment of this disease, Nizral Shampoo 2% (i.e. shampoo containing 2% Ketoconazole ) is shown as a new medicine use whereof cures clears a dandruff. It is suggested that it should be used once a week and on other days, normal shampoos may be used which clearly shows that Nizral Shampoo is to be used like a medicine, unlike other normal Shampoos. - In fact, notwithstanding the fact that the appellants have described the product as Selsun Shampoo, the Central Board of Excise and Customs, as noticed earlier, has classified the same as patent and proprietary medicine. Therefore, there is no force in the submission that the product must be equated with shampoo. - judgment of the Tribunal does not call for any interference - Decision in the case of B.P.L. Pharmaceuticals Ltd. v. CCE, Vadodra 1995 (5) TMI 98 - SUPREME COURT OF INDIA followed - Decided against Revenue.

Issues Involved:
1. Classification of 'Ketoconazole Shampoo' and 'Nizral Shampoo' for central excise duty purposes.
2. Determination of whether the product is a pharmaceutical product or a cosmetic/toilet preparation.
3. Interpretation of relevant Central Excise Tariff Act provisions and Harmonised System Committee guidelines.
4. Examination of the product's predominant use and essential characteristics.
5. Consideration of previous judicial precedents and tribunal decisions.

Detailed Analysis:

1. Classification of 'Ketoconazole Shampoo' and 'Nizral Shampoo':
The primary issue is the classification of 'Ketoconazole Shampoo' and 'Nizral Shampoo' for central excise duty purposes. The respondent classified the product under CSH 3003.10, claiming it as a medicine, while the appellant/Revenue classified it under CSH 3305.99, viewing it as a 'preparation for use on hair.'

2. Determination of whether the product is a pharmaceutical product or a cosmetic/toilet preparation:
Chapter 30 covers pharmaceuticals, including 'patent or proprietary medicaments,' while Chapter 33 includes 'Essential Oils and Resinoids; Perfumery, Cosmetic or Toilet Preparation,' with CSH 3305.99 specifically for 'preparations for use on the hair.' The Revenue argued that the product is primarily a shampoo with ancillary therapeutic properties due to the presence of 2% 'Ketoconazole,' thus classifying it under Chapter 33. The respondent contended that the product is medicinal, used to treat specific scalp disorders, and should be classified under Chapter 30.

3. Interpretation of relevant Central Excise Tariff Act provisions and Harmonised System Committee guidelines:
The Revenue relied on Chapter Note (6) to Chapter 33, which includes shampoos with therapeutic properties, and HSC guidelines to support their classification. They cited previous judgments emphasizing the importance of HSC criteria in classification disputes.

4. Examination of the product's predominant use and essential characteristics:
The Tribunal found substantial evidence showing the product's medicinal use, such as treatment of scalp disorders and sale under medical prescription. The product's literature, warnings, and limited use period indicated its primary therapeutic nature. The Tribunal concluded that the product's essential characteristics are medicinal, classifying it under CSH 3003.10.

5. Consideration of previous judicial precedents and tribunal decisions:
The Tribunal referred to the Supreme Court's judgment in B.P.L. Pharmaceuticals Ltd. v. CCE, Vadodra, which dealt with a similar issue of classifying a product with therapeutic properties. The Court emphasized the product's medicinal use, manufacturing under a drug license, and sale under medical prescription. The Tribunal also considered other relevant judgments and found that the product's primary therapeutic use justified its classification as a pharmaceutical product.

Conclusion:
The Supreme Court upheld the Tribunal's decision, agreeing that 'Nizral Shampoo' is classifiable under CSH 3003.10 as a pharmaceutical product. The Court emphasized the product's essential medicinal characteristics, therapeutic use, and sale under medical prescription. The appeal by the Revenue was dismissed, and the respondent's classification was affirmed. The Court also quashed the High Court's order in a related appeal, reinforcing the classification as a pharmaceutical product and not a shampoo.

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