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TMI Blog2023 (9) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... primary use of the product Jac Olivol Body Oil, as it appears from the label representing the product, is to care for skin - the product is described as For soft, smooth, glowing and healthy skin - the product label, as submitted by the applicant in paper copy is not identical with what the authorized advocate sent through e-mail on 28.07.2023. When the product itself proclaims to apply daily before or after bath all over your body , it is difficult for us to accept that people ordinarily buys it for treating of an ailment - the item namely JAC OLIVOL BODY OIL is commonly understood as a preparations for the care of skin thereby considered to be a cosmetic product used to get soft and smother skin and not considered as a medicament used for the treatment or prevention of any disease or ailment. The product JAC OLIVOL BODY OIL intended to be manufactured sold by the applicant would be covered under Heading 3304 of THE FIRST SCHEDULE TO THE CUSTOMS TARIFF ACT and would be taxed accordingly under the GST Act. - DR. TANISHA DUTTA, AND JOYJIT BANIK, MEMBER Applicant s Representative Heard : Mr. Ankit Kanodia, Authorised Advocate Preamble A person wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application has neither been decided by nor is pending before any authority under any provision of the GST Act. 1.7 The application is, therefore, admitted. 2. Submission of the applicant The submission of the applicant is that: 2.1 The product intended to be manufactured i.e. Jac Olivol Body Oil is an ayurvedic patent proprietary medicine which is clearly described in its label, incidentally protected by copyright and trademarks. The label representing the product in question, as incorporated in the written submission and sent by the authorised advocate of the applicant through e-mail on 28.07.2023 is as below: 2.2 The product in question is being used as an ayurvedic patent and proprietary medicine and that all ingredients used to produce the material are mentioned in the Ayurvedic pharmacopoeia and authoritative textbooks of Ayurveda (Bhavprakash) and inter alia approved by the Drug Controller. 2.3 The applicant states that as per the prevailing rate structure, the best classification of the product has to be done under HSN 3004 thereby attracts tax @ 12% of goods specified in Schedule II as below: S.No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Prophylactic Uses is a substance or device used for preventing disease. 2.8 The Applicant states the ayurvedic herbs used in the preparation of oil have therapeutic properties which is to be applied on the body and not consumed orally. The Applicant further states that the product ingredient includes Haridra (Rz.) Also known as turmeric has long historical background of having healing properties against many diseases. The rhizome of the herb used either fresh or dried, has a host of medicinal benefits. It has been used extensively in Ayurvedic medicine for centuries, as it is nontoxic and has a variety of therapeutic properties including antioxidant, analgesic, anti-inflammatory and antiseptic activities. Its antibacterial and antiseptic agent helps in curing minor burns, cuts, bites and bruises. It also helps in cleanse, clarify, smooth, calm, invigorate and brighten the skin. [Ref : The Ayurvedic Pharmacopoeia of India, Government of India, Vol. 1, Page No. 45, Bhavaprakasa, An Authentic Ayurvedic Book, Page No. 114] Manjistha (St.) Manjistha is a perennial herb that is used as Ayurvedic medicine, Manjistha is believed to have antioxidant and astringent p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [Ref : I. P. Vol. 2010, Page No. 2317] Arachis Oil It alleviates dry skin conditions such as rashes and flaky and itchy skin. In addition to soothing minor irritations, peanut oil may also reduce the appearance of redness. It contains powerful antioxidants, such as Vitamin E and resveratrol which calm down irritated skin. [Ref : I. P. Vol. 2010, Page No. 2475] Olive Oil Olive Oil packed with healthy vitamins, fats and antioxidants and these components can contribute to healthier looking skin. It moisturizes skin by locking in moisture and its antioxidants can help to improve signs of aging. [Ref : ISI (ICS) Page No. 67] 2.9 The Applicant states that product in question is clearly a herbal oil, intended to cure dry skin, heal wounds, reduces chronic muscle pain and joint pain but also have properties such as anti- ageing and anti-wrinkling which is consequential to the predominant purpose. 2.10 The Applicant states that apart from its curative properties, a gentle massage with this body oil provide a protective barrier to keep the skin hydrated and improves blood circulation and can help to reduce anxiety as well. Further the anti-ageing and anti- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we are inclined to accept the submissions on behalf of the respondent that even with reference to its packaging, the product AHAHO would remain a homeopathic medicament and would be covered under Chapter 30, where it could be placed in Sub-Heading 3004 90 14. Similarly, deletions of the reference to the Act of 1940 or to various pharmacopoeia cannot be interpreted to mean that a product like the one in question, which is otherwise a medicament, has to be classified on the basis of the base through which the application of medicine is being provided. 