Custom, Excise & Service Tax Tribunal
Ratnendu Bikash Tripathi vs Kolkata-V on 26 February, 2026
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
EASTERN ZONAL BENCH: KOLKATA
REGIONAL BENCH - COURT NO. 1
Excise Appeal No. 75133 of 2016
(Arising out of Order-in-Original No. 23/COMMR./CE/Kol-V/Adjn/2015 dated
20.10.2015 passed by the Commissioner of Central Excise, Kolkata-V, Kendriya Utpad
Shulk Bhawan, 180, Rajdanga Main Road, Shantipally, Kolkata - 700 107)
M/s. Anupama Ayurvedic Drug Company Pvt. Ltd. : Appellant
32, K.B. Sarani,
Kolkata - 700 080 (West Bengal)
VERSUS
Commissioner of Central Excise : Respondent
Kolkata-V Commissionerate,
Kendriya Utpad Shulk Bhawan,
180, Rajdanga Main Road, Shantipally,
Kolkata - 700 107 (West Bengal)
WITH
Excise Appeal No. 75738 of 2016
(Arising out of Order-in-Original No. 27/COMMR/CE/KOL-III/2015-16 dated
24.02.2016 passed by the Commissioner of Central Excise, Kolkata-III, 180, Rajdanga
Main Road, Shantipally, Kolkata - 700 107)
M/s. Anupama Ayurvedic Drug Company Pvt. Ltd. : Appellant
32, K.B. Sarani,
Kolkata - 700 080 (West Bengal)
VERSUS
Commissioner of Central Excise : Respondent
Kolkata-III Commissionerate,
Kendriya Utpad Shulk Bhawan,
180, Rajdanga Main Road, Shantipally,
Kolkata - 700 107 (West Bengal)
WITH
Excise Appeal No. 75777 of 2016
(Arising out of Order-in-Original No. 27/COMMR/CE/KOL-III/2015-16 dated
24.02.2016 passed by the Commissioner of Central Excise, Kolkata-III, 180, Rajdanga
Main Road, Shantipally, Kolkata - 700 107)
Shri Ratnendu Bikash Tripathi, Director, : Appellant
M/s. Anupama Ayurvedic Drug Company Pvt. Ltd.
32, K.B. Sarani,
Kolkata - 700 080 (West Bengal)
VERSUS
Commissioner of Central Excise : Respondent
Kolkata-III Commissionerate,
Kendriya Utpad Shulk Bhawan,
180, Rajdanga Main Road, Shantipally,
Kolkata - 700 107 (West Bengal)
Page 2 of 35
Appeal No(s).: E/75133,75738,75777,76767-DB
& E/79519/2018-DB
WITH
Excise Appeal No. 76767 of 2016
(Arising out of Order-in-Original No. 23/COMMR./CE/Kol-V/Adjn/2015 dated
20.10.2015 passed by the Commissioner of Central Excise, Kolkata-V, Kendriya Utpad
Shulk Bhawan, 180, Rajdanga Main Road, Shantipally, Kolkata - 700 107)
Shri Ratnendu Bikash Tripathi, Director, : Appellant
M/s. Anupama Ayurvedic Drug Company Pvt. Ltd.
32, K.B. Sarani,
Kolkata - 700 080 (West Bengal)
VERSUS
Commissioner of Central Excise : Respondent
Kolkata-V Commissionerate,
Kendriya Utpad Shulk Bhawan,
180, Rajdanga Main Road, Shantipally,
Kolkata - 700 107 (West Bengal)
AND
Excise Appeal No. 79519 of 2018
(Arising out of Order-in-Appeal No. 68/SLG-CGST/2018 dated 28.08.2018 passed by
the Commissioner, Siliguri Central Excise & C.G.S.T. Commissionerate, Central
Revenue Building, Hakimpara, Haren Mukherjee Road, Siliguri - 734 001)
M/s. Anupama Ayurvedic Drug Company Pvt. Ltd. : Appellant
32, K.B. Sarani,
Kolkata - 700 080 (West Bengal)
VERSUS
Commissioner of C.G.S.T. and C.Ex. : Respondent
Kolkata North Commissionerate
[erstwhile 'Kolkata-III Commissionerate']
180, Rajdanga Main Road, Shantipally,
Kolkata - 700 107 (West Bengal)
APPEARANCE:
Shri Arvind Baheti, Chartered Accountant,
For the Appellant(s)
Shri S.K. Dikshit, Authorized Representative,
For the Respondent(s)
CORAM:
HON'BLE SHRI ASHOK JINDAL, MEMBER (JUDICIAL)
HON'BLE SHRI K. ANPAZHAKAN, MEMBER (TECHNICAL)
FINAL ORDER NOs. 75327-75331 / 2026
DATE OF HEARING / DECISION: 26.02.2026
Page 3 of 35
Appeal No(s).: E/75133,75738,75777,76767-DB
& E/79519/2018-DB
ORDER:[PER SHRI ASHOK JINDAL] The appellants, namely, M/s. Anupama Ayurvedic Drug Company Pvt. Ltd. and Shri Ratnendu Bikash Tripathi, Director, are in appeal against the impugned orders whereby the total demand of central excise duty amounting to Rs. 4,58,47,486/- (Rs.3,26,63,018/- for April 2008 to May 2013, Rs.1,29,64,862/- for March 2013 to May 2014, Rs.2,19,606/- for May 2014), along with interest and equivalent penalty, penalty of Rs. 5,000 under Rule 27 of the Central Excise Rules, 2002 for not obtaining registration in 2008-09 and penalties of Rs.50,00,000/- (April 2008 to May 2013) and Rs.1,29,64,862/- (March 2013 to May 2014) on the Director under Rule 26 of the Central Excise Rules, 2002, covering the period from April 2008 to May 2014, has been confirmed.
