Customs, Excise and Gold Tribunal - Delhi
Naturelle Health Products Pvt. Ltd. vs Collr. Of C. Ex. on 17 October, 1995
Equivalent citations: 1996(81)ELT578(TRI-DEL)
ORDER Gowri Shankar, Member (T)
1. The issue for decision in this appeal is whether the medicated cough drops and throat drops manufactured by the appellants for M/s. Procter & Gamble (India) Limited and marketed under the brand named 'Vicks' are classifiable as patent or proprietary medicaments under sub-heading 3003.10 of the Central Excise Tariff or as Ayurvedic medicament under sub-heading 3003.30. In his impugned order, the Collector of Central Excise (Appeals), Hyderabad has confirmed the decision of the Assistant Collector of Central Excise, Hyderabad that the goods should be classified under sub-heading 3003.10 as a patent or proprietary medicament not as Ayurvedic medicament as claimed by the appellants.
2. We have heard Shri A. Hidayatullah, Advocate and Shri V.S. Nankani, Advocate for the appellants. The department's case was represented by Smt. Vijay Zutshi, Director (Publication) and Shri Sharad Bhansali, SDR. We have also considered the written submissions filed by the Advocate for the appellants subsequent to the hearing. No submission was filed by the Departmental Representative.
3. The arguments put forth by Shri Hidayatullah are as follows :
The appellants manufacture the goods in accordance with the licence issued under the Drugs and Cosmetics Act, 1940 for manufacture of patent or proprietary Ayurvedic medicine. This licence is issued by the competent authority after consulting an expert in the Ayurvedic System of Medicine as provided in Rules 154 and 154A of the Drugs and Cosmetics Rules, 1945. The licence is granted after due enquiry by the competent authority who has the required knowledge and expertise for that purpose. The licence is subject to annual renewal subject to fulfilment of conditions which embrace the premises of manufacturers' place, conditions relating to maintaining records, sampling of the goods as well as materials, labelling of the drugs etc. There is no definition of Ayurvedic medicament in the Central Excise Tariff, Central Excises and Salt Act, 1944 for the goods. It is a settled legal position that in the absence of such statutory definition, the goods are to be given the meaning in accordance with commercial parlance as understood by persons in the trade [India International Industry v. Commissioner of Sales-tax (AIR 1981 SC1079)]. The Bombay High Court has held that for levy of sales tax under the Goa Sales Tax Act [or] the Central Sales Tax Act, the provisions of the Drugs Act and the rules have over riding effect and must prevail. The true and real meaning of the drug in trade or in commerce is the meaning given to it in the Drugs Act 'Leukoplast India Ltd. v. State of Goa [1988 (36) E.L.T. 369A]. The provisions of Chapter 4 of the Drugs Act are in addition to and correspond to provisions of Chapter 4A of the Act which deal with Ayurvedic, Siddha and Unani drugs. Therefore, the licence issued under the Drugs Act for manufacture of the goods as Ayurvedic drugs is conclusive and determinative of the classification of the goods as Ayurvedic medicament for levy of excise duty. The Madhya Pradesh High Court has held that, in the absence of the definition of drugs in the Central Excises and Salt Act, 1944, the assistance of the Drugs Act can be taken from understanding the scope of Tariff Item 14E of the erstwhile Central Excise Tariff - Ramesh Chemical Industries v. Union of India [1980 (6) E.L.T. 598]. These three judgments have been followed by the Madhya Pradesh High Court in Panama Chemical Works v. Union of India [1992 (62) E.L.T. 241], in determining that the product 'Swad' was an Ayurvedic medicine as claimed by its manufacturers and not confectionery. This Tribunal has also been given effect to the provisions of the Drugs Act on the Collector of Central Excise v. Pharmaceutical Capsule Laboratories [1986 (25) E.L.T. 211]. The Tribunal held that it was bound by the Ramesh Chemical judgment, both in logic and in law. The Tribunal again referred to Ramesh Chemical case in Hoechst India v. Collector of Central Excise [1992 (62) E.L.T. 165] and held that tripartigen plates are drugs within the meaning of Section 3(b) of the Drugs Act and classifiable under Tariff Item 14E. The Tribunal has held 'Hajmola Candy' containing 75% sugar is ayurvedic medicine, following the Panama Chemical judgment in the case of Dabur India v. Collector of Central Excise [1994 (71) E.L.T. 1069]. There is no decision of the Hon'ble Supreme Court or any High Court contrary to the decisions in Leukoplast India Ltd., Ramesh Chemical and Panama Chemical. The Calcutta High Court in Calcutta Clinical Research Science Ltd.. v. Union of India (1971 Taxation Law Report 1073), therefore, has applied reference of drugs as under Drugs Act and held that manufacture of drugs is only complete after labelling. Whereas a consistent view has been taken by four High Courts and the Tribunal has expressed conflicting views, the judgments of the High Court are binding, as held by the Tribunal in 1985 (21) E.L.T. 904, 1987 (27) E.L.T. 93,1987 (28) E.L.T. 438, 1994 (70) E.L.T. 754 and 1994 (72) E.L.T. 735. The ratio of the Supreme Court's judgment in M.G. Abrol v. Shantilal & Company, [AIR 1966 SC 197] supports the view expressed by the High Courts. In that judgment, the Court held that when the Iron and Steel Controller, the licensing authority had certified that the consignment of iron and steel scrap was not useable in India and licensed its export, the Customs could not confiscate it on the ground that the scrap was not of the description given in the licence. While the Excise authority had jurisdiction to classify the product in accordance with the Tariff Headings and Rules for its interpretation, it is not open to them to open an enquiry into whether medicament per se is an Ayurvedic medicament or not.
