1988 (4) TMI 303 - HC - Central Excise

Court upholds Ayurvedic medicine classification, rejects total excise duty exemption claim. Union of India to pay Plaintiffs.

The High Court upheld the trial court's findings that the products are Ayurvedic medicines under Entry 14E but rejected the claim for total exemption from ... Classification - Issues Involved:1. Classification of Vicco Vajradanti and Vicco Turmeric Vanishing Cream as Ayurvedic medicinal preparations.2. Applicability of tariff items 14FF and 14F(1) of the Central Excises and Salt Act, 1944.3. Legality of excise duty recovery and jurisdiction of orders dated 14-6-1976 and 4-6-1977.4. Claim for refund of excise duty and entitlement to perpetual injunction.5. Jurisdiction of the Court and other procedural defenses.Summary:Issue 1: Classification of ProductsThe Plaintiffs claimed that Vicco Vajradanti and Vicco Turmeric Vanishing Cream are Ayurvedic medicinal preparations, supported by certificates from the Commissioner, Food and Drug Administration of Maharashtra. The products were manufactured under an Ayurvedic drugs licence and sold by chemists as Ayurvedic medicines. The trial court accepted this classification based on evidence from experts and practitioners, concluding that the products are indeed Ayurvedic medicinal preparations.Issue 2: Applicability of Tariff ItemsThe Defendants argued that Vicco Vajradanti is a tooth paste under item 14FF, and Vicco Turmeric Vanishing Cream is a cosmetic cream under item 14F(1). The trial court rejected these contentions, concluding that the products do not fall under these tariff items but should be classified under Entry 14E as Ayurvedic medicines.Issue 3: Legality of Excise Duty RecoveryThe Plaintiffs proved that the Defendants illegally recovered Rs. 17,95,472.80 as excise duty on Vicco Vajradanti and Rs. 61,21,424.63 on Vicco Turmeric Vanishing Cream. The trial court found the orders dated 14-6-1976 and 4-6-1977 to be without jurisdiction, illegal, and void. The court also held that the recovery of excise duty was without authority of law.Issue 4: Claim for Refund and Perpetual InjunctionThe trial court granted a money decree for the amounts recovered by way of excise levy for the period of three years prior to the filing of the suit. A perpetual injunction was also granted against the Defendants from recovering any excise duty on the products. However, the injunction was limited to the period before the change in excise entries on 28th February 1986.Issue 5: Jurisdiction and Procedural DefensesThe trial court held that it had jurisdiction to entertain and try the suit. The suit was not premature, barred by limitation, or bad for misjoinder of parties.Conclusion:The High Court upheld the trial court's findings that the products are Ayurvedic medicines under Entry 14E but rejected the claim for total exemption from excise duty due to defective pleadings. The court directed the Union of India to pay Rs. 1,12,98,552.43 to the Plaintiffs with interest at 12% per annum from 1st June 1988, subject to further proceedings related to a Civil Application challenging an order dated 17th April 1988. The court also ordered the Union of India to pay half the costs of the suit to the Plaintiffs.