| SooperKanoon Citation | sooperkanoon.com/45540 |
| Court | Customs Excise and Service Tax Appellate Tribunal CESTAT Ahmedabad |
| Decided On | May-18-2007 |
| Judge | M Ravindran, V T M. |
| Reported in | (2007)(120)ECC49 |
| Appellant | Daga Ayurvedic and Cosmetic Pvt. |
| Respondent | Cce |
21/MP/2002 dt.22.05.2002, which confirmed the demand and also imposed penalties on the appellants.
2. The relevant facts arise for consideration are the appellants are small scale industry and are manufacturers of oil under the brand name of "Daga Ghritkumari Oil, "Daga Chandan Oil". The officers of the Preventive Section visited the premises of the appellants and found that the appellants were manufacturing these oils but declaring them as ayurvedic medicine and were also, during the part of the period, manufacturing the products under the brand name, which is not their own. The officers retrieved the records from the premises of the appellant and seized the goods from the factory premises and recorded statements of various persons. Show cause notice was issued to the appellants directing them to show cause as to why the classification of the product manufactured by them should not be considered under chapter heading 3305 instead of 3003.20 as claimed by the appellants and why the duty for the extended period should not be demanded from them and penalty be not imposed on them. The appellants contested the show cause notice on the ground that the products, which are manufactured by them, are not hair oil and are ayurvedic medicines manufactured under the drug licence given by the FDA, Gujarat and they have produced affidavits of ayurvedic doctors to indicate that their product is not hair oil, but ayurvedic medicine. The Adjudicating Authority did not accept the contentions of the appellants and confirmed the demand, confiscated the stocks lying in the factory with an option to redeem the same on payment of fine and also imposed penalties on the appellant company as well as on the directors of the company. Hence, these appeals.
3. The Ld. Advocate appearing on behalf of the appellant takes us through the show cause notice and the replies filed by them. He specifically pointed out the fact that the cartons of the product manufactured by them were enclosed by them along with the appeal and he points out that they had very clearly mentioned in the carton that these two products are ayurvedic medicines and not a cosmetic or toiletry products. It is his submission that the ingredients which are used in the manufacturing of the ayurvedic oil were mentioned in the ayurvedic textbooks. But the formula used by them is of own. It is his submission that the Adjudicating Authority has arrived at the conclusion that it is a hair oil because the basic ingredient which is used in the product is "sesame oil/Til Oil". He submits that all the ingredients are put in to the sesame oil and boiled together to arrive at the final product. He also brings to our notice affidavits-cum-certificate given by the ayurvedic doctors from different regions. He also indicates that the carton of the product would clearly show that the oil is used for prevention of hair loss, effective ailment of scalp, relief from head-ache, restorative tonic for hair, excellent oil to treat multiple maladies and cool and massage the body in order to rejuvenate the skin and strengthen the body. He further submits that the demand of the duty is for the period 1995-96 to 1999-2000. It is his submission that the appellants have been filing the declaration as small scale industry with the authorities from 1994 and they have indicated the manufacturing of these two products in their declaration. It is his submission that the show cause notice was issued to appellant in 2000, which itself is beyond the period of limitation, as department was aware of the fact that the appellant is manufacturing these products. He relies heavily on the judgments of the Hon'ble Supreme Court in the case of Commissioner of Central Excise, Calcutta v. Sharma Chemical Works and Dabur (India) Ltd. v. Commissioner of Central Excise 2005 (182) E.L.T. 290 for the proposition, that is for the Revenue to prove that the product as claimed by the assessee is wrong and Revenue has not discharged the onus. He submits that the impugned order be set aside.
