IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS.783-803 OF 2004

COMMNR. OF CENTRAL EXCISE ... APPELLANT

VERSUS

M/S.WOCKHARDT LIFE SCIENCES LTD...RESPONDENT

O R D E R

1. These appeals are directed against the judgment and  

order  passed  by  the  Customs,  Excise  and  Gold  (Control)  

Appellate Tribunal, West Zonal Bench at Mumbai in Appeal  

Nos.E-1252-1271/02-MUM  and  E/3630-01-MUM  dated  

18.6.2003.   By  the  impugned  judgment  and  order,  the  

Tribunal has reversed the findings and conclusions reached  

both  by  the  Adjudicating  Authority  and  the  appellate  

authority.

2. The primary issue that  falls for  our consideration in  

these appeals is  the  classification  of  two  products  viz.  

‘Povidone  Iodine  Cleansing  Solution  USP  and  Wokadine  

Surgical Scrub for the purpose of levy of duty  under  the  

provisions of Central Excise Tariff Act, 1985 (‘The Tariff Act’  

for short).

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3. The assessee is the manufacturer of  Povidone Iodine  

Cleansing  Solution  USP  and  Wokadine  Surgical  Scrub.  

These two products have identical composition.  The only  

difference between these two products is that Wokadine is a  

branded  product  whereas  Povidone  Iodine  Cleansing  

Solution is a generic name.  The assessees' claim before the  

authorities and also before the Tribunal is that the aforesaid  

products  are  medicaments  and,  therefore,  require  to  be  

classified under Chapter sub-heading 3003 of the Tariff Act,  

1985, whereas the revenue's stand was that the products in  

question  are  detergents  and,  therefore,  to  be  classified  

under chapter sub-heading 3402.90.

4. The Adjudicating Authority had issued nearly 20 show  

cause notices to  the  assessee for  the  period commencing  

from  September,  1992  to  December,  1999.  In  the  show  

cause  notices,  it  is  alleged  that  the  assessee  has  mis-

classified  the  product  under  chapter  sub-heading  

3003.10/20, instead of chapter sub-heading 3402.90 of the  

Act  with  an intent  to  evade  the  payment  of  the  duty  by  

suppressing vital facts regarding usage of the product and  

the  same amounts  to  contravention  of  Rule  173B of  the  

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Central Excise Rules, 1944 (for short “Rules”).   It is further  

stated  in  the  show  cause  notices  that  the  products  in  

question  are  mainly  used  for  the  purpose  of  detergents  

rather than medicaments.   Accordingly,  the assessee was  

directed to show cause why the products in question should  

not be classified under chapter sub-heading 3402.90 and  

why the duty should not be demanded under Rule 9(2) read  

with proviso to section 11A (1) of  the Central Excise Act,  

1944  (for  Short  “the  Act  of  1944”)  along  with  interest  

thereon under Section 11AB of the Act of 1944 and penalty  

under Section 11 AC of the Act of 1944 read with Rule 173  

Q of the Rules for short payment of excise duty.

5. After receipt of the show cause notices, the assessee  

had filed its detailed reply, inter alia,  bringing to the notice  

of the adjudicating authority the contents of the products in  

question, their labeling on the commodity and the user to  

which the products are put.  The assessee had also relied on  

the  various  shades  of  meaning  that  is  attributed  to  the  

medicaments, in particular the expressions ‘therapeutic and  

prophylactic’ and had contended that those medicines are  

used for external treatment of a human-being.  The assessee  

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had also placed reliance on the Indian Pharmacopoeia, the  

United  States  Pharmacopoeia  and  the  International  

Pharmacopoeia.  The assessee had also contended that the  

‘Neutronix  and  Superamide’  are  other  two  products  with  

which Povidone Iodine is mixed to contend that they are in  

the  nature  of  vehiculars  for  the  spreading  of  the  

medicament.

6. After  receipt  of  the  reply  so  filed,  the  adjudicating  

authority  has  proceeded  to  conclude,  that,  since  the  

contents of Neutronix and Superamide are more than the  

medicament,  namely;   Povidone  Iodine,  the  product  in  

question requires to be classified as detergent and thereby,  

would fall  under chapter sub-heading 3402.90 and it has  

also observed in its order that the product in question is  

primarily  used  as  a  cleansing  solution  and,  therefore,  

cannot  fall  in  the  description  of  the  medicament.  

Accordingly, had confirmed the show cause notices issued  

earlier and, thereby, had directed the assessee to pay the  

difference in duty and also the penalty.

7. Aggrieved  by  the  aforesaid  order  passed  by  the  

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adjudicating authority, the assessee had carried the matter  

in appeal before the First Appellate Authority, who by his  

order dated 29.11.2001 had sustained the order passed by  

the  adjudicating  authority.   According  to  the  appellate  

authority, since the product in question is mainly used as a  

cleansing solution, the proper classification would be as a  

detergent and would fall under tariff entry 3402.90.

