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TMI Blog2021 (6) TMI 1026X X X X Extracts X X X X X X X X Extracts X X X X ..... ties. Even after amendment, Chapter Note 1(d) shows that Chapter 30 would not cover preparations of Headings 3303 to 3307 even if they have therapeutic or prophylactic properties. Thus, even before the amendment or after the amendment Chapter 30 would not cover preparation of Chapter 33 or preparation of Headings 3303 to 3307 of Chapter 33. It has, therefore, to be first established that the preparations fall in Chapter 33 or Headings 3303 to 3307 of Chapter 33. The Heading of Chapter 33 both before the amendment and after the amendment is essential oils and resinoids oils; perfumery, cosmetic or toilet preparations. The Headings 3303 to 3307 or 33.03 to 33.07 of Chapter 33 deal with cosmetic products. It would, therefore, have to be first established by the department that the products of the appellant fall under Chapter 33 as cosmetics. The requirement prior to 28.02.2005 was that the products should be suitable for use as goods of these Headings and put up in packings with labels, literature or other indications that they are for use as cosmetics - the requirement of a product to be suitable for use as cosmetics or toilets preparation continues. Much emphasis has been placed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Chapter 30 of the Tariff Act. Whether Clause 3(c) of the General Rules can be applied in this case as held by the Adjudicating Authority? - HELD THAT:- Clause 3 (c) of the General Rules would apply only when the goods cannot be classified by the reference to (a) or (b). So far as appellant is concerned there is no doubt that the products would be classifiable under (b). Thus, clause (c) of the General Rules would have no application in the facts and circumstances of the present case - there is no manner of doubt that the products manufactured and cleared by the appellant are not cosmetics under Chapter 33 or 34 of the Tariff Act and are medicaments falling under Chapter 30 of the Tariff Act. Appeal allowed - decided in favor of appellant. X X X X Extracts X X X X X X X X Extracts X X X X ..... Oil (ii) Indulekha Gold Complete Hair Care Oil 33049990 33059019 ₹ 1,51,09,635/- 6.11.2012 (i) Indulekha Complete Skincare Oil (ii) Indulekha Gold Complete Hair Care Oil 33049990 33059019 ₹ 4,92,21,934/- 26.07.2013 (i) Indulekha Skin Care Oil (ii) Indulekha Hair Care Oil (iii) Indulekha Bringa Oil (iv) Vayodha Hair Care Oil (v) Indulekha Akrot Face Pack (vi) Indulekha Satapatri Skin Care Cream (vii) Indulekha First Touch Baby Oil 33049990 33059019 33059019 33059019 33049910 33049990 33049990 ₹ 4,16,14,903/- 01.05.2014 (i) Indulekha Skin Care Oil (ii) Indulekha Coconut Milk Shampoo (iii) Indulekha Bringa Hair Care Oil (iv) Vayodha Hair Care Oil (v) Indulekha Akrot Face Pack (vi) Indulekha Satapatri Skin Care Cream (vii) Indulekha First Touch Baby Oil (viii)Vayodha Kattar Shampoo. (ix) Indulekha Brahmi Amlaki Oil. (x) Indulekha Cherupayar Soap. 33049990 33049990 33059019 33059019 33049910 33049990 33049990 33051090 33059019 34011110 ₹ 6,26,53,534/- 24.04.2015 (i) Indulekha Skin Care Oil (ii) Bringha Oil (iii) Akrot Face Pack (vi) Skin Care Cream (v) Bab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n be seen from the above advertisement that Indulekha Complete Skin Care Oil is portrayed and perceived as a product that enhances the beauty and not as an ayurvedic medicine. ****** Thus, It can be seen than the claims about hair growth made in the advertisement is only a marketing tactic. Further, the said disclaimer establishes the fact that Indulekha Complete Hair Care Oil cannot be used for or in the diagnosis, treatment, mitigation or prevention of any disease or disorder. Since the assessee themselves have disowned the therapeutic properties of the said hair oil, it cannot be considered as an Ayurvedic Medicine. ****** 18. On an enquiry, the Superintendent, District Ayurveda Hospital, Kannur vide letter E-722/11 dated 01.09.2011 has informed that Indulekha Complete Skin Care Oil and Indulekha Gold Complete Hair Care Oil are cosmetics and not ayurvedic medicine. 