Customs, Excise and Gold Tribunal - Ahmedabad
Coral Laboratories Ltd. vs Cce on 10 March, 2008
Equivalent citations: 2008(128)ECC203, 2008(154)ECR203(TRI.-AHMEDABAD), 2008(225)ELT544(TRI-AHMD)
ORDER Archana Wadhwa, Member (J)
1. As per facts on record, appellant is engaged in the manufacture of P & P Medicaments falling under chapter 3003.10 of Central Excise Tariff Act, 1985. They were, inter-alia manufacturing a product called "Zest Powder". The dispute in the present appeals relates to the classification of the said product. Whereas the appellant having claimed the same to be a 'medicament' falling under heading 3003.10, Revenue's claim is that the same is properly classifiable as a 'food product' under chapter subheading No. 2108.99. By holding so, duty of Rs. 5,36,387/- stands confirmed against them along with imposition of personal penalty of Rs. 30,000/-.
2.1. After hearing both the sides duly represented by Sh. Prakash Shah, ld. Advocate appearing for the appellants and Sh. Sameer Chitkara, ld. SDR appearing for the Revenue, we find that the various ingredients, as per Master Formula Card of the product "Zest Powder" for a batch of 200 kgs. are as under:
Sl. No. Ingredients Quantity in Kgs.
1.
Soya Protein Hydrolysate 20% I.H. 193.80 (Nitrogen content not less than 0.25 gm.)
2. Sodium Methyl Paraben I.P. 0.260
3. Sodium Propyl Paraben I.P. 0.130
4. Colloidal Silicon Dioxide I.P. 0.100
5. American Ice Cream I.H. 2.800
6. Cardamom Dry Flavour I.H. 1.200
7. Vitamin Premix I.H. 1.705
8. Carmoisine Supra 0.0005
9. Tartrazine Supra 0.0005
10. Brilliant Blue FCF 0.0005
11. Aspertame I.P. 0.040 As per manufacturing process, the ingredients shown above are mixed in a drum mixer for 90 minutes and after mixing, the sample is sent to the Quality Control Department for the bulk assay of active ingredients and bulk density. Thereafter the product is packed in containers of different sizes.
2.2. The label affixed on the product describes the product as under:
Powder of protein with Vitamins and Minerals Zest powder is a protein rich nutritional formula containing first class protein with best digest ability and highest biological value Zest Powder dissolved into milk/water or any other drink makes a delicious drink with high nutritive value with high quantity of protein and essential nutrients Zest Powder is versatile nourishment,"
Zest adds zing to Mother Nature's own health food added into milk. Zest powder makes delicious drink.
3. The two show cause notices issued to the appellant were on the following grounds:
a. Note 1(a) of Chapter 30 excludes foods or beverages (such as dietetic diabetic or fortified foods, food supplements, tonic beverages and mineral waters), from the purview of the said Chapter. The product 'Zest Powder' is food and not medicine.
b. The main characteristic of a medicine for an ailment of disease is that it is to be prescribed by a doctor with dosage and has to be taken for a prescribed period. Not a single characteristic of a medicament is evident from the label of Zest powder. Further, it is essential for considering a product as a drug if the same is intended to be used for or in the diagnosis, treatment mitigation or prevention of any disease or disorder in human being or animal. However, there is no indication of its label about the name of the disease for the treatment or prevention of which the Zest powder is to be taken.
c. From the raw materials used for the manufacture of Zest Powder, it appears that 199.505 kgs. of raw material is of In-House specification and only 0.495 kgs. of IP specifications is used in a batch size of 200 kgs. The product 'Zest Powder' manufactured by the appellant is basically a food product and can be described as a fortified food being enriched with vitamins and minerals.
d. There is no indication of the label of the product 'Zest Powder' that It is available in the market only on prescriptions of doctor.
Name of the disease, which the product 'Zest powder' is to prevent or cure.
Dosage and duration for which the product can be taken.
