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TMI Blog2011 (10) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... DR for the respondent. Per: Jyoti Balasundaram: Common issues arise for determination in these three appeals filed by Seagull Drug Ayurvedic (SDA), Ozone Pharmaceuticals Ltd. (OPL) and its Managing Director Sh. S. C. Sehgal, which are hence heard together and disposed of by this common order. 2. Vide the impugned order the Commissioner has confirmed differential duty demand against SDA under proviso to Section 11A, imposed equal amount of penalty and separate penalties on OPL and its Managing Director Sh. S.C. Sehgal. The duty confirmation and imposition of penalties have arisen pursuant to a show cause notice issued on 30.05.2003 under extended period of limitation under proviso to section 11A of Central Excise Act for the period 1999 - 2000, 2000-01 and 2001-02. 3. The Commissioner has held that the 'Nomark' cream manufactured by SDA was classifiable under heading 3304.00 of Central Excise Act as a cosmetic product instead of Ayurvedic medicine classified by Seagull under heading 3003.39 as Ayurvedic medicine. He has held that OPL through whom SDAwas selling bulk of their products was a related person of SDA in terms of Section 4 (4) (C) of Central Excise Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r heading No. 3003.39 of Central Excise Tariff Act,1985". We have been informed that the Department had accepted the above order-in-original as no appeal was filed against the said order. While passing the above order the Additional Commissioner had examined the literature of the product as indicated on its packing material, its medicinal values and conditions in which the same was to be applied. He also took into account the fact that Wanish cream was used to cure scares, burn marks, hyper pigmentation marks, dark circles under the eyes, obesity or post delivery stretch marks. 6. The issue of classification of Wanish cream also came up before the Tribunal which in the case of CCE vs. Ozone Ayurvedic -2003 (157) ELT 196 also negated the contention of the revenue that Wanish cream/ lotion was a cosmetic classifiable under chapter heading 3304.00 of CETA 1985. The Tribunal in para 6 onwards held as under:- "6. In the present case, the dispute is regarding classification of Wanish skin cream/ lotion manufactured by respondents. The respondents in this case produced evidence, which is relied upon by the Commissioner (Appeals) to show that Wanish skin cream/ lotion is sold at med ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty and Director of Ayurveda, Haryana and SDA was permitted to manufacture the same. In other words, the Licencing Authority and Director of Ayurveda accepted that Nomark cream was an ayurvedic medicine. We have gone through the ingredients/ composition of Nomark as declared to the Licencing Authority. We have also gone through the relevant pages of the diary seized on 18.01.2001 by the officers of the DGCEI during the search operation. It has been held by the Commissioner that the ingredients of Nomark cream and lotion declared to the Licencing Authority and Excise department were actually different than those actually used in the manufacture. We have gone through the ingredients declared by the SDA before the Licencing Authority and found in the diary. The said diary also contained composition of Wanish cream being manufactured by SDA prior to 1999-2000. Major part of both the creams/ lotions consisted of water, preservatives, additives etc. such as Bees wax, Emulsifying wax, G.M.S., S.M.S., Liquid light Paraffin, Glycerine etc. Other ingredients were found to be Aloe vera extracts, Neem extracts, Turmeric extracts, Sandal essence, Vitamin E acetate etc. The only difference betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uct 'Nomark' as per the composition declared to the Drug Controller. 8. It has been vehemently argued by the ld. DR that Wanish cream was being used as per the prescription of the Doctors whereas Nomark cream was being sold through General Stores, beauty parlors and chemists; that the same was being manufactured with a view to compete with cosmetics products such as Ponds and Lakme; that the product was meant for care of the skin and not for any cure; the same would not be covered under chapter 30 even if it had therapeutic or prophylactic propensities. He relied upon note 5 to chapter 33 to make the point that since Nomark was a beauty cream, the same would approximately be classifiable under heading No. 3304.00 of CETA 1985. 8.1 We find that SDA was manufacturing 'Nomark' under the proper Drug Licence issued by Drug Controller treating Nomark as Ayurvedic medicine. We have gone through the label of the product wherein it has been clearly mentioned that Nomark was meant for treatment of scars, pigmentation, pregnancy stretch marks. We have also gone through the contents of various statements recorded during investigation in the matter such as that of Mrs. Neeta Aggarwal, GM ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iii) Naturalle Health Products (P) Ltd. vs. CCE-2003 (158) ELT 257 (SC) iv) Puma Ayurvedic Herbal (P) Ltd vs. CCE-2006 (196) ELT 3 (SC) v) CCE vs. Sharma Chemical Works -2003 (154) ELT 328 (SC) vi) Meghdoot Gramodyog Seva Sansthan vs. CCE 2004 (174) ELT 14 (SC) vii) Ponds India Ltd. vs. CTT -2008 (227) ELT 497 (SC) ix) Manisha Pharma Plasto (P) Ltd. vs. UOI-1999 (112) ELT 22 (Del) x) CCE vs. Dollar Co. (P) Ltd. -2009 (234) ELT 549 (T) xi) CCE vs. Elder Health Care Ltd. -2007 (210) ELT 89 (T) 9.1 The crux of these judgements as far as SDA is concerned can be formulated as under:- (a) The product should be useful for treatment of a disease. (b) The product should be manufactured under a drug licence. (c) It fulfills the requirement of a drug as understood in the common parlance (d) Its label or literature should refer to it as a drug. (e) The fact that medicinal element in the product was minimal does not detract it from being classified as a medicament. (f) It was not necessary that the item be sold under a doctor's prescription. (g) Availability of the product across the counter in shops was not relevant as it makes no difference. (h) The product w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions Section 4 of CEA 1944 and applied the provisions of Section 4A of CEA 1944 i.e. calculated the differential duty on maximum retail price and allowed admissible abatement as per law. But since we have already held that the product 'Nomark' is classifiable under heading 3003.39 and not under heading 3304, we hold that SDA has correctly discharged their central excise duty under the provisions of Section 4 of the CEA 1944. The differential duty calculated in charts appended to the SCN is therefore set aside. 11. The next question is as to whether SDA and OPL are related persons in terms of Section 4(4)(c ) of CEA, 1944. The sole ground on which both are sought to be treated as related persons are that Mrs. Geeta Sehgal was holding 10% shares of OPL and family of Mrs. Geeta Sehgal is holding 90% of the total share capital of OPL. We find that the department has not been able to establish any mutuality of interest between SDA and OPL. OPL was a limited company whereas SDA was a proprietory firm of Mrs. Geeta Sehgal. The mere fact that Mrs. Geeta Sehgal was holding 10% share capital of OPL is not sufficient to treat both as related persons. The department has failed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the product Nomark was demanded only by taking the product out of the purview of Section 4 of CEA, 1944 and placing it under Section 4A of CEA, 1944. Hence the issue of related person had no applicability to the classification of the product 'Nomark'. In the present case, almost entire duty liability is on account of 'Nomark' only. As regards the evasion of central excise duty on the part of SDA on account of related person, we note that it is a very meager amount of Rs. 3171.52 as is evident by perusing Sr. No. 156 of duty calculation chart for the financial year 1999 -2000 appended with the show cause notice. We have already held that SDA and OPL are not related persons and hence the question of intentionally concealing the same from the department does not arise. Further there could not be any intention to evade duty on the part of SDA as they were selling the same product to OPL and other buyers at the same rate. We therefore hold that extended period of limitation is not applicable in the present case. 14. The Commissioner has imposed equal amount of penalty on SDA under Section 11AC of Central Excise Act read with Rule 173Q of erstwhile Central Excise Rules read with Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X
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