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TMI Blog2000 (8) TMI 861X X X X Extracts X X X X X X X X Extracts X X X X ..... 94 for ayurvedic Patent or Proprietary medicaments falling under CET sub-heading 3003.30. In the wake of intelligence gathered by the Directorate General of Anti-evasion that the products manufactured by IRLP were skin beautification creams, lotions, moisturisers, shampoos, etc., and were cosmetics and toilet preparations chargeable to duty @ 40% under Chapter 33 of the CETA but were being cleared as ayurvedic medicines on payment of duty @ 10% ad valorem, various premises of IRLP were searched by the officers of Directorate General of Anti-evasion on 17-1-96. Enquiries conducted by the Department revealed the following : 1. That IRLP are actually manufacturing and clearing cosmetics but with the intention of evasion of central excise duty, they are clearing their products as ayurvedic medicines. 2. They have fraudulently obtained a Licence under Drugs and Cosmetics Act 1940 by declaring use of certain herbals in their products but the cosmetics which are being used as essences, foaming agents, binding agents and giving bulk to the hair, cleansing agents, producing more lather, adjusting the PH value, chelating agents, astringents, having antiseptic property, chemical perfumes, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, a show cause notice was issued on 10-4-96 alleging that IRLP are manufacturing and marketing and selling products only as cosmetics and that their products are treated as cosmetics in trade parlance. The notice also alleged that M/s. Ishaan Marketing P. Ltd. (herein after referred to as IMPL) through whom IRLP was marketing its products, and IRLP are related persons as per Section 4(4)(c) of the Central Excise Act and that the transactions between them are not at arms length. The notice alleged that since IMPL and IRLP are related persons and normally whole-sale price for goods sold in sizes other than 35 ml. did not exist at the factory gate, the price at which IMPL have sold the products was to be taken as the cum-duty price of the goods manufactured and cleared by IRLP, for levy of duty. The notice proposed recovery of Rs. 3,06,68,074.78 BED and Rs. 34,39,918,89 SED during the period 1-4-91 to 16-1-96 by invoking the extended period of limitation; penal action was also proposed against them. The notice was adjudicated by the Commissioner of Central Excise vide his Order-in-Original No. 5/98 dated 29-1-98, confirmed a duty demand of Rs. 3,10,17,993/- and imposed a pena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 3401.10 (soap .... and preparations for use as soap) proceeds on the basis that the products were referred to as cosmetics by hotels to which they were supplied; that they are used as shampoos, moisturisers, etc., and not as medicines; that the literature of the appellants no where describes the products as medicines; that the shape and size of the containers also indicates that the products are cosmetics. She has held that the term "ayurvedic medicines" has been given on the label either above or below in very small size, that they do not claim any cureative or prophylactic properties against any ailment or disease and that, there is no evidence that these were prescribed by doctors or that any clinical trials were conducted thereon. She has further held that the definition of ayurvedic medicine under the Drugs and Cosmetics Act cannot apply to decide classification under the Central Excise Act, and, therefore, the popular meaning of the products is to be taken into account. She has relied upon the decision of the Tribunal in the case of Shri Baidyanath Ayurved Bhawan v. Collector of Central Excise reported in 1985 (22) E.L.T. 844 which has been affirmed by the Apex Court 1996 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce to the authoritative text books of Ayurveda. I am enclosing the data and the comments for these items alongwith this note. 3. All the 66 products examined by me contain ingredients which are well documented in authoritative ayurvedic text books-references have already been given in each of the product data sheet. Under the Drugs and Cosmetics Act, all these items will be considered as patent or proprietary ayurvedic medicaments in terms of Section 3(h). 