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TMI Blog2008 (9) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred to as "IRLP") are covered under the Central Excise Tariff Sub-heading 3003.30 and not under Chapter 33 of Central Excise Tariff and thus the said products would invite the duty as "Ayurvedic medicines" at the rate of 10% advalorem and not at the rate of 40% advalorem as claimed by the Revenue Department. The Revenue Department's claim was that these products were cosmetics such as skin beautification creams, lotions, moisturisers, shampoos, etc., and were as such the "cosmetics" and "toilet preparations" chargeable to 40% duty. The Tribunal further held that IRLP and M/s.Ishaan Marketing Private Limited (hereinafter referred to as "the IMPL") were not related persons in terms of Section 4(4)(c) of the Central Excise Act and as such the price at which IRLP sold the products was to be adopted as the basis for determining the assessable value. Similarly, the IRLP and IRL Marketing Pvt. Ltd. (hereinafter referred to as "IRL (M)") were also not related persons and as such the price at which the IRLP sold the goods would form the basis for determining the assessable value. The Tribunal further held that the extended period of limitation was not applicable in all the cases. Resulta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption to redeem the same on payment of Rs.25 lakhs. A further penalty of Rs.1 crore was imposed on IRLP under Rule 173Q of Central Excise Rules. A penalty of Rs.25 lakhs was imposed on IMLP under Rule 209A of Central Excise Rules. Lastly a penalty of Rs.35 lakhs was imposed on Ms.Vineeta Jain. Thus, the Commissioner held that the classification would be under Chapter 33. He also held that IRLP and IMPL were related persons and further that the Revenue was entitled to the extended period of limitation. 6. On the appeals filed before the Tribunal, the Tribunal allowed the claim of the IRLP in respect of as many as 22 products out of the total 92 products in respect of which the Show Cause Notices were given, they were at Sl.Nos.3,8,9,10,17,20,21,23,25,27,28,29,34,35,36,38,39,42,45 and 46, The remaining 70 products were held to be the "cosmetic" and "toilet preparations" falling under Chapter 33 of the Scheduled under Central Excise Act. The Tribunal further held that IRLP and IMPL were not the related persons and further the extended period of limitation could not be made available to Revenue in all the cases. 7. In the present appeals we are concerned only with those 22 produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chapter 33 and instead would be covered under Chapter 30, Entry 3003.30 inviting 10% duty and not 40%. We, therefore, leave these four more products out of consideration, barring 16 products, which we have to consider, they being: i) Bio Aloevera ii) Bio Bhringraj iii) Bio-cucumber iv) Bio-coconut v) Bio-costus vi) Bio-kelp vii) Bio-milk viii) Bio-margosa ix) Bio-peach x) Bio-pro xi) Bio-quince xii) Bio-saffron xiii) Bio-soya xiv) Bio-wheat xv) Bio-wintergreen xvi) Bio-walnut 13. Shri Radhakrishnan, learned Senior Counsel, appearing on behalf of the Revenue took us through the various entries of Chapter 33 and more particularly Entries 3304 and 3305 which are as under: "3304 - Wadding, gauze, bandages and similar articles (for example, dressing, adhesive, plasters, poultices), impregnated or coated with pharmaceutical substances or put up in forms or packings for medical, surgical, dental or veterinary purpose. 3305 - Pharmaceutical goods, not elsewhere specified." Learned counsel contended that the said products contain certain other ingredients also which cannot be said to be "Ayurvedic medicines". In support of his claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed counsel appearing on behalf of the Assessee Shri Lakshmikumaran heavily relied on the decision of BPL Pharmaceutical's case (supra). He urged that there is a line of decisions following BPL Pharmaceutical's case and pointed out that the decision in Shri Baidyanath Ayurved Bhavan's case and BPL Pharmaceutical's case were dealt with in another decision in Commissioner of Central Excise, Nagpur v. Vicco Laboratories [2005 (179) ELT 17 (SC)]. He also invited our attention to the decision in Megthdoot Gramodyog Sewa Sansthan v. Commissioner of Central Excise, Lucknow [2004 (174) ELT 14 (SC)] following the decision in Commissioner of Central Excise, Allahabad v. Himtaj Ayurvedi Udyog Kendra [2003 (154) ELT 323 (SC)]. Our attention was also invited to some other decisions to which we would make reference hereinafter. 