1976 (5) TMI 21 - HC - Central Excise

Summary

Issues Involved:
1. Classification of the disputed product under Entry No. 3 of the Schedule to the Medicinal and Toilet Preparations (Excise Duties) Act, 1955.
2. Determination of whether the disputed product is an Ayurvedic preparation.
3. Applicability of excise duty to the disputed product.

Detailed Analysis:

1. Classification of the Disputed Product:

The primary issue in this appeal is the classification of the medicinal preparation "Mahadraksharista" under Entry No. 3 of the Schedule to the Medicinal and Toilet Preparations (Excise Duties) Act, 1955. The respondent manufactures this product using basic Ayurvedic ingredients based on a traditional formula not recognized by any Ayurvedic pharmacopoeia. The product contains self-generated alcohol and was not previously subjected to excise duty under the Bengal Excise Act of 1909.

The Superintendent of Excise classified the product under Entry No. 3(iii) as "All others," which is subject to a duty of Rupee one and ten naya paise per litre. The respondent contended that the product should fall under Entry No. 3(i), which pertains to Ayurvedic preparations containing self-generated alcohol not capable of being consumed as ordinary alcoholic beverages and is subject to 'nil' duty.

2. Determination of Whether the Disputed Product is an Ayurvedic Preparation:

The respondent argued that the product, being an Ayurvedic preparation with self-generated alcohol, should be classified under Entry No. 3(i). The Appellate Tribunal dismissed this claim, stating that the product was not recognized by any Ayurvedic pharmacopoeia and hence could not be considered an Ayurvedic preparation.

The trial court, however, found that the product, although not manufactured according to any recognized Ayurvedic pharmacopoeia, was still an Ayurvedic preparation. The court noted that the term "Ayurvedic preparation" is not defined in the Act or the Rules, and thus should be interpreted in its ordinary sense. The court held that a product made from basic Ayurvedic ingredients using a traditional process qualifies as an Ayurvedic preparation.

3. Applicability of Excise Duty to the Disputed Product:

The trial court concluded that the disputed product falls under Entry No. 3(i) and is thus not liable for any excise duty. The court rejected the Appellate Tribunal's view that the product must be recognized by a standard Ayurvedic pharmacopoeia to qualify as an Ayurvedic preparation. The court emphasized that the Rules do not mandate that Ayurvedic preparations must be manufactured according to recognized pharmacopoeias.

The court also noted that Rule 64 recognizes "asavas" and "aristas" as principal types of Ayurvedic preparations with self-generated alcohol. Rule 65 states that until a standard Ayurvedic pharmacopoeia is evolved by the Central Government, pharmacopoeias in vogue in various States shall be recognized. However, these rules do not stipulate that a preparation must be manufactured according to such pharmacopoeias to be considered Ayurvedic.

The court found that the Appellate Tribunal's assumptions were erroneous. The Tribunal incorrectly believed that the preparation must be classified as Ayurvedic by the Central Government and must be noticed in a recognized Ayurvedic pharmacopoeia. The court clarified that the Act and the Rules do not require such classifications for a product to be considered Ayurvedic.

Conclusion:

The appeal was dismissed, and the trial court's decision was upheld. The court ruled that the disputed product "Mahadraksharista" is an Ayurvedic preparation under Entry No. 3(i) of the Schedule to the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, and is thus not liable for any excise duty. The court emphasized that the term "Ayurvedic preparation" should be interpreted in its ordinary sense and that the product qualifies as such despite not being recognized by any Ayurvedic pharmacopoeia.