TaxTMI 
TaxTMI 
1991 (9) TMI 199
X X X X Extracts X X X X
X X X X Extracts X X X X
....oducts manufactured by the appellant, attract duty under TI 14E of the First Schedule of Central Excise Tariff as the said products were not made from the exclusively ingredients of Ayurveda and are also not exclusively Ayurvedic. Hence, a show cause notice dated. 18-7-1985 was issued to show cause as to why penalty under Rule 173Q of Central Excise Rules, 1944 should not be imposed and also as to why a duty of Rs. 1,05,443.39 due on the said products should not be demanded for the period 1-4-1983 to 31-1-1984 under Rule 9(2) of Central Excise Rules, 1944 read with proviso to Section 11A of the Act. The show cause notice gave the ingredients of the said two products namely, Ayur Shakti (Pain Balm) and Santalin-D (Skin ointment) as below: I. For Ayur Shakti:- 1. Medicated oil (prepared by Dry Ginger, Paper Sanbirishi) 2. Petroleum Jelly 3. Pudina ka Phul 4. Ajwan ka Phul 5. Karpur I.P. 6. Karpuka Thel 7. Karpur G.F. 8. Gandhapuram Thaila 9. Niligiri Thaila 10. Terpinka Thel11. Twak Thaila 12. Gajeputka Thel 13. Paraffin Wax 14. Bee Wax 15. Lemon Grass oil 16. Lavanga Thaila 17. Colour Yellow. II. Santalin-D (Skin ointment):- 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... their reply within the stipulated time. Hence, the appellant submitted their detailed reply on 15-11-1985. In this reply they consented that department was aware of the notification of these products as their factory had been visited by department officials and samples had been drawn on 26-9-1983, under Test Memo No. 2/83. There was also correspondence in this regard. They contended that department had not discharged its burden of proof regarding classification of product. They contended that they had obtained Drug licence No. 305 dated. 20-10-1982 for their products as Ayurvedic medicines. The Head of Deptt. of Ayurvedic, Arin Gas Anna Hospital of ingredients medicine had also approved their formula. They relied on 'The Ayurvedic Formulary of India' Part-I-First Edition published by Govt. of India, Ministry of Health and Family Planning, Deptt. of Health. They contended that all the active ingredients figured in Ayurvedic treatises and it was commonly understood as Ayurvedic medicines. They filed certificates from several Ayurvedic practitioners, who have issued certificates in these lines. "I have examined the two medicines AYUR SHAKTI and SANTALIN-D' and from the ingredients....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ured out of synthetic substances and did not find a place in Ayurvedic medicines as they were of IP standards. The base ingredients Petroleum Jelly, emulsifying wax were also synthetic ingredients and these ingredients did not find a place in the authoritative test book on Ayurveda i.e. Bhava Prakasa. 9. In respect of 'Santalin-D' synthetic ingredients like sorbitol, emulsifying wax, Lanolin anhydride; Preservative (Nepagin) and extract preservative had been used and hence the product could not be ayurvedic drug. 10. As regards the certificates relied by the Party he held that none of them referred to any of the authoritative books on ayurveda mentioned in Schedule I to Section 3(a) of Drugs and Cosmetics Act, 1940 and hence he did not place much reliance on these certificates. 11. The learned Collector held that there was no suppression in the case and hence extended period of proviso to Section 11A could not be extended and penalty was also not imposable. 12. We have heard Shri B.B. Gujral, learned advocate for the appellant and Shri L.N. Murthy, learned JDR for the department. 13. Shri Gujral, learned Advocate submitted that the products in question had been manuf....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dic names to Synthetic ingredients, while in this case no such thing had happened. The ingredients were similar to the ones used in Shri Baidyanath's and Richardson's case and as it was made clear in those cases that mere use of Synthetic ingredients would not make the products non-ayurvedic, therefore, the learned Collector had gone wrong in relying on the definition of Section 3(a) of Drugs and Cosmetics Act. He contended that this Tribunal even in Warner Hindustan v. CCE reported in 1989 (42) E.L.T. 33 had also strictly followed previous rulings of this Tribunal referred supra. He contended that the learned Additional Collector had gone wrong in rejecting the certificates of ayurvedic practitioners. In trade the products had been accepted as ayurvedic ones and hence the appellants' contention should be accepted. He further pointed out that department had not supplied the Test results and thereby the burden of classification had not been discharged by the Revenue. 14. Shri L.N. Murthy, learned JDR arguing for Revenue contended that the principles laid down in Amrutanjan's case squarely apply to the facts of this case. The ingredients were same. There were clear uses of synthet....