4. The appellants, before the authorities below, raised the following contentions:
a. The fact that the Zest powder is manufactured under the authority and licence issued by the Drug Control Authority is sufficient to hold the goods as of medicaments.
b. The labels of the said product indicate various constituents and most of them are pharmacopoeial constituents having prophylactic uses and the said label indicate that the product is manufactured, sold and consumed for prophylactic use.
c. The said goods are sold only through Registered Medical Halls of shops and are not available in normal provision stores as food products.
d. The product is considered as a medicament by the traders / dealers and Registered Medical Practitioners / shops and as such by applying common parlance lest, they have to be considered as medicament and not as food products.
e. The certificate issued by the Drug Control Authorities, Vadodara is also to the effect that the 'Zest Powder' as prophylactic uses.1
f. Inasmuch as the Drug Controller has opined that the Zest Powder is medicament, Excise Authorities are bound to accept the same, in terms of the Hon'ble Tribunal's decision in the case of Shree Biadyanath Ayurved Bhavan Ltd. v. CCE g. The expression 'Fortified Food' and Versatile Nourishment' written on the label of the product cannot act against the appellant inasmuch as such an expression is used for the purposes of marketing strategy and commercial exigencies and contingencies. If the entire label manifestly reveals to the consumer that it is a medicament, consumer is generally reluctant to use the said goods as medicaments, but if he gets an apparent view that it is a versatile nourishment or fortified food, he does not have any objection, in consuming the said goods.
h. As compared to other admittedly food products like Protinules, the Zest Powder contains pharmacopoeial ingredients. The said difference is apparent on the close scrutiny of the ingredients of both the products.
i. As such, the product in question has to be held as medicament as against the Revenue's preference to heading to 2108.99. Accordingly, the same cannot be assessed under the provisions of Section 4A of the Central Excise Act, ready with Notification No. 13/2002-CE(NT) dt. 1/3/2002 and differential duty is not payable by them.
5. The above contentions of the appellant stand rejected by the lower authorities. We reproduce the relevant portions of the impugned order of Commissioner(Appeals), as under:
I find that in common parlance, the food is any eatable or potable substance consumed by human beings or animals throughout their life for satisfying hunger or test and mainly for getting required energy for strength and healthy growth of body. Whereas, the medicine is a substance which is consumed for a limited and specified purpose of preventing or curing some disease or infirmity under the advice of a medical expert. According to Concise Oxford Dictionary food is "any nutritious substance that people or animals eat or drink or that plants absorbs in order to maintain life and growth". According to the same dictionary, the "medicine or the medicaments" is a drug or other preparations for the treatment or prevention of disease". P&P medicaments is defined in Note 1(ii) of Chapter 30 of the Central Excise Tariff Act, 1985 in terms of a drug or medicinal preparation for the use in the internal or external treatment of, or for the prevention of ailments in human being or animals. Thus, the purpose the characteristics and the consumption patterns of goods and medicines are totally different in the show cause notice, it is claimed that "Zest Powder" is a food product only and can be described as fortified food enriched with Vitamins and Minerals. On the other hand, the appellant has claimed it as medicine.
