2003 (4) TMI 102 - SC - Central Excise

Product classified as Ayurvedic medicament under Tariff Item 3003.30; revenue bore burden to prove otherwise, appeals dismissed

SC held the product is classifiable as an Ayurvedic medicament under Tariff Item 3003.30, dismissing the appeals. The Court found the burden to prove a ... Classification of goods as Ayurvedic medicament versus perfumed hair oil - popular meaning versus scientific/technical meaning in tariff classification - burden of proof on the revenue to establish classification - administrative/advisory opinion of Drug Controller and Board circulars - interaction of Chapter 30 and Chapter 33 notes in tariff classification - proportion of active medicinal ingredient and presence of fillers not determinativeClassification of goods as Ayurvedic medicament versus perfumed hair oil - popular meaning versus scientific/technical meaning in tariff classification - interaction of Chapter 30 and Chapter 33 notes in tariff classification - Banphool Oil is classifiable as an Ayurvedic medicament and not as a perfumed hair oil - HELD THAT: - The Court held that the determinative criterion for classification is the use understood by the customers and the nature of the product as evidenced by its composition, labelling, registration and use. Applying the established principle that popular meaning and the users' understanding, rather than purely technical or scientific definitions, guide classification, the Court accepted that Banphool Oil contains Ayurvedic ingredients listed in standard texts, is registered with the Drug Controller and manufactured under a drug licence, and is represented with dosage directions supporting medicinal use. The Court rejected the submission that availability over the counter or the predominance of a carrier oil (til oil) converts the product into a mere perfumed hair oil, observing that a medicament may contain a large proportion of vehicle/filler while the active medicinal constituent may be small. Having considered the majority view of the Tribunal and the materials, the Court agreed that Banphool Oil falls under Tariff Item 3003.30 as an Ayurvedic medicament. [Paras 12, 14]Appeals dismissed and Banphool Oil held to be classifiable as an Ayurvedic medicament under Tariff Item 3003.30.Burden of proof on the revenue to establish classification - The revenue bears the burden of proving that a product falls within a particular tariff item and failed to discharge that burden in these cases - HELD THAT: - The Court reaffirmed the settled law that the onus to show that a product falls within a particular tariff entry lies on the revenue. It noted that the Department led no evidence to establish that Banphool Oil was understood by consumers as a mere hair oil; consequently the revenue did not discharge the burden required to rebut the product's character as a medicament. The absence of enquiries or evidence from the Department to demonstrate common parlance use weighed against the revenue's contentions. [Paras 12]Revenue's onus not discharged; classification in favour of the respondent sustained.Administrative/advisory opinion of Drug Controller and Board circulars - The Board circular and the Drug Controller's advisory opinion that Banphool Oil is an Ayurvedic preparation were material and binding on the Department in the absence of further reference or contrary evidence - HELD THAT: - The Court observed that Board Circular dated 5th December, 1991 prescribes referral to the State Drug Licensing Authority and, if necessary, to the Adviser, Ayurveda/Sub-Commissioner in the Office of the Drug Controller, when classification as an Ayurvedic medicament is in doubt. A reference had been made to the Drug Controller who opined that Banphool Oil is an Ayurvedic preparation; the Department did not pursue further reference to the Adviser at New Delhi. The Court held that the Department is bound by such administrative guidance and, coupled with the Drug Controller's opinion and the product's drug licence, this supported classification as an Ayurvedic medicament in the absence of contrary material from the revenue. [Paras 8, 13]The Drug Controller's opinion and adherence to the Board circular supported the product's classification as an Ayurvedic medicament and the Department's failure to seek further reference undermined its challenge.Final Conclusion: For the reasons stated, the majority view of the Tribunal is affirmed: Banphool Oil is classifiable as an Ayurvedic medicament under Tariff Item 3003.30. The appeals are dismissed and there shall be no order as to costs. Issues Involved:1. Classification of Banphool Oil as a 'perfumed hair oil' or an 'Ayurvedic Medicament'.2. Interpretation of relevant Tariff Items and Chapter Notes.3. Burden of proof regarding the classification of the product.4. Admissibility and relevance of expert opinions and circulars.Issue-wise Analysis:1. Classification of Banphool Oil:The primary issue in these appeals is whether Banphool Oil should be classified as a 'perfumed hair oil' under Tariff Item 3305.10 or as an 'Ayurvedic Medicament' under Tariff Item 3003.30. The Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT) had a split decision, with the majority classifying it as an Ayurvedic Medicament. The Supreme Court agreed with the majority opinion, noting that the product is used for treating various ailments and is registered with the Drug Controller, manufactured under a drug license.2. Interpretation of Relevant Tariff Items and Chapter Notes:The Additional Solicitor General argued that Banphool Oil should be classified under Chapter 33, which deals with perfumed hair oils. He cited Chapter Note 1(d) of Chapter 30, which states that preparations under Chapter 33, even with therapeutic properties, remain as toilet preparations. The respondent countered that Chapter 30 covers all types of medicines, and the ingredients of Banphool Oil are listed in Ayurvedic texts. The Supreme Court emphasized that the primary criterion for classification is the product's use by consumers, which in this case, is for medicinal purposes.3. Burden of Proof:The Court reiterated that the burden of proof to show that a product falls within a particular Tariff Item is on the revenue. The revenue failed to provide evidence that Banphool Oil is understood by consumers as a hair oil rather than a medicament. The Court noted that the product's label indicates its medicinal uses and dosages, supporting its classification as an Ayurvedic Medicament.4. Admissibility and Relevance of Expert Opinions and Circulars:The respondent highlighted a Board Circular dated 5th December 1991, which directs that in case of doubt regarding the classification of a product as an Ayurvedic Medicament, the matter should be referred to the State Drug Licensing Authority. The Drug Controller had opined that Banphool Oil is an Ayurvedic preparation. The Court held that the revenue should have followed this circular and referred the matter to the Adviser, Ayurveda, if doubts persisted.Conclusion:The Supreme Court upheld the majority opinion of the Tribunal, classifying Banphool Oil as an Ayurvedic Medicament under Tariff Item 3003.30. The appeals were dismissed, with no order as to costs. The Court emphasized the importance of consumer perception and expert opinions in determining the classification of products under the Excise Act.