1. The issue involved in these three appeals, arising out of a Common Order No. 9/99, dated 29-10-99 passed by the Commissioner, Central Excise, is whether the products manufactured by M/s. Meghdoot Gramodyog Sewa Sansthan are Ayurvedic Medicaments or preparations for use on the hair' falling under Heading 33.05 of the Schedule to the Central Excise Tariff Act.
2.1 Shri V. Lakshmikumaran, Learned Advocate, submitted that M/s.
Meghdoot Gramodyog Sewa Sansthan, a society registered under the Registration of Societies Act, 1860, manufacture Ayurvedic drugs in its factory which is registered with U.P. Khadi and Gramodyog Board; that they manufacture about 20 Ayurvedic drugs out of which the present appeals are concerned with the classification of the following products : 2.2 He mentioned that Appellants manufacture these products on the strength of the Ayurvedic drug licence under the Drugs and Cosmetics Act 1940; that the ingredients based on which the products are manufactured are duly mentioned in the Authoritative Ayurvedic Text Book i.e. Bhava Prakash, mentioned in the First Schedule to Drug & Cosmetics Act, 1940; that the Commissioner has not classified the impugned products under Heading 30.03 on the ground that the products have not been manufactured in accordance with the formula of preparation prescribed in the Authoritative Books on Ayurveda. The learned Advocate mentioned that Bhringraj Tail is manufactured by the Appellants as per Authoritative Books whereas the other products are manufactured as per their own formula but all the ingredients are mentioned in the Authoritative Text Books on Ayurveda.
3.1 The learned Counsel submitted that Chapter 30 of the Tariff covers "Pharmaceutical Products''. Heading No. 30.03 covers "Medicaments (including Veterinary medicaments)" and sub-heading 3003.30 covers "medicaments including those used in Ayurvedic, Unani, Siddha or Biochemic Systems"; that as such all medicaments used in Ayurvedic Systems are covered under sub-heading 3003.30; that the said sub-heading remained the same till Budget 1996; that for a product to fall under the category of Ayurvedic medicament there is no requirement that the same should be manufactured in accordance with the formula prescribed in the authoritative Ayurvedic text book; that if the ingredients of the products are duly mentioned in the authoritative Ayurvedic text book that are sufficient for the product's claim for classification under sub-heading No. 3003.30; that this is apparent from Notification No. 75/94-C.E., dated 29-3-94 (Serial No. 3) which prescribes NIL rate of duty for "medicaments used in Ayurvedic Systems manufactured exclusively in accordance with the formula prescribed in authoritative books specified in the First Schedule to the Drugs & Cosmetics Act and sold Under the name as specified in such books and falling under subheading No. 3003.30"; that Serial No. 3(iii) of the Notification prescribed a rate of 10% duty for "other" goods falling under sub-heading 3003.30; that thus for the first time a distinction was brought between two types of Ayurvedic medicaments viz. (1) those manufactured exclusively in accordance with the formulae prescribed in Ayurvedic books and sold under the name specified in the book (classical Ayurvedic medicines) and (2) those manufactured based on the ingredients mentioned in the text books but not manufactured in accordance with the formula mentioned in the book (Proprietary Ayurvedic Medicines). The learned Counsel then contended that since their products contained the ingredients mentioned in the authoritative text books, the same would fall for classification under Heading No.3003.30; that this submission is supported by the decision of the Larger Bench of the Tribunal in the case of Himtaj Ayurvedic Udyog Kendra v. CCE, Allahabad - 2002 (139) E.L.T. 610 wherein the Tribunal has held as under :- "25... The Notes explaining the important changes made in the Central Excise duty under the Finance Bill, 1994 (quoted in the earlier portion of this order) would show that exemption from excise duty on all patent or proprietary medicines of Homoeopathic, Unani, Siddha, Ayurvedic and Biochemics was withdrawn and a duty of 10% was being prescribed. This means that earlier such exemption was there for this category of Ayurvedic medicine also. When examined along with the earlier notifications of the year 1983 etc., it will be clear that such exemption was granted against subheading 3003.30 which should be taken as a heading including both categories of Ayurvedic medicines. Unbranded products continued to enjoy the benefit of the exemption. In the present case, the product of the appellant 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.
34 In the light of the above discussion, we come to the conclusion that the appellant's product is an Ayurvedic medicament." 3.2 The learned Advocate also mentioned that the Larger Bench has observed in Para 29 of the decision that once the decision of the Tribunal in the case of Amrutanjan Ltd. v. CCE - 1991 (32) ECR 538 was reversed by the Supreme Court in Amrutanjan Ltd. v. CCE - 1995 (77) E.L.T. 500 (S.C), the Tribunal's reasoning that the product should be manufactured according to the formulations laid down in any authoritative texts on Ayurveda has also not been upheld and the only requirement is that the product contains Ayurvedic ingredients. He, therefore, contended that the reasoning of the Commissioner for not classifying the medicines under Heading 30.03 is totally untenable.