4. Smt. Vijay Zutshi for the Collector of Central Excise, Hyderabad invited our attention to extracts from the following materials :
(a) Ayurvedic System of Medicine by Nagendranath Sen Gupta
(b) Materia Medicament of Ayurvedic
(c) Materia Medica of Pharmaceutical Combinations
(d) Matrindale Pharmaceutical Index; and
(e) Product Literature of Shree Baijnath Ayurved Bhawan By doing so, she sought to state that Ayurvedic medicine must not only contain ingredients prescribed in the recognised text on ayurveda but also must be manufactured in accordance with the formule prescribed therein. Section 3(a) of the Drugs Act defines Ayurvedic drug as one manufactured exclusively in accordance with the formula described in the authoritative books of Ayurvedic System of Medicines specified in the First Schedule to the Act. The appellants did not dispute that some of the ingredients in the product were synthetic formulations. The goods cannot, therefore, be considered to be Ayurvedic medicines. Sub-heading 3003.30 would not cover patent or proprietary ayurvedic medicaments. Heading 3003.10 excludes only those Ayurvedic, Unani, Siddha, Homeopathic or Bio-Chemic medicaments which are exclusively so. Since the goods claimed by the appellants to be patent or proprietary ayurvedic medicines within the meaning of Section 3(a) of the Drugs Act, they would, therefore, not cease to be patent or proprietary medicaments classifiable under Heading 3003.10. She relied upon the decision of this Tribunal in Amrutanjan Ltd. v. Collector of Central Excise [1991 (32) ECR 538] and of this Tribunal in Bhoruka Industries Pvt. Ltd. v. Collector [1992 (59) E.L.T. 652]. She invoked the judgment of the Hon'ble Supreme Court in Ishwar Singh v. State of UP (AIR 1966 SC 1450) to add emphasis to her interpretation [of] the word 'exclusive' occurring in Section 2(a) of the Drugs Act and sub-heading 3003.10 has the same meaning.
5. Shri Hidayatullah sought to counter her arguments. He said that the goods being patent or proprietary Ayurvedic medicament be excluded from the phrase 'other than those medicaments' which should qualify the patent or proprietary medicaments in Heading 3003.10. He argued that the decision in Amrutanjan case is not good law as it is contrary to the judgments in the High Courts cited earlier. Further, it is for the competent authority under the Drugs Act to look into and interpret the scope of ayurvedic medicaments. He attempted to point out some further flaws in that decision. The view that use of synthetic ingredients would render the item non-ayurvedic was now contrary to the judgment of the Madhya Pradesh High Court in Panama Chemical Works in which the Court held the product 'swad' which contained 75% liquid glucose which is an allopathic and ayurvedic medicine. He said that a plea of new argument in view of a subsequent discovery cannot affect the binding precedent as held by the Supreme Court in Ambica Prasad v. State of UP (AIR 1980 SC 1762). Since the Bhoruka Industries Pvt. Ltd. decision followed Amrutanjan that would also not be binding. He sought to distinguish (AIR 1968 SC 1450) cited by the Departmental Representative. He relied upon the maxim Generalia Specialibus Non Derogant citing AIR 1961 SC 1170 and AIR 1978 SC 16.
6. Subsequent to the hearing, a request was received from the appellants not to decide the appeal like the Supreme Court had decided the appeal of Amrutanjan.
7. The Assistant Collector and the Collector (Appeals) have not claimed that the product is not a medicament. Their objection to classification of the goods as ayurvedic medicines is that some of the ingredients are synthetically prepared. Relying upon the Amrutanjan decision, they have held that the product has synthetic ingredients and is not prepared according to the formula laid down in any authoritative text books of Ayurveda cannot be held to be Ayurvedic medicine. They, therefore, proceeded to classify goods as patent or proprietary medicines under Heading 3003.10. The issue in the present appeal, therefore, is whether the product, which is admitted to be a medicament by both. sides, is an Ayurvedic medicine classifiable under Heading 3003.30 under patent or proprietary medicine classifiable under Heading 3003.10.
8. Subsequent to the hearing of this appeal, the Supreme Court passed its order in the appeal filed by the assessee against the order of this Tribunal in M/s. Amrutanjan v. Collector of Central Excise reported in 1991 (32) ECR 538. In its judgment the Court has overruled the findings of this Tribunal, holding that methyl salicylate, thymol, turpentine and dementholised oil were known to ayurveda and their use in making of Amrutanjan did not by itself make it a non-ayurvedic product. The observations of the Supreme Court would apply to the present case. "Methol" thymol and camphol used in the manufacture of the drops have been described by manufacturer as pudina ka tel or pudina ka arca, ajwain ka phool and karpoor. That these products figure as ingredients of ayurvedic medicines in the texts known to ayurveda has been established from the evidence produced by Shri Hidayatullah at the hearing. These substances in fact are mentioned as ingredients in the ayurvedic medicines manufactured by M/s. Baidyanath, the catalogue of which was relied upon by the DR. The presence of these products and the fact that they were manufactured by processes other than traditional processes, therefore, would not be a bar to the goods being considered ayurvedic medicine.
9. In his order, the Collector (Appeals), has in fact accepted that the appellants manufacture their products in accordance with the licence issued under the Drugs and Cosmetics Act. But, he says that this does not stop the department from going into the composition of the product for purposes of classification. We are not able to agree with the proposition that once an article is being manufactured in accordance with the licence issued under the Drugs Act, the department cannot go into the classification of the product. The definition of "drug" in the Drugs Act is much wider than the definition of medicaments classifiable under Heading 3003 of the Tariff. The Central Excise Tariff includes, as we have seen in para 7, a number of goods which would not be classifiable under Heading 3003. Some of the goods defined as drugs under the Drugs Act and manufactured in accordance with the licence under that Act would be classifiable under Heading 30.02 (Vaccines) 30.04 (Certain kinds of bandages) 29.36 or 29.37. These are only a few examples. The function of the department relating to classification of goods for the purposes of assessment to Central excise duty therefore, necessarily entails study, independently and what the authorities under the Drugs Act may have correlated as to the nature of the product. Due consideration will of course have to be given to the fact that product is licensed under the Drugs Act. This would not however, be a conclusive determinant of classification.
