The dispute regarding the classification of Boroline arose from 1961. The company ultimately invoked the writ jurisdiction of a single judge of the high court who held that Boroline was essentially a drug and not a cosmetic product. Hence the excise duty payable by it would be of the lower level prescribed for a drug. The single judge placed strong reliance on the terms of a settlement recorded on January 18, 1983, in G.D. Pharmaceuticals (P) Ltd vs Collector of Central Excise, Orissa. In that settlement it was agreed that Boroline was to be assessed as a patent and proprietary medicine under Tariff Item 14E. The Central Excise authorities on that basis levied excise on boroline under Tariff Item 14E.

However,the excise authorities contended that with effect from February 1, 1986, the Tariff Act 1985 was amended by bringing in Chapter notes which changed the character of the levy under Items 14 E and 14 F. Hence the settlement could no longer operate and the single judge had gone wrong in ignoring the Chapter Notes.

Item 14E dealt with patent or proprietary medicines not containing alcohol, opium, Indian hemp or other harcotic drugs, other than those medicines which are exclusively ayurvedic, unani, siddha or homeopathic.

The explanation categorically records that the Item includes any drug or medicinal preparation in whatever form for use in the internal or external treatment of or for the prevention of ailments in human beings or animals and which bear either on themselves or on the container or both, a name which is not specified in a monograph in a Pharmacopoeia.

Item 14F dealt with cosmetics and toilet preparations for the care of skin, beauty, or make up preparations, such as beauty creams, vanishingcreams, cold creams, make up creams, cleansing creams, skin foods, skin tonics etc. to give protection against skin irritants. The excise authorities argued that in terms of the explanation Boroline is basically being used for protection against skin irritiants.

They further pointed out that the manufacturers of Boroline had availed of the October 1, 1985 exemption for antiseptic perfumed creams manufactured under the Drug Licence issued under the Drugs and Cosmetic Act, 1940. Having availed themselves of the exemption for antiseptic perfumed creams the manufacturer could not turn around and now claim that his product should be classified not as a cosmetic cream falling under the Explanation to Item 14F but as a medicine.

The answer of the manufacturer was that there were proceedings pending in an appellate court which on March 5, 1993 has declared that whatever notifications there may be under sub-heading 33.04 of Item 14F of the Central Excise Tariff Act, the manufacturer will be entitled to get thebenefit of such notifications.

The question in terms of these contentions was whether in implementing the appellate court order of March 5, 1993, the Central Excise authorities had been correct in giving the exemption. But the learned judges of the high court Justices U.C. Bannerjee and Sidheswar Narayan did not address themselves to this issue and instead simply held that whatever had been done in terms of the order did not constitute a waiver or estoppel against the excise authorities.

What was required was an examination of the conduct of the excise authorities in applying the appellate court's order and a further examination of the correctness of what had been done when the same excise authorities challenge the exemption given by themselves. It seems that the judges forgot that their duty was to see that no illegal loss is caused to public revenue.

Also forgotten was the test of how the product is looked upon in the market. This is a test formulated in umpteen judgments of the Supreme Court. Hencethe judges had to ask themselves the question whether the market looks upon Boroline as a cosmetic or as a medicine. Without doing this the judges simply stated that the trial judge had given an elaborate judgment holding Boroline to be a medicine, without pointing out as to whether he had applied the relevant tests or not. The judges simply stated that Boroline is Boric Acid, plus zinc oxide plus white petroleum jelly and Lanoline anhydrous.

Hence it has to be a medicine. This was an incorrect legal approach. Hopefully the Central Excise Authorities would come up in appeal against this to the apex court.