Custom, Excise & Service Tax Tribunal
Shreya Life Sciences Pvt Ltd vs Dehradun on 11 December, 2019
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
New Delhi - 110 066.
PRINCIPAL BENCH - COURT NO. III
Excise Appeal No. 51976 of 2018-DB
(Arising out of Order-in-Original No. 10-11/COMR./DDN/2018 dated 28.2.2018
passed by Commissioner, Central Goods & Service Tax, Dehradun)
M/s Shreya Life Sciences (P) Ltd. Appellant
Plot No. 13, 14 and 15,
Raipur P.O. Bhagwanpur,
Roorkee, Uttrakhand
Versus
Commissioner, Central Goods & Respondent
Service Tax, Customs & Central Excise, Dehradun E-Block, Nehru Colony, Haridwar Road, Dehradun, Uttrakhand And Excise Appeal No. 52657 of 2018-DB (Arising out of Order-in-Original No. 10-11/COMR./DDN/2018 dated 28.2.2018 passed by Commissioner, Central Goods & Service Tax, Dehradun) M/s Shreya Life Sciences (P) Ltd. Appellant Plot No. 13, 14 and 15, Raipur P.O. Bhagwanpur, Roorkee, Uttrakhand Versus Commissioner, Central Goods & Respondent Service Tax, Customs & Central Excise, Dehradun E-Block, Nehru Colony, Haridwar Road, Dehradun, Uttrakhand Appearance :
Shri S.S. Gupta, Advocate & - for the appellant Shri A.K. Hasija, Advocate Shri H.C. Saini, DR - for the respondent CORAM: Hon'ble Ms. Archana Wadhwa,, Member (Judicial) Hon'ble Mr. Bijay Kumar, Member (Technical) Date of Hearing: 19/07/2019 Date of Decision: 11/12/2019 2 Final Order No. 51625-51626/2019 Bijay Kumar :
This Appeal is filed against the common Order-in-Original No. 10-11/COMMR/DDN/2018 dated 28.2.2018, wherein the Commissioner, as the adjudicating authority, has decided two Show Cause Notices issued vide No. DGCEI/LZU//DRU/123/15/6252 dated 5.4.2017 and C.No. V(15)/ADJ/DDN/Shreya/55/2017/10599 dated 27.12.2017 issued to M/s Shreya Life Sciences (Pvt.) Limited, Roorkee, Uttrakhand (for short, „the appellant‟) Vide the impugned order, the adjudicating authority has confirmed the Central Excise duty to the extent of Rs. 3,82,64,512/- and Rs. 1,65,97,664/- respectively under the provisions of Section 11A(4) of the Central Excise Act, 1994 (for short, „the Act‟) along with interest for the demand confirmed under Section 11AA of the Act. The adjudicating authority has also imposed penalty of Rs. 5,48,61,846/- on the Appellant under the provisions of Section 11AC of the Act read with Rule 25 of Central Excise Rules, 2002 (for short, „the Rules‟). Being aggrieved, the Appellant has filed appeal before this Tribunal.
2. The Excise Appeal No. 51976 of 2018 was decided by this Tribunal vide Final Order No. 50595/2019 dated 30.4.2019 dismissing the appeal filed by the Appellant and sustaining the order of the adjudicating authority. However, the Appeal No. 52657 of 2018 remain undecided and was relisted for fresh hearing. The Appellant filed ROM application against the order of this Tribunal dated 30.4.2019, on the ground that the Tribunal has committed error apparent, while passing the said order to the effect 3 that various case laws, which were cited by the appellant, were not dealt with and the order was passed ignoring those decisions. The said ROM application was allowed vide order No. 50470/2019 dated 21.6.2019 and the Final Order dated 30.4.2019 was ordered to be recalled and further ordered to be heard along with pending Appeal No. 52657 of 2018. Against the above background, the two appeals are being disposed of by this common order.
3. The brief facts of the case are that the Appellant is Central Excise registered unit for the manufacture of pharmaceutical products namely „Beneficiale Liquid‟ and „DSN capsules‟ which were being clearing at Nil rate of duty by availing the exemption Notification No. 49/2003-CE dated 10.6.2003. Acting on the intelligence, that the Appellant is mis-classifying their manufactured product and claiming wrong benefit of Notification No. 49/2003-CE dated 10.6.2003, the officers of DGCEI, Regional Unit, Dehradun and the investigations were initiated. As per the intelligence, the said products were rightly classifiable under Central Excise Tariff Heading (CETH) 2106 instead of 3406 inasmuch as these products were in the nature of nutrition supplement/proprietary foods appeared to be classifiable under Tariff Item No. 2106. The Tariff Item No. 2106 is not a specified product in the Notification No. 49/2003-CE that exempted the excisable goods manufactured. Accordingly, the Show Cause Notices, as stated above, were issued to the appellant. These two Show Cause Notices were adjudicated by the Commissioner by confirming the demand in the impugned order along with imposition of interest and penalty.
44. Learned Advocate, on behalf of the Appellant, submits that the product manufactured by the Appellant have proprietary and therapeutic application and thus classifiable under Tariff item 3004 of the Central Excise Tariff Act - Sch. I (CETA) and the learned Adjudicating Authority has not given the findings on the various submissions, that were made in the reply to the Show Cause Notice. These points are as under :
Sr. Finding of Commissioner Relevant para Submission of No. no. of Appellant impugned OIO
1. Relied on the case of DR. Para 6.7 There is no discussion REDDY‟s LABORATOREIS on determination of LIMITED Verses STATE OF classification based on KERALA ST. Rev. No. 59 of common parlance test.
2006 as HC has observed that The Appellant has not dietary supplement is generally submitted the for goods health prescription of the doctor, invoices of chemist and doctors write up to substantiate that in common parlance the product is considered as medicine.