4. The Ld. Jt. CDR submits that the products which are manufactured by the appellants would not get covered under the category of the ayurvedic medicines inasmuch that the quantities of the active ingredients which are used by the appellants would indicate that they are very very negligent. She submits that note to Chapter 33 clearly indicate that even if products have therapeutic or prophylactic properties, they would be covered under chapter 33. It is her submission that mere look at the carton of the products as manufactured by the appellants would indicate that these products are for the purpose of growth of the hair and nothing more than that. It is her submission that these products would at the most be called perfumed hair oils and cannot be at any stretch of imagination called as ayurvedic medicines. She submits that the drug license as taken out by the appellants would in any case not be of much help to the appellants, as the drug authorities have not categorically mentioned that these products are ayurvedic medicines. It is her submission that the appellants had, during the relevant period, never declared the process of manufacture or filed the cartons with the authorities and hence now, cannot claim that the show cause notice is time based. She relies upon the judgments of the Hon'ble Supreme Court in the case of Commissioner of Central Excise, Surat v. Zandu Pharmaceutical Works Ltd. as and on the judgments of the Tribunal in the case of B.K. Products v. Collector of Central Excise, Patna as reported at and Commissioner of Central Excise, Cochin v. Kerala Ayurvedic Pharmacy Ltd. as reported at the proposition that, despite the products may have some ayurvedic ingredients, would in itself not make the product classifiable as ayurvedic medicines. It is her submission that identical product as manufactured by the appellant "Ghrit Kumari oil" was in dispute before the Tribunal in the case of M/s. B.K. Products (supra) and wherein Tribunal has held that these products are classifiable as hair oil under Chapter 33.
5. Considered the submissions made at length by both sides and perused the records. The issue involved in this case is regarding the classification of the product manufactured by the appellant. It is undisputed that the appellant were manufacturing these products under the drug license as given by the Drug Authorities of Gujarat. It is also undisputed that the ingredients which are going into manufacturing of these products are of ayurvedic nature and are not of synthetic nature. It is also undisputed that appellant had been filing the declarations with the authorities right from 1994 as regards the manufacturing of these products.
6. On merits of the case, we find that the appellants is manufacturing these products by using the ayurvedic ingredients boiled in the sesame oil. It has been contended by the appellant and not disputed by the Revenue that the formula which is used by the appellant is their own.
We also find from the record that the appellants had produced before the Adjudicating Authority, affidavits of two ayurvedic doctors, which read as I, Vidya Dilip A. Yadnik aged about 50 years, Hindu residing at 22, New Rangali Chawl, Jarimari Mandir Road, Bandra (W), Mumbai-400 050 do hereby state that I am practicing as a Doctor since last 25 years.
I have recommended the use of Ghrit Kumari Oil / Chandan Oil of Daga Ayurvedi & Cosmtics Pvt. Ltd. to my various patients since last 5 years. This oil contains various ayurvedic medicinal herbs such as Sandal Wood, Ghrit Kumari, Amla, Rusi Oil, Rathanjyot, etc. It is helpful in preventing premature loss of hair and gives quick relief from head-ache as well as gives effective relief in ailment of scalp.
Chandan Oil made from Chandan Wood (Sandal Wood) has medicinal properties and is very useful and effective for external use.
Chandan is a wood which has ingredients of many medicated oil and therefore is used as Medicine. Other ingredients in this oil have also various medicinal properties.
I, therefore, recommend the usage of aforesaid medicines to may patients.
Hindu residing at 9-A, Chaimuda Vihar, Opp. Milkanthaswar Mandir, Savarkar Nagar, Satpur, Nasik-7 do hereby state that I am practicing as a Doctor since last 17 years.
I have recommended the use of Ghrit Kumari Oil / Chandan Oil of Daga Ayurvedi & Cosmtics Pvt. Ltd. to my various patients since last 7 years. This oil contains various ayurvedic medicinal herbs such as Sandal Wood, Ghrit Kumari, Amla, Rusi Oil, Rathanjyot, etc. It is helpful in preventing premature loss of hair and gives quick relief from head-ache as well as gives effective relief in ailment of scalp.
Chandan Oil made from Chandan Wood (Sandal Wood) has medicinal properties and is very useful and effective for external use.
Chandan is a wood which has ingredients of many medicated oil and therefore is used as Medicine. Other ingredients in this oil have also various medicinal properties.
I, therefore, recommend the usage of aforesaid medicines to may patients.
7. It can be seen from the above reproduced affidavits of the qualified ayurvedic doctors that they recommend the product of the appellant for relief from head-ache and to give relief in ailment of the scalp. The appellants have also produced affidavits of various persons who distribute and sell the products of the appellant to indicate that the sale of the appellant product is as ayurvedic medicine. On perusal of the cartons in the appeal memoranda, we find that the appellants have been claiming these products as ayurvedic medicines and there is a specific claim that "this is not a cosmetic or toiletry preparation".
