Customs, Excise and Gold Tribunal - Delhi
Naturence Research Lab (P) Ltd. vs Commr. Of C. Ex. on 31 January, 2003
Equivalent citations: 2003(154)ELT672(TRI-DEL)
ORDER V.K. Agrawal, Member (T)
1. The issue involved in this appeal, filed by M/s. Naturence Research Lab (P) Ltd., is whether the products manufactured by them are Ayurvedic medicament falling under subheading 3003.39 of the Schedule to the Central Excise Act as claimed by them or under Chapter 33 of the Tariff as confirmed by the Commissioner (Appeals) in the impugned Order.
2. Shri J.P. Kaushik, learned Advocate, mentioned at the outset that out of 29 products involved in the appeal, the Appellants are challenging the classification, as confirmed in the impugned Order, only in respect of five products at Serial Nos. 2, 6, 19, 21 and 23; that in respect of Serial Nos. 4, 16, and 21, namely, Floral Body Gel, Natural Touch and Forest Flower, the Department has classified the products under Tariff Heading other than the Tariff Heading proposed in the show cause notice; that for example Floral Body Gel was proposed to be classified under sub-heading 3304.00 but it had been classified under sub-heading 3307.39 of the Tariff; that the classification of any product can not be determined under a new Heading without putting the manufacturer on Notice. He also mentioned that the Department has confirmed the classification of products "Strike" and "Keratene" (Serial Nos. 1 and 20) as claimed by them under sub-heading 3003.39 of the Tariff.
3.1 The learned Advocate submitted that the Appellants have been granted manufacturing licence of Ayurvedic Drug by the Director of Ayurveda, Harayana after they submitted the complete details of ingredients, their reference in authoritative text book, formulations and other particulars; that sub-heading 3003.31 of the Tariff covers Classic Ayurvedic Medicaments that is the medicaments manufactured exclusively in accordance with the formulae described in authoritative books specified in the First Schedule to the Drugs and Cosmetics Act, 1940 sold under name as specified under such books; that sub-heading 3003.39 covers all other Ayurvedic Medicaments manufactured otherwise that is having ingredients exclusively mentioned in the authoritative books, but manufactured in accordance with the formulations of the manufacturer. He relied upon the decision of the Larger Bench of the Tribunal in Himtaj Ayurvedic Udyog Kendra v. CCE, Allahabad, 2002 (139) E.L.T. 610 (Tri. - LB) = 2002 (48) RLT 264 (CEGAT-LB) and contended that the products in question are having ingredients exclusively mentioned in the authoritative text books, but manufactured in accordance with their formulations and sold under their trade name and accordingly are classifiable under sub-heading 3003.39 of the Tariff; that the vial or bottles and the containers clearly bore the marking "Ayurvedic Medicines", that no prudent businessman would describe its cosmetic products as medicines.
3.2 The learned Counsel explained the ingredients used in each products, their properties and use as under :-
(i) COMAL (For Cracked Feet) Ingredients : Kaju 1%, Badam 1%, Neem 2%, Pudina Tail 1.8%, Katha 2.5%, Madhu 2%, Gulab 3%, Ghritkumari 4.5%, Salai Guggal 4.5%, Marham base contained Madhu Mom 10%, Til Tail 25%, Parishrut Jal (to make 100%).
Properties : This cream helps to cure the problem of cracked feet. Its soothing effect helps to improve muscular.
Circulations thereby providing relaxing effect to the feet.
Use: To be used regularly for cracked feet.
(ii) LA FAIRE (Anti Blemish Lotion) Ingredients : Gulab 2.9%, Gajar Beej 3.2%, Ghrit Kumari 4%, Nariyal Tail 15%, Peet Chandan 1%, Badam Tail 1.2% Yashad Bhasm 12%, Kulanjan 4.2%. Jojoba Tail 1%, Jaiphal 1.40%, Kheera 5%, Lotion based containing Madhu Mom 2%, Samundar Kai 4%, Bihidana 4%, Parishrut Jal (to make 100%) Properties: A De-pigmentation and anti-blemish treatment with the antiseptic properties of sandalwood to minimise the dark patches and lines thereby improving complexion.
Use : Stop once the symptoms are clear.
(iii) TURMERIC 'N' CLOVE (Antiseptic Anti-acne Treatment) Ingredients : Aam 4.2%, Palash 3.8%, Kali Mirch 1.35%, Gulab 4.5%. Nimbic Amla 1.0%, Multani Mitti 10.6%, Shankh Bhasm 2.9%, Haldi 2.8%, Lavang Tail 1.5%, Parishrut Jal (To make 100%) Properties : This has antiseptic healing properties for acne skin. It helps to remove epidermal impurities and deep seated pollutants which cause pimples and acne.