2. Relied on the case of DABUR Para 6.8 The Tribunal had in INDIA LTD. Versus addition to this COMMISSIONER OF CENTRAL observation, have EXCISE, JAIPUR - 2005 (183) examined in detail the ELT 432 (Tri.-Del.) as Tribunal report of CRCL and has observed that products are authoritative books on not medicine as package carried Ayurveda to arrive phrase "not for medical use". that conclusion that the products in dispute are not medicine. The Commissioner has ignored these observations of Tribunal and relied only a part observation. Further, there is no such remark on the package of the appellant.
3. Relied on the chapter note to Para 6.10 & Appellant has already chapter 30 which states that 6.11 substantiated in para chapter 30 does not apply to 1 and 4 that products food preparation containing only in dispute have nutritional substances. prophylactic value.
They are not only nutritional supplements.
4. Stated that due to following Para 6.12 and (a)Not-mention of packing the product is 6.13 warning message is nutritional supplement: not determinative for classification of the products. Most of over 5
(a)No warning or precautions the counter drugs do message. not have any such
(b)Stated as Nutritional warning on packaging.
Supplement. (b)The mention of
(c)No mention that the product nutritional supplement
can be used for prevention or is marketing practice
treatment of any disease. followed by the
appellant. The
marketing and
advertisement of
product is not criteria
for classification.
(c)The product is used
during recovery stage
of any treatment. In
addition to this, none
of the medicine
package contains the
usage of medicine to
prevent from being
sold without
prescriptions by
chemists.
The detailed legal
submission has been
made on para 5 below.
5. Product is nutritional Para 6.12 and License is not relevant
supplement as Appellant have 6.16 to determine the
been manufactured it under classification. Kindly
FSSAI license refer to para 7 for
submission on this
finding.
6. Relied on the test report of Para 6.15 The Chief Examiner
CRCL has not stated the
basis on which he has
observed in report
that products are not
medicaments. Hence,
such report is opinion
and cannot be relied
upon. Kindly refer
para 6 for submission
on this finding.
4.1 It was also submitted that the goods are appropriately
classified under Tariff Heading 3004 only. The reliance was placed on the following case laws:
(i) CCE Vs. Wockhardt Life Sciences Ltd. - 2012 (277) ELT 299 (SC);
(ii) CCE, Mumbai- Vs. Ciens Laboratories, Mumbai - 2013 (295) ELT 3 (SC) 4.2 Further, learned Advocate submitted that the term „Medicament‟ or „Drug‟ is not defined in the Central Excise Tariff 6 and there is no standardised manner to interpret these terms.
However, it is well established principle that the product should be classified based on the „common parlance test‟ placing reliance on the following decisions:
(i) G.S. Auto International Ltd. Vs. Collector of Central Excise, Chandigarh - 2001 (152) ELT 3 (SC);
(ii) Golden Streak Drug & Pharma Ltd. Vs. Commissioner of Trade Tax Lucknow - 2018 (8) GSTL 377 (All);
(iii) Metagraphs Pvt. Ltd. Vs. Collector of Central Excise, Bombay -
1996 (88) ELT 630 (SC).
4.3 It is also submitted that the products manufactured by the Appellant cannot be considered as food supplement classifiable under Tariff Item 2106 of CETA merely on the ground that there is no precautionary warning on the packages, placing reliance on the following case laws :
(i) Commissioner of Central Excise, New Delhi - Connaught Plaza Restaurant (P) ltd. - 2012 (286) ELT 321 (SC);
(ii) Kothari Products Ltd. Vs. Commissioner of Central Excise, Kanpur
- 2002 (139) ELT 633 (Tri.-Del.).
4.4 Further, it was pleaded that the test report, that has been relied upon by the Department, can only be a suggestion to classify the product in category other than medicament as the chemical examiner is not competent to decide the classification of the product but is only required to give the chemical composition of the samples forwarded for test to CRCL for opinion. The classification of the product is required to be decided on the basis of „common parlance test‟ as has been held in the various case laws mentioned hereinabove.
4.5 It was also submitted that the product manufactured by the Appellant cannot be considered as nutritional supplement merely on 7 the basis of license obtained from the Department of Food and Safety. For the classification manufacture of product under CETA drug licence is not a pre-requisite, more so to classify the product under Chapter 30. The reliance was placed in this regard in the following case laws of:
(i) Dabur (India) Ltd. Vs. Commissioner of Central Excise, JSR - 2002 (145) ELT 441 (Tri.-Kolkata);
(ii) DXN Manufacturing (India) Pvt. Ltd. Vs. CCE & ST, Pondicherry -
2018 (11) GSTL 68 (Tri.-Kolkata).
4.6 It was also submitted that the Commissioner has erred in holding that the Appellant has applied for drug licence, which was obtained in year 2017, which is subsequent to issue of the Show Cause Notice. However, the fact remained that the Appellant has applied and obtained drug licence in year 2007 valid from 2007 to 2012 and the same was renewed in year 2012 for validity till 2017 and again the licence was renewed in year 2017 which was made valid up to 2022. Copies of licences were also enclosed. It was also submitted that the drug licence is never issued in the brand name of the product and is always issued in generic names of the product. The annexure attached to drug licence is for the manufacture of the Capsules and Syrup Beneficiale in their Chemical Formation. The Appellant manufactures capsules under his brand name DSN capsules and syrup under brand name of „Benificiale Liquid‟. The chemical composition of the capsules and syrup attached to the drug licence is identical to that of test analysis found by the Central Revenue Control Laboratory (CRCL). Thus, the products are covered under the drug licence. The appellant, therefore, had valid licence both under drug licence and food safety licence, which had wide 8 acceptance in the market. Therefore, it was submitted that the correct classification of the product would be under Tariff Item 3004 of Central Excise Tariff Act and not under 2106 as proposed in the Show Cause Notice and confirmed in the impugned order.