10. This is in fact what the Collector (Appeals) has done, while accepting that the goods have been manufactured under licence for ayurvedic drugs he [has] held that these cannot be classifiable as Ayurvedic medicament for the reasons that synthetic ingredients have been used as manufacture and that the formula of the drugs had not been shown to be in accordance with the authorised books on Ayurvedic. The first objection stands disposed of in view of the Supreme Court's judgment in the Amrutanjan case. As to the second, there is no requirement in the Central Excise Tariff that there should be manufacture in accordance with the formulae contained in Ayurvedic texts. The decision of the Madhya Pradesh High Court in Panama Chemicals Works v. Union of India [1992 (62) E.L.T. 241] that 'Swad' tablets, which contained Ayurvedic ingredients but have been manufactured according to the manufacturer's own formula was an ayurvedic medicine is squarely in favour of the present appellant. This decision has been followed by this Tribunal in Dabur India v. Collector of Central Excise [1994 (71) E.L.T. 1069]. The Tribunal noted that there was no contrary decision. The Departmental Representative could not rebut this view. It has, therefore, to be held that the products in question are ayur-vedic medicines insofar as ingredients are concerned.
11. The products have been classified by the Drug Central authorities as patent or proprietary ayurvedic medicines under Section 3(a) of the Act. It is however, claimed that the goods would not be classifiable as patent or proprietary medicaments under Heading 3003.10 of the Tariff. The argument runs as follows. The sub-heading is for patent or proprietary medicaments "other than those medicaments which are exclusively ayurvedic" etc. The words "those medicaments" refer to "those patent or proprietary medicaments" which are exclusively ayurvedic, unani etc. Since the goods are patent or proprietary medicaments they therefore, fall outside sub-heading 3003.10. I agree with the meaning that the Advocate gives to the words 'those medicaments'. He however, stops [short] of following his argument to its logical conclusion that it is only those patent or proprietary medicaments which are established to be exclusively ayurvedic, unani etc. which should be excluded from the scope of the heading. The advocate's argument proceeds on the assumption that the medicament is exclusively ayurvedic. If it were, the goods would not fall under sub-heading 10 of the Heading. We have to see whether these are in fact exclusively ayurvedic.
12. The Drugs and Cosmetics Act makes a clear distinction between ayurvedic medicaments and patent or proprietary ayurvedic medicaments. The former defined in Section 3(a) have to be exclusively manufactured in accordance with the formula described in the authoritative books on ayurveda specified in the First Schedule. The latter, defined in Section 3(h) covers formulations containing ingredients mentioned in the formula described in the authoritative books of ayurveda and excludes a formulation excluded in these authoritative books. Thus while both kinds of medicines must have ingredients mentioned in the formula described in the authoritative books. Patent or proprietary medicines however may not - indeed must not have a formulation included in these books. Such a medicine is thus a formulation evolved outside the authoritative books. This clear distinction does not exist in the Central Excise Tariff. There is however, no question that the drops are patent or proprietary medicaments by virtue of the fact that they satisfy the specified criteria prescribed to this effect in Note 2(h) to Chapter 30. It bears a brand name and symbol. The question is, are the goods 'exclusively ayurvedic'?
13. The Departmental Representative pointed out that Section 3(a) of the Drugs Act, while defining an ayurvedic drug also prescribed that the medicines must be manufactured exclusively in accordance with the formulation in the authoritative books. She therefore, seeks to interpret the terms 'exclusively ayurvedic' in the tariff heading to correspond with the definition in the Section 3(a) of the Drugs Act. Shri Hidayatullah seeks to rebut this by saying that the use of word 'exclusively' in both statutes is a coincidence. This may not be entirely the case. The phrase used in sub-heading 3003.10 is also used in the Tariff Item 14E of the earlier tariff. It would appear that this phrase has been transplanted from Item 14E to the present heading. It is possible to speculate legitimately that in framing the Item 14E reference [were] made to the Drugs Act. Be that as it may, in the absence of the definition of the terms 'exclusively ayurvedic' in the tariff, we have to refer to the Drugs Act where identical terminology is employed. The ratio of the Panama Chemicals case is that one has to look to the scientific and technical aspects of the product with the aid of Drugs and Cosmetics Act to see if it is an ayurvedic product. The same criterion would apply to see whether a product is an exclusively ayurvedic medicament in [the] absence of a definition of the term in the tariff.
14. The application of the criteria in Section 3(a) of the Drugs Act shows that the product is not exclusively ayurvedic. The appellants themselves agree with this by claiming it to be a patent or proprietary ayurvedic medicine that the formulation is not ayurvedic while ingredients may be. Since the product is not manufactured in accordance with formula prescribed in the texts, it cannot be considered to be exclusively ayurvedic. It would fall for classification under sub-heading 3003.10.
15. In the result, therefore, we confirm the conclusion of the Collector (Appeals) that the product is classified under Heading 3003.10 and dismiss the appeal.
Sd/-
(Gowri Shankar)
Dated : 28-7-1995 Member (T)
S.K. Bhatnagar, Vice President
16. With due respects to Hon'ble Member (Technical) my views and orders are as follows :
17. The basic question before us is the determination of correct classification of pharmaceutical products 'Vicks medicated cough drops and Vicks vaporet throat drops' under the Central Excise Tariff.
18. The Assistant Collectors (and other officers of the Central Excise De partment) who have been vested with the authority to determine such issues for Central Excise purposes are therefore, naturally required to proceed in accordance with the Principles of Interpretation, the Section Notes, Chapter Notes and the relevant headings and sub-headings of the Central Excise Schedule.
19. In the process of applying these provisions if the Central Excise Authorities are required to keep the provisions of certain other enactments in view, normally, it is so stated explicitly in the Act, Schedule or the Notification(s) (as for example Sections 3 & 4 of the Act and the example can be multiplied).
20. There is however, nothing in the Act or the Tariff to show that the Central Excise Authorities are required to be governed by the provisions of the Drugs and Cosmetics Act or the orders of the Drug Controllers or other officers mentioned in the Drugs and Cosmetics Act.
21. The Drug Control Officers are authorities under the Drugs and Cosmetics Act and exercise that authority for the purposes of that Act and not for the purpose of Central Excise Act and Tariff. Therefore, orders, whether in the nature of licence or otherwise, issued by them for the purposes of Drugs and Cosmetics Act cannot be considered or held to be binding on the Central Excise Officers for the purpose of Central Excise Act and Schedule.