Use: Use till the symptoms are cured.
(iv) FOREST FLOWER : (HAIR REJUVENATOR OIL) Ingredients : Bhringraj 2.65%, Brahmi 1.84%, Jatamansi 2.7%, Japa Pushp 3.15%, Nilani 2.9%, Akhrot 2.95%, Amla 3.48%, Ghrit Kumari 1.65%, Maju Phal 1.75%, Badam Tail 1.0%, Narial Tail 65.0%, Til Tail 34%, Palash 2.70%.
Properties : A non-greasy hair tonic effectively controls dandruff, hair loss and brittleness of hair. This helps to improve the strength and texture of hair. Makes hair more manageable.
Use : Can be used daily to impart strength and to control hair fall.
(iv) BASIL 'N' NEEM (Treatment Scalp Cleanser) Ingredients : Har Singar 2%, Madhu 2.05%, Neem 3.4%, Badam Tail 1.0%, Bakayan 2.8%, Methi 3%, Nimbu 2.6%, Geru 3.9%, Shikakai 5%, Tulsi 9%, Parishrut Jal (to make 100%) Properties : Blended with ayurvedic extracts, mis cleanser cleanses the scalp and hair thereby controlling the dandruff and hair fall.
Use: Can be used twice a week.
3.3 He also mentioned that the Reference books are (1) Drav Gun Vigyan (2) Bhav Prakash Nighand and (3) The India Material Medica. He contended that as these products cure diseases and are manufactured using ingredients which are specifically mentioned in the authoritative text books on Ayurveda; that the Larger Bench in Himtaj Ayurvedic Udyog Kendra case has held 'Himtaj Oil' as Ayurvedic medicament as it is having ingredients exclusively mentioned in the authoritative books, but manufactured in accordance with the formulation of the manufacturer. He also contended that directions for use and period have also been indicated; that in the case of BPL Pharmaceuticals Ltd. v. CCE, 1995 (77) E.L.T. 485 (S.C.) = 1995 (8) RLT 569 (S.C.), the Supreme Court classified the product 'Selsun' as medicine as it was intended to cure dandruff and was to be used twice weekly initially and then as often as necessary or as directed by the Physician. He, therefore, mentioned that the impugned products are also Ayurvedic medicaments and not cosmetics.
4.1 The learned Advocate also mentioned that show cause notice dated 31-3-98 for demanding duty for the period from 1-4-1996 to 20-8-96 is clearly time barred; that it had been mentioned in Board's Circular No. 25/91 dated 3-10-91 that the Government had accepted the two tests laid down by the Tribunal in the case of Richardson Hindustan Ltd. v. CCE [1988 (35) E.L.T. 424 (T)] for determining the classification of the products claimed to be as Ayurvedic medicines; that the Tribunal had held in that matter that a preparation would merit classification as an Ayurvedic medicine, if in the common parlance, it is known as an Ayurvedic medicine and all its ingredients are mentioned in the authoritative books on Ayurvedic medicine; that these tests had also been upheld by the Supreme Court in Civil Appeal No. 2127 of 1988 [1989 (42) E.L.T. A100 (S.C.)] - CCE v. Richardson Hindustan Ltd. The learned Counsel thus contended that even as per Department's own understanding such items were being classified as Ayurvedic medicaments; that the said circular was suppressed vide Circular No. 360/76/97-CX, dated 3-12-97 only; that even if it is held that the impugned products are not "Ayurvedic Medicines" the demand up to 2-12-1997 is liable to be set aside. He further mentioned that extended limitation could not be invoked as they were under a bona fide belief that their products were ayurvedic medicine; that their two products had also been classified as Ayurvedic medicines by the Adjudicating Authority; that classification of a product is a matter of belief and their bona fide belief was based on the facts that they possessed a Drug License from the competent authority, manufactured goods as per formulations mentioned in the authoritative text books and the Circular dated 3-10-1991; that the confusion was also prevalent which is evident from Circular No. 333/49/97-CX, dated 10-9-1997. Reliance has also been placed on the decision in Cosmic Dyes and Chemicals v. CCE, 1995 (75) E.L.T. 721 (S.C.) and Granite (India) Ltd. v. CCE, 1997 (92) E.L.T. 84 (T). He also contended that no penalty is imposable on them as it is well settled that in matters involving interpretation of the provisions of the statute, no penalty is imposable - Unipatch Rubber Indus. v. CCE, Bhopal, 2001 (130) E.L.T. 348 (T) = 2001 (42) RLT 508 (T). Finally the learned Advocate submitted that if duty is held to be payable, the price should be treated as cum duty price as held by the Supreme Court in CCE, Delhi v. Maruti Udyog Ltd. - 2002 (141) E.L.T. 3 (S.C.) = 2002 (49) RLT 1 (S.C.) and by the Larger Bench of the Tribunal in Srichakra Tyres Ltd. v. CCE - 1999 (108) E.L.T. 361 (Tri. - LB) = 1999 (32) RLT 1 (CEGAT-LB); that the demand of duty has not been worked out properly as the exemption under Notification Nos. 140/83 and 1/93-CE has not been properly given.