5. Learned Authorised Representative, on behalf of the Revenue, submits that the samples were drawn in presence of the Appellant and the same was sent to CRCL for test. The test report categorically stated that the products are other than the medicament. Therefore, the adjudicating authority has rightly concluded that the goods are classifiable under Tariff Item 2106 which is not included in the Notification 49/2003. The Appellant has not contested the test report and, therefore, the same becomes binding on the appellant. Accordingly, there is no infirmity in the order passed by the adjudicating authority.
6. We have heard the parties and perused the case record.
7. The issue is to be in this appeal is regarding classification of the product, namely, DSN capsules and beneficiale liquid as to whether under Tariff hearing 3004 or 2106. The product has been tested by the Department and the test report of CRCL is as under :
"Test Memo No. 02/2016Report:-
On opening the sample packet two samples were found. Out of these are sample is packed in glass bottle kept inside paper cartoon (unit packing) described as "beneficial R Liquid" and registered here as CL-159 (DGCEI)/15.09.16 and second sample is packed in caps kept inside blister strip packing (2 Nos.) bearing described as "DSN capsules" & register here CL-160 (DGCEI)/15.09.16.
1. CL-159(DGCEI)/15.09.16 [Described as Beneficial Liquid] The sample is in the form of light yellow colour liquid packed in a Unit packing (glass bottle). It answers positive test for Vitamin A, Vitamin B1, Vitamin B2, Vitamin B6, Vitamin B12 folic acid, zinc and manganese. It is preparation composed 9 vitamins and minerals needed by the body to remain healthy.
It is other than medicament.
2. CL-160 (DGCEI)/15.09.16 [Described as DSN capsules] The sample in the form of light yellow colour powder filled in capsules kept in blister strip packing it answers for Vitamin B1, Vitamin B2, Vitamin B6, Vitamin B12, Vitamin C, Zinc and Folic acid. It is a preparation composed vitamins and minerals needed by the body to remain healthy. It is other than medicament.
Sealed remnant sample returned".
8. This report is not contested by the appellant, which is a fact not disputed. However, it has been submitted that the test report cannot be relied upon on the ground that the chemical examiner is not required to decide classification of the product as other then medicament.
9. Further in order to appreciate the controversy in question, it will be appropriate to reproduce the two entries which are to be looked into for the purpose of classification of two products manufactured by the appellant. The Appellant contend the classification of the products under Section 3004 which is as under:
Tariff Irem Description of goods Unit Rate of duty (1) (2) (3) (4) 3004 Medicaments (excluding goods of heading 3002, 3005 or 3006) consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses (including those in the form of transdermal administration systems) or in forms or packings for retail sale
10. The description is meant for medicament which is having prophylactic or therapeutic use. The term prophylactic and therapeutic is not defined in the Central Excise Tariff and has to be found in the general trade parlance. However, the medicament is 10 defined under heading 3004 of the Central Excise Tariff which reads
(i) Medicament means goods other than 3002, 3005, 3006 which have following characteristics:
(a) Product comprising of two or more that constituents which have been mixed or compounded to be other for therapeutic then prophylactic uses or
(b) Unmixed product suitable for such uses put up any major dose in packing or retail sale for use in hospital.
(c) And proprietary medicament means any drug or medicinal preparation in whatever form, for use in the internal or external treatment of, or for the prevention of ailment in human beings or animals, which bear either on itself or on its container or both is a name which is not specified in monograph any food formula or other publications The Chapter note 2106 of Central Excise Tariff Act is reproduced as under:
"Food preparation not elsewhere specified or included.
11. From the perusal of the two entries, it is clear that the goods will be classified under the heading 2106, only if the products are not covered under Chapter heading 3004 of the Central Excise Tariff. It is the contention of the Appellant that their product is covered under the definition of medicament on the ground that these products are used for cure/treatment of diseases and being regularly prescribed by the medical practitioners. The Appellant 11 has also produced the affidavit on this behalf, from the various medical practitioners along with the prescriptions. The prescription indicates that two products in question, namely DSN capsules and Liquid Beneficiale, are being prescribed by the medical practitioners in treatment of diseases to booster immune system. The products are prescribed by the doctors for removal of condition of weakness and also to boost immunity of the patients along with other medicines. The contention of the Department that these products are dietary supplement and not the medicine is not correct in view of that the prescription of these product by the doctors/medical practitioner. In this regard, we find that the learned Advocate has referred the decision of CCE Vs. Wockhardt Life Sciences Ltd. -
2012 (277) ELT 299 (SC). The perusal of the judgement makes it abundantly clear that even the product which have either therapeutic or prophylactic use, can be treated under the expression medicament. The relevant paragraphs of the judgement is reproduced as under:
"13. In order to resolve the controversy that is raised before us, we need to notice first the entries which the revenue and the assessee relies upon to drive home their point of view. The Tariff Items under Chapter sub-heading 3003 and chapter sub-heading 3402.90, at the relevant time, are extracted. The same reads as under :
Heading Sub- Description of goods Rate of
No. heading duty
No.
30.03 Medicaments (including
veterinary medicaments)
3003.10 Patent or proprietary 15%
medicaments, other than those
medicaments which are
exclusively Ayurvedic, Unani,
Siddha, Homeopathic or Bio-
chemic.
3003.20 Medicaments (other than patent 8%
or proprietary) other than those
which exclusively used in
Ayurvedic,. Unani, Siddha,
Homeopathic or Bio-chemic
systems Medicaments, including
12
those in Ayurvedic, Unani,
Siddha, Homeopathic or Bio-
chemic systems.