19. From the above, it appears that "Indulekha Complete Skin Care Oil and Indulekha Gold Complate Hair Care Oil" manufactured and cleared by M/s. Mosons Extractions, Palayad, Thalassery are actually cosmetics falling under Chapter 33 of the First Schedule to Central Excise Tariff Act, 1985 and that they are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Even if the products of the Noticee like hair oils, body oils, soaps, creams do have therapeutic value, these products merit classification under Chapter 33 in view of the Chapter Note 1(d) of the Chapter 30 read with Chapter Note 3 of Chapter 33 of the Central Excise Tariff Act, 1985. Once a product is a preparation for hair and fits the descriptions under chapter Heading 33.05 of the CETA, 1985, the fact that it has therapeutic values does not take it away from the purview of Chapter 33. ****** 08(iii). The Noticee has referred to several citations, allegedly in favour of their contention that the products manufactured by them are ayurvedic medicines only. On going through these judgments, including those of the Hon'ble Supreme Court, it is seen that all these judgments relate to the period prior to 2005. During the year 2005, various amendments were made to the to the Central Excise Tariff Act, 1985 vide Notification No. 6/2005-CE(NT) dated 24.02.2005, issued from F. No. 4/3/2002-CX.I (Part-II). ****** 08(v). The Chapter Note 2 to Chapter 33, prior to 2005, had to satisfy certain condition before classification under Chapter 33. One of it was that the product must be in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the product for classification, especially when the Chapter notes and the descriptions in the CETA are sufficient to classify the product. 09(iii). The reliance placed on the Letter dated 01.09.2011 of Superintendent, District Ayurveda Hospital, Kannur has been objected to by the Noticee. The Noticee themselves have tried to advance their case by producing prescriptions by doctors. However, the opinion of the Superintendent, District Ayurveda Hospital, Kannur, or the fact that these goods are available over the counter or prescribed by doctors has no relevant to determining the classification of the products as held in the citations mentioned by the Noticee himself. It is pertinent to note that the Noticee had sought cross examination at the time of reply but did not pursue the matter at the time of personal hearing. Further, since the reliance is not been relied upon, cross examination is also not required. ****** 09(v). With respect to the product, Indulekha Cherupayar Soap, it is claimed to be an Ayurvedic Medicament. The product is also a toilet soap. Therefore, by all means, the product is a medicated toilet soap. With effect from 28.02.2005, I find that there is a very ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for use as goods of Heading 33.03 to 33.08; and they must be put in packing. The literature and other indication should also show that they are for use as cosmetic or toilet preparation; (iii) Even though Chapter Note 2(ii) to Chapter 30 has been removed, but still products of the appellant find place as medicaments under the Heading 3003 of Chapter 30, specifically at 3003 90 11 under the description of goods of ayurvedic system; (iv) Even though the conditions prescribed under Chapter Note 3 of Chapter 33 have been removed, it has no effect on the classification of the products in dispute under Chapter 30. This is for the reason that the requirement of fulfilling the conditions under Chapter Note 2 of Chapter 33, still has to be made in order to classify the disputed product as cosmetics; (v) It is settled law that the department has to discharge its burden to prove that the products are classifiable under chapter 33 of the Tariff Act. The department has not adduced any evidence to establish that the disputed products are cosmetic products and cannot be classified as medicaments. In this connection reliance has been placed on the following decisions: (a) Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... virtue of Chapter Note 1(d) of Chapter 30; (ii) In terms of rule 3 also, in case of a dispute between Chapter 30 and Chapter 33, classification is to be done under Chapter 33 as it occurs last in the numerical order; (iii) For the common parlance test it will have to be seen whether in common parlance the item is accepted as a medicament. If a product falls in the category of medicament it will not be an item of common use. A user will use it only for treating a particular ailment and will stop its use after the ailment is cured; (iv) The products under dispute can be used in normal routine. All the products are suitable to use on normal skin and one need not have a medical condition or problem to use the product. The moment a product becomes suitable to use in normal circumstances, it cannot be classified as a medication under common parlance. Thus, if we apply the common parlance test in the present case, the products fail the test and would be classified under Chapter 33; (v) The second test is whether the ingredients used in the products are mentioned in the authoritative text books of ayurveda. The interpretation of this aspect has been widened and in a number of cases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers dated 11.04.2016, 27.02.2017 and 19.06.2019. The last order dated 19.06.2019 dropped the proceedings initiated by the seventh show cause notice dated 16.02.2018. The first three orders have been assailed in the three appeals filed by the appellant and the fourth order dated 19.06.2019 has been assailed in the appeal filed by the Department. 