On examination of the appellant's label on the product, which is cited as materials evidence in the show cause notice for classifying the product as foods, it is found that Zest Powder is undoubtedly described more like a food product than the medicine. The product is described as Chocolate with Cocoa flavour. American Ice cream flavour containing first class protein with best digestibility and highest biological value but not containing excess of sugar, cholesterol or sodium. As per label, the product is suitable for all age groups, including calorie conscious persons and pregnant women. It is further stated that "Zest Powder", dissolves into milk/water/ any other drink, makes a delicious drink with high nutritive value, high biological value with high quantity of protein and essential nutrients. It is described as versatile nourishment. This is also described as Health food. The picture of the product on the label showing a CUP containing the preparation of the product with bold phrases like Chocolate with Cocoa flavour for versatile nourishment clearly gives the image of a food beverage like Bournvita or Coffee and other various product available in market now-a-days. Except one small line "for prophylactic use", the label does not contain any other clue by which it can be construed as medicaments by the public. Taking into view the totality of the label, the whole thrust is on the food value of the product, it's falavour, deliciousness, richness, nourishment, attractiveness and all other qualities for which normal people look to the food for their health, growth and taste. Easy preparation of Zest Powder is also emphasized. The ingredients of Zest powder as mentioned in the label are also of the food value. Moreover, generally allopathic medicines are consumed by the patients in the form these are available in the market and no such preparation at the level of patients is left. Such preparations are made rather mostly in the case of food items only. The product is described as for prophylactic use' in the label, but the diseases or ailment which can be cured or prevented by use of 'Zest Powder' are not mentioned anywhere in the label. The word 'prophylactic' means the medicines or course of action taken for preventing disease. If the broader sense of prophylactic use is taken, then all foods are prophylactic in nature, as all proper food prevents the diseases by providing necessary energy, strength and nutrition to the body which are essential for preventing the diseases. But in the context of medicines, prophylactic medicines are only those, which prevent the specific diseases by enhancing fighting and resistance capacity to the body or by providing safety mechanism. That some foods or beverages can be akin to the prophylactic medicines is recognized in Chapter 30 of the Central Excise Tariff Act, 1985 and to avert the confusion on this point. Note 1(a) in Chapter 30 is inserted for exclusion of such food supplements, tonic beverages and mineral water etc. from the purview of medicaments of Chapter 30.
The appellants has, however, claimed its product as P & P medicaments on several grounds emphasizing mainly that the said product is manufactured under Drug license, it is consumed on prescription of doctors only, it is sold through medical shops, its ingredients are of IP standard and its physician samples are distributed. The case is made out by the assessee that the product is manufactured under the Drug licence and on that basis it is claimed as Drug. However, it is not found to be correct as the licence from Food & Drug Authority, Gandhinagar, was obtained on 23/1/2001 only but as per the classification list dt. 1/4/1997 given by the assessee itself along with defence reply, the product 'Zest Powder' was manufactured since 1995. The said classification list is produced by the assessee to prove that the Department was having knowledge about the product and its classification under Chapter 30 and there was no suppression of facts on their part. This fact of manufacturing the product from 1995 or may be earlier also contradicts the arguments of the assessee that the product is manufactured under Drug Control only. Moreover, on examination of the label, it is found that they have only mentioned 'manufacturing license No. G/888' but nowhere it is mentioned that is a drug license issued by Drug Control Authority. Apparently the intention of the assessee is not to project its product to the people as medicaments but to sell like versatile food only. Moreover by mere fact that the product is manufactured under Drug license, the product cannot be classified as medicaments as per Central Excise Tariff Act. The classification of the products for Central Excise purpose is to be decided as per Provisions of Central Excise Tariff only. Manufacturing under drug licence cannot be a sole determining factor as in order to maintain proper public health and hygiene many products are manufactured under Drug license issued by Food and Drug Control Administration. Many products manufactured under Drug License are classifiable under Chapter 17(Vital Z), under Chapter 19(Protinules), under Chapter 21(Alprovit Granules), under Chapter 30(Hajmola Candy) and under Chapter 33(Danth Manjan Lal and Others). It is also well settled law that the Drug License may be used as a guide for the classification of the product but cannot be a determination factor."
As per Indian Drug Review Vo. X No. 2 March-April, 2004 also the products identical to the Zest Powder with regard to ingredients contained in them are considered under the heading Nutrition: as preparations of Food products (at Sl. No. 12. G). The products are "Ecoprot Plus" manufactured by Jenburkt as well as "Zest Powder" manufactured by the appellant.