34.02 Organic Surface active agents
(other than soap) : surface-
active preparations, washing
preparations (including auxiliary
washing preparations and
cleaning preparation, whether
or not containing soap.
3402.90 Other 18%
16. It is also relevant to explore the meaning of the word „prophylactic‟ in medical parlance as well, in order to resolve the controversy before us. The word „prophylactic‟ derives from Greek word „prophylaktikos‟ which means "to take precautions against" or "to keep guard before". Dorland‟s Medical Dictionary 1364 (28th ed. 1994) defines "prophylactic" as "an agent that tends to ward off disease". Merriam-Webster‟s Medical Desk Dictionary 579 (1993) defines it as "guarding from or preventing the spread or occurrence of disease or infection"; Mosby‟s Dictionary 1284 (4th ed. 1994) defines it as a biologic, chemical, or mechanical agent that prevents the spread of disease.
27. The expression "therapeutic" or "prophylactic" is not defined under the tariff entry. Therefore, useful reference can be made to the dictionary meaning to these expressions. In fact the assessee, in his reply to the show cause notices issued, has relied upon the meaning of the expression "therapeutic" and prophylactic" from Webster‟s New 20th Century Dictionary, Chambers English Dictionary, Websters New 20th Century Dictionary. In our view, reference to all other dictionary meanings may not be necessary. We intend to confine ourselves only to the aforesaid three dictionaries. In that the meaning of the expression "therapeutic" and "prophylactic" is stated as under:
"To prevent, to guard against it, before, in medicine, preventive protecting against disease."; "Guarding against disease, a preventive of disease; a condom; preventive treatment against disease." and; "Serving to cure or heal, Curative concerned in discovering and applying remedies for disease."
30. There is no fixed test for classification of a taxable commodity. This us probably the reason why the „common parlance test‟ or the commercial usage test‟ are the most common [see A. Nagaraju Bors. v. State of A.P., 1994 Supp (3) SCC 122 = 1994 (72) E.L.T. 801 (S.C.)]. Whether a particular article will fall within a particular Tariff heading or not has to be decided on the bases of the tangible material or evidence to determine how such as article in understood in „common parlance‟ or in „commercial world‟ or in „trade circle‟ or in its popular sense meaning. It is they who are concerned with it and it is the sense in which they understand it that constitutes the definitive index of the legislative intension, when the statute was enacted [see D.C.M. v. State of Rajasthan, 1980 (4) SCC 71 = 1980 (6) E.L.T. 383 (S.C.)]. One of the essential factors for determining whether a product falls Chapter 30 or not is whether the product in understood as a pharmaceutical product in common parlance [see C.C.E. v. Shree Baidyanath Ayurved, 2009 (12) SCC 413 = 2009 (237) E.L.T. 225 (S.C.)]; Commissioner of Central Excise, Delhi v. Ishaan Research Lab (P) Ltd. - 2008 (13) SCC 349 = 2008 (230) E.L.T. 7 (S.C.)]. Further, the quantity of medicament used in a particular product will also not be a relevant factor for, normally, the 13 extent of use of medicinal ingredients is very low because a larger use may be harmful for the human body. [Puma Ayurvedic Herbal (P) Ltd. v. C.C.E., Nagpur - 2006 (3) SCC 266 = 2006 (196) E.L.T. 3 (S.C.)]; State of Goa v. Colfoax Laboratories - 2004 (9) SCC 83 = 2003 (158) E.L.T. 18 (S.C.)]; B.P.L. Pharmaceuticals v. C.C.E. - 1995 Supp (3) SCC 1 = 1995 (77) E.L.T. 485 (S.C.)].
36. In B.P.L. Pharmaceuticals Ltd. v. C.C.E. (supra), the issue before this Court was regarding the classification of the "Selenium Sulfide Lotion USP" manufactured and sold by assessee under the brand name "Selsun shampoo". According to the manufacturers this shampoo was a medicated shampoo containing 2.5% Selenium Sulfide‟ w/v as the only active ingredient which was meant to treat a disease of the hair, namely; dandruff, and the rest of the ingredients of the shampoo merely serve the purpose of a bare medium. The revenue contended that the product contains 2.5% w/v of Selenium Sulfide which is only of a subsidiary curative or prophylactic value and therefore, notwithstanding the product having a medicinal value will fall under Chapter 33. This Court held that having regard to the preparation, label, literature, character, common and commercial parlance, the product was liable to be classified as a medicament under Chapter sub-heading 3003.19. This decision would not assist the revenue because this Court held after considering various factors that selsun shampoo is a medicament as it has therapeutic property to treat dandruff unlike ordinary shampoo which could be of common use by common people.
37. In Alpine Industries v. C.C.E., New Delhi (supra), the issue which arose for the consideration of this Court was whether the product „Lip salve‟ is classifiable as a medicament under Chapter Sub-Heading 30.03 or as preparation for care of skin‟ under Chapter Sub-heading 33.04. The stand of the assessee was that the product in question was supplied exclusively to the military for use while serving at high altitude. They claimed, by relying on various literatures based on the composition of the product that it was used as "medicament" and therefore, sought classification under Chapter Sub-Heading 30.03. The stand of the revenue was that it was used as "a preparation for care of skin" to protect the skin on the lips against damage by natural factors. This Court after considering the various medical and pharmaceutical literatures held that the Entries are not to be understood in their scientific or technical sense, but by their popular meaning for the purpose of interpretation. This court had observed that for the purpose of classification, the commercial parlance theory has to be applied and the chemical ingredients of the product are not decisive. This Court after considering the nature of the product and the use to which it is put had observed that the „Lip salve‟ is used for "care of skin" and not "cure of skin" and just because it has some curative effect, its primary use is not curative, therefore it is not medicament and also needs no prescription from a doctor. This Court also held that it is neither prescribed by any doctor nor obtainable from the chemist or pharmaceutical shops in the market. This decision would not assist revenue as this Court had arrived at a conclusion that the product is not medicament but cosmetic after considering the commercial parlance test and primary user of the product.
