# THE STATE OF GOA AND ANR v. MIS. COLFAX LABORATORIES.LTD. Ai--iD ANR - **Citation:** [2003] Supp. 4 S.C.R. 1050 - **Court:** Supreme Court of India - **Decided:** 2003 - **Bench:** S. Rajendra Babu, G.P. Mathur - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/the-state-of-goa-and-anr-v-mis-colfax-laboratories-ltd-ai-id-anr-19492 - **Pages:** 21 ## Headnote Medicinal and toilet Preparations (Excise Duty/Act, 1955~ecti0n 2(g) and (k)-After shave; lotion-Manufa'ctitred under· a licen9e for manufacture of cosmetiC products--Classification_:_Whether it' is 'toil~t , . . . • I C preparation' or 'medicinal preparation '-Held:· Since the good is not for diagnosis, treatment, mitigation or preven'tion of a~y disease b;' disorder, it not being a durg and hence cannot come within pu"rview. of 'medicinal preparation '-Ditty liable to be'"/evied on it ~s a· 'toilet prepa~ation '.'....:. Drugs and Cosmetics Act,. 1940-.:....Sectio~ 3(aaa).l.DAgs and Cosmetics Rules, 1945--Chapter Vil. '. · ' · · · · 1 ' ., ' " · D , ,~ i. ,1 Medicinal and Toilet Preparations (ExCise Duties) 'Rules, 1955.:...:.. Rules 11and12-'-After Shave Lotion-Duty.ofi-f>aiii by ihanufaeturer till 1984 as toilet preparation-After the order from ExCise CommissiOrfer duty paid as meaicinal preparaiion.c.!..Notice under Sectioh I j /n 199 i "demanding E balance duty on the ·ground that duty should 'have been paid as' toilet preparation-High Court held that the ·notic~s issuea would be c'onstroed under Ruli·j I-On appeal, held ."Order ofChn1missioner directing to pay 'the duty 'as· medicinal preparation being a 'nuility 'hCIVing been passed without jurisdiction is liable to be ignored and Revenue lntitled to ~ecdver F the deficiency in duty w.ej the date duty was not paid-Since the duties had not. been short levied through ·inadvertence; ~;r~r, collusion or misconstruction on' ihe part of Excise 'Officer ~; th~~·ugh' misstatement on n- • t f". '~ . ~ . Ll I J I" i 1 1 f • part .of owner, Rule 11 is not applicable~ There being no specific provision for such case, Sectio~ '12 wil/"apply. ,,. ::· '· · : . · . ·. G Central Excise Act, 1944-Section 4(4)(d):...:...£:i~ise' du~Rate ofCalculation-Held: Has to be calculated applying the formula laid down in Section 4(4)(d). Respondent-Company manufactured After Shave Lotion, under H a Licence under Medicinal and Toilet Preparations (Excise Duties) Act, 1050 ST ATE v. COLFAX LABORATORIES LTD. 1051 1955 for manufacture of cosmetic products. Till the year 1984 the A excise duty on the product was on the basis of it being a toilet preparation. ln 1985 company moved an application before commissioner of Excise for reclassification of the product as a 'medicinal preparation' for the purpose oflevy of excise duty. Excise commissioner issued show cause notice to the company and then by order dated B 23.3.1985 classified the same as 'medicinal preparation'. Another company which manufactured After Shave Lotion under the loan licence with the company. The licence issued to it was for manufacture of cosmetic products. The company started paying duty on the product at the rate applicable to 'medicinal preparations.' c In 1991 Commissioner of Excise issued notices under Rule 12 of Medicinal and Toilet Preparations (Excise Duties) Rules, 1956 to the Companies demanding balance of excise duty on the ground that the duty should have been pai~ as 'toilet preparation'. The Commissioner, after hearing the parties passed the order holding that After Shave D Lotions were toilet preparations. Writ Petition against the order dismissed by High Court, holding that the products are toilet preparations and Revenue was entitled to recover short paid duty on account of erroneous classification of the product. However, it held that the notices issued would be construed in exercise of Rule 11 of the E Rules and hence the Revenue was entitled to recover the duty within a period of 6 months immediately proceeding the date of issue of each of the notices, and that quantification of duty will have to be worked out by applying the formula as laid down in Section 4(4)(d) of Central Excise Act, 1944, and consequently excise duty will have to be deducted F from the wholesale price and the figure arrived at would be the value . of the excisable goods. Hence the present appeals. The issues before this Court are : 1. Whether t ## Text _Characters 0–39,944 of 51,446. This is a partial read: ask again with offset=39944 for what follows._ A B THE STATE OF GOA AND ANR. . . v. MIS. COLFAX LABORATORIES.LTD. Ai--iD ANR. - • . , ' . ·;I . ~ " • .J ~ . - . I OCTOBER. 