COMMISSIONER OF CENTRAL EXCISE, HYDERABADversusM/S. SARVOTHAM CARE LIMITED

                   .[2015] 10S.C.R.1


 COMMISSIONER OF CENTRAL EXCISE, HYDERABAD                   A
                            v.
           M/S. SARVOTHAM CARE LIMITED
             (Civil Appeal No.4480 OF 2005)
                                                             B
                      MAY 14, 2015
         [A. K. SIKRI AND R. F. NARIMAN, JJ.]
       Central Excise Tariff Act, 1985 - CHS 3003.10 and
CHS 3305. 99- Ketoconazole Shampoo and Nizral Shampoo c
- Classification of, under CHS 3003. 10 as 'pharmaceuticals
product' or under CHS 3305.99 as 'preparation for use on
hair' - Held: The_ essential properties of Ketoconazole
Shampoo and Nizral Shampoo are medicinal in nature -
Thus, the product is classifiable under CSH 3"003. 10 as D
pharmaceutical Product.

      Disposing of the appeals, the Court

      HELD: 1.1 The view taken by the tribunal that the
product 'Nizral Shampoo' is classifiable under CSH           E
3003.10 as pharmaceuticals Product and not CSH
3305.99 as preparation for use on hair, is concurred with.
[Para 13] [13-D]

      1.2 The product known as 'Nizral Shampoo' gives F
the nomenclature of the product as shampoo. To
determine as to whether the product in question is
primarily used as a shampoo or it is used as a
medicament, it is necessary to keep in mi mt the essential G
characteristics of the product. On examination from the
said perspective, it is concluded that the respondent is
correct in submitting that the essential properties of the
product are medicinal in nature. The manufacturer has
given clear warning and precautions for the use of this H
                            1
2        SUPREME COURT REPORTS               [2015] 10 S.C.R.


A product. It is mentioned as to how the treatment should
  be given to a person suffering from various kinds of
  dandruffs. Even the adverse.reactions of the treatment
  are mentioned by the manufacturers with specific advice
  that overdose of this shampoo is not expected. Thus,
B not only limited period use is stated, another important
  feature that appears in the literature supplied by the
  respondent is the information for the 'patient', describing
  the user of the product as a 'patient'. [Para 14, 15] [13-E-
  F, G; 14-A, G; 15-8-C, E-F; 16-C]
c
          1.3 The use is suggested only on the advice of a
  Doctor and there is a suggestion that a Doctor should
  be consulted for any further information: The respondent
  has also provided the literature/material showing that
D dandruff is a disorder which affects the hairy scalp. It is
  generally triggered by a single celled organism which is
  a kind of fungus, with scientific name 'Pityrosporum
  Ova le'. For treatment of this disease, Nizral Shampoo 2%
  (i.e. shampoo containing 2% ('Ketoconazole') is shown
E as 'a new medicine' use whereof cures dandruff. It is
  suggested that it should be used once a week and on
  other days, normal shampoos may be used which clearly
  shows that 'Nizral Shampoo' is to be used like a medicine,
F unlike other normal Shampoos. Further, in order to show
  that the product was used only as a medicament for
  curing dandruff and not for using the same for the
  purpose of cleaning hair, the assessee filed affidavits of
  various Doctors. [Para 16,17] [16-F-H; 17-A-B]

G·      1.4 The. tribunal held that there is enormous
  evidence produced by the appellants with regard to the
  use of Ketoconazole Shampoo for treatment of several
  disorders and diseases mentioned in the pamphlet and
H the same is sold by a chemist under a prescription issued
  by a Registered medical Practitioner or a Hospital or a
COMMISSIONER OF CENTRAL EXCISE, HYDERABAD v.                3
         M/S. SARVOTHAM CARE LTD.

Laboratory. Thus, the judgment of the tribunal does not A
call for any interference. As regards the other appeal, for
the reasons recorded in C.A. No. 4480 of 2005, the order
of the High Court as well as respondent No.2 demanding
differential duty is quashed. [Paras 19, 20, 22] [25-C-D,
E; 26-A-B]                                                  B

     B.PL. Pharmaceuticals Ltd. v. CCE, Vadodra
     1995 (3) SCR 1235: 1995 Supp. (3) sec 1 -
     relied on.
     Collector of Central Excise, Shillong v. Wood         c
     Crafts Products Ltd. 1995 (2) SCR 797: (1995) 3
     SCC 454; CCE, Hyderabad v. Bakelite Hy/am
     1997 (91) ELT 13; Amit Ayurvedic & Cosmetic
     Products v. Commissioner2004 (168) ELT 354;
                                                           D
     CCE Vapi v. Beta Cosmetics 2004 (173) ELT 255
     - referred to.
                   Case Law Reference
1995 (2) SCR 797                 Referred to.    Para 7    E
1997 (91) ELT 13                 Referred to.    Para 8
2004 (168) ELT 354               Referred to.    Para 9
2004 (173) ELT 255               Referred to.    Para 9
 1995 (3) SCR 1235               Relied on.      Para 18   F

      CIVILAPPELLATE JURISDICTION: Civil Appeal No.
4480 of2005

       From the Judgment and Order dated 18.01.2005 of the G
 Customs, Excise & Service TaxAppellate Tribunal, South Zonal
.Bench at Bangalore in Final Order No. 120 of 2005 in Appeal
 No. 555 of 2002.
                          WITH
                                                           H
Civil Appeal No. 5752 of 2015
4        . SUPREME COURT REPORTS               [2015] 10 S.C.R.


