CE- Excisability of liquid vegetable extracts obtained in the manufacture of Ayurvedic Medicines - clarification regarding. - Central Excise - 334/50/97-CX

Circular No. 334/50/97-CX dated 16/9/97 F. No. 102/11/94-CX.3 Government of India Ministry of Finance Department of Revenue Central Board of Excise Customs, New Delhi Subject: CE- Excisability of liquid vegetable extracts obtained in the manufacture of Ayurvedic Medicines - clarification regarding. I am directed to say that a doubt has been raised as to whether liquid vegetable extracts obtained in the course of manufacture of ayurvedic medicines are excisable under the Central Excise Traiff Act, 1985 and if so whether they merit classification under Chapter 13 or under Chapter 30 of the Central Excise Tariff Act, 1985. 2. A general study of the process for obtaining these extracts reveals that in the first stage medicinal herbs/ shrubs are ground/ crushed to obtain coarse powder and thereafter it is boiled in water to get the extract. In the second stage the said extract is subjected to preservative processes whether fermentation or otherwise. 3. The matter has been examined. In this context it mentioned that liquid vegetable extracts which emerge at an intermediate stage in the manufacture of Ayurvedic, Unani or siddha medicines are not marketable unless subjected to preservative processes whether fermentation or otherwise. Therefore, such liquid vegetable extracts unless subjected to fermentation or other preservative processes are not liable to be considered as "goods" attracting the scope of excise levy. If these are subjected to fermentation which gives rise to self generated alcohol, they go out of the purview of CETA, 1985 in view of Chapter Note 4 to Chapter 30 and attract duty under the Medicinal Toilet Prepartions (ED) Act, 1955. Rule 66 of the M TP Rules, 1956 also makes it clear that medicinal prepartions containing self generated alcohol are chargeable to duty under the M TP act. In this connection attention is drawn to the judgement of Supreme Court in the case of M/s. Baidyanath Ayurved Bhavan (P) Ltd. [1971 (1) SCR 590] wherein it has been held that in order to attract duty under the M TP Act, all that is required is that a medicinal preparation should contain alcohol. Alcohol may be part of the preparation either because it is directly added to the solution or it came to be included in it because one of the components of that preparation contained alcohol. 4. If such extracts are subjected to other preservative processes which do not give rise to self generated alcohol or addition of alcohol in the extracts, they would attract duty under the CETA, 1985. Such extracts can be classified as under. Simple Extract - Extraction from singly herb / plant. Compound Extract - Extraction from different herbs/ plants together. HSN explanatory notes at page 93 excludes vegetable extracts from chapter 13 which have been mixed or compounded for therapeutic or prophylactic purposes. HSN explanatory notes at page 436 further state that heading 30.03 includes medicinal compound vegetable extracts including those obtained by treating a mixture of plants. As per HSN explanatory notes single ingredient extracts are classifiable under Chapter 13 of the CET. However, single ingredient extracts when put up in measured doses for therapeutic or prophylactic purposes or in forms op packings for retail sale for such purposes are covered under Chapter heading 30.04. 5. In view of the above it is clarified that liquid vegetable extracts unless subjected to fermentation or other preservative processes are not liable to be considered as "goods" attracting the scope of excise levy. Mixed or compounded vegetable extracts which have therapeutic or prophylactic value are appropriately classifiable under Heading 30.03 of the Central Excise Tariff. However, single ingredient extracts when put up in measured doses for therapeutic or prophylactic purposes or in forms of packings for retail sale for such purposes are appropriately classifiable under Heading 30.03 of the Central Excise Tariff. 6. All pending disputes / assessments on the issue may be settled in the light of these guidelines. Sd/- (Srinivas Tata) Under Secretary to the Government of India