4. The learned Advocate further submitted that Heading 33.05 covers those products which are used for the purpose of beautification of the hair; that the products in question are not used on the hair for the beautification of the hair but for curation of certain ailments including hair loss; that hair loss is a disease and is known as 'alopecia'; that these products are used for curing various ailments as mentioned in the package of the medicine and this claim is supported by the various certificates given by the doctors who actually prescribe those medicines to the patients for the curing of various diseases; that further for a product to be classified under Heading No. 33.05, it must satisfy Note 2 to Chapter 33 which requires that for a product to fall under Heading No. 33.05, it should be suitable for use as goods of that heading and put up in packings with labels, literature or other indications that they are for use as cosmetics or toilet preparations or put up in a form clearly specialized to such use; that thus there must be a clear indication on the label of the product that it is for use as cosmetic and the same should be put up in a form clearly specialized to such use; that the Supreme Court in the case of BPL Pharmaceuticals Ltd. v. CCE, Vadodara - 1995 (77) E.L.T. 485 (S.C.) has held that for a product to fall under Chapter 33, it must first be a cosmetic and it must first satisfy the test of Note 2 to Chapter 33; that in the present matter, labels of the products do not indicate the product as cosmetic and not even as hair oil or shampoo; that as such requirement of Note 2 to Chapter 33 is not satisfied and accordingly the products in question cannot fall under Heading No. 33.05. He also mentioned that apart from the ingredients mentioned in the Ayurvedic Text books, the Appellants do not add perfume to the oil; that for this reason also, the products Bhringraj hair oil and Trifala Brahmi Oil cannot be classified as a perfumed hair oil under sub-heading 3305.10 of the Tariff.
5. He further argued that the invocation of extended period of limitation is not tenable, that they had filed a declaration before the Assistant Collector for financial year 1994-95 along with a list of goods manufactured by them indicating whether the goods are manufactured in accordance with the formula given in the authoritative Ayurvedic Text books or otherwise; that it was open to the Department to investigate the matter whether the products are entitled to complete exemption under Notification No. 75/94-CE; that there was no suppression or misstatement on their part with an intent to evade payment of duty; that moreover when the issue involved is one of classification and when there were conflicting views on the coverage of Heading 33.03 and the issue got resolved only by the Larger Bench of the Tribunal, suppression of facts with an intent to evade payment of duty cannot be alleged; that this is more so when they are a society engaged in rural development works. He relied upon the decision in Dena Jee Sansthan v. CCE, Meerut, Final Order No. 267-269/2000-C, dated 30-3-2000 [2000 (125) E.L.T. 1182 (T)] and in Kshetria Shree Gandhi Ashram v. CCE, Meentt, Final Order No. 812 - 813/99-C, dated 18-8-99 [2002 (150) E.L.T. 834 (T)], wherein the demand beyond six months period was set aside as the findings of the Adjudicating Authority did not say that the Appellants wilfully misstated or suppressed anything with an intent to evade payment of duty. Reliance has also been placed on the decision in Centre for Development of Advance Computing v. CCE, Pune [2002 (141) E.L.T. 6 (S.C.) = 2002 (49) RLT 4 (S.C)] wherein the Supreme Court held that the extended period of limitation would not apply as the Centre was established to carry out research etc. and was recognized by the Department of Electronics as a research and development unit. He finally submitted that for the same reasons, penalty under Section 11AC of the Central Excise Act and Rule 173Q of the Central Excise Rules, 1944 and interest under Section 11AB of the Act cannot be levied; that the quantification of demand is incorrect and they are entitled for small scale benefit under the various Notifications in force from time to time.
