Customs, Excise and Gold Tribunal - Delhi
Sunny Industries (P) Ltd. vs Collector Of C. Ex. on 26 October, 1988
Equivalent citations: 1989(19)ECC306, 1989(20)ECR59(TRI.-DELHI), 1989(39)ELT468(TRI-DEL)
ORDER I.J. Rao, Member (T)
1. The question that arises in the present appeal relates to the classification of "AD Vitamin Massage Oil Forte" manufactured by the appellants. Till 16-3-1985 this item was being classified under Tariff Item 14E as patent & Proprietary Medicine. It is the case of the Department that with effect from 1-7-3-1985 when Tariff Item 14F (Cosmetics and Toilet Preparations) was amended by addition of an Explanation II, this product should be classified under TI 14F. The appellants' case is that even after amendment (to 14F) the goods continue to be classifiable under TI 14E.
2. TI 14E was as follows:
"Patent or Praprietary Twelve and a half per cent ad-
Medicines not containing al- valorem
cohol, opium, Indian Hemp or
other narcotic drugs or other
narcotics other than those
medicines which are exclusive-
ly Ayurvedic, Unani, Sidha or
Homeopathic."
TI 14F was worded as follows:
"Cosmetics and toilet prepara- One hundred per cent advalorem
tions not containing alcohol or
opium, Indian Hemp or other
narcotic drugs or narcotics,
namely:
(i) Preparations for the care of the skin including beauty creams, vanish- ing creams, cold creams, makeup creams, cleansing creams, skin foods and tonics, face powders, baby powders, toilet powders, talcum powders and lipsticks.
(ii) Preparations for the care of the hair
(a) Hair lotions, creams and pomades
(b) Perfumed hair oils
(c) Shampoos whether or not containing soap or detergent
(iii) Shaving creams, whether or not containing soap or detergents.
Explanation : 'Alcohol', 'Opium', 'Indian Hemp', 'Narcotic Drugs' and 'Narcotics' have the meanings respectively assigned to them in Section 2 of the Medicinal and Toilet Preparations (Excise Duties) Act, 1955."
3. In the Finance Bill 1985 (which later became Finance Act 1985) certain changes were effected in Tariff Item 14F and after the amendment the item read as follows :
"14F. Cosmetics and Toilet Preparations Not containing Alcohol or Opium, Indian Hemp or Other Narcotic Drugs or Narcotics, Namely One hundred and five per cent ad-valorem.
(i) Preparations for the care of the skin, beauty or makeup, preparations and manicure or pedicure preparations, such as : beauty creams, vanishing creams, cold creams makeup creams, cleansing creams, skin foods and skin tonics, face powders, baby powders, toilet powders, talcum powders and grease paints, lipsticks, eye-shadow and eyebrow pencils, nail polishes and varnishes, cuticle removers and other preparations for use in manicure or chiropody, sub-burn preventive preparations and subtan preparations, barrier creams to give protection against skin irritants, personal (body) deodorants, depilatories.
(ii) Preparations for the care of the hair, such as: brilliantines, perfumed hair oils, hair lotions, pomades and creams, hair dyes, shampoos whether or not containing soap or organic surface active agents.
(iii) Shaving creams, whether or not containing soap or organic surface active agents.
Explanation I:...
Explanation II: This item includes cosmetics and toilet preparations whether or not they contain subsidiary pharmaceutical or antiseptic constituents, or are held out as having subsidiary curative or prophylactic value.
Explanation III:..."
The Central Excise Department felt that after the inclusion of Explanation II to Item 14F the appellants' products become classifiable under 14F. A show cause notice was, therefore, issued to the appellants proposing the reclassification of the goods under 14F(1). The notice was resisted by the appellants but after due process the Assistant Collector passed an order holding that the product was classifiable as cosmetics and toilet preparation for the care of skin and not as an item of medicine falling under Tariff Item 14E.