6. We have heard both the sides duly represented by Sh. Prakash Shah, ld. Advocate appearing for the appellants and Sh. Sameer Chitkara, Id. SDR appearing for the Revenue. As is clear from the above, the dispute relates to the classification of the appellant's product 'Zest Powder'. The sole question required to be decided is whether the said product can be considered to be a medicament so as to fall under chapter 30. We have already produced the descriptions given on the label of the product, which projects the same to be a powder of protein rich nutritional formula and required to be taken by dissolving the same in milk or water or any other liquid drink. The same also reflects upon the fact that the powder in question is having high nutritive value and makes a delicious drink, when dissolved in liquid. The appellants has not been able to show us any indication in the label to the effect that the same is required to be taken for a specific disease or is meant for a specific ailment. The same admittedly stands declared by the appellant as versatile nourishment with high quality of protein and essential nutrients'. The same has been equated with a drink to be taken in routine by dissolving the same in a cup of milk. In fact, we find that the photograph by dissolving 'Zest Powder' content in a cup is printed on the label, in the same manner in which a cup of milk containing Bhournvita or Horlicks is required to be taken in the morning break-fast. A pack of 200 gms. of Zest Powder boldly declares the same to be chocolate with cocoa. When viewed from this angle, admittedly the Zest Powder in question is meant for everyday use and treated in the common parlance as equivalent to any other healthy like Bhournvita, Horlicks etc. in the milk. There is no specific ailment mentioned in the label of the product so as to indicate that the same is helpful in curing that ailment.
7. The appellant's contention that the products stand manufactured by them under a drug licence stands very effectively dealt by Commissioner(Appeals). It is well settled that merely because a drug licence has been issued to the appellant, does not ipso-facto lead to the inevitable conclusion that the product is a medicament. In the case of Sunny Industries (P) Ltd. v. CCE , it was observed that mere grant of drug licence by the Drug Controller does not make a product a drug for the Central Excise purposes.
8. As also rightly observed by the appellate authority, a drug licence may be required for manufacture of various products for the purposes of maintaining proper public health and hygiene but still the same cannot be classifiable as medicaments. Reference in this regard may be made to various products like Protinules classifiable under Chapter 19, Alprovit Granules falling under Chapter 21, Hajmola Candy falling under Chapter 30 and Danth Manjan Lal falling under Chapter 33, it is well settled that a classification of the product cannot be made on the basis of the goods having been manufactured under a drug licence.
9. We have also seen the various constituents reflected on the label of the product. The appellants have strongly contended that they are pharmacopoeial constituents and as such, the product should be held to be a medicament. We de not feel convinced with the appellant's arguments. The use of various vitamins and minerals of IP stands cannot convert the product into medicine and the same only reflect upon the higher quality of the product. Merely because materials of pharmacopoeia have been used to enhance the quality of the product and resultant marketability will not be a factor to hold the product to be a medicine.
10. In the case of Mayo (India) Ltd. v. CCE, Aurangabad , 'Honeypro granules' described as 'readily disgestible milk protein enriched with lysine, methionine, iron, zinc, calcium, honey, lecithin and vitamins, used for building up of general health and energy in post-surgical and convalescence patients and those suffering from diseases like TB, diabetes, etc. were held to be not medicaments falling under chapter 30, but food supplements under chapter 21. By taking note of the fact that there was no indication as to what is the active ingredients, in the preparation and what is the disease which it seeks to treat or prevent, the product cannot be held to be a medicament. Similar is the position of the present case also. There is nothing to show that the product is useful in a particular disease or for prevention of the same.
11. The appellants have now placed on record certain certificates given by the Doctors, which are to the effect that they prescribed 'Zest Powder' during pregnancy and after delivery for lactation purposes and to post-operational patients. All the certificates are general in nature. Some of them indicate that the Zest Powder is prescribed for better tissue building in post-operative conditions. In fact this goes on to show that the product is a general health product which may assist in improving the general health conditions and as such prescribed by the doctors to the effect in the post-operational weak health. There is nothing in the certificate of any of the doctors to indicate that the said product is meant for prevention or treatment of a particular disease. All the certificates reflect upon and indicate is only one fact that the product is nothing but a general health improver.
