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TMI Blog2019 (12) TMI 522X X X X Extracts X X X X X X X X Extracts X X X X ..... kness and also to boost immunity of the patients along with other medicines. The entry that is Chapter 2106, which is relied upon by the Revenue is only residuary entry. The product which is more appropriately classified under the specific headings has to be preferred before resorting to classification of goods in the residuary entry. It is also a fact that merely because the product can be used otherwise it will not be become the foods supplement. The adjudicating authority in the impugned order has held that the Appellant was not having the drug licence during the impugned period. However, the same is found to be incorrect, in view of submissions made by the learned Advocate and also by the production of copies of Drug Licence which proves the fact of having the valid licence for the manufacture, of the products namely DSN Capsules and Liquid Beneficiale - We are in agreement with the contention raised by the learned Advocate that the drug licence is issued under generic name and not in the trade name of the drugs manufactured. This fact is evident from the Drug Licence and also the composition of the products of the two drug licences. There is no justification of cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with and the order was passed ignoring those decisions. The said ROM application was allowed vide order No. 50470/2019 dated 21.6.2019 and the Final Order dated 30.4.2019 was ordered to be recalled and further ordered to be heard along with pending Appeal No. 52657 of 2018. Against the above background, the two appeals are being disposed of by this common order. 3. The brief facts of the case are that the Appellant is Central Excise registered unit for the manufacture of pharmaceutical products namely Beneficiale Liquid and DSN capsules which were being clearing at Nil rate of duty by availing the exemption Notification No. 49/2003-CE dated 10.6.2003. Acting on the intelligence, that the Appellant is mis-classifying their manufactured product and claiming wrong benefit of Notification No. 49/2003-CE dated 10.6.2003, the officers of DGCEI, Regional Unit, Dehradun and the investigations were initiated. As per the intelligence, the said products were rightly classifiable under Central Excise Tariff Heading (CETH) 2106 instead of 3406 inasmuch as these products were in the nature of nutrition supplement/proprietary foods appeared to be classifiable under Tariff Item ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Relied on the chapter note to chapter 30 which states that chapter 30 does not apply to food preparation containing only nutritional substances. Para 6.10 6.11 Appellant has already substantiated in para 1 and 4 that products in dispute have prophylactic value. They are not only nutritional supplements. 4. Stated that due to following packing the product is nutritional supplement: (a)No warning or precautions message. (b)Stated as Nutritional Supplement. (c)No mention that the product can be used for prevention or treatment of any disease. Para 6.12 and 6.13 (a)Not-mention of warning message is not determinative for classification of the products. Most of over the counter drugs do not have any such warning on packaging. (b)The mention of nutritional supplement is marketing practice followed by the appellant. The marketing and advertisement of product is not criteria for classification. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w Delhi - Connaught Plaza Restaurant (P) ltd. 2012 (286) ELT 321 (SC); (ii) Kothari Products Ltd. Vs. Commissioner of Central Excise, Kanpur 2002 (139) ELT 633 (Tri.-Del.). 4.4 Further, it was pleaded that the test report, that has been relied upon by the Department, can only be a suggestion to classify the product in category other than medicament as the chemical examiner is not competent to decide the classification of the product but is only required to give the chemical composition of the samples forwarded for test to CRCL for opinion. The classification of the product is required to be decided on the basis of common parlance test as has been held in the various case laws mentioned hereinabove. 4.5 It was also submitted that the product manufactured by the Appellant cannot be considered as nutritional supplement merely on the basis of license obtained from the Department of Food and Safety. For the classification manufacture of product under CETA drug licence is not a pre-requisite, more so to classify the product under Chapter 30. The reliance was placed in this regard in the following case laws of: (i) Dabur (India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e record. 7. The issue is to be in this appeal is regarding classification of the product, namely, DSN capsules and beneficiale liquid as to whether under Tariff hearing 3004 or 2106. The product has been tested by the Department and the test report of CRCL is as under : Test Memo No. 02/2016 Report:- On opening the sample packet two samples were found. Out of these are sample is packed in glass bottle kept inside paper cartoon (unit packing) described as beneficial R Liquid and registered here as CL-159 (DGCEI)/15.09.16 and second sample is packed in caps kept inside blister strip packing (2 Nos.) bearing described as DSN capsules register here CL-160 (DGCEI)/15.09.16. 1. CL-159(DGCEI)/15.09.16 [Described as Beneficial Liquid] The sample is in the form of light yellow colour liquid packed in a Unit packing (glass bottle). It answers positive test for Vitamin A, Vitamin B1, Vitamin B2, Vitamin B6, Vitamin B12 folic acid, zinc and manganese. It is preparation composed vitamins and minerals needed by the body to remain healthy. It is other than medicament. 2. CL-160 (DGCEI)/15.09.16 [Des ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king or retail sale for use in hospital. (c) And proprietary medicament means any drug or medicinal preparation in whatever form, for use in the internal or external treatment of, or for the prevention of ailment in human beings or animals, which bear either on itself or on its container or both is a name which is not specified in monograph any food formula or other publications The Chapter note 2106 of Central Excise Tariff Act is reproduced as under: Food preparation not elsewhere specified or included. 