Customs, Excise and Gold Tribunal - Bangalore
Arya Vaidya Pharmacy (Cbe) Ltd. vs Commissioner Of C. Ex. on 2 July, 2004
Equivalent citations: 2004(172)ELT338(TRI-BANG)
ORDER S.L. Peeran, Member (J)
1. Both these appeals arise from a common Order-in-Appeal Nos. 498/2001 and 499/2001, dtd. 20-12-2001. The appellants are manufacturers of ayurvedic products. In respect of four specific products the original authority had classified the same as cosmetics/toilet preparations under Customs Tariff Headings 3304 and 3305,99, while the appellants claimed classification under Chapter Heading 3303.30 w.e.f. 1-3-97 as ayurvedic medicaments. The finding recorded by the Commissioner (Appeals) on merits of the case is extracted below as all the documents and the aspects have been clearly brought out on the same. The findings recorded in Para 4(A) to 8 are reproduced herein below :-
(A) (i) From the records it is seen that the Departmental proceedings to revise the classification was initiated as per the Supreme Court judgment dated 30-3-95 in the case of Sri Baidyanath Ayurved Bhawan Ltd. The subsequent Ministry's circular F. No. 333/49/97 CR, dated 10-9-97 reported in 1997 (95) E.L.T. T-14 was issued relying on the Supreme Court judgment and Tribunal decisions in the case of M/s. Alpine Industries reported in 1997 (92) E.L.T. 53 (T), M/s. Richardson Hindustan Ltd., 1998 (35) E.L.T. 424 (T). As per Ministry's circular the Commissioners were directed to re-examine the assessments of products claimed to be Ayurvedic medicines under Ch. 30 so as to re-determine their classification under Central Excise Tariff Act, 1985. For the correct classification, the following facts were required to be kept in view :-
(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 medicine/drug. It may be noted that the 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 a 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) Chapter 30 and Chapter Note 2 to Chapter 33 and various judgments mentioned above.
(ii) Hence the appeal is to be examined in the light of the above guidelines in so far as the four products manufactured by them. On examination of the facts it is seen that, (a) all the four products are manufactured under the Drug Licence No. 33/25D/76 in Form No. 5 specified for the manufacture of ayurvedic drugs only, (b) all the four products are manufactured in accordance with the formula approved by the Drugs Controller as required under the Drugs and Cosmetics Act, 1940, (c) the products do not contain any cosmetic ingredient or any perfume. All the ingredients used are those mentioned in basic ayurvedic text books and are having medicinal properties, and (d) in order to exclude a product from the coverage of the Notification I(d) of Chapter 33, it should be proved that the product falls under Chapter 33.
(iii) According to Chapter Note 2 of Chapter 33, to classify at product as cosmetic, (a) the product should be suitable for usage as goods of Chapter 33, (b) the product should be put up in packings with labels, literature and indications that they are for use as cosmetic or toilet preparation, and (c) it should be put up in a form clearly specified to such use and includes products whether or not they contain subsidiary prophylactic or antiseptic constituents or are held out as having subsidiary curative or prophylactic value.
(B) In order to examine the above parameters, the details of these 4 products as given on the labels are as discussed below :
(i) From the details on the label of 'Kesini' written on the picture of green leaf it can be seen that Kesini is used while taking bath. The usage is given as - "take 2 to 3 tsps of Kesini in 30 ml of warm water in a bowl and apply it thoroughly in a wet scalp, gently massage in a circular motion and wash thoroughly." It is claimed that application of Kesini will "make a gentle, nourishing protective hair leaving the hair bouncing and lustrous." There is no mention of any specific disease or aliment that can be cured by this Kesini. Thus even though the department has no case that any special cosmetic ingredient or synthetic/chemical substances are added to the product during its preparation, it is difficult to consider mis product as a medicament; rather it is to be classified as a cosmetic or toilet, preparation satisfying the basic parameters mentioned in Chapter Note 2.
(ii) Similarly, the label of the product Lavanya with the face of a woman is printed as "a herbal facial mix". The details on the label reads indication- "For the skin texture and facial glow. How to use Mix 2 tsps of powder in unboiled milk or water and apply on the face. Keep for 2 hrs. For best results keep overnight". In this case also no cosmetic or synthetic substances are added. The product was not aimed at curing any ailment or disease. Thus, this product also cannot be considered as medicine. Instead the same would qualify as cosmetic or toilet preparation to be classified under Chapter 33.