A        A. K. Panda, S.K. Bagaria, Rajiv Nanda, T.M. Singh, B.
    Krishna Prasad, Alok Yadav, Anuj B., Udit Jain, Ajit, Harish
    Pandey, Ranjan Narain for the appearing parties.
         The Judgment of the Court was delivered by
B        A. K. SIKRI, J.
         Civil Appeal No. 4480 of 2005

        1. Respondent herein is the manufacture of
  'Ketoconazole $hampoo' and 'Nizral Shampoo' which are sold
C in the bottles of 50 ml and 5 ml. Dispute is about the
  classification of the aforesaid product for the purposes of
  payment of central excise duty. The respondent had filed the
  declaration classifying the said product under CSH 3003.10
  of the Central Excise Tariff Act, 1985 on the ground that it is
D basically a medicine. However, as per the appellant/Revenue,
  the appropriate classification ofthis product is under CSH
  3305.99 as it perceives the p~oduct as 'preparation for
  use on on hair'.

E        2. Chapter 30 under which CSH 3003.10 falls deals
    with Pharmaceuticals products and the aforesaid entry thereof
    reads as under:
         "Patent or proprietary medicaments, other than those
         medicaments which are exclusively Ayurvedic, Unani,
F
         Siddha, Hom9eopathic or Bio-chemic."
         On the other hand, Chapter 33 deals with the products
         which fall under the nomenclature 'Essential Oils and
         Resinoids; Perfumery, Cosmetic or Toilet Preparation'.
G        The entry CSH 3305.99 thereof is as under:
         "Preparations for use on the hair
         -Perfumed hair oils
         -Other:
         -Hair fixer
H        -Other"
COMMISSIONER OF CENTRAL EXCISE, HYDERABAD v.                        5
   M/S. SARVOTHAM CARE LTD. [A. K. SIKRI, J.]

      3. It becomes clear from the reading of the aforesaid A
two entries that the respondent claims that the product in
question belongs to the specie of Pharmaceutical products
i.e. medicinal product and is covered by the expression
'patent or proprietary medicaments'. On the other hand, the
case of the Revenue is thc;it it is simply a shampoo which is B
to be used for cleaning hair and is nothing but a 'toilet
preparation', If the product is to be treated as Pharmaceutical
product covered by Entry 3003.1 b, excise duty pres~ribed
is 16%. The excise duty of goods covered by Entry 3305.99
is24%.                                                          C
      4. The Revenue issued show cause notice demanding
differential duty amounting to Rs.8, 12, 194. After the reply
was given by the respondent along with the material placed
by it before the Adjudicating Authority, the Adjudicating           0
Authority passed the Order-in-Original dated 18.11.1999
for the period December, 1998 to April, 1999 confirming
the differential duty of Rs.8, 12, 194 under Section 4A read
with Section 11A of the Central Excise Act, 1944. In appeal
preferred by the respondent, the aforesaid demand was               E
upheld by the Commissioner (Appeals) vide order in
original dated 13.02.2002, resulting in the dismissal of the
appeal of the respondent. Next level appeal filed by the
respondent before the CESTAT, Bangalore, however, yielded
results favourabls to t~e respondent, as this appeal is allowed     F
by the Tribunal vide final Orders dated 18.01.2005 with
consequential reliefs, if any. It was held that there is enormous
evidence to show that the product in question was used for
treatment of several disorders/diseases and it has also
been sold by Chemists under the prescription issued by              G
the Registered Medical Practitioners or the Hospitals.
Therefore, it is a medicinal product and not simply a shampoo
for use of hair. Naturally, the Revenue is not satisfied with
the aforesaid view of the Tribunal and, therefore, has preferred
the instant appeal in this Court.                                   H
6         SUPREME COURT REPORTS                   [2015) 10 S.C.R.


A          5. In his endeavour to demonstrate thatthe product 'Nizral
    Shampoo' was simply a toilet preparation to be used on the
    hair and could not be classified as a product belonging to
    the family of Pharmaceutical products, Mr. Panda, learned
    senior counsel appearing for the Revenue, drew our
B   attention to the orders passed by the Commissioner
    (Appeals) wherein findings in respect of this product are
    arrived at after discussing the ingredients/properties of the
    said product. On that basis, it was argued (as reasoned by
    the Commissioner (Appeals) as well) that there was no
C   dispute raised even by the assessee that the product 'Nizral'
    was basically a shampoo preparation. Even if it was
    coupled with therapeutic or prophylactic properties imparted
    to it with the presence of an anti-fungal agent known as
    'Ketoconazole', this would not change the basic character of
0
    the product viz. shampoo, which is meant for the use of cleaning
    hair. It was argued that such a classification was in conformity
    with · Chapter Note (6) to Chapter 33 which specified
    'shampoos' whether or not containing soap or organic surface
E   active agent. He further submitted that as per the packings,
    labels, leaflet literature, it was apparent that the product in
    question was held out commercially as having subsidiary
    curative or prophylactic value with main purpose and the main
    purpose of the produce was cleaning of scalp and hair.
F   Therefore, Chapter Note (2) of Chapter 33 also got attracted
    as per·which how the product is explained and marketed by
    the manufacturer itself becomes the determining factor. It
    was also submitted that HSC of Chapter 33 also includes not
    only shampoos containing soap and OSAC, but 'other
G   shampoos' as well which would imply that those products
    which are essentially shampoos would still be treated as
    shampoos even if the subsidiary benefits of using such a
    shampoo would be curative in nature. On that basis,
    submission was that presence of 'Ketoconazole' which was
H   hardly 2% WN in the said shampoo making it anti-fungal
COMMISSIONER OF CENTRAL EXCISE, HYDERABAD v.                   7
   MIS. SARVOTHAM CARE LTD. [A. K; SIKRI, J.]