4. I have read the peculiar definition under the Excise Tariff mentioned in your letter with great interest. According to me, any ayurvedic medicament will be considered as a medicament even if it has cosmetic use but the definition quoted in your letter being peculiar, I have examined the data, the method of use and the lable claim of all these products. As I understand this peculiar definition, any cosmetic product which is used either as a toilet preparation or as a beauty aid (like skin care preparations or hair care preparations) would be treated as cosmetic or toilet preparations even if such products have subsidiary medicinal claims. In other words, unless and until the product is predominantly an Ayurvedic Medicament, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... good effect for user (Bahava Prakash Nigantu P. No. 529). BASE Q.S. (6) SLES Derived from Coconut Oil (7) SLS -do- -do- (Indian Pharmacopoeia (II) P. No. 475 (8) Cocodie -do- -do- (9) Sodium Benzoate Preservative -do- -do (II) P. No. 465 (10) Methyle Paraben -do- -do- -do- (I) P. No. 318 (11) Propyl Paraben -do- -do- -do- (I) P. No. 427 (12) Fragrance V.J.8. From natural sources Note : This product is made out of combination of five Ayurvedic constituents derived from plants sources. This is also authenticated by Pharmco Dynamics (Guna Dharma) as described in Ayurvedic Literature. In view of these ingredients this product is an Ayurvedic Medicine to cure seboric skin disorders and hair problems. This combination is evolved to liquefy the Sebacious discharges and simultaneously clean the scalp from variety of polluents and external microbes. Ayurvedic discipline advocates Siddharthakara Yogas to be used in variety of skin disorders in the form of decoction both internally and externally. This combination stands for the same and its use is limited externally to the head, hair and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iseases where rakta dhatu and pitta doshas are disturbed. (Dravya Gun Vigyan P. No. 117) Varnya - Provides strength to the skin 2. DOODHAL (3.5%) Rupana - Active tissue regeneration Vishnashani - Removes toxins. Bhava Prakash Nighantu P. No. 458 3. MANJISTHA (2.1%) Kushtahara - Removes the skin disorders. Vrananashani - Eradicates the minute ulceration. (Shaligram Nighantu P. No. 154) 4. NIMBAKAMLA (0.5%) Rich in Vit. C and citrous action 5. BADAM TAIL (2%) Stimulant, nutrative nervine tonic Bahav Prakash Nigantu P. No. 588 BASE Q.S.: 6. STEARIC ACID From vegetable oil - (Indian Pharmacopoeia-II) P. No. 481 7. COCONUT OIL Good for skin, excellent 8. EMULSIFYING WAX For emulsion -do- (I) P. No. 186 9. MYTHYL PARABEN Preservative -do- (I) P. No. 318 10. PROPYL PARABEN -do- -do- (I) P. No. 427 11. V.K. DRAKKAR Fragrance 12. PURIFIED WATER Q.S. Note : Notes : This Ayurvedic medicine is very interesting and has its own merit. Its first five items are Ayurvedic medicinal plants of established classical efficacy. The item No. 6 and 7 are two types of milk obtained from domesticated animals. They are added to 1:3 proportion. AJA DUDHA (Goa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of change in the season and the products is specially effective in the case of Padadari (Rhagades) inflammatory condition of the feet. The items like stearic acid, glycerin, have their origin from the vegetable oils and are used as base. Cetyl Alcohol and Lanolin, are immolient, to provide soothing and softening effect. The Mythyl Paraben and Propyle Paraben are preservatives and flavour VK Drakkar is added for the purpose of giving a distinctiveness to the product. The clinical efficiency of the first four items in condition of Padadari (Rhagades) as mentioned in Ayurvedic treatises clearly makes it an Ayurvedic Medicine. The other items used do not have any clinical effect other than helping in making the preparation a finished product. After examining the 64 products, Dr. Pandey opined that 4 products do not come under the category of ayurvedic medicines, and that all other products are ayurvedic medicines in view of compounding/mixing of various active ingredients for therapeutic or prophlactic use. In respect of the following 4 products, he has stated that they cannot be classified as ayurvedic medicines : Bio-thyme Bio-grass Bio-plantain Bio-orris 5.1.2 During t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds you are requested to give your expert opinion on additional following medicines :- 1. BIO-COCOBUTTER 2. BIO-CUCUMBER Please offer your expert opinion at your earliest convenience supported by references, if any, from authoritative texts on Ayurveda. Thanking you, Yours faithfully For ISHAAN RESEARCH LAB. PVT. LTD. Sd/- AUTHORISED SIGNATORY Dr. V.N. PANDEY ABMS, D.A.Y.M. Ph.D., Ayurveda Ex-Dir, C.C.R.A.S. A-50, South Extn. Part-I, New Delhi-110 049. 5th December, 1997 M/s. Ishaan Research Laboratories Pvt. Ltd. 901, Nirmal Tower, 26, Barakhamba Road, New Delhi - 110001. Dear Sir, Please refer to your letter dated 13-11-97 seeking my opinion and also the reference to four products. 2. You have added two more products, BIO COCOBUTTER and BIO CUCUMBER to the above list on 21-11-1997. 3. I have once again examined the issue in the light of the queries raised and my opinion is as under : QUESTION No. 1 Are there any minimum or fixed percentage of ingredients to be used in Ayurvedic Medicaments to be effective against a particular disease? If so, whether ingredients mentioned in 62 items adhered to the percentage? If they adhered to the percentage, whether addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties : Adsorption, absorption, assimilation, metabolisation, humanisation and bio-transformation. 