12. We also find from the HSN Notes that heading 30.03 excludes from its coverage food supplements containing vitamins or minerals salts which are put up for the purposes of maintaining health or well being but have no indication as to use for the prevention or treatment of any disease or ailment. It further goes on to say that these products which are usually in liquid form but may also be put up in powder or tablet form are generally classifiable in heading 21.06 or chapter 22. Ld. Advocate has also referred to Indian Drug Review publication November-December, 2004 to support his contention that the product is meant for use during pregnancy and lactation, for growing children and old patients and during convalescence, eneral debility, physical exertion. However, we find that the said Sl. No. 12G describes the products mentioned there under, under the heading "preparations of food products". Zest Powder is one of the mentioned products under the said heading, thus indicating that the same is a food product and not a medicament. Such high value food products may help in the improvement of the general health, which in turn may help in fighting the various diseases by increasing the immunity of the patient, but the same cannot be held to be medicament for treatment of a particular disease.
13. Ld. Advocate has relied upon various decisions of the courts in support of his submissions that the product should be considered to be a medicament. We find that most of the said decisions were considered by Commissioner(Appeals) and distinguished by him. We have also gone through the same like the Hon'ble Supreme Court's decisions (1) CCE, Nagpur v. Vicco Laboratories , (2) Puma Ayurvedic Herbal (P) Ltd. v. CCE, Nagpur , (3) CCE, Calcutta v. Sharma Chemical Works 2003 (154) ELT (SC), wherein by considering the various constituents of the product and the diseases for which the same were meant and that the ingredients were as per the Ayurvedic Text Books, it was held that the same were medicaments. We find that product in each case has to be considered in the light of the various factors and criterias laid down by the courts from time to time. As already discussed, the said product does not pass the said criteria of common parlance test, absence of indication of any disease, projection of the product in the market and the ingredients being used for treatment of a particular disease etc. As such, we are of the view that the product in question cannot be held to be a medicament. The same is accordingly classifiable under chapter 21, as food product.
14. Before we part, we would like to reproduce the relevant part of Commissioner(Appeals)' order vide which he has dealt with the appellant's plea of the product being distributed as free of cost amongst the medical practitioners as physician samples.
The distribution of physician samples to the medical practitioners also do no necessarily establish that the product is a medicaments, as contended by the assessee. Like in the case of medicine, the distribution of samples of supplementary food also is meant for enhancing its market. Moreover, no evidence has been adduced by the appellants at any time as to how much and to which doctors the samples of the product were distributed as samples of medicine. The assessee has produced only the labels of 'Zest Powder' marked as 'Physician Sample Not To Be Sold'. On such labels they have mentioned the dosage as well as the warning 'To be sold by retail on the prescription of a registered medical practitioner only'. However, both these things are missing from the labels meant for selling the product in retail. Moreover, the phrases like 'Improved' and 'a versatile nourishment' is added to the labels marked for the medical practitioners. The labels for the physician and market are thus contradictory and misleading. Moreover, no evidence of providing sample to the Medical Practitioners is given. By producing labels only, the fact of distribution of sample of the product to the Medical Practitioner is no established. Clearance of Physician Samples of a product to medical practitioners does not otherwise also establish that the product is a medicament only. The purpose of samples to physician of products including the item like 'Zest Powder' is generally to give the detail of ingredients as well as other characteristics of the product for information of the medical practitioners and it is one kind of marketing strategy to boost the sales. For examples in a similar case of Oto-Motive Products (I) Ltd. v. CCE, Mumbai-III , the appellants engaged in the manufacture of miscellaneous edible preparations viz. Alprovit Granules 200 gms., Alprovit Granules 100 gms. etc. classified under Chapter subheading 2107.91 distributed the samples of all these items to physicians and their valuation dispute was decided by Tribunal in the said order.
As is clear from the above, the appellants in their anxiety to get the product classified as medicaments, have produced labels before the Commissioner, which are different from the routine labels used by them for the product. No explanation has come forth from the appellants as regards the findings of the appellate authority on the issue of labels meant for physicians and for the market being contradictory and misleading.
15. In view of our foregoing discussions, we find no merits in the appeal and reject the same.
(Pronounced in Court on 10.3.08)