8. The assessee, being aggrieved by the order so passed,  

had carried the matter in appeal before the Tribunal.  Even  

before  the  Tribunal,  the  assessee  had  produced  copious  

material  in  the  form  of  product  literature  and  also  the  

dictionary  meaning of  the  expression “medicaments”.  The  

Tribunal,  while  appreciating  the  rival  contentions  of  the  

revenue and the assessee, has considered the wide range of  

literature on the above products, their composition and user  

and  accordingly  has  concluded  that  the  ‘Povidone  Iodine  

Cleansing  Solution  USP’  is  used  as  an  antiseptic  and  

disinfectant.  The  Tribunal  has  further  observed  that  the  

main  contention  of  the  revenue  is  that  the  addition  of  

surface active agent and other substances would result in a  

product in which ‘Prophylactic’ qualities of Povidone Iodine  

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would become subsidiary to its primary use as a washing  

solution.  The  Tribunal,  while  rejecting  the  revenue’s  

contentions and accepting the assesse’s stand, has observed  

that  the  presence  of  the  surface  active  agent  and  other  

substances is only to ensure appropriate dispersible to the  

product and not to render its use as a washing or cleansing  

preparation.  The  Tribunal,  while  relying  on  the  Affidavit  

dated 9.8.2002 filed by the Senior President (Marketing) of  

the assessee in order to show sale pattern of the goods, has  

observed that the product is not used as a general cleansing  

solution  similar  to  medicated  soaps  used  by  ordinary  

persons,  but  it  is  only  used  in  places  where  practice  of  

surgery and medicine is being carried out. The Tribunal has  

further observed that  the  products are packed in opaque  

brown thick plastic bottles with plain labels, unlike, soaps  

and other products which are packed in bright  attractive  

colors  as  used  by  ordinary  household  consumers.  It  has  

also observed that the labeling of the product shows that it  

is  intended  for  preoperative  use  by  the  surgeon  and  his  

team or on the patient. The Tribunal after referring to the  

Explanatory Notes under heading 30.04 of the Harmonized  

System  of  Nomenclature  relating  to  medicament,  which  

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covers Povidone Iodine as Polyvinyl Povidone Iodine and, the  

test  laid  down  for  classification  of  the  product  as  

medicament: has concluded that the product is purchased  

primarily  for  its  therapeutic  or  prophylactic  qualities  and  

not for its qualities as organic surface active preparation. In  

conclusion,  the  Tribunal,  while  allowing  the  appeal,  has  

held that the product in question is, primarily intended and  

also actually, used for its antiseptic properties, therefore, it  

is  classifiable  as  medicament  under  Chapter  30  of  the  

Schedule to the Act.  It is the correctness or otherwise of the  

findings  and  conclusions  reached  by  the  Tribunal  is  the  

subject matter of these appeals before us.    

9. We have heard Shri R.P. Bhatt, learned senior counsel  

appearing for the Revenue and Shri Ajay Aggarwal, learned  

counsel  appearing  for  the  Assessee.   Both  the  learned  

counsel have dealt with the matter in detail and have also  

relied upon some of the decisions of this Court to buttress  

their submissions.

10.  Shri  R.P.  Bhatt,  learned senior  counsel  for  revenue  

would submit that the product in dispute, namely; Povidone  

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Iodine  Solution  or  its  patent  and  proprietary  equivalent  

Wokadine surgical scrub, contains only 80 kg of Povidone  

Iodine  and  250  kg  of  Neutronix  in  1000  litres  of  

demineralised water and is essentially used as a medicated  

detergent.  He  would  contend  that  the  said  product  

predominantly  contain  surface  active  agents  which  are  

primarily used as a medicated cleaning agent for removal of  

dirt,  bacteria,  fungi  etc.  In  this  regard,  he  would further  

submit  that  the  said  product  is  admittedly  used  as  an  

antiseptic agent for washing hands of surgeons and is also  

applied  on  the  skin  of  the  patients  before  operation.  He  

would  further  contend  that  the  said  product  is  not  a  

medicament in terms of Chapter Note 2(i) of the Tariff Act as  

it  neither  has  “Prophylactic”  nor  “Therapeutic”  usage.  He  

would contend that in order to qualify as a medicament, the  

goods must be capable of curing or preventing some disease  

or ailment. Therefore the said products cannot be classified  

under Chapter Heading 3003 of Tariff Act.  

11. Shri Bhatt would further submit that Chapter Note 1(e)  

of  Chapter 30 clearly  excludes soap or  other  products of  

Chapter  34,  containing  added  medicament,  from  their  

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classification  under  Chapter  30.  He  would,  therefore,  

submit that the product is more appropriately classifiable  

under  the  Chapter  3402  as  an  organic  surface  active  

agent/preparation, or cleansing preparation, irrespective of  

the fact that it contains certain percentage of medicaments.  

In other words, he would contend that even if said products  

have  added  prophylactic  effectiveness,  they  would  be  

considered as cleansing agent and not medicaments for the  

purpose  of  classification  in  view  of  their  primary  and  

essential use which is cleansing and their prophylactic or  

therapeutic  quality,  by  virtue  of  added  medicament,  is  

secondary  in  nature.  He  has  placed  reliance  on  some  

decisions of this Court in support of his submission that it  

is the primary functional properties and composition of the  

goods that would decide its classification under particular  

Chapter. We will refer to the decisions on which reliance is  

placed by learned counsel at an appropriate time.

12. Shri Ajay Aggarwal, learned counsel for the assessee,  

has  meticulously  taken  us  through  the  judgment  of  the  

Tribunal  and supported its  reasoning.  He contended that  

the revenue in their show cause notices has admitted that  

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the products in issue are antiseptic. He further submits that  

the  products are  medicament in  which some carriers  are  

added and therefore, it will fall under Chapter Sub-heading  

3003 and not under Chapter 34.   

