TaxTMI 
TaxTMI 
2000 (8) TMI 861
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....CET sub-heading 3003.30. In the wake of intelligence gathered by the Directorate General of Anti-evasion that the products manufactured by IRLP were skin beautification creams, lotions, moisturisers, shampoos, etc., and were cosmetics and toilet preparations chargeable to duty @ 40% under Chapter 33 of the CETA but were being cleared as ayurvedic medicines on payment of duty @ 10% ad valorem, various premises of IRLP were searched by the officers of Directorate General of Anti-evasion on 17-1-96. Enquiries conducted by the Department revealed the following : 1. That IRLP are actually manufacturing and clearing cosmetics but with the intention of evasion of central excise duty, they are clearing their products as ayurvedic medicines. 2. They have fraudulently obtained a Licence under Drugs and Cosmetics Act 1940 by declaring use of certain herbals in their products but the cosmetics which are being used as essences, foaming agents, binding agents and giving bulk to the hair, cleansing agents, producing more lather, adjusting the PH value, chelating agents, astringents, having antiseptic property, chemical perfumes, humectants, skin softeners, etc., were not declared by them wh....
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....sued on 10-4-96 alleging that IRLP are manufacturing and marketing and selling products only as cosmetics and that their products are treated as cosmetics in trade parlance. The notice also alleged that M/s. Ishaan Marketing P. Ltd. (herein after referred to as IMPL) through whom IRLP was marketing its products, and IRLP are related persons as per Section 4(4)(c) of the Central Excise Act and that the transactions between them are not at arms length. The notice alleged that since IMPL and IRLP are related persons and normally whole-sale price for goods sold in sizes other than 35 ml. did not exist at the factory gate, the price at which IMPL have sold the products was to be taken as the cum-duty price of the goods manufactured and cleared by IRLP, for levy of duty. The notice proposed recovery of Rs. 3,06,68,074.78 BED and Rs. 34,39,918,89 SED during the period 1-4-91 to 16-1-96 by invoking the extended period of limitation; penal action was also proposed against them. The notice was adjudicated by the Commissioner of Central Excise vide his Order-in-Original No. 5/98 dated 29-1-98, confirmed a duty demand of Rs. 3,10,17,993/- and imposed a penalty of Rs. 1 crore on M/s. IRLP under....
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.... preparations for use as soap) proceeds on the basis that the products were referred to as cosmetics by hotels to which they were supplied; that they are used as shampoos, moisturisers, etc., and not as medicines; that the literature of the appellants no where describes the products as medicines; that the shape and size of the containers also indicates that the products are cosmetics. She has held that the term "ayurvedic medicines" has been given on the label either above or below in very small size, that they do not claim any cureative or prophylactic properties against any ailment or disease and that, there is no evidence that these were prescribed by doctors or that any clinical trials were conducted thereon. She has further held that the definition of ayurvedic medicine under the Drugs and Cosmetics Act cannot apply to decide classification under the Central Excise Act, and, therefore, the popular meaning of the products is to be taken into account. She has relied upon the decision of the Tribunal in the case of Shri Baidyanath Ayurved Bhawan v. Collector of Central Excise reported in 1985 (22) E.L.T. 844 which has been affirmed by the Apex Court 1996 (83) E.L.T. 492 (S.C.). S....
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....now completed the research of the efficacy of the ingredients used in the remaining items with reference to the authoritative text books of Ayurveda. I am enclosing the data and the comments for these items alongwith this note. 3. All the 66 products examined by me contain ingredients which are well documented in authoritative ayurvedic text books-references have already been given in each of the product data sheet. Under the Drugs and Cosmetics Act, all these items will be considered as patent or proprietary ayurvedic medicaments in terms of Section 3(h). 4. I have read the peculiar definition under the Excise Tariff mentioned in your letter with great interest. According to me, any ayurvedic medicament will be considered as a medicament even if it has cosmetic use but the definition quoted in your letter being peculiar, I have examined the data, the method of use and the lable claim of all these products. As I understand this peculiar definition, any cosmetic product which is used either as a toilet preparation or as a beauty aid (like skin care preparations or hair care preparations) would ....