22. Of course, in the application of Central Excise Act or Schedule, if some help is required from other sources whether legal or technical, it can certainly be so requisitioned or used but one has to be rather cautious while doing so. Indeed, various High Courts and the Hon'ble Supreme Court have in a number of cases, already held that terms, phrases or definitions given in other enactments do not automatically apply and one has to be very careful. In other words, it is not that we cannot call to aid the Drugs and Cosmetics Act or any other law but while doing so we have to take care as to whether the provisions are pari materia. In this connection, I entirely agree with my learned colleague Hon'ble Member (T) that the provisions of the Drugs and Cosmetics Act are not pari materia with those of the Central Excise Act and Tariff. It is noteworthy in this respect that the definition of 'Medicament' and "Patent and Proprietary medicament" and 'Drugs' as given in Note 2 Chapter 30 of the Central Excise Schedule is different and distinguishable from the one given in the Drugs and Cosmetics Act.
23. It is interesting to note that Chapter 30 refers to the 'Medicinal and Toilet Preparations Act (Excise Duties Act), 1955' (although for the purposes of showing exclusions) in a very significant manner indicating that "For the purposes of this Note 'Alcohol', 'Opium', 'Indian Hemp', 'Drugs and Narcotics' have the meanings assigned to them in Section 2 of the Medicinal and Toilet Preparations Act Excise Duties Act, 1955 (16 of 1955). But there is no corresponding provision (in respect of 'inclusions' in Chapter 30) referring to the Drugs and Cosmetics Act, 1940.
24. The Chapter Note 2 which indicates the meaning of 'Medicament and 'Patent and proprietary medicament' and 'Drugs' does not refer to Drugs and Cosmetics Act, 1940 (although it refers to the Trade and Merchandise Marks Act, 1958). In fact, there is every reason to believe that the Legislature has intentionally adopted a different definition for 'Medicament', 'Drug' and 'Patent and proprietary medicament' etc. It is interesting to note in this connection that phrase 'pharmaceutical products' is peculiar to Central Excise Schedule and does not find mention in the Drugs and Cosmetics Act and even the word 'drugs' used in Note 2(ii) has been used in the Central Excise Schedule only to show that it falls within the ambit of the 'Medicaments' and that too in a sense different from the one used in the Drugs and Cosmetics Act where it has a specific connotation for the purpose of that Act as it excludes Ayurvedic, Siddha or Unani Drugs and includes not only medicines but other substances and devices; this is however, not the case in Central Excise Tariff. For example, substances, devices and goods other than medicaments would be classifiable as pharmaceutical products (and not as drugs) for central excise purposes.
25. I have drawn attention deliberately to Chapter Note 4 of Chapter 30 (although it provides for exclusion) just to show that it indicates that certain words mentioned therein have been given the meaning assigned to them in Section 2 of the Medicinal and Toilet Preparations Act but this type of direction has not been incorporated in Chapter Note 2 of Chapter 30 with reference to Drugs and Cosmetics Act. If the idea of the Legislature was to use the words medicines, drugs or ayurvedic medicines or patent or proprietary medicament in exactly the same sense as in the Drugs and Cosmetics Act, it would have made a similar provision.
26. Further, Section 2 of the Drugs and Cosmetics Act merely says that the provisions of this Act shall be in addition and not derogation to the Dangerous Drugs Act, 1930 or any other law for the time being in force. This again is intended for guiding the authorities under Drugs and Cosmetics Act and in any eventuality is not in the nature of a Section linking the Drugs and Cosmetics Act with the Central Excise Act.
27. The linking Sections always act as a sort of 'coupling' joining two laws and one of the best examples can be had from the Customs and the Import and Export side in as much as Section 11 of the Customs Act and Section 3 of the Import and Export Control Act, 1947 act as a 'coupling', joining the two laws within an express mandate in Section 3(2) of Imports and Exports Act that "All goods to which any order under Sub-section (1) applies shall be deemed to be goods of which the import or export has been prohibited under Section 11 of the Customs Act, 1962 (52 or 62) and all the provisions of that Act shall have effect accordingly."
28. In the Drugs and Cosmetics Act itself Section 11 links Drugs and Cosmetics Act with the Customs Act (and the Drugs Control Rules (such as Rule 11 etc.) show the nature and extent of relationship so established).
29. But in so far as Central Excise is concerned neither the Central Excise Act and Schedule nor the Drugs and Cosmetics Act or Rules have any such coupling or linking provision and, therefore, it cannot be said that all the provisions of the Drugs and Cosmetics Act and orders issued therein (such as licence) shall be deemed to apply for Central Excise purposes and shall have effect accordingly.
30. I have mentioned this to show that merely because in certain cases, in the circumstances of those cases some Courts or the Tribunal had occasion to refer to the provisions of Drugs and Cosmetics Act, that by itself is not sufficient to hold that in all cases, in all circumstances all the provisions of the Drugs and Cosmetics Act shall always apply to Central Excise cases and/or the Central Excise Authorities are bound by the provisions of that Act or the orders (whether in the nature of licence, otherwise) issued by Drug Controller or other officers under the Drugs and Cosmetics Act. I, therefore, entirely agree with my learned colleague that the Central Excise officers, can independently determine the meanings of the words and phrases used in the Central Excise Tariff for the purposes of Central Excise Act, infer the intention of the legislature from the language used therein or the context or the purpose thereof; and act accordingly.
31. Of course, to the extent, there is a certain amount of commonality and the scope of similar phrases and words is required to be determined and clarified and it is so considered by the Central Excise Authorities themselves or the Courts or the Tribunal that it could be so done with the help of other laws, they can certainly look to not only the provisions of the Drugs and Cosmetics Act but other laws as well as also other authoritative pronouncements and text or material published by recognized bodies such as publications of Govt. of India, Ministry of Health and nationally and internationally recognized works such as pharmacopoeias and Ayurvedic treatises; And all this exercise may be done, if necessary, to arrive at a correct decision under the Central Excise Act and Tariff for its purposes and not to import wholesale the provisions of other enactments without regard to the context, purpose or wordings in the Central Excise Act and Schedule.
32. In the present case, it is important to note that the products in question are marketed as Allopathic medicine and sold under the same trade mark for exactly the same treatment or cure in America and other foreign countries without any claim to their being even remotely related to Ayurved.