15. Shri Lakshmikumaran, during his address, took us through the Notes as also the definitions, more particularly covered under Section 3(a) and 3 (h) of Drugs and Cosmetics Act defining drug and patent of proprietary medicines. Relying on these provisions and further relying on the provisions of Chapter 30 Note No.2, the learned counsel further pointed out that this co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed our attention to the decision of the Tribunal delivered in CCE, Pune v. Ramakrishna Vidyut Ltd. (Final Order No.847/99-C dated 16.8.1999 of Tribunal) which was affirmed by this Court in Civil Appeal No.2353 of 2000 (judgment delivered on 15.3.2005) holding that Mahabringaraj Hair Oil is classifiable under Tariff Item 3003 and not as a "cosmetic". 13 18. Going back to the List of Items in para 11, Item No.(ii) Bio Bhringraj would stand covered by that decision. On this backdrop we are thus left with 15 items. Shri Radhkrishnan also did not dispute this position regarding item No.(ii) Bio Bhringraj. 19. In BPL Pharmaceutical's case a clear cut distinction was made in the "cosmetics" and the "drugs". Observations made in para 31 are: "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, n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noted the label, literature and medicinal properties concerning the product in question and noted that the label gave out specifically that: "Firstly, it was a poison; Secondly, there was a cautionary note that it should be used for external use and should be kept out of the eyes and away from children and also that it should be used immediately after bleaching, tinting or permanent waving of hair or on inflamed scalp; Thirdly, it should be used twice weekly initially and then as often as necessary; Fourthly, that it was a medical treatment for dandruff; Fifthly, it contains Selenium Sulphide USP 2.5% w/v; Sixthly, the hairs should be washed first and then the Selsun should be massaged into the scalp. The Court also perused the literature which suggested that it was for the use of registered Medical Practitioner or a Hospital or Laboratory and that it further indicated that the product controls Dandruff and has beneficial effect on the scalp as it is helpful in controlling acne, otitis externa and Bleph-aritis. The Court also relied on the affidavits filed by the appellants. The Court found that the product was classified by the Excise Authorities as a patent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise Board and Excise and Customs wherein the product was treated as patent and proprietary medicines. The Court relied on as many as 13 reasons, some of these reasons are extremely relevant for our case also, e.g.: Firstly, the court held that the product was useful for a treatment of a disease; Secondly, it held that it was manufactured under a drug licence; Thirdly, it held that the Foods and Drugs Administration had certified it as a drug; Fourthly, that the Drug Controller had opined that Selenium Sulphide present in Selsun was in a therapeutic concentration; Fifthly, that it was included as a drug in the National formulary, US Pharmacoepia and the Merck Index; Sixthly, that it fulfils the requirement of a drug as understood in the common parlance; Seventhly, that it was certified in standard books and treaties; Eighthly, it was marketed as a patent; and Ninthly, that its literature referred to it as drug and the literature was addressed to the physician. The Court on this basis went on to hold the product as medicinal product and further held that it would fall under Tariff Item 3003.19. A very heavy reliance was placed and since this happens to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as by far the first judgment in respect of the product claimed as Ayurvedic Medicament. This Court went into the questions in detail. It was argued that 98% of Bhanpool Oil consists of "til oil" and remaining 2% are Ayurvedic ingredients like amla, chandan camphor, etc., and also that it was being sold across the counter and was not stored just by chemists but even by ordinary grocers. In short, it was submitted that in common parlance it was not called as perfumed hair oil. The court also referred to the law laid down in Shri Baidyanath Ayurved Bhavan's case (supra) and Alpine Industries v. Collector of Central Excise, New Delhi [(2003) 3 SCC 111] and took stock of the arguments that the common parlance test as laid down in these two cases was the only relevant test. On the other hand it was pointed out by the assessee that Chapter 30 dealt with all types of medicines and not only Ayurvedic medicines. It was further urged that the medicaments could be as per the