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Commissioner of Central Excise, Chennai-IV v. Hindustan Lever Ltd.

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 1941 of 2006)Decided 25 Aug 2015
Civil Appeal No. 1941 of 2006
Justice A.K. Sikri · Justice Rohinton Fali Nariman

Background

The dispute was whether "Vaseline Intensive Care Heel Guard," a product for cracked heels, should be classified for excise duty purposes as a mere cosmetic skin-care preparation (taxed at a higher rate) or as a medicament with curing properties (taxed at a lower rate). The product was manufactured under a drug licence, contained salicylic acid, and the Tribunal below had found it was genuinely therapeutic, treating a cracked-heel condition caused by dryness and exposure, rather than just moisturizing skin.

Decision Breakdown

The Supreme Court held that the percentage of the active therapeutic substance (salicylic acid) in a product is immaterial to whether it counts as a medicament: what matters is whether its primary effect is curative/prophylactic rather than cosmetic. It found that the Revenue Department bore the burden of proving the product was merely cosmetic but failed to produce any real evidence, instead selectively relying on marketing material while ignoring the product's licensing as a drug and consumer/dealer affidavits supporting its therapeutic use. The Court agreed with the Tribunal that the product was correctly classified as a medicament under Chapter Heading 3003.10, and dismissed the Revenue's appeal with no order as to costs.

Lesson Learnt

In tax classification disputes, the burden of proof is on the tax authority to show a product fits the category it is claiming, and a product's real medicinal function (as shown by its drug licence and actual therapeutic effect) prevails over how its marketing happens to describe it.

Official source (sci.gov.in)View Judgment (PDF)

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