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TMI Blog1991 (5) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... ir classification as patent and proprietary medicines was approved on 21-7-1986. The change introduced in the description of cosmetics under 14F(1) in the Finance Bill of 1985 to include sunburn preventive preparations and sun tan preparation against skin irritants and also the explanation cosmetic and toilet preparation included preparation whether or not they contained subsidiary pharmaceutical or antiseptic constituents or were held out as having subsidiary curative or prophylactic value, made it necessary for the Revenue to revise the classification of Melalite Cream from 14E to 14F. A show cause notice was issued to the respondents on 8th August, 1986 requiring them to show cause as to why :- (i) Their product melalite cream should not be re-classified under Tariff Item 14F(1) for the period from 7th June, 1985 to 27th February, 1986 and under sub-heading 3304.00 from 28th February, 1986 onwards. (ii) Why the assessable value already approved should not be modified according to the proposed re-classification. (iii) Why the differential duty of Rs. 11,36,911.21 payable on the clearances of Melalite Cream from 7th June, 1985 to 19th May, 1986 and the differential duty invo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s manufactured under the licence issued by the State Drugs Controller as a drug and was dispensed by the licensed chemists and druggists on the strength of the prescriptions issued by the doctors also lent support to the fact that the product merited classification as a P or P medicaments, and added to the above overwhelming functions one more could be added that this product was recognised as a medicine by the State Sales Tax authorities also, and he had observed that the main function of the Melalite Cream was curative and therapeutic in nature and the sun screening function was a subsidiary one. The Assistant Collector had held that the Melalite Cream manufactured by the respondents as patent or proprietary medicaments falls under T.I. 14E upto 28th February, 1986 and under Chapter 3003.00 after 1st March, 1986, with the result that the entire proceedings initiated in the show cause notice dated 8th August, 1986 were dropped. 2A. The revenue authorities being not satisfied with the order passed by the Assistant Collector, filed a review application under Section 35E(4) of the Central Excises and Salt Act, 1944 before the Collector of Central Excise (Appeals), Madras to be trea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed with the appeal and a reading of the pamphlet will show that it is a cream which is to be treated as a cosmetic. He has pleaded for the acceptance of the appeal. 5. Shri A.M. Setalvad, the learned Senior Advocate, Shri C.M. Korde and Shri S.M. Thakore, Advocates have appeared on behalf of the respondents. Shri Setalvad, the learned Senior Advocate argued that the question before the Bench is what is the true nature of the product. Shri Setalvad, the learned Senior Advocate pleaded that the classification lists filed by the respondents were duly approved by the Department and in case the revenue chooses to change the classification, the burden of proof is on the Department and the revenue has failed to discharge the burden of proof. In support of his argument, he has referred to the following judgments :- (1) 1989 (39) E.L.T. 175 (SC) at page 177 Para 4 - Collector of Central Excise v. Calcutta Steel Industries Ors. (2) 1988 (36) E.L.T. 135 (Tri.) - S.S. Enterprises v. Collector of Customs, Bombay. Shri Setalvad, the learned Senior Advocate has referred to the reply to the show cause notice which appears on pages 3 to 11 of the respondents paper book and has made a par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a medicine generally prescribed by doctors and skin specialists for cure of Hyperpigmentation and in para 4 he has deposed that Melalite Cream is regarded as a medicine and is not generally sold by general stores which stock cosmetics and toilet preparations. He has also referred to another affidavit of Dr. Anil J. Manerkar, who is a general medical practitioner, where in para No. 3 he has mentioned that the specialists prescribed Melalite Cream and after consulting him the patients commenced use of the said cream as a medicine and the patients found this to be an effective medicine and he had prescribed this medicine to the patients who were suffering from Hyperpigmentation and regarded Melalite Cream as a medicine and not as a cosmetic or toilet preparation. He argued that for sales-tax purposes Melalite Cream is considered as a medicine. He has referred to the order-in-original where the Assistant Collector has given his observations in coming to the conclusion that the Melalite Cream is a medicine. He has referred to the grounds of appeal filed before the Collector (Appeals) and in the grounds of appeal it is mentioned that the chemical report of Melalite Cream manufactured b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y may be useful also in the protection or care of the skin can hardly, because of their latter attribute, be classifiable as cosmetics or toilet preparations. In the case, of calaminol, calamyl, acquaminol as well as histacalamine, it is stated that the product is indicated in urticaria, exzema, sunburn and allergic dermatitis etc. Calcalcream is stated to be the drug of choice for patients suffering from all types of dermatitis as mentioned above in dry conditions, calamine is described as being a potent sunscreen effective in reddened and inflamatory conditions of skin due to sunburn. Calaminol and Histacalamine, as per the catalogue is indicated in oozing dermatities. Thus the effect of use of product is curative and not protective. In the face of the catalogue and specimens of cartons which give the nature of the product, its attributes, indications and applications, quite clearly they are not advertised or sold as cosmetics or toilet preparations. The use of special perfume to give pleasant smell to the items in question will not make them cosmetics and toilet preparations. Large supplies of the items in questions are made to Hospitals and are prescribed by Doctors for the