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TMI Blog2009 (4) TMI 759X X X X Extracts X X X X X X X X Extracts X X X X ..... Since all these appeals are directed against the very same Order-in-Original, though filed by different appellants, they are being disposed off by a common order, as the issue involved is same. 2. The relevant facts that arise for consideration are the main appellant M/s. Glaxo Smithkline Asia (P) Ltd. (hereinafter referred to as appellant-1) are manufacturers of ENO fruit salt . Appellant-1 entered into an agreement for the manufacture of ENO fruit salt on the job work basis with M/s. Southern Drugs Pharmaceuticals (hereinafter referred to as appellant-2). Appellant-1 had taken drug licence to manufacture ENO fruit salt as P or P Ayurvedic medicaments. Appellant-2 were supplied with the main raw materials for the manufacture of the ENO fruit salt and appellant-2 after manufacturing the goods on job work basis cleared the same from their factory premises classifying the said products as P or P Ayurvedic Medicaments under chapter heading 3003.39/3004.90 11 of First schedule to the Central Excise Tariff Act, 1985. The duty liability was discharged by the appellant-2 on the basis of cost construction method. Investigations were carried out by the revenue authorities on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -2006 was also issued on the same ground for the demand of differential duty of Rs. 5,38,41,526/-. 36. Further, a notice vide C. N.V/15/33/2006-Adj.VSP-ll dated 27-10-2006 for the subsequent period 10/2005 to 09/2006 was issued to SDP and Glaxo Smithkline Asia (P) Limited, demanding the differential duty of Excise of Rs. 5,38,41,526/- (Rupees Five Crores Thirty Eight Lakhs Forty One Thousand Five Hundred and Twenty six only) towards CENVAT and Rs. 10,76,820/- (Rupees Ten Lakhs Seventy Six Thousand Eight Hundred and Twenty only) towards Education Cess alongwith interest under Section 11AB of Central Excise Act, 1944 and imposition of penalty under Rule 25 of Central Excise Rules, 2002. 2.2 All the appellants herein contested the show cause notice on various grounds. The main ground raised by the appellants before the Adjudicating Authority was that the product ENO fruit salt is a P or P Ayurvedic Medicament and is manufactured under a licence given by the Drug Authorities. The main raw material going into the manufacturing of the said final product is ayurvedic in nature and they are covered by various decisions of the Supreme Court and the Tribunals. The Adjudicating Author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvedic by the Drug Controller (a) The Appellants submit that M/s. Hiena Pharma, supplier of the main raw materials, has been granted a Drug License for manufacture of Svarjikshar (Shudh) and Nimbukamlam (Shushkam) on 11-5-1996 which has also since been renewed. The Drug Controller has also noted the authoritative books in which these two ingredients have been referred to. The Drug Controller at the time of grant of the license to M/s. Hiena Pharma has also taken note of the fact that the said authoritative textbooks have been duly listed in the schedule to the Drugs and Cosmetics Act, 1940. (b) The Appellants submit that Eno Fruit Salt manufactured by the Appellants has also been certified to be a P or P Ayurvedic medicament by their jurisdictional Drug Controller. While granting the said license which is valid till 2011, the Drug Controller, after taking note and verifying the ingredients of Eno Fruit Salt has certified the same to be a P or P Ayurvedic medicament. (c) The Appellants submit that when the competent authority viz. Drug Controller of India has certified that the Svarjikshar and Nimbukamlam as procured by the Appellants from M/s. Hiena Pharma are to be considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by M/s. Hiena Pharma continues to be as ayurvedic medicament only. (c) The Appellants submit that once the activity undertaken by M/s. Hiena Pharma has been accepted as manufacture by the Jurisdictional Excise officer and duty on such activity has been collected at the manufacturer s end, no dispute could be raised with respect to the classification of the products. The appellant, therefore, submits that Adjudicating Authority has no jurisdiction to dispute the same. In this regard reliance is placed on the following decisions:- (i) Sarvesh Refractories (P) Ltd. v. CCE - 2007 (218) E.L.T. 488 (S.C.) (ii) Blow Plast Ltd. v. CCE - 2006 (195) E.L.T. 211 (Tri.- Mum) (iii) Prem Cables Pvt. Ltd. v. CCE - 2001 (127) E.L.T. 400 (Tri.