agent, would not change the pre-dominant character of the A
product as shampoo and turn it i~to a patent or proprietary
medicament classifiable under Chapter sub-heading 3003.10.
The learned senior counsel, in this behalf, drew our attention
to the following justification given by the Commissioner
(Appeal) in his order reflecting that mere 2% of presence of B
'Ketoconazole' would not make any difference:
     "It is rather unassailable that active ingredient
     'Ketoconazole' is considered to prophylactic in nature
     for it to treat the cause of dandruff. Admitting that the C
     active ingredient 'Ketoconazole' is for prophylactic for
     dandruff, it is clear that the product 'Nizral Shampoo'
     shall stand excluded from the purview of Chapter 30, in
     view of Chapter Note 1(d) to Chapter. 30 which lays
     down that 'Preparation of Chapter 33 even if they D
     have therapeutic or prophylactic properties' are not
     covered. On careful reading of the above Chapter
     Notes, which are statutory in nature and binding, a
     clear finding emerges thatthe impugned goods have a
     specific entry under Chapter 33 in terms of Chapter (6) E
     to Chapter 33. The heading which provides the most
     specific description, shall be preferred to headings
     providing a more general description as per Rule 3(a). of
     Rules for the interpretations of the Schedule. Hence,
     by all the above statutory accounts the impugned goods F
     would not permit classification under Chapter 30 of
     Central Excise Tariff Act, 1985 as medicament, b1;1t
     only as a 'preparation for use on hair".
      6. It was further argued by Mr. Panda that merely
because the respondent was manufacturing this product on G
loan/licence basis from Johnson & Johnson Ltd., with the
express permission/ licence of Drug Controller of India and
Food & Drug Administration, would be of no avail to the
respondent. Likewise, even if it was sold by the Chemist would H
be of no significance as the claim of the respondent that it
8           SUPREME COURT REPORTS                 [2015] 10S.C.R.


A   could be sold only on specific prescription of the registered
    medical practitioner was clearly wrong as the respondent
    was widely publishing the product through advertisements
    clearly conveying to the users that the same was available
    with leading Chemists. Mr. Panda referred to those portions
B   of the order of the Commissioner (Appeals) where the
    aforesaid arguments of the respondent were discussed and
    discarded. He pleaded that what was to be seen was the
    pre- dominant use of the product in question; that is to say
    whether the product 'Nizral Shampoo' was primarily used as
C   a shampoo or as a medicinal product and argued that the
    domi_nant purpose of the product was to use it as a shampoo
    with ancillary/added advantage being prevention of scalp
    related infection i.e. dandruff.

D         7_ To buttress the aforesaid submissions, Mr. Panda took
    the aid of certain judgments of this Court. First judgment on
    which he relied is in the case of Collector of Central Excise,
    Shillong v: Wood Crafts Products Ltd.1, wherein this Court
    emphasized that the criteria/classification laid down by
E   Harmonised System Committee (HSC), established under
    Article 6 of the International Convention on Harmonised
    System, is to be acted upon while deciding the cases of
    classification inasmuch as it was an expert body which was
    assigned the main function of preparing explanatory notes,
F   classification opinions or other advice as guides to the
    interpretation of the Harmonised System and to secure
    uniformity in the interpretation and application of the
    Harmonised System. It was so held by this Court in the said
    judgment in the following manner:
G
            "11. The Statement of Objects and Reasons of the
            Central Excise Tariff Bill, 1985 whic_h led to the
            enactment of the Central Excise Tariff Act, 1985 is·
            indicative of the pattern of the structure of the Central
            excise tariff enacted therein. It reads as under:
H   1
        (1995) 3 sec 454
CQMMISSIONER OF CENTRAL EXCISE, HYDERABAD v.                          9
   M/S. SARVOTHAM CARE LTD. [A. K. SIKRI, J.)

         1. Central Excise duty is now levied at the rates specified A
         in the First Schedule to the Central Excises and Salt
         Act, 1944. The Central Excises and Salt Act, 1944
         originally provided for only 11 items. The number of Items
         has since increased to 137. The levy, which was
         selective in nature, to start with, acquired a               B
         comprehensive coverage in 1975, when the residuary
         Item 68 was introduced. Thus, barring a few Items like
         opium, alcohol, etc., all other manufactured goods now
         come under the scope of this levy.
                                                                      c
      2. The Technical Study Group on Central Excise Tariff,
      which was set up by the Government in 1984 to
      conduct a comprehensive inquiry into the structure of·
      the Central excise tariff has suggested the adoption
      of a detailed Central excise tariff based broadly on D
      the system of classification derived from the International
      Convention on the Harmonised Commodity Description
      and Coding System (Harmonised system) with such
      contractions or modifications thereto as are necessary
    ; to fall within the scope of the levy of Central excise duty. E
      The Group has also suggested that the new tariff should
      be provided for by a separate Act to be called the
      Central Excise Tariff Act.
                        .
         3. The tariff suggested by the Study Group is based on       F

..!' an      internationally accepted nomenclature, in the
· ~· formulation of which all considerations, technical and
 f,    legal, have been taken into account. It shou1d, therefore,
.·t
 _j ~:
       reduce disputes on account of tariff classification. G
  -~ · Besides, since the tariff would be on the lines of the
 .W Harmonised System, 1t would bring about considerable
       alignment between the customs and Central excise
       tariffs and thus facilitate charging of additional customs
       duty on imports equivalent to excise duty. Accordingly, H
10   SUPREME COURT REPORTS                   [2015] 10 S.C.R.