formula set out in various pharmacopoeias or they could be under some patented formula of a particular party and further the product having medicinal properties in very small percentage did not matter. If the percentage o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 book 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. This burden is not discharged as no such proof is adduced. On the contrary we find that the oil can be used for treatment of headache, eye problem, night blindness, reeling, head weak memory, hysteria, ammenesia, blood pressure, insomnia etc. The dosages required are also set out on the label. The product is registered with Drug Controller and is being manufactured under a drug licence." (EMPHASIS SUPPLIED) 27. Following the above judgment this Court held in favour of the assessee in Calcutta Chemicals Co. Ltd. v. Commissioner of Central Excise, Chennai reported in 2003 (154) ELT 326 (SC) in respect of Maha Bringaraj Oil to which we have already made a reference and also in the decision in Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. Again the basis of show cause notice was the decision in Shri Baidyanath Ayurved Bhavan's case (supra). The test applied by the Revenue was: firstly, whether the products were being used daily and were sold without prescription by a medical practitioner and secondly, whether the products were available in General Store Department/Grocery Shops. In para 4, the Court came to the conclusion that a mere decision of a court of law without more cannot be 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. The said decision was distinguished on the ground that the aforementioned tests were not applicable there. In para 5 it is pointed out by the court in the following words: "The court did not itself affirmatively hold that what was laid down by the Tribunal as a test to be `ordinarily' followed was invariably to be the sole test for determining whether a product is to be proved as a medicine or as a cosmetic. " The Court then went on to approve the law laid down in BPL Pharmaceutical's case (supra) and other cases, namely, Sharma Chem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BPL Pharmaceutical's case (supra) was approved and relied upon. 30. All these cases would, therefore, suggest that the products in question were found to be and rightly held to be covered under Chapter 30 and not Chapter 33. We must immediately point out that the expert opinion was pressed into service before the Tribunal of Dr.V.N. Pandey who had in details analysed all these products and noted that the products contained the elements having Ayurvedic medicinal value. It was also noted rightly by the Tribunal that all these products were produced under the drugs licence issued under the Drugs and Cosmetics Act. Shri Radhakrishnan could not dispute this fact. 31. Further it was obvious from the labels of the products which we have ourselves inspected in the court that there is a claim made in each of the lable of the medicinal properties of the product. It is also found that there was a specific claim that this is not a cosmetic product. In this behalf Shri Radhakrishnan took us through the show cause notice and tried to point out that the products were sold to the Hotels, Beauty Parlours etc. Our attention was also invited to various orders as also to the literature and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and other taxes and other permissible deductions under Section 4 should be allowed in accordance with the law." To this Shri Radhakrishnan has no objection. We, therefore, hold accordingly. 34. Lastly, the question was raised regarding the limitation. In view of our findings that these products were genuinely Ayurvedic medicaments, it would not be necessary for us to go into that question. However, since the parties have argued the question, we would consider the same. 35. The Show Cause Notices in this case were given on 10.4.1996, 30.9.1996, 31.12.1996, 2.5.1997 and 28.10.1997. The Revenue sought to take advantage of the extended period of limitation. On 10.4.2008 this Court had passed the following order in respect of limitation: "As far as the question of limitation is concerned, following the decision of High Court of Allahabad in the case of Shahnaz Ayurvedics Vs. Commissioner of Central Excise, Noida 2004 (173) ELT 337, it was held that the extended period of limitation is not applicable. Against the said decision of the High Court of Allahabad, a petition being SLP (C) No. 21585 of 2004 [CC 8996/04] was filed in this Court in the case of Commissioner of Central ..... 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