29, 2003 (S. RAJENDRA BABU AND G.P. MATHUR, JJ.] Medicinal and toilet Preparations (Excise Duty/Act, 1955~ecti0n 2(g) and (k)-After shave; lotion-Manufa'ctitred under· a licen9e for manufacture of cosmetiC products--Classification_:_Whether it' is 'toil~t , . . . • I C preparation' or 'medicinal preparation '-Held:· Since the good is not for diagnosis, treatment, mitigation or preven'tion of a~y disease b;' disorder, it not being a durg and hence cannot come within pu"rview. of 'medicinal preparation '-Ditty liable to be'"/evied on it ~s a· 'toilet prepa~ation '.'....:. Drugs and Cosmetics Act,. 1940-.:....Sectio~ 3(aaa).l.DAgs and Cosmetics Rules, 1945--Chapter Vil. '. · ' · · · · 1 ' ., ' " · D , ,~ i. ,1 Medicinal and Toilet Preparations (ExCise Duties) 'Rules, 1955.:...:.. Rules 11and12-'-After Shave Lotion-Duty.ofi-f>aiii by ihanufaeturer till 1984 as toilet preparation-After the order from ExCise CommissiOrfer duty paid as meaicinal preparaiion.c.!..Notice under Sectioh I j /n 199 i "demanding E balance duty on the ·ground that duty should 'have been paid as' toilet preparation-High Court held that the ·notic~s issuea would be c'onstroed under Ruli·j I-On appeal, held ."Order ofChn1missioner directing to pay 'the duty 'as· medicinal preparation being a 'nuility 'hCIVing been passed without jurisdiction is liable to be ignored and Revenue lntitled to ~ecdver F the deficiency in duty w.ej the date duty was not paid-Since the duties had not. been short levied through ·inadvertence; ~;r~r, collusion or misconstruction on' ihe part of Excise 'Officer ~; th~~·ugh' misstatement on n- • t f". '~ . ~ . Ll I J I" i 1 1 f • part .of owner, Rule 11 is not applicable~ There being no specific provision for such case, Sectio~ '12 wil/"apply. ,,. ::· '· · : . · . ·. G Central Excise Act, 1944-Section 4(4)(d):...:...£:i~ise' du~Rate ofCalculation-Held: Has to be calculated applying the formula laid down in Section 4(4)(d). Respondent-Company manufactured After Shave Lotion, under H a Licence under Medicinal and Toilet Preparations (Excise Duties) Act, 1050 ST ATE v. COLFAX LABORATORIES LTD. 1051 1955 for manufacture of cosmetic products. Till the year 1984 the A excise duty on the product was on the basis of it being a toilet preparation. ln 1985 company moved an application before commissioner of Excise for reclassification of the product as a 'medicinal preparation' for the purpose oflevy of excise duty. Excise commissioner issued show cause notice to the company and then by order dated B 23.3.1985 classified the same as 'medicinal preparation'. Another company which manufactured After Shave Lotion under the loan licence with the company. The licence issued to it was for manufacture of cosmetic products. The company started paying duty on the product at the rate applicable to 'medicinal preparations.' c In 1991 Commissioner of Excise issued notices under Rule 12 of Medicinal and Toilet Preparations (Excise Duties) Rules, 1956 to the Companies demanding balance of excise duty on the ground that the duty should have been pai~ as 'toilet preparation'. The Commissioner, after hearing the parties passed the order holding that After Shave D Lotions were toilet preparations. Writ Petition against the order dismissed by High Court, holding that the products are toilet preparations and Revenue was entitled to recover short paid duty on account of erroneous classification of the product. However, it held that the notices issued would be construed in exercise of Rule 11 of the E Rules and hence the Revenue was entitled to recover the duty within a period of 6 months immediately proceeding the date of issue of each of the notices, and that quantification of duty will have to be worked out by applying the formula as laid down in Section 4(4)(d) of Central Excise Act, 1944, and consequently excise duty will have to be deducted F from the wholesale price and the figure arrived at would be the value . of the excisable goods. Hence the present appeals. The issues before this Court are : 1. Whether the products in question are 'medicinal preparation' G or 'toilet preparation'? 