ail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tographic. Containers: Glass bottles, multiwall paper sacks; fiber drums. Hazard: Tox by ingestion and inhalation; irritant. Tolerance, 2 mg per cubic meter of air. Uses: Photographic developer (except colour film); dye intermediate; medicine, antioxidant; inhibitor; stabilizer in paints and varnishes, motor fuels and oils; antioxidant for fats and oils; inhibitor of polymerization." In Pharmacology and Pharmacotherapeutics revised tenth edition by R.S. Satoskar and S.D. Bhandarkar page 699 the description of Hydroquinone is given as under :- Hydroquinone. This drug inhibits tyrosmase and hence melanin synthesis in the melanocytes. It is commonly used in the form of a 2-49% cream or lotion in the treatment of freckles, post-inflammatory pigmentation, and melasama of pregnancy and that due to oral contraceptives. Its effect is reversed by sunlight and hence it has also been used in combination with an opaque sunscreen (see later). In Drug Evaluation 6th edition American Medical Association, Hydroquinone at 1017 has been described as under :- A preparation containing an opaque sunscreen (Eldopaque, Eldopaque Forte) may be required to suppress the effect of sunlight on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... medicine is a remedial agent, a substance which may be sold in various forms such as liquid, tablets, capsules or powder, which is administered in the treatment of disease and which has the property of curing or remedying disease. The expression toilet article in Entry 21A of Schedule E of the Bombay Sales Tax Act, 1959 should be confined only to those articles which produce direct toilet effect, that is, to articles which could be directly used in dressing or grooming a person so as to beautify his appearance. Nycil medicated powder is not an article which is ordinarily used for the purpose of grooming a person by beautifying his appearance. It is, therefore, not a toilet article within the meaning of Entry 21A of Schedule E." The Tribunal in the case of Pasteur Laboratories (P) Ltd. v. Collector of Central Excise, Calcutta reported in 1987 (31) E.L.T. 192 (Tribunal) had observed as under :- 15. We have carefully considered the facts of the case and the submissions made before us. Before we deal with the arguments put forward by either side, let us first examine as to what are the items, the classification of which has to be decided by us. The containers of the item ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s preparations for the care of the skin. 19. The Assistant Collector in his order-in-original has taken the view that while as per the Indian pharmacopoeia, calamine is categorised as astringent but preparations of calamine are shown as protective. He, therefore, concludes that such preparations cannot be curative or preventive . The Assistant Collector then makes the general observation that there are many products in the category of cosmetics and toilet preparations which are useful in the protection of the skin against certain effects on the skin, but that does not make those products, drugs or medicines. In this connection he mentions the cosmetics preparation available in the market by the name of Lactocalamine. He points out that this item is used, sold and known as cosmetics. 20. It seems to us that there is a fallacy in these arguments. Cosmetics and toilet preparations, which incidentally or secondarily have curative or prophylactic use, cannot be classified as drugs or medicines. At the same time, it is equally true that drugs and medicines, which incidentally may be useful also in the protection or care of the skin can hardly, because of their latter attribute, be c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sold or used as cosmetics and toilet preparations. 31. We are not inclined at all to go into the question of the ingredients of the impugned products or to weigh the arguments in terms of therapeutic value of the different contents. We are of the view that decision in such cases must rest on consideration of the basic issue as to what are the products known in the market as and how are they treated in the medical profession. We have noted that the products are being prescribed by doctors for specific ailments and diseases and supplied for use in various hospitals. Considering all the facts and evidence produced before us, it is clear that these are not items which are bought and sold in the market or used as items of toilet preparations or cosmetics." Hon ble Calcutta High Court in the case of M/s. Calcutta Clinical Research Association Ltd. v. The Union of India reported in 1971 Tax Law Reports 1073 had observed as under in para 7 :- 7. The manufacturer or producer had to comply with the requirements of Drugs Act because Mr. Roy Chowdhury contended that no patent medicine could come into the market unless it had so complied and these goods would not be marketable without su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... word in its ordinary, dictionary meaning. The dictionary meaning is that to become goods it must be something which can ordinarily come to the market to be bought and sold and is known to the market. That it would be such an article which would attract the Act was brought out in AIR 1963 SC 791." Therefore, it is in order to be bought and sold in the market in case of the patent and proprietary medicine there must be labelling and such labelling is, therefore, manufacture. Quite apart from that question, independent of the Drugs Act and independent of sub-clause (iii) of S. 2(f) of the Central Excises Act, 1944, I am of the opinion that in view of the peculiar nature of the patent and proprietary medicines labelling is a process incidental to or ancillary to the completion of manufacture of that product. From that point of view in my opinion the imposition of levy in this case was valid. Unlabelled medicines are not and cannot be described as patent and proprietary medicines. Mr. Dutta s second contention therefore fails." In view of the above discussion, we are of the view that Melalite Cream is a medical preparation and cannot be treated as a cosmetic or toilet preparation. C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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