Custom, Excise & Service Tax Tribunal
Cce, Chennai-I vs Impcops on 11 August, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH AT CHENNAI E/207/2003, E/497/2003 & E/509/2004 (Arising out of dated 11.04.2007 passed by the Committee of Chief Commissioner and Order-in-Appeal No. dated 31.08.09 dated 14.03.2014, passed by the Commissioner of Central Excise (Appeals), Madurai). CCE, Chennai-I : Appellant Vs. IMPCOPS : Respondent
Appearance Ms. Indira Sisupal, AC (AR) For the applicants Shri Srinivasan, Adv., For the respondent CORAM Honble Shri R. PERIASAMI, Technical Member Honble Shri P.K. CHOUDHARY, Judicial Member FINAL ORDER: 41205 - 41207 / 2015 Date of Hearing : 14.05.2015 Date of Pronouncement :
Per: P.K. Choudhary The issue involved in the present appeals of the Revenue are against the Order of the Commissioner of Central Excise (Appeals) as to whether the respondent assessees products viz.,Neelibhringadi Thailam (Gingelly Oil base), Neelibhringadi Thailam (Coconut Oil base) and Sugandham Thailam and Danta Dhavana Churnam falling under sub-heading No. 3305.99 or the same is entitled to be classified under sub-heading No. 3003.39 of CETA,1985, as Ayurvedic formulations/medicaments as claimed by the assessee. The Commissioner (Appeals) while taking into account the entire facts and circumstances of the case has accepted the assessees stand that the goods are to be classified as ayurvedic medicaments and has dropped the proceedings against them. Hence, the present appeals.
Appeal No.E/509/04 OIA 9/04 dt. 29.01.2004
1. Neelibringadi Thailam (with coconut oil base)
2. Neelibringadi Thailam (with Gingelly oil bas) 3, Sugantham Thailam hair oil Classification 30.03.39 by the respondents and 33.05.90 by the department.
Appeal No.E/207/03 OIA 201/02 dt. 26.12.2002
1. Neelibringadi Thailam (with coconut oil base)
2. Neelibringadi Thailam (with Gingelly oil bas) 3, Sugantham Thailam hair oil Classification 30.03.39 by the respondents and 33.05.90 by the department
4. Danda Dhavana Churnam Classification 30.03.39 by the respondents and 33.06.10 by the department.
Appeal No. E/497/03 OIA 63/03 dt. 14.05.2003
1. Neelibringadi Thailam (with coconut oil base)
2. Neelibringadi Thailam (with Gingelly oil bas) 3, Sugantham Thailam hair oil Classification 30.03.39 by the respondents and 33.05.90 by the department
4. Danda Dhavana Churnam Classification 30.03.39 by the respondents and 33.06.10 by the department
2. Ld. AR for the Revenue reiterated the grounds of appeals and submitted that the main contentions of the revenue are as follows:-
i) Thailams are of coconut or gingelly oil based and are meant for the use of the scalp/hair.
ii) The assessee has not proved exactly as to whether the products are substantial or subsidiary therapeutic curative or prophylactic uses.
iii) The goods are put up in unit container in measured quantities and in packages form for retail sale with labels affixed on them.
iv) Items are assessed as cosmetics as per the TNGST Act.
v) Manufacture of the goods need a drug license would not make the product a medicament.
vi) Goods are not prescribed by the doctors in doses for limited time for specific condition.
vii) Market enquiry revealed that these products are generally available to customers, bought and sold without any prescription of the doctor which confirms that the curative or prophylactic users are subsidiary and not substantial.
3. He however, heavily relied on various judicial pronouncements to stress the point that common parlance theory would be the only guide to determine the classification of the impugned goods and therefore the appeal of the revenue should be allowed. He relied on the decision in the case of Puma Ayurvedic Herbal (P) Ltd. Vs. CCE, Nagpur 2006 (196) ELT 3 (S.C). wherein the word medicament is not defined anywhere while the word cosmetic is defined in the Drugs and Cosmetics Act, 1940, as under:-
A cosmetic means any article intended to be rubbed, poured, sprinkled or sprayed on, or introduced into, or otherwise applied to the human body or any part threof for cleansing, beautifying, promoting attractiveness, or altering the appearance, and includes any article intended for use as a component of cosmetic.
