Hair Oil AHAHO's Classification as Medicament, Rejects Cosmetic Label

On 3 May 2023, the Supreme Court of India settled a long-standing dispute over the classification of the product AHAHO. The court held that AHAHO should be classified as a "medicament" under Chapter 30 of the Central Excise Tariff Act, 1985, rather than a "cosmetic or toilet preparation" under Chapter 33. This landmark judgment, delivered on May 3, 2023, carries significant implications for the classification and regulation of similar products in the future.

The dispute centered around the interpretation of the twin test, consisting of the ingredients test and the common parlance test, to determine the true nature of AHAHO. After careful consideration of the findings of the Adjudicating Authority, the submissions made by the appellant, and the observations of the Tribunal, the Supreme Court arrived at its decision.

Under the ingredients test, the court examined the composition of AHAHO and established that it contained four homeopathic medicines: Arnica Montana, Cantharis, Pilocarpine, and Cinchona. The court relied on authoritative texts, such as the Homeopathic Pharmacopoeia of India and the Dictionary of Practical Materia Medica, to confirm the legitimacy of these ingredients. It dismissed doubts raised by the Adjudicating Authority regarding the utility of Pilocarpine as a homeopathic drug, highlighting that AHAHO had obtained proper registration as a homeopathic medicine.

Turning to the common parlance test, the court refuted the appellant's argument that AHAHO's availability in both medical and general stores, as well as its over-the-counter purchase, classified it as a cosmetic. The court referenced prior judgments, emphasizing that availability and non-prescription status alone did not dictate the categorization of a product as a medicament. Additionally, the court noted that AHAHO possessed therapeutic and prophylactic properties, as indicated by its intended use and composition, further supporting its classification as a medicament.

Addressing the contention that AHAHO's labeling as "Hair Oil" necessitated a cosmetic classification, the court highlighted that the label prominently displayed the terms "Homeo" and "Arnica" alongside the expression "Hair Oil." These preceding terms indicated the medicinal nature of the product, rendering the "Hair Oil" reference secondary. The court further emphasized that depictions on the label, such as a woman with long flowing hair, were consistent with the product's intended indications for hair fall control, dandruff prevention, and improving sleep quality.

The court swiftly dismissed the Revenue's argument that amendments made to Chapters 30 and 33 in 2012 justified re-classification. It concluded that these changes, although broadening the scope of the chapters and providing detailed specifications, did not fundamentally alter the character of AHAHO. The court drew on earlier judgments to underscore that changes in the tax structure did not warrant re-classification unless the product itself underwent significant transformation.

Date: May 3, 2023

COMMISSSIONER OF CUSTOMS, CENTRAL EXCISE AND SERVICE TAX, HYDERABAD   VS ASHWANI HOMEO PHARMACY