Customs, Excise and Gold Tribunal - Delhi
Sh. Kamal Chandravadan Shah And ... vs C.C.E. on 22 January, 2004
Equivalent citations: 2004(94)ECC279, 2004(165)ELT520(TRI-DEL)
ORDER V.K. Agrawal, Member (T)
1. The common issue involved in these four appeals, arising out of three different Orders, is whether the products, namely, Canifur Liquid and canifur AZ Liquid manufactured by M/s. Humphrey & Colman Health products (P) Ltd. are classifiable under sub-heading No. 3003.30 of the Schedule to the Central Excise Tariff Act as claimed by them or under Heading No. 33.05 of the Tariff as confirmed by the Revenue.
2.1 Sh. V. Lakshmikumaran, learned Advocated, submitted that the Appellant co. is engaged in the manufacture of Ayurvedic Veterinary medicines and the impugned two products are being manufactured by them under loan license for and on behalf of M/s. Cadila Veterinary ; that the ingredients used in the manufacture of these two products are as under :
(i) Canifur Liquid : Combined extract of Melia Azadirachta (S:Nimba) and Lawsonia Inermis (S:Medika), Base Q.S.
(ii) canifur AZ Liquid : Combined Extract of Melia azadirachta (S:Nimba), Lawsonia (S. Medika) and Cocos nucifera (S:Gadapushpa), Base Q.S."
2.2 He mentioned that the impugned products contain ingredients which are mentioned in the Ayurvedic Textbooks and are used to cure pets and animals from lice, ticks, mites and dandruff; that these products are bought and sold only from drug shops and on prescription of doctors ; that the Revenue has classified these products under Sub-heading 3305.90 on the ground that the therapeutic/prophylactic properties of the products is not the primary use and is only secondary and that these products have not been manufactured in accordance with the formulae prescribed in Ayurvedic Texts and the products as such do not find mention in the Ayurvedic Text books.
2.3 The learned Counsel submitted that for a product to be classified under Heading 30.03 as Ayurvedic medicament, the requirement is only that the ingredients of the product should find mention in the Ayurvedic Text book, the products would be classified as Ayurvedic medicaments only though as patented medicines; that the Larger Bench of the Tribunal in Himtaj Ayurvedic Udyog Kendra vs. C.C.E., Allahabad, 2002 (139) E.L.T. 610 (T-LB), affirmed by the Supreme Court in C.C.E. vs Himtaj Ayurvedic Udyog Kendra, 2003 (154) E.L.T. 323 (S.C.), has held that the product "having ingredients exclusively mentioned in the authoritative books, but manufactured in accordance with the formulation of the manufacturer and sold in the brand name 'Himtaj Oil' is Ayurvedic medicament even though not a classical one". He mentioned that the ingredients contained in the impugned products are mentioned in "Bhavaprakasa of Bhavamisra" Volume-1; that the Supreme Court in C.C.E., Calcutta vs Sharma Chemical Works, 2003 (154) E.L.T. 328 (S.C.) has held that "Of course the formula may not be as per the text books but a medicament can also be under a patented or proprietory formula. The main criteria for determining classification is normally the use it is put to by the customers who use it."
3.1 The learned Advocate also contended that the finding that the medicinal properties of the impugned products is only secondary one is a mere ipsi dixit and not based on any evidence whatsoever; that on the other hand, the evidences produced by them in the form of clinical trials, affidavits from the doctors, dealers and users of the product, drug licence issued by the authority conclusively establish that the primary use of the product is as a medicament and not as a hair growth item; that it has been mentioned by the Commissioner in Order-in-Original No. V-30/15-163/Dem/95 dated 30.12.97 that the label of the products described the products as under :
(i) Canifur : An anti-dandruff ectoparasiticidal hair growth promotor and fur conditioner
(ii) Canifur AZ : A patent herbal ectoparasiticidal and fur conditioner.
3.2 He, thus, contended that in view of the legal position laid down by the Supreme Court in Sharma Chemical Works, the impugned products are classifiable only as veterinary ayurvedic medicaments under Sub-heading No. 3003.30 of the Tariff.
4. Finally, he mentioned that in Appeal No. E/3387/98-B, the show cause notice is barred by limitation having been issued beyond six months from the relevant date; that they were under the bonafide belief that their products were ayurvedic medicaments not chargeable to Central Excise duty; that their bonafide conduct is also evident from the fact that in March, 1994, when the patented Ayurvedic medicines attracted duty of excise, they filed classification under Heading 30.30; that there is nothing on record to suggest that the Appellants had any malafide intention to evade payment of duty; that for the same reason no penalty is impassable on any of the Appellants.