2. Whether the notices issued by Excise Commissioner should be treated to be one under Rule 11 or Rule 12 of Medicinal and Toilet Preparations (Excise Duties) Rules, 1956? H 1052 SUPREME COURT REPORTS [2003) SUPP. 4 S.C.R. A 3. What would be the formula for quantification of the duties? B c Dismissing the appeal of the Company and allowing that of the State, the Court HELD : 1.1. In order to come within the ambit of 'medicinal preparations' the intended use of the article must be for treatment, mitigation or prevention of disease. If the intended use of the article is not for any one of the aforesaid purposes, it cannot be described as a 'medicinal preparation'. [1060-D-E) 1.2. 'Disease' means an impairment of the normal state of the living animal that interrupts or modifies the performance of the vital functions being a response to environmental factors (as malnutrition, industrial hazards, or climate) or to specific infective agents (as worms bacteria or viruses) or to inherent defects of the organism (as various D genetic anomalies) or to combinations of these factors. The process of shaving does not cause any kind of impairment of the normal state of a person. It does not in any manner interrupt or modify the performance of any vital functions of the human body. On a plain interpretation of the statutory provisions, an after shave lotion (ASL) cannot come E within the ambit of a "medicinal preparation" as defined in Section 2(g) of Medicinal and Toilet Preparations (Excise Duty) Act, 1955. The definition of the terms 'cosmetic' and 'drug' in Drugs and Cosmetics Act will also show that until the intended use of the article is for diagnosis, treatment, mitigation or prevention of any disease or F disorder, it cannot be a drug. [1060-F-H, 1061-B, 1061-FJ 1.3. No authoritative scientific text has been placed before the Court to show that only on account of a marginal increase of alcohol content to 62% an ASL will acquire any such property so as to make it a medicinal preparation within the meaning of Section 2(g) of the Act. The scientific G literature relied upon by the company-manufacturer regarding the properties of the alcohol cannot be a safe guide to determine the characteristic of the products in question. [1061-H, 1062-A) 1.4. In view of its advertisement stating therein that the Company H was engaged in manufacture of cosmetics (such as also the product in ST ATE v. COLFAX LABORATORIES LTD. 1053 issue) till as late as December, 1990 the Company itself was giving out A . that it is engaged in manufacture of cosmetics and not of any medicinal preparation. (1062-E-FI BPL Pharmaceuticals Ltd. v. Collector of Central Excise, (19951 Supp. 3 sec 1, distinguished. B 2.1. The licences for manufacture of both the ASLs were as a cosmetic product and they were throughout renewed for manufacture of cosmetic product. Section 18(c) of the Drugs and Cosmetics Act clearly lays down that no. person shall manufacture any drug except under and in accordance with the licence issued for such purpose .. C manufacture of drugs without a licence is an offence under Section 27 of the Drugs and Cosmetics Act. If as asserted by the company, it was manufacturing a drug or medicinal preparation it was clearly committing an offence and was liable for punishment as it had no licence for the said purpose. There being no provision for a prior D classification of product under the Act and the Rules made thereunder the entire proceedings commenced on the basis of the application given by the Company and culminating with the order of the Commissioner of Excise are wholly without jurisdiction. The order passed by the Commissioner of Excise on 23.3.1985 being without jurisdiction is a E nullity in the eyes of law and is liable to be ignored. (1067-F-H] 2.2. Rule 11 of the Rules will apply when duties or charges have been short levied through inadvertance, error, collusion or misconstruction on the part of an excise officer or through misstatement F as to the quantity or description of such goods on the part of the owner. After the order dated 23.3.1985 had been passed by the Commissioner of Excise, the concerned Excise Officer who made the relevant entries in Form A.R.