2019 (12) TMI 522 - AT - Central Excise

Classification of goods - Beneficiale Liquid - DSN capsules - whether classifiable under CETH 2106 or under 3004? - Area Based exemption - N/N. 49/2003-CE dated 10.6.2003 HELD THAT - From the perusal of the two entries, it is clear that the goods will be classified under the heading 2106, only if the products are not covered under Chapter heading 3004 of the Central Excise Tariff. It is the contention of the Appellant that their product is covered under the definition of medicament on the ground that these products are used for cure/treatment of diseases and being regularly prescribed by the medical practitioners. The Appellant has also produced the affidavit on this behalf, from the various medical practitioners along with the prescriptions. The prescription indicates that two products in question, namely DSN capsules and Liquid Beneficiale, are being prescribed by the medical practitioners in treatment of diseases to booster immune system. The products are prescribed by the doctors for removal of condition of weakness and also to boost immunity of the patients along with other medicines. The entry that is Chapter 2106, which is relied upon by the Revenue is only residuary entry. The product which is more appropriately classified under the specific headings has to be preferred before resorting to classification of goods in the residuary entry. It is also a fact that merely because the product can be used otherwise it will not be become the foods supplement. The adjudicating authority in the impugned order has held that the Appellant was not having the drug licence during the impugned period. However, the same is found to be incorrect, in view of submissions made by the learned Advocate and also by the production of copies of Drug Licence which proves the fact of having the valid licence for the manufacture, of the products namely DSN Capsules and Liquid Beneficiale - We are in agreement with the contention raised by the learned Advocate that the drug licence is issued under generic name and not in the trade name of the drugs manufactured. This fact is evident from the Drug Licence and also the composition of the products of the two drug licences. There is no justification of classification of the two products in question under heading 2106, but they are appropriately classifiable under Tariff Heading 3004 of Central Excise Tariff Act - As we held the goods are classified under Heading 3004 of CETA, the Appellant would be entitled for the benefit exemption from central excise duty under Notification No. 49/2003 - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Classification of products under Central Excise Tariff Heading.
2. Eligibility for exemption under Notification No. 49/2003-CE.
3. Validity of test reports and their relevance in classification.
4. Relevance of drug licenses in determining product classification.
5. Interpretation of terms like 'medicament' and 'nutritional supplement'.
6. Admissibility of 'common parlance test' in classification disputes.

Detailed Analysis:

1. Classification of Products under Central Excise Tariff Heading:
The primary issue revolves around whether the products 'DSN capsules' and 'Beneficiale Liquid' should be classified under Tariff Heading 3004 (medicaments) or 2106 (food preparations). The adjudicating authority classified them under 2106 based on the CRCL test report, which stated that the products are nutritional supplements and not medicaments. However, the appellant argued that these products have therapeutic and prophylactic applications, thus fitting the definition of medicaments under Heading 3004. The Tribunal noted that the products are prescribed by medical practitioners for treating conditions like weakness and boosting immunity, supporting their classification under 3004.

2. Eligibility for Exemption under Notification No. 49/2003-CE:
The adjudicating authority denied the exemption under Notification No. 49/2003-CE, which applies to goods classified under certain headings, including 3004 but not 2106. Since the Tribunal reclassified the products under 3004, the appellant is entitled to the exemption, thus nullifying the demand for Central Excise duty and penalties imposed.

3. Validity of Test Reports and Their Relevance in Classification:
The CRCL test report concluded that the products are nutritional supplements based on their composition. However, the Tribunal emphasized that the chemical examiner's role is to provide the chemical composition, not to decide the classification. The Tribunal found that the test report alone cannot determine the classification, especially when the products are prescribed by medical practitioners for therapeutic use.

4. Relevance of Drug Licenses in Determining Product Classification:
The adjudicating authority questioned the validity of the appellant's drug license, suggesting it was obtained post the issuance of the Show Cause Notice. The appellant provided evidence of having valid drug licenses from 2007 to 2022. The Tribunal agreed that the presence of a drug license supports the classification of the products as medicaments under Heading 3004, reinforcing the appellant's position.

5. Interpretation of Terms like 'Medicament' and 'Nutritional Supplement':
The Tribunal referred to various legal precedents to interpret the terms 'medicament' and 'nutritional supplement'. It emphasized that products with therapeutic or prophylactic uses, even if available over the counter, can be classified as medicaments. The Tribunal cited the Supreme Court's decision in CCE Vs. Wockhardt Life Sciences Ltd., which held that products with therapeutic or prophylactic properties fall under the definition of medicaments.

6. Admissibility of 'Common Parlance Test' in Classification Disputes:
The Tribunal reiterated the principle that product classification should be based on how the product is understood in common parlance, especially by the users and medical practitioners. The Tribunal found that the products in question are commonly understood and used as medicaments, thus supporting their classification under Heading 3004.

Conclusion:
The Tribunal concluded that the products 'DSN capsules' and 'Beneficiale Liquid' are appropriately classified under Tariff Heading 3004 as medicaments. Consequently, the appellant is entitled to the exemption under Notification No. 49/2003-CE, and the demands for Central Excise duty and penalties are set aside. The appeals were allowed with consequential benefits as per law.