Andhra HC (Pre-Telangana)
Unknown vs Union Of India And Others on 21 October, 2014
Bench: L.Narasimha Reddy, Challa Kodanda Ram
THE HONBLE SRI JUSTICE L.NARASIMHA REDDY AND THE HONBLE SRI JUSTICE CHALLA KODANDA RAM
W.P.No.2939 of 2002
21-10-2014
Sarvotham Care Limited. .Petitioner
Union of India and others. .Respondents
Counsel for the petitioners: Sri C.R.Sridharan
Counsel for respondents : Sri Gopala Krishna Gokhale
<GIST:
>HEAD NOTE:
? Cases referred:
1.1995 (77) E.L.T.485 (S.C.)
2. 1996(81)E.L.T. 7 (S.C.)
THE HONBLE SRI JUSTICE L.NARASIMHA REDDY
AND
THE HONBLE SRI JUSTICE CHALLA KODANDA RAM
W.P.No.2939 of 2002
ORDER:(Per LNR,J) This writ petition is filed assailing the order, dated 28.12.2001 passed by the Deputy Commissioner of Customs and Central Excise, Hyderabad, 2nd respondent herein.
The petitioner is the manufacturer of a product by name Nizral Shampoo. It is stated that necessary licence under the Drugs and Cosmetics Act, 1940 (for short the Act) and the Rules made thereunder has been obtained for that purpose. The product is subjected to levy of excise duty. According to the petitioner, the product is Medicaments that falls under the sub-heading No.3303.10 of the Central Excise Tariff Act, 1985 (for short the Tariff Act). The duty was paid on that basis. However, the 2nd respondent intended to treat it as the preparation for use on hair occurring in sub-heading No.3305.00 of the Tariff Act. A show cause notice was issued in this behalf, in respect of the product cleared between May 1999 and December 2000.
The petitioner submitted its explanation. Personal hearing was also given. Thereafter, the 2nd respondent passed a detailed order in original dated 28.12.2001 holding that the petitioner is liable to pay differential duty of Rs.78,51,483/-. The said order is challenged in this writ petition.
Sri C.R.Sridharan, learned senior counsel for the petitioner submits that though the petitioner is required to pursue the remedy of appeal under Section 35 of the Central Excise Act, 1944 in the ordinary course, there exist special circumstances for filing of the writ petition. He contends that the very issue as to whether a shampoo, with medicinal values can be classified as medicament or preparation for use on hair was dealt with by the Honble Supreme Court in B.P.L.Pharmaceuticals Ltd. vs. Collector of Central Excise, Vadodara and that though the same was relied upon before the 2nd respondent, he differentiated it on totally untenable grounds. He submits that the product is manufactured after obtaining licence under the Act by treating it as a drug and in that view of the matter, classification of the same as a cosmetic is contrary to law.
Learned senior counsel submits that even in the ordinary parlance, the product is used as a cure for dandruff and other related ailments and thereby, it acquired medicinal value. He contends that every parameter that was indicated by the Honble Supreme Court in B.P.L.Pharmaceuticals Ltd.s case (1 supra) applies to the facts of the present case and that the impugned order is liable to set aside. He further submits that in the case of the petitioner itself, the Central, Excise and Gold (Control) Appellate Tribunal passed an order on 18.01.2005, during the pendency of the writ petition, holding that the product falls under Sub-heading 3003.10 of the Tariff Act and though the matter is pending before the Supreme Court, at the instance of the respondents, as of now, the contention of the petitioner deserves acceptance.
Sri Gopala Krishna Gokhale, learned counsel for the respondents on the other hand submits that the writ petition is not maintainable, since an effective alternative remedy is provided for under the Central Excise Act. He further submits that the classification of manufactured items with reference to the Tariff Act is a complicated process and that where technical aspects are involved, the matter must be left to the concerned authority, to decide. He places reliance upon the judgment of the Supreme Court in Assistant Commissioner of Sales Tax, Kerala vs. P.Kesavan & Co.