3. An appeal to the Collector of Central Excise (Appeals) was rejected. The Collector (Appeals) recorded, inter alia, that all products manufactured under Drug Licence cannot be medicines/drugs. This observation he made while disposing of a plea of the appellants that a reference should have been made to the Drug Controller. Hence the present appeal.
4. Shri Rathindra Nath Das, the learned Senior Advocate of the appellants recalled all the facts of the matter and advanced the following arguments in support of his appeal :
I. The product is primarily a drug (P & P Medicines defined in explanation I to 14E CET). This is because :
(i) it contains a drug or medicinal preparation in oil form;
(ii) it is used for massage;
(iii) it prevents the ailment of rickets and treats the same ;
(iv) it has a trade mark and symbol including that it is a proprietary.
II. Item 14E was not amended and Explanation II modifies Item 14F only. For the purpose of this explanation the goods should be basically cosmetics and toilet preparations containing subsidiary pharmaceutical or antiseptic constituents or possess subsidiary curative or prophylactic value.
III. The product was being considered to P & P Medicine from 1961 and it continued to be so even after 1985.
IV. The word "Forte" is used only to indicate fortified strength of the vitamins and occurs only in respect of medicines.
V. The Product Manual issued by the appellants shows that vitamins A & D are used for medical purposes. The vitamins are, therefore, drugs and the product is a medicine.
VI. The product is sold as a drug and is recognised as such.
VII The product is manufactured under a licence by the Drugs Department should be trated as a drug even after 1985.
VIII. What was a medicine and not a cosmetic prior to 1985 cannot suddenly become a cosmetic or toilet preparation after its amendment.
IX. Apart from being manufactured under a drug licence the product contains an expiry date which is the requirement only for medicines.
X. The evidence filed by the appellants was not controverted by the original and appellate authorities and the Department did not bring in any evidence to support the new classification. The affidavit of the renowned Doctor was ignored.
XI. The allegation made in the show cause notice that the drug is a preparation for care of skin is not correct.
XII. Test report describing the product as a preparation for the care of skin was not conclusive and the findings of the Assistant Collector and the Appellate Collector are perverse.
5. Shri Durghayya, the learned SDR opposing the arugments and supporting the impugned order submitted that the tariff has to be read with the explanation and that 14F covered skin goods and skin tonics. In the instant case the product is a preparation for care of skin and it is used for massage only. Answering an objection that this was not a ground raised by the lower authorities the learned SDR submitted that a new ground may be taken on the basis of existing records and relied on a judgment in the case of Collector of Central Excise v. United Paper Products [reported in 1988 (37) E.L.T 258 (Tri.)]. He submitted that massage oil takes care of the skin and aruged that a drug too can be a tonic as it contains vitamins which have the function of a tonic. Shri Durghayya referred to the tariff entry and submitted that the tariff item is specific to preparations for the care of skin. Arguing that even if the product contains vitamins it is not necessarily a medicine, Shri Durghayya relied on a judgment of the Bombay High Court in Glindia Ltd. v. Union of India [1988 (36) E.L.T. 479, Bombay]. He submitted that although the appellants produced evidence to show that it is a medicine and is sold in Chemist's shops there is no proof of it that it was not sold by general merchants. Referring to the certificate given by the Doctor, Shri Durghayya argued that this certificate or even a few more like that do not establish the nature of the goods. Referring the "Product Manual" filed by the appellants, Shri Durghayya submitted that this is a document prepared by the appellants themselves and there is no sanction to it by any authorised body. He finally pleaded that the product is primarily a massage oil and may be having marginal medicinal properties. Even so in view of the explanation II to 14F, it is classifiable under this item.
