2007 (7) TMI 89 - AT - Central Excise

Classification - Department contended that appellant product i.e. Vicco Vajradanti powder and paste Vicco turmeric cream classifiable under Chapter 33 of CET not under Chapter 30.03 ibid - Held that appellant product classifiable under Chapter 30.03 of CET as Ayurvedic product

Issues Involved:
1. Classification of products as Ayurvedic medicines or cosmetics.
2. Validity of show cause notices and adjudication orders.
3. Reliance on previous judgments and circulars for classification.
4. Commercial parlance and trade understanding of the products.
5. Impact of advertisements and packing materials on classification.
6. Legal requirements for labeling and advertising products for export.

Detailed Analysis:

1. Classification of Products as Ayurvedic Medicines or Cosmetics:
The appellants are engaged in the manufacture of various products including Vicco Vajradanti Paste, Vicco Vajradanti Powder, and Vicco Turmeric Cream. The core issue is whether these products should be classified as Ayurvedic medicines under Chapter 30 or as cosmetics under Chapter 33 of the Central Excise Tariff Act, 1985 (CETA, 1985). Historical judgments, including those from the Bombay High Court and the Supreme Court, have previously classified these products as Ayurvedic medicines. The Tribunal reaffirmed this classification, noting that the products contain therapeutic ingredients and are manufactured under an Ayurvedic license.

2. Validity of Show Cause Notices and Adjudication Orders:
The department issued multiple show cause notices between 1997 and 2005, proposing the classification of the products as cosmetics. These notices were based on advertisements and packing materials. However, the Tribunal noted that these issues had already been addressed in previous judgments and could not be re-agitated. The Commissioner of Central Excise, Goa, classified the products as cosmetics, leading to a duty demand of Rs. 3,41,81,782/- and education cess of Rs. 12,292/-. This order was challenged and ultimately set aside by the Tribunal.

3. Reliance on Previous Judgments and Circulars for Classification:
The Tribunal emphasized that the classification issue had been settled by its order dated 3-2-2003 and various judgments, including those from the Bombay High Court and the Supreme Court. The Central Board of Excise and Customs (CBEC) also issued a circular in 1989, treating the products as Ayurvedic medicines based on expert opinions and authoritative texts. The Tribunal found no change in the products' therapeutic contents, reinforcing their classification as Ayurvedic medicines.

4. Commercial Parlance and Trade Understanding of the Products:
The Tribunal considered affidavits from consumers, Ayurvedic experts, wholesalers, dealers, and chemists, all of whom regarded the products as Ayurvedic medicines. The Tribunal rejected the department's reliance on the commercial parlance test, noting that the products' therapeutic properties and Ayurvedic ingredients were well-established.

5. Impact of Advertisements and Packing Materials on Classification:
The Tribunal found that advertisements and packing materials related to products exported to countries where the Ayurvedic system is not recognized. The products were labeled and advertised as herbal products to comply with foreign regulations, not because they were cosmetics. The Tribunal cited Rule 161A of the Drugs and Cosmetics Rules, 1945, which allows adaptation of labels for exports.

6. Legal Requirements for Labeling and Advertising Products for Export:
The Tribunal accepted the appellants' argument that the products were re-labeled for export to meet foreign legal requirements. The Drug Controller had issued a no-objection certificate for this purpose. The Tribunal concluded that this did not affect the products' classification as Ayurvedic medicines within India.

Conclusion:
The Tribunal held that the disputed products are Ayurvedic medicaments under Chapter Heading 30.03 of the Schedule to the CETA, 1985, attracting a nil rate of duty. The orders classifying the products under Chapter 33 and the consequent duty demands were set aside, and the appeals were allowed. The Tribunal's decision was based on a thorough examination of previous judgments, expert opinions, and the therapeutic properties of the products.

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