On merits, the learned counsel submits that the very description of the product as shampoo brings it within the purview of the Sub-heading 3305.00. It is also urged that in B.P.L.Pharmaceuticals Ltd.s case (1 supra) decided by the Supreme Court, though the product was initially manufactured as Selsun Shampoo, by the time the adjudication has taken place, the word shampoo was removed and that itself made considerable difference. He submits that the Honble Supreme Court took note of that important fact as well as the medicinal values, which were disclosed in the pamphlet printed by the manufacturer. According to him, in the present case, the product still continues to be sold as shampoo and in the literature prepared in relation to the product, nowhere it was mentioned that the product has any independent medicinal values. Learned counsel submits that if the product has any characteristics of controlling dandruff, it is indeed common, almost for all the shampoos.
On the question of maintainability of the writ petition, we find some justification for the petitioner in approaching this Court directly. Firstly, the petitioner is of the view that the judgment of the Supreme Court in B.P.L.Pharmaceuticals Ltd.s case (1 supra) covers the matter in its entirety and that there is no point in requiring it to undergo the ordeal of appeals one after the other. Secondly, whatever may have been the circumstances, under which the writ petition was filed in the year 2002, during the pendency of the writ petition, in the case of the petitioner itself, an adjudication has come into existence, may be from the Tribunal and that the same is subject matter of an appeal before the Supreme court. We are of the view that the writ petition can be entertained under these circumstances.
Coming to the merits of the matter, the name of the product manufactured by the petitioner is Nizral Shampoo. The very name gives an indication that it is used as a substance that can be applied to hair be it for a healthy growth or for maintenance.
The Dictionary meaning of the word shampoo is as under:
A liquid preparation for washing the hair In case, the petitioner wanted its product to be simply of medicinal values and of no relevance for application to hair, it could have formulated the name accordingly omitted the word shampoo, atleast after the dispute has arisen. Heavy reliance is placed upon the judgment of the Supreme Court in B.P.L.Pharmaceuticals Ltd.s case (1 supra). In that case, the name of the product is Selsun. Initially, the product was also named as Selsum Shampoo. After some time, the word shampoo was dropped and it was being sold as Selsun. The literature and other material that was placed before the adjudicatory authority, i.e., Central Board of Excise ad Customs disclosed that the component by name Selenium Sulfide contained in it is a product, to cure certain skin diseases and its presence in profound quantity made the product nearer to medicine. After recounting the various values, which the product had, and the factum of the dropping the word shampoo, the Supreme Court agreed with the opinion expressed by the Central Board of Excise and Customs, which classified it as medicine. The importance and existence of word shampoo, rather the absence thereof, was dealt with by the Honble Supreme Court as under:
26. Elaborating the above submissions, the learned counsel for the respondents invited our attention to Chapter notes of Chapter 30 and Chapter 33 and also the Rules of interpretation. According to the learned counsel a careful reading of Chapter Notes of Chapter 30 would show that preparations of Chapter 33 even if they have therapeutic or prophylactic properties would not fall under chapter 30.
However, he fairly admitted that medicaments are those that have therapeutic or prophylactic uses. Nevertheless those medicaments, if they are classifiable under Chapter 33 or Chapter 34 will not fall under Chapter 30, according to him, if they are more specifically preparations of Chapter 33 or Chapter 34. In other words, he wants to equate the product in question to shampoo enumerated under Heading 33.05. He also invited our attention to the fact that the appellants before the coming into force of the new Tariff Act described the product as shampoo and they have omitted the word shampoo deliberately only to claim that the product would fall under Chapter 30.
From this, it is clear that continued use of the word shampoo to the product would certainly have made the difference. In the instant case, the product is being sold with the name Nizral Shampoo.