2.14 The Applicant relies on the judgement of Divisional Bench of Uttarakhand in the case of The Commissioner Commercial Tax Uttarakhand Vs Perfetti Van Melle India Pvt Ltd 2018 SCC OnLine Utt 113 : (2009) 19 VST 218, Wherein it has been held that 10. It is not disputed that there are three kinds of medicines available in the market. Firstly, the medicines which can be purchased from only approved chemist/pharmacist that too only on the prescription of the registered medical practitioner. Secondly, the medicines, which can be purchased from approved chemist/pharmacist but not necessarily required to be prescribed by regist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mulations prescribed by authoritative books of ayurvedic medicines. Therefore, charging of 12.5 per cent trade tax in respect of these items cannot be said to be wrong. 2.15 In case of CCE v. Wockhardt Life Sciences Limited (2012) 5 SCC 585 the Hon ble Apex Court while discussing the Interplay of Chapter 30 vis- -vis Chapter 34 (which deals with detergent products), observed that: 39. In our view, as we have already stated, the combined factors that require to be taken note of for the purpose of the classification of the goods are the composition, the product literature, the label, the character of the product and the use to which the product is put. 2.16 The Applicant relies on the Judgement of Hon ble Apex court in case of Commissioner of Central Excise, Mumbai IV Vs Ciens Laboratories (2013) 14 SCC 133 wherein The Hon ble Supreme Court of India formulated the following principles for determining the nature of a product as to whether it is a medicament or a cosmetic: 22. Thus, the following guiding principles emerge from the above discussion. 22.1. Firstly, when a product contains pharmaceutical ingredients that have therapeutic or prophylactic or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IDHDHA H= HOMOEOPATHY Previously this was named as Indian System of Medicine and Homoeopathy. Whereas the allopathic medicines, are simply known as modern medicines and dealt by a separate department of the Drug Controller, Ayurvedic medicines do not require any selling licence. The same was confirmed by the Minister of State, AYUSH(IC) in a written reply to a question in Rajya Sabha. 2.19 The authorized advocate also draws attention to the definition of Ayurvedic Drugs stating that the legal definition of Ayurvedic drug is given in Section 3(a) the Drugs and Cosmetics Act, 1940, which includes all medicines intended for internal or external use for or in the diagnois, treatment, miigation or prevention of disease or disorder in human beings or animals, and manufactured exclusively in accordance with the formulae described in the authoritative books of Ayurvedic system specified in the First Schedule of the Act. Patent or Proprietary medicines in relation to Ayurvedic system are all formulations containing only such ingredients, which are mentioned in the formulae described in the authoritative books of Ayurvedic specified in the First Schedule of the Drugs and Cosme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns, minor burns and prevents blisters. The only question involved in the instant case is to decide whether the product falls within the category of medicaments or cosmetics. To answer the question, we need to determine whether the goods is classifiable under the Central Excise Tariff Act, 1985 as medicaments under Chapter 30 or as cosmetics under Chapter 33. 3.3 Heading 3004 of the Customs Tariff covers MEDICAMENTS (EXCLUDING GOODS OF HEADING 3002, 3005 OR 3006) CONSISTING OF MIXED OR UNMIXED PRODUCTS FOR THERAPEUTIC OR PROPHYLACTIC USES, PUT UP IN MEASURED DOSES (INCLUDING THOSE IN THE FORM OF TRANSDERMAL ADMINISTRATION SYSTEMS) OR IN FORMS OR PACKINGS FOR RETAIL SALE . Further, note 1(e) of Chapter 30 excludes preparations of headings 3303 to 3307 even if they have therapeutic or prophylactic properties. On the other hand, heading 3304 of the Customs Tariff covers BEAUTY OR MAKE-UP PREPARATIONS AND PREPARATIONS FOR THE CARE OF THE SKIN (OTHER THAN MEDICAMENTS), INCLUDING SUNSCREEN OR SUNTAN PREPARATIONS; MANICURE OR PEDICURE PREPARATIONS . Thus, it is evident that the use of the goods and not its properties is to be considered as a decisive factor to classify the goods as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or prophylactic uses of the product and the product must be manufactured primarily to control or cure a disease. 