19. It is important to note that the Adjudicating Authority while deciding the four show cause notices made the following observations in the impugned order dated 21.01.2015: (i) Though the licenses and certificates may have been issued under the Drugs and Cosmetics Act 1940 but they have a limited purpose only under the said statue and even the CBEC in its Circular dated 10.09.1997 clarified that the drugs license may be used as a guide for the classification of a product but not as a determining factor and that the classification of a product under Chapter 30 or Chapter 33 has to be done in accordance with the General Rules read with Chapter Notes; (ii) Prior to 28.02.2005, the products were classifiable as drugs under Chapter 30 of the Tariff Act since Chapter Note 2 to Chapter 33 as its stood upto the said date was interpreted to m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... products, whether or not mixed (other than aqueous distillates and aqueous solutions of essential oils), suitable for use as goods of these headings and put up in packings with labels, literature or other indications that they are for use as cosmetics or toilet preparations or put up in a form clearly specialised to such use and includes products whether or not they contain subsidiary pharmaceutical or antiseptic constituents, or are held out as having subsidiary, curative or prophylactic value. 23. The Heading 33.03 to 33.07 are as follows: Heading No. Sub-Heading No. Description of goods Rate of Duty (1) (2) (3) (4) 33.03 3303.00 Perfumes and toilet waters, not containing the sub-stances specified in note 1(d) to this chapter 16% 33.04 3304.00 Beauty or make-up preparations and preparations for the care of the skin (other than medicaments), including sunscreen and suntan preparations; manicure or pedicure preparations 16% 33.05 Preparations for use on the hair 16% 33.06 Preparations for oral or hygiene, including dentifrices (for example, toothpaste and tooth-powder) and denture fixative pastes and powders 16% 33.07 Pre-shave, shaving or after-shave ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or toilet preparations. Thus, the requirement of a product to be suitable for use as cosmetics or toilets preparation continues. Much emphasis has been placed by the Learned Authorised Representative of the Department that for a product to be cosmetics the requirement that the packing should have a label mentioning that the product is for use as cosmetics or toilet preparation is no longer the requirement after the amendment. This may be so but the department has still to prove that the product is either cosmetic or toilet preparation. 25. In this connection reference can be made to the decision of the Supreme Court in B.P.L. Pharmaceutical Ltd. The Supreme Court observed that the product must first be a cosmetic : 31. The contention based on Chapter notes is also not correct. One of the reasons given by the Authorities below for holding that Selsun would fall under Chapter 33 was that having regard to the composition the product will come within the purview of note 2 to Chapter 33 of the Schedule to Central Excise Tariff Act, 1985 is without substance. According to the Authorities the product contains only subsidiary pharmaceutical value and, therefore, notwithstanding the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... octor prescription. The relevant portion of the judgement of the Supreme Court is reproduced below: 20. It will be seen from the above definition of cosmetic that the cosmetic products are meant to improve appearance of a person, that is, they enhance beauty. Whereas a medicinal product or a medicament is meant to treat some medical condition. It may happen that while treating a particular medical problem, after the problem is cured, the appearance of the person concerned may improve. What is to be seen is the primary use of the product. To illustrate, a particular Ayurvedic product may be used for treating baldness. Baldness is a medical problem. By use of the product if a person is able to grow hair on his head, his ailment of baldness is cured and the person's appearance may improve. The product used for the purpose cannot be described as cosmetic simply because it has ultimately led to improvement in appearance of the person. The primary role of the product was to grow hair on his head and cure his baldness. 