2. The facts of the case are that M/s. Anupama Ayurvedic Drug Company Private Limited (hereinafter referred to as the appellant/company) is a private limited company engaged in the manufacture of proprietary Ayurvedic medicines and drugs classifiable under Chapter Heading 30 of the Central Excise Tariff Act, 1985 (CETA). During the period 2008-2011, the appellant- company did not have its own manufacturing facility and operated under a loan licence arrangement with B.D. Enterprises (Job Worker), as permitted under Rule 153A of the Drugs and Cosmetics Rules, 1945 (Drug Rules). The Drug Control Authority granted Loan Licence No. AL-48-M(L), authorizing manufacture of proprietary Ayurvedic medicines at the premises of the Job Worker. The manufacturing activities were undertaken by the Job Worker at its own manufacturing facility, using its own workforce, Page 4 of 35 Appeal No(s).: E/75133,75738,75777,76767-DB & E/79519/2018-DB under the supervision of qualified technical staff in terms of the said licence. The appellant supplied all raw materials and packing materials required for manufacture of the finished goods. Since the manufacturing operations during this period were undertaken by the Job Worker, no excise duty was discharged by the appellant on such job-work manufacture.
3. Subsequently, the appellant-company was converted from a partnership firm into a private limited company and commenced its own manufacturing operations from September 2011 onwards. Upon crossing the threshold limit of Rs. 1.5 crores, the appellant obtained Central Excise registration in March 2012 bearing Registration No. AAJCA3597NEM001.
4. Since the products manufactured under the Drug Licence satisfied the description of Heading 3004 of Chapter 30 to the First Schedule of the CETA, the appellants classified the same as medicaments for the purposes of excise law as per the general rules of interpretation. The relevant extract of Heading 3004 is reproduced below:
"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"Page 5 of 35
Appeal No(s).: E/75133,75738,75777,76767-DB & E/79519/2018-DB
5. On 13.03.2012, officers of the Anti-Evasion Unit of Central Excise, Kolkata-V Commissionerate visited the premises of the appellants as well as the Job Worker. Upon scrutiny of records, it was alleged that the appellant-company had failed to obtain Central Excise registration despite allegedly exceeding the SSI exemption limit of Rs. 150 lakhs. Consequently, the first Show Cause Notice bearing No. V(12)12/Anupama /CE/AE/Kol-V/2012/13706 dated 06.11.2013 [SCN-1] was issued alleging non- payment of duty for the period April 2008 to February 2012 and short payment of duty for March 2012 to March 2013 on Ayurvedic hair and skin products marketed under the brand name 'Arish', on the premise that the same were cosmetics and not medicaments as claimed by the appellant.
5.1. Thereafter, a periodic Show Cause Notice bearing No. V(12)12/Anupama /CE/AE/Kol- V/2012/19412 dated 23.04.2014 [SCN-2] was issued on the same issue.
5.2. Subsequently, pursuant to a visit by officers to the appellant's registered factory premises on 28.05.2014, further periodic Show Cause Notices viz. Show Cause Notice No. V(30)05/CE/AE/ AADCPL/Kol- III/14-15/8929-30 dated 03.07.2014 and V(30)05/CE/AE/ AADCPL/Kol-III/2014-15/246 dated 05.02.2015 [SCN-3 and SCN-4] were issued reiterating the misclassification allegations. In response to SCN-4, the appellant deposited duty amounting to Rs. 1,09,803/-.
5.3. The matters were adjudicated and the demands raised against the appellants were confirmed, along with interest and penalties.
Page 6 of 35Appeal No(s).: E/75133,75738,75777,76767-DB & E/79519/2018-DB
6. In the present cases, across the aforesaid four Show Cause Notices, classification of a total of 34 products is under dispute in the present Appeals. The details of the Show Cause Notices issued to the appellant/(s) during the relevant period and the duty demand culminating therefrom have been tabulated in the Table given below: -
Appeal Period SCNs Order appealed Amount of duty No. involved against involved E/75133/ April V(12)12/Anupama O-I-O No. Rs. 3,22,56,043/- 2016 2008 to /CE/AE/Kol- 23/COMMR/CE/Kol - (Rs. 1,17,85,750/- for March V/2012/13706 V/Adjn/2015 dated April 2008 to 2013 dated 06.11.2013 20.10.2015 passed by February 2012 for (SCN-1) Ld. Commissioner, non-payment of duty Central Excise (Ld. and Rs. 2,04,70,293/- Adjudicating Authority), for March 2012 to confirmed the demand March 2013 for short classifying the products payment of duty) April V(12)12/Anupama in question as cosmetics Rs. 4,06,975/-
2013 to /CE/AE/Kol- and appropriated only towards alleged
May V/2012/19412 Rs. 71,34,295/- out of short-payment of
2013 dated 23.04.2014 Rs. 1,40,48,276/- duty
(SCN-2) already deposited.
E/75738/ March V(30)05/CE/AE/ O-I-O No. Rs. 1,29,64,862/-
2016 2013 to AADCPL/Kol- 27/COMMR/CE/KOL- towards short-
May III/14-15/8929- III/2015-16 dated payment of duty
2014 30 dated 24.02.2016 passed by
03.07.2014 Ld. Adjudicating
(SCN-3) Authority, confirmed the
demand classifying the
products in question as
cosmetics.
E/79519/ May V(30)05/CE/AE/ O-I-A No. 68/SLG- Rs. 2,19,606/- (out of
2018 2014 AADCPL/Kol- CGST/2018 dated which Rs. 36,601/- is
III/2014-15/246 28.08.2018 passed by not contested)
dated 05.02.2015 Ld. Adjudicating
(SCN-4) Authority, upheld the O-
I-O No. 11/AC/CE/BST/
KOL-III/2016-27 dated
15.11.2016, classifying
the products in question
as cosmetics.