4. Virya Potency Minimum, optimum and maximum levels of dyanamic property available in the drug material leading to overall effect. 5. Prabhava Specific property, which cannot be explained by known chemico physical laws of the universe. 6. Karma (Action) The ultimate clinical result achieved The whole emphasis in drug action of Ayurveda is to synchronise with guruvadi guna. In other words their effect on Rasa (Plasma and lymph), Rakta (blood), Mans' (muscles), Meda (fat and adiposity), Asthi (skeletal system) majja (bone marrow). The other one is paradigunas which is subdivided in two types (i) paratva and (ii) apartavad types. It refers to important drug made from selected plants - and the other items used as adjuvents, preservative, vehicles, etc., having subsidiary or secondary action The above objectives are achieved through Yukti (all efforts, methods, measures, combinations) applied to achive the following methodology; 1. Sankhya - Selection of item/items to be used. 2. Samyoga - combinations leading to physicochemical changes 3. Vibhaga - Certain qualities are impr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary of Government of India we have tried to formulate our own percentages for all the items except to the powders, Lepas, Udvartanas (poultice, pack and balm). In given taila preparation, prescribed kashayas (decoction) and kalkas of drugs are added and then they are boiled. This process assures absorption of oil soluble constituents having active therapeutic properties. This is called Tail paka process and the same is of three types; [i] Mrudu paka [ii] Madhyama paka [iii] Khara paka. In the view of these facts the observations on six Ayurvedic medicaments and their therapeutic effects are being placed as example to elucidate the above points :- [1] BIO-ALOEVERA This is a Ayurvedic medicament prepared to have Rasayana (vitalizing) effect if applied locally on facial skin. It contains Ghritakumari. Its juice is extracted by crushing fresh herbs without adding water. Peetchandan decoction is prepared as 1/8 ratio as indicated in Ayurvedic text for decoction preparations. Thereafter two oils namely Surajmukhi tail and Kusumbhi oil are added at a ratio of 5% and 3% respectively. Ghritakumari concentrate is 2% and peetchandan decoction is 0.25%. This combination is solely guided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... almost 25%. Rest is water. This preparation is also worked out as a representative to the reduction achieved through the process of Ashthamansavshesha, 1/8 prescribed for Kasayas. This preparation is useful for application out side the body in a condition of skin where inflammation is obvious preferably in case of Pama (scabies) & Dadru (ringworm). [4] BIO-BHRINGARAJ Ayurveda discipline has advocated novel method of external application of medicated oils. They have propounded that external applications of medicated oil through the processes like Abhyanga (external oleation over the head in the form of massage), Sirovasty, Sirodhara is good to treat the vatika shiroroga (headache). Therefore, the variety of medicated vasti and oleation have been indicated treating it a unique technique. They have used of cow/goat milk as one of the constituent. On this background Bio-Bhringaraja has been prepared as Ayurvedic medicament. It contains the decoction to ratio of 25%. (Chaturthanshavshesha or ¼ reduction). This preparation is prepared in 100 ml of coconut oil, after adding (chathurthanshavshesha) decoction of bhringaraja (6ml), amla (4ml), tesupushpa (4.5 ml), mulathi (3.5 ml), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pradhan dravya is calculated to 12.5%. Rest of the items such as from S. No. 7 to 14 are added as bases to the extent of 34.5%. Lastly to make it 100% purified water is added to the extent of 53.35%. Most popularly cocobutter which is known to have sufficient vegetable fat is used in various types of ointments as mentioned in Indian Materia Medica. Sarson tail is good as Krimighana (antimicrobial) Arjuna chhal is helpful in stoppage of degeneration and decadence and acts as a healing agent. Mahua chhal reduces burning sensation. Badam tail is stimulant and nutrient. Nagkeshar is popular in dispelling bad smell and acts as an anti-toxin and anti-allergic agent. This combination is prescribed in Nighantus which helps as ready reckoner to the clinical uses and specific pharmaco-dynamics of important Ayurvedic medicinal plant. 4. In future kindly give me sufficient time. In view of my tight schedule I find it difficult to accommodate your request for early response. Yours faithfully, Sd/- Dr. V.N. PANDEY 5.1.3 The adjudicating authority has not looked into the expert evidence, but has entirely gone by the test of common parlance. However, in our view, the issue is to be view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rning sensation due to effective ingredients. Follow with freshner and then moisturises. 