20.?It will be seen from the above definition of cosmetic that the cosmetic products are meant to improve appearance of a person, that is, they enhance beauty. Whereas a medicinal product or a medicament is meant to treat some medical condition. It may happen that while treating a particular medical problem, after the problem is cured, the appearance of the person concerned may improve. What is to be seen is the primary use of the product. To illustrate, a particular Ayurvedic product may be used for treating baldness. Baldness is a medical problem. By use of the product if a person is able to grow hair on his head, his ailment of baldness is cured and the persons appearance may improve. The product used for the purpose cannot be described as cosmetic simply because it has ultimately led to improvement in appearance of the person. The primary role of the product was to grow hair on his head and cure his baldness.
3. The Ld. Advocate on behalf of the respondents submits the following:-
1. The revenue having accepted that the goods under dispute are manufactured as per the ayurvedic pharmacopeia by use of the ingredients set out in the said pharmacopeia merely because it is applied on the hair for purity performances cannot propose the reclassification of the already accepted classification under Chapter 30.
2. The finding of the original authority that the market enquiries revealed that these products are generally available to customers and are brought and sold without any prescription of the doctor to conclude that the curative and prophylactic uses are subsidiary and not substantial is highly arbitrary and unreasonable being contrary to the various judgments of the Honble Supreme Court of India. In fact the very preparation of these products admittedly being as per the ayurvedic pharmacopeia by itself would nullify the above arbitrary and revenue biased finding recorded by the original authority.
3. Similarly, the reliance placed on the appearance of the monograms/brand effect of IMPCOPS and non-indication of the product that they are to be strictly used under medical prescription even while admitting that the label contained the inscription ayurvedic medicine could in no way lead to the conclusion that the products could be regarded as cosmetics and not as medicine.
4. The levy of sales tax as per a different enactment namely Tamil Nadu General Sales Tax Act could in no way be a ground for revising the accepted classification under the Central Excise Tariff Act.
5. The finding of the original authority also having not adverted to whether the product in question are intended to cure any ailment or defect or as a product for care of the skin, etc. would warrant the setting aside of the appeal of the revenue. The ayurvedic product under dispute are primarily to cure certain ailments or defect and not for the care or any beautification. The odour emanating from the product very well establish to the fact that they are only medicine as no person who do not have the ailment or defect would be willing to buy and use these products.
6. The reliance placed on Note 1(1) of Chapter 30 and Note 2 of Chapter 33 has no application to the case of the respondent as the revenue failed to note that as per note 2 to chapter 33, the product must first be a cosmetic and that it must be used as such and it should also be put in such packing declaring it to be a cosmetic product (para 31 of BPL Pharmaceutical case decided by the Honble Supreme Court).
7. The revenue further failed to note that in terms of Board Circular dated 03.04.1996 also, the use of preservative by the manufacturers of ayurvedic medicines does not exclude it from the purview of the classification as an ayurvedic medicament so long as they are prepared in accordance with the formulae prescribed in the authoritative books and the ingredients added other than those prescribed in the authoritative text books do not have any therapeutic value. Following are the case laws relied upon by the respondents:-
1. CCE Delhi Vs. Ishaan Research Lab Pvt. Ltd.
2008 (236) ELT 7 (S)
2. CCE, Nagpur Vs. Baidyanath Ayurved Bhavan Ltd.
2009 (237) ELT 225 (SC)
3. CCE, Mumbai-IV Vs. CIENS Laboratories Mumbai 2013 (295) ELT 3 (S.C)
4. We have carefully considered the submissions from both sides and perused the records. The main issue involved in these cases is whether the impugned goods are classifiable under chapter 3305.99 according to the Revenue or classifiable under chapter 3303. 39 according to the respondents and whether Danda Dhavan Churam is classifiable under chapter 33.06.10 according to the Revenue or classifiable under chapter 3303.39 according to the respondents.
