2016 (4) TMI 600 - AT - Central Excise

Classification - whether two products of Dabur Chyawanprash (Awaleha Special & Awaleha with Ashtawarg) should be classified as Ayurvedic medicaments under CETH 30.03, as claimed by the appellant, or the same should be classified under CETH 21.07/21.08 as decided by the Adjudicating authority - Held that - An interpretation that Chyawanprash, also having health tonic capabilities will be classifiable only under chapter 21 of CETH, will be an absurd interpretation when the same product manufactured by the same appellant elsewhere in the country, and similar Chyawanprash manufactured by the competitors of the appellant, is being classified as Ayurvedic medicament under CETH 30.03. It is now a well settled legal proposition that interpretation of a statute should be done in such a way to avoid absurdity. In view of the above appeal filed by the appellant is required to be allowed by holding that the impugned products are classifiable as Ayurvedic Medicaments under CETH 30.03. The confirmation of demands, imposition of penalties and confiscation of goods was thus not justified. It is made clear that this bench has not gone into the time barred aspect of the demands because on merits, the case has been decided in favour of the assessee.

Issues Involved:
1. Classification of the appellant's products under the Central Excise Tariff.
2. Validity of the Drug Control Authorities license.
3. Common/market parlance understanding of the products.
4. Use of substitute ingredients in Ayurvedic formulations.
5. Applicability of penalties and confiscation of goods.

Detailed Analysis:

1. Classification of the Appellant's Products:
The primary issue was whether the appellant's products, "Chyawanprash Awaleha with Ashtawarg" and "Chyawanprash Awaleha Special," should be classified under CETH 30.03 as Ayurvedic medicaments or under CETH 21.07/21.08 as food supplements/tonics. The appellant argued that their products are Ayurvedic medicines, made as per authoritative Ayurveda texts and licensed under the Drugs & Cosmetics Act, 1940. The adjudicating authority classified the products under CETH 21.07/21.08, treating them as food supplements/tonics. The Tribunal observed that the products are described as Ayurvedic medicines on their wrappers and contain Ayurvedic ingredients. The Tribunal concluded that the products should be classified as Ayurvedic medicaments under CETH 30.03, as they have therapeutic and prophylactic uses.

2. Validity of the Drug Control Authorities License:
The Revenue argued that the appellant did not have a validly extended Drug Control Authorities license for certain periods. The Tribunal noted that the appellant had produced copies of the extended license up to 31.12.2001. It held that if a product is considered an Ayurvedic drug, it remains so for all periods when the ingredients are the same, regardless of the license's status for certain periods.

3. Common/Market Parlance Understanding:
The Revenue contended that the products are known as food supplements or health tonics in common parlance. The Tribunal found that the products are described as Ayurvedic medicines on their wrappers and contain Ayurvedic ingredients. It held that the products should be classified based on their therapeutic and prophylactic uses, not just common parlance.

4. Use of Substitute Ingredients:
The Revenue argued that the substitute ingredients used in the products are not acceptable as Ayurvedic medicaments. The Tribunal observed that the use of substitute ingredients is permissible as per legal Notice No.5 of the Ayurvedic Formulary of India. The substitutes were declared to the Drug Control Authorities, who granted the license for manufacturing Ayurvedic medicines. The Tribunal concluded that the use of substitutes does not disqualify the products from being classified as Ayurvedic medicaments.

5. Applicability of Penalties and Confiscation of Goods:
The adjudicating authority confirmed a total demand of Rs. 12,31,65,919/- along with interest and imposed an equivalent penalty under Rule 173Q(1) of the erstwhile Central Excise Rules, 1944. Additionally, 25 kg of the impugned goods were confiscated and allowed redemption on paying Rs. 2,142/- as redemption fine. The Tribunal held that the confirmation of demands, imposition of penalties, and confiscation of goods were not justified as the products are classifiable as Ayurvedic medicaments under CETH 30.03. The Tribunal did not address the time-barred aspect of the demands, as the case was decided in favor of the appellant on merits.

Conclusion:
The Tribunal allowed the appeal filed by the appellant, holding that the impugned products are classifiable as Ayurvedic Medicaments under CETH 30.03. The confirmation of demands, imposition of penalties, and confiscation of goods were thus not justified.

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