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Ayurchem Products Vs. Commissioner of Central Excise - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Mumbai
Decided On
Judge
Reported in(2005)(190)ELT275Tri(Mum.)bai
AppellantAyurchem Products
RespondentCommissioner of Central Excise
Excerpt:
.....have been followed by the adjudicating authority to confirm the classification of the impugned goods under chapter 33 as cosmetics and toilet preparations and the impugned order is based on the following case law:-shree baidyanath ayurved bhavan ltd. v. cce, nagpur [1996 (83) elt 492 (sc)]alpine industries v. cce, delhi 9. the issue regarding classification of goods under the rival chapters has been a subject matter of dispute for some time now. the board in the circular dated 10.9.1997 cited supra, has directed the field formations to keep the following factors in mind while classifying the products under chapter 30 or 33 of ceta, 1985:- "(a) the perception of the product in popular parlance, whether as medicaments or cosmetics/toilet requisite. the advertising, marketing and the.....
Judgment:
2. The appellants M/s. Ayurchem Products manufacture ayurvedic preparations and classify them under Chapter 30 of the Central Excise Tariff Act, 1985 and claim total exemption/concessional duty as ayurvedic medicaments (3003.30 of CETA), under notifications 75/94-CE dated 29.3.1994 and 8/94-CE dated 1.3.1994 as the case may be. The following 13 products are manufactured by them:- 3. The department contends that the above listed goods fall under Chapter 33 and accordingly confirms the demand for duty under that chapter as cosmetics or toilet preparations. Hence these appeals.

5. The learned advocate, Dr. D.M. Mishra, on behalf of the appellants, contends that the manufacturers hold a drug licence for manufacture of ayurvedic medicaments; that the Directorate of Ayurved, Maharashtra State, certified that the products are ayurvedic medicines; that the products are manufactured exclusively out of ingredients prescribed in the authoritative ayurvedic text books and/or formula prescribed therein; that the ayurvedic ingredients used in each of the products have been mentioned on the labels; that the products are recommended by medical practitioners for treatment of specific ailments; that dosages are also specified on the labels and were recommended for use only for a limited period; that various affidavits and certificates of doctors and chemists clearly establish that the products in question are ayurvedic medicaments; that the products are sold from chemists shop; that a common man understands them only as ayurvedic medicament; that the Board's circular dated 10.9.1997 has been misinterpreted by the lower authorities; that their request for retest of the samples has not been acceded to, and that the principles of natural justice have been violated. The appellants rely on the following case law in support of their contention that the products fall under sub-heading 3003.30 of CETA.BPL Pharmaceuticals Ltd. v. CCE, Vadodara [1995 (77) CLT 485 (SC)] 6. The appellants contend that if the products in question are classified under Chapter 33, the slab-wise exemption under notification 140/83-CE dated 5.5.1983 should be accorded. It is also contended that the duty has been calculated on the cum duty price without giving the abatements required to be given as ruled by the Tribunal in Sri Chakra Tyres Ltd. v. CCE, Meerut [1999 (108) ELT 361].

7. On behalf of the Revenue, it is contended that the request for retest was not accorded by the Commissioner for good and valid reasons; that it is usual for an advertiser of products to claim all possible virtues for his product but the classification of goods cannot be done on the basis of claims in advertising material; that the fact of manufacture of an item under licence under the Drugs and Cosmetics Act is not a criteria for determining the classification under CETA; that the certificates and affidavits given by the Vaidyas do not advance the case of the appellants; that if a product is prima facie classifiable under two or more headings, classification has to be determined as per Rule 3A and Rule 3C of the Rules for interpretation; that some of the products amongst the 13 listed above are in the nature of skin care used basically for beautifying the skin; that some other products are used externally on hair for stopping hair loss, splitting of hair or untimely greying and for improving the quality of hair; that in respect of one product, it is basically used for the care of teeth and gums for cosmetic effect; that in the case of Shree Baidyanath Ayurved Bhavan Ltd. v. CCE, Nagpur [1996 (83) ELT 492 (SC)], the Supreme Court held that tooth powder is a toilet preparation; that the products are preparations for the care of skin or hair; that the Board's circular No. 333/49/97 dated 10.9.1997 specifies detailed guidelines for classifying the products of this nature; that these guidelines have been followed by the adjudicating authority to confirm the classification of the impugned goods under Chapter 33 as cosmetics and toilet preparations and the impugned order is based on the following case law:-Shree Baidyanath Ayurved Bhavan Ltd. v. CCE, Nagpur [1996 (83) ELT 492 (SC)]Alpine Industries v. CCE, Delhi 9. The issue regarding classification of goods under the rival chapters has been a subject matter of dispute for some time now. The Board in the circular dated 10.9.1997 cited supra, has directed the field formations to keep the following factors in mind while classifying the products under Chapter 30 or 33 of CETA, 1985:- "(a) The perception of the product in popular parlance, whether as medicaments or cosmetics/toilet requisite. The advertising, marketing and the manner in which the product is put up may also be taken into consideration.

