Tribunal overturns cosmetic classification, emphasizes Ayurvedic texts & manufacturing standards

The Tribunal set aside the order classifying the appellant's products as cosmetics, remanding the matter for a fresh decision. The Chemical Examiner's report was to be disclosed to the appellant for contesting. The Tribunal emphasized considering a common man's perception of the product, ingredients in authoritative Ayurvedic texts, and manufacturing under a Drug Controller's license. The decision highlighted the need for a detailed examination of ingredients and referenced a Board's Circular on product classification in Ayurvedic medicines. All stay petitions and appeals were disposed of, leaving other issues open for future consideration.

---

---

Issues:
Classification of products - Ayurvedic preparations vs. Cosmetics

Analysis:
The judgment revolves around the dispute regarding the classification of the appellant's products, namely Hair Oil, Face pack, and hair oil for dandruff. The appellants have classified the products as Ayurvedic preparations falling under Chapter 30, attracting a lower rate of duty. On the other hand, the Revenue has classified them as Cosmetics falling under Chapter 33 of the Central Excise Tariff Act, attracting a higher rate of duty. This classification resulted in a confirmation of around Rs. 17,00,000 as duty of excise, along with interest and penalties.

Upon review, it was noted that the appellants claimed to manufacture the goods under a Drug license issued by the ASU Drugs Controller of the Kerala Government, with all ingredients sourced from ancient Ayurvedic Text Books. The Revenue solely relied on the report of the Chemical Examiner, which classified the items as 'Cosmetic preparations'. The appellants argued that they were not provided with the Chemical Examiner's report to contest it, and highlighted that the Chemical Examiner's role is not to determine the product's classification, which is the responsibility of Central Excise officers.

The appellants cited a Supreme Court decision where similar products were classified under Chapter 30, supporting their claim. The Tribunal acknowledged that the lower authorities did not dispute the appellants' possession of a Drug license or the presence of ingredients in ancient Ayurvedic texts. Consequently, the Tribunal found a prima facie case in favor of the appellant and decided to allow the stay petitions unconditionally.

The Tribunal emphasized the need to consider how a common man perceives the product, the presence of ingredients in authoritative Ayurvedic texts, and whether the goods were manufactured under a Drug Controller's license. It was highlighted that the lower authorities did not thoroughly examine the ingredients provided by the appellants alongside authoritative Ayurvedic Books. Additionally, a Board's Circular was referenced, outlining the twin tests for determining product classification in Ayurvedic medicines.

Ultimately, the Tribunal set aside the impugned order and remanded the matter to the original adjudicating authority for a fresh decision. The Chemical Examiner's report was to be provided to the appellant for contesting purposes. The judgment concluded by disposing of all stay petitions and appeals in the aforementioned manner, keeping other issues open for consideration.

---