4.2 Countering the arguments, Shri R.C. Sankhla, learned DR, submitted that for a product to be classified as a medicine, it should be for therapeutic or prophylactic use; that the Adjudicating Authority, after studying the details of each product, came to the conclusion that except "Strike" and "Keratene" no other products is Ayurvedic medicines; that further as held by the Supreme Court in Shree Baidyanath Ayurved Bhawan Ltd. v. CCE, Nagpur, 1996 (83) E.L.T. 492 (S.C.) = 1995 (10) RLT 327 (S.C.), the popular meaning, that is to say, meaning attached to the products by those using the same should be resorted to for the purpose of classification, that it is to be seen as to how the product is described on the label; that if the product is having subsidiary therapeutic or prophylactic property, it can not be classified as medicine under Chapter 30 of the Tariff; that this is evident from Note 1(d) to Chapter 30 which excludes "preparations of Chapter 33 even if they have therapeutic or prophylactic properties'" from the purview of Chapter 30 of the Tariff; that further Note 2 to Chapter 33 also provides that Heading Nos. 33.03 to 33.07 apply to products suitable for use as goods of these headings whether or not they contain subsidiary pharmaceutical or antiseptic constituents, or are held out as having subsidiary curative or prophylactic value; that it is thus clear that subsidiary therapeutic or prophylactic values will not take away the products from the cosmetics character.
4.3 The learned DR, further mentioned that "Comal" is supposed to cure the problem of cracked feet; that cracked feet is not disease; that the impugned product merely moistens the foot to prevent it from cracking and it is like Vaseline with a view to soften the feet, that as such "Comal" is not a medicine and is classifiable as a pedicure preparation under Heading 33.04 of the Tariff; that as per literature, "La-faire" minimizes dark patches and lines on the skin thereby improving complexion; that the label describes this product as an anti-blemish fairness lotion and regular use ensures clear and fairer look; that this product is for regular use, that as such "La-faire" is also a skin care item and not treating any disease; that this is, therefore, appropriately classifiable under Heading 33.04 of the Tariff. He, further, contended that "Turmeric 'N' Clove" as per literature, has been described as an antiseptic skin treatment paste which also helps to remove skin impurities which cause pimples and acne; that this product does not claim to be a treatment for pimples or acne and can not, therefore, be treated as a medicine; that "Turmeric 'N' Clove" is nothing but a variety of a face pack in the nature of a skin care product, falling under Heading 33.04.
4.4 The learned DR also mentioned that "Forest Flower" as per literature, is a hair tonic to give nourishment to the hair scalp and root; that the product is not packed with any printed instructions/literature indicating its use as a medicine, prescribed dosage, etc.; that there is no evidence of any clinical trials being conducted on the product being sold to, or prescribed by a medical practitioner, that the product is a hair care lotion classifiable under sub-heading 3305.99 of the Tariff; that as per literature "Basil 'N' Neem" is a scalp cleanser; that the label on the product refers to it as an antiseptic cleanser and is supposed to prevent dandruff; that the product is nothing but a shampoo with anti-dandruff properties; that there is no printed instruction indicating its use as a medicine, the prescribed dosage, etc., that there is no evidence of any clinical trials that thus the product is classifiable as a hair care item under sub-heading 3305.99 of the Tariff.