A    it is proposed to specify the Central excise tariff
     suggested by the Study Group by a separate tariff Act
     instead of the present system of the tariff being governed
     by the First Schedule to the Central Excises and Salt
     Act, 1944.
B
     4. The main features of the Bill are as follows:
     (i) The tariff included in the Schedule to the Bill has
     been made more detailed and comprehensive, thus
     obviating the need for having a residuary tariff Item.
c    Goods of the same class have been grouped together
     to enable parity in treatment.
          xx          xx      xx
     5. The Bill seeks to achieve the above objects.(emphasis
D    supplied)
     12. It is significant, as expressly stated, in the Statement
     of Objects and Reasons, that the Central excise tariffs
     are based on the HSN and the internationally accepted
     nomenclature was taken into account to "reduce
E    disputes on account of tariff classification". Accordingly,
     for resolving any dispute relating to tariff classification,
     a safe guide is the internationally accepted
     nomenclature emerging from the HSN. This being the
     expressly acknowledged basis of th~ structure of Central
F
     exci~e tariff in the Act and the tariff classification made
     therein, in case of any doubt the HSN is a safe guide
     for ascertaining the true meaning of any expression used
     in the Act. The ISi Glossary of Terms has a different
     purpose and, therefore, the specific purpose of tariff
G
     classification for which the internationally accepted
     nomenclature in HSN has been adopted, for enacting
     the Central Excise Tariff Act, 1985, must be preferred,
     in case of any difference between the meaning of the
H    expression given in the HSN and the meaning of that
     term given in the Glossary of Terms of the ISi."
COMMISSIONER OF CENTRAL EXCISE, HYDERABAD v.                       11
   M/S. SARVOTHAM CARE LTD. [A. K. SIKRI, J.]

     8. He also pointed out that the aforesaid principle           A
contained in Wood Crafts Products was reiterated in CCE,
Hyderabad v. Bakelite Hylam 2 as follows:

       "17. Hence for the interpretation of the New Tariff
       harmonised system of nomenclature and its explanatory B
       notes are relevant. In the case of Collector of Central
       Excise, Shillong v. Wood Crafts Products Ltd. 1995 (3)
       SCC 454, this Court, while considering the Central
       Excise Tariff Act of 1985, has held that looking to the
       Statement of Objects and Reasons the Central Excise C
       Tariff under the 1985 Act is based on the Harmonised
       System of Nomenclature (HSN) and the internationally
       accepted nomenclature has been adopted to reduce
       disputes on account of tariff classification.Accordingly,.
       for resolving any dispute relating to tariff classification, D
       the internationally accepted nomenclature emerging from
       the HSN is a safe guide, this being the expressly
       acknowledged basis of the structure of the Central
       Excise Tariff in the 1985 Act and the tariff classification
       made therein. In case of any doubt, the HSN is a safe E
       guide for ascertaining the true meaning of any expression
       used in the Act."

     9. Mr. Panda also referred to certain decisions of the
Tribunals wherein such shampoos with 2% anti-fungal agents         F
were still treated as shampoos and not a medicinal product.
Notably, among these decisions are (i) AmitAyurvedic &
Cosmetic Products v. Commissioner3 and (ii) CCE Vapi
v. Beta Cosmetics 4 •
                                                                   G
     10. Mr. Bagaria, learned senior counsel, appearing
for the respondent/assessee stoutly refuted the aforesaid
2
    1997 (91) ELT 13
3
    2004 (168) ELT 354
'   2004 (173) ELT 255                                             H
12        SUPREME COURT REPORTS                  [2015] 10 S.C.R.


A arguments of the Revenue laying great emphasis on the
  plea that the product in question was basically a medicine
  which was pre-dominant use. In order to demonstrate that
  the product 'Nizral Shampoo' could only be used as medicine
  and not like any other general/ordinary shampoo, he pointed
B out the following features which stood established on record
  in the form of plethora of materials/evidence placed before
  the authorities below:

         (i) The medicinal properties of the product were
C        adequately emphasized and the product was sold by the
         assessee on that basis in the market.

         (ii) There was a warning to the patients about the
         adverse reaction of the use of this shampoo, if used for
o        a long period.

         (iii) The product was essentially described as 'medicine'
         only and not as a shampoo meant for cleaning the hair.

         (iv) The literature along with the product sold specifically
E        stated the diseases which could be cured by the use of
         this shampoo.

         (v) Limited period use of the product was suggested,
         unlike a normal shampoo which could be used regularly
F        for infinite period.

        11. Mr. Bagaria argued that matter needed to be
  examined keeping in view the aforesaid essential attributes/
  characteristics of the product and in this context, the fact that
G the productwas held out by the respondent to the public at
  large as medicine; availability of the said product with the
  Chemists; sale of the product on the prescription of a Doctor;
  assume much relevancy in treating the product as
  medicament having therapeutic value and not as ordinary
H shampoo.
COMMISSIONER OF CENTRAL EXCISE, HYDERABAD v.                   13
   M/S. SARVOTHAM CARE LTD. [A. K. SIKRI, J.]

      12. Mr. Bagaria also pointed out that presence of 2% A
'Ketoconazole' in the said shampoo could not be treated as
something insignificant. On the contrary, it was the maximum
percentage required to treate the dandruff inasmuch as
presence of more 'Ketoconazole' could be harmful. He further
submitted that if it is less than that, then it may lose its B
therapeutic value and for this reason, in those shampoos where
the assessee was earlier putting 1% to 1 Yi% of
'Ketoconazole',    theassessee was itself treating the said
product as shampoo only and not as Pharmaceutical
product. He concluded his arguments by submitting that the C
judgment of this Court in B.P.L. Pharmaceuticals Ltd. v.
CCE, Vadodra 5 squarely covered the issue involved in this
case.