-Del.) Affirmed by Hon ble High Court of Rajasthan - 2008 (226) E.L.T. 334 (Raj.) (iii) Issue raised by department conclusively settled by the Hon ble Supreme Court in the case of Natural Health Amrutanjan Ltd. (a) In any case, and without prejudice to their other contentions, the Appellants submit that the very argument of the department raised in this case viz., the raw material being synthetic in nature and therefore the final product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the actual manufacturer who is liable to pay duty and not on the raw material supplier also simultaneously. (d) In spite of the settled principles of law, the Show-Cause Notice and the-impugned Order-in-Original proceed to demand the Excise Duty from both the Appellant and Glaxo Smithkline without determining the liability as required by the law. The appellants, therefore, submit that the duty demand having also been raised against the raw material supplier is not sustainable against them as the department cannot recover the same from them also. (v) ENO fruit salt fully satisfies the test laid down by the board vide Circular dated 25-10-1991 (a) It was submitted that the case of the department in the show-cause notice is that:- (i) The two main ingredients in question, viz., Svarjikshar and Nimbukamlam cannot be considered Ayurvedic; (ii) The two ingredients are obtained through a process of synthesis and, therefore, synthetic in nature; (iii) The Chemical Examiner has opined that the two ingredients are synthetic; (iv) Based on the above allegations the show cause notice proposed to change the classification of ENO from 3003.10 to 3003.39. (b) The Appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... process is used in Pharmaceutical Industries (Pages 981-985 of the paper-book). (c) As far as Swarjikshara is considered, the expert in his opinion dated 29-3-2006 (Pages 957-961 of the paper-book) has opined that. The Ayurvedic Formulary of India published by the Government itself recognizes Svarjikshara as sodium bicarbonate. The well-known Sanskrit lexicon Sabdasthoma Mahanidhi mentions that Svarjikshara is also available as a mineral in river. The Ksharas in Ayurveda are of two types viz. Sarjika Kshara and Yava Kshara referred to as Sodium bicarbonate and Potassium bicarbonate. The Ayurveda also refers to Kshara Trayam i.e. Svarjika Kshara, Yava Kshara and Tankana Kshara (Borax). The Ayurveda also recognizes the Ashta Ksharas which means to say eight Ksharas (Alkali) and that Svarjikshara is also obtained as mineral from earth crust from mining operations or from the soils from brine based areas like sea or dried up river basin. Ushtrapriya referred to by the Government Indian Pharmacy is only one such plant and which is a secondary source and not a primary source of sodium bicarbonate. The process give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rch/molasses, which are both natural sources. (viii) Citric acid and sodium bicarbonate is also considered as ayurvedic products (a) Notwithstanding the submissions made, the fact that modern Ayurvedists also consider Citric Acid as Nimbukamlam and Sodium Bicarbonate as Svarjikshara is borne out by the following authoritative books; (i) Rastaragini by Pandit Kashinath Shastrini (mentioned in Drugs Cosmetics Act-SI. No. 22, Page 979) (ii) Ayurvedic Sarasangraha by Shri Baidhyanath Ayurved Bhavan (Pgs. 989-998 of the paper-book) (b) From a perusal of the Drug Licence granted to M/s. Hiena Pharma it is evident that both the ingredients are mentioned in the Ayurvedic Formulary of India as shown below:- (i) Sarjiksara- Pg. Nos. 75, 147 and 237 (ii) Nimbu svarasa-Pg. No. 153 (c) From the expert opinion of Dr. I. Sanjeeva Rao, it is clear that the following authoritative textbooks also refer to the ingredients as follows :- (i) Ashtanga Hridayam Sutra Sthana S. No. 4 (ii) Charaka Samhita S. No. 13 (iii) Rasa Taragini S. No. 22 (iv) Rasatantrasara Va Siddha Prayog Samgraha Vol. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act that these two companies synthesize their products from natural sources only. The Appellants submit that this is a fatal error in the chemical examiner s report, which reveals the total non-application of mind by the chemical examiner. (x) Sample furnished by the Government Indian Pharmacy cannot be considered as Svarjikshara at all (a) The Department has procured samples of Svarjikshara from the Government Indian Pharmacy and forwarded it to the chemical examiner for testing. The test report of the chemical examiner shows that the percentage of sodium bicarbonate is 3.96% as is evident from Para-B of Part-I of the chemical examiner s report dated 9-5-2006. (b) The Appellants principals viz. M/s. GSAPL have officially obtained a similar sample of Svarjikshara from the same Government Indian Pharmacy on 17-7-2006. (Pgs. 1172-1176 of the paper-book). (c) M/s. GSAPL have thereafter forwarded the Svarjikshara obtained from the Government Indian Pharmacy to Vimta Labs, a Government approved Laboratory at Hyderabad for analysis. The test report was furnished by Vimta Labs on 17-8-2006 is enclosed at (Pgs. 1177 of the paper-book). (d) The result of testing of this sample by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expression formulation excludes any medicine included in