38. In ICPA Health Products (P) Ltd. v. C.C.E. (supra), this Court has considered the issue of classification of surgical scrubs, namely‟ Hexiprep, Hexiscrub (Surgiscrub) and Hexiaque, manufactured by the assessee which was used as a skin disinfectant to paint the skin before surgery and as a wound disinfectant. It was admitted that Hexiprep is used to paint the skin as required to disinfect the skin before surgery. Hexiaque is used as a skin disinfectant to paint the skin before surgery and as a wound, abrasions and minor cuts disinfectant. Hexiscrub is used on hands and forearms of surgeons 14 for rapid hand disinfection prior to surgery. The assessee claimed the classification of these products as medicament under Chapter sub-heading 3003.10. Whereas, the revenue contended that these products should be classified as disinfectants under Chapter sub- heading 38.08. This Court had considered the report of the Chemical examiner who opined that the products therein contained „chlorhexidine gluconate solution BP‟ which had therapeutic properties. However, he also opined that they were used as disinfectant, therefore should be classified under Chapter sub- heading 38.08. This Court after considering the label and usage of products therein and dictionary meaning of the word „prophylactic‟ had observed that the products therein were used to disinfect the skin prior to surgery, to clean the wound and minor cuts, and therefore, they have prophylactic usage and classifiable under Chapter sub-heading 3003.10.
39. In State of Goa v. Colfax Laboratories (supra), the issue before this Court was that whether the After Shave Lotion (ASL) known as "Old Spice" and "Blue Stratos" are classifiable as toilet preparations or medical preparations. The assessee relying on various pharmacopoeia took the stand that the product was "medicinal preparation" due to the high percentage of alcohol content (above 60%). The revenue contended that the use of after shave lotion was in the form of "toilet preparations" and not "medicinal preparation". The revenue also pointed that the assessee had obtained the license for manufacture of ASL as a cosmetic product and not as a medicinal product. This Court while rejecting the assessee‟s contention held that the high composition of alcohol in the product is not a relevant factor for ASL to be considered a medicament. This Court further observed that in order to come within the ambit of "medicinal preparations", the article must be used for the purpose of either curing or mitigating the disease after its symptoms have appeared or in prevention of any disease and therefore, on a plain interpretation ASL cannot be considered to be within the ambit of "medicinal preparation". Thus, in that case, this Court did not rely on the composition of the product but relied on the principal use and the common understanding of the product in the market as the test for classification, in other words, the classification of commodity does not depend on the incidental character that the commodity takes but on its primary character.
40. In C.C.E., Nagpur v. Vicco Laboratories, (2005) 4 SCC 17 = 2005 (179) E.L.T. 17 (S.C.) the point in consideration before this Court was that whether the products, namely; Turmeric skin cream, vajradanti toothpaste and tooth powder manufactured by the assessee would be classifiable as Pharmaceutical products under Chapter 30 or cosmetics under Chapter 33 of the Tariff Act. In that case, the assessee‟s products were classifiable as pharmaceutical products before and after the enactment of the Tariff Act. However, the revenue issued show cause notices on the basis of the decision of this Court in Shree Baidyanath, 1996 (9) SCC 402 = 1996 (83) E.L.T. 492 (S.C.) alleging that the products are understood as cosmetics in common parlance. The revenue further contended before this Court that the product was classifiable under Chapter 33 as a cosmetic as there was no need for a medical practitioner‟s prescription and the same was sold in general/departmental store. The assessee took the stand that products were classifiable under Chapter 30 as being pharmaceutical product. This Court held that mere decision of a court of law without more cannot be a justification enough for changing the classification without a change in the nature of a product or a change in the use of the product, or a fresh interpretation of the tariff heading by such decision. This Court has held that the Show cause notices having issued on the misapprehension of the tests laid down in Shree Baidyanath cannot be sustained, even though, the adjudicating authority had found 15 from the market survey that the products are understood as cosmetics in common parlance. This Court also held that the product cannot be treated as cosmetic only because it was not sold by chemists or under doctor‟s prescription. We are afraid that decision would assist the revenue as the show cause notices in that case were issued on the misapprehension of the test laid down in the Shree Baidyanath and this Court further observed that the decision in Shree Baidyanath was based on its peculiar facts.
41. In Sujanil Chemo Industries v. C.C.E. & Customs (supra), the question of classification of the product "licel", manufactured by the assessee, was raised before this Court. The assessee claimed, on the basis of the reports of chemical examiners and the Department of Dermatology and Venereology, that the product is an insecticide and is classifiable under Chapter Sub-heading 3808.10 whereas the Department contended that the product is classifiable as medicament under Chapter Sub-heading 3003.10. This Court after referring to Chapter Note 1(d) of Chapter 38 which excludes "medicaments under Heading 30.03 or 30.04" from its ambit and considering the definition of "medicament‟ in terms of Chapter Heading 2(i) of Chapter 30, had observed that in normal parlance, a product may be considered to be an insecticide but if that product has any therapeutic and prophylactic use then for purposes of classification that product would fall under Chapter 30 instead of Chapter 38. This Court observed that Licel cures the infection or infestation of lice in human hair which is a disease; therefore, it is thus therapeutic. This Court further observed that Licel is also prophylactic inasmuch as it prevents disease which will follow from infestation of lice. This Court referring to its earlier decision in ICPA Health Products (P) Ltd. v. C.C.E. (supra) has concluded that this product for its therapeutic and prophylactic usages would be classified as medicament under Chapter Sub-heading 3003.10. We are of the opinion that decision would not come to rescue of the revenue as this Court in that decision has clearly observed that the licel prevents as well as cures the infection or infestation of the lice.
