Saturday, August 17, 2013

Medicine or cosmetic - SC uses 'cure or care' formula

 The Supreme Court has used "cure or care" differentiation to separate medicinal products from cosmetics for levy of central excise duties.

It is of seminal importance to producers of cosmetics to classify their products as medicaments, which attract a central excise duty of 15% as against cosmetics that face 15% levy.

How to classify a product as medicament or cosmetic? This question was raised before a bench of Justice SJ Mukhopadhaya and Justice Kurian Joseph by central excise, Mumbai, which wanted to tax the product "Moisturex" as cosmetics, even as the producer claimed it to be a medicament.

Referring to the Central Excise Act, the bench found that preparations for the care of skin, beauty or make-up preparations were the ones to be classified as cosmetics but it had clarified that cosmetics with medicinal preparations used to treat certain skin complaints could be categorized as medicaments or products containing pharmaceutical substances used for medical, surgical, dental or veterinary purposes.

Writing the judgment for the bench, Justice Joseph said: "If a product comprises of two or more constituents mixed or compounded together for therapeutic or prophylactic use, the same is to be covered under medicament."

Applying the law to the dispute whether 'Moisturex' was medicine or cosmetic, the bench said, "Care or cure', is the clue for the resolution of the lis (dispute) arising in these cases."

The bench said prior to adjudicating upon whether a product was a medicament, courts have to see what consumers understand the product to be. "If a product's primary function is "care" and not "cure", it is not a medicament," it said.

The bench said, "Cosmetic products are used in enhancing or improving a person's appearance or beauty, whereas medicinal products are used to treat or cure some medical condition. A product that is used mainly in curing or treating ailments or diseases and contains curative ingredients even in small quantities is to be branded as a medicament."

The bench said, "The use of the cream is not for the care of the skin. 'Moisturex' is also not primarily intended to protect the skin from sun, tan or dryness, etc. On the other hand, it is intended for treating or curing the dry skin conditions of the human skin and for a few other skin complaints like fissure feet, dry scaly skin conditions, ichthyosis, etc."

The excise department said if it was a medicament as claimed by the producer, it should have been sold under doctor's prescription and not over the counter like any other cosmetic.

Rejecting this argument, the bench said: "If a product is sold without a prescription of a medical practitioner, it does not lead to the immediate conclusion that all products that are sold over/across the counter are cosmetics. There are several products that are sold over-the-counter and are yet, medicaments."

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