2009 (4) TMI 6 - SC - Central Excise

Product classified as tooth powder under subheading 3306, not medicament under Chapter 3003.31; Note 1(d) applied

Commissioner of Central Excise Versus Shree Baidyanath Ayurved Bhawan Ltd. And vice versa

SC held the product to be a tooth powder classifiable under Chapter subheading 3306, not a medicament under Chapter 3003.31, applying the twin test ... Classification of “Dant Manjan Lal” (DML) - medicament under Chapter Subheading 3003.31 of the Central Excise Tariff Act, 1985 Or cosmetic/toiletry preparation/tooth powder classifiable under Chapter Heading 33.06 - common parlance test - applicability of maxim Res judicata - benefit available under the Notification No.62/78-CE - HELD THAT:- Applying twin test for determination of classification of products (including common parlance test), this Court in Puma Ayurvedic Herbal (P) Ltd.[2006 (3) TMI 141 - SUPREME COURT] held that items 1,2,3,4,7,9,10 & 11 were medicaments while items 5,6 & 8 were liable to be classified as cosmetics under Chapter subheading 33.04. We endorse the view that in order to determine whether a product is covered by 'cosmetics' or 'medicaments' or in other words whether a product falls under Chapter 30 or Chapter 33 : twin test noticed in Puma Ayurvedic Herbal (P) Ltd., continue to be relevant. The primary object of the Excise Act is to raise revenue for which various products are differently classified in New Tariff Act. Resort should, in the circumstances, be had to popular meaning and understanding attached to such products by those using the product and not to be had to the scientific and technical meaning of the terms and expressions used. The approach of the consumer or user towards the product, thus, assumes significance. What is important to be seen is how the consumer looks at a product and what is his perception in respect of such product. The user's understanding is a strong factor in determination of classification of the products. We find it difficult to accept the contention of the learned senior counsel for Baidyanath that because DML is manufactured exclusively in accordance with the formulae described in Ayurveda Sar Sangrah which is authoritative text on Ayurvedic system of treatment and is notified in the First Schedule to the Drugs and Cosmetics Act, 1940 and the said product is sold under the name 'Dant Manjan Lal' which is the name specified for the said product in Ayurveda Sar Sangrah, the common parlance test is not applicable. As a matter of fact, this contention is based on misplaced assumption that Chapter Sub-heading 3003.31 by itself provides the definition of Ayurvedic Medicine and there is no requirement to look beyond. There is no doubt that a specific entry must prevail over a general entry. This is reflected from Rule 3(a) of the general Rules of interpretation that states that heading which provides the most specific description shall be preferred to headings providing a more general description. DML is a tooth powder which has not been held to be Ayurvedic Medicine in common parlance in Baidyanath I. We have already observed that common parlance test continues to be one of the determinative tests for classification of a product whether medicament or cosmetic. There being no change in the nature, character and uses of DML, it has to be held to be a tooth powder - as held in Baidyanath I. DML is used routinely for dental hygiene. Since tooth powder is specifically covered by Chapter Sub-heading 3306, it has to be classified thereunder. By virtue of Chapter Note 1(d) of Chapter 30 even if the product DML has some therapeutic or medicinal properties, the product stands excluded from Chapter 30. The applicability of maxim Res judicata pro veritate occipitur in the matters of classification of goods has to be seen in that perspective. The interpretation given by this Court in Baidyanath I with regard to this product has been considered and applied by us after amendment because Chapter Sub-heading 3003.31 does not contain definition of Ayurvedic Medicine and the product DML in nature, character and uses remains the same as it was prior to amendment. Appeals of Baidyanath must fail and are dismissed. The Department's appeals are allowed. Issues Involved:1. Classification of 'Dant Manjan Lal' (DML) under the Central Excise Tariff Act, 1985.2. Application of common trade parlance test versus statutory definitions for classification.3. Impact of previous judicial decisions and statutory amendments on the classification.Detailed Analysis:1. Classification of 'Dant Manjan Lal' (DML):The primary issue in these appeals is whether DML, manufactured by Baidyanath Ayurved Bhawan Limited, should be classified as a medicament under Chapter Subheading 3003.31 or as a cosmetic/toiletry preparation/tooth powder under Chapter Heading 33.06 of the Central Excise Tariff Act, 1985. Baidyanath contends that DML is a medicament due to its Ayurvedic formulation, while the Department argues it is a toiletry product.2. Application of Common Trade Parlance Test:The classification of DML has seen fluctuating opinions among different benches of the Tribunal. The West and East Regional Benches of the Tribunal classified DML as a medicament, while the Larger Bench classified it as a toiletry product. The Supreme Court previously upheld the common trade parlance test in Baidyanath I, determining that DML is not known as an Ayurvedic Medicine in common parlance and thus classified it as a toilet requisite. The Court reiterated that the common parlance test remains relevant even after the enactment of the New Tariff Act and its amendments.3. Impact of Previous Judicial Decisions and Statutory Amendments:The Court noted that the factual position that DML is manufactured according to the formulae in the Ayurved Sar Sangraha and sold under the specified name has not been disputed. However, the Court emphasized that merely because there is some difference in the tariff entries, the product's classification cannot change without a change in its nature or use. The Court held that Chapter Subheading 3003.31 does not provide a specific definition of Ayurvedic Medicine but rather describes the process of manufacture and sale. Therefore, the common parlance test, which considers how the product is understood by consumers, remains applicable.Detailed Legal Reasoning:- Common Trade Parlance Test: The Court maintained that the common trade parlance test is crucial for classification, as it reflects the consumer's understanding and use of the product. The decision in Baidyanath I, which applied this test, remains pertinent because the product DML has not changed in composition, character, or use.- Statutory Interpretation: The Court examined the relevant provisions of the Central Excise Tariff Act and the Drugs and Cosmetics Act. It concluded that the description in Chapter Subheading 3003.31 is not a definition but a description of goods. Therefore, the classification must be determined according to the terms of the headings and relative Section or Chapter Notes, as per Rule 1 of the Rules for Interpretation of the Schedule.- Judicial Precedents: The Court referred to several previous decisions, including Puma Ayurvedic Herbal (P) Ltd. and BPL Pharmaceuticals Ltd., which affirmed the application of the common parlance test. It emphasized that without a statutory definition, the product's classification should not change based on the new tariff entries alone.- Res Judicata and Consistency: The Court addressed the principle of res judicata, noting that while it is a cogent factor, it is not an absolute bar in taxation matters. The Court reiterated that the classification should remain consistent unless there is a significant change in the product's nature or use.Conclusion:The Supreme Court dismissed Baidyanath's appeals and upheld the Department's classification of DML as a toiletry product under Chapter Heading 33.06. The Court reaffirmed the application of the common trade parlance test and held that the product's classification cannot change without a change in its nature or use. The parties were directed to bear their own costs.