33. A perusal of the Materia Medica of Pharmaceutical and Specialities by U.B. Narayan Rao shows that it covers products of the Vicks Chemical Co., Greens Borough; and 'Vicks Vaporub' finds mention therein. Similarly the 'Martindale, The Extra Pharmacopoeia', TwentyEighth Edition includes Vicks Vaporub (Richardson-Vicks, UK), Vicks Cough Calmers (Richardson-Vicks, UK), Vicks Inhaler (Richardson-Vicks, UK), Vicks Lozenges, Lemon Plus (Richardson-Vicks, UK), Vicks Medinite (Richardson-Vicks, UK), Vicks Sinex Nasal Spray (Richardson-Vicks, UK), etc.
34. It is well known that the above Materia Medica and Martindale relate to allopathic medicines and do not cover or include ayurvedic preparations. A question, therefore, arises as to whether a product manufactured in accordance with the Western Allopathic System and marketed as allopathic medicine in the Western World could be trumpted and marketed as ayurvedic medicine in India just like that or does such a product or its ingredients change their character as soon they enter into the territorial waters of India or is it so that the same essential ingredients (whether imported or indigenously made or procured) when used for manufacturing a preparation or formulation in India in the same allopathic way result in a product which could be described and marketed as Ayurvedic Medicine?
35. The appellants' products are manufactured under a licence granted by the firm of Richardson Vicks Inc. USA and a processing agreement with Richardson Hindustan Limited (and a supplement agreement with Proctor and Gamble India Ltd.) in India and therefore, must be governed by the terms and conditions of the licence.
36. The appellants have not produced any material or other evidence to show that they have been licenced to produce these medicines according to the Ayurvedic principles and practice and yet sell them under the same Brand Name or Trade Mark by which they are known as Allopathic Medicines the world over.
37. The appellants have admittedly manufactured them by methods not known to Ayurveda. Therefore, even it could be shown that some of the ingredients were known to Ayurveda that would by itself not be sufficient to prove that these were Ayurvedic medicines.
The Legal Notice published by the Govt. of India, Ministry of Health and Family Planning, Deptt. of Health as a part of Ayurvedic Formulary of India Part-I, First Edition is important. The Clause 5 & 6 of this legal notice are reproduced herewith :
"5. Use of substitute drugs (Pratinidhi Dravyas) wherever the original drugs are not available, is permissible in the Ayurvedic classic and practice. It must however be ensured that only the substitutes as are mentioned in the texts or included in the Formulary are used.
6. Formulations included in the Ayurvedic Formulary may also be manufactured as per formulae given in various Ayurvedic Classics. The Ayurvedic Formulary has however, included the most commonly accepted Formulae for the medicinal preparations included therein. It does not however preclude the Ayurvedic Pharmaceutical Industry and the practitioners from manufacturing medicines on the basis of other formulae. But should the medicines be prepared according to the reference mentioned in the Formulary, deviation in the details of the ingredients or their quantities is not permissible."
38. In the present case admittedly the method of preparation and formulae are of Western origin.
39. The contention that there is a change in formula as used in the vicks vaporub or cough drops etc. manufactured in foreign countries and in the products manufactured by them under licence in India [in]asmuch as there is addition of an extract of a herb 'ARKE' has no meaning for our purpose unless it can be shown that whole preparation was in accordance with Ayurvedic principles and practice and recognised by any one of Ayurvedic classics. The appellants have made no attempt to do so.
40. There is, however, one point very forcefully pressed by the learned counsel that the ayurvedic system has not remained static and should not be allowed to become moribund and its growth cannot be stiffled; And the fact that they have used modern scientific methods and procedures by itself would not render the medicine as non-ayurvedic.
41. I entirely agree with the first part of the statement. Certainly the ancient Ayurvedic system has grown over a long period of time and the use of substitutes of drugs (Pratinidhi Dravyas) wherever original drugs are not available is permissible in Ayurvedic system and certainly the very fact that different Ayurvedic classics differ in the formulations or methods of preparation itself shows that there is no bar against adoption of new methods or formulas but then this must be done in accordance with Ayurvedic principles and gain recognition as such and thereby get included in the Ayurvedic Materia Medica or Formulary or some other authoritative/recognised Ayurvedic text.
42. The material produced by the appellants themselves shows the difference in the principles followed by the two systems. The importance attached to method of preparation and use in Ayurvedic (and Homeopathic) systems is also a known fact. It will perhaps be more evident if we draw an analogy from the difference between Allopathic and Homeopathic systems. Thus, for example, the Homeopathic system fallows the principle of "Similia Similibus Curentur i.e., similars are cured by similars" and the drugs used in homeopathy are first given to healthy human volunteers and only after these provings they are included in Homoeopathy Materia Medica, and its medicines are prepared from 'mother tincture' by following the method of ionisation or dilution. Thus, greater the dilution, the greater its potency and the system believes in administering minimum possible quantity of medicine. It is well known that Allopathic medicines are not prepared on these principles or by these methods; with the results that 'Borax' in allopathy is very different from 'Borax in homeopathy; even though the chemical is the same. The examples can be multiplied. In other words, even a substance known by the same name in both the systems could have different effects and be used in different ways. Even if the constituents of a medicine are the same as known to Ayur-veda that by itself would not mean that the product is an Ayurvedic preparation and there can be constituents known to both the systems.
43. The Hon'ble Supreme Court's judgment in the Amrutanjan's case uses very significant words e.g. 'by itself. Therefore, the list of constituents by itself does not determine as to whether the medicine was allopathic, ayurvedic or homoeopathic. It is also immaterial whether the names are similar or different. In fact many names are exactly the same in homoeopathy and allopathy and that by itself does not make the product either homoeopathic or allopathic. Similarly, it does not matter as to whether a particular component is known by its Hindi, English or Sanskrit name.
44. In my opinion the ratio of the Amrutanjan case does not help the appellants in the present case beyond a point in as much as in the present case admittedly the Ayurvedic principles and practices have been given a go by and it is the western scientific methods and procedure not known to the Ayurveda, which have been applied, and that is why I cannot agree with the conclusion that the medicines so prepared could be considered as Ayurvedic preparation.
