1991 (5) TMI 152 - AT - Central Excise

Issues Involved:
1. Classification of Melalite Cream under the Central Excise Tariff.
2. Re-opening of the approved classification by the Assistant Collector.
3. Determination of assessable value and differential duty.
4. Burden of proof for re-classification.
5. Nature of Melalite Cream: Medicine vs. Cosmetic.

Issue-wise Detailed Analysis:

1. Classification of Melalite Cream under the Central Excise Tariff:
The primary issue was whether Melalite Cream should be classified as a patent and proprietary medicine under Tariff Item 14E and Chapter Heading 30, or as a cosmetic under Tariff Item 14F(1) and Heading 3304.00. The respondents argued that Melalite Cream, containing Hydroquinone and Glyceryl Mono Para Amino Benzoate, was used for treating hyperpigmentation and was sold only by licensed druggists on medical prescriptions. The Assistant Collector and the Collector (Appeals) both upheld the classification of Melalite Cream as a medicine, emphasizing its curative and therapeutic properties over its cosmetic attributes.

2. Re-opening of the Approved Classification by the Assistant Collector:
The respondents contended that the re-opening of the classification, which had already been approved by the Assistant Collector, was improper and could only be prospective. The Assistant Collector had initially approved the classification of Melalite Cream as a patent and proprietary medicine. The Tribunal affirmed that the re-opening of the classification was not justified, as the product was consistently recognized as a medicine by various authorities, including the State Sales Tax Department.

3. Determination of Assessable Value and Differential Duty:
The show cause notice issued to the respondents questioned the assessable value and demanded differential duty of Rs. 11,36,911.21 for the period from 7th June 1985 to 19th May 1986. The Assistant Collector, upon reviewing the classification and evidence provided by the respondents, concluded that the product was correctly classified as a medicine, thereby nullifying the demand for differential duty. The Tribunal upheld this decision, agreeing that the primary function of Melalite Cream was curative and therapeutic.

4. Burden of Proof for Re-classification:
The respondents argued that the burden of proof for re-classification lay with the Department. The Tribunal noted that the Department failed to provide sufficient evidence to justify the re-classification of Melalite Cream as a cosmetic. The respondents supported their classification with various documents, including drug licenses, medical literature, and affidavits from medical practitioners, which demonstrated that Melalite Cream was recognized and used as a medicine.

5. Nature of Melalite Cream: Medicine vs. Cosmetic:
The Tribunal examined the composition and intended use of Melalite Cream, referring to medical literature and expert affidavits. The product was found to be primarily used for treating hyperpigmentation, a medical condition, and contained active ingredients with recognized therapeutic properties. The Tribunal cited previous judgments, including those from the Gujarat High Court and the Tribunal itself, which supported the classification of similar products as medicines rather than cosmetics. The Tribunal concluded that Melalite Cream was a medical preparation and not a cosmetic or toilet preparation.

Conclusion:
The Tribunal dismissed the appeal filed by the revenue, upholding the classification of Melalite Cream as a patent and proprietary medicine under Tariff Item 14E up to 28th February 1986, and under Heading 3003.19 thereafter. The orders passed by the lower authorities were affirmed, and the demand for differential duty was nullified.

← Previous Next →