4.5 Finally the Learned DR submitted that the extended period of limitation is invokable as the Appellants did not file classification declaration under Rule 173B or price declaration under Rule 173C of the Central Excise Rules, 1944; that the fact of manufacture of hair care and skin care products has been suppressed by them from the Revenue; that they may have the view that products are Ayurvedic medicines but they cannot take a decision on their own on the aspect without consulting with the Central Excise Officers; that statements of S/Shri A.S. Parihar, Technical Officer, Manoj Prabhakar and R.K. Nanda, Directors clearly reveal that they were aware that they were manufacturing products for the care of hair, skin and mouth; that this is also apparent from the fact that the appellants are not contesting the classification of all the products; that they are contesting the classification of only 5 products. He also relied upon the decision of the Supreme Court in the case of BPL India Ltd. v. CCE, Cochin, 2002 (143) E.L.T. 3 (S.C.) = 2002 (50) RLT 249 (S.C.), wherein the Supreme Court has held that extended period of limitation is invokable as the assessee did not disclose the manufacture of the excisable goods and their removal to the Department.
5.1 We have considered the submissions of both the sides. Note 2 to Chapter 30 of the Schedule to the Central Excise Tariff Act defines Medicaments as under :-
"2... .For the purposes of heading No. 30.03
(i) 'Medicaments', means goods (other than foods or beverages such as dietetic, diabetic or fortified foods, tonic beverages) not falling within heading No. 30.02 or 30.04 which are either :-
(a) Products comprising two or more constituents which have been mixed or compounded together for therapeutic or prophylactic uses, or
(b) Unmixed products suitable for such uses put up on measured doses or in packings for retail sale for use in hospitals."
It is thus apparent from Note 2 to Chapter 30, which deals with "Pharmaceutical Products", that the products to be considered as medicaments, must have therapeutic or prophylactic uses. Merely because of the fact that some ingredients mentioned in the Authoritative text books on Ayurveda have been used in the manufacture of a product, would not make the product a 'medicament'. The product should be mainly for therapeutic or prophylactic uses. This view is strengthened from Note 1(d) to Chapter 30 which provides that Chapter 30 does not cover "Preparations of Chapter 33 even if they have therapeutic or prophylactic properties. Further Note 2 to Chapter 33 retains the products under Chapter 33 only as products falling under Heading Nos. 33.03 to 33.07 even if "they contain subsidiary pharmaceutical or antiseptic constituents, or are held out as having subsidiary curative or prophylactic value." This was also the view of the Larger Bench of the Tribunal in the case of Shri Baidyanath Ayurved Bhavan v. CCE, Patna, 2002 (140) E.L.T. 459 (Tri. - LB) = 2002 (48) RLT 897 (CEGAT-LB) wherein the Larger Bench confirmed the classification of 'Dant Manjan Lal', comprising of several ingredients and manufactured according to the formula prescribed in the Book included in the First Schedule to the Drugs and Cosmetics Act, 1940, under Heading No. 33.06 of the Tariff and not under sub-heading 3003.31 of the Tariff.
5.2 The learned Advocate has only challenged the classification of five products, mentioned in Paragraph 2 of this Order, besides mentioning that products namely "Floral Body Gel", "Natural Touch" and "Forest Flower" have been classified under heading/sub-heading different from the Heading/sub-heading proposed in the show-cause notice. He has also mentioned that the Revenue has accepted the classification under sub-heading 3003.39 in respect of two products namely 'Strike' and 'Keratene'. Thus the appellants have not challenged the classification as confirmed under the impugned Order in respect of remaining twenty products. We, therefore, uphold the impugned Order as far as classification of those products is concerned.
5.3 As far as products "Floral Body Gel" and "Natural Touch" are concerned, we observe that these have been classified under sub-heading 3307.39 and 3307.10 respectively as against 33.04 proposed in the show cause notice. We remand the matter in respect of classification of these two products to the Adjudicating Authority for re-adjudication after affording a reasonable opportunity of hearing to the Appellants.
