2018 (1) TMI 572 - AT - Customs

Classification of imported goods - bulk Reishi Gano Powder - bulk Ganocelium Powder - claim of the respondent is to classify the product as Ayurvedic Proprietary Medicine under heading 30039011 claiming the benefit of N/N. 53/2011 (Sl. No. 363). The Revenue did not agree with the same and intended to classify the product as food supplement under CTH 21069099. Whether the decision of Tribunal, Chennai in the case of DXN Manufacturing (India) Pvt. Ltd. 2017 (11) TMI 608 - CESTAT CHENNAI applies to the present case, where Tribunal held that the product should be classified as miscellaneous food supplement under heading 2108 of the Central Excise Tariff, as it was existing during the relevant time.? Held that - The impugned order distinguished the decision of the Tribunal, Chennai passed in the first round of litigation. We note that based on the direction of the Apex Court, the Tribunal, Chennai went into the dispute in much more elaborate manner with all the evidences placed before them and we have no reason to differ from the ratio and finding arrived by the Tribunal, Chennai. The impugned order has erred in classifying the product as Ayurvedic medicine and it should have been correctly classified as food supplement as pleaded by the Revenue - appeal allowed - decided in favor of Revenue.

Issues Involved:
1. Correct classification of bulk Reishi Gano Powder and bulk Ganocelium Powder.
2. Applicability of the benefit of Notification 53/2011 (Sl. No.363).
3. Consideration of previous Tribunal decisions and Supreme Court directives.
4. Recognition by Ayush Authorities and Drugs and Cosmetics Authorities.
5. Parameters for classification under Custom Tariff.
6. Interpretation of HSN notes and legal precedents.

Detailed Analysis:

1. Correct Classification of Bulk Reishi Gano Powder and Bulk Ganocelium Powder:
The core issue revolves around whether the imported products should be classified as "Ayurvedic Proprietary Medicine" under heading 30039011 or as "food supplement" under CTH 21069099. The Original Authority ruled against the respondent, but the Commissioner (Appeals) classified the products under Heading 30039011. The Revenue appealed this decision.

2. Applicability of the Benefit of Notification 53/2011 (Sl. No.363):
The respondent claimed benefits under Notification 53/2011 by classifying the products as Ayurvedic Proprietary Medicine. The Revenue contested this, arguing for classification under a different heading which would not allow such benefits.

3. Consideration of Previous Tribunal Decisions and Supreme Court Directives:
The learned AR referenced a previous Tribunal decision in the case of DXN Manufacturing (India) Pvt. Ltd., where similar products were classified as miscellaneous food supplements under heading 2108. The Supreme Court had directed a re-examination of this classification, leading to a detailed order by the Tribunal, Chennai, which reaffirmed the classification under CETH 2108.99. This decision was argued to be applicable to the current case.

4. Recognition by Ayush Authorities and Drugs and Cosmetics Authorities:
The respondent argued that the products were recognized and licensed by State Authorities and Ayush Authorities as Ayurvedic medicines. However, the Tribunal noted that such recognition does not necessarily determine classification under the Customs Tariff, which should be guided by statutory entries and explanatory notes.

5. Parameters for Classification under Custom Tariff:
The Tribunal emphasized that classification should be based on statutory entries and explanatory notes, including HSN notes, rather than recognition by drug authorities. The Tribunal, Chennai's detailed examination, including the product labels and marketing materials, indicated that the products were intended for general well-being rather than treating specific diseases, thus classifying them as food supplements.

6. Interpretation of HSN Notes and Legal Precedents:
The respondent argued that the full HSN Note 16 was not considered by the Tribunal, Chennai, particularly the exclusion of preparations intended for disease prevention. However, the Tribunal found that the products did not meet the common parlance test for medicaments and were marketed as food supplements. The Tribunal cited the Supreme Court's decision in the Richardson Hindustan case, which laid down tests for classification as Ayurvedic Medicaments: the product should be known as a medicament in common parlance, and its ingredients should be mentioned in Ayurvedic texts. The Tribunal found that the products did not satisfy these tests.

Conclusion:
The Tribunal concluded that the products should be classified as food supplements under CETH 2108.99, following the detailed examination and findings of the Tribunal, Chennai. The impugned order by the Commissioner (Appeals) was set aside, and the appeal by the Revenue was allowed. The decision was based on the analysis that the products were intended for general well-being and not for treating specific diseases, and the classification should be guided by statutory entries and explanatory notes rather than drug authority recognition.

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