(iii) The product Baby Oil is labelled with the picture of a child with a caption "Give Your Baby A Soft Touch". "Indication - Cures bed sore, helps in better cutanious circulation, improves texture of the skin and prevents roughness. Dosage: For external use only (massage)." Thus the message printed on the label clearly indicate that the products is conceived as a cosmetic preparation to leave the baby skin soft; And not as specific remedy for any specified illness or disorder. Thus, with the evidences on record the. product is more appropriately perceived by the users as a cosmetic preparation meant for babies.
(iv) The product Firm Up also does not specifically indicate as a specific remedy for any specified illness or disorder. The indication on label reads - "For undersized/underdeveloped and enlarging/hanging of breasts". The Dosage given is "for external use only (by massage)." Thus this product also could not qualify to be treated as a medicine and the same would satisfy the parameters of Note 2 and 6 of Chapter 33.
(C) On a verification of the specimen labels approved by the Drugs Controller and filed along with the appeal, it is seen that for all the three products Baby Oil, Kesini and Lavanya, just below the name within brackets the writing "An Ayurvedic Medicine preparation" was shown. For the product Firm Up (Thailam) it was shown as 'An Ayurvedic Medicine'. But on the labels as appearing on the specimen samples produced at the time of Personal Hearing, it is noticed that there is no such inscription as 'An Ayurvedic Preparation' or 'An Ayurvedic Medicine'. It is only mentioned as "MFD BY THE ARYA VAIDYA PHARMACY (COIMBATORE) LTD.". Again, the indication as appearing on the labels on the packing/bottles do not mention any specific disease or illness and thus in the popular parlance these products are neither marketed nor perceived as medicaments. The appellant has not disputed the advertisement describing the cosmetic properties of these products which appeared in publications relied upon by the Original Authority in the impugned orders. The contention that the advertisement was given by their distributor for booking up the sales and for withstanding the competition in the market cannot be accepted as they claim that the products are available only in their Depots/Agencies and not in open market. On the contrary, it establishes that the products are being advertised and marketed through their Depots/Agencies as cosmetic products.
(D) Though the ingredients are admittedly natural herbs/plants, fruits etc. generally used in ayurvedic medicines having medicinal properties, and referred to in basic ayurvedic texts, all these 4 products are neither made as per any authoritative text nor are mentioned as such in any such books. Thus even though the 4 products are claimed as medicaments, the therapeutic values are not substantial and instead are only subsidiary in nature. Therefore, these products are presented for usage as goods of Chapter 33. Being ayurvedic medicine there is no necessity for a mandatory prescription from a physician or Doctor to purchase from the market. The specific period of usage and specific ailments for which to be used etc. are glaringly absent in the labels for all these products. Medicaments are normally prescribed in doses for a limited time and for specific conditions/ailments. The medicinal properties of the ingredients used are only shown in the formula claimed for approval by Drugs Controller. It has been repeatedly held that the Drug Licence cannot be determining factor for the classification of a product but may be used as guide only. Thus the only point in their favour that the products are manufactured by an ayurvedic pharmacy as per specific Drug Licence No. DL No. 33/25D/76 issued by the Drugs Controller cannot be accepted as the sole deciding factor for the classification of these products.
0.5 In view of the above analysis, as per the Rules of Interpretation 3. (a) under Central Excise Tariff Act, 1985 and the Chapter Note 1 of Chapter 30, Note 2 of Chapter 33, the 4 products are to be held not as branded ayurvedic medicines under Chapter 30 but are more appropriately classifiable under Chapter 33, despite the fact that they are manufactured under a Drug Licence. Therefore, the products Lavanya, Firm Up and Baby Oil would fall under Central Excise Tariff Heading 3304.00 and Kesini under Central Excise Tariff Heading 3305.99 as held by the Original Authority.
0.6 It is observed that the impugned order No. 97/98 dt. 12-5-98 has been issued finalizing the classification of the products with effect from 1-3-
97. But there is no mention about the demand of differential duty involved either in the Show Cause Notice or the order. As per order No. 12/99 dt. 4-2-99, the differential duty proposed in the Show Cause Notice dt. 30-10-98 for the period 1-4-98 to 30-9-98 has been confirmed for the demand of Rs. 21,103/-.
0.7 In the light of the discussions above the two orders are upheld as legally correct and sustainable to the above extent.