      13. We have considered the submissions of counsel D
for the parties and find ourselves in agreement with the view
taken by the Tribunal holding that the product in question
'Nizral Shampoo' is classifiable under CSH 3003.10 and
not CSH 3305.99.
                                                                E
      14. At the outset, we may mention that the product
known as 'Nizral Shampoo' gives the nomenclature of the·
product as shampoo. However, the respondent claim that it
is a patent or proprietary medicament as it's essential
characteristics is therapeutic in nature. It is the common case F
of the counsel for the parties the pre-dominant use of the
product in question is to be taken into consideration
while deciding the classification issue. Therefore, it.is to be
determined as to whether the product in question is primarily
used as a shampoo or it is used as a medicament. To find G
answer to this question, it is necessary to keep in mind the
essential characteristics of the product. When the matter is
examined from the aforesaid perspective we come to the
'   1995 Supp. (3) sec 1                                       H
14         SUPREME COURT REPORTS                 [2015) 10 S.C.R.


A    conclusion that the respondent is correct in submitting that
     the essential properties of the product are medicinal in
     nature. It is clear from the following description:

          "Pharmacodynamics
B         Ketoconazole, a synthetic imidazole dioxolane derivative
          ha a potent anti- fungal activity against dermatophytes,
          such as Trichophyton sp. Epidermophyton sp.
          Microsporum sp. and yeasts, such as candida sp.
          And Malassezia furfur (Pityrosporum ovale).
c         Ketoconazole shampoo rapidly relieves scaling and ·
          pruritus, which are usually associated with pityriasis
          versicolor seborrhoeic dermatitis and pityriasis capitis
          (dandruff).

D         Pharmacokinetics
          Percutaneous absorption of Ketoconazole shampoo is
          negligible since blood levels cannot be detected, even
          after chronic use. Systematic effects, therefore, are
          not expected.
E
          Indications
          Treatment and prophylaxis of infections in which the yeast
          pityrosporum is involved, such as Pityriasis versicolor
          (localized), seborrhoeic dermatitis and pityriasis capitis
F         (dandruff).
          Contra-indications
          Known hypersensitivity to Ketoconazole or the excipient."

G         The manufacturer has given clear warning and
     precautions for the use of this product which are follows:
          "Warnings and Precautions
          To prevent a rebound effect after stopping a prolonged
H         treatment with topical corticosteroid it is recommended
COMMISSIONER OF CENTRAL EXCISE, HYDERABAD v.                      15
   MIS. SARVOTHAM CARE LTD. [A. K. SIKRI, J.]

     to continue applying the topical corticosteroid together A
     with Nizral Shampoo 2% and to subsequently and
     gradually withdraw the steroid therapy over a period of
     2-3 weeks. Seborrhoeic dermatitis and dandruff are
     often associated with increased hair shedding, and
     this has also been reported although rarely, with the B
     use of Nizral Shampoo 2%."
      It is further mentioned as to how the treatment should
be given to a person suffering from various kinds of dandruffs:
     "Treatment:                                                  c
     -Pityriasis versicolor; once daily for maximum 5 days.
     -Seborrhoeic dermatitis and pityriasis capitis; twice
     weekly for 2 to 4 weeks.
                                                                  D
     Prophylaxis:
     -Pityriasis versicolor: once daily for a maximum 3 days
     during a single treatment course before the summer.
     -Seborrhoeic dermatitis and pityriasis capitis: once
     every one or two weeks."                                     E
      Even the adverse reaction of the treatment are
mentioned by the manufacturers with specific advice that
overdoses of this shampoo is not expected, as is clear from
the following:                                                    F
     "Adverse readions
     Topical treatment with Nizral Shampoo 2% is generally
     well tolerated. As with other Shampoos, a local burning
     sensation, itching, irritation and oily/dry hair may occur, G
     but are rare, during the period of use of Nizral Shampoo
     2%.
     In rare instances, mainly in patients with chemically
     damaged hair or grey hair, a discolouration of the hair H
     has been observed.
16         SUPREME COURT REPORTS                   [2015] 10 S.CaR..
                                                                  !'-



A         Overdosage
          Not expected as Nizral Shampoo 2% is intended for
          external use only. In the event of accident ingest~n.
          only supportive measures should be carried out. !n order
          to avoid aspiration, neither emesis nor gastric lav'!liiJe
B
          should be performed."

          15. Thus, not only limited period use is stated, anotfler
     important feature that appears in the literature supplied by lhe
     respondent is the information for the 'patient', describing the
C    user of the product as a 'patient'. It is as under:
          "Patient information
          Ketoconazole Shampoo 2%
          Nizral Shampoo 2%
D         You have been advised byyourdoctorto use this shampoo
          to treat dandruff. This leaflet gives you sor'ne information
          that you should keep in mine while using Nizral
          Shampoo. It also gives some background information
          on dandruff, which is important for you to deal with it.
E         Please read this leaflet carefully to get the best results
          from this treatment. Remember that it cannot answer
          all your questions, and that you should check with your
          doctor for any further information you may require."
F       16. The use is suggested only on the advice of a Doctor
  and there is a suggestion that Doctor should be consulted
  for any further information. The respondent has also provided
  the literature/material showing that dandruff is a disorder
  which affects the hairy scalp. It is generally triggered by a
G single celled organism which is kind of fungus, with
  scientific name 'Pityrosporum Ova le'. For treatment of 1Pis
  disease, Nizral Shampoo 2% (i.e. shampoo containing l%
  'Ketoconazole') is shown as 'a new medicine' use whereof
  cures clears a daridruff.. It is suggested that it should be U$ed
H once a week and on other days, normal shampoos may be
COMMISSIONER OF CENTRAL EXCISE, HYDERABAD v.                    17
   M/S. SARVOTHAM CARE LTD. [A. K. SIKRI, J.]

used which clearly shows that 'Nizral Shampoo' is to be         A
used like .a medicine, unlike other normal Shampoos.