-2 submitted by the Company could not have taken a different view and had to proceed on the footing that ASL, was a medicinal preparation. Being a subordinate officer he was fully bound G by the order of the highest excise authority of the State. Thereafter, till 1991 when notices were issued and the matter was finally decided by the Excise Commissioner, he had to proceed treating the ASL as medicinal preparation. In the fact situation, the concerned Excise Officer who made entries in Form AR-12 will be the Excise Officer for lI 1054 SUPREME COURT REPORTS [2003] SUPP. 4 S.C.R. A the·purposes of Rule-11 and 12 as the matter was not dealt with by any other authority. In- such circumstances it cannot be.held-that the duties or charges had been short levied through inadvertence,. error, collusion or misconstruction on the part of the concerned Excise Officer or through misstatement as to the quantity or description of B such goods on the part of the owner. Hence, Rule ·I I -of the Rules can have no application to the facts of the case. (1068-D-H, 1069-A] 2.3. Rule I2 confers residuary powers for recovery-of -sums due to Government. There being no specific provision for a case like the present one· for collection of duty which has been short levied, the C provisions of Rule I2 of the Rules will be applicable.There is no period of limitation prescribed under Rule '12.1 In· view of the ·fact that the order dated 23.3.I985 of·the Cominissioner of'Excise was an-order passed wholly without jurisdiction and consequently was a ntillity,-the Government is entitled to recover.the deficiency in duty w.e.f. the date D the duty was not paid. (1069-B-D] / J 'IJ91 .'• 3:As regarding-qualification of duties the view' of the High Court that-the phrase 'ad valorem' appearing in the column 'rate of duty' in the Schedule appended to the Act refers to the value of the excisable E goods and; therdore, it-will have to be :worked out by ·applying the formula as laid down in· Section 4(4)(d) of Central' Excise 'Act, is ·perfectly correct and calls for no interference. (1069-G-H, 1070A-B] CIVIL APPELLATE JURISDICTION : Civil Appeal No. 414 of F 2000: ,' ' G From die Judgment and Order dated i .4.99 of the Bombay High· Court at Goa, Panaji in W.P. No. 337 of 1998. WITH C.A. No. 415-of 2000. Mukui:Rohtagi, Additional Solicitor General;·M.S.'Usgaoncor, Dhruv Mehta~ Ms. Shalini 'Gu~ta; Mohit Chaudhary and -S:K. Gupta for the H Appellants. '' · · · - STATE v. COLFAX LABORATORIES LTD. [G.P. MATHUR, J.) 1055 Ashok H. Desai, Vikram Nankani, Ms. Ruby Singh Ahuja, R.N. A Karanjawala, Mrs. Manik Karanjawala and Ms. Pragya for the Respondents. The Judgment of the Court was delivered by G.P. MA THUR, J. : I. Mis Colfax Laboratories (India) Ltd. and B State of Goa have preferred these appeals by special leave against the judgment and order dated 1.4.1999 of High Court of Bombay (Goa Bench), by which the writ petition preferred by Mis Colfax Laboratories (India) Ltd. was partly allowed. 2. Mis Colfax Laboratories (India) Ltd. (for short 'Colfax') was C granted a licence to manufacture various types of cosmetics including after shave lotion under the trade mark 'Old Spice' on 15.4.1968 under the Drugs and Cosmetics Act. A licence under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 (for short 'the Act') in form L1 for manufacture of 'Old Spice' after shave lotion and cologne for men D as toilet preparations was granted on 1.4.1969. Till the end of the year 1984 excise duty on 'Old Spice' after shave lotion (hereinafter called as 'ASL') was paid on the basis that it was a toilet preparation. On 14.1.1985 Colfax moved an application before the Commissioner of Excise, Government of Goa for reclassification of Old Spice ASL as a 'medicinal preparation' E falling under Tariff Item No.l(i)(b) of the Schedule to the Act for the purpose of levy of excise duty. The Excise Commissioner vide his order dated 23 .3 .1985 classified the same as 'medicinal preparation'. Subsequently, by the order dated 12.6.1985 Old Spice ASL was classified as falling within the ambit of Item No.l(i)(b) of the Schedule. Colfax thereafter made application for refund of excess amount of the excise duty paid after 23 .3 .1985 which was allowed by the Commissioner of Excise and orders for refund of the excess amount of the excise duty were passed. F Mis PJM Pharmaceuticals Pvt. Ltd. moved an application before the Drugs Controller, Government of Goa on 14.1.1989 for manufacture of G some cosmetic products including 'Blue Stratos' ASL under the loan licence with Mis Colfax Laboratories (India) Ltd. which was approved and a licence was issued on 13.2.1989. The Exci~e Commissioner vide order dated 12. l 0 .1989 approved the price inclusive of duty, the duty component thereon as well as the maximum price for the products. Mis PJM H · 1056 SUPREME COURT REPORTS [2003] SUPP. 4 S.C.R. A Pharmaceuticals Pvt. Ltd. started paying duty on Blue Stratos ASL at the rate applicable to medicinal preparations. 