3.7 In matters of classification of goods, the common parlance test i.e., how the goods is understood in the market by common people has been recognized by all the judicial forums including the Supreme Court of India. The Hon ble Apex Court in the case of Commissioner of Central Excise vs Baidynath Ayurwed Bhawan Ltd has observed as follows: As a matter of fact, this Court has consistently applied common parlance test as one of the well recognized tests to find out whether the product falls under Chapter 30 or Chapter 33. In a recent decision in Puma Ayurvedic Herbal (P) Ltd. vs. Commissioner, Central Excise, Nagpur 10 this Court observed that in order to determine whether a product is a cosmetic or medicament, a twin test (common parlance test being one of them) has found favour with the courts. This is what this Court observed: .... In order to determine whether a product is a cosmetic or a medicament a twin test has find favour with the courts. The test has approval of this Court also vide CCE v. Richardson Hindustan {(2004) 9 SCC 156}. There is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g tariff entries in taxation statute like Excise Act where the primary object is to raise revenue and for that purpose various products are differently classified, the entries are not be understood in its scientific and technical meaning. The terms and expressions used in tariff have to be understood by their popular meaning that is the meaning that is attached to them by those using the product. See the decision of Supreme Court on the dispute regarding classification for excise duty, the product-Dant Manjan Lal manufactured by Shree Baidyanath Ayurved Bhavan Ltd. reported in the case of Shree Baidyanath Ayurved Bhavan Ltd v. Collector of Central Excise, Nagpur and Ors., [1996] 9 SCC 402. The manufacturer claimed the product to be an ayurvedic medicina preparation product for dental care. The view of the Tribunal was upheld by this court by holding that 'ordinarily a medicine is prescribed by a medical practitioner and it is used for a limited time and not every day unless it is so prescribed to deal with a specific disease like diabetes. It is firmly established that on the question of classification of product under Central Excise Tariff Act, commercial parlanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act of 1985. The Hon ble Apex Court upheld the order of the Tribunal and classified the product AHAHO as a homeopathic medicament covered under Chapter 30 and placed the product in Sub-Heading 3004 90 14. 3.10 The relevant extracts from the said judgment throwing light on these aspects are reproduced below: Another essential feature while examining the question as to whether a particular product is classifiable as medicament under Chapter 30 or as cosmetic under Chapter 33 would be as to whether the preparation is essentially for cure or prevention of disease i.e., with therapeutic or prophylactic properties or only for care. Tersely put, when the preparation is for cure or prevention, it would be medicament but, if only for care, it would be cosmetic. Of course, a cosmetic would not become medicament even if having subsidiary curative or prophylactic value, as held by this Court in Alpine Industries (supra). However, the product in question, AHAHO, does not fail on this count for the reason that it is a preparation of Homeopathic medicine and when it is marketed as carrying those medicines, in commercial as also common parlance, with its name carrying the significant ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the Revenue to prove that the product falls under a particular entry. 3.12 We find that in Ciens Laboratories (supra), the Hon ble Apex Court has also formulated following guiding principles in addition to what has already been referred by the applicant (refer to para 2.16): .prior to adjudicating upon whether a product is a medicament or not, Courts have to see what the people who actually use the product understand the product to be. If a product's primary function is care and not cure , it is not a medicament. Cosmetic products are used in enhancing or improving a person's appearance or beauty, whereas medicinal products are 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. 3.13 It thus appears that common parlance test is well recognized as one of the twin tests for the purpose of classification of a product as medicament or cosmetic. Therefore, to decide whether a product would be classified as medicament under heading 3004 of the Customs Tariff Act, the common parlance test shall be res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent premature ageing and wrinkles. Guards against minor rashes, discolouration and dryness. However, both the labels also read Apply daily before or after bath all over your body . The labels further indicate the application of the product as In winter: Before bath In summer: After bath . 3.16 We have also found that the product is also available on online platform. From the product description as declared on the web portal of different marketing companies, it appears that the use of the item is primarily for care of the skin. Following are the product description which is given as an illustrative manner only: For a soft, smooth, glowing and healthy skin, reach out for Jac OlivoL, which is enhanced with Italian olive oil. It has a light texture with sandalwood aroma and nourishes your skin with ayurvedic elements. Absorbed by skin easily. Makes skin soft, smooth and radiant. Effective herbal body oil [website of bigbasket] Jac for a soft, smooth, glowing and healthy skin, opt for Jac Olivol, which is enhanced with italian olive oil. It has a light texture with sandalwood aroma and nourishes your skin with ayurvedic elements. Absorbed by skin easily. Makes ..... 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