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2008 (9) TMI 4 - SC - Central ExciseClassification & Valuation Bio Aloevera, Bio Bhringraj, Bio-cucumber, Bio-coconut etc. - revenue claim to classify these products u/ch 3304 or 3305 as cosmetics & charge duty @ 40% is not accepted - products contained elements having Ayurvedic medicinal value hence impugned products are covered u/ch 3003.30 as Ayurvedic medicines & chargeable duty @ 10% advalorem only IRLP (respondent) & IMPL are not related persons so price at which IRLP sold the products was to be adopted
Issues Involved:
1. Classification of 22 products manufactured by IRLP. 2. Valuation of the products. 3. Applicability of the extended period of limitation. Detailed Analysis: 1. Classification of 22 Products: The primary issue was whether the 22 products manufactured by IRLP should be classified under Central Excise Tariff Sub-heading 3003.30 as "Ayurvedic medicines" attracting 10% duty or under Chapter 33 as "cosmetics" and "toilet preparations" attracting 40% duty. The Tribunal had earlier classified these products under Sub-heading 3003.30, a decision challenged by the Revenue. Arguments by Revenue: - The Revenue argued that these products were cosmetics, not Ayurvedic medicines, and should be classified under Chapter 33. - They relied on the common parlance test and various statements and literature suggesting the products were used for beautification. Arguments by Assessee: - The Assessee argued that the products contained Ayurvedic medicinal herbs and were marketed as Ayurvedic medicines. - They relied on the fact that the products were manufactured under a drugs license and were labeled as having medicinal properties. Court's Analysis: - The Court examined the ingredients, manufacturing licenses, and labels of the products. - It referred to previous judgments, including BPL Pharmaceuticals Ltd. v. Collector of Central Excise, Vadodara, which distinguished between cosmetics and drugs based on their intended use and labeling. - The Court noted that merely because a product could be used for beautification did not make it a cosmetic if it had medicinal properties and was marketed as such. - The Court upheld the Tribunal's classification of the 22 products under Sub-heading 3003.30, except for "Bio-Heena" and "Bio Heena Leaf," which were conceded by the Assessee to be cosmetics. 2. Valuation of the Products: The valuation issue was secondary but crucial for determining the assessable value for duty computation. Statement by Assessee: - The Assessee proposed that the least price charged to third parties should be taken as the basis for sales to IMPL. - If products were sold only to IMPL, the wholesale price charged by IMPL to dealers should be the basis. - Permissible deductions under Section 4 should be allowed. Revenue's Position: - The Revenue did not object to the Assessee's proposal. Court's Decision: - The Court accepted the Assessee's statement and held accordingly for valuation purposes. 3. Applicability of the Extended Period of Limitation: The Tribunal had held that the extended period of limitation was not applicable, a finding challenged by the Revenue. Arguments by Revenue: - The Revenue sought to apply the extended period of limitation for the Show Cause Notices issued. Arguments by Assessee: - The Assessee argued that there was no suppression or mis-statement of facts to justify the extended period. - They cited the case of Shahnaz Ayurvedics v. Commissioner of Central Excise, Noida, where the extended period was not applied. Court's Analysis: - The Court compared the products in question with those in the Shahnaz Ayurvedics case and found them comparable. - It agreed with the Tribunal's finding that there was no suppression or mis-statement by the Assessee. - The Court affirmed the Tribunal's decision that the extended period of limitation was not applicable. Conclusion: The Supreme Court dismissed the appeals by the Revenue, upholding the Tribunal's classification of the 22 products as Ayurvedic medicines under Sub-heading 3003.30, accepting the Assessee's valuation method, and affirming that the extended period of limitation was not applicable. No costs were imposed.
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