2017 (3) TMI 1439 - AT - Central Excise

Classification of goods - Keshyog Oil and Keshyog Herbal Powder Hair Wash/Shampoo - Ayurvedic medicine under Chapter 30 or cosmetic/ toilet preparations under CETH 3305? - Held that - classification of similar product came for examination before the Tribunal in CCE, Chandigarh vs. Saini Hair Products reported in 2003 (11) TMI 403 - CESTAT, NEW DELHI , where it was held that The product is made under a drug licence in accordance with an Ayurvedic Text and from Ayurvedic ingredients. It is packed and distributed in packings and with literature proclaiming it as Ayurvedic medicine. Some instructions are also given on the label about dosage, period, etc. The label also indicates the problems for which it is to be applied. As pointed out by the lower authorities, Tariff and HSN notes also advice classification of the product as a drug - the product, in question, are rightly classifiable under Chapter 30 as Ayurvedic Medical Preparation. Whether the process of labelling, packing undertaken by the appellant (M/s GTM/Global) will amount to manufacture or not? - Held that - labelling of the products, packing from bulk cartons to combo boxes (with one oil and one shampoo container) and making them ready for retail market is carried out by M/s GTM/Global, in their premises. The cartons with 200 bottles received by GTM/Global are meant for inter-unit transfer in bulk and not for retail consumer. Such bulk consignments are made in to retail packs (combo packs with bottle of oil and powder) in a single retail carton box. This carton box is fit for retail sale undertaken by GTM/Global. Applying the provisions of Note 6 of Chapter 30, we find that the processes undertaken by the appellant will amount to manufacture attracting Central Excise levy. Personal Penalty on Shri Anuj Agarwal is Director of the appellant (GTM) - Held that - The duty liability in this case arises, even after such classification, in view of deemed manufacture in terms of Chapter Note 6. In such situation alleging malafide intend to violate the provisions of central excise law against an individual, as officer of the appellant company, is not tenable. The original order did not elaborate and justify the penalty imposed on individuals - the personal penalty imposed on Shri Anuj Agarwal is set aside. Penalties imposed on the assessees/appellants are confirmed. Appeal allowed - decided against appellant-assessee.

Summary

Issues Involved:
1. Correct classification of the impugned goods.
2. Duty liability of the impugned goods.
3. Whether the processes undertaken by the appellants amount to manufacture.
4. Imposition of penalties on the appellants and individuals.

Issue-Wise Detailed Analysis:

1. Correct Classification of the Impugned Goods:
The primary issue was whether "Keshyog Oil and Keshyog Herbal Powder Hair Wash/Shampoo" should be classified as Ayurvedic medicine under Chapter 30 or as cosmetic/toilet preparations under Chapter 33. The appellants argued that the products should be classified under Chapter 30 since they are manufactured according to ingredients listed in the Ayurvedic text "Bhav Prakash Nighantu" and are recognized by the Ministry of Ayush, Government of India. The Tribunal noted that the products were approved by the State Drug Authorities as Ayurvedic medicine and the packaging identified them as such. Citing the Tribunal's decision in CCE, Chandigarh vs. Saini Hair Products, it was concluded that the products are rightly classifiable as Ayurvedic medicines under Chapter 30.

2. Duty Liability of the Impugned Goods:
The Original Authority confirmed the Central Excise duty of ?1,36,72,354/- on M/s GTM Teleshopping Pvt. Ltd./M/s Global Tele Mall, along with equal penalties. It was argued by the appellants that their activities did not amount to manufacture and hence no duty was liable. However, the Tribunal upheld the duty liability, stating that the processes undertaken by the appellants amounted to manufacture as per Note 6 of Chapter 30, which includes labelling, re-labelling, and repacking from bulk to retail packs.

3. Whether the Processes Undertaken by the Appellants Amount to Manufacture:
The Tribunal examined whether the activities of labelling, re-labelling, and packing undertaken by the appellants constituted manufacture. It was found that the appellants received packed and sealed bottles, which were then labelled, packed into combo packs, and made marketable. These activities were deemed to constitute manufacture under Note 6 of Chapter 30, which specifies that such processes render the product marketable to the consumer and therefore amount to manufacture. The Tribunal dismissed the appellants' reliance on case laws that were based on different facts.

4. Imposition of Penalties on the Appellants and Individuals:
Penalties were imposed on various individuals, including the Director of GTM and the Proprietor of M/s Ishguru High Tech Natural Care Products. The Tribunal set aside the penalties on individuals, noting that the Original Authority did not provide sufficient justification for imposing these penalties. Specifically, the penalties on Shri Anuj Agarwal and Shri Pranayadutta Shukla were set aside due to lack of elaboration and justification in the original order. The Tribunal also dismissed the Revenue's appeal against the reduction of penalties by the Commissioner (Appeals).

Conclusion:
The Tribunal concluded that the impugned goods are to be classified as Ayurvedic medicines under Chapter 30. The processes undertaken by the appellants, including labelling and packing, amount to manufacture, thereby attracting Central Excise duty. The penalties imposed on the assessees/appellants were confirmed, while the penalties on individuals were set aside. Appeals by the Revenue and the assessee against the Commissioner (Appeals) order were dismissed. The judgment was pronounced in open court on 01/03/2017.