6. The learned Advocate in his rejoinder submitted that Item 14F before the amendment covered preparations for the care of skin like skin food, skin tonics, etc. from 1961 to 1985 the product was not treated as falling under TI14F. He argued that if prior to the introduction of Explanation II the classification of the product was 14E, the same classification should continue after the explanation which did not alter the nature of the product. He referred to the documents filed in the paper book at pages 161 to 200 including cash memos and certificates and also certificates given by the Doctors at pages 57 to 63 and pleaded that the market knew this product only as a medicine. He submitted the fragrance attributed to the medicine is not material and emphasised that medicine penetrates body bringing to its medicinal benefits.
7. We have considered the arguments of both sides. We have carefully gone through the show cause notice and the Collector's order and the relevant entries in the tariff. The appellants vehemently argued that the product in question is primarily a drug and for that they gave four reasons. That the product contains a drug is sought to be proved by the argument that vitamins A & D are present in the same. Admittedly it is used for massage and it has a trade mark and symbol showing that it is proprietary. They say that it prevents the ailment of rickets and treats the same. The mere grant of a drug licence by the Drugs Department does not make the product a drug. Besides, what is a drug under the Drugs Act need not necessarily be considered as drug for purposes of Central Excise Duty. It was held accordingly in the Judgment of the Tribunal in Shree Baidyanath Ayurved Bhawan Ltd. Patna and Anr. v. Collector of Central Excise, Patna and Anr. (supra)]. In paragraph 116 of the judgment the Tribunal held as follows:
"The definition of the word 'Ayurvedic medicines' given in Section 3(a) of the Drugs and Cosmetics Act, 1940 cannot be made use of for the purpose of classifying a product under Central Excise Tariff. Drugs and Cosmetics Act, 1940 is a distinct and separate Act enacted by the Parliament and no provision of it has been incorporated or referred to in the Central Excises and Salt Act, 1944 or Central Excise Tariff which is also a separate enactment".
8. Therefore, we have to decide wether for the purpose of Central Excise Tariff, in the light of the words used therein, the product is a cosmetic falling under 14F or a medicine falling under 14E. The appellants' argument that what was a drug prior to the amendment of the tariff cannot suddenly become a cosmetic is not sustainable because the Department has a right to reclassify a product any time provided that there are valid reasons to do so. An erroneous classification once done does not achieve inviolable permanence, never to be tampered with. This can be done, subject to provisions of law. Such question, however, is not involved in this matter, which relates to approval of a classification list. The arugment that Explanation II to 14F is in general terms whereas the wording of Item 14E is specific is another ground which cannot be accepted because unless it is proved that the product is capable of being classified in either of the headings, the question of choosing between whatjs said to be a general term and what is said to be a specific term does not arise. In this matter, the Department's stand is that the product is classifiable under 14F.
9. We have considered the appellants' argument that the word "Forte" is used only to indicate fortified strength of the vitamins and occurs only in respect of medicines. This does not prove anything because the appellants have not shown that any one in this country cannot use the word "Forte" after mixing vitamins in a product. We are aware that vitamins are added in several cosmetic preparations, skin care lotions, etc. We do not agree that the mere addition of vitamins would render the product into a drug. Apart from such a view being against commonsense the judgment in Shree Baidyanath Ayurved Bhawan Ltd. (supra) is against any such possibility. The appellants' argument that the product is sold as a drug and is recognised as such are based entirely on the affidavits they obtained and filed. But in the light of what we observed above viz., that the product has to be judged entirely in the light of the words in the tariff and not with reference to the licence under Drug Control Act, how a few people look at it. It is not that opinion given by certain persons connected with medicine should be ingnored. We shall presently refer to them and assess their values.
10. We have carefully examined the documents filed by the appellants to support their pleas, and contianed in the paper book from pages 161 to 221. The first two are receipts showing sales, presumably of the appellants' products. At page 167 is a prescription by a doctor issued to one Smt. Renu Chatterjee, 68 years old, prescribing what appears to be "A.D. Oints to be massage" (sic). There is no name of the medicine prescribed and interestingly the prescription bore a marginal notation "weakness lower limb" (sic).
