2003 (3) TMI 428 - AT - Central Excise

Issues Involved:
1. Classification of Krithika Hair Vitaliser
2. Applicability of exemption under Notification No. 140/83-C.E.
3. Determination of duty and penalties

Detailed Analysis:

1. Classification of Krithika Hair Vitaliser:

The primary issue revolves around whether Krithika Hair Vitaliser should be classified under CET 3305.10 as a cosmetic item (hair oil) or under CET 3003.39 as a patent medicine of the Siddha system. The Revenue argued that the product is a cosmetic preparation, citing its composition, method of manufacture, and common parlance understanding. They emphasized that the product is marketed as a hair preparation, not prescribed by medical practitioners, and sold in general stores and supermarkets, thus classifying it under Chapter 33.

The respondents contended that the product is a Siddha medicament, highlighting its therapeutic properties for hair fall, graying, and dandruff. They argued that the product is manufactured under a license specific for drugs (Form 25E) and contains significant herbal content (42%), distinguishing it from typical hair oils. They referenced various judgments, including the Hon'ble Madhya Pradesh High Court's decision in Panama Chemical Works v. UOI, to support their claim that products with substantial therapeutic properties should be classified as medicaments.

The Tribunal, after considering the rival submissions, upheld the classification under CET 3003.39, noting the product's therapeutic properties, licensing under Form 25E, and higher price point compared to regular hair oils. They referenced the Delhi High Court's decision in Manisha Pharma Plasto Pvt. Ltd. v. U.O.I. and the CEGAT ruling in Himtaj Ayurvedic Udyog Kendra v. CCE, Allahabad, which supported classifying products with substantial therapeutic properties as medicaments.

2. Applicability of Exemption under Notification No. 140/83-C.E.:

The Revenue argued that the exemption under Notification No. 140/83-C.E. would not apply as the brand name "Krithika" belongs to M/s. Mothi Pharma Pvt. Ltd., and not the respondents. The respondents countered that M/s. Mothi Pharma Pvt. Ltd. was the actual manufacturer of the product, licensed under the Drugs and Cosmetics Act, and thus the exemption should apply.

The Tribunal did not specifically address this issue in detail but implicitly rejected the Revenue's argument by upholding the classification under CET 3003.39, which would inherently consider the product's status as a medicament.

3. Determination of Duty and Penalties:

The original authority had classified Krithika Hair Vitaliser under CET 3003.10, demanded duty under Rule 9(2) read with Section 11A of the CE Act, 1944, and imposed penalties under various provisions. The Commissioner (Appeals) reclassified the product under CET 3003.39, directed redetermination of value and duty, and set aside the penalties and fines.

The Tribunal upheld the Commissioner (Appeals)'s order, rejecting the Revenue's appeals. They noted the absence of willful suppression by the assessee, who believed in good faith that their products were exempt from excise duty. The Tribunal emphasized the importance of common parlance understanding and the product's therapeutic properties in determining its classification and duty liability.

Conclusion:

The Tribunal concluded that Krithika Hair Vitaliser is a medicament under CET 3003.39, rejecting the Revenue's appeal for classification under CET 3305.10. They upheld the Commissioner (Appeals)'s order, which included reclassification, redetermination of duty, and setting aside penalties, based on the product's therapeutic properties, licensing, and common parlance understanding.

← Previous Next →