6.1. Aggrieved by the confirmation of the above demands, along with interest and penalties, the appellants are before us.Page 7 of 35
Appeal No(s).: E/75133,75738,75777,76767-DB & E/79519/2018-DB
7. The various submissions made by the Ld. Counsel representing the appellants can be broadly summarized as under: -
A. The products in question are classifiable as 'medicaments' under Tariff Heading 3004 and have been correctly classified as such by the Appellant considering that these products were duly manufactured under drug licences and the expert opinion classifying these products as Ayurvedic.
(i) At the outset, it is submitted that as per description of Heading 3004 of Chapter 30 to the First Schedule of the CETA, a medicament includes those under the Ayurvedic system and also covers products in the form of transdermal administration systems.
(ii) Reference is invited to Section 33EEC of the Drugs and Cosmetics Act, 1940 ("Drugs Act"), which mandates that manufacture and sale of Ayurvedic proprietary medicines can be undertaken only under a valid licence, failing which the same is prohibited. Further, under Rule 154 of the Drugs and Cosmetics Rules, 1945 (Drugs Rules), a licence for manufacture of Ayurvedic drugs is granted by the Licensing Authority after consultation with experts in Ayurveda (including Siddha) or Unani systems as approved by the State Government. Thus, a product manufactured under a valid Ayurvedic drug licence stands recognised by the competent statutory authority as a medicament under the Ayurvedic system. Therefore, products falling under Excise Tariff Heading 3004 (medicaments having Page 8 of 35 Appeal No(s).: E/75133,75738,75777,76767-DB & E/79519/2018-DB therapeutic/prophylactic properties) necessarily require such licence.
(iii) In the present case, the products in question qualify as Ayurvedic Proprietary Medicines (APM) as defined under clause (a) read with clause (h) of Section 3 of the Drugs Act.
Accordingly, all 34 products were duly approved by the ISM Drug Control (Drug Licensing Authority), Government of West Bengal, under Drug Licence Nos. AL-930-M and AL-48-M(L) and were manufactured strictly in terms thereof.
(iv) The appellants had obtained certificate dated 16.03.2015 from the Directorate of Drug Licensing Authority, certifying that the impugned products are Ayurvedic medicines. The said authority is the competent expert body empowered to issue licences for Ayurvedic drugs, whereas a different authority regulates cosmetics. In Commr Vs Sharma Chemical Works [2003 (4) TMI 102] the Hon'ble Supreme Court classified Banphool Oil as a medicament since its ingredients matched Ayurvedic texts, dosage instructions were provided, it was registered with the Drug Controller and the Drug Controller opined it to be an Ayurvedic medicament. The Court also referred to Board Circular dated 05.12.1991 directing doubts on classification to be referred to the State Drug Licensing Authority. Hence, the said certification of the Drug Licensing Authority cannot be overlooked.
Page 9 of 35Appeal No(s).: E/75133,75738,75777,76767-DB & E/79519/2018-DB
(v) Further, the appellants have placed on record sample promotional materials showing that the products are advertised as Ayurvedic medicines. One of the products has been endorsed by Dr. Dipanita Hazari as an Ayurvedic medicine. Further, a clinical test report from Jadavpur University for "Hair Plus (Premium)" establishes its efficacy in treating baldness, thereby evidencing its therapeutic character.
(vi) Further, Circular No. 25/91 dated 03.10.1991, issued in light of the decision of the Supreme Court in CCE Vs M/s. Richardson Hindustan Ltd. [1989 (42) ELT A100 (SC)], clarifies that the Government has accepted the "twin test" (i.e., the ingredient test and common parlance test) for determining whether a product qualifies as an Ayurvedic medicament under Chapter 30. In the present case, it is undisputed that the ingredients of the impugned products are derived from authoritative Ayurvedic texts. Further, the promotional materials, consumer testimonials and packaging claims establish that the products were marketed and perceived as medicaments, thereby satisfying the common parlance test. Accordingly, both limbs of the twin test stand satisfied.
(vii) The Ld. adjudicating authority has, on a sample basis, analysed the product labels and concluded that they are intended to enhance appearance. In response, the appellant submits a list of those products along with their therapeutic/prophylactic uses and relied upon judicial precedents wherein identical/similar Page 10 of 35 Appeal No(s).: E/75133,75738,75777,76767-DB & E/79519/2018-DB products have been classified as medicaments. An illustrative tabulation is set out below:
Sl Appellant's Usage/Treatment Drug Case laws and products licence rationale evolved No Pg.
No.
1. Arish Hair Heps to cure CC/Pg Puma Ayurvedic Herbal Plus (Normal) different types of - 15 (P) Ltd Vs Commr [2006 Senile Alopecia (3) TMI 141-SC] Baldness is a medical
2. Arish Hair Heps to cure CC/Pg -
condition. If a product Plus different types of 16 enables hair growth and (Premium) Senile Alopecia and cures baldness, it cannot growth of hair on be termed a cosmetic bald merely because it improves appearance. Its
3. Arish Anti- Helps to cure and CC/Pg -
primary purpose is to
Dandruff cleanse irritated 20
treat baldness, not to
Solution oily scalp, psoriasis,
enhance appearance.
eczema, yeast like
fungus malassezia
Commissioner Vs
4. Arish Anti- Heps to cure and CC/Pg -
Ashwani Homeo
Dandruff cleanse irritated 37
Pharmacy [2023 (385)
Shampoo oily scalp, psoriasis,
ELT 6 (SC)]
eczema, yeast like
fungus malassezia It was noted that the
product 'Aswini Homeo
Arnica Hair Oil' was
intended to control hair
fall, prevent dandruff and
to induce good sleep,
therefore, having
Page 11 of 35
Appeal No(s).: E/75133,75738,75777,76767-DB & E/79519/2018-DB therapeutic and prophylactic use. The product was clearly indicated to be Homeopathic medicine and accordingly, classified as a medicament.
