2018 (5) TMI 210 - AT - Central Excise

Classification of goods - NUZEN GOLD HERBAL HAIR OIL - appellant claims that the product is an oil based Ayurvedic Proprietary Medicament (Anubhutayogams) used for the purposes of hair and scalp related ailments classified the same under chapter 3003 of Central Excise Tariff Act, 1985 - Revenue authorities were of the view that the said product merits classification under chapter 33 as perfumed hair oil and the seized stocks of NGHHO found in the factory premises. Whether the product would fall under chapter 30 as claimed by the appellant or under chapter 33 as claimed by revenue? Held that - Hon ble High Court of Gujarat in the case of Vasu Pharmaceuticals Pvt. Ltd. 2010 (8) TMI 1090 - GUJARAT HIGH COURT while deciding the classification of similar product Trichup Oil as to whether the said product would be classifiable under chapter 30 or chapter 33, has held that the product merits classification under chapter 30. Penalties - Held that - Since we have set aside the demands on merits itself, question of penalties on the company as well as on the individuals who are Directors would not arise, accordingly all the penalties are set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Classification of "Nuzen Gold Herbal Hair Oil" (NGHHO) under Central Excise Tariff Act, 1985.
2. Validity of the extended period for the payment of differential duty.
3. Imposition of penalties on the company and its directors.
4. Confiscation of seized goods.

Detailed Analysis:

1. Classification of NGHHO:
The primary issue was whether NGHHO should be classified under Chapter 30 (Ayurvedic Proprietary Medicament) or Chapter 33 (Perfumed Hair Oil) of the Central Excise Tariff Act, 1985. The appellant argued that NGHHO is an Ayurvedic Proprietary Medicament used for hair and scalp-related ailments, supported by a license from the Drugs Controller Department of Ayush, Government of Andhra Pradesh. The product's label indicated it as an Ayurvedic Proprietary Medicine, and its ingredients were listed in authoritative Ayurvedic texts.

The Revenue contended that NGHHO should be classified under Chapter 33, citing Chapter Note 2 of Chapter 33 and Chapter Note 1(e) of Chapter 30, which exclude products with subsidiary therapeutic properties from being classified as medicaments. They argued that the product's primary function was cosmetic, not therapeutic.

The Tribunal referred to several judgments, including the Supreme Court's decision in Hindustan Lever Limited, which provided guidelines for classification. These guidelines emphasized the product's primary use, the curative attributes of its ingredients, and the perception of users. The Tribunal found that NGHHO, being manufactured under a drug license and containing ingredients listed in authoritative Ayurvedic texts, met the criteria for classification under Chapter 30.

2. Validity of the Extended Period for Payment of Differential Duty:
The Tribunal did not specifically address the validity of the extended period for the payment of differential duty in detail. However, by setting aside the demands on merits, it implicitly rejected the Revenue's invocation of the extended period.

3. Imposition of Penalties on the Company and its Directors:
Since the Tribunal concluded that NGHHO should be classified under Chapter 30, it held that the demands raised by the adjudicating authority were unsustainable. Consequently, the penalties imposed on the company and its directors were also set aside.

4. Confiscation of Seized Goods:
The Revenue's appeal against the non-confiscation of seized goods was rejected. The Tribunal upheld the adjudicating authority's decision that the seized goods, being within the factory premises, were not liable for confiscation.

Conclusion:
The Tribunal concluded that NGHHO should be classified under Chapter 30 as an Ayurvedic Proprietary Medicament. It set aside the demands and penalties imposed by the adjudicating authority and rejected the Revenue's appeal regarding the confiscation of seized goods. The appeals filed by the company and its directors were allowed, while the Revenue's appeal was dismissed.