07. BIO-CHLOROPHYLL : - - - Its antiseptic and antiflammatory. Properties are useful in after depilation and minor cuts. Prevents infection and keeps skin smooth and supple. 08. BIO-COCOBUTTER : - - Cure pigmentation due to ill health and helps to smoothen stretch marks on the skin. For during and after pregancy and when dieting. 09. BIO-COCONUT : - - - Before moisturing. Depigmentation and skin whitening. Antimicrobial and keralotyfic properties help remove pigmentation freckles and other skin blemishes. 10. BIO-COSTUS : - Cures foot infection stops foot itch. 11. BIO-BAEL (B) : - A soothing barrier that protects the skin against the miseries of nappy rash and helps natural heeling. 12. BIO-WHEAT GERM CREAM (B) : - - Helps soothe and prevent nappy redness and chapping. Nourishes dehydrated skin and helps cure skin problems such as acne, pimples etc., 13. BIO-CRESS : - - - Helps restore health to damaged hairs. After shampoo conditioner. Help strengthen hair follicles and encourage hair growth. 14. BIO-COCUMBER : - - - A very effective cooling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : - - - Treat pimples, acne and other skin infections. Deep impurity and dead cell remover. Not recommended for sensitive skins. 35. BIO-PRO : - - Helps protect skin from environmental pollution, infection, swelling pigmentation and reduces excess sweating. After moisturising. 36. BIO-QUINCE : - For the effective treatment of skin conditions as eczema, scabies, wrinkles eruption etc. 37. BIO-ROOT : - Therapeutic pack for hair and scalp. Invigorates and revitalises the scalp and adds body to hair. 38. BIO-SAFFRON : - Keeps skin free from pimples, acne and skin problems. 39. BIO-SOYA : - Helps undo damage caused by heat and chemical treatment. Helpful in Alopecia. 40. BIO-SCRUB : - - For the treatment of skin infection, blackheads, whiteheads, scars and to remove dead epithilial cells. Can follow with face pack. 41. BIO-WAVE : - Forms protective and antiseptic cover to the hair and scalp. 42. BIO-WHEAT : - Nourishes dehydrated skin and helps cure skin problems such as acne, pimple etc. 43. BIO-WEED : - Remove Dark circle under the eyes and increase blood circulation and brightness of the eyes. 44. BIO-WINTER CHERRY : - Removes skin i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due to scalp infections. Product at Sl. No. 21 - Bio-henna leaf It prevents hair loss Product at Sl. No. 23 - Bio-kelp It is intended to cure alopecia Product at Sl. No. 25 - Bio-milk It is intended to cure skin ailments such as acne and white patches Product at Sl. No. 27 - Bio-mud It is intended to cure white patches i.e. Leukoderma, which is a skin disease Product at Sl. No. 28 - Bio-myristica It is intended to cure acne which is a severe skin ailment Product at Sl. No. 29 - Bio-margosa It is intended to cure scalp infections Product at Sl. No. 34 - Bio-peach It is intended to cure pimples and acne and other skin infections Product at Sl. No. 35 - Bio-pro It is intended to cure pigmentation Product at Sl. No. 36 - Bio-quince It is intended for cure of skin diseases such as eczema, scabies, etc. Product at Sl. No. 38 - Bio-saffron It is intended for cure of pimples and acne Product at Sl. No. 39 - Bio-soya It is intended to cure alopecia Product at Sl. No. 42 & 45 - Bio-wheat and Bio-wintergreen It is intended to cure acne and pimples Product at Sl. No. 46 - Bio-walnut It prevents or cures hair fall. As for the product at Sl. No. 5 - Bio-bhringraj, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Bom). Even if they are considered as related persons, the price charged by IRLP cannot be discarded unless and until it is established that the relationship between the two companies has influenced the price, as held by the Hon'ble Bombay High Court in the case of Ralliwolf Ltd. v. Union of India reported in 1992 (59) E.L.T. 220 (Bom) which has been followed by the Tribunal in the case of M/s. Xerographers Ltd. v. Commissioner of Central Excise, Ahmedabad reported in 1999 (108) E.L.T. 372. As regards advances made by IMPL to IRLP, we note that interest was provided for on yearly basis and for the financial year 1995-96, it was debited on 31-3-1996. The third proviso to Section 4(1)(a) applies only where all the goods are sold through a related person and if some of the goods are sold to persons or entities other than related persons, 3rd proviso would not come into operation. In the case of M/s. Kirloskar Cummins Ltd. reported in 1991 (51) E.L.T. 325 (Bom) it was clearly held that sales to industrial consumers are also sales in whole-sale trade and the price charged to industrial consumers can be adopted as the basis for sales made to related persons as well, and the question of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Order-in-Original Nos. 49-50/98 dated 31-8-1998, 24/98 and 