11. At page 169 is a certificate from Dr. Mrs. Zutshi to the effect that AD Vitamin Oil is extensively used for general massage of new born or small infants as well as in cases of postpolio paralysis, with good results.
12. Another interesting document is at page 171 wherein, on what appears to be a prescription form used in a Government Hospital, printed in Hindi, a Paediatric, probably working in Kanpur Nagar Palika, wrote diagonally across the paper that quite often prescribe...(illegible) for its anti-rickets value...(illegible) medicine for massage. This certificate does not help the appellants as it is vague and has no nexus to the appellants' product.
13. The certificate given by Doctor Ena Poddar bears reproduction because it is an expression of hope rather than a testimonial:
"I am prescribing AD Massage Oil Forte for babies with the hope that it might prevent Vitamin A & D deficiency and infection of the skin; and also protect...(illegible)."
It also shows that the massage oil is used for care of the skin.
14. The certificate of Dr. Ms Arti Roy merely shows that AD Vitamin oil has been used in women with additional advantages. The certificates from pages 177 to 185 (5 in all) show that those Doctors prescribe the product. The first 3 are "To whom it may concern". The certificate at page 187 shows that the Doctor is a "regular prescriber of AD Vitamin Massage Oil for babies for natural gorwth and vitality".
15. On page 189 is a certificate from Shri J.C. Roy, presumably a doctor. In this he says that "I am satisfied with AD Oil [AD Vitamin Massage (sic) forte] of M/s. Sunny Industries (P) Ltd. Calcutta. I always advise this massage (sic) oil for my paediatric patients". This certificate expresses the Doctor's satisfaction and advises the use of the massage oil. We take note that in this certificate the learned Doctor has cut out the word which appears to be "prescribe" and inserted the word "advise" in its place. The next two certificates on pages 191 and 193 show that the doctors prescribe it for vigour of the babies and children and for growth and increase of vitality of the babies.
16. Doctor Santra's certificate on page 195 shows that the doctor generally prescribes the massage oil especially for toning up growing babies and in cases of cerebral palsy and mental retardation. Dr. Sarkar on page 197 prescribes it for a lot of indications like retarded growth, rickets, dry skin, icthroysis and postparalytic massage purposes. Dr. Tapas Kumar Konar says, in block letters, that he is prescribing the massage oil for growth and vigour of the babies and children. The next 3 certificates on pages 201,203 and 205 show the use of the oil in respect of children and babies. Dr. Agarwal at page 205 says, to whom it may concern, that he is using AD Vitamin oil in malnourished children and in cases of post polio-paralysis. The next two certificates from Dr. Ghosh and Pandey show that it is being prescribed for new born babies. Pages 211,213,215 and 217 are not certificates, but pages of the appellate order.
17. The last document (pages 219 to 221) filed by the appellant is the affidavit of Dr. Murari Mohan Mukherjee, a medical practitioner, age about 71 years and residing in Calcutta. According to the affidavit he has been prescribing "a very popular medicine/drug called Advitamin Massage Oil Forte produced/manufactured by a local pharmaceutical industry named and styled as M/s. Sunny Industries Private Ltd., Calcutta" (appellants). The learned Doctor deposes that the massage oil "reacts like magic in all cases suffering from vitamin A deficiencies particularly for the natural growth and vitality for the babies from which they largely suffer in our country...". The learned Doctor in paragraph 7 of the affidavit says that "AD Vitamin Massage Oil Forte is thus a "medicine" and the same is not an item to be included in either cosmetics or toilet preparations used for the care of the skin". The words in this paragraph obviously referred to the words in the Tariff Items 14E & 14F.
18.. We have referred extensively to the documents so that their value can be assessed. All the certificates show that the oil is used for massage. The virtues that the doctors variously found are the virtues of Vitamins A & D. But there is no doubt at all that the oil is for massage, as can be seen from the various documents referred in the preceding paragraphs. The Chemical Examiner came to a similar conclusion. The name of the product itself indicates so.