11. From the perusal of the two entries, it is clear that the goods will be classified under the heading 2106, only if the products are not covered under Chapter heading 3004 of the Central Excise Tariff. It is the contention of the Appellant that their product is covered under the definition of medicament on the ground that these products are used for cure/treatment of diseases and being regularly prescribed by the medical practitioners. The Appellant has also produced the affidavit on this behalf, from the various medical practitioners along with the prescriptions. The prescription indicates that two products in question, na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions and cleaning preparation, whether or not containing soap. 3402.90 Other 18% 16 . It is also relevant to explore the meaning of the word prophylactic in medical parlance as well, in order to resolve the controversy before us. The word prophylactic derives from Greek word prophylaktikos which means to take precautions against or to keep guard before . Dorland s Medical Dictionary 1364 (28th ed. 1994) defines prophylactic as an agent that tends to ward off disease . Merriam-Webster s Medical Desk Dictionary 579 (1993) defines it as guarding from or preventing the spread or occurrence of disease or infection ; Mosby s Dictionary 1284 (4th ed. 1994) defines it as a biologic, chemical, or mechanical agent that prevents the spread of disease. 27 . The expression therapeutic or prophylactic is not defined under the tariff entry. Therefore, useful reference can be made to the dictionary meaning to these expressions. In fact the assessee, in his reply to the show cause notices issued, has relied upon the mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . - 1995 Supp (3) SCC 1 = 1995 (77) E.L.T. 485 (S.C.)]. 36 . In B.P.L. Pharmaceuticals Ltd. v. C.C.E. (supra), the issue before this Court was regarding the classification of the Selenium Sulfide Lotion USP manufactured and sold by assessee under the brand name Selsun shampoo . According to the manufacturers this shampoo was a medicated shampoo containing 2.5% Selenium Sulfide w/v as the only active ingredient which was meant to treat a disease of the hair, namely; dandruff, and the rest of the ingredients of the shampoo merely serve the purpose of a bare medium. The revenue contended that the product contains 2.5% w/v of Selenium Sulfide which is only of a subsidiary curative or prophylactic value and therefore, notwithstanding the product having a medicinal value will fall under Chapter 33. This Court held that having regard to the preparation, label, literature, character, common and commercial parlance, the product was liable to be classified as a medicament under Chapter sub-heading 3003.19. This decision would not assist the revenue because this Court held after considering various factors that selsun shampoo is a medicament as it has therapeutic propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used as a skin disinfectant to paint the skin before surgery and as a wound, abrasions and minor cuts disinfectant. Hexiscrub is used on hands and forearms of surgeons for rapid hand disinfection prior to surgery. The assessee claimed the classification of these products as medicament under Chapter sub-heading 3003.10. Whereas, the revenue contended that these products should be classified as disinfectants under Chapter sub-heading 38.08. This Court had considered the report of the Chemical examiner who opined that the products therein contained chlorhexidine gluconate solution BP which had therapeutic properties. However, he also opined that they were used as disinfectant, therefore should be classified under Chapter sub-heading 38.08. This Court after considering the label and usage of products therein and dictionary meaning of the word prophylactic had observed that the products therein were used to disinfect the skin prior to surgery, to clean the wound and minor cuts, and therefore, they have prophylactic usage and classifiable under Chapter sub-heading 3003.10. 39 . In State of Goa v. Colfax Laboratories (supra), the issue before this Court was that whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and the same was sold in general/departmental store. The assessee took the stand that products were classifiable under Chapter 30 as being pharmaceutical product. This Court held that mere decision of a court of law without more cannot be a justification enough for changing the classification without a change in the nature of a product or a change in the use of the product, or a fresh interpretation of the tariff heading by such decision. This Court has held that the Show cause notices having issued on the misapprehension of the tests laid down in Shree Baidyanath cannot be sustained, even though, the adjudicating authority had found from the market survey that the products are understood as cosmetics in common parlance. This Court also held that the product cannot be treated as cosmetic only because it was not sold by chemists or under doctor s prescription. We are afraid that decision would assist the revenue as the show cause notices in that case were issued on the misapprehension of the test laid down in the Shree Baidyanath and this Court further observed that the decision in Shree Baidyanath was based on its peculiar facts. 41 . In Sujanil Chemo Industries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the product are mentioned in the authoritative ayurvedic textbooks. The assessee further contended that the use of the product by the customers should be taken into account for determining the classification of products as these as the products which have special and distinct use for treating a particular ailment and are not items of common use. The revenue argued that even if a product had some curative or prophylactic value, it will still be cosmetic on the basis of Note 2 of Chapter 33 of the Central Excise Tariff Act which excludes cosmetics and toilet preparation having subsidiary curative and prophylactic value. This Court while appreciating the assessee s contention observed that revenue has miserably failed to prove that the products in dispute are not medicament and not understood as medicament by the common man. This Court had upheld the twin test for classification of ayurvedic products relied by the assessee and observed that the primary role or use of the product has to be taken into account for the purpose of classification, even though, it may happen that while treating a particular medical problem, after the problem is cured, the appearance of the person concer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and are marketed as ayurvedic medicines not cosmetics, however it incidentally improve the appearance, and also held that the common parlance test by itself is not conclusive. 