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....6 & Shaligram Nigantu P. No. 252) (5) ARISHTAKA (4.25) Tridoshaghna - Brings balance in Tridoshic disorders. Kushtaghna - Useful for various types of skin disorders. Kanduvishphotaknashaka - It is anti-itching, anti-toxin and anti-inflammatory. Mangalya - Bahava Prakash has given this as a synomym which indicates overall good effect for user (Bahava Prakash Nigantu P. No. 529). BASE Q.S. (6) SLES Derived from Coconut Oil (7) SLS -do- -do- (Indian Pharmacopoeia (II) P. No. 475 (8) Cocodie -do- -do- (9) Sodium Benzoate Preservative -do-    -do (II) P. No. 465 (10) Methyle Paraben -do- -do-    -do- (I) P. No. 318 (11) Propyl Paraben -do- -do-    -do- (I) P. No. 427 (12) Fragrance V.J.8. From natural sources Note : This product is made out of combination of five Ayurvedic constituents derived from plants sources. This is also authenticated by Pharmco Dynamics (Guna Dharma) as described in Ayurvedic Literature. In view of these ingredients this p....
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....n Ayurvedic Pharmacoepia. The item placed at serial numbers 5, 6 and 7 are bases from vegetable oil acting as emulsifying agent. The Pot. Hydroxide is used to adjust pH. and glycerin is used to preserve its fluidity. The last two items listed are preservatives. .. Since the Ghrit Kumari has rasayan effect, it delays the process of ageing. Dushtavarnah cures chronic ulcer & infection on the skin. It delays the process of ageing. The Gunakarma (Pharmaco dynamics) of main items at Sl. No. 1 to 4 indicate that it is good for the conditions like Dushtavarana (chronic ulcers) infections and wrinkles. BIO-COCONUT INGREDIENTS 1. NARIYAL PANI (3%) Raktapittanashak - Cures for the diseases where rakta dhatu and pitta doshas are disturbed. (Dravya Gun Vigyan P. No. 117) Varnya - Provides strength to the skin 2. DOODHAL (3.5%) Rupana - Active tissue regeneration Vishnashani - Removes toxins. Bhava Prakash Nighantu P. No. 458 3. MANJISTHA (2.1%) Kushtahara - Removes the skin disorders. Vrananashani - Eradicates the minute ulceration. (Shaligram Nighantu P. No. 154) 4. NIMBAKAMLA (0.5%) Rich in Vit. C and citrous action 5....
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.....S. 5. STEARIC ACID From vegetable oil Indian Pharmacopia (II) P. No. 481 6. GLYCERIN From vegetable oil (humectant)  -do-  (I) P. No. 234 7. CETYL ALCHOHOL Thickener and stabilizer     -do-  (II) P. No. 92 8. LANOLIN Animal Fat          -do-  (II) P. No. 545 9. METHYL PARABEN Preservative          -do-  (I) P. No. 318 10. PROPYL PARABEN Preservative          -do-  (I) P. No. 427 11. FLAVOUR VK DRAKKAR Natural Sources Note : This product contains four items of plant origin described in Ayurvedic treatises. Their application is emphasized in a clinical conditions called Padadari (Rhagades) both by Bahav Prakash and Raj Nighantu. In this clinical conditions skin cracks and becames painful because of on-going inflammatory changes. This disease is often seen in adults and in elderly people, mostly at the time of change in the season and the products is specially effective in the case of Padadari (Rhagades) inflammatory condition of the ....
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....age, addition of other excipients or other ingredients do they diminish the therapeutic effect of these ingredients? If the percentage is not fixed in the text books, on what basis we say the percentage of ingredients present in the medicaments have therapeutic effect. The learned Commissioner selected the following medicines for comments in this regard. 1. BIO-ALOEVERA 2. BIO-APPLE 3. BIO-APRICOT 4. BIO-BHRINGRAJ Please offer your expert opinion at your earliest convenience supported by references, if any, from authoritative texts on Ayurveda. Thanking you, Yours faithfully For ISHAAN RESEARCH LAB. PVT. LTD. Sd/- AUTHORISED SIGNATORY ISHAAN RESEARCH LABORATORIES PVT. LTD. Regd. Office : 901, Nirmal Tower, 26 Barakhamba Road, New Delhi-110001, Phone: 3738011-13 Works: S-35, OKHLA INDUSTRIAL AREA, PHASE-II, NEW DELHI-110020, PHONE: 6912832 21st November, 1997 Dr. V.N. Pandey ABMS, D.A.Y.M., PhD. Ayurveda Ex-Director Central Council for Research Ayurveda & Siddha A-50, South Extn., Part-I, New Delhi-110049 Dear Sir, Please refer to our letter dated 13-11-97. On the same grounds you are requested to give your expe....
