2015 (10) TMI 139 - AT - Central Excise

Classification of goods - cosmetic preparations or Ayurvedic medicine - Classification under Chapter 30 or 33 - Held that - Appellants have taken a categorical stand that the goods were being manufactured by them under the Drug licence issued by ASU Drugs Controller of the Kerala Government and all the ingredients used by them in the said product have been placed in ancient Ayurvedic Text Books. The said two contentions raised by the appellant do not stand rebutted by the Revenue but the lower authorities have solely relied upon the report of the Chemical Examiner, which opined that the items appeared to be appropriately classifiable as Cosmetic preparations - while dealing with the disputed issue, the Hon ble Supreme Court in the case of Puma Ayurvedic Herbal (P) Ltd. 2006 (3) TMI 141 - SUPREME COURT OF INDIA has observed that it has to be seen that how the common man understands the product in question and whether the ingredients used in the product stand mentioned in the authoritative text books of Ayurveda and as to whether the goods have been manufactured under Drug Controllers licence. Lower authorities have not disputed the appellant s stand that they have a Drug licence from the Drug Controller to manufacture the goods in question and the ingredients also find place in the ancient Ayurvedictext books. As such we are of the view that appellant has a good prima facie case in its favour so as to allow the stay petitions unconditionally. - As per the Board s Circular No. 25/91 dated 03.10.1991 clarifying that in cases of Ayurvedic medicines and in case of doubts, the Collectors are required to make a reference to the Board, who would take up the matter with the Drugs Controller of India or the Commissioner may exercise his option to take up the matter and seek clarification from the Drug Controller. The said Circular also talks about the twin tests laid down for determining the classification of the product, by the Hon ble Supreme Court in the case of CCE, Hyderabad V. M/s. Richardson Hindustan Ltd 1989 (1) TMI 352 - SUPREME COURT OF INDIA . The said two tests are the common parlance test as also the mentioning of the ingredients in the authoritative books on Ayurvedic medicines. - Impugned order is set aside - matter remanded back - Decided in favour of assessee.

Summary

Issues:
Classification of products - Ayurvedic preparations vs. Cosmetics

Analysis:
The judgment revolves around the dispute regarding the classification of the appellant's products, namely Hair Oil, Face pack, and hair oil for dandruff. The appellants have classified the products as Ayurvedic preparations falling under Chapter 30, attracting a lower rate of duty. On the other hand, the Revenue has classified them as Cosmetics falling under Chapter 33 of the Central Excise Tariff Act, attracting a higher rate of duty. This classification resulted in a confirmation of around Rs. 17,00,000 as duty of excise, along with interest and penalties.

Upon review, it was noted that the appellants claimed to manufacture the goods under a Drug license issued by the ASU Drugs Controller of the Kerala Government, with all ingredients sourced from ancient Ayurvedic Text Books. The Revenue solely relied on the report of the Chemical Examiner, which classified the items as 'Cosmetic preparations'. The appellants argued that they were not provided with the Chemical Examiner's report to contest it, and highlighted that the Chemical Examiner's role is not to determine the product's classification, which is the responsibility of Central Excise officers.

The appellants cited a Supreme Court decision where similar products were classified under Chapter 30, supporting their claim. The Tribunal acknowledged that the lower authorities did not dispute the appellants' possession of a Drug license or the presence of ingredients in ancient Ayurvedic texts. Consequently, the Tribunal found a prima facie case in favor of the appellant and decided to allow the stay petitions unconditionally.

The Tribunal emphasized the need to consider how a common man perceives the product, the presence of ingredients in authoritative Ayurvedic texts, and whether the goods were manufactured under a Drug Controller's license. It was highlighted that the lower authorities did not thoroughly examine the ingredients provided by the appellants alongside authoritative Ayurvedic Books. Additionally, a Board's Circular was referenced, outlining the twin tests for determining product classification in Ayurvedic medicines.

Ultimately, the Tribunal set aside the impugned order and remanded the matter to the original adjudicating authority for a fresh decision. The Chemical Examiner's report was to be provided to the appellant for contesting purposes. The judgment concluded by disposing of all stay petitions and appeals in the aforementioned manner, keeping other issues open for consideration.