COMMISSIONER OF CENTRAL EXCISE, HYDERABAD versus M/S. SARVOTHAM CARE LIMITED
[2015] 10 S.C.R. 1, Supreme Court of India, 2015
Outcome: Disposed off
Segment: Ratio
.[2015] 10S.C.R.1 
COMMISSIONER OF CENTRAL EXCISE, HYDERABAD 
A 
v. 
M/S. SARVOTHAM CARE LIMITED 
(Civil Appeal No.4480 OF 2005) 
MAY 14, 2015 
[A. K. SIKRI AND R. F. NARIMAN, JJ.] 
B 
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.PL. Pharmaceuticals Ltd. v. CCE, Vadodra 
1995 (3) SCR 1235: 1995 Supp. (3) sec 1 -
relied on. 
Collector of Central Excise, Shillong v. Wood 
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; 
CCE Vapi v. Beta Cosmetics 2004 (173) ELT 255 
- referred to. 
Case Law Reference 
1995 (2) SCR 797 
Referred to. 
Para 7 
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 
CIVILAPPELLATE JURISDICTION: Civil Appeal No. 
4480 of2005 
B 
c 
D 
E 
F 
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 
Civil Appeal No. 5752 of 2015 
H
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 
F 
G 
H 
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, 
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'. 
The entry CSH 3305.99 thereof is as under: 
"Preparations for use on the hair 
-Perfumed hair oils 
-Other: 
-Hair fixer
-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 
0 
'Ketoconazole', this would not change the basic character of 
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 
G 
H 
judgment in the following manner: 
"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: 
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. 
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 
c 
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 reduce disputes on account of tariff classification. G 
_j 
~: 
-~ · 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 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2015] 10 S.C.R. 
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. 
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. 
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 
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 
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 
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 
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 
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 Hylam2 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 Cosmetics4• 
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) EL T 255 
G 
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. 
E 
F 
(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 
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 
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', the assessee 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, Vadodra5squarely 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. 
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 
E 
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: 
B 
c 
D 
E 
F 
"Pharmacodynamics 
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). 
Ketoconazole shampoo rapidly relieves scaling and · 
pruritus, which are usually associated with pityriasis 
versicolor seborrhoeic dermatitis and pityriasis capitis 
(dandruff). 
Pharmacokinetics 
Percutaneous absorption of Ketoconazole shampoo is 
negligible since blood levels cannot be detected, even 
after chronic use. Systematic effects, therefore, are 
not expected. 
Indications 
Treatment and prophylaxis of infections in which the yeast 
pityrosporum is involved, such as Pityriasis versicolor 
(localized), seborrhoeic dermatitis and pityriasis capitis 
(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: 
-Pityriasis versicolor; once daily for maximum 5 days. 
-Seborrhoeic dermatitis and pityriasis capitis; twice 
weekly for 2 to 4 weeks. 
Prophylaxis: 
-Pityriasis versicolor: once daily for a maximum 3 days 
during a single treatment course before the summer. 
c 
D 
-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 
A 
B 
SUPREME COURT REPORTS 
[2015] 10 S.CaR.. 
!'-
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 
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. 
E 
F 
G 
H 
xx 
xx 
xx 
24. Elaborating the above submissions, the learned 
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 
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 
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
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 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2015] 10 S.C.R. 
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 
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 
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 
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 
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 
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 
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 
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 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2015) 10 S.C.R. 
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 
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 
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 
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·. 
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 
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 
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
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 
A 
B 
c 
D 
E 
F 
G 
H 
~PREME COURT REPORTS 
[2015] 10 S.C.R. 
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 
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) 
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 
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 
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 
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. 
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 
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.