19. We note one more remarkable fact from these documents. It is that the absorption of A & D vitamins through skin has not been referred to. Even in the literature on Vitamins A & D, incorporated in the Product Manual, there is no reference to the absorption or administration of these two vitamins through the skin. The appellants did not, during the course of hearing, claim that AD Vitamins can be or should be absorbed through skin only. It is well known that even babies are given vitamins through oral administration there are vitamin drops for babies also. Therefore, it is clear from the documents that the Massage Oil's containing of the vitamins is not a circumstance which render it a medicine with possible skin care properties.
20. The appellants' claim that the date of expiry indicates that it is a drug is equally unacceptable because while there is a law that drugs should indicate date of expiry, there is no such law that whatever indicates a date of expiry is a drug.
21. The appellants' argument that the Department has not brought in any evidence whereas the appellants did was examined by us. The Department has the test report by the Chemical Examiner. At one stage of the hearing an impression was given to the Bench that this report was not made available to the appellants. However, on a perusal of the impugned order shows that it was notso and that the appellants had an opportunity to represent against what the report said.
22. The product is made of olive oil, and vitamins A & D and a few other things. The "Product Manual" filed by the appellants is very interesting. Before we proceed to look at some details of this, we must record that this is a document prepared by the appellants and stenciled on paper and not printed. We took at a close look at this document and found the headings "promotional strategy", "detailing objective", and "suggested detailing" are so interesting that we reproduce the same here:
PROMOTIONAL STRATEGY To make your presentation impressive a folder has been designed. Each one of you will receive 200 of these folders for a 2 months period. In addition a voluminous sample quantity have also been allocated for the regular promotion of AD Vitamin Massage Oil-forte.
Visits Obs. & Gyn. & Pediatrics Departments of your institutions for prescription of Ad Vitamin Massage Oil-Forte along with discharge certificates in OG and prescription from Pediatrics.
Select your consultants of OG & Ped. for the same purpose.
Select 10 top Nursing Homes/Maternity Clinics/Well Baby Clinic and make it your objective to see that each one of them give you just 1 prescription a day.
DETAILING OBJECTIVE Before we detail 'AD VITAMIN MASSAGE OIL-FORTE', let us keep in mind the purpose, we have to achieve. We must be certain of our aim so that we shoot to score perfectly. Thus a detailing story to be followed rigorously. Mentioned below are the basic points for the detailing story.
1. TO EMPHASIZE A. That Ad vitamin Massage Oil-Forte is not just another vitaminous formulation.
B. That Advitamin Massage Oil-Forte is a MATCHLESS COMBINATION OF ingrediants, which are TESTED, TRIED, PROVEN & ESSENTIAL for growth & vigour of infants & children.
C. Combined therapeutic effect which provides comprehensive approach for definite therapeutic success & especially in deficiency cases of Vitamin A & D, which are & thus stands for the FIRST CHOICE in day to day practice.
Ask for DEFINITE prescription from the doctor.
SUGGESTED DETAILING
Doctor, Regards from Sunny Industries and thanks for your everlast-
ing patronage of-our AD VITAMIN MASSAGE OIL-
FORTE.
Doctor, The only truely medicated brand of Massage oil available in
the market is our Advitamin Massage Oil-Forte.
Doctor, Advitamin Massage Oil is a traditional massage oil enriched
with essential Vitamins for use in all cases of Vitamin A & D
deficiency. Thus, the therapeutic advantages of Vitamin 'A',
Vitamin 'D' and Natural Vitamin 'E' are available through
massage for infants and children.
Doctor, The most important point of Advitamin Massage Oil-Forte is
that it is absolutely free from Mineral oil such as Liquid Paraf-
fin.
And that is why, Advitamin Massage Oil-Forte is the only
brand or its kind, which is therapeutically safe for infants and
children.
