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Commissioner of Central Excise, Hyderabad v. M/S Sarvotham Care Limited

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 4480 of 2005)Decided 14 May 2015
Civil Appeal No. 4480 of 2005
Justice A.K. Sikri · Justice Rohinton Fali Nariman

Background

The respondent manufactured "Ketoconazole Shampoo" (sold as "Nizral Shampoo"), an anti-fungal/anti-dandruff preparation, and classified it as a medicine (lower excise duty) rather than a cosmetic hair preparation (higher excise duty). The Excise Department disagreed, demanded differential duty of about Rs. 8.12 lakh, and this was upheld by the adjudicating authority and the Commissioner (Appeals), but the Tribunal (CESTAT) ruled in the company's favour, holding it was genuinely a medicinal product. The Revenue then appealed to the Supreme Court; a connected appeal by the company itself, arising from a separate but identical dispute, was heard together.

Decision Breakdown

The Supreme Court held that the product, despite being a shampoo in form, was sold only under a Registered Medical Practitioner's prescription, contained a defined therapeutic dose of an anti-fungal drug (Ketoconazole), and was used to treat specific skin conditions like dandruff and seborrhoeic dermatitis, satisfying the "common parlance" test the Court has applied in earlier cases (e.g., Vicco Laboratories, B.P.L. Pharmaceuticals) to distinguish a medicament from a cosmetic. The Court agreed entirely with the Tribunal's reasoning and found no error in its classification. As a result, the Revenue's appeal (C.A. 4480/2005) was dismissed with costs, and the company's connected appeal (C.A. 5752/2015) was also allowed, quashing the demand for differential duty.

Lesson Learnt

Whether a product is taxed as a "medicine" or a "cosmetic" depends on how it is actually used and understood in ordinary trade practice (prescribed by doctors, therapeutic dosage, treats a specific ailment), not merely on its outward form (e.g., being a shampoo) or its everyday-use packaging.

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

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