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....e patient. The same has been reflected and proposed in Ayurvedic formulary of India Part-I which is a compromise document. The participation of each ingredient have been worked out into their percentages. Because, it is more difficult since the drug differ with respect to the land, season, source, flavour, taste, potency, post digestive effect and specification. Further it becomes more puzzling since the men and women differ with the respect to the body, morbid tendency, constitution, age, vitality, gastric fire, proclivities, homologation & stage of disease. (Charaka, Kalpasthan Chapter-1, 1-6) The Ayurvedic drug action is not deduced as it is done in case of modern drugs (synthetic, semi-synthetic) of today. The Ayurvedic drug action depends upon its panchabhoutic composition (physico-chemical combination). The Dravya (matter) is a source material and Guna is property available in drug material. However, to simplify these qualities, the basis evolved by Ayurvedic philosophers and scientist to describe the Ayurvedic pharmaco-dynamics of medicament is being described in the following order :- 1. Rasa - (Taste) Indicating chemical composition based on taste ....
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....ater, soluble portion of the plants. They are prepared on the basis of the principles applied for preparation of Kashayas as used in Ayurveda. There is standard method of reduction of Kashaya contents after boiling ¼ (Chaturthansha avashesha) (25%), 1/8 (Ashthamansavashesha) 12.5%, 1/16 (sodasansavashesha) 6.25%. These decoctions are separate to that of swarash (juices) which are crushed and pressed to extract out their contents. 2. In the present formulations the percentages of the main ingredients range from 3 to 25% except certain packs, powders and balms. 3. In event of bringing out standard quality of drug the percentages are being given as it is followed in most of the Ayurvedic proprietory formulation by most of the firms. 4. The bases which have been added to the main ingredients do not have therapeutic effect since they are used as vehicle or excipients. They simply help in maintaining the proposed combination, their fine presentation. They do help in activating the synergestic action or at time potentiate their effect. The percentag....
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.... of 100%. The presence of main ingredients to the tune of 11.25% is in conformity with a principle of Ashthamanashavshesha (1/8 ratio of decoctions) as advocated in Ayurvedic texts for kashaya preparation. [2] BIO-APPLE This preparation of Ayurveda contains Shikakai 1%, Samundrakai 2%, Brahmi 3%, Aristaka 3% and Chhoti duddhi 1%. The aggregate of the combination makes it 10% as base material. The added bases are approximately 27% which do not have any therapeutic property. This preparation is mainly to be used in Darunaka (Dandruff) or wherever syboric obnoxious discharges are observed in the hair roots specially scalp. Shikakai acts as kaphaghana dravya and Aristaka along with Chhotiduddhi help as anti-itching, anti-toxin and anti-microbial agent. Brahmi acts there as a healing agent and vitalizers after the skin of the scalp becomes raw in a biological cleansing process. Samundrakai forms a jelly like structure after being dissolved in hot water. Its property as Mruduvirachaka (mild laxative) is used here in a different context. It soaks the discharges released by its hygroscopic action after pealing of the crust by Aristaka, Chhoti duddhi and Shikakai. The total quantit....
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....skin, capable of providing strength to the muscles and hair roots of the scalp. [5] BIO-CUCUMBER It is a specialized medicinal plant based Ayurvedic preparation which contains decoction (1:8 ratio) of Daruhaldi 0.1%, Dhania 2%, Majuphal 2% and Pudina Tail 0.85% separately. The total percentage of main ingredients comes to 4.95%. To provide it an expected color brilliant blue green 5mg in 100ml and tetrazine yellow 5 mg n 100 ml are added. It is further supplemented by preservatives such as methyl paraben 1.5% and propyl paraben 0.1%. The rest is made 100% by adding pure water. It is a light application on face as a medicated fluid to save the skin from infections. It helps in recovering the bad smell and healing of molecular ulceration on face. The analysis of ingredients used in this item indicates Daruhaldi as a healing agent and help in avoiding itching and irritation of skin. Dhania dispels bad smell. Majuphal does not allow bad discharges from the skin because of its grahi (capacity to adsorb or absorb discharges). Lastly Pudina tail acts as an disinfectant and induces the feeling of being fresh due to its krimi prabhanjana property. The whole idea is to keep the face....
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....ucts in question. The Court noted that the product in dispute was not intended for cleansing, beautifying, promoting attractiveness or altering appearance but was intended to cure or prevent certain diseases. The Court held that in the matter of application of Note 2 to Chapter 33, the product must first be cosmetics, it should be suitable for use as goods of Heading 33.03 to 33.08 and must be put up in packing with labels, literatures and other indications showing that they are for use as cosmetics or toilet preparation. The Court held that the product cannot be called cosmetics only for the reason that it is packed in attractive plastic bottles. The Court observed that the important factor is that the constituent (selenium sulfide) is the main ingredient and it is the only active ingredient and set aside the finding of the Excise authorities that selenium sulfide has only subsidiary curative or prophlactic value. Applying the test laid down by the Apex Court, let us examine whether the products in dispute in the present case are intended to cure or prevent certain diseases. For this purpose, we reproduce below the description given on the labels of the products : SL.NO. NAM....