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n's case and hence the Tribunal had correctly classified and laid the proposition therein. The Tribunal even in Warner Hindustan's case had held that the preparation should satisfy the test of having been prepared exclusively ayurvedic. 15. We have carefully examined the contentions raised by both the sides and also perused the records and the rulings relied by both the sides. 16. The question that arises for our consideration is as to whether the products in question are exclusively ayurvedic or not and whether it justifies for classification under TI 14E of First Schedule of Central Excise Tariff as 'P. or P. Medicine'. 17. The issue in question is no longer res integra. It has by now been clearly clarified and spelt out in the rulings referred to supra. But the Counsel had raised a point that in Amrutanjan's case, the Tribunal had deviated from the earlier rulings and the matter required to be spelt out clearly and it required reconsideration. It was his main case that the grant of licence under Drugs and Cosmetics Act is sufficient to hold the products to be ayurvedic and again he put the proposition that the drugs need not be manufactured exclusively as per formula or....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tems but their use in Ayurvedic preparations does not render such preparations non-ayurvedic provided the use of these ingredients is recognised in authentic treatises on Ayurveda. Mrs. Zutshi, SDR fairly conceded to this proposition in view of the circulars of the Central Board of Customs and Excise issued in this behalf from time to time. Board's circular letter No. 8 (Medicines) 62 conveyed vide letter F. No. 7/26/61-CX.VI dated 23-6-1961 allowed the use of iron, Sulphur, Mercury Camphor in Ayurvedic preparations, though they are of B.P. grade. The departmental representative has not disputed this fact that these pharmacopoeial items have been used in a very small quantity and that they find mention in the authoritative treatises on Ayurveda and are also established as such by uses and traditions. Under these circumstances, we confirm the findings of the Appellate Collector, Central Excise, Calcutta that the products namely, Himalaya Surma, Moti Surma, Netramrita Surma, Agnimukh Churan, Atul Shaktidata, Gaisol Pachak, Kasbati, Namak Sulemani, Pachak and Sodhi Harre, Swet Parpati as mentioned in show cause notice C. No. V(14F)(3) Val-27/76/5473 dated 10-3-1980 are classifia....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d the exemption from duty was admissible in respect of those medicines. We do not find any justifiable reasons for not following this principle. The ingredients of Vicks Vaporub are Pudine ke phool, Karpur, Ajwan ke phool, sarala drava, Nilgiri tel, Jatiphal tel and ointment base (Paraffin). The ingredients of Vicks Inhaler are Pudina ke phool, Karpur, Banafshah and Sarala Drava. Learned Advocate has stated that all the ingredients of Vicks Vaporub and Vicks Inhaler are mentioned in authoritative books on Ayurvedic medicines. The Collector (Appeals) has not examined the case from this angle although extracts from such books and other materials are stated to have been submitted to him." 22. In Shree Baidyanath Ayurved Bhavan Ltd. reported in 1985 (22) E.L.T. 175 (Tribunal) in paras 15 to 19, it is stated as follows: "The crucial point for decision is whether this product 'Surma' is exclusive Ayurvedic medicine or not. After discussing the entire case law on the subject, taking into account the ingredients contained in the 'Surmas' and the Board's circular letter No. 8(Med.) 162, dated 26th June, 1961 it was held that Surmas are exclusively Ayurvedic drug though pharmacop....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y medicine falling under Tariff Item 14E (CET) and excluded being exclusively Ayurvedic drug." 23. In Warner Hindustan's case in paras 22 to 25 at pages 40 and 41 of the report, it is stated as follows: "We observe that for any formulation to be considered as medicine, the same should be either recognised so in a standard Ayurvedic work or should be so proved by clinical trials or should be recognised so by an authority like DGHS. We observe that both sides have produced literature showing that in the standard recognised books of Ayurveda various formulations containing Pudina and Euclyptus oil for various purposes have been mentioned. The appellants' case for considering the goods as medicine is only based on one fact that the active ingredients, namely, Pudina which in fact is menthol and Euclyptus oil, are 'Ayurvedic' in nature and these have medicinal properties. The question for consideration is can the mere presence of some quantity of medicinally active ingredients irrespective of the quantity make a particular formulation a medicine. We observe as it is pudina and euclyptus oil have some medicinal properties for certain purposes but the same have to be presented in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ere selling the product as medicine, whether they had any product literature in this regard. They could not produce any such literature. The appellants have not produced any evidence from any practising physician as to whether they have recommended Icemint Tablets as a medicine for any condition of the throat. They have not produced any evidence from the trade to show that these tablets have been marketed and accepted as medicine." 