Common parlance test controls excise classification of herbal product; separate non-use-of-power exemption claim remanded for reconsideration.

Central excise classification of Dant Manjan Lal turned on common parlance, trade understanding and principal use: the product was treated as a tooth powder for dental cleansing rather than an Ayurvedic medicine or drug, and the later inclusion of Ayurvedic Sar Sangrah in the Drugs and Cosmetics Act did not alter its excise character for the relevant period. It was therefore classifiable under Tariff Item 68 and denied exemption under Notification No. 55/75 as amended by Notification No. 62/78. A separate claim for exemption under Notification No. 179/77, based on non-use of power, was held open for reconsideration in de novo proceedings, with opportunity of hearing and decision on evidence.

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Issues: (i) Whether Dant Manjan Lal was an Ayurvedic medicine or drug entitled to exemption under the relevant central excise notification; (ii) Whether the assessee's claim for exemption under Notification No. 179/77 could be examined in the de novo proceedings.

Issue (i): Whether Dant Manjan Lal was an Ayurvedic medicine or drug entitled to exemption under the relevant central excise notification.

Analysis: The product was examined on the basis of common parlance, trade understanding, and its principal function. The decisive test was whether the end product was known and used as a medicine or whether it was essentially a tooth powder for daily dental cleansing. The prior Tribunal ruling on the same product was treated as binding and was found to remain applicable despite the later inclusion of Ayurvedic Sar Sangrah in the First Schedule to the Drugs and Cosmetics Act, 1940 and despite reliance on the meaning of 'drug' in that Act. The Court also held that the change in legal position under the Drugs and Cosmetics Act did not alter the essential character of the product for central excise classification during the material period.

Conclusion: Dant Manjan Lal was held classifiable under Tariff Item 68 and was not treated as an Ayurvedic medicine or drug for exemption under Notification No. 55/75 as amended by Notification No. 62/78.

Issue (ii): Whether the assessee's claim for exemption under Notification No. 179/77 could be examined in the de novo proceedings.

Analysis: The claim for exemption on the ground of non-use of power had been raised before the de novo adjudication and the earlier remand direction had opened the matter for fresh consideration on merits. Since the exemption claim went to the legality of the duty demand and had not been adjudicated, fairness required that the claim be examined on evidence after giving the assessee an opportunity of hearing.

Conclusion: The exemption claim under Notification No. 179/77 was held open for reconsideration by the appellate authority on remand.

Final Conclusion: The product was not accepted as an Ayurvedic drug for the disputed period, but the matter was remanded for decision on the separate exemption claim under Notification No. 179/77.

Ratio Decidendi: For central excise classification, the decisive test is the common and commercial understanding of the finished product and its principal use, not the statutory definition of a term in another enactment; a later inclusion in the Drugs and Cosmetics Act does not by itself alter the excise character of the product for an earlier period.

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