1. The appellant is a co-operative society had been registered only for the purpose of manufacture of ayurvedic and siddha medicaments and that the products have been registered with the Drug Control Authority for the purposes of promoting ayurvedic and siddha medicaments.
2. The manufacturing process is as outlined in the authoritative books of ayurveda, the formula is that as mentioned in Sahasrayogam with reference to the Neelibhringadi Thailam which is made with coconut oil base and Neelibhringadi Thailam which is manufactured with Gingelly oil base, the other products viz. Sugandham Thailam and Danda Dhavana Churnam are manufactured as per the classical formula prescribed in Vaidya Yoga Ratnavai, a Formulary of Ayurvedic Medicines.
3. It was further pleaded by the Ld. Counsel representing M/s. Impcops, that the impugned products have been understood by doctors, dealers and users primarily as being ayurvdic medicaments. The goods have been manufactured as per formula in the ayurvedic system of medicine for which a drug licence has been issued; the goods are certified by the doctors to be useful in treating certain skin disorders of the scalp and face, prevent hair falling and give coolness to the eyes and the body system; as per various judicial pronouncements the ingredients must find a place in authoritative texts of the ayurveda, Unani and siddha system.
4. Indian Medical Practitioners Co-operative Pharmacy and Stores Ltd. the appellant is a manufacturer of various ayurvedic medicaments; they have the necessary drug licences from the proper authority for the products manufactured.
5. The products in question have substantial therapeutic value, the ingredients are only medicinal in nature; the product in question are prescribed for use by ayurvedic doctors as a medicament. Moreover, the formulae of the constituents is as per the classical ayurvedic texts only.
6. The manufacturing process remains the same over the years, that the ingredients are available in the authoritative books of ayurveda, that the department was aware of the various letters from the doctors who prescribe the particular product as a medicine in view of its medicinal properties, that till date there has been no change in the ingredients and that there was no change in the tariff to classify the product in question under 3305.
7. Major reasons for classification as a medicament are:
a. The goods have been manufactured as per formula in the ayurvedic system of medicine for which a drug licence has been issued b. The three thailams are understood by doctors, dealers and users to be primarily an ayurvedic medicament c. The goods are certified by doctors to be useful in treating certain skin disorders of the scalp and face, prevent hair falling and gives coolness to the eyes and the body system d. As per judicial pronouncements the ingredients must find a place in authoritative texts of the ayurveda, unani and siddha system.
5. The Apex Court has dealt this issue in detail in the case of CIENS Laboratories Mumbai (supra), which is reproduced as under:-
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)
15.?In Puma Ayurvedic Herbal (P) Ltd. v. Commissioner of Central Excise, Nagpur - 2006 (196) E.L.T. 3 (S.C.), it was held that the purpose of cosmetic product is to improve the appearance of a person and for enhancing the beauty whereas a medicinal product or medicament is meant to treat some medical condition. It was also held that merely because a product is sold not under a doctors prescription, the same does not cease to be a medicament. In both these cases, it was held that minimal presence of medicinal element does not detract the product from being classified as a medicament. To quote :
20.?It will be seen from the above definition of cosmetic that the cosmetic products are meant to improve appearance of a person, that is, they enhance beauty. Whereas a medicinal product or a medicament is meant to treat some medical condition. It may happen that while treating a particular medical problem, after the problem is cured, the appearance of the person concerned may improve. What is to be seen is the primary use of the product. To illustrate, a particular Ayurvedic product may be used for treating baldness. Baldness is a medical problem. By use of the product if a person is able to grow hair on his head, his ailment of baldness is cured and the persons appearance may improve. The product used for the purpose cannot be described as cosmetic simply because it has ultimately led to improvement in appearance of the person. The primary role of the product was to grow hair on his head and cure his baldness.