5. Arish Haldia Cleanse the face to CC/Pg M/s. Warrier's Hospital & Neem Face control excess - 24 Panchakarma Centre Vs wash and sebum and prevent and 33 Commr. [2025 (9) TMI Arish Haldia the development of 871] Neem Face folliculitis and Dhatri Brand Fairness Pack seborrheic Face Pack was held as dermatitis medicament considering that the appellant
6. Arish Face Helps to cure acne CC/Pg produced evidence, Cleanser vulgaris, pastules, - 18 to including packaging nobules, cysts and 19 claims and satisfied the also clean the twin tests established by sebum the Supreme Court. No contrary evidence has
7. Arish Helps to cure CC/Pg -
been placed by the Sandalwood sebum control, 26 Revenue. Face Toner prevent acne vulgaris, also effective as skin Puma Ayurvedic Herbal tonic (P) Ltd Vs Commr [2006 (3) TMI 141-SC] 8. Arish Clear Helps to cure acne CC/Pg - Off Gel vulgaris, white 31 It was held that anti- heads, blackheads, pimple packs, face packs, papules, pustules, remedy for Facial nobules, cysts and Blemishes, hair tonic Page 12 of 35
Appeal No(s).: E/75133,75738,75777,76767-DB & E/79519/2018-DB also clean the powder, anti-dandruff oil, sebum etc. are medicinal products, intended to
9. Arish Papaya Helps to prevent CC/Pg - treat certain medical Chandan acne, pimple and 41 conditions of the human Serum reduce body and therefore, in pigmentation and view of the twin tests, are dark spots liable to be classified as medicaments.
10. Arish Clear Helps to control CC/Pg -
Mark Serum acne causing 29 bacteria, pimples CCE Vs Dollar Co. Pvt. and reduce dark Ltd. [2009 (234) ELT 549 spots and skin (Tri. - Chennai)] soothing The product 'Face to Face' cream/lotion, 11. Arish Fair Helps to cure skin CC/Pg - prescribed for acne, Secret Lotion hyper 22 pigmentation, sunburn pigmentation, and related skin blemishes, suntan disorders, supported by caused by UV Rays medical certificates and clinical reports, was held 12. Arish Fair Helps to cure skin CC/Pg - to be an Ayurvedic Secret Scrub hyper 23 medicament under pigmentation, Chapter 30. blemishes, suntan by exfoliation of skin Commr Vs Vale Export (P) Ltd. [2017 (9) TMI 13. Arish Fair Helps to reduce CC/Pg - 1486 - CESTAT Chennai] Serum pigmentation, skin 40 Herbal face cream irritation, redness, formulated to treat blemishes, dullness conditions such as and also improve varicose veins, sunburn, Page 13 of 35
Appeal No(s).: E/75133,75738,75777,76767-DB & E/79519/2018-DB skin glow and inflammation and rashes complexion was held to be a medicament on account of its therapeutic and prophylactic properties.
CCE Vs Ishaan Research Lab (P) Ltd [2008 (230) ELT 7 (SC)] Upon examining the ingredients, drug licenses and labels, various products in the form of creams, lotions, moisturisers, shampoos, etc. were classified as medicaments.
14. Arish Hair Helps to cure hair CC/Pg - Commr. Vs Pee Gee Plus Vitalizer loss, dandruff and 36 Pharma [2003 (155) ELT makes the roots 341 - CEGAT] stronger Krithika Hair Vitaliser was classified as a medicament considering the product's therapeutic properties, drug license, and higher price point compared to regular hair oils.
Page 14 of 35Appeal No(s).: E/75133,75738,75777,76767-DB & E/79519/2018-DB
15. Arish Hydra Helps to cure CC/Pg - Commr. Vs Ciens Moist Lotion dryness, itchiness, 34 Laboratories [2013 (295) hydrates the skin ELT 3 (SC)] palliative healing It was held that the the skin, also product 'Moisturex', used balance the water to treat Ichthyosis moisture vulgaris, Fissure foot, Dry Scaly Skin conditions, is not primarily intended for protection of skin. The ingredients in the cream, the pharmaceutical substances showed that it was for prophylactic and therapeutic purposes. Resultantly, the product was classified as a medicament.
16. Arish Body Helps to cure CC/Pg - Dabur (India) Ltd. Vs CCE Oil dryness, eczema, 17 [2005 (182) E.L.T. 290 pruritis, chapped (SC)] skin Dabur Lal tail, used for stimulating blood circulation and making baby's bones & muscles strong, was classified as a medicament, considering the ingredient test, Drug Controller's Licence and prescriptions of Ayurvedic Doctors, who Page 15 of 35 Appeal No(s).: E/75133,75738,75777,76767-DB & E/79519/2018-DB have prescribed the product for treatment of rickets.
(viii) Without prejudice, and strictly in response to the findings in the orders appealed against, the Appellant summarises the allegations with respect to misclassification and its submissions as under:
Sl No Allegations Appellant's Submissions
1. The products lack The products are manufactured under therapeutic/ a valid Ayurvedic drug licence, their prophylactic properties therapeutic uses are detailed on a sample basis hereinabove, and the competent ISM Drug Control authority has certified them as Ayurvedic medicines, which establishes their therapeutic and prophylactic character. Further, the judicial precedents cited above also support this position.
2. Mere drug licence does The appellant places reliance on the not determine existence of a licence as well as the classification expert certifications issued by the competent statutory authority under the Drugs Act categorically recognising the products as Ayurvedic medicines. In the absence of any contrary expert opinion or material evidence produced by the Department to rebut such Page 16 of 35 Appeal No(s).: E/75133,75738,75777,76767-DB & E/79519/2018-DB certification, the allegation of misclassification is unsustainable. The Revenue has failed to discharge its burden of proof.