13. In order to resolve the controversy that is raised before  

us, we need to notice first the entries which the revenue and  

the assessee relies upon to drive home their point of view.  

The  Tariff  Items  under  Chapter  sub-heading  3003  and  

chapter  sub-heading  3402.90,  at  the  relevant  time,  are  

extracted. The same reads as under:

Heading  No.

Sub- heading  

No.

Description of goods Rate of  duty

30.03 Medicaments  (including  veterinary medicaments)

3003.10

Patent  or  proprietary  medicaments,  other  than  those  medicaments  which  are  exclusively  Ayurvedic,  Unani,  Siddha,  Homeopathic  or  Bio- chemic.

15%

3003.20

Medicaments  (other  than  patent  or  proprietary)  other  than  those  which  exclusively  used  in  Ayurvedic,  Unani,  Siddha,  Homeopathic  or  Bio-chemic  

8%

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systems  Medicaments,  including  those  in  Ayurvedic,  Unani,  Siddha,  Homeopathic  or  Bio- chemic systems.

34.02

Organic  Surface  active  agents  (other  than  soap):  surface-active  preparations,  washing  preparations  (including  auxiliary  washing  preparations  and  cleaning preparations, whether or  not containing soap.

3402.90 Other 18%

14. The chapter note 2 (i) of Chapter 30 to the schedule of  

Tariff Act pertaining to pharmaceutical products, define the  

meaning of the expression “medicament”.  It is as under :

Medicament”  means  goods  (other  than  foods  or  

beverages such as dietetic, diabetic or fortified foods, tonic  

beverages)  not  falling  within  heading  No.  30.02  or  30.04  

which are either:

(a)  products  comprising  two  or  more  constituents  

which  have  been  mixed  or  compounded  together  for  

therapeutic or prophylactic uses; or

(b)unmixed products suitable for such uses put up in  

measured doses or in packings for retail sale or for use in  

hospitals.

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15. Chapter  note  makes  it  clear  that  the  products,  

comprising  two  or  more  constituents  which  have  been  

compounded together either for therapeutic or prophylactic  

uses,  would  fall  within  the  meaning  of  the  expression  

Medicaments. In the present case, it is not in dispute that  

along with the  medicament,  namely;  Povidone Iodine,  the  

assessee while manufacturing the products in question uses  

three  other  constituents,  namely;  Neutronix,  Superamide  

and   Sodium Hydroxide as a preservative.   

16. It is also relevant to explore the meaning of the word  

‘prophylactic’ in medical parlance as well, in order to resolve  

the controversy before us.  The word ‘prophylactic’  derives  

from  Greek  word ‘prophylaktikos’  which  means  "to  take  

precautions  against"  or  "to  keep guard before”. Dorland's  

Medical  Dictionary  1364  (28th  ed.  1994)  defines  

“prophylactic” as “an agent that tends to ward off disease”.  

Merriam-Webster's  Medical  Desk  Dictionary  579  (1993)  

defines  it  as  “guarding  from or  preventing  the  spread  or  

occurrence of disease or infection”; Mosby's Dictionary 1284  

(4th  ed.  1994)  defines  it  as  a  biologic,  chemical,  or  

mechanical agent that prevents the spread of disease.  

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17. It is relevant to notice the composition, label and usage  

of the products whose classification is in dispute before us.  

The label of the products would stipulate its formula and  

describe its usage. However, the labels of both the products  

are identical. Therefore, we would consider ‘Povidone Iodine  

Cleansing  Solution  USP’  which is  presented in a  maroon  

coloured bottle of 500ml capacity on which a label has been  

pasted which read as thus:

Povidone Iodine Cleansing Solution USP

“Povidone Iodine Cleansing Solution USP to be used as a  surgical scrub.

Broad  Spectrum  topical  microbicidal  effective  against  bacteria, fungi, protozoa, yeasts and viruses.

Formula: Povidone-Iodine I.P. 7.5. w/v (Available Iodine 0.75% w/v) Phosphate Free”

Store in a cool place For External use only  

Usage:

1. For preoperative cleansing and degerming of surgeon’s  

and operating team’s hands

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a) Wet hands and forearms with water. Pour about 5  

ml  of  surgical  scrub  with  the  help  of  the  ‘elbow   

dispenser’ on the palm and spread over both hands   

and forearms scrubbing thoroughly over all areas for   

about 5 minutes. Add little water to develop copious   

suds. Rinse thoroughly under running water.

b) Complete  the  cleansing  with  another  5  ml  of   

surgical scrub in the same way.

2. For preoperative uses on Patients.

  After the skin area is shaved, wet it with water. Apply  

Povidone Iodine surgical scrub on the skin and scrub,  

thoroughly for about 5 minutes. Rinse off  by aid of   

sterile gauze saturated with water. Now paint the skin  

with Povidone-Iodine solution and allow to dry before  

incision.”

18. The  composition  of  the  product  per  1000  litres  has  

been produced below:

S.No.    Ingredients      Quantity 1. Povidone Iodine IP 80.21 Kgs.