The factors, that become relevant in classification of the products for one purpose, are substantially different from those that are relevant for other purposes. For example, the classification of drugs and cosmetics under the Act may not be the same as the one under the Tariff Act. The considerations under the enactments are totally different. Ultimately, it must be left to the concerned authorities, wherever the technical evaluation is involved. In P.Kesavan & Co.s case (2 supra), the Supreme Court held:
5. Where technical matters are involved, and particularly when processes of manufacture have become increasingly complicated, it is appropriate that the authorities best competent to deal with such matters should be allowed to do so. The learned single judge was swayed by the fact that some time had already elapsed since the writ petition was admitted. Far less time had elapsed then than has elapsed now. The Division Bench cited judgments in support of the view that it was not necessary to refer the respondents to the authorities under the Act. It does not appear to have appreciated that regard must be had to the facts of each case. Where sufficient evidence is placed before the writ court for an unambiguous conclusion upon technical matters to be reached, those authorities might be apposite, but we must stress that where intricate technical processes are involved, it is proper that the writ court should direct writ petitioners to agitate their grievances before statutory authorities who are more competent to assess the merits thereof.
Howsoever tempting it may be for a Court or Tribunal to undertake by itself, the analysis of classification or to take into account, the utility of the product, that would tend to be an encroachment into the jurisdiction, which the Parliament conferred on other agencies.
Another aspect is that the classification of the product is determined on the basis of the process of manufacture and its proclaimed use and utility. The fact as to how the product is used, after it is manufactured, can not at all be taken into account. For instance, in respect of shampoos themselves, there are instances, where people use them for washing vehicles or cleaning floors, because their chemical impact is relatively less. On that account, the product cannot be treated as a washing medium. Another instance is of whitener, manufactured by various companies, which is an item of stationary. It is in two components; white paste and the diluting medium. Instances are galore that the diluting medium was used as a drug mostly by misguided students may be on account of its profuse alcoholic content. The misuse was so rampant that the manufacturing companies have changed the process and ready mix whiteners are produced. If one goes by the use of the product in the context of classification, the diluting medium of a whitener could have safely been treated as intoxicant and classified accordingly. The examples can be multiplied on this aspect.
It is represented that the product is being manufactured under the licence obtained under the Act. However, neither the copy of the licence is placed before us nor the conditions, subject to which the licence was granted, are made available. The very fact that the drugs and cosmetics are dealt with under the same enactment discloses the proximity of those two products. The definitions of cosmetic on the one hand and drug on the other hand read as under:
cosmetic means any article intended to be rubbed, poured, sprinkled or sprayed on, or introduced into, or otherwise applied ot, the human body or any part thereof for cleansing, beautifying, promoting, attractiveness, or altering the appearance, and includes any article intended for use as a component of cosmetic.
drug includes-
(i) all medicines for internal or external use of human beings or animals and all substances intended to be used for or in the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings or animals, including preparations applied on human body for the purpose of repelling insects like mosquitoes;
(ii) such substances (other than food) intended to affect the structure or any function of the human body or intended to be used for the destruction of vermin or insects which cause disease in human beings or animals, as may be specified from time to time by the Central Government by notification in the Official Gazette;
(iii) all substances intended for use as components of a drug including empty gelatin capsules; and
(iv) such devices intended for internal or external use in the diagnosis, treatment, mitigation or prevention of disease or disorder in human beings or animals, as may be specified from time to time by the Central Government by notification in the Official Gazette, after consultation with the Board;
The import or manufacture of drugs as well as cosmetics is dealt with under the same provision. The licensing process is also common. The circumstances under which the petitioner is said to have obtained licence for manufacturing shampoo, are not immediately before us. It is only when the relevant conditions are verified, that the proper conclusion can be arrived at. We have already mentioned that the purpose, which a particular enactment serves, are different from those under other enactments, though incidentally the same product may be dealt with by both of them. Further, the predominant object under the Act is to ensure that the products are not manufactured without licence. Unless necessary material is placed before us, we do not intend to deal with the contentions in this regard, in detail.
The 2nd respondent has taken into account, the judgment of the Supreme Court in B.P.L.Pharmaceuticals Ltd.s case (1 supra) and made a clear analysis as to how the facts of the present case are at variance with that of the one before the Supreme Court. We therefore do not find any merits in the writ petition.
The writ petition is accordingly dismissed.
The miscellaneous petition filed in this writ petition shall also stand disposed of. There shall be no order as to costs. ___________________ L.NARASIMHA REDDY, J ______________________ CHALLA KODANDA RAM, J Date: 21.10.2014