0.8 The two appeals are accordingly disposed of as rejected.
2. Ld. Consultant filed a written submission and contended that the item is not a cosmetic/toilet preparation and they are medicaments. He relied on the trade licence issued for the goods in Form-25D for ayurvedic medicines and not in Form 32 applicable for cosmetics. He stated that the goods were manufactured in accordance with the ayurvedic formulae approved by the Drugs Controller. He submits that the products did not contain any cosmetic ingredient or any perfume and the ingredients used were only natural herbal plants and fruits and the ingredients are those mentioned in the basic ayurvedic text book. He also submitted that the goods are not offered for sale as cosmetics and not a preparations under Chapter 33. Hence it is excludable from Chapter 33. He also submitted that the goods are not for daily use as cosmetics but used for specific purposes and the use is discontinued on attaining the desired effect. It is his submission that in usage, on price and dosage the impugned goods differs from cosmetics. He also contended that no expert opinion for classifying the goods as cosmetics have been obtained by the Department whereas the appellant had proved by producing the drugs licence that the goods are ayurvedic products. He relied on the judgment rendered by the Apex Court in the case of Naturalle Health Products Pvt. Ltd. as reported in 2003 (158) E.L.T. 257 wherein it has been mentioned that if ingredients as mentioned in authoritative ayurvedic text book are used and Drugs licence is also relied then the product is required to be treated as ayurvedic medicines. He further relied on the ratio of the following judgments : -
(i) Herbal Products v. CCE, Calicut - 2002 (146) E.L.T. 126 (Tri. - Bang.)
(ii) CCE, Coimbatore v. Pee Gee Pharma [2003 (155) E.L.T. 341 (Tri. -Chennai)
(iii) CCE, Calcutta v. Pandit D.P. Sharma [2003 (154) E.L.T. 324 (S.C.)]
(iv) Burman Laboratories Ltd. v. CCE, Indore [2003 (154) E.L.T. 661 (Tri.-Del.)]
(v) CCE, Calcutta v. Sharma Chemical Works [2003 (154) E.L.T. 328 (S.C.)]
(vi) Manisha Pharma Plasto Pvt. Ltd. v. Union of India [1999 (112) E.L.T. 22 (Del.)]
(vii) Griffon Laboratories Pvt. Ltd. v. CCE, Bombay [2003 (156) E.L.T. 787(Tri. - Del.)
(viii) Pandit D.P. Sharma v. CCE, Calcutta [2001 (133) E.L.T. 723(Tri-Kolkatta)]
(ix) Naturalle Health Products Pvt. Ltd. v. CCE, Hyderabad [2003 (158) E.L.T. 257 (S.C.)]
3. Ld. SDR distinguished the judgments relied by the Id. Consultant on the grounds that none of the items manufactured by the appellants are medicaments as it does not have any therapeutic properties. He submitted that mere fact of the appellant taking drug licence is not sufficient nor the ingredients mentioned in ayurvedic text books. The appellants have not proved that the item is not a cosmetic and they are medicaments. He submitted that even the appellants' claim in respect of the items is that they are :
(a) Kesini Herbal Hair Wash Powder. Even in terms of their claim it is only made to remove the wet scalp by washing it through this powder.
(b) Lavanya Powder is also meant for cosmetic purpose. As claimed by them it is applied to the skin by mixing it in boiled milk or cold water and washed out the next day. The claim is also meant for use on the skin to keep it as fresh as morning dew.
(c) Firm up is an oil used for massaging the breast that are under sized/under developed and hanging.
(d) Ayushman is a baby oil meant to better cutaneous circulation, improve texture of the skin and prevent roughness.
He submits that the judgments cited by the Consultant specifically referred to therapeutic and curative properties and claimed to be medicaments and not as a cosmetics and therefore those judgments are not applicable. He relied on the Supreme Court judgments which have held that the products are for care of skin or hair and not cure of skin or hair and had been held that the therapeutic or prophylactic properties are merely subsidiary. He relied on the following judgments : -
(a) CCE, Nagpur v. Puma Ayurvedic Herbal Pvt. Ltd. [2003 (155) E.L.T. 561 (Tri. - Del.)
(b) Sunny Industries Pvt. Ltd. v. CCE, Calcutta [2003 (153) E.L.T. 259 (S.C.)]
(c) Alpine Industries v. CCE, New Delhi [2003 (152) E.L.T. 16 (S.C.)]