2. Neutronix  S-60(Anionic  Detergent)  (active  content  58%)

250 Kgs.

3. Superamide  L-9  (foaming  agent)

12 Kgs.

4. Sodium  Hydroxide  (Preservative)

1.46 Kgs

5. Demineralised water Balance  quantity

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19. The said product contains– Povidone Iodine: The 7.5%  

w/v  of  Povidone  Iodine  provides  0.75%  w/v  of  available  

iodine  which  is  functions  as  disinfectant.  Neutronix:  The  

25% of  composition  of  the  product  is  Neutronix  which is  

Anionics and used as detergents, wetting, emulsifying and  

dispersing agents. Further the content of Superamide is just  

1.2%  in  the  said  product  which  serves  as  an  excellent  

booster and stabilizer, viscosity builder and detergent with  

wetting and soil suspending properties.  

20. The assessee has relied on various pharmacopeias to  

throw light on the essential composition of Povidone Iodine  

Solution including surface active agents and their respective  

functions. It is relevant to refer to these pharmacopeias in  

order  to  appreciate  and  analyze  the  functions  of  various  

ingredients contained in a Povidone Iodine Solution.   

21. According to the US Pharmacopeia, Povidone Iodine is  

a complex of Iodine with Povidone. It contains not less than  

9.0%  and  not  more  than  12.0%  of  available  iodine  

calculated  on  the  dried  basis.  Povidone  Iodine  cleansing  

solution is a solution of Povidone Iodine with one or more  

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suitable surface active agents. It contains not less than 85%  

and  not  more  than  120% of  the  labelled  amount  of  the  

iodine. It may contain a small amount of alcohol. The only  

difference between the two is  that  while the first  product  

has a suitable surface active agent, the second product does  

not have surface active agent.  

22. The Japan Pharmaceutical Reference notes that Iodine  

Surgical Scrub is a disinfectant containing povidone-iodine  

with  a  foaming  agent  and  a  surfactant  –  which  exerts  

disinfecting  action  by  releasing  iodine,  which  shows  

disinfecting effect against broad range of  micro-organisms  

including bacteria, fungi and viruses.  

23. Goodman & Gilman’s book titled ‘The Pharmacological  

Basis of Therapeutics’ reads:

“The most widely used iodophor is povidone iodine, in which   

the  carrier  molecule  is  povidone……  A  standard  surgical   

scrub with a 10% solution (1% available iodine) will decrease   

the usual  cutaneous bacterial  population by about 85%......   

When  the  hands  are  contaminated  by  gram-negative   

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bacteria,   povidone-iodine  is  more  effective  scrubbing   

disinfectant.”

24. Remington’s  Pharmaceutical  Sciences records  that  

Povidone  Iodine  USP  is  a  virtually  non-stinging,  film  

forming, water soluble iodine compound used as a topical  

antiseptic  that  essentially  retains  the  non-selective  broad  

range  microbicidal  activity  of  iodine.  Povidone  Iodine  will  

rapidly kill bacteria (both Gram positive and Gram negative  

as  well  as  antibiotic  resistant  organisms),  fungi,  viruses,  

protozoa and yeasts, to cause a substantial reduction of the  

microorganisms on  the  skin.  Preoperatively,  or  as  a  post  

surgical  antiseptic  scrub,  its  microbicidal  action  is  fast  

acting  and is  effective  for  a period of  6  to  8 hours.  It  is  

further stated that povidone-iodine antiseptic preparations  

are clinically indicated for the prevention and treatment of  

surface  infections  as well  as  to  degerm the  skin prior  to  

injection  and  hyperalimentation  procedures,  for  pre  and  

post operative scrubbing and washing of hospital operating  

room personnel  and for  pre-operative  skin preparation of  

the patient of surgery.  

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25. In Martindale’s  The Extra Pharmacopoeia,  states that  

Povidone-Iodine  is  an  iodophore  which  is  used  as  a  

disinfectant  and  antiseptic  mainly  for  the  treatment  of  

contaminated wounds and pre-operative preparation of the  

skin and mucous membranes. It is stated that solutions of  

Povidone-Iodine gradually release iodine to exert an effect  

against bacteria, fungi, viruses, protozoa, cysts and spores.  

26. In  Satoskar  and  Bhandarkar’s  Pharmacology  &  

Pharmaco Therapeutics, it reads:

“Iodophors  are  developed  by  complexing  iodine  with   

surfactants  like non-ionic  detergents.  The detergents  act   

as solubilizers and carriers, combining detergent property   

with  anti-bacterial  activity.  They  owe  their  germicidal   

activity to the slowly released elemental iodine.”

27. The expression “therapeutic”  or  “prophylactic”  is  not  

defined under  the  tariff  entry.  Therefore,  useful  reference  

can be made to the dictionary meaning to these expressions.  

In fact the assessee, in his reply to the show cause notices  

issued,  had  relied  upon  the  meaning  of  the  expression  

“therapeutic”  and  “prophylactic”  from Webster's  New  20th  

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Century Dictionary, Chambers English Dictionary, Websters  

New 20th Century Dictionary. In our view, reference to all  

other dictionary meanings may not be necessary. We intend  

to confine ourselves only to the aforesaid three dictionaries.  

In  that  the  meaning  of  the  expression  “therapeutic”  and  

“prophylactic” is stated as under:

“To prevent, to guard against it, before, in medicine,   

preventive  protecting  against  disease.”;  “Guarding   

against  disease,  a preventive  of  disease;  a condom;   

preventive treatment against diseases.” and;  “Serving  

to cure or heal, Curative concerned in discovering and  

applying remedies for diseases.”  

28. Before we discuss the issue posed before us, it would  

be useful  to  make reference  to  observation made by this  

Court  in  the  case  of  ICPA  Health  Products  (P)  Ltd.  Vs.   