21. The extent or the quantity of medicament used in a particular product will also not be a relevant factor. Normally, the extent of use of medicinal ingredients is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion of the Technical Member. It is a settled law that the onus or burden to show that a product fall within a particular Tariff Item is always on the revenue. Mere fact that a product is sold across the counters and not under a Doctors prescription, does not by itself lead to the conclusion that it is not a medicament. We are also in agreement with the submission of Mr. Lakshmikumaran that merely because the percentage of medicament in a product is less, does not ipso facto mean that the product is not a medicament. Generally the percentage or dosage of the medicament will be such as can be absorbed by the human body. The medicament would necessarily be covered by fillers/vehicles in order to make the product usable. It could not be denied that all the ingredients used in Banphool Oil are those which are set out in the Ayurveda text books. Of course the formula may not be as per the text books but a medicament can also be under a patented or proprietary formula. The main criteria for determining classification is normally the use it is put to by the customers who use it. The burden of proving that Banphool Oil is understood by the customers as an hair oil was on the revenue. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y conducted by the scholars of the Department of Biochemistry, University of Kerala. Similarly, the medicinal properties of other herbal ingredients were described in detail by the appellant, relying on reference as available in the classical ayurvedic texts. The appellant stated that the carton and label of the preparations indicate the Drug License No. and also contain indications such as repair of skin and other skin diseases namely Vama Vikara (pigmentation disorder), Yauvanapitika (Acne vulgaris), Pama (Eczema), Kandu (Itching) etc. The manner of usage is also prescribed. 35. Though, as contented by learned Authorized Representative of the Department, it may be correct that if a product is suitable to use in normal circumstances it cannot classify as medication under common parlance, but it has been found as a fact that the people use or treat the products manufactured by the appellant as medicament as the products do address the medical issues faced by them. It will also not be possible to accept the contention of the learned Authorized Representative of the Department that even if the products find mention in the Ayurvedic text they would not be medicament. 36. The second ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng on the seventh show cause notice examined in detail whether the products manufactured and cleared by the appellant were medicaments. The Commissioner after noticing that medicaments were substances having therapeutic or prophylactic uses, held that the preparations of the products manufactured and cleared by the appellant meet the requirements of medicaments prescribed under chapter 30 of the Tariff Act. The findings of the Commissioner are as follows: 15. This definition is no longer available after the amendment to the First Schedule post 28.02.2005. However, even in the present Chapter 30, it is insisted that medicaments consist of mixed or non-mixed products for therapeutic or prophylactic uses. Admittedly, the preparations manufactured by the noticee are mixtures consisting of different ayurvedic components prescribed in the ayurvedic classical texts. Further, admittedly these are presented in measured doses and in packings for retail sale. On a very close scrutiny, I am of the considered opinion that, in so far as the making of the preparations and presentation thereof are concerned, the preparations meet the requirements of medicaments prescribed under chapter 30. The o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for disorders/diseases of the skin and scalp. Ingredients are ayurvedic drugs prescribed under authoritative ayurvedic texts. Their level of advertisement is indicative of the therapeutic and prophylactic properties of the product and these are specifically declared as ayurvedic medicines licensed with the competent authorities. Therefore, after careful perusal of the case laws above and the submissions of the noticee, I am of the considered view that the preparations in question are classifiable under chapter 30 as proprietary and patent ayurvedic medicine. 25. The reliance placed on the department on chapter note 1(e) to chapter 30 is also erroneous. This chapter note specifies that preparations of chapter 3303 to 3307 are excluded from chapter 30 even if they have prophylactic or therapeutic properties. However, in order to enforce the provisions of this chapter note, the preparations should be first classifiable under chapter 33 as cosmetics. On the other hand, as held above, the preparations are primarily classifiable under chapter 30 as medicaments, and, therefore, this chapter note would not be applicable. Same is the case of chapter note 3 to chapter 33. To attract cha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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