3. The products are skin- The mere presence of an ancillary care items and cosmetic effect does not dilute the therefore cosmetics. primary therapeutic character of a product. If a product cures, mitigates or prevents a disorder, it qualifies as a medicament notwithstanding any cosmetic benefit. Reliance in this regard is placed on Ciens Laboratories (supra). Further, in Ishaan Research (supra) it was noted that merely because a product could be used for beautification did not make it a cosmetic if it had medicinal properties and was marketed as such. In the present case, consumer testimonials demonstrate that the products cure disorders such as severe hair fall and acne vulgaris.
4. The products are Rule 161(3) of the Drugs Rules cosmetics based on the mandates that the label of an description on the Ayurvedic drug shall bear the words labels. "Ayurvedic Medicine." The labels of the products in question clearly describe them as APM. Therefore, the label declaration is not a unilateral claim but a reflection of the licensed category of the product.Page 17 of 35
Appeal No(s).: E/75133,75738,75777,76767-DB & E/79519/2018-DB In Commr. Of C. Ex. & S.T. Vs Multani Pharmaceutical [2018 (15) GSTL 278] it was held that a product, having therapeutic & prophylactic properties, shall be classified as APM if the ingredients are as mentioned in the Ayurvedic Authoritative texts and the product is approved by the State Drug Licensing Authority as APM. In the present case, these conditions stand satisfied. The Ld. adjudicating authority has failed to appreciate this crucial statutory recognition.
5. The products are sold in The Hon'ble Apex Court in Ishaan general stores and not Research (supra) rejected the exclusively in medical argument that sale of a product stores. through hotels or beauty parlours makes it cosmetic. In any event, the appellant has produced invoices evidencing sales to medical stores as well.
6. The common parlance The common parlance test is not the test is not satisfied sole or determinative test for classification, and in any event, the appellant has produced consumer testimonials demonstrating that the products are perceived and used as medicaments.
Further, extracts of the Brand Trust Report 2015 and 2016 classify the brand "Arish Ayurvedic" under the category "Ayurveda", thereby Page 18 of 35 Appeal No(s).: E/75133,75738,75777,76767-DB & E/79519/2018-DB evidencing its recognition in common parlance as Ayurvedic products.
7. Limited usage test not The fact that Ayurvedic products may satisfied be safe for prolonged use does not negate their medicinal character, as the decisive factor remains their therapeutic or prophylactic purpose. Further, the limited usage is one of the tests involved from the judicial precedents and not a decisive one.
Be that as it may, no prudent person would continue to use products like anti-dandruff shampoo/lotion or acne creams, after the ailment or disorder has been cured.
(ix) It is settled law that the burden to establish that goods fall under a particular tariff entry lies upon the Revenue. Reliance in this regard is placed on Sharma Chemical Works (supra) and Vasu Pharmaceutical Pvt. Ltd. Vs UOI [2010 (8) TMI 1090 - Guj. HC]. The Revenue has failed to adduce any cogent expert or other evidence to demonstrate that the impugned products are mere cosmetics or lack therapeutic properties.
(x) The Ld. adjudicating authority has relied on certain judgments, in particular, Commr of Trade Tax Vs Singhal Brothers [2009 (234) ELT 61 (All.)], to classify the products as cosmetics. It is submitted that those decisions merely lay down guiding principles for distinguishing Page 19 of 35 Appeal No(s).: E/75133,75738,75777,76767-DB & E/79519/2018-DB medicaments from cosmetics. Further, in Singhal Brothers case, no opinion was obtained from the Drug Controller and the product in question was of general use. Therefore, the said decision is distinguishable and inapplicable to the present case, where expert certification from the Drug Licensing Authority is available.
(xi) In view of the statutory licensing framework, expert certification, labeling compliance under Rule 161, judicial precedents, and absence of contrary evidence from the Revenue, the products in question clearly merit classification as medicaments under Heading 3004. The finding of the Ld. Adjudicating Authority to the contrary is therefore unsustainable in law and on facts.
B. The Appellant is not liable to pay duty on goods manufactured by its Job Workers under a loan license agreement for the period April 2008 to February 2012, as the Appellant was not the manufacturer of such goods.
(i) The Ld. adjudicating authority has alleged that since the manufacturing unit of the Job Worker was situated in rural area and as such they do not have any duty liability as per Notification No. 8/2003-CE dated 01.03.2003 and therefore, the duty liability in respect of the goods manufactured under the loan licence arrangement would fall upon the Appellant, being the loan licensee.
Page 20 of 35Appeal No(s).: E/75133,75738,75777,76767-DB & E/79519/2018-DB
(ii) It is submitted that though, by virtue of the loan licence, the appellant may be regarded as a "manufacturer" for the limited purposes of the Drugs and Cosmetics Act, 1940, such statutory recognition cannot be equated with "manufacture" or "manufacturer" as defined under Section 2(f) of the Central Excise Act, 1944. Under Central Excise law, the "manufacturer" includes a person who employs hired labour in the production or manufacture of excisable goods, and any person who engages in their production or manufacture on his own account.
(iii) Reliance in this regard is placed on the Hon'ble Supreme Court's judgment in the case of Commr of C. Ex., Goa Vs Cosme Farma Laboratories Ltd. [2015 (318) ELT 545 (S.C.)] wherein the Court noted that merely because the loan licensee prescribes specifications or quality standards, it would not render the loan licensee the manufacturer. The Court upheld the views of the Tribunal that the job worker was the manufacturer for the excise purposes. This view has been followed in Commissioner Vs Cosme Remedies Ltd. [2015 (325) E.L.T. A96 (SC)].
(iv) In the present case, as is evident from the correspondence and confirmation issued by the Job Worker, the manufacturing operations were carried out on a principal-to-principal basis. The appellant-company merely supplied raw materials and specifications, which, in view of the settled law, does not render the appellant the manufacturer under the Central Excise Act.