3. On 15.5.1991, the Commissioner of Excise, Goa issued a notice under Rule 12 of the Medicinal and Toilet Preparations (Excise Duties) B Rules, 1956 to Colfax to pay balance of excise duty amounting to Rs.17, 77, 16,361.20 (Rupees seventeen crore, seventy-seven lakh, sixteen thousand, three hundred sixty one and paise twenty only) within 30 days from the date of receipt of notice on the ground that w.e.f. 1.4.1985 the company had paid excise duty on Old Spice range of ASLs as medicinal preparation though it should have paid duty as toilet preparation. On C 13 .3 .1991, a notice was issued to Mis P JM Pharmaceuticals Pvt. Ltd. to pay balance of excise duty amounting to Rs.92,43.684.08 (Rupees ninetey two lakh, forty three thousand, six hundred eighty four and paise eight only) within 30 days from the date of receipt of notice on the ground that it had paid excise duty on Blue Stratos ASL as a medicinal preparation D though it should have paid duty as toilet preparation. 4. Colfax then filed Writ Petition Nos.109of1991 and 351 of 1991 challenging the aforesaid notices before the Bombay High Court· (Goa Bench) which were disposed of with a direction to the Excise Commissioner E to treat the demand notices as show cause notices and thereafter to pass a final order after giving the Company an opportunity of hearing. It was left open for the Excise Commissioner to supplement the said notice by additional grounds or materials, ifhe so desired. Thereafter, supplementary memorandum were issued by the Excise Commissioner on 6.9.1991 and 30.9.1991 to which Colfax gave a reply. The Excise Commissioner after F hearing the parties gave his decision on 7 .11.1991 which was challenged in appeal by the State Government and Colfax· preferred Writ Petition No.84 of 1992 before the High Court. The High Court by its order dated 21.12.1994 directed the Excise Commissioner to decide all the issues afresh after giving an opportunity of hearing to the company. The Excise G Commissioner, after hearing the parties passed a detailed order on 12.8.1998 holding that after shave lotions were toilet preparations and the company was liable to pay excise duty as mentioned in the demand notices dated 13 .3 .1991 and 15 .5 .1991, which was challenged by Colfax by filing Writ Petition No.337 of I 998. - The High Court in its impugned order dated H 1.4.1999 has held that after shave lotions are toilet preparations and the .> J STATE v. COLFAX LABORATORIES LTD. [G.P. MATHUR, J.] 1057 Revenue was entitled to recover short paid duty on account of erroneous A classification of the aforesaid goods. The notices issued will have to be construed in exercise of power under Rule 11 of the Rules. Thus, the Revenue would be entitled to recover short paid duty on the goods cleared for which the duty was short paid within a period of six months immediately preceding the date of issue of each of the notices. It has been B. further held that the phrase 'ad valorem' appearing in the column 'rate of duty' in the Schedule appended to the Act refers to the value of excisable goods and, therefore, it will have to be worked out by applying the formula as laid down in Section 4(4)(d) of the Central Excise Act, 1944 and consequently, the excise duty will have to be deducted from the wholesale price and the figure arrived at would be the value of the excisable C goods. 5. Mis Colfax has preferred Civil Appeal No.415 of2000 challenging the finding of the High Court that 'Old Spice' and 'Blue Stratos' ASLs are toilet preparations and not medicinal preparations. The State of Goa has D preferred Civil Appeal No.414 of 2000 challenging the remaining part of the order of the High Court, wherein the notices have been directed to be treated to be under Rule 11 of the Rules and their right to recover the short paid duty has been restricted to a period of six months immediately preceding the date of issue of notices and also the direction regarding E manner of calculation of excise duty out of the wholesale price at which the goods in question were sold. 6. We will first consider the appeal preferred by Colfax, wherein challenge has been made to the finding of the High Court that ASLs are not medicinal preparations but are toilet preparations. Shri Ashok Desai, F learned senior counsel for Colfax has submitted that the term 'medicinal preparation' h3s been defined in Section 2(g) of the Act and it includes all drugs which are a remedy or prescription intended to be used for or in the treatment, mitigation or prevention of disease in human beings or animals. 