Commissioner  of  Central  Excise,  Vadodara,  (2004)  4  SCC  

481, wherein this Court, after referring to the meaning of  

the  expression  “prophylactic”  from  the  Concise  Oxford  

Dictionary,  9th Edn.,  has  noted  that  the  expression  

“prophylactic”  means  a  medicament  intended  to  prevent  

diseases, a preventive medicine or course of action.

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29. It  is  the  specific  case  of  the  assessee  before  the  

adjudicating  authority  that  the  products  in  question  are  

primarily used for external treatment of the human-beings  

for the purpose of the prevention of the disease.  This is not  

disputed by the revenue, but their stand appears to be since  

the  products  in  question  are  primarily  used  as  

detergents/cleansing  preparation,  they cannot  be  brought  

under the definition of medicaments.  As we have already  

noticed,  medicaments  are  products  which  can  be  used  

either  for  therapeutic  or  prophylactic  usage.  Since  the  

product in question is basically and primarily used for the  

prophylactic uses, in our view the Tribunal was justified in  

coming to a conclusion that the adjudicating authority and  

the first appellate authority were not right in classifying the  

products  under  chapter  sub-heading  3402.90  and,  

therefore, had classified those products under chapter sub-

heading 3003.  

30. There  is  no  fixed  test  for  classification  of  a  taxable  

commodity. This is probably the reason why the ‘common  

parlance test’  or the ‘commercial usage test’  are the most  

common [see A. Nagaraju Bors. v. State of A.P., 1994 Supp  

20

(3) SCC 122]. Whether a particular article will fall within a  

particular Tariff  heading or not has to be decided on the  

basis of the tangible material or evidence to determine how  

such an article is understood in ‘common parlance’  or in  

‘commercial world’ or in ‘trade circle’ or in its popular sense  

meaning. It is they who are concerned with it and it is the  

sense  in  which  they  understand  it  that  constitutes  the  

definitive index of the legislative intention, when the statute  

was enacted [see D.C.M. v. State of Rajasthan, (1980) 4 SCC  

71]. One of the essential factors for determining whether a  

product  falls  within  Chapter  30  or  not  is  whether  the  

product  is  understood  as  a  pharmaceutical  product  in  

common parlance [see  CCE v.  Shree Baidyanath  Ayurved,  

(2009) 12 SCC 413; Commissioner of Central Excise, Delhi  

v. Ishaan Research Lab (P) Ltd. (2008) 13 SCC 349]. Further,  

the quantity of medicament used in a particular product will  

also not be a relevant factor for, normally, the extent of use  

of  medicinal  ingredients is  very low because a larger use  

may  be  harmful  for  the  human  body.  [Puma  Ayurvedic  

Herbal (P) Ltd. v. CEE, Nagpur  (2006) 3 SCC 266; State of  

Goa  v.  Colfoax  Laboratories (2004)  9  SCC  83  ;  B.P.L  

Pharmaceuticals v. CCE, 1995 Supp (3) SCC1]

21

31. However,  there cannot  be a static  parameter for  the  

correct classification of a commodity. This Court in the case  

of  Indian Aluminium Cables Ltd. v. Union of India,  (1985) 3  

SCC  284,  has  culled  out  this  principle  in  the  following  

words:

“13.  To  sum  up  the  true  position,  the  process  of   manufacture of a product and the end use to which it is  put,  cannot  necessarily  be  determinative  of  the   classification of that product under a fiscal schedule like   the  Central  Excise  Tariff.  What  is  more  important  is   whether the broad description of the article fits in with   the expression used in the Tariff…”

32. Moreover,  the  functional  utility  and  predominant  or  

primary usage of  the commodity which is being classified  

must be taken into account, apart from the understanding  

in  common  parlance  [see  O.K.  Play  (India)  Ltd.  v.  CCE,  

(2005)  2  SCC  460; Alpine  Industries  v.  CEE,  New  Delhi   

(1995) Supp. (3) SCC 1;  Sujanil  Chemo Industries v. CEE &  

Customs  (2005) 4 SCC 189; ICPA Health Products (P) Ltd v.   

CEE  (2004)  4  SCC  481; Puma  Ayurvedic  Herbal  (Supra);  

Ishaan  Research Lab (P) Ltd.(Supra)  ;  CCE v. Uni Products   

India Ltd., (2009) 9 SCC 295].  

22

33. A commodity cannot be classified in a residuary entry,  

in  the  presence  of  a  specific  entry,  even if  such  specific  

entry requires the product to be understood in the technical  

sense [see Akbar Badrudin v. Collector of Customs, (1990) 2  

SCC 203;  Commissioner of Customs v. G.C. Jain, (2011) 12  

SCC 713]. A residuary entry can be taken refuge of only in  

the absence of a specific entry; that is to say, the latter will  

always prevail over the former [see CCE v. Jayant Oil Mills,  

(1989)  3 SCC 343;  HPL Chemicals  v.  CCE,  (2006)  5 SCC  

208; Western India Plywoods v. Collector of Customs, (2005)  

12 SCC 731;  CCE v. Carrier Aircon, (2006) 5 SCC 596]. In  

CCE v. Carrier Aircon, (2006) 5 SCC 596, this Court held:

“14… There are a number of factors which have to be taken   

into  consideration  for  determining  the  classification  of  a   

product.  For  the  purposes  of  classification,  the  relevant   

factors  inter  alia  are  statutory  fiscal  entry,  the  basic   

character, function and use of the goods. When a commodity   

falls within a tariff entry by virtue of the purpose for which it   

is put to (sic. produced), the end use to which the product is   

put to, cannot determine the classification of that product.”