Page 21 of 35Appeal No(s).: E/75133,75738,75777,76767-DB & E/79519/2018-DB
(v) Further, insofar as the reliance placed by the Ld. adjudicating authority on the said notification in concerned, it is respectfully submitted that the said notification merely grants an exemption up to a prescribed monetary limit (Rs. 1.5 crores), beyond which clearances become dutiable. The notification is an exemption provision and does not determine taxability or shift the incidence of duty from the manufacturer to any other person. Therefore, the contention that because the job worker was entitled to exemption under the said notification, the duty liability would automatically fall upon the appellant is misconceived and unsustainable in law.
(vi) Accordingly, in light of the clear statutory provision and judicial precedent, the appellant cannot be held liable to discharge duty in respect of the goods manufactured by the Job Worker during the period April 2008 to February 2012.
C. The Appellant is entitled to the concessional rate of duty under Notification No. 1/2011- CE dated 01.03.2011 and consequential refund in these appeals.
(i) Since the products in question are correctly classifiable as medicaments, the appellant is entitled to the benefit of Notification No. 1/2011-CE and, consequently, to refund of the excess duty paid.
(ii) The said notification prescribed a concessional rate of 1%/2% ad valorem on specified excisable goods, subject to the condition that Page 22 of 35 Appeal No(s).: E/75133,75738,75777,76767-DB & E/79519/2018-DB such goods are manufactured from inputs or by utilising input services on which appropriate duty/service tax has been paid and no CENVAT credit of such duty or tax has been availed by the manufacturer. Serial No. 37 of the notification specifically covers "Medicament" as eligible goods.
(iii) After obtaining Central Excise registration, the Appellant discharged duty at 1%/2%, as applicable, by availing the benefit of the said notification. However, as evident from the letter dated 31.12.2012 issued by the Superintendent, the appellant, at the instance of the Department, started paying duty @6% from September 2012 onwards.
(iv) The details of duty paid, duty payable at the concessional rate, and refund arising therefrom are as under:
Appeal Period Duty paid Duty Amount No. involve (Rs.) payable refundable d (A) @1.03%/2.0 (Rs.) 6% (Rs.) (A - B) (B) E/75133 April 1,43,36,168/- 30,22,450/- 1,13,13,718/-
/ 2016 2008 to
March
2013
April 4,06,933/- 1,35,651/- 2,71,282/-
2013 to
May
2013
E/75738 March 1,29,64,862/- 43,21,616/- 86,43,246/-
/ 2016 2013 to
May
2014
E/79519 May 1,09,803/- 36,601/- 73,202/-
/ 2018 2014
Total 2,78,17,766/- 75,16,318/- 2,03,01,448/-
Page 23 of 35
Appeal No(s).: E/75133,75738,75777,76767-DB & E/79519/2018-DB
(v) The appellant had not availed any CENVAT credit during the relevant period, and this fact has not been disputed by the Department in the earlier stages of the proceedings. The conditions of the notification thus stand satisfied, and the appellant is entitled to the concessional rate of duty and consequential refund of Rs.
2,03,01,448/-.
(vi) It is further submitted that the sum of Rs.
71,34,295/-, appropriated against the demand vide O-I-O dated 20.10.2015, forms part of the total refundable amount for the period April 2008 to March 2013, as reflected hereinabove, and is therefore liable to be refunded to the appellant.
D. Double assessment for the same period on the same issue is impermissible in law.
(i) It is submitted that the impugned proceedings suffer from impermissible double assessment. From the table under para 6 above, it is evident that the periods covered by SCN-2 and SCN-3 overlap, namely March 2013 to May 2013. Both the said SCNs raise the very same issue, i.e., alleged short payment of excise duty on account of misclassification of the products.
(ii) Further, SCN-3 and SCN-4 also overlap for the period May 2014. Although SCN-4 has been issued on the grounds of alleged shortage of stock, the said period already stood covered and assessed under SCN-3. Thus, the Department has sought to subject the same period to Page 24 of 35 Appeal No(s).: E/75133,75738,75777,76767-DB & E/79519/2018-DB multiple proceedings on substantially the same cause.
(iii) It is settled law that there cannot be two assessments for the same period. Reliance in this regard is placed on Duncans Industries Ltd. Vs CCE [2006 (201) ELT 517 (SC)] and Simplex Infrastructure Limited [2016 (4) TMI 548 - Cal HC]. Accordingly, the demand for the overlapping period (from March 2013 to May 2013 and May 2014) is not sustainable in law and is liable to be set aside.
E. The extended period of limitation has been wrongly invoked for the period March 2013 to May 2013 in the absence of any suppression of facts or wilful misstatement with intent to evade duty.
(i) The Ld. adjudicating authority has erred in alleging wilful misstatement with intent to evade duty. The record itself shows that the Department was fully aware of the appellant's classification and duty payment. Vide letter dated 31.12.2012 issued by the Superintendent, it is evident that the Department knew that duty was being discharged @6%. Further, during the investigation conducted in March 2012, the Anti-Evasion wing was aware that the products were being classified as medicaments. The appellant-company was also regularly filing VAT returns describing the goods as "Drugs & Medicines" and had fully cooperated during departmental visits by producing all relevant Page 25 of 35 Appeal No(s).: E/75133,75738,75777,76767-DB & E/79519/2018-DB records. Hence, there was complete disclosure and no suppression of facts.
(ii) It is settled law that classification is a legal interpretational issue which cannot be equated with that of mis-statement or mis-declaration. Reliance in this regard is placed on Northern Plastic Ltd. Vs CC [1998 (101) ELT 549 (SC)] and Densons Pultretanik Vs CCE [2003 (155) ELT 211 (SC)].
(iii) Accordingly, the invocation of the extended period is unsustainable, and the demand for the period March 2013 to May 2013, being beyond the normal period of limitation, is time-barred.
F. Classification being an interpretational issue, personal penalty under Rule 26 cannot be imposed upon Director.
(i) It is submitted that penalty under Rule 26 of Central Excise Rules, 2002 can be imposed only when a person deals with excisable goods, which he knows or has reasons to believe are liable for confiscation. In the instant case, the impugned Order does not propose any confiscation of goods from the appellant- Director and as such personal penalty under Rule 26 is not invocable. Reliance in this regard is invited to the ruling in case of P.M. Enterprises, reported in 2015 (328) ELT 756.
