2006 (3) TMI 141 - SC - Central Excise

Certain products held to be medicaments under Chapter 30 (Headings Note 3003.20/3003.30); three items classified as cosmetics under Chapter 33.04

The SC held that several appellant products qualified as medicaments under Chapter 30 rather than cosmetics under Chapter 33: items at serial nos. 1, 2, ... Medicament versus cosmetic classification - common parlance test - ingredients in authoritative Ayurvedic texts - subsidiary curative or prophylactic use - burden on the Revenue to prove correct classification - remand for quantification and limited verificationMedicament versus cosmetic classification - common parlance test - ingredients in authoritative Ayurvedic texts - burden on the Revenue to prove correct classification - Whether the specified Puma Ayurvedic products are medicaments liable to be classified under Chapter 30. - HELD THAT: - The Court applied the established twin test - (i) whether in common parlance the article is understood as a medicament and (ii) whether the ingredients are mentioned in authoritative Ayurvedic texts. The assessee produced licences from the Drug Controller, expert opinions including that of the Directorate of Ayurveda (which tested samples and stated the ingredients are described in Ayurvedic texts and the items are used in treatment of skin diseases), medical certificates and user evidence. The Revenue led no rebuttal evidence and thus failed to discharge its onus to prove that the products are not medicaments. The Court held that the primary use of a product determines its character; incidental improvement in appearance does not convert a medicament into a cosmetic. The quantity of active medicinal ingredient or over the counter availability does not preclude classification as a medicament. Applying these principles, the Court found that the products at Serial Nos. 1, 2, 3, 4, 7, 9, 10 & 11 (as listed in the judgment) are intended to treat medical conditions and satisfy the twin test, and therefore are classifiable as medicaments under Chapter 30. [Paras 28]Products at Serial Nos. 1, 2, 3, 4, 7, 9, 10 & 11 are medicaments and liable to classification under Chapter 30.Medicament versus cosmetic classification - subsidiary curative or prophylactic use - remand for quantification and limited verification - Classification and treatment of Puma Herbal Massage Oil, Puma Herbal Massage Oil for Women and Puma Scalp Tonic Powder (Serial Nos. 5, 6 and 8). - HELD THAT: - The Court examined Note 2 to Chapter 33 and Note 1(d) to Chapter 30 and held that Article 33's coverage includes products put up as cosmetics even if they have subsidiary curative properties; but the subsidiary/primary distinction is determinative. The learned counsel for the appellant conceded that the three specified items do not qualify as medicaments. On the material before the Court, those three items did not exhibit the necessary medicinal character under the twin test and therefore could not be upheld as medicaments. The Court directed that these items be treated as cosmetics under Chapter 33 and remitted the matter to the Assistant Collector for quantification of duty for the relevant period. [Paras 28]Products at Serial Nos. 5, 6 and 8 are not medicaments, are to be classified as cosmetics under Chapter 33, and the question of quantification of duty for the relevant period is remanded to the Assistant Collector.Final Conclusion: The appeals were allowed in part: the majority of the listed Puma Ayurvedic products (Serial Nos. 1, 2, 3, 4, 7, 9, 10 & 11) are held to be medicaments under Chapter 30; three items (Serial Nos. 5, 6 and 8) are not medicaments, are classifiable as cosmetics under Chapter 33, and the duty quantification for those items is remitted to the Assistant Collector; other connected appeals were dismissed. Issues Involved:1. Classification of products as medicaments or cosmetics under the Central Excise Tariff Act, 1985.2. Application of the twin test for determining product classification.3. Evaluation of evidence and burden of proof regarding product classification.4. Relevance of authoritative opinions and previous judgments in classification disputes.Detailed Analysis:1. Classification of Products:The core issue was whether the products manufactured by the appellant should be classified as medicaments under Chapter 30 or as cosmetics under Chapter 33 of the Central Excise Tariff Act, 1985. The classification impacts the rate of excise duty, with medicaments attracting nil duty and cosmetics attracting a higher duty.2. Application of the Twin Test:The judgment emphasized the twin test for classification:- Common Parlance Test: Whether the product is commonly understood as a medicament. If a product is used specifically for treating ailments and not for regular use, it is considered a medicament.- Ayurvedic Ingredients Test: Whether the ingredients are mentioned in authoritative Ayurvedic texts.The court noted that both tests are recognized by the Central Board of Excise and Customs and should be applied to determine the classification.3. Evaluation of Evidence and Burden of Proof:The appellant provided substantial evidence, including Ayurvedic texts, certificates from doctors, and opinions from Ayurvedic practitioners, to support the classification of their products as medicaments. The Collector (Appeals) relied on an opinion from the Directorate of Ayurveda, Maharashtra, which confirmed that the ingredients used in the products were described in Ayurvedic texts and were meant for treating skin diseases. The court highlighted that the burden of proving the correct classification lies with the revenue, which failed to provide any evidence to rebut the appellant's claims.4. Relevance of Authoritative Opinions and Previous Judgments:The court referenced several previous judgments where products with Ayurvedic ingredients were classified as medicaments. For instance:- C.C.E. v. Sharma Chemical Works: The burden of proof lies with the revenue to show that a product is not a medicament.- C.C.E. v. Pandit D. P. Sharma: Emphasized the common parlance test for classification.- Naturalle Health Product (P) Ltd. v. C.C.E.: Followed the twin test for classification.- Amrutanjan v. C.C.E.: Held that products with medicinal ingredients, even in small quantities, should be classified as medicaments.- BPL Pharmaceuticals v. C.C.E.: Classified a medicated shampoo as a medicament based on its therapeutic use.- Muller & Phipps (India) Ltd. v. C.C.E.: Classified Johnson Prickly Heat Powder as a medicament.- Dabur (India) Ltd. v. C.C.E.: Classified products with Ayurvedic ingredients as medicaments.Conclusion:The court concluded that most of the appellant's products should be classified as medicaments under Chapter 30, except for Puma Herbal Massage Oil, Puma Herbal Massage Oil for Women, and Puma Scalp Tonic Powder, which were classified as cosmetics under Chapter 33. The appeals were allowed for the products classified as medicaments, and the matter was remanded to the Assistant Collector for quantification of duty for the products classified as cosmetics. The appeals in Civil Appeals No. 1414-1416/2004 were dismissed.Products Classified as Medicaments:- Puma Neem Facial Pack (Neemal)- Puma Anti-Pimple Herbal Powder (Pimplex)- Puma Herbal Facial Pack (Herbaucare)- Puma Herbal remedy for Facial Blemishes- Puma Hair Tonic Powder (Sukeshi)- Puma Anti-Dandruff Oil (Dandika)- Puma Shishu Rakshan Tel- Puma Neem TulsiProducts Classified as Cosmetics:- Puma Herbal Massage Oil- Puma Herbal Massage Oil for Women- Puma Scalp Tonic Powder (Scalpton)