5.1 Countering the arguments, Sh. Jagdish Singh, learned D.R., submitted that the impugned products are not medicaments but veterinary shampoo having some subsidiary curative or prophylactic value; that the primary use of the product is as a shampoo for dogs, cats and other animals; that the Commissioner has given his specific finding in Order-in-Original dated 30.12.97 that the label of product 'Canifur' indicated as under:
"Bathe the dog to ensure complete wetting. Apply 10 to 20 grams of Canifur and rub throughly into the depth of the hair coat for 5 to 10 minutes and wash with the water. Repeat using canifur again and rinse thoroughly with water. Pat dry with clean towel. Brush the coat when dry. Regular weekly use of Canifur provides effective results or use as directed by the Veterinary practioner."
5.2 He also stated that the label boldly claims the products virtues as "an anti-dandruff, actoprarsiticidal, hair growth promoter and fur conditioner"; that it is thus apparent that the product is basically a 'shampoo' for the growth of hair and fur conditioning; that if it was not so, regular weekly use would not have been recommended in the product's literature; that Canifur AZ has similar properties except that it has a little more patent actoparasiticidal effect and it is used not only for dogs and cats but for other animals also. He also referred to the "Observations on the usefulness of Canifur AZ (Herbal Preparation) against Skin Problems of Pets Associated with Ecto-Parasites", wherein it is mentioned that "Majority of dog owners who participated the trial reported that the shine and luster of the hair coat of their dog was increased by the application of Canifur AZ." the learned D.R. also submitted that the judgment in the case of Sharma Chemicals works is not applicable as in that case, dosages were prescribed and the oil in question there was used on scalp and not on hair; that the decision of the Larger bench in Himtaj Ayurvedic Udyog Kendra is also not applicable to the facts of the present matters as in the said matter the Department wanted to classify 'Himtaj Oil' as a perfumed oil and the Tribunal observed that no perfume had been added by the Appellants therein; that in Himtaj the label of the product did not indicate that it was a hair oil and the direction was to use it on the scalp and not on the hair; that moreover, there was a chemical report also which opined that "no synthetic perfumery chemical could be detected by chromategraphic and spectrophotoma i.e., analysis one on the distillate obtained on steam distillation of the product." He, further, mentioned that Section 3(h) of the Drugs and Cosmetics Act, 1940, while defining the term 'patent or proprietory medicine' in relation to Ayurvedic system of medicine clearly mentions that formulation should contain only such ingredients mentioned in the formulae described in the authoritative books of Ayurvedic System; that in Himtaj case, the Tribunal has specifically observed in Para 24 of the decision that "there are ample materials made available by the appellant in support of his contention that the ingredients which had gone into the manufacture of 'Himtaj Oil' are only those which are specifically mentioned in the authoritative text books on Ayurvedia"; that in 'Himtaj' case there were sufficient materials to support the contention that the said product is known as Ayurvedic medicament in common parlance which is missing in the present matters.
6. The learned D.R. referred to Note 1(d) to Chapter 30 of the Tariff which excludes "Preparations of Chapter 33 even if they have therapeutic or prophylactic properties" from the purview of Chapter 30 and stated that Note 2 to Chapter 33 is also to the same effect as it provides that Heading Nos. 33.03 to 33.07 "includes products whether or not they contain subsidiary pharmaceutical or antiseptic constituents, or are held out as having subsidiary curative or prophylactic value"; that the products in question are veterinary shampoo having some subsidiary curative or prophylactic value and as such is classifiable under Heading 33.05 of the Tariff.
7. In reply the learned Advocate submitted that in a medicine, some other ingredients such as excipients, fillers are added as a pharmaceutical necessity; that use of these ingredients would not make an ayurvedic medicament as a cosmetic or toilet properties; that the Central Board of Excise & Customs itself has clarified under circular No. 196/30/96-CX dated 3.4.1996 that the "medicaments remain Ayurvedic medicines.. even if preservatives or binding agents, etc., are added... In this context, the Ayurvedic, Sidha and Unani Drugs Technical Advisory Board ... were consulted who has opined that significant changes have taken place in the process of making of Ayurvedic medicines and preservatives, inner excipients like starch, factose and wetting agents like sodium laurel sulphate are now-a-days widely used". He also contended that no evidence has been produced by the Revenue that the impugned products are used as cosmetics; that findings in an Adjudication Order are not evidence; that the dosages have been mentioned specifically and as the lice sits on the root of the hair, the medicine has to be used on hair also. He also relied upon the decision in the case of C.C.E., vs Pharmasia (p) Ltd., 1900 (47) E.L.T. 658 (T) wherein it has been held by the Tribunal that "Any preparation containing active ingredients to remove the root cause, whether they are used for internal consumption or external application has to be considered as a medicament." The learned D.R. countered by mentioning that said Board's Circular refers to fillers which are insert material whereas detergent used by the Appellants in manufacturing the impugned product is an active ingredient; that sodium laurel sulphate is not used in present matters as wetting agent; that evidence is available on record that the products in question provide lusture to the fur; that in Pharmasia case, again there was no regular use as is in respect of impugned products.