6.1 Countering the arguments, Shri R.C. Sankhla, learned DR, submitted that the show cause notice dated 31-3-1999 was issued to the Appellants as on scrutiny of leaflets and publicity materials it was found that Meghdoot Herbal Sat and Neem Sat were liquid shampoos, Brahmi Amla, Bhringraj Tel and Trifala Brahmi Tel were perfumed hair oils and not Ayurvedic medicaments; that the ingredients used in Brahmi Amla Kesh Tel and Bhringraj Tel are the same as given at page 67 of the Appeal filed; that main use of Bhringraj Tel, as per Page 66 is to make hair long, black, soft and shining; that the secondary use is to check baldness; that Note l(d) to Chapter 30 clearly mentions that Chapter 30 does not cover "preparations of Chapter 33 even if they have therapeutic or prophylactic properties"; that similarly Note 2 to Chapter 33 mentions that Heading Nos. 33.03 to 33.07 apply to products suitable for use as goods of these headings and includes products whether or not they contain subsidiary pharmaceutical or antiseptic constituents, or are held out as having subsidiary curative or prophylactic value; that thus these products cannot be classified as medicaments. The learned DR relied upon the decision of the Supreme Court in the case of Shree Baidyanath Ayurved Bhavan v. CCE, Nagpur [1996 (83) E.L.T. 492 (S.C.) = 1995 (10) RLT 327 (S.C.)] wherein it has been held that "in interpreting statutes like the Excise Act, the primary object of which is to raise revenue and for which purpose various products are differently classified, resort should not be made to scientific and technical meaning of the terms and expressions used but to their meaning, that is to say, the meaning attached to them by those using the product"; that the Supreme Court has held that Dant Manjan Lal is not classifiable as an ayurvedic medicament but under Heading 33.06 of the Tariff; that the Supreme Court has also observed in the said judgment that a medicine is used for a limited time and not every day unless it is so prescribed to deal with a specific disease like diabetes; that applying the ratio of the decision of the Supreme Court, the impugned products are not classifiable as ayurvedic medicaments. He also relied upon the decision of the Larger Bench in the case of Baidyanath Ayurved Bhavan v. CCE, Patna [2002 (140) E.L.T.459 (T-LB) = 2002 (48) RLT 897 (CEGAT-LB)] wherein the Appellants claimed that their product was manufactured according to the formula described in the authoritative book included in the First Schedule to the Drugs and Cosmetics Act but the Larger Bench has held the product not to be an ayurvedic medicine but as tooth powder observing that even if the product has some minor curative or prophylactic ingredients, by virtue of Note 2 to Chapter 33, the product has to be classified as tooth powder under Heading 33.06. The learned DR also mentioned that decision in the case of Himtaj Ayurvedic Udyog Kendra, supra, is not applicable as the facts are different; that in the said case, the product was not to be used on hair but on scalp whereas the impugned product is used on hair; that further in Himtaj case the product's dosage and period of use was also specified.
6.2 The learned DR also submitted that the extended period of limitation for demanding duty is invocable as in the declaration filed by them no heading/sub-heading of the Tariff was mentioned; that no process of manufacturing was also indicated in Column 9 of the declaration; that filing of wrong declaration and submission of wrong information itself tantamounts to suppression of facts. He relied upon the decision in the case of Adhunik Food Products v. CCE, Meerut, Final Order Nos. 215-219/2001-D, dated 9-11-2001 [2002 (149) E.L.T. 254 (T)], the extended period was held applicable as the goods were misdeclared in the declaration for exemption from Registration. Reliance has been placed on the decision in J. Mitra & Co. Ltd. v. CCE, New Delhi-I - [2002 (140) E.L.T. 524 (T) = 2002 (48) RLT 644 (CEGAT)] and State of U.P. v. CCE, Allahabad - 2001 (134) E.L.T. 713 (T). In reply the learned Advocate relied upon the decision in CCE v. Dabur India Ltd. - 2001 (137) E.L.T. 434 (T) wherein also though the process of manufacture was not disclosed, the Tribunal has held that extended period of limitation is not attracted once the classification list has been filed and approved. He also mentioned that products in question specifically mention the disease they are meant for and that there are numbers of medicines where nothing is mentioned about the dosage.
6.3 We have considered the submissions of both the sides. The contention of the Appellants is that as the ingredients used by them in the manufacture of the impugned products are mentioned in the Authoritative Ayurvedic Text Book and there is no requirement to manufacture them in accordance with the formula prescribed in the Authoritative Ayurvedic Text Books, they are classifiable as Ayurvedic medicaments under sub-heading 3003.30 of the Central Excise Tariff. The Revenue has disputed the claim of the Appellants by contending that products in question are not medicaments but are products falling under Heading No. 30.05 of the Tariff. As per Note 2 to Chapter 30 of the Tariff which deals with "Pharmaceutical Products", "medicament" means goods (other than foods or beverage such as dietetic, diabetic or fortified goods, tonic beverages) not falling within Heading No. 30.02 or 30.04 which are either - (a) Products comprising two or more constituents which have been mixed or compounded together for therapeutic or prophylactic uses; or (b) Unmixed products suitable for such uses put up in measured doses or in packings for retail sale or for use in hospitals.