      17. We also find that in order to show that the product
was used only as a medicament for curing dandruff and not
for using the same for the purpose of cleaning hair, the        B
assessee filed affidavits of various Doctors.

       18. Having regard to the aforesaid material on record,
we find that the case is directly covered by the ratio of this
Court's judgment in B.P.l. Pharmaceuticals Ltd. (supra). That c
was a case where the assessee was engaged ii;t...~
manufacture of Selenium Sulfide Lotion which contained
2.5% selenium sulfide WN. The assesseewas manufacturing
this product under a loan licence from Abbott Laboratories
in accordance with Abbott's specifications, raw materials, D
packing materials and quality control. It was sold under the
private name 'Selsun'. The assessee in that case claimed
that this product was used in the therapeutic quantity i.e.
2.5% WN which was the only active ingredient and other
ingredient merely served the purpose of a bare medium. It E
was also claimed that the product is manufactured under a
drug licence issued by the Food and DrugAdministration.
The assessee, thus, wanted the product to be classified
under heading 3003.19 as Pharmaceutical Product under
Chapter 30. However, the Revenue took the plea that it would F
fall under sub-heading 3305.90 i.e. under Chapter 33. Thus,
the respective contentions of the Department as well as the
assessee were almost on the same lines as in the present
case, namely, whether the said product was Pharmaceutical
product or it was a cosmetic/toiletry preparation. The only G
difference was of sub-headings under those Chapters. This
Court went into the essential characteristics of the product
and found it that dominant use of the product was medicinal,
as it was sold only on medical prescription as a medicine for H
18        SUPREME COURT REPORTS .              [2015) 10 S.C.R.:


A treatment of disease known as Seborrhoeic Dermatitis,
  commonly known as Dandruff. It was manufactured under a
  Drug Licence; the Food and Drug Administration had certified
  it as a Drug; and the Drug Controller had categorically opined
  that Selenium Sulfide present in Selsun was in a therapeutic
B concentration etc. The relevant passages from the said
  judgment throwing light on these aspects are reproduced
  below:
         "19. So far as medicinal properties of the product are
c        concerned it can be gathered from the technical and/or
         pharmaceutical references that Selenium Sulfide has
         anti-fungal and anti-seborrhoeic properties and is used
         in a detergent medium for the treatment of dandruff on
         the scalp which is milder form of Seborrhoeic Dermatitis
D        and linea Versicolour 2.5% of this compound is the
         therapeutic quantity.
         xx      xx     xx
         24. Elaborating the above submissions, the learned
E        counsel for the respondents invited our attention to
         chapter notes of Chapter 30 and Chapter 33 and also
         the rules of interpretation. Ac~ing to the learned
         counsel a careful reading of ch~pter notes of Chapter
         30 would show that preparations of Chapter 33 even if
F        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
G        will not fall under Chapter 30, according to him, if they
         are more specifically preparations falling under Chapter
         33 or Chapter 34. In other words, he wants to equate
         the product in question to 'shampoo' enumerated under
         Heading No. 33.05. He also invited our attention to the
H
COMMISSIONER OF CENTRAL EXCISE, HYDERABAD v.                    19
   . MIS: SARVOTHAM CARE LTD. [A. K. SIKRI, J.)

      fact that the appellants before the coming into force of A
      th_e new Tariff Act described the product as shampoo
      a·nd they have omitted the word 'shampoo' deliberately
      only to claim that the product would fall under Chapter
      30.
                                                                 B
      25: We do not think that we can accept all the contentions
    • of the learned counsel for the respondents except certain
 · ' obvious admitted positions. The submission that the
   .·.product in question must be equated to shampoo falling
      under Chapter 33 is not at all correct.                   c
    26. It is true thatthe learned counsel for the appellants
    have placed reliance on the definition of the words
    "cosmetic and drug" as defined in the Drugs and
    CosmeticsAct, 1940. On a perusal of the definitions, we
    can broadly distinguish cosmetic and drug as follows:     D
      "A 'cosmetic' means any article intended to be rubbed,
. · ·.poured, sprinkled or sprayed on, or introduced into, or
       otherwise applied to, the human body or any part thereof
       for cleansing, beautifying, promoting attractiveness, or E
       altering the appearance, and includes any article
     . intended for use as a component of cosmetic.•.
    and
    "A 'drug' includes all medicines for internal or external F
    use of human beings or animals and all substances
    intended to be used for or in the diagnosis, treatment,
    mitigatiori or prevention of any disease or disorder in
    human beings or animals, including preparations applied
    on· human body for the purpose of repelling insects."     G
   · 27. We cannot ignore the above broad classification while
  · ·considering the character of the product in question.
     Certainly, the product in question· is not intended for
     cleansing beautifying, promoting attractiveness or H
20   SUPREME COURT REPORTS                  [2015] 10 S.C.R.