45. In my opinion these products can at best claim to be some sort of hybrid products (and be dubbed as Allovedic or Alloayur preparation on the analogy of nomenclature prevalent in Biological field). This would also take care of the Learned Advocate's anxiety for the growth of the Ayurvedic system. As in agriculture and animal husbandary the species of plants and animals can be improved by hybridization, so also the science of medicine can grow and develop by hybridization between allopathic, ayurvedic or other systems (such as Chinese or Unani). Indeed it must be so done for the cause of humanity and human health is much more important than conservative addiction to a particular system or its orthodox practices.
46. Further, even if the lack of evidence regarding adoption ayurvedic principles or practices and the admitted use of modern scientific methods was ignored, and for arguments sake it was accepted that the mere use of modern methods will not render a medicine the ingredient of which were known to Ayurveda, as non-ayurvedic then too the contention of the appellants that it was not classifiable under 3003.10 cannot be accepted for the simple reason that the evidence produced by the appellants themselves shows that it was "Patent and proprietary" in character and even going by the Drugs and Cosmetics Act upon which the Ld. Counsel has so heavily relied it is evident that there is a clear distinction between ayurvedic drug or medicine, a patent or proprietary ayurvedic drug or medicine and other drugs or patent or proprietary medicines. The proviso of Sections 3(a), 3(b) and 3(h) are clear and important. Section 3(a) lays emphasis on the manufacture exclusively in accordance with the formulae described in the authoritative books of ayurvedic system of medicine; Section 3(h) on formulations containing only such ingredients as specified in the First Schedule and Rule 161 of the Drugs and Cosmetics Rules relating to the Ayurvedic drugs emphasises the "method of preparation thereof as detailed in the standard text and Adikarna, as are prescribed in the authoritative books specified in the First Schedule of the Act."
47. It is significant that the word 'exclusively' has been subject matter of interpretation by the Hon'ble Supreme Court in the case of Ishwar Singh Bindra and Ors. v. The State of U.P. In the case Bench consisting of Hon. Mr. M. Hidayatullah, C.J., C.A. Vaidialingam and A.N. Grover, JJ, has made the following observations:
There can be no difficulty now after the amendments made by Act XIII of 1964 in the matter of medicines and substances exclusively used or prepared for use in accordance with the Ayurvedic or Unani system of medicine provided they are processed and manufactured according to the formulae described in the authoritative books as specified in the First Schedule.
48. Further while discussing the definition of Drug as given in Section 3 their lordships have observed :
"In our view medicines or substances have to be taken as a whole and in the present cases it will have to be decided by the trial Magistrate whether Bindra's Antiphlogistic Plaster and Bindra's Yabrooj Plaster Belladona Plaster) are medicines which are exclusively used or which have been prepared for use exclusively in accordance with the Ayurvedic or Unani System of medicine. As regards the adverb "exclusively" we concur in the view of the High Court that it must be taken to govern the words "used" as well as "prepared for use"; but in our opinion each individual ingredient or component of the preparation in question will not be the decisive or determining factor and what the court will have to decide after recording such evidence as may be produced will be whether the aforesaid medicines (they can hardly be called substances) were exclusively used or were prepared for use exclusively in accordance with the Ayurvedic or Unani, system."
49. From this judgment two general principles can be inferred :
(i) Ayurvedic medicines are those which are processed and manufactured according to the formulae described in the authoritative ayurvedic books and they must be such which are exclusively used or prepared for use in accordance with Ayurvedic system of medicine.
(ii) The product has to be taken as a whole and each individual ingredient or component will not be decisive or determining factor.
In the present case, first and foremost there is nothing to show that the product was processed, prepared or manufactured in accordance with the formulae given in authoritative Ayurvedic Books or in accordance with the principles and procedures of Ayurvedic system of medicine.
50. Secondly, the product taken as a whole is a preparation included in Allopathic texts and manufactured according to the methods and principles of western system of medicine. It has been patented and marketed as Allopathic medicine and is known throughout the world as such.
51. The fact that one of the ingredients is extract of a herb 'ARKE' known to Ayurved (used in addition to those used in the American or the British product of the same Trade Mark, is not and could not be a determining factor in accordance with the aforesaid Supreme Court's judgment itself.
52. Thus, even going by Drugs and Cosmetics Act it could not be considered as an Ayurvedic drug.
53. It must be noted that the Supreme Court's judgment in the Amrutanjan's case has not reviewed or overruled its judgment in the Ishwar Singh's case and has to be read along with it. In fact Amrutanjan's case only clarifies and pronounces only on those aspects which came up before it for its consideration; And the observations; and findings of the Supreme Court in the Ishwar Singh's case are still good law; Hence, we are bound to take them into consideration as well.
54. Again, for arguments sake accepting (but not admitting) that these were Ayurvedic medicines still as my Ld. Colleague has pointed out that they could at best be considered only as Patent or Proprietary Ayurvedic drugs and since they are not exclusively Ayurvedic in character, therefore, the Heading 3003.10 which excludes only exclusive ayurvedic preparations would still be attracted.
55. Thus, whichever way we may look at it, the products of the appellant are classifiable correctly under 3003.10 in my opinion. However, as the Supreme Court judgment in Amrutanjan case was not before the Bench during the course of the hearing and on being subsequently received, the extent of its applicability or coverage has not been put to debate and a difference of opinion has arisen in respect thereof, it would be better if the matter is reopened and straightaway referred to a larger Bench keeping in view the importance of the issues involved for the industry as a whole.
Sd/-
(S.K. Bhatnagar)
Dated : 29-8-1995 Vice President
S.L. Peeran, Member (J)
56. I have gone through the orders prepared by my Learned Brother, Shri Gowri Shankar, Member (T) and the Vice President. I agree with the findings given by both my Learned Brothers. In both the orders, it has been held that the impugned order has correctly classified the impugned goods under sub-heading 3003.10 of Central Excise Tariff Act, 1985.I agree for classification of the impugned goods under this heading. I agree with the finding of my Learned Colleagues that in the present case admittedly the Ayurvedic principles and practice have not been applied and the product has been prepared on the basis of Western allopathic methods and the product is not manufactured according to the Indian Ayurvedic Formulary of India or as per the authoritative text. I also agree with the finding that the product has been manufactured according to the formula and patent of the appellant's company which is registered in America and found mentioned in Martindale. I agree with the conclusion that the medicines so prepared cannot be considered as "exclusively Ayurvedic medicines" as known to Ayurvedic text and Ayurvedic science as has been discussed by both my Learned Brothers in their respective orders.