any bonafide ayurvedic system of medicine. The Appellants submit that the two products in question viz., Eno Regular Eno Lemon are both covered by ayurvedic systems of medicine. This is borne out by the declaration made by the Appellants on the labels that both the products in question are Ayurvedic Proprietary Medicines . (xiii) Penalty and interest are not leviable (a) The Commissioner has imposed penalty on the Appellant under Section 11AC of the Central Excise Act, 1944 and Rule 25 of the Central Excise Rules, 2002. (b) Since the duty demand itself is not sustainable, penalty and interest also not leviable. (xiv) Penalty not imposable on Hiena Pharma (a) The present dispute relates to the ENO Fruit Salt manufactured by SDP on behalf of GSAPL. The department has questioned the classification of the said goods at the hands of SDP (b) Hiena Pharma supply to GSAPL Ayurvedic products Svarjikshara (Shudh) and Nimbukamlam (Shuskam), which are used as raw materials for the manufacture of ENO Fruit Salt. (c) The Jurisdictional Central Excise Officers have not disputed the classification of the products manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord to show that it is from plant source in this case. 4.2 He would submit that in order to classify a product as an ayurvedic medicament, two main tests are required. One is common parlance test and the other one is ingredient test mentioned in the Authoritative Books. He would submit that this is dealt in paragraph 75 of the impugned order and would submit that the common parlance test in this case is not satisfied. These items are not sold as Ayurvedic medicament as has been stated by the professor of the ayurvedic college. He would also submit that the written opinion submitted by the appellants is indeed dated after the Order-in-Original was passed and object to this. It is his submission that impure sodium bicarbonate is not the same as pure sodium bicarbonate. He would submit that the ratio in the case of the Amrutanjan Ltd. (supra) is not applicable to this case as the facts are different and hence, it cannot be applied mechanically. He would rely upon the decision of the Larger Bench of the Tribunal in the case of Sri Vaidyanath Ayurved Bhavan v. CCE, Patna - 2002 (140) E.L.T. 459 (Tri.-LB) for the proposition that mere issuance of drug licence does not mean that it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat despite such a letter being issued, the Drug Authorities have renewed their drug licences. He would submit that the invoice which was issued by M/s. Tata Chemicals and M/s. Solaris Bio Tech to M/s. Hiena Pharma, the main supplier of the raw materials, clearly indicate that the products are of natural source. It is his submission that Eno salt even if it is an O.T.C. (Over the Counter) product, it would not mean that, it is not an ayurvedic medicament. This view has been held by the Hon ble Supreme Court in the case of Sharma Chemicals Works (supra). He would submit that in the case of Alphine Industries (supra) as relied upon by the learned special counsel that the facts in dispute was whether the product would fall under Chapter 30 or 33 and not within the same chapter as is in this case. It is his submission that the entire order needs to be set aside and appeals be allowed. 6. We have considered the submissions made at length by both sides and perused the records carefully. 6.1 The issue which arises before us in this case is. (i) Whether ENO fruit salt manufactured by appellant-2 on behalf of appellant-1 is a patented and proprietary ayurvedic medicament or a n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Puma anti-dandruff oil (Dandika), Puma Shishu Rakshan tel, Puma neel tulsi, etc. After referring to the decisions referred to above and other decisions like CCE v. Richardson Hindustan Ltd. [(2004) 9 SCC 156], CCE v. Pandit D.P. Sharma [(2003) 5 SCC 288], Naturalle Health Products (P) Ltd. v. CCE [(2004) 9 SCC 136], Amrutanjan Ltd. v. CCE [(1996) 9 SCC 413], BPL Pharmaceuticals Ltd. v. CCE [1995 Supp (3) SCC 1], Muller Phipps (India) Ltd. v. CCE [(2004) 4 SCC 787], Dabur India Ltd. v. CCE [(2005) 4 SCC 9], Manisha Pharma Plasto (P) Ltd. v. Union of India [1999 (112) E.L.T. 22 (Del.)], the court came to the conclusion that the word medicament was not defined anywhere while the word cosmetic is defined in the Drugs and Cosmetics Act, 1940. The court specifically held that the extent of the quantity of medicament used in a particular product and the fact that the use of the medicinal element in the product was minimal does not detract from it being classified as a medicament. It also held in Para 22 that it was not necessary that the item must be sold under a doctor s prescription. Similarly, availability of the product across the counter in shops is not relevant as it makes no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urvedic product on the factual basis, and it contained the medicinal Ayurvedic medicament. The miniscule percentage used is also not a deciding factor and this court has, in series of decisions, held that the miniscule percentage does not change the nature of the product from medicament to the cosmetic products. In the wake of all these decisions it would have to be held that the products referred to above, excepting in respect of which Shri Lakshmikumaran has conceded, were the medicinal products and as such were covered by Chapter 30 and not under Chapter 33. 