'Toilet preparation' has been defined in Section 2(k) of the Act G and it means any preparation which is intended to be used in the toilet of the human body or any substance intended to cleanse, improve or alter the complexion, skin, hair or teeth and includes deodorants and perfumes. Learned counsel has submitted that the basic difference between the medicinal preparation and toilet preparation is the intent and purpose for H , .. 1058 SUPREME COURT REPORTS [2003] SUPP. 4 S.C.R. A which it is used. If the article is used for the treatment, mitigation or prevention of disease, it is a medicinal preparation but if it is used to cleanse, improve or alter the complexion, skin, hair or teeth, etc. then it is a toilet preparation. According to Colfax its ASL contains alcohol - 62%, Propylene glycol - 5%, Benzyl alcohol - 0.5% and the remaining is water. B Learned counsel has further urged that the concentration of alcohol in various ASLs manufactured by other companies is less than 60% whilst that manufactured by Colfax it is 62% and in fact actual test .results show that it is 63%. Where the alcohol is less than 60% in any ASL, it cannot have any medicinal properties and it will be treated as a toilet preparation, but where the concentration is more than 60%, it will have medicinal C properties. In this connection Shri Desai has referred to British Pharmacopoeia Codex and Remington Pharmaceutical-. Science to show that if strength of alcohol increases beyond 60% to 90% and ·beyond 90%, it has no microbiolisation. Reference has also been made to Martindale Pharmacopoeia to show that benzyl alcohol has also bactericidal properties. D Propylene glycol is a humectant and it promotes retention of moisture. It has been urged that after shaving skin may get fungus and, therefore, propylene glycol is used as moisturizer. Ethyle alcohol in a concentration of 62% to 65% has bactericidal effects. It is astringent to prevent penetration of bacterias and, therefore, it has antiseptic properties. Propylene E glycol is a humectant as well as inhibitant to fungus. Benzyl alcohol is a mild anaesthetic and has antiseptic properties. Therefore, composition of these products in the above mentioned proportion, it is contended, makes Old Spice and Blue Stratos ASLs made by the company as medicinal products. F 7. Shri M. Usgaonkar, learned Senior Advocate for the State of Goa, has submitted that Colfax had a licence to manufacture cosmetics and even the licence applied in the year 1989 for manufacture of Blue Stratos ASL for PJM was also for a cosmetic product. Colfax also admits that such after shave lotions which have a concentration of alcohol below 60% are toilet G preparations. Merely because the alcohol content is slightly increased and it goes up to 62% or 63%, it would not mean that the same will become a medicinal preparation. Learned counsel has submitted that ASL is basically an acqueous alcohol solution containing a perfume. The popular brands of ASLs in UK contain 50% to 70% of ethyl alcohol by weight and H in United States the volume of alcohol recommended for ASLs is 40% to STATE v. COLFAX LABORATORIES LTD. [G.P. MATHUR, J.] 1059 60%. Propylene glycol is preferred because it has low viscocity and high A volatility. Learned counsel has also laid stress upon the fact that after shave lotions contain perfume as a key component and nonnally perfume is not used in a medicinal preparation. It has thus been urged that the products Old Spice and Blue Stratos manufactured by Colfax are pure and simple toilet preparations and cannot be said to be medicinal preparations by any B stretch of imagination. 