(ii) Further, it is a settled law that penalty under Rule 26 cannot be imposed in cases where the issue involved is interpretational in nature. In the instant case, dispute pertains to the classification of the products sold by the Page 26 of 35 Appeal No(s).: E/75133,75738,75777,76767-DB & E/79519/2018-DB appellants, which is entirely an interpretational issue. Mens rea, which is an essential ingredient for the imposition of penalty has also not been established by the Department. Additionally, it is a settled law that penalty cannot be imposed, when the demand itself is unsustainable. Accordingly, no penalty can be demanded from the Director under Rule 26. Reference in this regard is invited to the following judgements:
• Fun Foods Pvt. Ltd. vs. Commissioner Of Central Excise, Jaipur-I [2017 (348) E.L.T. 357 (Tri. - Del.)] • V.P. Yadav vs. Commissioner Of C. Ex. & S.T., Lucknow [2018 (361) E.L.T. 1030 (Tri. - All.)] • Commissioner Of Central Excise, Chennai vs. Roofit Industries Ltd. [2019 (365) E.L.T. 834 (Tri.
- Chennai)] • Logix Soft Tel. Pvt. Ltd. vs. Commissioner Of Cus., C. Ex. & S.T., Noida [2019 (370) E.L.T. 973 (Tri. - All.)] • GTM Teleshopping Pvt. Ltd. Vs CCE [2017(6) GSTL 313 (Tri-Del)] [Affirmed in 2018 (18) GSTL 227 (M.P. HC)] G. The demand is vitiated on account of an error in quantification.
(i) It had been specifically submitted that, due to an inadvertent clerical error in the quarterly return for the period ending September 2012, the sales value of the product Hair Plus Premium was erroneously declared as Rs. 9,33,32,153/-
instead of Rs. 93,32,153/-. This typographical mistake resulted in an artificial inflation of turnover by approximately Rs. 8.4 crores and consequently led to an additional duty demand of about Rs. 67.49 lakhs. (refer para 4.1.13 of the O-I-O dated 20.10.2015) Page 27 of 35 Appeal No(s).: E/75133,75738,75777,76767-DB & E/79519/2018-DB
(ii) The Ld. adjudicating authority rejected this explanation on the ground that the appellant had sufficient time to rectify the error and that the mistake cannot be considered after a lapse of two years (refer para 12 of the O-I-O dated 20.10.2015). It is respectfully submitted that a manifest clerical error affecting quantification cannot be sustained merely on the ground of delay, particularly when the correct figures are borne out from the books of accounts and supporting records. A demand based on an arithmetical or typographical mistake is unsustainable in law.
8. On the other hand, the Ld. Authorized Representative of the Revenue submitted that the medicaments manufactured by the appellant are "cosmetics" and the same are classifiable under Chapter 33 of the Central Excise Tariff Act, 1985 in terms of the decision in the case of Shri Baidyanath Ayurved Bhavan v. Commissioner of C.Ex., Patna [2002 (140) E.L.T. 459 (Tri. - LB.)] wherein it has been held that products are to be classified as per their usage.
8.1. He further contends that M/s. B.D. Enterprises has manufactured the goods on behalf of the appellant-company and therefore the appellant- company shall be liable to pay duty. It is also his submission that the appellants did not take Registration and hence the benefit of SSI exemption cannot be granted to the appellant.
9. Heard the parties and considered the submissions made by both the sides.
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10. It is a fact on record that the appellant-company had obtained Licence i.e., Loan Licence No. AL-48-M(L) for manufacturing the items in question through M/s. B.D. Enterprises. The appellant- company have also obtained Licence for the same from the Directorate of ISM Drugs Control, Government of West Bengal. The Licence/Certificate obtained by the appellant from the Director of ISM Drugs Control, Kolkata in respect of some of the products in question have been extracted hereinbelow: -
Page 29 of 35Appeal No(s).: E/75133,75738,75777,76767-DB & E/79519/2018-DB
11. Further, a Certificate dated 02.05.2012 has also been issued by the Directorate of ISM Drugs Control, Health & Family Welfare Department, Govt. of West Bengal, confirming that the products in question are Ayurvedic and comes under the Directorate of ISM Drugs Control created by the Health & Family Welfare Department, Govt. of West Bengal, which deals with the licenses of Ayurveda, Siddha and Unani and that Page 30 of 35 Appeal No(s).: E/75133,75738,75777,76767-DB & E/79519/2018-DB the other ingredients being inactive in chemical nature are allowed to be used in Ayurvedic formulations under the Govt. of India instruction / notification. For better appreciation, copy of the aforesaid Certificate is reproduced below: -
Page 31 of 35Appeal No(s).: E/75133,75738,75777,76767-DB & E/79519/2018-DB
12. On going through the arguments advanced by both the sides, the following issues emerge: -
(i) Whether the products in question are classifiable as "Medicaments" under Chapter 30 of the Central Excise Tariff Act, 1985, or as "Cosmetics" under Chapter 33 of the Central Excise Tariff Act, 1985, for the purpose of payment of central excise duty.
(ii) Whether the appellant-company is liable to pay duty up to August, 2011, on the goods manufactured by M/s. B.D. Enterprises, who is the job worker under the Loan Licence Agreement with the appellant, or not.
(iii) Whether for the period from September, 2011 to February, 2012, the appellant is entitled to SSI exemption in terms of Notification No. 08/2003-C.E. dated 01.03.2003, or not.
13. In this case, the appellant has obtained registration from March, 2012 and started paying duty at the rate of 2% on the said products, classifying the said goods under Chapter 30 of the Central Excise Tariff Act, 1985, as Ayurvedic medicines. The Revenue wants to demand duty at the rate of 6% on the said products in terms of Chapter 33 of the Central Excise Tariff Act, 1985. Therefore, the main issue that arises before us is whether the items in question are Ayurvedic medicines or cosmetics / toilet preparations.
