2003 (1) TMI 171 - AT - Central Excise

Summary

Issues Involved:
1. Classification of products as Ayurvedic medicaments under sub-heading 3003.39 or as cosmetics under Chapter 33.
2. Validity of classification without proper notice.
3. Time-barred demand for duty.
4. Extended period of limitation and bona fide belief.
5. Calculation of duty and exemptions.

Detailed Analysis:

1. Classification of Products:
The primary issue is whether the products manufactured by M/s. Naturence Research Lab (P) Ltd. are Ayurvedic medicaments falling under sub-heading 3003.39 or cosmetics under Chapter 33. The appellant challenged the classification of five products: Comal, La Faire, Turmeric 'N' Clove, Forest Flower, and Basil 'N' Neem.

The Tribunal emphasized that for a product to be classified as a medicament, it must have therapeutic or prophylactic uses, as defined in Note 2 to Chapter 30. The mere presence of ingredients mentioned in authoritative Ayurvedic texts does not suffice. The product should primarily serve therapeutic or prophylactic purposes, not just contain subsidiary properties.

- Comal: Classified as an Ayurvedic medicine under Chapter 30 because it heals cracked feet, which is considered a therapeutic use.
- La Faire: Classified under Heading 33.04 as it is a skin care product aimed at minimizing scars and improving complexion, without primary therapeutic use.
- Turmeric 'N' Clove: Classified as an Ayurvedic medicine under Chapter 30 due to its use for treating acne and pimples.
- Forest Flower: Classified under Heading 33.05 as it is a hair care product providing nourishment and controlling hair loss, not primarily therapeutic.
- Basil 'N' Neem: Classified as an Ayurvedic medicine under Chapter 30, similar to the precedent set by the Supreme Court for anti-dandruff products.

2. Validity of Classification Without Proper Notice:
The appellant argued that some products were classified under headings different from those proposed in the show-cause notice. The Tribunal remanded the matter for re-adjudication for products like Floral Body Gel and Natural Touch, ensuring the manufacturer is given a reasonable opportunity to be heard.

3. Time-Barred Demand for Duty:
The appellant contended that the demand for duty from 1-4-1996 to 20-8-1996 is time-barred, citing a bona fide belief based on the Board's Circular No. 25/91. The Tribunal noted that the circular was withdrawn only in 1997, which could have led to confusion. However, the extended period of limitation was deemed applicable due to the lack of proper disclosures by the appellant.

4. Extended Period of Limitation and Bona Fide Belief:
The Tribunal found that the appellant did not disclose the manufacturing and clearance of products to the department, justifying the invocation of the extended period of limitation. The Supreme Court's decision in BPL India Ltd. supported this stance, emphasizing that non-disclosure warrants extended limitation.

5. Calculation of Duty and Exemptions:
The Tribunal agreed that the price should be treated as cum duty price, and assessable value should be determined after permissible deductions, as per the Supreme Court's decision in Maruti Udyog Ltd. The matter was remanded for re-examination of duty calculation, availability of exemption notifications, and potential calculation mistakes. The question of penalty imposition was left open to the jurisdictional authority.

Conclusion:
The appeal was disposed of with specific directions for re-adjudication on certain classifications and recalculations of duty, ensuring a thorough review of the appellant's claims and adherence to legal standards.