A    altering appearance. On the other hand it is intended
     to cure certain diseases as mentioned supra.
     28. The fact that the appellants have previously described
     the product as "Selsun Shampoo" will not conclude the·
     controversy when the true nature of the product falls for
B
     determination. In fact, notwithstanding the fact that the
     [pie] appellants have described the product as Selsun
     Shampoo, the Central Board of Excise and Customs,
     as noticed earlier, has classified the same as patent
c    and proprietary medicine. The respondents have
     accepted the same. Therefore, there is no force in the
     submission of the learned counsel for the respondents
     that the product must be equated with shampoo.
     29. The contention based on chapter notes is also not
D    correct. One of the reasons given by the authorities
     below for holding that Selsun would fall under Chapter
     33 was that having regard to the composition, the
     product will come within the purview of Note 2 to Chapter
     33 of the Schedule to Central Excise Tariff Act, 1985
E
     is without substance. According to the authorities the
     product contains only subsidiary pharmaceutical value
     and, therefore, notwithstanding the product having a
     medicinal value will fall under Chapter 33. We have
F    already set out Note 2 to Chapter 33. In order to attract
     Note 2 to Chapter 33 the product must first be a cosmetic,
     that the product should be .suitable for use as goods
     under Headings Nos. 33.03 to 33.08 and they must be
     put in packing as labels, literature and other
G    indications showing that they are for use as cosmetic
     or toilet preparation. Contrary to the above in the
     present case none of the requirements are fulfilled.
     Therefore, Note 2 to Chapter 33 is not attracted.
     Again it is without substance the reason given by
H    the authorities that the product contains 2.5% w/v of
COMMISSIONER OF CENTRAL EXCISE, HYDERABAD v.                       21
   M/S. SARVOTHAM CARE LTD. [A. K. SIKRI, J.]

   Selenium Sulfide which is only of a subsidiary curative A
   or prophylactic value. The position is that therapeutic
   quantity permitted as per technical references including
   US Pharmacopoeia is 2.5%. Anything in excess is likely
   to harm or result in adverse effect. Once the therapeutic
   quantity of the ingredient used, is accepted, thereafter B
   it is not possible to hold that the constituent is
   subsidiary. The important factor is that this constituent
   (Selenium Sulfide) is the main ingredient and is the only
   active ingredient.
                                                                   c
   xx      xx      xx
   33. The labels which give the warning, precaution and
   directions for use do make a difference from that of
   ordinary shampoo which will not contain such warning
   or precautions for use. Further no individual would be          D
   prepared to say in a social gathering that he or she is
   using Selsun to get rid of dandruff or other similar
   diseases whereas nobody would hesitate to state in a
   similar gathering that he or she is using a particular          E
   brand of shampoo for beautifying his or her [pic]hair.
   Thus there are lot of favourable materials to treat the
   product in question as a medicine rather than cosmetic.
   In this connection the reliance placed by the learned
   counsel for the appellants on a decision of this Court          F
   reported in case Indian Metals & Ferro Alloys Ltd. v.
   CCE can be usefully referred to. In that case this Court
   held: "It (the Tribunal) seems to say that, even if the goods
   manufactured by the Appellant had been rightly classified
   under Item 26-AA before 1-3-1975, the introduction of           G
   Item 68 makes a difference to the interpretation of Item
   26-AA. This is not correct. Item 68 was only intended as
   a residuary item. It covers goods not expressly
   mentioned in any of the earlier items. If, as assumed
   by the Tribunal, the poles manufactured were rightly            H
22    SUPREME COURT REPORTS                  [2015) 10 S.C.R.


A    classified under Item 26-AA, the question of revising the
     classification cannot arise merely because Item 68 is
     introduced to bring into the tax net items not covered
     by the various items set out in the Schedule. ·it does
     not and cannot affect the interpretation of the items
B    enumerated in the Schedule. This logic of the Tribunal
     is, therefore, clearly wrong."               · ·
     34. This judgment supports the case of the appellant when
     it is contended that there is no good reason to change
c    the classification merely on the ground of coming into
     force of the new Central Excise Tariff Act, 1985without
     showing more that the product has changed its character.
     35. The learned counsel also placed reliance on· a
     number of judgments to support his argument that in
D    common and commercial parlance the product is known
     as medicine rather than cosmetic. As pointed out'
     already and in support of that submission, affidavits and
     letters from chemists, doctors and customers are filed
     to show that the product is sold under prescription only·.
E
     in chemists' shops unlike shampoos sold in any
     shop including provision shops. This conclusion, namely,
     that the product is understood in the common and
     commercial parlance as a patent and proprietary
F    medicine was also found by the Central Board of Exdse
     and Customs as early as in 1981 and accepted byth8.
     Excise authorities and in the absence of any          new .
     material on the side of the respondents there is no
     difficulty in accepting this contention without referring to
G    decision cited by the counsel for the appellants.
     36. Yet another reason given by the CEGAT for not
     accepting the case of the appellants was that the
     product is sold with a pleasant odour and, therefore,
     it must be treated as a cosmetic. Selenium Sulfide
H
COMMISSIONER OF CENTRAL EXCISE, HYDERABAD v.                      23
   M/S. SARVOTHAM CARE LTD. [AK. SIKRI, J.]

