Products classified as medicinal must demonstrate intended use for treatment; hence, after shave lotions are toilet preparations, subject to excise duties.

1 M/s Colfax Laboratories (India) Ltd. and 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 M/s Colfax Laboratories (India) Ltd. was partly allowed.

2 M/s Colfax Laboratories (India) Ltd. (for short 'Colfax') was 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 L - 1 for manufacture of 'Old Spice' after shave lotion and cologne for men 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' falling under Tariff Item No. 1(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. 1(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.
2.1. M/s PJM Pharmaceuticals Pvt. Ltd. moved an application before the Drugs Controller, Government of Goa on 14.1.1989 for manufacture of some cosmetic products including 'Blue Stratos' ASL under the loan licence with M/s Colfax Laboratories (India) Ltd. which was approved and a licence was issued on 13.2.1989. The Excise Commissioner vide order dated 12.10.1989 approved the price inclusive of duty, the duty component thereon as well as the maximum price for the products. M/s PJM 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 R.12 of the Medicinal and Toilet Preparations (Excise Duties) 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 13.3.1991, a notice was issued to M/s PJM Pharmaceutical Pvt. Ltd. to pay balance of excise duty amounting to Rs.92,43.684.08 (Rupees ninety 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 though it should have paid duty as toilet preparation.

4 Colfax then filed Writ Petition Nos. 109 of 1991 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 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, if he 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 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.