8. In order to appreciate the contention raised by learned counsel for the parties, it is necessary to have in mind the relevant provisions of the Statute under which the licence to manufacture the product is granted and the excise duties are levied. Section 2(a), 2(c), 2(g) and 2(k) C of the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 read as under: Section 2 (a) 'alcohol' means ethyl alcohol of any strength and purity having chemical composition C2H50H ; D (c) 'dutiable goods' means the medicinal and toilet preparations specified in the schedule as being subject to the duties of excise levied under this Act; (g) 'medicinal preparation' includes all drugs which are a remedy E or prescription' prepared for internal or external use of human beings or animals and all su!Jstances intended to be used for or in the treatment, mitigation or prevention of disease in human beings or animals; (k) 'toilet preparation' means any preparation which is intended for use in the toilet of the human body or in perfuming apparel of any description, or any substance intended to cleanse, improve or alter the complexion, skin, hair or teeth, and includes deodorants and perfumes. Sub-section (I) of Section 3 of the Act is the charging section and it lays down that there shall be levied duties of excise at the rates specified in the Schedule on all dutiable goods manufactured in India. Sub-section F G (3) of Section 3 lays down that subject to other provisions contained in the Act, the duties aforesaid shall be collected in such manner as may be H 1060 SUPREME COURT REPORTS [2003] SUPP. 4 S.C.R. A prescribed. Item 1 (i)(b) of the Schedule provides that the rate of duty on 'allopathic medicinal preparations' (other than patent or proprietory medicines) would be Rs. IO per litre of pure alcohol content. Item No.4 of the Schedule deals with toilet preparations and at the relevant time rate of duty for toilet preparations containing alcohol was 100% ad valorem. B Section 6 of the Act lays down that no person shall engage in the production or manufacture of any dutiable goods or of any specified components, parts or ingredients of such goods except under the authority and in accordance with the terms and conditions of a licence granted under the Act. Section 18( c) of the Drugs and Cosmetics Act, 1940 lays down that no person shall himself or by any other person on his behalf C manufacture for sale or for distribution or sale or stock or exhibit or offer for sale or distribute any drug or cosmetic except under and in accordance with the conditions of the licence issued for such. purpose. The definition of the term 'medicinal preparation' in Section 2(g) of the Act shows that it will include all such drugs which are a remedy or prescription prepared D for internal or external use of human beings or animals and all sflbstance intended to be used for or in the treatment, mitigation or prevention of disease in human beings or animals. Therefore, in order to come within the ambit of 'medicinal preparations' the intended use of the article must be for treatment, mitigation or prevention of diseqse. The article must be E used for the purpose of either curing or mitigating the disease after its symptoms have appeared or in prevention of any disease. If the intended use of the article is not for any one of the aforesaid purposes, it cannot be described as a 'medicinal preparation'. Therefore, the main question to be examined is whether 'shaving' results in some kind of a disease which F requires treatment by a medicine so that it may be cured or its effect is mitigated or at least an effort has to be made to prevent the happening of such disease by taking a preventive medicine. 'Disease' means an impairment of the normal state of the living animal that interrupts or modifies the performance of the vital functions being a response to environmental factors (as malnutrition, industrial hazards, or climate) or to specific G infective agents (as worms, bacteria, or viruses) or to inherent defects of the organism (as various genetic anomalies) or to combinations of these factors. The process of shaving does not cause any kind of impairment of the normal state of a person. It does not in any manner interrupt or modify the performance of any vital functions of the human body. Many people H have been shaving regularly every day fo; 40-50 years but no one has ever STATE v. COLFAX LABORATORIES LTD. [G.P. MATHUR, J.] 1061 suffered any kind of a disease. If the process of shaving would have A resulted in some kind of a disease, the best preventive measure to be adopted was not to shave. The number of persons who shave every day and have been shaving for years would run into crores even in our own country and except for a very insignificant percentage thereof, who belong to affluent class, no one uses any after shave lotion. But they have not B suffered any disease. Therefore, on a plain interpretation of the statutory provisions an after shave lotion cannot come within