     has an unpleasant odour and to get rid of it insignificant A
     amount of perfume is used and make it acceptable to
     the consumers. A medicine, for example, sugar-coated
     pill will nevertheless be medicine notwithstanding the
     sugar- coating. Likewise the addition of insignificant
     quantity of perfume to suppress the smell will not take B
     away the character of the product as a drug or medicine.
     Again one other reason given by the Tribunal is regarding
     the packing. The Tribunal has held that the product is
     cosmetic because it is packed in an attractive plastic
     bottle. This by itself will not change the character, as C
     cosmetic is put up for sale with some indication on the
     bottle or label that it is to be used as cosmetic or it is
     held out to be used as a cosmetic. As already noted
     the. label here gives warnings. The fact that it is D
     packed in a plastic bottle is .a wholly irrelevantcriteria."
      19. The aforesaid judgment not only provides a complete
answer to the issue at hand, it also suitably answers the
various arguments of the Revenue and the manner in which
those arguments were rebutted by the Court in the said case.      E
The Tribunal has summed up the entire legal proposition in
para 5 of its judgment with which we entirely agree. This para
reads as under:

     "5. We have carefully considered the submissions F
     made by the learned Counsel and the learned DR. We
     find from the extracted literature that the item comprises
     of 20 mg Ketoconazole in one ml and the pamphlet
     clearly indicates that it is for the use only of a Registered
     Medical. Practitioner or a Hospital or a Laboratory. The G
     pamphlet claims that the item is used for treatment
     and prophlaxis of infections in which the yeast
     pityrosporum is involved such as pityriasis versicolor
     (localized),    seborrhoeic dermatitis and pityriasis
                                                                   H
24   ~PREME COURT REPORTS                  [2015] 10 S.C.R.


A    cap1tis(dandruff). The procedure for treatment and the
     adverse reactions on such treatment due to overdose is
     also stated in the pamphlet. The Apex court, in the case
     of Muller & Phipps (India) Ltd. v. CCE, 2004 (167) ELT
     34 7 (SC) has clearly held that once the item has been
B    manufactured under a Drug licence and the Department
     has treated the item as a Drug, it would not cease to be
     one notwithstanding the factthatnewTariffActhascome
     into force. The Apex Court again held in the case of
     CCE v. Pandit D.P. Sharma, 2003 (154) ELT 324 (SC)
c    that once in the cdmmon parlance the item is treated as
     a medicament and manufactured under drug licence
     and the evidence is produced by the party with regard
     to the item being a medicament, then it should be treated
     as such and should not treat 'Himtaj Oil' as 'perfumed
D
     hair oil'. The Apex Court's ruling in the case of B.P.L.
     Pharmaceuticals Ltd. v. CCE, 1995 (77) ELT 485 has
     held that 'Selsun' and anti-dandruff preparation
     containing 2.5% selenium sulphide which is full
E    therapeutic limit permissible as per pharmacopoeia
     and manufactured under Drug Licence and certified
     by Food and Drugs Administration as a medicine,
     and the same is put up as a medicine to be used under
     Doctor's advise in accompanying literature and sold
F    through chemist shops under doctor's prescription
     should be considered as a medicament under Sub-
     Heading 3003.19 of CE Act and not as a cosmetics. In
     the present case also, same evidence is relied which
     are identical to the facts of B.P.L. Pharmaceuticals Ltd.
G    The item also acts as an anti-dandruff preparation with
     2% Ketoconazole. The same is sold on doctor's
     prescription and by the chemists and understood as a
     medicine in common parlance as per he enormous
     literature and affidavit produced. Therefore, there was
H    no necessity for the Commissioner to have
COMMISSIONER OF CENTRAL EXCISE, HYDERABAD v.                     25
   M/S. SARVOTHAM CARE LTD. [A. K. SIKRI, J.]

     distinguished this Apex Courtjudgmentwhich applies          A
     on all fours to the facts of the present case. We also
     find that the judgment of the Apex Court rendered in the
     case of CCE v. Vicco Laboratories, 2005 (179) ELT 17
     (SC) also applies to the facts of the case. In this case,
     the Apex Court has clearly noted that the common            B
     parlance test should be applied for determining whether
     a product is classificable as a pharmaceutical product
     under Chapter 30 of CET Act or as a cosmetics under
     Chapter 33 ibid as laid down by the Supreme Court in
     the case of Shree Baidyanath Ayurved Bhavan ltd., 1996      C
     (83) ELT 492 (SC). As there is enormous evidence
     produced by the appellants with regard to the use of
     Ketoconazole Shampoo for treatment of several
     disorders and diseases mentioned in the pamphlet and        D
     the same is sold by a chemist under a prescription
     issued by a Registered medical Practitioner or a Hospital
     or a Laboratory, therefore, the appeal is required to
     be allowed with consequential relief, if any."

     20. We, thus, are of the view that the judgment of the      E
Tribunal does not call for any interference and the appeal is
dismissed with cost.

Civil Appeal No. 5752 of2015
(arising out of SLP (C) No. 1531 of2015)                         F

     21. Leave granted.

      22. This appeal is preferred by the assessee and the
issue arises is the same as discussed in Civil Appeal No. G
4480 of 2005. Here, respondent No.2 has passed an order
directing the appellant to pay differential duty, treating the
product as Shampoo and not Medicaments. Challenging
that order, appellant had filed the writ petttion, which has been
dismissed by the High Court vide impugned judgment primarily H
26          SUPREME COURT REPORTS            [2015] 10 S.C.R.


A on the ground the matter had left to the concerned authority
  to decide the classification on the basis of technical
  evaluation and it could not be decided by the High Court.
  For the reasons recorded in Civil Appeal No. 4480 of 2005,
  this appeal stands allowed hereby quashing the order of the
B High Court as well as respondent No.2 dated 28.12.2001
  demanding.differential duty.

     Nldhi Jain                               Appeals disposed of.