44 . In view of the above, we reject the Revenue s appeals and confirm the order passed by the Tribunal with no order as to costs. 12. We also find that similar view has been taken by the Hon ble Supreme Court in the case of CCE Vs. Cian Laboratory, Mumbai, where in it is held in para 10, 12, 13, 14 and 19, that the product MOISTUREX will be classifiable under medicament rather than cosmetic preparation for care of a skin. For the sake of clarity, the relevant paragraphs are reproduced as under : 10 . In the product literature, the cream is indicated for any dryness of skin associated with winter, fissure feet, cracked nipples, in the treatment of pathological dry skin conditions and also for dryness associated with leprosy and clofazimine. Detailed discussion on the pharmaceutical content and its use for treatment of dry skin conditions of human skin is given at Paragraph 12 in Time Pharma v. Commissioner of Central Excise, Mumbai-II - 1998 (99) E.L.T. 643 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utical constituents and, hence, they cannot be held out as having curative, therapeutic or prophylactic value, cannot also be appreciated. It is the presence of the ingredients of the pharmaceutical constituents which makes the difference and not the percentage of the ingredients as held by this Court in Meghdoot Gramodyog Sewa Sansthan v. Commissioner of Central Excise, Lucknow - 2004 (174) E.L.T. 14 (S.C.). It was held that the composition and the curative properties would make the difference in the classification. If the product is composed of pharmaceutical constituents which have curative properties, the product is to be classified as medicament. To quote : 6. The Appellant has drawn our attention to the composition of the six products and the uses in respect of each of these six products. This has not been doubted by the Tribunal nor indeed by the Departmental authority. The composition and the curative properties being admitted, it was not open either to the Department or the Tribunal to hold that the items were cosmetics merely by reason of the outward packing. (Emphasis supplied) 14 . Another contention advanced by the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e used to treat or cure some medical condition. A product that is used mainly in curing or treating ailments or diseases and contains curative ingredients even in small quantities, is to be branded as a medicament. 13. We find that the entry that is Chapter 2106, which is relied upon by the Revenue is only residuary entry. The product which is more appropriately classified under the specific headings has to be preferred before resorting to classification of goods in the residuary entry. It is also a fact that merely because the product can be used otherwise it will not be become the foods supplement. Reliance is also placed on the decision of Time Pharma Vs. Commissioner of Central Excise, Mumbai II 1998 (99) ELT 643 (Tri.-Mumbai), which is reproduced as under : 13 . From the above it is clear that product finds use for the treatment of skin disorder in human beings like ichthyosis vulgaris. So far as the therapeutic properties of the product are concerned it is seen that in the affidavit of Dr. Rakesh Seth, a Consultant Dermatologist of Bombay produced by the appellants, it has been stated that urea is the active ingredient for treatment ichthyosi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis vulgaris and other scaly diseases, senile skin and other dry skin states, ichthyosis. There are also uses of urea in combination for other skin disorders given therein. It would appear therefore that 10% urea is a therapeutic quantity in a formulation to treat skin disorders like ichthyosis. Also it is found that in the Indian Pharmacopoeia 1996, it has been indicated that urea cream contains urea in a suitable basis with usual strength 10% w/w. This would then indicate that it cannot therefore be said that the product in question has only subsidiary curative or prophylactic value. It has already been noted that the indication on the label as well as the product literature show that the goods are used to treat dry skin conditions of the human skin and is prescribed by the doctors for the purpose. 14 . Therefore, the product satisfies the definition of medicament in the sense that it is comprising of ingredients which have been mixed together for therapeutic or prophylactic use. There is nothing in the label or the literature of the product which would support a conclusion that it is to be applied to the human body or any part thereof for cleansing, beautifyin ..... 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 and Puma Neem Tulsi are clearly medicinal products and are intended to treat certain medical conditions of the human body and therefore, in view of the above tests, are liable to be classified as medicaments falling under Chapter 30 and Note 3003.20/3003.30. Items at Serial Nos. 5, 6 and 8 viz. Puma Herbal Massage Oil, Puma Herbal Massage Oil for Women and Puma Scalp Tonic Powder (Scalpton) however do not appear to be of any medicinal property and it is difficult to classify them under the head of medicament. In fact the learned counsel for Appellant conceded that these three items do not qualify to be treated as medicaments. Therefore, the same will be liable to be classified as cosmetic under Chapter head 33.04. Regarding these 3 items the matter will have to go to the Assistant Collector for quantification of the duty for the relevant period. Subject to this, the appeals are allowed. No costs. 16. We also find that the adjudicating authority in the impugned order has held that the Appellant was not having the drug licence during the impugned period. However, the same is found to be incorrect, in view of su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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