23

34. In our view, as we have already stated, the combined  

factor that requires to be taken note of for the purpose of  

the  classification  of  the  goods  are  the  composition,  the  

product literature, the label,  the character of  the product  

and  the  user  to  which  the  product  is  put.  However,  the  

miniscule  quantity  of  the prophylactic  ingredient is  not  a  

relevant factor.  In the instant case, it is not in dispute that  

this is used by the surgeons for the purpose of cleaning or  

degerming  their  hands  and  scrubbing  the  surface  of  the  

skin of the patient before that portion is operated upon. The  

purpose is to prevent the infection or disease. Therefore, the  

product  in  question  can  be  safely  classified  as  a  

“medicament” which would fall under chapter sub-heading  

3003 which is a specific entry and not under chapter sub-

heading 3402.90 which is a residuary entry.  

35. The learned senior counsel for the revenue has placed  

reliance on several decisions of this Court in support of his  

argument  that  the  products  requires  to  be  classified  as  

medicament only when they are intended or meant to cure a  

disease  or  prevent  the  occurrence  of  disease.  He  further  

24

submits that the disease can only be prevented when there  

are some symptoms of disease. We intend to refer to those  

decisions  relied  by  learned  senior  counsel  Shri  Bhatt  to  

sustain the submissions made before the Court.  

36. In  B.P.L.  Pharmaceuticals  Ltd. v.  CCE, (Supra),  the  

issue before this Court was regarding the classification of  

the “Selenium Sulfide Lotion USP” manufactured and sold  

by  assessee  under  the  brand  name  “Selsun  shampoo”.  

According  to  the  manufacturers  this  shampoo  was  a  

medicated shampoo containing 2.5% Selenium Sulfide’ w/v  

as the only  active ingredient which was meant to treat a  

disease of  the hair, namely; dandruff, and the rest of the  

ingredients of the shampoo merely serve the purpose of a  

bare  medium.  The  revenue  contended  that  the  product  

contains 2.5% w/v of Selenium Sulfide which is only of a  

subsidiary  curative  or  prophylactic  value  and  therefore,  

notwithstanding the product having a medicinal value will  

fall under Chapter 33. This Court held that having regard to  

the  preparation,  label,  literature,  character,  common and  

commercial parlance, the product was liable to be classified  

as a medicament under Chapter sub-heading 3003.19. This  

25

decision would not assist the revenue because this Court  

held after considering various factors that selsun shampoo  

is  a  medicament  as  it  has  therapeutic  property  to  treat  

dandruff  unlike  ordinary  shampoo  which  could  be  of  

common use by common people.  

37. In  Alpine  Industries  v.  CCE,  New Delhi (Supra),  the  

issue which arose for the consideration of this Court was  

whether  the  product  ‘Lip  salve’  is  classifiable  as  a  

medicament  under  Chapter  Sub-  Heading  30.03  or  as  

‘preparation for  care  of  skin’  under  Chapter  Sub-heading  

33.04.  The stand of the assessee was that the product in  

question  was  supplied  exclusively  to  the  military  for  use  

while serving at high altitude. They claimed, by relying on  

various literatures based on the composition of the product  

that  it  was  used  as  “medicament”  and  therefore,  sought  

classification under Chapter Sub- Heading 30.03. The stand  

of the revenue was that it was used as “a preparation for  

care of skin” to protect the skin on the lips against damage  

by natural factors. This Court after considering the various  

medical  and  pharmaceutical  literatures  held  that  the  

Entries  are  not  to  be  understood  in  their  scientific  or  

26

technical  sense,  but  by  their  popular  meaning  for  the  

purpose of interpretation. This court had observed that for  

the  purpose  of  classification,  the  commercial  parlance  

theory has to be applied and the chemical ingredients of the  

product are not decisive. This Court after considering the  

nature of the product and the use to which it is put had  

observed that the ‘Lip salve’ is used for “care of skin” and  

not  “cure of  skin” and just  because it  has some curative  

effect,  its  primary  use  is  not  curative,  therefore  it  is  not  

medicament and also needs no prescription from a doctor.  

This  Court  also held that  it  is  neither  prescribed by any  

doctor nor obtainable from the chemist or pharmaceutical  

shops in the market. This decision would not assist revenue  

as this Court had arrived at a conclusion that the product is  

not  medicament  but  cosmetic  after  considering  the  

commercial parlance test and primary user of the product.