21.?The extent or the quantity of medicament used in a particular product will also not be a relevant factor. Normally, the extent of use of medicinal ingredients is very low because a larger use may be harmful for the human body. The medical ingredients are mixed with what is in the trade parlance called fillers, or vehicles in order to make the medicament useful. To illustrate an example of Vicks Vaporub is given in which 98% is said to be paraffine wax, while the medicinal part i.e. Menthol is only 2%. Vicks Vaporub has been held to be medicament by this Court in C.C.E. v. Richardson Hindustan Ltd. - 1989 (42) E.L.T. A100. Therefore, the fact that use of medicinal element in a product was minimal does not detract from it being classified as a medicament.
22.?In order to be a medicinal preparation or a medicament it is not necessary that the item must be sold under a doctors prescription. Similarly availability of the products across the counter in shops is not relevant as it makes no difference either way. ?????????????????????(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 products primary function is care and not cure, it is not a medicament. Cosmetic products are used in enhancing or improving a persons 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.
6. The Ahmadabad Bench of the Tribunal in the case of CCE, Rajkot Vs. Ban Labs PVt. Ltd. 2009 (236) ELT 542 (Tri.-Ahmd.), held that the oil with ingredients specified in the authoritative books and manufactured with licence from Drugs Control Authority are classifiable as ayurvedic medicine under sub-heading 3003.99 of Central Excise Tariff and not as hair oil under sub-heading 3305.99. The relevant portion of the said decision is reproduced as under:-
3.?By taking the above facts and circumstances and the Larger Bench decision of the Tribunal in the case of Himtaj Ayurvedic Udyog Kendra v. CCE, Allahabad - [2002 (139) E.L.T. 610 (Tribunal-LB) = 2002 (48) RLT 264 (LB-T)], he has held the goods to be Ayurvedic medicine.
4.?As against the above we find that the Revenue in their grounds of appeal has again reiterated the same stand that the product cannot be considered to be a medicine inasmuch as medicine is always prescribed fort a limited period to cure a particular disease. Further, there is no mention of dose or doses to be directed by the physician. As such they have contended that it cannot be held to be Ayurvedic medicine.
5.?We find that all the above submissions were raised by the Revenue before the Tribunal in the case of Himtaj Ayurvedic Udyog Kendra and the same were not accepted by the Tribunal. Apart from the Larger Bench decision in the above case we also take note of the Honble Supreme Courts decision in the case of Sharma Chemicals reported in 2003 (154) E.L.T. 328 (S.C.) laying down that the product should be manufactured in accordance with the various ingredients specified in the authoritative ayurvedic books and under a licence from the Drug Control authority have to be classified as Ayurvedic medicine. We find that apart from the various facts enumerated above the assessee has also produced affidavit/certificate/clinical trial report showing that the product is formulated to cure various hair diseases like Alopecia, Graying of hair, Dandruff, Itching of skull and to improve blood circulation to hair follicles. Hence, the product has to be held as having therapeutic and prophylactic value. As such we do not find any infirmity in the view taken by the Commissioner. Accordingly, appeal filed by the Revenue is rejected.
7. The Commissioner (Appeals) in his impugned order had observed that the assessees products as certified by various Doctors and Consumers to show that the impugned goods were prescribed and used as medicines and the assessee had been able to satisfy the common parlance test and held that the impugned products in question are ayurvedic medicaments, which will be classifiable under the heading 3003.30 of the CETA, 1985 and not under 3305.10. By following the Apex Court decision and the decision of the Tribunal as above, the impugned order is upheld and the appeals filed by the Revenue are rejected.
(Order pronounced in the open Court on )
(P.K. CHOUDHARY) (R. PERIASAMI)
JUDICIAL MEMBER TECHNICAL MEMBER
BB
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