5.4 The learned Advocate has not challenged the classification of a number of products under Chapter 33 of the Tariff though they contain ingredients mentioned in the Authoritative Text Books on Ayurveda. It is thus clear that merely using ingredients mentioned in the Books on Ayurveda is not sufficient to hold the product as "medicine" and as held by the Supreme Court in the case of Shree Baidyanath Ayurved Bhavan Ltd. v. CCE, Nagpur, 1996 (83) E.L.T. 492 (S.C.) = 1995 (10) RLT 327 (S.C.), the scientific and technical meanings would not advance the case of the appellants if the same runs counter to how the product is considered in popular parlance. This is also to be seen as to whether the product is having therapeutic or prophylactic use as the main use or subsidiary use. The product 'Comal' heals the cracked feet. The product also makes the same claim. As 'Comal' is curing cracked feet, its main use is as medicine and can not be classified under Heading 33.04 which applies to "Beauty or make-up preparations and preparations for the care of the skin (other than medicaments)......" We observe that Heading 34.04 specifically excludes medicine from its purview. Accordingly, we hold that Comal is an Ayurvedic medicine classifiable under Chapter 30 of the Tariff. Similarly "Turmeric 'N' Clove" is also not classifiable under Heading 33.04 as the product is used for 'acne' and 'pimples' and is classifiable as Ayurvedic Medicine under Chapter 30. The learned Advocate has mentioned that "Basil 'N' Neem" is used on scalp and hair to control dandruff and hair fall. In BPL Pharmaceuticals Ltd. v. CCE, 1995 (77) E.L.T. 485 (S.C.), the Apex Court classified the product 'Selsun' as medicaments under Chapter 30 as it was intended to cure dandruff in spite of the fact that even the Appellants had previously described the product as "Selsun shampoo". We, therefore, hold that "Basil "N" Neem" is also not classifiable under Heading 33.05 which covers "Preparations for use on hair" but is classifiable as Ayurvedic medicament under heading 30.03.
5.5 We, however, agree with the learned DR that Products namely "La Faire" and Forest 'N' Flower" are not Ayurvedic medicaments and these are classifiable under Heading 33.04 and 33.05 of the Tariff. Product La Faire is nothing but a preparation for the care of the skin as it helps, as per label on the product, to minimize scars, blemishes and dark patches and regular use ensures clear and fairer look. It is thus not a medicament, as it has no main therapeutic or prophylactic use. Product "Forest Flower" is mainly to "give nourishment to the scalp and hair roots" as per matter mentioned on the packing. The product also helps "control hair loss and prevents scalp infection, encourages luxurious growth of hair". The product is to be used every day. It is thus a "preparation for use on the hair" falling under Heading 33.05 and is not a Ayurvedic medicine. The Larger Bench of the Tribunal in Shri Baidyanath Ayurved Bhavan's case has classified Dant Lai Manjan under Heading 33.06 as it was for daily use and not as a medical prescription for treatment of any disease. We find no force in the submission of the learned Advocate that the product has been classified under sub-heading 3305.99 as against 3305.10 proposed in the show cause notice. Heading 33.05 applies to "Preparations for use on the hair." Sub-heading 3305.10 applies to perfumed hair oils and 3305.99 covers all "other" preparations. As the product has been classified under main Heading 33.05, a mere change in sub-heading has not caused any prejudice to the Appellants inasmuch as the dispute was whether the product is Ayurvedic medicine or preparation for use on the hair and not between sub-heading 3305.10 and 3305.99.
6. The appellants have submitted that extended period of limitation is not applicable in view of the bona fide belief held by them that their products are Ayurvedic medicine in the light of Board's Circular No. 25/91, dated 3-10-91 which was withdrawn only in 1997. We are not convinced with the said submission of the appellant since the issue of Circular dated 3-10-91 should have made the appellant's conscious of the fact that there are disputes regarding the products manufacture by them. Further the two tests which were accepted by the Government for determining the classification of the product as Ayurvedic Medicine were common parlance test and the fact that all ingredients were mentioned in the authoritative books on Ayurvedic medicine. It has not been disputed by the appellants that had never disclosed the fact of manufacture of the impugned product and their clearances to the department. We find force in the submissions of the learned DR that once the department came to know about their manufacturing activity and objections were raised in treating their products as Ayurvedic medicines, they have themselves not contested classification under Chapter 33 in respect of 20 products out of total 29 products manufactured by them. Further Supreme Court recently in the case of BPL India Ltd. has held that extended period of limitation is invokable when the manufacturer had manufactured the products and removed the same without any intimation to the department. We, therefore, hold that the extended period of limitation is invokable. However, we agree with the learned Advocate that the price charged by them will be treated as cum duty price and the assessable value will be determined after allowing the permissible deductions in terms of Supreme Court's decision in the case of Maruti Udyog Ltd. - 2002 (141) E.L.T. 3 (S.C.) = 2002 (49) RLT 1 (S.C.). The appellants have also claimed the benefit of exemption under Notification No. 1/93 and 140/83 and they have also challenged the calculation of the duty done by the Revenue. As the matter has to go back to re-calculate the duty to be charged from the appellants, these aspects of availability of exemption notification and calculation mistake may also be re-examined before calculating the amount of duty. We also leave the question of imposition of penalty open to the jurisdictional authority.
7. The appeal is disposed of in the above terms.