6.4 It is thus clear from the definition of "medicament" given in Note 2 to chapter 30 that the product should have therapeutic or prophylactic uses. Merely because of the fact that some ingredients mentioned in the Authoritative text books on Ayurveda have been used will not make the product a medicament. This view find support from the decision of the Larger Bench of the Tribunal in the case of Baidyanath Ayurved Bhavan, supra wherein the Larger Bench classified "Dant Manjan Lal", comprising of several ingredients and manufactured according to the formula prescribed in the book included in the First Schedule to the Drugs & Cosmetic Act, 1940, under Heading 33.06 of the Tariff and not under Heading 3003.31 of the Tariff. It is also apparent from Note 1(d) to Chapter 30 that the preparations of Chapter 33 are not covered by Chapter 30 even if they have therapeutic or prophylactic properties.
Note 2 to Chapter 33 also retain the products under Chapter 33 even if they contain subsidiary pharmaceutical or antiseptic constituents, or are held out as having subsidiary curative or prophylactic value. The learned DR has emphasized that the products in question are used on hair and not on scalp and as such the products are "preparations for use on the hair", Bhrin-graj Kesh Tail, for example, as per label, makes hair long, black, soft and shining, also provides stability. It also checks baldness, after long use white hair becomes black, removes headache. Similarly Sat Reetha as well as Herbal Sat are used on wet hairs. The Appellants have produced letters from one Dr. (Mrs.) Neelam Jauhari, Medical Officer, Govt. Ayurvedic College/Hospital about the uses of the products Neem Sat Herbal, Sat Reetha and Herbal Sat and Powder on patients and relief to them in Headache, vision weakness, dandruff etc. Except these letters, they have not produced any evidence that the products are prescribed by Medical Practitioner as medicines for the various diseases. There is nothing brought on record to show that the patients were kept under observations. There is also nothing to show that the results said to have been achieved by the use of these products were obtained by keeping the patients in the hospital over a period of time and by observing as to whether they were using these products or not and also whether they were using any other products. We are of the view that these letters cannot be taken as proof of the products in question being having mainly therapeutic or prophylactic uses. The learned Advocate has contended that as per Note 2 to Chapter 33, there must be a clear indication on the label of the product that it is for use as cosmetic. We observe that the Commissioner has given a specific finding in the impugned Order that "products like Sat Reetha, Bhringraj Kesh Tel, show on their packing a lady with black flowing hairs, Meghdoot Herbal Sat and Herbal Powder also carry similar depictions. These manifestations which are typical of cosmetics, obviously, are indicative of manufacture's intentions to market his product in that way among the customers. The marketing of any medicine or drug in this way is very uncommon and unheard of. Thus the products in question are classifiable under Heading 33.05 as preparations for use on the hair and not Ayurvedic Medicaments.
7. We find that the show cause notice has been issued on 31-3-1999 for demanding Central Excise duty for the period from 1-4-1994 to 31-10-98 by invoking the proviso to Section 11A(1) of the Central Excise Act.
Thus maximum period is beyond the normal period of six months specified in Section 11A(1) of the Act. We find substantial force in the submission of the learned Advocate that the extended period of limitation is not invocable as the Appellants had filed a declaration in April, 1994 in which they had mentioned that they were manufacturing "Ayurvedic Medicines" and a list of the products was also enclosed. All the impugned products were mentioned in the said list. It can, therefore, be not alleged that the Appellants had suppressed the manufacture of any of the products in question. The decision in J.Mitra & Co. relied upon by the learned DR, is not applicable as in that case, the declaration was sent to the Department under certificate of posting and the Commissioner did not accept the said certificate as conclusive proof of filing of declarations and the Tribunal agreed with those findings. In the present matter it has not been disputed by the Revenue that the declaration was not received by it in April, 1994.
Adhunik Food Products were manufacturing "Wheat Puffs" and "soya nuts" which were described by them as "Prasadam/Prasadam, Chabena and Soya textured protein, the expressions which were used in exemption Notification and nowhere they described their goods as Wheat Puffs and Puffed Soya Nuts. Further in the contracts, orders, invoices, etc. the products were described as Wheat Puffs and Soya Nuts. In view of these facts, the Tribunal upheld the invocation of extended period of limitation. In the present matter, the Appellants had given the list of products manufactured by them and it is not the case of the Revenue that these descriptions are not the ones under which these goods were sold. In view of this we hold that the duty cannot be demanded for the extended period as there was no suppression of facts by the Appellants.
For the same reasons we are of the view that no penalty is imposable on any of the Appellants. We, therefore, set aside the penalties imposed on all the three Appellants.