We find from the records that the Revenue has not controverted these evidence by any other evidence in support of the Revenue's claim that the said products are nothing but hair oil. It is also on record that the Revenue had drawn the samples of the appellants' product in 1996 and in 1999, but Revenue has not been able to produce the Deputy Chief Chemist's report of the samples drawn by them. In the absence of any evidence to indicate that these products are hair oil, the Revenue's case is on a weak footing. Without any evidence, a mere assertion that on reading the carton would indicate that the products would fall under Chapter 33, as hair oil, is not a correct legal proposition.
8. Hon'ble Supreme Court in the case of M/s. Sharma Chemical Works (supra) has held as under 12. We have heard the parties and considered the submissions made by them. We have also read the opinion of the majority Bench and the minority opinion of the Technical Member. It is a settled law that the onus or burden to show that a product fall within a particular Tariff Item is always on the revenue. 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 is not a medicament. We are also in agreement with the submission Mr. Lakshmikumaran 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. The burden of proving that Banphool Oil is understood by the customers as an hair oil was on the revenue. This burden is not discharged as no such proof is adduced. On the contrary we find that the oil can be used for treatment of head ache, eye problem, night blindness, reeling, head weak memory, hysteria, ammenesia, blood pressure, insomnia, etc. The dosages required are also set out on the label. The product is registered with Drug Controller and is being manufactured under a drug licence.
13. Another aspect to be kept in mind is that the revenue is bound by the circulars issued by the Board. The Board circular dated 5th December, 1991 clearly stipulates that in case of doubt the matter should be referred to the Drub Controller. The matter was referred to the Drug Controller, who as stated above, has opined that it is an ayurvedic medicament. If the department was till entertaining any doubts, they could have referred the matter to the Adviser, Ayurveda/Sub-commissioner in the office of Drug Controller, Director General of Health Services, New Delhi. This was not done.
9. Further, the Hon'ble Supreme Court in the case of M/s. Dabur (India) Ltd. has held as underCommissioner of Central Excise, Nagpur v. Vicco Laboratories considering whether turmeric skin cream and vajradanti toothpaste and tooth powder were to be classifiable under Chapter 30 or Chapter 33, note Shree Baidyanath Ayurved Bhavan's case and held as follows: 2. the basis of the show cause notices was the decision of this Court in Shree Baidyanath Ayurved Bhavan Ltd. v. Collector of Central Excise, Indore Imported allegedly laid down in that decision for determining whether a product should be classified under Chapter 33 or chapter 30.
3. The two tests according to the show cause notice for determining whether a product was classifiable as a. pharmaceutical product under Chapter 30 of the Central Excise Tariff were (1) whether the products are being used daily and are sold without prescription by a medical practitioner; and (2) whether the products are available in General Store Department/Grocery shops. The department's case in the show cause notice is that as these two tests were not fulfilled the product failed to come within the prescription of pharmaceutical products' in Chapter 30.
4. The mere decision of a court of law without more cannot be justification enough for changing the classification without a change in the nature of a product or a change in the use of the product or a fresh interpretation of the tariff heading by such decision. It is not the appellant's case that any of these circumstances were present in this case, besides the decision in Shree Baidyanath's case (supra) does not lay down, the test of classification as concluded by the Department at all. In that case the Tribunal had considered the evidence produced before it with regard to the sale and purchase of the product in question. It was found as a matter of fact that in common parlance the produce was not described as a medicinal preparation but was described as a toilet preparation. This Court affirmed the tests laid down by the Tribunal, namely, that since the primary object of the Excise Act was to raise revenue, resort should not be had, for the purpose of classification, to the scientific and technical meaning of the terms and expressions, used therein but to their popular meaning, that is to say, the meaning attached to that by those using the product.
5. The court also noted that the Tribunal had rejected the assessee's claim in that case holding that "ordinarily" a medicine is prescribed by a medical practitioner and it is used for a limited time and not every day unless it is so prescribed to deal with a specific disease like diabetes". It may be noted that the court affirmed this line of reasoning of the Tribunal on the ground that it was "in general agreement with it". The court did not itself affirmatively hold that what was laid down by the Tribunal as a test to be "ordinarily" followed was invariably to be the sole test for determining whether a product is to be proved as a medicine or a cosmetic. Indeed this Court in BPL Pharmaceuticals Ltd. v. CCE reported in 1995 (Suppl.) 3 SCC 1 has upheld the classification of 'Selsun" medicated shampoo as a medicine and not as a cosmetic and held that in order to attract Note 2 to Chapter 33 the product was first proved to be a cosmetic and " that the product should be suitable for use as goods under Heading No. 33.03 to 33.08 and they must be put in packing as labels, literature and other indications showing that they are for use as cosmetic or toilet preparation'.