42. In Puma Ayurvedic Herbal (P) Ltd. v. Commissioner of Central Excise, Nagpur (supra), the issue before this Court was that whether the ayurvedic goods manufactured by the assessee are classifiable under the Central Excise Tariff Act, 1985 as cosmetics under Chapter 33 or as medicaments under Chapter 30. The assessee contended that their products are manufactured as per the Ayurveda pharmacopoeia and other text books and have curative, therapeutic or prophylactic value which are meant to give relief in body ailments and they are not items of cosmetics. The assessee further relied on the twin test: Whether the product is used as medicament in common parlance; and whether the ingredients used in the product are mentioned in the authoritative ayurvedic textbooks. The assessee further contended that the use of the product by the customers should be taken into account for determining the classification of products as these as the products which have special and distinct use for treating a particular ailment and are not items of common use. The revenue argued that even if a product had some curative or prophylactic value, it will still be cosmetic on the basis of Note 2 of Chapter 33 of the Central Excise Tariff Act which excludes cosmetics and toilet preparation having subsidiary curative and prophylactic value. This Court while appreciating the assessee‟s contention observed that revenue has miserably failed to prove that the products in dispute are not medicament and not understood as medicament by the common man. This Court had upheld the twin test for classification of ayurvedic products relied by the assessee and observed that the primary role or use of the product has to be taken into account for the purpose of classification, even though, it may happen that while treating a particular medical problem, after the problem is cured, the appearance of the person concerned may 16 improve. This Court further held that it is not necessary for the medicament to be sold only under doctor‟s prescription and its availability across the counter in shops is not relevant for its classification as medicament. This Court held that, therefore, the fact that use of medicinal element in a product was minimal does not detract from it being classified as a medicament. This Court concluded that the products in dispute are medicinal products which are intended to treat certain medical conditions of the human body and improvement in appearance is subsidiary, therefore, are liable to be classified as medicaments falling under Chapter 30. This case would not assist revenue as this Court had applied a primary user test of the products in question which has certain medicinal ingredient.
43. In Commissioner of Central Excise, Delhi v. Ishaan Research Lab (P) Ltd. (supra), the issue before this Court was whether the products manufactured by the assessee would fall under Sub- Heading 3003.30 as medicament or under Chapter 33 as cosmetics. The assessee contended that each of the products was having ayurvedic medicinal herbs in it and even the labels on these products claim specifically the medicinal properties of the product. The assessee further urged that even if the user of product leads to improvement in appearance of a person that by itself cannot bring it into the category of "cosmetics" if otherwise the product is having a medicinal value and is marketed as such. According to the revenue, all these products were understood to be the "cosmetics" in common parlance and not actually the "ayurvedic medicines" for various reasons, the said products should have been held to be covered under Chapter 33. This Court after inspecting the labels of the product has held that the assessee had claimed in each of the label regarding its medicinal properties and, the product is not a cosmetic. This Court also observed that the common parlance test is not "be all and end all", and held that the miniscule percentage used is also not a deciding factor. This Court concluded that the products in question are medicinal products and, therefore, are covered by Chapter 30 and not under Chapter 33. That case would not assist revenue as this Court after taking into account the labels on the products observed that these products have medicinal ingredients and are marketed as ayurvedic medicines not cosmetics, however it incidentally improve the appearance, and also held that the common parlance test by itself is not conclusive.
44. In view of the above, we reject the Revenue‟s appeals and confirm the order passed by the Tribunal with no order as to costs.
12. We also find that similar view has been taken by the Hon‟ble Supreme Court in the case of CCE Vs. Cian Laboratory, Mumbai, where in it is held in para 10, 12, 13, 14 and 19, that the product „MOISTUREX‟ will be classifiable under medicament rather than cosmetic preparation for care of a skin. For the sake of clarity, the relevant paragraphs are reproduced as under :
10. In the product literature, the cream is indicated for any dryness of skin associated with winter, fissure feet, cracked nipples, in the treatment of pathological dry skin conditions and also for dryness associated with leprosy and clofazimine. Detailed discussion on the 17 pharmaceutical content and its use for treatment of dry skin conditions of human skin is given at Paragraph 12 in Time Pharma v.
Commissioner of Central Excise, Mumbai-II - 1998 (99) E.L.T. 643 (Tri.-Mumbai), wherein the Customs, Excise and Gold (Control) Appellate Tribunal, West Zonal Bench, Mumbai held that the product is a medicament. Since there is no dispute as to the description of the product, the contents and the usage, we shall extract paragraph 12 :-
"12. It is further stated that the product literature is given for use by medical practitioners. This gives the pharmacology of the ingredients in the product; under the heading, "Indications & usage", it is stated that Moisturex cream is indicated in dryness of skin associated with winter, fissure feet, cracked nipples, in the treatment of pathological dry skin conditions like ichthyosis and it is also indicated in dryness associated with leprosy and clofazimine. It contain a precaution and warning against application in large quantities as it contains keratolytic moisturing agent that have potential to cause irritation and stinging sensation; it is not to be used near eyes and mucous membranes. The dosage and administration is indicated that thin layer of the cream should be applied to the affected area (emphasis supplied) once or twice daily and in case of severe dry skin conditions three times application may be required."
(Emphasis supplied) It is brought to our notice that the said decision has attained finality qua the assessee therein since the Special Leave Petition filed by the Central Excise was dismissed.
12. Thus, if a product comprises of two or more constituents which have been mixed or compounded together for therapeutic or prophylactic use, the same is to be covered by Heading 30.03. Urea, lactic acid, propylene glycol are pharmaceutical constituents as per as Indian Pharmacopoeia.
