2003 (1) TMI 335 - AT - Central Excise

Issues Involved:
1. Classification of products as Ayurvedic Medicaments or preparations for use on the hair under Heading 33.05.
2. Applicability of extended period of limitation for demanding duty.
3. Imposition of penalties under Section 11AC and Rule 173Q.

Detailed Analysis:

1. Classification of Products:
The primary issue in these appeals is whether the products manufactured by M/s. Meghdoot Gramodyog Sewa Sansthan are Ayurvedic Medicaments or preparations for use on the hair under Heading 33.05 of the Central Excise Tariff Act. The products in question include Bhringraj Tail, Trifla Brahmitail, Neem Herbal Sat, Sat Reetha, Meghdoot Herbal Sat, and Meghdoot Herbal Powder.

The appellants argued that their products should be classified under Heading 30.03 as Ayurvedic Medicaments since they contain ingredients mentioned in Authoritative Ayurvedic Text Books. They cited the decision in Himtaj Ayurvedic Udyog Kendra v. CCE, Allahabad, where the Tribunal held that products containing Ayurvedic ingredients, even if not manufactured according to the prescribed formula, could be classified as Ayurvedic medicaments.

The Revenue contended that the products are preparations for use on the hair under Heading 33.05, emphasizing that the products are used on hair and not on the scalp, and are marketed with depictions typical of cosmetics. They relied on Note 1(d) to Chapter 30 and Note 2 to Chapter 33, which exclude preparations of Chapter 33 from being classified as medicaments even if they have therapeutic or prophylactic properties. The Supreme Court's decision in Shree Baidyanath Ayurved Bhavan v. CCE, Nagpur, was also cited, which held that Dant Manjan Lal, despite having Ayurvedic ingredients, was not an Ayurvedic medicament but a tooth powder under Heading 33.06.

The Tribunal concluded that merely using ingredients from Ayurvedic Text Books does not make a product a medicament. The products in question are used for beautification and hair care, as indicated by their packaging and marketing, and thus fall under Heading 33.05.

2. Applicability of Extended Period of Limitation:
The show cause notice was issued on 31-3-1999 for the period from 1-4-1994 to 31-10-98, invoking the extended period under Section 11A(1) of the Central Excise Act. The appellants argued that they had filed a declaration in April 1994, listing the products as Ayurvedic Medicines, and thus there was no suppression of facts.

The Tribunal agreed with the appellants, noting that the declaration was indeed filed and the products were listed. The Revenue did not dispute the receipt of the declaration. The Tribunal found that there was no suppression of facts, and thus the extended period of limitation was not applicable. Consequently, the duty could not be demanded for the extended period.

3. Imposition of Penalties:
Given the Tribunal's finding that there was no suppression of facts, the penalties imposed under Section 11AC and Rule 173Q were set aside. The Tribunal noted that the appellants had provided the necessary information and there was no intent to evade payment of duty.

Conclusion:
The products in question are classified under Heading 33.05 as preparations for use on the hair, not as Ayurvedic Medicaments. The extended period of limitation for demanding duty is not applicable due to the lack of suppression of facts. Consequently, the penalties imposed on the appellants are set aside. All appeals are disposed of accordingly.

← Previous Next →