24. Even the Board's circular dated 23-6-1981 referred in para 16 in Amrutanjan's case has clearly stated that "use of ingredients of pharmacopoeial items like Camphor B.P. or Sulphur B.P. in Ayurvedic preparations, were the use of those ingredients is recognised in authentic treatises on ayurveda and is established by usage and tradition, does not render such preparations non-ayurvedic on that score alone (emphasis supplied). 25. Therefore, it is very clearly stated in earlier rulings that the use of synthetic I.P.; BP grade should be recognised by authentic treatises on ayurveda and it should be established by usage and tradition. 26. In Amrutanjan's case (supra) this is precisely what has been stated also in paras 26 to 32 and 35, 44, 45A of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arged in this case. 27. The learned Additional Collector had examined the authoritative text 'Bhava Prakasa' relied by the manufacturer. He found that the ingredients like Karpoor, IP Terpinka Thel, Ajwayan ka Phool, Twak Thaila, Paraffin wax, Pudina ka Tel, Nilgiri Tel and Gejapulka Tel BPC 1975 in IP 2nd Edition, Camphor (Karpur IP) crystals were synthetic in nature. He found that Ayur Shakti contains certain ingredients which are not mentioned in the authoritative Text book on Ayurveda i.e. 'Bhava Prakasha' relied by the manufacturer. He also found in 'Santalin-D' synthetic chemicals like sorbitol, emulsifying wax, lanolin Anhydride, Preservative (Nepagin) were used. Shri Gujral, learned Advocate contended that these ingredients were only preservatives and not active ingredients. But he has failed to show and convince us that such ingredients are recognised in Ayurvedic licence and that such use will still make the product exclusively ayurvedic. 28. It is his contention that the preparation need not be as per formulae prescribed in authoritative text and as per Section 3(a) of Drugs and Cosmetics Act and this argument had been negated in Shree Baidyanath's case by Tribunal....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... makes it abundantly clear that only those drugs which are manufactured under a valid licence issued under the said Act and in compliance with its provisions can be lawfully sold, exhibited for sale or distributed. This also indicates that trade in respect of drugs is lawfully possible only when there is a compliance with the provisions of the said Act, both by the manufacturers and dealers. In Ashok Leyland's case (above), the Division Bench of this Court held that the relationship between the manufacturer and the dealer is not that of a principal and agent but that of a seller and a buyer. Applying the ratio of this decision to the case at hand, it seems to us obvious that the relationship that is established between the manufacturer and the dealer as regards the sale of the products manufactured by the petitioners is of a seller and a buyer and thus, the observation of the Supreme Court in Hindustan Sugar Mills' case (above) became most relevant. Their Lordships of the Supreme Court dealing with the provisions of the Central Act regulating the sale and the price of cement vis-a-vis the clauses of the agreement entered into by the parties, indeed observed that the provisions of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... used for or in the diagnosis, treatment, mitigation or prevention of disease in human beings or animals; and (ii) such substances, (other than food) intended to affect the structure or any function of the human body or intended to be used for the destruction of vermin or insects which cause disease in human beings or animals, as may be specified from time to time by the Central Government by notification in the Official Gazette. A look at the above definition will show that drug includes substances other than food intended to affect the structure or any function of the human body. Things which can fall within the category of food are expressly excluded from the definition of drug. The expression "any drug or medicinal preparation" as used in Explanation I defining "patent or proprietary medicines" indicates that the words "medicinal preparation" are used in the same sense as "drug". This inference is further supported by S. 3(h) of the Drugs and Cosmetics Act which defines "patent or proprietary medicines" to mean a drug. The assistance of the Drugs and Cosmetics Act can be taken for understanding the scope of Tariff Item No. 14-E of Sch. I of the Central Excises and Salt Ac....