2017 (9) TMI 1176 - AT - Central Excise

Classification of goods - Herbal Sheekakai Powder and Herbal Reetha Powder - classified under CTH 3003.39 of CETA 1985 as an ayurvedic proprietary medicine attracting duty of 10% or under CTH 3305.90 as cosmetic preparations? - Held that - there is no evidence put forward by the respondent that the impugned products are sold in the market as medicines. Further it is also seen that the said products are advertised in TV as well as other media as preparations used on the hair and also understood by public as toiletry requisite only - further the product does not have any property of curing disease. The Supreme Court in the recent judgment in the case of Commissioner of Central Excise Mumbai Vs. CIENS Laboratories Mumbai 2013 (8) TMI 467 - SUPREME COURT has held that for an ayurvedic medicine to be classified under Chapter 30 has to pass the test whether it is for cure of any disease. If the same is only meant for care then such product would not fall under medicament. Products to fall under CTH 3305.90 - Appeal allowed - decided in favor of Revenue.

Summary

Issues: Classification of Herbal Sheekakai Powder and Herbal Reetha Powder under Central Excise Rules

Issue 1: Classification Dispute
The case involved a dispute regarding the classification of Herbal Sheekakai Powder and Herbal Reetha Powder. The respondents claimed classification under Sub-heading 3003.39 of CETA, 1985, while the department argued for classification under 3305.90. The original authority confirmed the demand, but no penalty was imposed. The Commissioner (Appeals) set aside the duty demand, leading to an appeal by the department before the Tribunal.

Analysis:
The department contended that Chapter 30 applies to products for therapeutic or prophylactic uses, emphasizing that the products in question were not marketed as medicines but as toiletry items for hair care. The absence of evidence showing medical prescription or therapeutic properties led the department to argue against classification under Chapter 30. They also cited a previous Tribunal decision regarding similar products being classified under Chapter Heading 3305.99. The Tribunal noted the distinction between products suitable for medicinal use and those marketed as cosmetics or toiletries, highlighting relevant Chapter Notes that exclude preparations of Chapter 33 from Chapter 30 classification, especially if marketed as cosmetics. The lack of evidence supporting medicinal use, coupled with public perception and advertising as hair care products, influenced the Tribunal's decision. Referring to a Supreme Court judgment, the Tribunal emphasized the requirement for ayurvedic medicines to be intended for curing diseases to fall under Chapter 33. Drawing parallels with the Medi Herbs case, where a similar product was classified under Chapter Heading 3305.99, the Tribunal ruled in favor of the department's classification argument, setting aside the Commissioner (Appeals) decision and restoring the original authority's order.

Conclusion:
The Tribunal's decision hinged on the distinction between products marketed as medicines and those positioned as cosmetics or toiletries. The lack of evidence supporting medicinal use, combined with public perception and advertising as hair care products, influenced the classification under Chapter Heading 3305.99. The decision aligned with previous legal interpretations and established principles, emphasizing the importance of intended use and market positioning in determining product classification under Central Excise Rules.