Align Customs duty on medicines, cosmetics

EXPERT EYE

Boroline, a household medicine for skin problems , alone has a dozen reported judgments to its credit over the last couple of decades. This includes one Supreme Court judgement[1][1] also which has finally called it medicine and not cosmetics. Nobody , except revenue officers, can call it cosmetics.

The most recent case[2][2] decided by the Supreme Court is about bio-aloevera, bio-bhringrai, bio-cucumber, bio-coconut, bio-costus, etc. which contain elements that have ayurvedic medicinal value and were produced under drug license issued under Drugs and Cosmetics Act, 1940. The court has held them to be medicines.

The distinction between medicine and cosmetics has not been codified, in spite of several judgements by the Supreme Court on the issue. The reason is that there are overlapping uses. The best that has been enunciated so far is in a land mark judgement[3][3] of the Supreme Court where it went elaborately into various aspects of the use of an anti dandruff preparation known as ‘Selsun’.

It observed that the distinction should be on the basis of definition given in the Drugs and Cosmetics Act 1940. On the perusal of the definition, the Supreme Court broadly distinguished cosmetics and drugs as follows:

“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 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 use of human beings or animals and all substances intended to be used for or in the diagnosis, treatments, mitigation or prevention of any disease or disorder in human being or animals, including preparations applied on human body for the purpose of repelling insects”.

However, while applying the definitions to individual items like Selsun, the question that arises is that while it is basically medicine, it is used as a shampoo which is normally a cosmetic. The Supreme Court observed that several considerations should be taken into account..
 

CAUGHT IN INTERPRETATION

The Supreme Court has observed that several considerations should be taken into account to solve the conundrum. They are the following: (i) How is it understood in the common parlance though that is not “be all and end all”. The writing on the label to indicate how it is sold is also relevant. (ii) The therapeutic quality is more or the quality for beautifying, cleansing, and promoting attractiveness is more.
(iii) Are they available with or without prescription?
ALL THE ABOVE CRITERIA ARE SUBJECT TO CONTROVERSY

The common parlance criterion involves making enquiry in the market but that also becomes vague if opinions given by shopkeepers and users differ. The predominant quality is often subject to chemical testing. Availability with the prescription is not always clinching evidence.

The idea of differential duties has been on the basic thesis that while cosmetics are used by the rich, medicines are used by the poor also. Historically customs duty on cosmetics used to be very high almost in the region of 100 per cent. Gradually it has come down to 30 per cent.

Medicines on the other hand attract the customs duty of 12.5 per cent. In central excise the duties have been made 14 per cent for both but due to various exemptions for different types of medicines various exemptions for different types of medicines, the need to distinguish between medicine and cosmetics still continues. Even if the excise duties become the same, the distinction still will have to be made for the purpose of levying customs duty and the countervailing duty which is equal to the excise duty.

The conclusion is that the solution to this controversy lies in abolishing the exemptions and make the effective rates of duty same.

smukher2000@yahoo.com