(b) It may be ascertained that the products claimed to be medicaments, should have substantial therapeutic claims which are not subsidiary in nature and the mode of prescription and use should be similar to that of a medicine/drug. It may be noted that medicaments are normally prescribed in doses, for a limited time, and for specific conditions/ailments.

(c) The drug licence may be used as a guide for the classification of product but not as the determining factor. The classification of a product under Chapter 30 or Chapter 33 may be done as per the Rules of Interpretation of the Central Excise Tariff Act, 1985 read with Chapter Note 1(d) to Chapter 30 and Chapter Note 2 to Chapter 33 and various judgments mentioned above." 10. We have perused the relevant chapter notes under Chapter 30, particularly 1(d) of Chapter 30 and chapter notes 2, 5, 6 and the heading 33.06 to Chapter 33. It is clear from the chapter notes that the preparations of Chapter 33 even if they have therapeutic or prophylactic properties, are excluded from Chapter 30. Further, goods to fall under Chapter 33.03 to 33.07, the products should fulfil the criteria prescribed under chapter note 2 to Chapter 33. The products under Chapters 33.03 to 33.07 would inter alia satisfy the following conditions:- (b) Put up in packings with label, literature or other indications that they are for use as cosmetics or toilet preparations, or (d) Includes products whether or not they contain subsidiary pharmaceutical or antiseptic constituents or are held out as having subsidiary curative or prophylactic value.

Chapter notes 5 and 6 inter alia specify certain type of products by description/use etc. to which headings 33.04 and 33.05 apply.

11. The lower authorities have found that the first eight products listed above are in the nature of skin care and skin shine and skin troubles used basically for beautifying the skin. The next four products, according to them, are used externally on hair for slopping hair loss etc. The last product in the list is held to be a tooth powder used continuously for the care of teeth and gums for cosmetic effect, The lower authorities held, therefore, that the goods are correctly classifiable under heading 33.05 etc. We observe that it is the appellant who is seeking the benefit of notification and, therefore, it is upto him to adduce evidence to show how he is entitled to the benefit of notifications 8/94 and 75/94. They seek to discharge the burden by filing affidavits/certificates.

12. The appellants have placed heavy reliance on the Supreme Court's decisions in the case of BPL Pharmaceuticals Ltd v. CCE, Vadodara [1995 (77) ELT 485 (SC)], Amrutanjan Ltd. v. CCE [1995 (77) ELT 500 (SC)] etc. We, however, find that these decisions do not help the appellants.

In the BPL Pharmaceutical's case, the Supreme Court was dealing with a product called 'Selsun' used for treatment of dandruff. The Hon'ble Court held it to be a medicament classifiable under Chapter 30. We find that in that case, the department itself was classifying the product as medicament, but suddenly changed the classification as cosmetic product. In paragraph 39 of the judgment, the apex court concluded as follows:- "On a perusal of the entire material we are satisfied that the product in question, having regard to the preparation, label, literature, character, common and commercial parlance understanding and the earlier decisions of the Central Board of Excise and Customs, would fall under sub-heading 3003.19 and there is no justifiable reason for changing the classification. As we have reached the above conclusion with reference to the materials placed before us on facts, we do not think it necessary to go into other decisions cited at the Bar. In the result the appeals are allowed holding that the product 'Selsun' will fall under Tariff Item 3003.19. However, there will be no order as to costs." 13. Thus, in view of earlier decisions of the Board, the Court did not find any justifiable reason for changing the classification. In the Amrutanjan Ltd.'s case, the dispute related to classification of goods under the same chapter, i.e. Chapter 30. The Hon'ble Supreme Court held that the ingredients used in the manufacture of Amrutanjan were known to be ayurvedic products and since they were known to Ayurved, their use in the making of the balm would make the final product as an ayurvedic medicament.