the ambit of a "medicinal preparation" as defined in Section 2(g) of the Act. 9. Section 3(aaa) of the Drugs and Cosmetics Act defines a 'cosmetic' and it means any article intended to be rubbed, poured, sprinkled or sprayed C 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. Section 3(b) of the same Act gives a very exhaustive definition of 'drug'. Sub-clause (i) thereof lays down that drug may include all D medicines for internal or external use of human beings or animals and all substances intended to be used for or in the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings or animals, including preparations applied on human body for the purpose of repelling insects like mosquitoes. Sub-clause (ii) thereof lays down that drug will E include such substances (other than food) intended to affect the structure or any function of human body or intended to be used for the purpose of destruction of vermin or insects which cause disease in human beings or animals as may be specified from time to time by the Central Government by notification in the Official Gazette. The definition of the terms 'cosmetic' and 'drug' in this Act will also show that until the intended use F of the article is for diagnosis, treatment, mitigation or prevention of any disea~ or disorder, it cannot be a drug. I 0. The technical material produced by Colfax shows that various kinds of after shave lotions (Aqua Velva, Park A venue, Monarch, Emami,, G etc.) generally contain concentration of alcohol below 60%. The only distinguishing feature pointed out by Colfax is that the alcohol content of the ASLs manufactured by it, viz., Old Spice and Blue Stratos is 62%. No authoritative scientific text has been placed before us to show that only on account of a marginal increase of alcohol content to 62% an ASL will H 1062 SUPREME COURT REPORTS [2003] SUPP. 4 S.C.R. A acquire any such property so as to make it a medicinal preparation within the meaning of Section 2(g) of ~he Act. It may be noted that according to Colfax the ASLs manufactured by it contain al~ohol - 62%, Propylene_ Glycol - 5%, Ben_zyl alcohol - 0._5% ?nd t_h_e rell)_aining 32.5% is w_ater. They also contain some perfume. According to f:larry's Cosmetico!ogy, B after shave lotion is basi~ally an acqueous alcohol solution containing a perfume. The desired balance of 'mild astringency' and 'coolness' is achieved by controlling ratio of ethyl alcohol to water. Popular bran~s of after shave lotions in UK contain 50% to 75% of ethyl alcohol by weight. In the United States also volume of alcohol in after shave lotions range from 40% to 60%. It is necessary to emphasise that we ar_e not con~erned C here with the properties of alcohol simplicitor but a solution which contains 62% alcohol and 33% water. Th_e said solution on account of presence of water cannot yield the same result as that of alcohol.simplicitor. Even a small percentage of presence of one ingredient may completely alter the chemical prop.erties of another ingredient. Jherefo~_e, the scientific lit_erature D relied upon by the learned counsel for Colfax in support of his submission regarding th_e prop_erties of the _al~ohol cannot be a safe guide to determine the characteristic of the products Old Spice and Blue Stratos. 11. There is another asp_ect of the matter which also deserv_es to be E noticed. The Company (Colfax) issued an advertisement in Dec_ember, 1990 inviting deposits from public for fj.xed period an~ offering 14% inter_est. In the details and particulars submitted as per the <;::ompanies (Acceptance of peposits) Rul_e, 1975, it was stated that the Company is engaged in the manufacture of cosmetics such as Old Spic_e ASL, Cologne, F etc. Ther_efore, till as late as D_e~_ember, 1990, th_e ~ompany itself was giving out that it is engaged in manufa~ture of ~osm_etics find not of any medicinal preparation. 12. Shri Ashok Desai h_as placed great reliance in support of his submission on BPL Pharmaceuticals Ltd. v. Collector of Central Excise, G [1995] Supp. 3 sec I, wher_ein the de~~sion ofCE9AT h9lding 'Selsun' Shampoo as a ~osm~ti~ pr9~u~t was rev_ersed ~y this ~purt ~nd it was held to be a drug or medi~in~. The judgment shows that the <;::ourt w~nt into the chemical ~?m pon~nts pf th~ i:f1icle, the n?tur~ <;>fuse find ~h~ ~on tents of the label on the bottle. The main factors which w_eighed with th~ Court H were : (i) the arJ:i~le was use~ f?r tr_e?tm_ent of a diseas_e 1