57. I wish to add the following reasons to my order. The appellants were issued with show cause notice dated 18-10-1989 in respect of two products namely, "Vicks Vaporet Throat Drops" and "Vicks Cough Drops Medicated" under loan licence issued by M/s. Procter & Gample India Ltd. They filed classification list claiming the products as Ayurvedic medicaments falling under Chapter sub-heading 3003.30 which attracted 'nil' rate of duty. Vicks Cough Drops and Vicks Vaporet Throat Drops are manufactured out of Pudinah Arka, Nilgiri Tel with Sugar base. The appellants claim that it has therapeutic and prophylactic use, as the said throat drops clear the nasal congestion and soothes the sore throat. The show cause notice alleges that in the manufacture of Ayurvedic medicaments crude drugs or the decoction or the extracts prepared by treating the medicinal vegetable substances such as roots, leaves and barks or drugs in water alcohol or milk are used. It is alleged that the ingredients used in Vicks throat drops and cough drops are only pure/synthetically prepared ingredients. It is also urged that "Vicks" is a registered trade mark. Therefore, the show cause notice calls upon them to explain as to why their product should not be classified under sub-heading 3003.10 of Central Excise Tariff Act as 'Patent and Proprietary Medicaments' other than those medicaments which are exclusively Ayurvedic, Unani, Sid-dha, Homoeopathic or Biochemic drugs attracting 15% adv. rate of duty.
58. The Tariff Entry 30.03 and its sub-headings are noted herein below :
"30.03 Medicaments (including veterinary medicaments) 3003.10 Patent or proprietary medicaments, other 15% than those medicaments which are exclusively Ayurvedic, Unani, Siddha, Homoeopathic or Biochemic 3003.20 Medicaments (other than patent or Nil proprietary) other than those which are exclusively used in Ayurvedic, Unani, Siddha, Homoeopathic or Biochemic systems 3003.30 Medicaments, including those used in Nil"
Ayurvedic, Unani, Siddha, Homoeopathic or Biochemic systems
59. The Chapter Note 2 lays down a definition of medicaments as well as that of Patent or proprietary medicaments. The same is noted herein below :
"2. For the purposes of Heading No. 30.30 :
(i). Medicaments' means goods (other than foods or beverages such as dietetic 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 in measured doses or in packings for retail sale or for use in hospitals.
(ii) 'Patent or proprietary medicaments' means any drug or medicinal preparation, in whatever form, for use in the internal or external treatment of, or for the prevention of ailments in human beings or animals, which bears either on itself or its container both, a name which is not specified in a monograph, in a Pharmacopoeia, Formulary or other publications, namely :
(a) The Indian Pharmacopoeia;
(b) The International Pharmacopoeia;
(c) The National Formulary of India;
(d) The British Pharmacopoeia;
(e) The British Pharmaceutical Codex
(f)The British Veterinary Codex;
(g)The United States Pharmacopoeia;
(h) The National Formulary of the U.S.A.
(i) The Dental Formulary of the U.S.A.; and.
(j) The State Pharmacopoeia of the U.S.S.R.;
or which is a brand name, that is, a name or a registered trade mark under the Trade and Merchandise Marks Act, 1958 (43 of 1958), or any other mark such as a symbol, monogram, label, signature or invented words or any writing which is used in relation to that medicine for the purpose of indicating or so as to indicate a connection in the course of trade between the medicine and some person, having the right either as proprietor or otherwise to use the name or mark with or without any indication of the identity of that person."
60. As can be seen from the definition of "patent and proprietary" as laid down in Note 2(ii) the product in question clearly falls within the said definition. The goods in question bears on its container a specific name viz. "Vicks", which is not specified in a monograph, or in a Pharmacopoeia, or Formulary or other publications as noted in (a) to (j) of Note 2(ii). The product is used in America. It carries a trade name, symbol, monogram, which is used in relation to the medicine and which indicates a connection in the course of trade between the medicine and the propreitor. Therefore, the Chapter notes clearly bring within its ambit the impugned goods for classification as 'patent and proprietary medicine'.
61. As regards the plea taken by the Learned Senior Advocate that the licence issued by the Drug Controller is conclusive of the fact that the product is an exclusive Ayurvedic medicine, does not have much force. The reasons being that admittedly they are not using genuine, pure and exclusive indigenous Ayurvedic ingredients. The Drugs and Cosmetics Act, 1940 and the Rules made thereunder [have] made distinction between Ayurvedic medicines manufactured exclusively in accordance with formula described in the authoritative text as per Section 3 (a) as well as 'patent and proprietary medicines' in relation to Ayurveda as per Section 3(h). The Sections 3(a) and 3(h) are noted hereinbelow :
"3(a) "Ayurvedic, Siddha or Unani drug" includes all medicines intended for internal or external use for or in the diagnosis, treatment, mitigation or prevention of [disease or disorder in human beings or animals, and manufactured] exclusively in accordance with the formulae described in, the authoritative books of [Ayurvedic, Siddha and Unani Tibb systems of medicine], specified in the First Schedule;]"
3(h) "patent or proprietary medicine" means,
(i) in relation to Ayurvedic, Siddha or Unani Tibb systems of medicine all formulations containing only such ingredients mentioned in the formulae described in the authoritative books of Ayurveda, Siddha or Unani Tibb systems of medicine specified in the First Schedule, but does not include a medicine which is administered by parenteral route and also a formulation included in the authoritative books as specified in clause (a);
(ii) in relation to any other systems of medicine, a drug which is a remedy or prescription presented in a form ready for internal or external administration of human beings or animals and which is not included in the edition of the Indian Pharmacopoeia for the time being or any other Pharmacopoeia authorised in this behalf by the Central Government after consultation with the Drugs Technical Advisory Board constituted under Section 5."
62. Even as per the above definitions the ingredients to be used in the manufacture of P & P Medicine in relation to Ayurvedic system of medicine should have been mentioned in the formula described in the authoritative books of Ayurveda. The Rules 160 and 161 of the Drugs and Cosmetics Rules, 1945 state as follows :
"160. Identification of raw materials. - Raw materials used in the preparation of Ayurvedic (including Siddha) or Unani drugs shall be identified and tested, wherever tests are available for their genuineness, and records of such tests as are carried out for the purpose and the methods thereof shall be maintained.