38. In  ICPA Health  Products  (P)  Ltd.  v.  CCE (Supra),  this  

Court has considered the issue of classification of surgical  

scrubs,  namely’  Hexiprep,  Hexiscrub  (Surgiscrub)  and  

Hexiaque, manufactured by the assessee which was used as  

a skin disinfectant to paint the skin before surgery and as a  

27

wound disinfectant. It was admitted that Hexiprep is used  

to paint  the skin as required to disinfect  the skin before  

surgery. Hexiaque is used as a skin disinfectant to paint the  

skin before surgery and as a wound, abrasions and minor  

cuts disinfectant. Hexiscrub is used on hands and forearms  

of surgeons for rapid hand disinfection prior to surgery. The  

assessee  claimed  the  classification  of  these  products  as  

medicament under Chapter sub-heading 3003.10. Whereas,  

the  revenue  contended  that  these  products  should  be  

classified  as  disinfectants  under  Chapter  sub-heading  

38.08. This Court had considered the report of the Chemical  

examiner who opined that the products therein contained  

‘chlorhexidine gluconate solution BP’ which had therapeutic  

properties. However, he also opined that they were used as  

disinfectant,  therefore  should  be  classified under  Chapter  

sub-heading 38.08. This Court after considering the label  

and usage of  products therein and dictionary meaning of  

the  word  ‘prophylactic’  had  observed  that  the  products  

therein were used to disinfect the skin prior to surgery, to  

clean the wound and minor cuts, and therefore, they have  

prophylactic  usage  and  classifiable  under  Chapter  sub-

heading 3003.10.  

28

39. In State of Goa v. Colfax Laboratories (Supra), the issue  

before this Court was that whether the After Shave Lotion  

(ASL)  known  as  “Old  Spice”  and  “Blue  Stratos”  are  

classifiable as toilet preparations or medical preparations.  

The  assessee  relying  on  various  pharmacopoeia  took  the  

stand that the product was “medicinal preparation” due to  

the  high  percentage  of  alcohol  content  (above  60%).  The  

revenue contended that the use of after shave lotion was in  

the  form  of  “toilet  preparations”  and  not  “medicinal  

preparation”.  The  revenue  also  pointed  that  the  assessee  

had  obtained  the  license  for  manufacture  of  ASL  as  a  

cosmetic  product  and  not  as  a  medicinal  product.  This  

Court while rejecting the assessee’s contention held that the  

high composition of alcohol in the product is not a relevant  

factor for ASL to be considered a medicament. This Court  

further observed that in order to come within the ambit of  

“medicinal preparations”, the article must be used for the  

purpose of either curing or mitigating the disease after its  

symptoms have appeared or  in prevention of  any disease  

and  therefore,  on  a  plain  interpretation  ASL  cannot  be  

considered  to  be  within  the  ambit  of  “medicinal  

29

preparation”. Thus, in that case, this Court did not rely on  

the composition of the product but relied on the principal  

use and the common understanding of the product in the  

market  as  the  test  for  classification,  in  other  words,  the  

classification  of  commodity  does  not  depend  on  the  

incidental  character  that  the  commodity  takes but on its  

primary character.

40. In CCE, Nagpur v. Vicco Laboratories, (2005) 4 SCC 17,  

the  point  in  consideration  before  this  Court  was  that  

whether  the  products,  namely;  Turmeric  skin  cream,  

vajradanti  toothpaste  and tooth  powder  manufactured by  

the  assessee  would  be  classifiable  as  Pharmaceutical  

products under Chapter 30 or cosmetics under Chapter 33  

of the Tariff Act. In that case, the assessee’s products were  

classifiable as pharmaceutical products before and after the  

enactment of  the  Tariff  Act.  However,  the  revenue issued  

show cause notices on the basis of the decision of this Court  

in Shree Baidyanath,  (1996) 9 SCC 402 alleging that  the  

products are understood as cosmetics in common parlance.  

The revenue further contended before this Court that the  

product was classifiable under Chapter 33 as a cosmetic as  

30

there was no need for a medical practitioner’s prescription  

and the same was sold in general/departmental store.  The  

assessee  took  the  stand  that  products  were  classifiable  

under  Chapter  30 as being pharmaceutical  product.  This  

Court held that mere decision of a court of law without more  

cannot  be  a  justification  enough  for  changing  the  

classification without a change in the nature of a product or  

a change in the use of the product, or a fresh interpretation  

of the tariff heading by such decision. This Court has held  

that  the  Show  cause  notices  having  issued  on  the  

misapprehension of the tests laid down in Shree Baidyanath  

cannot  be  sustained,  even  though,  the  adjudicating  

authority  had  found  from  the  market  survey  that  the  

products are understood as cosmetics in common parlance.  

This Court also held that the product cannot be treated as  

cosmetic only because it was not sold by chemists or under  

doctor's  prescription.  We  are  afraid  that  decision  would  

assist the revenue as the show cause notices in that case  

were issued on the misapprehension of the test laid down in  

the Shree Baidyanath and this Court further observed that  

the decision in Shree Baidyanath was based on its peculiar  

facts.

31

41. In Sujanil Chemo Industries v. CCE & Customs (Supra),  

the  question  of  classification  of  the  product  “licel”,  

manufactured by the assessee, was raised before this Court.  

The  assessee  claimed,  on  the  basis  of  the  reports  of  

chemical  examiners  and  the  Department  of  Dermatology  

and Venereology, that the product is an insecticide and is  

classifiable  under  Chapter  Sub-heading  3808.10  whereas  

the Department contended that the product is classifiable  

as medicament under Chapter Sub-heading 3003.10. This  

Court  after  referring  to  Chapter  Note  1(d)  of  Chapter  38  

which  excludes  “medicaments  under  Heading  30.03  or  

30.04”  from  its  ambit  and  considering  the  definition  of  

‘medicament’  in terms of  Chapter Heading 2(i)  of  Chapter  

30, had observed that in normal parlance, a product may be  

considered to be an insecticide but if that product has any  

therapeutic  and  prophylactic  use  then  for  purposes  of  

classification  that  product  would  fall  under  Chapter  30  

instead of Chapter 38. This Court observed that Licel cures  

the infection or infestation of lice in human hair which is a  

disease; therefore, it is thus therapeutic. This Court further  

observed  that  Licel  is  also  prophylactic  inasmuch  as  it  

32

prevents disease which will  follow from infestation of lice.  

