2004 (1) TMI 119 - AT - Central Excise

Issues Involved:
1. Classification of Canifur Liquid and Canifur AZ Liquid under Central Excise Tariff.
2. Whether the products are Ayurvedic Veterinary medicines or veterinary shampoos.
3. Applicability of Note 1(d) to Chapter 30 and Note 2 to Chapter 33 of the Tariff.
4. Evidence supporting the primary use of the products.
5. Limitation and bona fide belief regarding the classification of the products.
6. Imposition of penalty.

Detailed Analysis:

1. Classification of Canifur Liquid and Canifur AZ Liquid:
The core issue is whether Canifur Liquid and Canifur AZ Liquid, manufactured by M/s. Humphrey & Colman Health Products (P) Ltd., should be classified under sub-heading No. 3003.30 of the Central Excise Tariff Act as Ayurvedic medicaments, or under Heading No. 33.05 as confirmed by the Revenue.

2. Ayurvedic Veterinary Medicines vs. Veterinary Shampoos:
The Appellant argued that the products are Ayurvedic Veterinary medicines containing ingredients listed in Ayurvedic Textbooks and used to cure pets from lice, ticks, mites, and dandruff. These products are bought and sold only from drug shops and on prescription of doctors. The Revenue, however, classified these products under sub-heading 3305.90, asserting that their therapeutic/prophylactic properties are secondary and that the primary use is as a shampoo for hair growth and fur conditioning.

3. Applicability of Note 1(d) to Chapter 30 and Note 2 to Chapter 33:
The Revenue cited Note 1(d) to Chapter 30 and Note 2 to Chapter 33, which exclude preparations of Chapter 33 from Chapter 30 even if they have therapeutic or prophylactic properties. They argued that the products are essentially veterinary shampoos with some subsidiary curative or prophylactic value, thus classifiable under Heading 33.05.

4. Evidence Supporting Primary Use:
The Appellant provided clinical trials, affidavits from doctors, dealers, and users, and drug licenses to establish that the primary use of the products is as medicaments. The Commissioner noted that the labels described the products as anti-dandruff, ectoparasiticidal, hair growth promoters, and fur conditioners. The Appellant contended that the medicinal properties are primary, supported by clinical reports showing significant anti-dandruff and ectoparasiticidal action.

5. Limitation and Bona Fide Belief:
In Appeal No. E/3387/98-B, the Appellant argued that the show cause notice was barred by limitation, issued beyond six months from the relevant date. They claimed a bona fide belief that their products were Ayurvedic medicaments not chargeable to Central Excise duty, evidenced by their conduct in filing classification under Heading 30.03 when patented Ayurvedic medicines attracted duty.

6. Imposition of Penalty:
The Appellant argued against the imposition of penalties, asserting no mala fide intention to evade duty. The Revenue did not provide evidence of any mala fide conduct.

Conclusion:
The Tribunal concluded that both products contain ingredients mentioned in authoritative Ayurvedic Textbooks. It is not necessary for a medicament to be prepared according to the formulae in these Textbooks. The Supreme Court has upheld that a product with ingredients listed in Ayurvedic Textbooks, even if manufactured under a patented formula, remains an Ayurvedic medicament. The Tribunal found that the primary use of the products is therapeutic or prophylactic, not subsidiary, and the Revenue failed to provide evidence to the contrary. Consequently, the products were classified under Heading 30.03 as Ayurvedic medicaments, setting aside the impugned orders and allowing all appeals.

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