PART XVII [LABELLING, PACKING AND LIMIT OF ALCOHOL IN] AYURVEDIC (INCLUDING SIDDHA) OR UNANI DRUGS
161. [Labelling, packing and limit of alnohol]. (1) There shall be conspicuously displayed on the label of the container or package of an Ayurvedic (including Siddha) or Unani drug, the true list of all the ingredients used in the manufacture of the preparation together with the quantity of each of the ingredients incorporated therein and a reference to the method of preparation thereof as detailed in the standard text and Adikarana, as are prescribed in the authoritative books specified in the First Schedule of the books specified in the First Act :
Provided that if the list of ingredients contained in the medicine is large and cannot be accommodated on the label, the same may be printed separately and enclosed with the packing and reference be made to this effect on the label.
(2) The container of a medicine for internal use made up ready for the treatment of human ailments shall, if it is made up from a substance specified in Schedule E(l), be labelled conspicuously with the words 'Caution: to be taken under medical supervision' both in English and Hindi languages.
(3) Subject to the other provisions of these rules, the following particulars shall be either printed or written in indelible ink and shall appear in a conspicuous manner on the label of the intermost container of any Ayurvedic (including Siddha) or Unani drug and on any other covering in which the container is packed, namely :
(i) The name of the drug. For this purpose the name shall be the same as mentioned in the authoritative books included in the First Schedule of the Act.
(ii) A correct statement of the net content in terms of weight, measure or number as the case may be. The weight and volume shall be expressed in metric system.
(iii) The name and address of the manufacturer.
(iv) The number of licence under which the drug is manufactured, the figure representing the manufacturing licence number being preceded by the word 'Manufacturing Licence Number' or 'Mfg. Lic. No.' or "M.L.".
(v) A distinctive batch number, that is to say, the number by reference to which details of manufacture of the particular batch from which the substance in the container is taken are recorded and are available for inspection, the figure representing the batch number being preceded by the words "Batch No." or "Batch" or "Lot Number" or "Lot No." or "Lot" or any distinguishing prefix.
(vi) The date of manufacture. For this purpose the date of manufacture shall be the date of completion of the final products, or the date of bottling or packing for issue.
(vii) The words "Ayurvedic medicine" or "Siddha medicine" or "Unani medicine" as the case may be.
(viii) The words "FOR EXTERNAL USE ONLY" if the medicine is for external application.
(ix) Every drug intended for distribution to the medical profession as a free sample shall, while complying with the labelling provisions under clauses (i) to (viii), further bear on the label of the container the words "Physician's sample. Not to be sold" which shall be overprinted.
(ix)(a) Preparation (Asavas) with high content of alcohol as base.
_____________________________________________________________ Name of the Drug Maximum size of packing _____________________________________________________________
(i) Kapur Asava 15 ml.
(ii) Ahiphenasava 15 ml.
(iii) Mrgamadasava 15 ml.
_____________________________________________________________
(ix)(b) Preparation containing self-generated alcohol _________________________________________________________________ Name of the drug Maximum content Maximum size of alcohol of packing (Ethylalcohol v/s) _________________________________________________________________
(i) Mritsanjivani 16 per cent 30 ml.
(ii) Mahadrakshava 16 per cent 120 ml.
_________________________________________________________________ (4) Nothing in these rules shall be deemed to require the labelling of any transparent cover or of any wrapper-case or other covering used solely for the purpose of packing transport or delivery."
63. As can be seen from the above rules it is clear that the raw material to be used in preparation of Ayurvedic Drugs shall be identified and tested for their genuineness and records of such tests as are carried out for the purpose and methods thereof shall be maintained by the manufacturers. When these rules were pointed out to the Learned Senior Advocate and a query was posed to him to explain as to whether the appellants have maintained such test results and registers, the Learned Senior Advocate replied in the negative. It is his contention that the Excise Authorities [do] not have power to challenge the grant of licence by the Drug Authorities under the said legislation. We are not agreeable with this contention. The exemption from charging duty has been granted to exclusive Ayurvedic products which uses genuine raw materials in the preparation of Ayurvedic Drugs. Sections 3(a) and 3(h) as well as in Rules 160 & 161 of the Drugs and Cosmetics Act and its rules lay down provision for the preparation of Ayurvedic Drugs by use of genuine ingredients. The appellants admit that their product is mentioned in Martindale and it is a patented medicine in "U.S.A." and it is sold all over the world under the trade name "Vicks". Against this background, to consider the present goods as 'exclusive Ayurvedic medicine' is not acceptable and, therefore, their plea for considering their product as genuine and exclusive Ayurvedic medicine is required to be rejected. The Learned Senior Advocate also produced the Company's broucher to say that the company had its R & D Section and has employed scientists holding M. Sc. and Ph. D. Degrees, in Pharmacology and Chemistry and that [they are] standardising Ayurvedic Drugs. Admittedly, these experts are not qualified in Ayurvedic medicine and the appellants have not produced any evidence to show that they are standardising exclusive Ayurvedic medicines. In view of clear exposition brought by both the Learned Brothers in their respective orders, I do not see any necessity to refer this matter to the larger Bench as there is no disagreement between any of us with regard to classification of the impugned product under sub-heading 3003.10. Both the members have dealt with the judgment of Hon'ble Supreme Court rendered in the case of Amrutanjan in the light of evidence and earlier Supreme Court's judgment noted in their respective orders. In that view of the matter there being no conflict of opinion between any judgments of the Tribunal, I do not see any reasons for reference of this matter to larger Bench. Therefore, I agree with my Learned Brother, Shri Gowri Shankar, M (T) for dismissal of the appeal.
Sd/-
(S.L. Peeran) Dated : 6-9-1995. Member (J) FINAL ORDER
64. In view of the majority opinion, it is held that the products in question cannot be considered as 'Ayurvedic' as they were not exclusively Ayurvedic preparations. They are only 'Patent and Proprietary Medicament' classifiable under Tariff Heading 3003.10 for Central Excise purposes.
65. The appeal is dismissed accordingly.