4. On a careful consideration of the submission and on perusal of the detailed order of the Commissioner (Appeals) which is extracted, it is seen that :-
(a) Kesini is a herbal hair wash powder. There is no doubt that ingredients are ayurvedic but even in terms of appellants' own claim it is not a medicament but it is meant only to add a mild fragrance to the newly washed hair and remove the scalps therein. There is no claim of this item being a medicament for therapeutic, prophylactic or curative purpose. Therefore, it is a cosmetic and the classification adopted by the Revenue under Chapter 33 is correct one and is required to be confirmed.
(b) Lavanya is a powder meant to improve the skirt texture. It is not claimed that has got any prophylactic or therapeutic properties and merely because it has got ayurvedic ingredients it cannot be considered as medicaments unless it is shown that it has got properties in the therapeutic, prophylactic or curative in nature. Hence it has to be treated as cosmetic.
(c) "Firm up" is an oil for massaging the breast which are under developed, under sized and hanging. It is not meant for any curative, prophylactic or therapeutic purpose for any ailment. Hence, it has to be treated as cosmetic.
(d) 'Baby oil', as claimed by themselves, is meant for better cutaneous circulation to improve the texture of the skin and to prevent roughness. It is also a cosmetic preparation and it is not claimed to be used for therapeutic, curative or prophylactic purpose and therefore the claim of the Department to classify the items as cosmetic/toilet preparation under Chapter 33 is required to be upheld.
5. We notice that the Tribunal in the case of CCE v. Puma Ayurvedic Herbal Pvt. Ltd. (supra) has noted that products for care of skin or hair are required to be treated as cosmetic/toilet preparation under Chapter 33 and has also noted that mere therapeutic or prophylactic properties is not sufficient and as they are only subsidiary in nature. The Tribunal has also found that the items cannot be treated as medicaments. The Apex Court in the case of Sunny Industries Pvt. Ltd v. CCE, Calcutta (supra) has also held that massage oil is to be treated as meant for care of skin to be covered under Chapter Heading 33.04 and not as a medicament under Heading 30.03. The Apex Court in the case of Alpine Industries v. CCE, New Delhi (supra) has held that skin care cream 'lip salve' is used for care of the skins and it is essentially meant protective/preventive preparation for chapping of lips, though incidentally it may have some curative effect on cracked and chapped lips. Therefore, the Apex Court upheld the classification under Chapter 33.04 as skin care cream and not as a medicament under 30.03.
6. All the above three citations clearly apply to the facts of the case. In so far as the judgments relied by the Consultant, we notice that in the case of Naturalle Health Care Product, the claim was that the item is meant for treating cough and various other ailments and that they were medicaments. The Apex Court after careful consideration found the items to be medicaments and upheld that contention, therefore this judgment is clearly distinguishable. So also in the case of Herbal Products v. CCE, Calicut, the item was considered to be medicament and in the light of the opinion of the Drug Controller and experts. So also in the case of CCE v. Pee Gee Pharma the item was found to be a medicament in the light of the evidence produced. In the case of CCE v. Sharma Chemical Works, the 'Banphool oil' was treated as medicine as it was used for treatment of headache, eye problem, night blindness, reeling head, weak memory, hysteria, ammenesia, blood pressure, insomnia, etc. Likewise, the Delhi High Court in the case of Manisha Pharma Plasto Pvt. Ltd. v. Union of India held that the nycil prickly heat powder was a drug as it had curative properties and not a cosmetic item. The Tribunal in the case of Griffon Laboratories Pvt Ltd. v. CCE, Bombay noted that paraminol cream was meant for treatment of skin by filtering out ultra violet B rays and it was to be used only on prescription by the Doctors. Therefore, the citations relied by the Id. Consultant are distinguishable as the Tribunal and the Apex Court have clearly held that the items have therapeutic, prophylactic and curative properties and the items are sold as medicaments under prescription. There is no claim of the appellant in the present case that the item is sold on prescription or it has got therapeutic, prophylactic or curative effect. There is no claim that the items are capable of curing any skin disease. Their own claim is that it is meant for massaging the skin to add a mild fragrance to the newly washed hair (Kesini Herbal Hair Wash Powder), to improve skin texture (Lavanya Powder), to tone up breasts (Firm up), for cutaneous circulation and to improve texture of the skin (Baby oil). In view of the judgments of the Apex Court and the Tribunal relied by the SDR, the order passed by the Commissioner is just, legal and proper. There is no merit in these appeals and the same is rejected.