This Court referring to its earlier decision in  ICPA Health  

Products (P)  Ltd. v.  CCE (Supra)  has  concluded that  this  

product for its therapeutic and prophylactic usages would  

be  classified  as  medicament  under  Chapter  Sub-heading  

3003.10.  We  are  of  the  opinion  that  decision  would  not  

come to rescue of the revenue as this Court in that decision  

has clearly observed that the licel prevents as well as cures  

the infection or infestation of the lice.  

42. In  Puma Ayurvedic Herbal (P) Ltd. v. Commissioner of   

Central Excise, Nagpur  (Supra), the issue before this Court  

was that  whether the ayurvedic goods manufactured by the  

assessee are classifiable under the Central Excise Tariff Act,  

1985 as cosmetics  under  Chapter  33 or  as  medicaments  

under  Chapter  30.  The  assessee  contended  that  their  

products  are  manufactured  as  per  the  Ayurveda  

pharmacopoeia  and  other  text  books  and  have  curative,  

therapeutic or prophylactic value which are meant to give  

relief in body ailments and they are not items of cosmetics.  

The assessee further relied on the twin test: Whether the  

product is used as medicament in common parlance; and  

whether the ingredients used in the product are mentioned  

33

in  the  authoritative  ayurvedic  textbooks.  The  assessee  

further  contended  that  the  use  of  the  product  by  the  

customers should be taken into account for determining the  

classification of  products as these  as the  products which  

have  special  and  distinct  use  for  treating  a  particular  

ailment and  are  not  items  of  common use.  The  revenue  

argued  that  even  if  a  product  had  some  curative  or  

prophylactic value, it will still be cosmetic on the basis of  

Note 2 of Chapter 33 of the Central Excise Tariff Act which  

excludes cosmetics and toilet preparation having subsidiary  

curative  and  prophylactic  value.   This  Court  while  

appreciating  the  assessee’s  contention  observed  that  

revenue has miserably failed to prove that the products in  

dispute  are  not  medicament  and  not  understood  as  

medicament by the common man.  This Court had upheld  

the twin test for classification of ayurvedic products relied  

by the assessee and observed that the primary role or use of  

the product has to be taken into account for the purpose of  

classification,  even  though,  it  may  happen  that  while  

treating a particular medical problem, after the problem is  

cured,  the  appearance  of  the  person  concerned  may  

improve. This Court further held that it is not necessary for  

34

the medicament to be sold only under doctor’s prescription  

and  its  availability  across  the  counter  in  shops  is  not  

relevant  for  its  classification  as  medicament.  This  Court  

held that, therefore, the fact that use of medicinal element  

in a product  was minimal does not  detract from it  being  

classified as a medicament. This Court concluded that the  

products  in  dispute  are  medicinal  products  which  are  

intended to treat certain medical conditions of the human  

body  and  improvement  in  appearance  is  subsidiary,  

therefore, are liable to be classified as medicaments falling  

under Chapter 30. This case would not assist revenue as  

this Court had applied a primary user test of the products  

in question which has certain medicinal ingredient.

43. In  Commissioner  of  Central  Excise,  Delhi  v.  Ishaan   

Research Lab (P)  Ltd. (Supra),  the issue before this Court  

was  whether  the  products  manufactured by  the  assessee  

would fall  under Sub-Heading 3003.30 as medicament or  

under  Chapter  33  as  cosmetics.  The  assessee  contended  

that each of the products was having ayurvedic medicinal  

herbs  in  it  and  even the  labels  on  these  products  claim  

specifically  the  medicinal  properties  of  the  product.  The  

assessee further urged that even if the user of product leads  

35

to  improvement  in  appearance  of  a  person  that  by  itself  

cannot bring it into the category of “cosmetics” if otherwise  

the product is having a medicinal value and is marketed as  

such.  According  to  the  revenue,  all  these  products  were  

understood to be the “cosmetics” in common parlance and  

not actually the “ayurvedic medicines” for various reasons,  

the  said  products  should  have  been  held  to  be  covered  

under Chapter 33. This Court after inspecting the labels of  

the product has held that the assessee had claimed in each  

of  the  label  regarding  its  medicinal  properties  and,  the  

product is not a cosmetic.  This Court also observed that the  

common parlance test is not “be all and end all”, and held  

that the miniscule percentage used is also not a deciding  

factor. This Court concluded that the products in question  

are  medicinal  products  and,  therefore,  are  covered  by  

Chapter 30 and not under Chapter 33. That case would not  

assist revenue as this Court after taking into account the  

labels on the products observed that these products have  

medicinal  ingredients  and  are  marketed  as  ayurvedic  

medicines not cosmetics, however it incidentally improve the  

appearance, and also held that the common parlance test  

by itself is not conclusive.   

36

44. In view of the above, we reject the Revenue's appeals  

and confirm the order passed by the Tribunal with no order  

as to costs.

Ordered accordingly.   

............................J. (H.L. DATTU)

............................J. (ANIL R. DAVE)

NEW DELHI; FEBRUARY 22, 2012

37