6. These observations however were not made in connection with Chapter Note 1(d) of Chapter 30 the impact and purport of which may have to be considered in an appropriate case.Commissioner of Central Excise, Calcutta v. Sharma Chemical Works reported in 2003 (5) SCC 60 has also disapproved the approach of the Department in holding that the product was a cosmetic only because it was not sold by chemists or under doctors prescription. This according to the decision, does not by itself lead to the conclusion that it is not a medicament. The court reaffirmed the test as categorically laid down in Shree Baidyanath, namely, that the burden of proof that a product is classifiable under a particular tariff head is on the revenue and must be discharged by proving that it is so understood by consumers of the product or in common parlance. (See also Meghdoot v. Commissioner of Central Excise 2004 (174) E.L.T. 14 (S.C)] 9. From the above mentioned authorities, it is clear that in classifying a product the scientific and technical meaning is not be resorted to. The product must be classifiable according to the popular meaning attached to it by those using the product. As state above, in this case the appellants nave shown that all the ingredients in the product are those which are mentioned in Ayurvedic Text Books. This by itself may not be sufficient but the appellants have shown that they have a Drug Controller's Licence for the product and they have also produced evidence by way of prescriptions of Ayurvedic Doctors, who have prescribed these for treatment of rickets. As against this, the Revenue has not made any effort and not produced any evidence that in common parlance the product is not understood as a medicament.
10 The issue involved in the present case before us is in respect of oil which contains ayurvedic ingredients and identical issue was before the Hon'ble Supreme Court, in the cases of M/s. Dabur (India) Ltd. as well as M/s. Sharma Chemical Works. To our mind the issue involved in the current appeal is squarely covered by the judgments of Hon'ble Supreme Court, in the favour of appellant.
11. As regards the case law relied upon by the Ld. Jt. CDR, we find that the judgment of the Hon'ble Supreme Court in the case of M/s.
Zandu Pharmaceutical Works Ltd. (supra) on the contrary is supporting the case of the appellant before us inasmuch that the said judgment of the Hon'ble Supreme Court clearly upholds the ratio of M/s. Sharma Chemical Works' case. The reliance placed by the Jt. CDR on the case of M/s. B.K. Products as being identical to the product manufactured by the appellant, on reading the facts we find that the appellants in the case of M/s. B.K. Products were themselves describing their product in the advertisement as a "hair oil for the care of hair and for bright, thick, dark and long hair." On these facts, the Tribunal came to the conclusion, that since the appellant, therein, was advertising the product as a product for the care of the hair, it was held that product would fall under chapter heading 3305.10 and not under 3003. The facts of the current case before us are totally different inasmuch that the appellant has been claiming their products as ayurvedic medicine and on perusal of the cartons produced by the appellants would indicate that the product was sold as ayurvedic medicine. Hence, the judgment of the Tribunal in M/s. B.K. Product's case could not be of any help to the Revenue. Further, it is noticed that the judgment of the Tribunal in the case of M/s. B.K. Products was given in the year 1998 while, the three member bench of the Hon'ble Supreme Court given the judgment in M/s. Dabur (India) Ltd. in the year 2005, which is very relevant for the facts of the current case before us.
12. As regards the duty amount confirmed on the products cleared by the appellants using the brand name of some other person, we find that the appellants had filed a declaration under Notification No. 13/92 CE (NT) dt. 14.5.1992 with the authorities on 12.4.1994 wherein they had clearly indicated that they are manufacturing " Tankar Ghrit Kumari Oil'. The Revenue authorities have been keeping quiet on such declaration filed by the appellants before them. It is settled law that if the authorities do not act upon the declaration made by the appellant and did not ask for further clarification then the Revenue is precluded from invoking extended period for demand of duty. The records indicate that the Revenue had not asked for any clarification from, the appellant on the declaration filed by them in April, 1994 and subsequent years till the visit of the officers in 1999. In view of these, the demand on the branded products which were cleared by the appellants is hopelessly time barred.
13. Accordingly, in view of the facts and circumstances respectfully following the judgments of the Hon'ble Supreme Court, we find that the impugned order is liable to be set aside and we do so. All the appeals are allowed with consequential relief, if any.