14. We have seen the other decisions relied upon by the appellants.

According to us, they also do not help the appellants' case. In Manish Pharmaceuticals, the product before the Tribunal was 'Softovac', a medicament in which the husk of isafgol was the major ingredient and it is to be ingested specifically for elimination of constipation. The issue related to the classification under sub-heading 3003.30 or under 3003.10. The Tribunal held in that case that the said product was an ayurvedic preparation and classifiable under sub-heading 3003.30. In UOI v. G.D. Pharmaceuticals Ltd. cites supra, the product, i.e. Bordine containing boric acid with zinc oxide, was being classified under item 14E of the erstwhile Central Excise Tariff as patent and proprietary medicine. The High Court of Calcutta held that the introduction of new tariff under CETA did not make any difference to the issue of classification of medicaments and rejected the argument that because of change in the tariff headings, the same product is classifiable under a different chapter heading, viz. 33.04.

15. The Hon'ble Supreme Court in the case of Alpine Industries [2003 (152) ELT 16] was dealing with a product named 'Lip Salve'. The apex court held that the product is a skin care cream used for the care of the lips and is therefore liable to be classified under Chapter heading 33.04 as per note 2 read with note 5 of Chapter 33 and not as medicament under heading 30.03. The Hon'ble Supreme Court found that the product is essentially a protective/preventive preparation for chapping of lips though incidentally it may have curative effect on cracked and chapped lips. The Court held in that case that the product is not only used by soldiers in high altitudes but it is used as a protective cream in cold weather or against bright sun. The Court held that certificates issued by the Army authorities and chemical ingredients of a product are not decisive. Insofar as classification of goods for levy of central excise duty, commercial parlance theory is applicable for classification of products under the tariff. The apex court did not agree that a protective cream or a barrier cream which is used against skin irritants is a medicament falling under Chapter 30.

In another case of Sunny Industries Pvt. Ltd. [2003 (153) ELT 259], the Supreme Court was dealing with classification of 'AD-Vitamin Massage Oil Forte' containing A and D vitamins. The Court held that the oil in question is not used for cure of skin but is an oil for massage even if it prevents ailment of rickets and treats the same. The Court held that the oil is used for care of the skin and not for the cure of the skin and is therefore covered by heading 33.04 of CETA. In view of these pronouncements and other judicial decisions containing in cases reported in 2003 (155) ELT 561 and 2004 (172) ELT 338 wherein the Tribunal dealt with the classification of products of this nature, we are unable to take a different view from the one taken by the lower authorities. We confirm that the 13 products in question are preparations for the care of skin hair and teeth and are therefore covered under sub-headings 3304.00, 3305.90 and 3306.10 respectively.

In Alpine Industries's case, the Supreme Court has laid down the criteria for determining the classification of products which claim curative and prophylactic properties. The apex court emphatically held that the chapter notes under the two rival chapters should be the criteria for determining the classification of the goods. We have followed the Hon'ble Supreme Court's ratio laid down in Alpine Industries to come to the conclusion that the products in question are classifiable under Chapter 33.

16. The appellants are also not entitled to the benefit of notifications 8/94 and 75/94 for the above reasons.

17. The appellants' claim for exemption under notification 140/83-CE dated 5.5.1983 is also considered by us. We reject the claim for the benefit of this notification as the basic condition under this notification for slab-wise duty entitlement is not satisfied inasmuch as no declaration has been filed by the appellants as required under the notification.

18. We agree with the appellants that the price charged by them has to be considered as cum duty price. The impugned order does not show that this aspect has been considered by the lower authority. In the case of Sri Chakra Tyres [108 ELT 361], the Tribunal in a larger bench held that where demand has to be calculated on the basis of price charged, proper abatements are required to be given treating such a price as a cum duty price. The lower authority has not followed the ratio of the above said decision. The duty therefore has to be recalculated treating the price at which the goods are sold, as a cum duty price. In view of the fact that the duty amount has to be redetermined, we set aside the penalty imposed and direct the original authority to redetermine the price and the penalty, if any.

19. The appeals are thus allowed by way of remand in the following terms.

(a) The impugned goods are classifiable under Chapter 33 of CETA, 1985 under appropriate headings. The goods are not eligible for the concessional duty under notifications 8/94 and 75/94.

(b) Exemption under notification 140/83 is not available to the appellants.

(c) The price charged to be considered as cum duty price and duty calculated in accordance with law. Upon such determination, the appellants are directed to pay the duty.

19. Needless to say that such determination will be done by the original authority after giving a reasonable opportunity to the appellants of being heard.


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