8. We have considered the submissions of both the sides. It is not disputed by the revenue that both the impugned products contain ingredients which are mentioned in the authoritative text books on Ayurveda. For being an ayurvedic medicament, it is not necessary that the said medicament is prepared according to the formulae given in authoritative text books. The Larger Bench of the Tribunal, in the case of Himtaj ayurvedic Udyog Kendra, has held Himtaj oil to be an ayurvedic medicine as it had ingredients exclusively mentioned in the authoritative books though it was manufactured in accordance with the formulation of the manufacturer and sold in his brand name. The appeal filed by the Commissioner has been dismissed by the Supreme Court as reported in 2003 (159) E.L.T. 323 (S.C.). Moreover, the Supreme court has also held in C.C.E., Calcutta vs Sharma Chemical Works, 2003-TAXINDIAONLINE-45-SC-CX, that the formula may not be as per the text books and a medicament can also be under a patented or proprietory formula. Thus a product does not cease to be an ayurvedic medicament, which contains ingredients mentioned in the authoritative text books on Ayurveda, merely because it has not been processed or manufactured according to formulae prescribed in the authoritative Ayurvedic Text books.
9.1 The second contention raised by the Revenue is that the impugned products are 'Veterinary Shampoos' having some subsidiary curative or prophylactic value and in terms of Note 1(d) to Chapter 30 and Note 2 to Chapter 33, they would be classifiable under Heading 33.05 being preparations for use on the hair. On the other hand, the learned Advocate for the Appellants has contended that the impugned products are used to cure pets and animals from lice, ticks, mites and dandruff. The labels on the products clearly mention as under :
Canifur : Ayurvedic Veterinary Medicine An anti-dandruff, ectoparasiticidal, hair growth promoter and fur conditioner.
Canifur AZ : Ayurvedic Veterinary Medicine. A patent herbal ectoparasiticidal and fur conditioner.
9.2 It is thus apparent that even the labels on the impugned products, besides claiming them to be Ayurvedic Veterinary Medicine, clearly mentions that the products are 'ectoparasiticidal' besides being hair growth promotor and fur conditioner. Further in respect of Canifur AZ it is also mentioned on the label that the product has to be applied "on the area of heavy infestation, rub thoroughly" and after washing for 5 minutes wash with water. The process has to be repeated, if required and thereafter apply comb to remove the killed parasites. The appellants have also brought on record the affidavits from the users and dealers in support of their contention that the products are generally sold on doctor's prescription and are used to cure ectoparasite disease. The Revenue, on the other hand, has not adduced any material/evidence to show that these products are generally used as 'hair growth promoter and fur conditioner'. The appellants have also brought on record the clinical report which clearly shows that the 'Canifur had significant anti-dandruff and ectoparasiticidal action and ticks were totally eliminated out. There was no reoccurrence. The learned D.R. has referred to "Observations on the usefulness of Canifur AZ" to show that the product is a shampoo as the shine and luster of the hair coat of dog was increased by the application of Canifur AZ. A perusal of the said Observations reveal that the results of application of Canifur AZ against the problem associated with ectoparasite infestation and non-specific prusites were presented in Table I which shows that tick infestation was improved after 1st application and 2nd application was not needed; that Prusites with lice infestation in dog disappeared about 50% on 1st application and after 3rd application approximately 90% disappeared. The Observation also mentions that "Ticks and Lice were collected from various sps of animals were also dipped into the Canifur AZ solution and time required was recorded in Table 2. According to this Table Lice in dog/buffalows completely died after 30 minutes and ticks in cattle also died in 30 minutes. In conclusion, it was mentioned in the said Observation that Canifur AZ" was found to be effective against the lice, fleas and ticks infestation in pet animals. The drug is also useful to subside the non-specific prusites in dogs... The application of the Canifur AZ maintained the softness, shiness and lustrous to hair coat condition of dogs." It is thus apparent that the impugned products have therapeutic or prophylactic character which is not subsidiary one and as such these are medicaments and not preparation for use on hair. The use of detergent in substantial quantity is not a relevant factor to decide the classification. In B.P.L. Pharmaceuticals Ltd, supra, the product 'Selsum' contained selenium disulphide only 2.5% and water 75.3%. The Supreme Court held that "once the therapeutic quantity of the ingredients used, is accepted, thereafter it is not possible to hold that the constituent is subsidiary." the Supreme Court recently in Sharma Chemical Works case, 2003-TAXINDIAONLINE-45-SC-CX, has held that merely because the percentage of medicament in a product is less, does not 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 is also a settled law that onus or burden to show that a product falls within a particular Tariff Item is always on the Revenue. The Revenue has not brought any material on record to show that the medicinal use of the impugned product is a subsidiary one. Accordingly, we hold that the impugned products Canifur Liquid and Cainfur AZ Liquid are Ayurvedic medicament classifiable under Heading 30.03 of the Central Excise Tariff. We, therefore, set aside all the impugned orders and allow all the appeals.