Doctor, The comprehensive formulation of Vitamin 'A', Vitamin 'D'
& Natural Vitamin 'E' in the oil vehicle, credits Advitamin
Massage Oil-Forte as the FIRST CHOICE for its purely
therapeutic value, which has not been reached by any of its
competitors.
Doctor, Moreover, Advitamin Massage OilForte is readily accept-
able to infants and children.
Finally, Doctor, Advitamin Massage Oil is backed by more than 36
years of best expertise in this field by the pioneer in mas-
sotherapy, Sunny Industries and your never-ending patronage
since then.
Doctor, Advitamin Massage Oil is truely a combination of medical ac-
ceptance since 36 years and the service towards medical
profession since 1949.
Administration: BABIES: Once a day after discharge from the Nursery, and
half hour before bath.
23. The detailing objective is that "we must be certain of our aim so that we shoot to score perfectly". The good effect for the children through the use of A & D Vitamins is to be emphasised and the objective of the Salesman is to see that this product should be prescribed "along with discharge certificate in OG and prescription from Pediatrics". In the suggested detailing the doctor has to be told that "only truely (sic) medicated brand of Massage Oil...". What is offered is "therapeutic advantage" of vitamins A, D and E to children through massage. The administration of the product is once a day to the baby after discharge from the nursery and half hour before bath. But no where in this part of the write-up the document mentions the disease listed on the carton or in the affidavit of the distinguished doctor.
24. We also note that the "Product Manual" is enriched by "Pharmacology and Therapeutics of Vitamin 'A', Role of Vitamin E and Vitamin D" and these are reproduced from a book "Pharmacological Basis of Therapeutics, 5th Edition by L.S. Goodman and A.G. Iman. The chapters and page numbers are given in the document. Herein of course various diseases are mentioned. But these are mentioned with reference to the Vitamins A & D and not with reference to the appellants' product. We, however, keep in mind that the product contains the vitamins.
25. We have referred to the document at some length to show that virtues attributed to the preparation are in fact the virtues of the vitamins. A thorough reading of this Product Manual indicates that the product is a preparation for the care of skin with some marginal advantages emanating from the vitamins contained in the same. The test report dated 27.4.85 of the Chemical Examiner filed by the appellants themselves (page 21 of the paper book) said that the product may be regarded as a formulation of care of skin. The Chemical Examiner also added that, however, "the opinion of the Drug's (sic) Controller may be sought, if necessary". The argument of the appellants that this report is not conclusive is based on the suggestion for consultation made by the Chemical Examiner and on the fact that no such consultation was done. The Assistant Collector did not lose sight of this objection raised by the appellants. He considered that the opinion of the Drug Controller need not be sought because a drug licence was already issued to the product which "more than reveals the opinion of the Drug Controller about the nature of the product and on the basis of their own law". We do not support this observation. The Assistant Collector, however, did take note and further recorded that the classification under Central Excise would be guided by their own law. We have already referred to the view of the Tribunal that for the purpose of classification under Central Excise Tariff, The definitions and conditions of the other legislations including those on drugs and the preparations are not relevant. Therefore, we do not accept that the Assistant and the Collector (Appeals) gave perverse findings.
26. The detailed scrutiny of the documents filed by the appellants, their own Product Manual, and of the nature of the product, therefore, leads us to the finding that reading the words of the Tariff strictly, the classification done by the impugned orders is correct and that these orders do not call for interference.
27. In view of this finding, the other arguments advanced by the appellants became irrelevant. We do not express any opinion on the classification of the product prior to 17-3-1985 as that is not an issue before us. To, conclude, we hold that the product in question is clearly a massage oil, intended for care of the skin, but possibly having some marginal medicinal properties. We, therefore, hold that the lower authorities committed no error in coming to the conclusion about the classification of the product. We uphold the impugned order and dismiss the appeal.