13. The contention that „Moisturex‟ is a moisturizing cream used for softening the skin cannot be appreciated. As we have already discussed, the use of the cream is not for the care of the skin. „Moisturex‟ is also not primarily intended to protect the skin from sun, tan or dryness, etc. On the other hand, it is intended for treating or curing the dry skin conditions of the human skin and for a few other skin complaints like fissure feet, dry scaly skin conditions, ichthyosis, etc. The argument advanced on behalf of the Central Excise that use of urea or lactic acid or propylene glycol, etc., is only as subsidiary pharmaceutical constituents and, hence, they cannot be held out as having curative, therapeutic or prophylactic value, cannot also be appreciated. It is the presence of the ingredients of the pharmaceutical constituents which makes the difference and not the percentage of the ingredients as held by this Court in Meghdoot Gramodyog Sewa Sansthan v. Commissioner of Central Excise, Lucknow - 2004 (174) E.L.T. 14 (S.C.). It was held that the composition and the curative properties would make the difference in the classification. If the product is composed of pharmaceutical constituents which have curative properties, the product is to be classified as medicament. To quote :
"6. The Appellant has drawn our attention to the composition of the six products and the uses in respect of each of these six products. This has not been doubted by the Tribunal nor indeed by the Departmental authority. The composition and the curative properties being admitted, it was not open either to 18 the Department or the Tribunal to hold that the items were cosmetics merely by reason of the outward packing."
(Emphasis supplied)
14. Another contention advanced by the appellant-Central Excise is that the product is sold not under any medical prescription but the same is available across or under the counter and, hence, the same cannot be treated as medicament. This contention also has been rejected by this Court in Commissioner of Central Excise, Calcutta v. Sharma Chemical Works - 2003 (154) E.L.T. 328 (S.C.). To quote :
"12. ...Mere fact that a product is sold across the counters and not under a Doctors prescription, does not by itself lead to the conclusion that it is not a medicament. We are also in agreement with the submission of Mr. Lakshmikumarn that merely because the percentage of medicament in a product is less, does also ipso facto mean that the product is not a medicament. Generally the percentage or dosage of the medicament will be such as can be absorbed by the human body. The medicament would necessarily be covered by fillers/vehicles in order to make the product usable. It could not be denied that all the ingredients used in Banphool Oil are those which are set out in the Ayurveda text books. Of course the formula may not be as per the text books but a medicament can also be under a patented or proprietary formula. The main criteria for determining classification is normally the use it is put to by the customers who use it. ..."
(Emphasis supplied)
19. Thus, the following guiding principles emerge from the above discussion. Firstly, when a product contains pharmaceutical ingredients that have therapeutic or prophylactic or curative properties, the proportion of such ingredients is not invariably decisive. What is of importance is the curative attributes of such ingredients that render the product a medicament and not a cosmetic. Secondly, though a product is sold without a prescription of a medical practitioner, it does not lead to the immediate conclusion that all products that are sold over/across the counter are cosmetics. There are several products that are sold over-the-counter and are yet, medicaments. Thirdly, prior to adjudicating upon whether a product is a medicament or not, Courts have to see what the people who actually use the product understand the product to be. If a product‟s primary function is "care" and not "cure", it is not a medicament. Cosmetic products are used in enhancing or improving a person‟s appearance or beauty, whereas medicinal products are used to treat or cure some medical condition. A product that is used mainly in curing or treating ailments or diseases and contains curative ingredients even in small quantities, is to be branded as a medicament."
13. We find that the entry that is Chapter 2106, which is relied upon by the Revenue is only residuary entry. The product which is more appropriately classified under the specific headings has to be preferred before resorting to classification of goods in the residuary entry. It is also a fact that merely because the product can be 19 used otherwise it will not be become the foods supplement.
Reliance is also placed on the decision of Time Pharma Vs. Commissioner of Central Excise, Mumbai -II - 1998 (99) ELT 643 (Tri.-Mumbai), which is reproduced as under :
"13. From the above it is clear that product finds use for the treatment of skin disorder in human beings like ichthyosis vulgaris. So far as the therapeutic properties of the product are concerned it is seen that in the affidavit of Dr. Rakesh Seth, a Consultant Dermatologist of Bombay produced by the appellants, it has been stated that urea is the active ingredient for treatment ichthyosis and dry skin conditions. An emollient with urea when applied to the skin attracts moisture from the atmosphere and hydrates the skin in addition to preventing water loss from the skin to the atmosphere, whereas, says the Doctor, ordinary moisturising creams only prevent water loss from the skin to the atmosphere. The affidavit further avers that the British Pharmacopoeia mentions urea as a pharmacological ingredient. According to the affidavit lactic acid the order ingredient, is also a natural moisturising agent which helps easy penetration of topically applied cream into the skin and it hydrates the skin. The therapeutic properties of urea and lactic acid have been useful in treatment of disease such as ichthyosis and dry skin condition. Similar affidavits have been filed from two other Doctors who also say that the product is not cosmetic. The affidavits have to be given due consideration as they are from medical practitioners in dermatology and certain authorities have also be cited for the averments made therein. The Supreme Court in the BPL case (supra) has also observed in that case that affidavits cannot be discarded by saying they are identically worded. It cannot be said in this case that all the 3 Affidavits are identically worded. The affidavits serve the purpose of showing that the product has properties which would differentiate it from ordinary moisturising cream. The Commissioner (Appeals) has referred to Hawley‟s Condensed Chemical Dictionary‟ to say that urea finds other uses including in cosmetics. He has also found from a paper furnished by the appellants, `Uses of Urea in Cosmetology‟ as indicating use of urea in cosmetic preparation like moisturising cream. However, it has to be borne in mind that the ingredients of the product having other uses will not make the product not a medicament if it satisfies the definition thereof. There is evidence to show that urea is contained in the product in therapeutic quantity. Further, in the paper `uses of urea in cosmetology‟ it is stated. "For cosmetic purposes, concentrations of 4 to 10% urea are considered sufficient to induce the desired effects. It must be borne in mind that urea is quite difficult to incorporate into cosmetically acceptable PREPARATIONS". In the same paper there is a Table `Indicetions for use in dermatology wherein it is given that urea alone (10%) for atopic eczema psoriasis vulgaris and other scaly diseases, senile skin and other dry skin states, ichthyosis. There are also uses of urea in combination for other skin disorders given therein. It would appear therefore that 10% urea is a therapeutic quantity in a formulation to treat skin disorders like ichthyosis. Also it is found that in the Indian Pharmacopoeia 1996, it has been indicated that urea cream contains urea in a suitable basis with usual strength 10% w/w. This would then indicate that it cannot therefore be said that the product in question has only subsidiary curative or prophylactic value. It has already been noted that the indication on the label as well as the product literature show that the goods are used to treat dry skin conditions of the human skin and is prescribed by the doctors for the purpose.