30/98 dated 30-4-1998 and 51/98 dated 31-8-1998 cannot arise. In terms of Notification issued under Section 4(a), where duty is charged on MRP, abatement of 50% is to be allowed from MRP. Further the price charged from the Delhi Depot has been adopted by the adjudicating authority for the purpose of duty demand; however, since sales were made by IMPL from various depots all over the country, in view of difference in local taxes, octroi and discount in the respective States, discount charges varied from one depot to another and, therefore, adoption of the price charged by the Delhi Depot is not legally permissible. The demand has been quantified without allowing for abatement of duty. Applying the ratio of the Larger Bench decision in the case of Sri Chakra Tyres reported in 1999 (108) E.L.T. 361, we hold that the sale price should be taken as the cum-duty price and duty payable should be abated therefrom. 5.2.2 In the case of show cause notice dated 2-5-97 (for the period 1-10-1996 to 31-3-1997) which culminated in Order-in-Original No. 51/98 dated 31-8-1998, the appellants paid duty under Chapter 33 under protest w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rug Control authorities themselves had permitted the appellants (who had submitted detailed information with regard to the formulae and manufacturing process of their products along with the application for grant of permission to manufacture Patent/Proprietary ayurvedic/unani medicines) to continue the manufacture under the drug licence - as a result of commencement of investigation by the Directorate General of Anti-evasion, the Drug Control authorities issued a notice directing the appellants to discontinue the manufacture. The appellants filed a Writ Petition before the Delhi High Court, but during the pendency of the petition, the Drug Control authorities permitted the appellants to continue manufacture under the existing licence and directed the appellants to specify on the label of the products that "the product is not a cosmetic item". The memorandum dated 17-4-96 of the Deputy Drugs Controller to the appellants in this connection is reproduced below : This has reference to the reply dated 9-4-96 received from the firm and their subsequent letters dated 15-4-96 and 16-4-96 and personal explanation given by Mrs. Vinita Jain, Managing Director of the firm in response to this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, Bio-chestnut and Bio-soap Berry. This clearly shows that the authorities clearly applied their mind before according approval. We also note that in the case of another manufacturer of similar products viz. Shehnaz Herbals, the claim for classification of similar products under Chapter 30 was accepted by the Department as seen from adjudication order No. 51/89 dated 29-8-89 passed by the Additional Collector of Central Excise, New Delhi (1052 to 1065 Vol. IV of the paper book) which was followed by the Assistant Collector (pages 1067-1070 Vol. IV of the paper book) vide his order dated 30-10-1992 in the case of Shehnaz Herbals. It is also relevant to note that immediately after the issue of the show cause notice alleging, inter alia, that presence in the products of ingredients which are not mentioned in the Ayurvedic Text Books is fatal to their claim for classification as ayurvedic medicines, the Collector of Central Excise, Delhi has issued Trade Notice No. 13/96 dated 22-4-96 permitting the presence of preservatives, excipients, binding agents, etc., even though those are not mentioned in the formulae prescribed in the authoritative text books. The Trade Notice is reproduce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hence set aside the demand covered by adjudication order No. 5/98 as time- barred. 5.3.1 To conclude our findings are summed up as follows : (a) The 22 products as set out in internal page Nos. 42 & 43 (para No. 5.1.4) are P & P ayurvedic medicaments falling under CET sub-heading 3003.30. (b) The remaining products in dispute are cosmetics and toilet preparations falling under Chapter 33 of the Schedule to the CETA, 1985. (c) IRLP and IMPL are not related persons in terms of Section 4(4)(c) of the Central Excise Act and, therefore, the price at which IRLP sold the products is to be adopted as the basis for determining the assessable value. Similarly, IRLP and IRL Marketing are not related persons and hence the price at which IRLP sold the goods form the basis for determining the assessable value. (d) The extended period of limitation is not applicable in these cases. 6. The duty demand on the products held to be cosmetics and toilet preparations is to be requantified for the normal period of limitation of six months, adopting the price of IRLP as the basis for the computation of assessable value. The question of levying appropriate penalty on IRL ..... X X X X Extracts X X X X X X X X Extracts X X X X
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