Page 32 of 35Appeal No(s).: E/75133,75738,75777,76767-DB & E/79519/2018-DB 13.1. Admittedly, the said items have been manufactured in terms of the Licence/Certificate No.1410-06(G.M.P.)154-10 dated 13.07.2011 for the categories viz. "Taila" and "Prabahi Kwath". The details of the products thereof are enclosed along with the certificate, some of which have also been extracted hereinabove under paragraph 10 of this order. Therefore, it is evident that the above manufactured items are none other than Ayurvedic medicines. In view of this, we find that the said items are to be classified under Chapter 30 of the Central Excise Tariff Act, 1985 as Ayurvedic medicines / Medicaments.
13.2. A similar view was taken by the Hon'ble Apex Court in the case of Commissioner of C.Ex., Calcutta v. Sharma Chemical Works [2003 (4) TMI 102 - SC=2003 (154) E.L.T. 328 (S.C.)], wherein the Hon'ble Supreme Court has classified 'Banphool Oil' as a medicament since its ingredients matched Ayurvedic texts and dosage instructions were provided. Admittedly, in this case also, all the products manufactured by the appellant are as per Ayurvedic texts and dosages thereof are provided, as prescribed in such Ayurvedic texts. Therefore, the ratio laid down in the case of Sharma Chemical Works (supra) is squarely applicable to the facts of the case on hand.
13.3. The Ld. Authorized Representative of the Revenue has cited the decision in the case of Shri Baidyanath Ayurved Bhavan v. Commissioner of C.Ex., Patna [2002 (140) E.L.T. 459 (Tri. - LB.)] to say that the items in question are to be classified under Chapter 33 of the Central Excise Tariff Act, 1985. In the said case, it was held that 'Dant Manjan Lal' has to be classified as tooth powder under sub-
Page 33 of 35Appeal No(s).: E/75133,75738,75777,76767-DB & E/79519/2018-DB heading 3306 of the Tariff, which covers the preparations for oral and dental hygiene, including dentrifices and denture fixative pastes and powders. Thus, the above said case law cited by the Revenue is not applicable to the facts and circumstances of the present case as the items in question are manufactured in terms of the Licence issued by the Drug Controller as Ayurvedic medicines.
13.4. In these circumstances, we hold that the goods manufactured by the appellant are appropriately classifiable as Ayurvedic medicines / Medicaments under Chapter 30 of the Central Excise Tariff Act, 1985.
14. On the issue of duty liability of the appellant- company in respect of the items in question for the period prior to August, 2011, we take note of the fact that as per the Central Excise Act, duty is to be paid by the manufacturer of the goods. Admittedly, M/s. B.D. Enterprises is the manufacturer of the goods in question, on Loan Licence basis. M/s. B.D. Enterprises was not having the licence to manufacture the said Ayurvedic Medicaments, which can be manufactured only under a legal licence issued by the licensing authorities in terms of the Drugs and Cosmetics Rules, 1945. In the impugned order, the ld. adjudicating authority itself has held that since M/s. B.D. Enterprises, the manufacturer, is located in a rural area, M/s. B.D. Enterprises is not liable to pay duty. However, on the basis of the above finding in the impugned order that M/s. B.D. Enterprises being located in a rural area is not liable to pay duty on the said products, the duty liability cannot be fastened on the appellant-company, being the Loan Licensee, for Page 34 of 35 Appeal No(s).: E/75133,75738,75777,76767-DB & E/79519/2018-DB the licence to manufacture the Ayurvedic Medicines / Medicaments in question.
14.1. Therefore, we hold that the demand pertaining to the period prior to August, 2011 is not sustainable in the eyes of law and accordingly, the same is set aside.
15. We also take note of the submission made by the Ld. Counsel for the appellant that for the period from September, 2011 to February, 2012, the total turnover of the appellant was less than Rs.1.5 crore, which is well within the limits of SSI exemption as per Notification No. 08/2003-C.E. dated 01.03.2003. In these circumstances, the appellant-company is not liable to pay duty for the period from September, 2011 to February, 2012.
16. From March, 2012, the appellant has obtained registration and has been paying duty at the rate of 2% on the said items, classifying the said goods under Chapter 30 of the Central Excise Tariff Act, 1985, as Ayurvedic medicines. Hence, no demand of differential duty is sustainable against the appellant during the said period, in terms of the observations made by us at paragraph 13 to 13.4 of this order.
17. Consequently, we also hold that no penalty is imposable on the appellant-company or its Director, namely, Shri Ratnendu Bikash Tripathi (the appellant no. 2 herein) in the facts and circumstances of the case.
Page 35 of 35Appeal No(s).: E/75133,75738,75777,76767-DB & E/79519/2018-DB
18. In view of the discussions hereinabove, we hold as under: -
(i) For the period prior to August, 2011, the appellant-company is not liable to pay central excise duty on the items in question as the appellant is not the manufacturer of the said items.
(ii) For the period from September, 2011 to February, 2012, the appellant is entitled to SSI exemption in terms of Notification No. 08/2003-
C.E. dated 01.03.2003, and hence no duty is payable.
(iii) Thereafter, from March, 2012, the appellant-
company has been paying the appropriate duty on the said items under Chapter 30 of the Central Excise Tariff Act, 1985 and therefore, no demand of differential duty is sustainable against the appellant.
(iv) Consequently, no penalty is imposable on the appellants.
19. In these terms, we set aside the impugned orders and allow the appeals with consequential relief, if any.
(Operative part of the order was pronounced in open court) Sd/-
(ASHOK JINDAL) MEMBER (JUDICIAL) Sd/-
(K. ANPAZHAKAN) MEMBER (TECHNICAL) Sdd