14. Therefore, the product satisfies the definition of medicament in the sense that it is comprising of ingredients which have been mixed together for therapeutic or prophylactic use. There is nothing in the label or the 20 literature of the product which would support a conclusion that it is to be applied to the human body or any part thereof for cleansing, beautifying or promoting attractiveness so as to be called a cosmetic product. Moisturex is more a product in the nature of a medicament for the cure of dry skin conditions in human beings, than a preparation for the care of the skin. As a medicament, the product gets excluded from Heading 33.04 as per wording of that Heading. In this view of the matter, since Heading 33.04 CETA does not merit equal consideration along with Heading 30.03, the question of preferring the latter heading in numerical order in the Tariff, in terms of Rule 3(c) of Interpretation Rules of the Tariff, does not arise. In the result, it is held that it will be appropriate to classify product moisturex under sub-heading 3003.10 of CETA, 1985. The impugned order is set aside, and the appeal is allowed."
14. We also find that the classification has to be done on the basis of „common parlance test‟, that is, as to how the product is understood by the user/customer or medical practitioner. In the case at hand, the produce under question as has been referred above is being regularly prescribed by the medical practitioner for cure of ailment even though the products are available over counter. This issue has been decided in a number of case such as:
(a) Honda Siel Power Products Ltd. Vs. Commissioner of Income Tax, Delhi - 2008 (9)STR 117 (SC);
(b) Commissioner of Service Tax, Bangalore Vs. Yokogawa Blue Star Ltd. - 2010 (19) STR 482 (Kar);
(c) Abhay Industries Vs. Union of India - 2011 (269) ELT 330 (Bom.);
(d) Schenck Rotech India Ltd. Vs. Commissioner of Cus., C. Ex. & S.T. Noida- 2017 (3) GSTL 425 (Tri.-All.);
(e) GTL Infrastructure Ltd. Vs. Commissioner of Central Excise, Mumbai - 2016 (45) STR 389 (Tri.-Mumbai).
15. The relevant paragraph in the case of Puma Ayurvedic Herbal (P) Ltd. Vs. CCE, Nagpur - 2006 (196) ELT 3 (SC) (supra), which is relevant to the facts of the classification in this case is reproduced as under:
"28. Now we will take up each item of the products of Appellant and examine as to under which classification they fall. The products at Serial Nos. 1, 2, 3, 4, 7, 9, 10 & 11 viz. Puma Neem Facial Pack (Neemal), Puma Anti-Pimple Herbal Powder (Pimplex), Puma Herbal Facial Pack (Herbaucare), Puma Herbal remedy for Facial Blemishes, Puma Hair Tonic 21 Powder (Sukeshi), Puma Anti-Dandruff Oil (Dandika), Puma Shishu Rakshan Tel and Puma Neem Tulsi are clearly medicinal products and are intended to treat certain medical conditions of the human body and therefore, in view of the above tests, are liable to be classified as medicaments falling under Chapter 30 and Note 3003.20/3003.30. Items at Serial Nos. 5, 6 and 8 viz. Puma Herbal Massage Oil, Puma Herbal Massage Oil for Women and Puma Scalp Tonic Powder (Scalpton) however do not appear to be of any medicinal property and it is difficult to classify them under the head of medicament. In fact the learned counsel for Appellant conceded that these three items do not qualify to be treated as medicaments. Therefore, the same will be liable to be classified as "cosmetic" under Chapter head 33.04. Regarding these 3 items the matter will have to go to the Assistant Collector for quantification of the duty for the relevant period. Subject to this, the appeals are allowed. No costs."
16. We also find that the adjudicating authority in the impugned order has held that the Appellant was not having the drug licence during the impugned period. However, the same is found to be incorrect, in view of submissions made by the learned Advocate and also by the production of copies of Drug Licence which proves the fact of having the valid licence for the manufacture, of the products namely „DSN Capsules‟ and „Liquid Beneficiale‟. We are in agreement with the contention raised by the learned Advocate that the drug licence is issued under generic name and not in the trade name of the drugs manufactured. This fact is evident from the Drug Licence and also the composition of the products of the two drug licences.
17. In view of above, we find that there is no justification of classification of the two products in question under heading 2106, but they are appropriately classifiable under Tariff Heading 3004 of Central Excise Tariff Act. As we held the goods are classified under Heading 3004 of CETA, the Appellant would be entitled for the benefit exemption from central excise duty under Notification No. 49/2003, as above.
2218. In view of above, the impugned order is not sustainable and liable to be set aside, which we do so.
19. Resultantly, we set aside the impugned order and allow appeals with consequential benefit as per law.
(Pronounced in Court on 11/12/2019) (Archana Wadhwa) Member (Judicial) (Bijay Kumar) Member (Technical) RM