32. Even at the cost of repetition we must observe that there has been no attempt on the part of the Revenue to prove that these products are cosmetic as has been held in BPL Pharmaceutical s case (supra). In that view we are of the clear opinion that the Tribunal was right in holding these products to be the medicinal products and we approve of the finding of the Tribunal in that behalf regarding the classification of the product. 6.3 It can be seen from the above reproduced ratio of the judgment of Hon ble Supreme Court, that the most important aspect or factor which requires for consideration, is the product labels a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ience recognises only the use of natural extracts from medicinal plants and these could not be substituted by modern chemical ingredients. The Tribunal said that the appellant had imported synthetic grade IP chemicals and had, with the intention of evading liability to excise duty, asked the suppliers to change the names upon invoices and labels to ayurvedic nomenclatures. Thus, methyl salicylate was changed to pudina ka phool , dementholised oil to pudina ka tel , thymol and turpentine to ajwan ka phool and turpentine ka tel and methyl salicylate to winter green tel . The Tribunal would appear to have overlooked the fact that the same article can have a use both in ayurvedic and in the western sciences and be known by different names. The letters IP after the article concerned only demonstrate that it is of pharmaceutical quality, as it ought to be if it is to be used in a medicinal preparation. The Tribunal was in error in considering that the articles afore-stated were synthetic in nature. Having regard to the evidence, we are inclined to hold that the articles afore-mentioned were articles known both to ayurvedic and western sciences and were refined for use in medicamen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appeals against the assessee in C.A. No. 2072/1996 on two grounds, namely:- (i) The products are not manufactured according to the formula in any authoritative text books on Ayurved; and (ii) The judgment of the CEGAT in the case of Amrutanjan Ltd., Madras v. CCE, Madras reported in 1991 (32) ECR 538 is applicable to the appellant. 23. We have perused the order in Amrutanjan case passed by CEGAT wherein the Tribunal held that the products were having pharmaceutical name but the assessee was using Hindi name only to claim classification as Ayurvedic Medicine. This order of the Tribunal was overruled by this court in the case of Amrutanjan Ltd. v. CCE reported in 1995 (77) E.L.T. 500 (S.C.). Unfortunately, the Assistant Commissioner and the Commissioner (Appeals) relied on the overruled judgment of the CEGAT, because the judgment of this Court was not available at the time they decided the matter. The Tribunal distinguished the same. It was held by this Court in Amrutanjan s case that the ingredients, which are used in preparation of ayurvedic medicines even if they are used after refinement or bringing them to pharmaceutical quality, they do not become synthetic in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 41. In our view, the Tribunal has completely misdirected itself in law and on facts by being influenced by the unimportant factors like the mention of similar names of goods in Martindale and patent of the same in USA and failed to take into account the relevant factors like the issue of licence to manufacture Ayurvedic drugs under the Drugs Act, the popular understanding of the products, the law laid down by this Court in the cases referred to above and the circular issued by the Government of India in the light of Richardson Hindustan case. The Tribunal placed undue reliance on the definition of Ayurvedic medicament in Section 2(a) of the Drugs Act. In our opinion, all the products ought to be classified as Ayurvedic medicaments under sub-heading 3003.30 of the Central Excise Tariff. 6.6 From the plain reading of the judgments of the Hon ble Supreme Court, we find that the issue is now squarely covered in favour of the appellant. 6.7 Despite this, we would like to record our findings on the fact that the raw materials viz., Svarjikshara and Nimbukamlam are supplied to appellant by M/s. Hiena Pharma under an invoice on which Central Excise duty is discharged by them. On mere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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