2004 (5) TMI 68 - SC - Central Excise

Whether Johnson's Prickly Heat Powder and Phipps Processed Talc are patent or proprietary medicines classifiable for the purposes of excise duty under the erstwhile Tariff Item 14E (as prior to 1-3-1986) and Heading 30.03 (subsequent to 1-3-1986) as claimed by the appellants or whether they are cosmetics or toilet preparations falling under the erstwhile Tariff Item 14F (prior to 1-3-1986) and Heading 33.04 (after 1-3-1986) as claimed by the Department? Held that - In the present case when throughout the meaning given to products in question not only by the department itself but also by other departments like Drug Controller and the Central Sales Tax authorities is that the product in question is a medicinal preparation should be accepted. Applying the principles enunciated in BPL Pharmaceuticals Ltd., case 1995 (5) TMI 98 - SUPREME COURT OF INDIA and taking into consideration various circumstances as to the manner in which the goods had been treated on the earlier occasions by the department and the product having been utilised with reference to the commercial parlance and understanding, that it had been treated as a drug it would not cease to be one notwithstanding the fact that new tariff act has come into force. What is to be seen in such cases is when in the common parlance, for purpose of the Drug Act, for purpose of Sales Tax Act and in various findings recorded on earlier occasions by the department itself having been noticed, the conclusion is inevitable that the products in question must be treated as medicinal preparations. No hesitation in reversing the view of the Tribunal and restore that of the Collector that in view of the medicinal ingredients, namely, salicylic acid and boric acid which are meant to cure the disease called Milaria Rubra, prickly heat powder is a drug and, therefore, classifiable as a drug or a medicinal preparation. Appeal allowed of assessee.

Summary

Issues Involved:
1. Classification of Johnson's Prickly Heat Powder and Phipps Processed Talc for excise duty purposes.
2. Determination of whether the products are patent/proprietary medicines or cosmetics/toilet preparations.
3. Interpretation of relevant tariff items and headings.
4. Consideration of expert opinions and previous classifications by authorities.

Issue-wise Detailed Analysis:

1. Classification of Johnson's Prickly Heat Powder and Phipps Processed Talc for Excise Duty Purposes:
The primary issue was whether these products should be classified under the erstwhile Tariff Item 14E (patent or proprietary medicines) and Heading 30.03 (medicaments) or under Tariff Item 14F (cosmetics or toilet preparations) and Heading 33.04 (beauty or make-up preparations and preparations for the care of the skin).

2. Determination of Whether the Products are Patent/Proprietary Medicines or Cosmetics/Toilet Preparations:
The Tribunal had classified the products as 'cosmetics' based on the presence of subsidiary pharmaceutical or antiseptic constituents. However, the appellants contended that the products were used for the treatment and prevention of prickly heat (Milaria Rubra) and were manufactured under a Drug Licence. They argued that the products contained significant medicinal ingredients like boric acid and salicylic acid, which have curative properties.

3. Interpretation of Relevant Tariff Items and Headings:
The relevant entries under Tariff Item 14F and Heading 33.04 included preparations for the care of the skin, such as beauty creams and talcum powders. The Tribunal relied on Explanation II to Tariff Item 14F, which included cosmetics and toilet preparations containing subsidiary pharmaceutical or antiseptic constituents. However, the appellants argued that the products were known and understood in commercial parlance as patent or proprietary medicines used for the prevention and treatment of prickly heat.

4. Consideration of Expert Opinions and Previous Classifications by Authorities:
The appellants cited various expert opinions and previous classifications by authorities, including the Drug Controller of India and the Sales Tax Tribunal, which had classified the products as drugs. The Central Board of Excise and Customs had also previously recognized similar products as drugs. The appellants referred to the decision in BPL Pharmaceuticals Ltd. v. CCE, where selenium sulfide was classified as a drug based on its preparation, label, literature, and common commercial understanding.

Judgment:
The Supreme Court emphasized the importance of considering the manner of classification by the authorities rather than relying solely on etymological meanings or expert opinions. The Court noted that the products had been consistently treated as medicinal preparations by various authorities, including the Drug Controller and Sales Tax authorities. The Court also referred to the principles enunciated in the BPL Pharmaceuticals Ltd. case, emphasizing the value of earlier understandings and precedents.

The Court concluded that the products in question should be classified as medicinal preparations based on their commercial parlance and understanding, as well as their treatment by the authorities on earlier occasions. The view of the Tribunal was reversed, and the classification by the Collector was restored.

Conclusion:
The appeals were allowed, and the products were classified as patent or proprietary medicines under the relevant tariff items and headings. The judgment highlighted the importance of consistent classification practices and the reliance on commercial parlance and previous authoritative decisions in determining the classification of goods for excise duty purposes.