1990 (7) TMI 227 - AT - Central Excise

Issues Involved:

1. Classification of 'Dant Manjan Lal' as an Ayurvedic medicine or a cosmetic product.
2. Eligibility for exemption under Notification 55/75 as amended by Notification 62/78.
3. Applicability of Notification 179/77 for exemption due to non-use of power in manufacturing.
4. Impact of the inclusion of 'Ayurvedic Sar Sangrah' in the First Schedule of the Drugs and Cosmetics Act, 1940.

Issue-wise Detailed Analysis:

1. Classification of 'Dant Manjan Lal' as an Ayurvedic medicine or a cosmetic product:

The Tribunal considered whether 'Dant Manjan Lal' produced by M/s. B.A.B. qualifies as an Ayurvedic medicine or a cosmetic product. The Tribunal reiterated its previous decision in 1985 (22) E.L.T. 844, which held that 'Dant Manjan Lal' is a tooth powder, an article of daily use for cleaning teeth, and not an Ayurvedic medicine. The Tribunal emphasized that the product should be considered as a whole and not classified based on its ingredients. It cited various judicial pronouncements, including the Supreme Court's decision in the case of M/s. Sarin Chemical Laboratory v. Commissioner of Sales Tax, U.P., which held that tooth powder is a toilet requisite. The Tribunal concluded that 'Dant Manjan Lal' is classifiable under Item 68-CET and not as an Ayurvedic drug.

2. Eligibility for exemption under Notification 55/75 as amended by Notification 62/78:

The Tribunal examined whether 'Dant Manjan Lal' is eligible for exemption under Notification 55/75 as amended by Notification 62/78. The Tribunal referred to its earlier decision, which applied the test of common parlance, trade understanding, and judicial decisions. The Tribunal found that the product's principal function is cleaning teeth, and despite the manufacturer's claims of medicinal properties, it remains a tooth powder. Therefore, 'Dant Manjan Lal' is not eligible for exemption under the said notifications as it is not an Ayurvedic medicine.

3. Applicability of Notification 179/77 for exemption due to non-use of power in manufacturing:

The Tribunal addressed the claim of M/s. B.A.B. for exemption under Notification 179/77, which exempts goods not manufactured using power. The Tribunal noted that M/s. B.A.B. had raised this claim in a letter dated 26-11-1985, before the Assistant Collector's order in the de novo proceedings. The Tribunal found that the Collector (Appeals) had directed the Assistant Collector to decide the case de novo on merits, and therefore, the question of eligibility for exemption under Notification 179/77 should be considered. The Tribunal remanded the case to the Collector (Appeals) to decide the eligibility for exemption under Notification 179/77 after considering the evidence and providing an opportunity for a personal hearing.

4. Impact of the inclusion of 'Ayurvedic Sar Sangrah' in the First Schedule of the Drugs and Cosmetics Act, 1940:

The Tribunal considered the impact of the inclusion of 'Ayurvedic Sar Sangrah' in the First Schedule of the Drugs and Cosmetics Act, 1940, which occurred on 28-8-1987. The Tribunal found that this inclusion did not warrant a change in the classification of 'Dant Manjan Lal' as it had already applied the test of common parlance and judicial decisions. The Tribunal noted that the previous decision had addressed the argument of inclusion in the Drugs and Cosmetics Act only for argument's sake and had not relied on it for classification. Therefore, the inclusion of 'Ayurvedic Sar Sangrah' did not affect the classification of 'Dant Manjan Lal' as a tooth powder under Item 68-CET.

Conclusion:

The Tribunal set aside the order of the Collector (Appeals) and remanded the case for reconsideration of the eligibility for exemption under Notification 179/77. The Tribunal upheld its previous decision that 'Dant Manjan Lal' is a tooth powder and not an Ayurvedic medicine, and therefore, not eligible for exemption under Notification 55/75 as amended by Notification 62/78. The Tribunal dismissed the department's cross-objection as it was merely comments on the appeal filed by M/s. B.A.B.

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