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.... - - - - Cure pigmentation of skin, eczema, psoriasis etc., and increase blood circulation. Follow with freshner and then moisturiser. Not recommended for sensitive skins. May cause burning sensation due to effective ingredients. 18. BIO-GEL : - - It removes microbes and pollutants from skin making it healthy and smooth. Follow with freshner and then mousturiser. 19. BIG-HONEY : - - Helps to tighten pores and removes traces of dirt and pollutants. Follow with moisturiser. 20. BIO-HENNA : - Stop hair fall, useful in alopecia. 21. BIO-HENNA LEAF : - Preventing hair loss and giving it a healthy look. 22. BIO-SANDAL : - - Antiseptic, anti infective qualities combat with skin problems. Use every morning after moisturising. 23. BIO-KELP : - Penetrate hair shafts, nourish scalp and retard hair loss. Use in Aloepecia. 24. BIO-LIP : - - - For chopped and dehydrated lips. Treats soars, swelling dry dehydrated chopped lips. Restore natural suppleness of the lips. 25. BIO-MILK : - - Nourishes dry and dehydrated skin. Helps to remove epithelial ....
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....e eyes. 44. BIO-WINTER CHERRY : - Removes skin infection and blemishes. It nourishes dry and dehydrated skin leaving it soft. 45. BIO-WINTERGREEN : - - Controls acne, pimples and other skin blemishes. May cause temporarily tengling sensation due to effective ingredients. 46. BIO-WALNUT : - Stops hair fall. 47. BIO-VERA : - Help to protect skin from environmental pollution and microbes. 48. BIO-VIT : - It stimulates blood circulation and helps relax the Body. 49. BIO-CHESTNUT : - It helps tighten facial muscles. It removes deep seated microbes and pollutants. It improves cell respiration and blood circulation. 50. BIO-ORANGE : - Cures skin infection 51. BIO-SEA KELP : - - It cleans without dehydrating. Removes all microbes and pollutants. 52. BIO-BASIL : - Provides day long protection from perspiration and bad odour. 53. BIO-CADO : - It relieves body of all tiredness. 54. BIO-CIT : - The rich blend of essential oils helps to refresh and invigorate the body. 55. BIO-CARROT OIL : - Help retard dryness and moisture loss that occur a....
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.... Product at Sl. No. 39 - Bio-soya It is intended to cure alopecia Product at Sl. No. 42 & 45 - Bio-wheat and Bio-wintergreen It is intended to cure acne and pimples Product at Sl. No. 46 - Bio-walnut It prevents or cures hair fall. As for the product at Sl. No. 5 - Bio-bhringraj, we note that in the case of Collector of Central Excise, Pune v. Ramakrishna Vidyut (Final Order No. 847/99-C dated 16-8-99), the Tribunal has upheld the findings of the Commissioner that Mahabhringraj Hair Oil is to be classified as ayurvedic medicine, relying upon the CBEC Circular dated 3-4-94 reported in 1996 (83) E.L.T. T50 and upon the Apex Court decision in the case of BPL Pharmaceuticals Ltd. (supra). The ratio of the above decision would cover this product and, therefore, we hold that the product at Sl. No. 5 is also covered by CET sub-heading 3003.30. The Revenue has not rebutted the claim of the appellants that the above products are intended to cure or prevent certain ailments or diseases as set out above. Hence, applying the test laid down by the Apex Court in the case of BPL Pharmaceuticals (supra), we hold that the products at Sl. Nos. 1, 3, 5, 8, 9, 10, 17, 20, 21, 23, 2....
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.... the case of M/s. Kirloskar Cummins Ltd. reported in 1991 (51) E.L.T. 325 (Bom) it was clearly held that sales to industrial consumers are also sales in whole-sale trade and the price charged to industrial consumers can be adopted as the basis for sales made to related persons as well, and the question of adopting the price charged by related persons cannot arise. Applying the ratio of this judgment, we hold that the price charged by IRLP to hotels should be taken as the basis of assessable value of the products in dispute. The Commissioner has referred to sales made to M/s. Prem Jewellers to whom the goods were sold in the same size packs that were being sold by IRLP to IMPL, in paragraph 34.7 of the impugned order. However, this is not relevant as no sales were made to Prem Jewellers by IRLP after July 95. IRLP sold the products in 35 ml. pack as well as 120 ml pack to hotels as well as IMPL. In the year 1994-95, out of total sales 39.40% was to hotels, while the percentage of sales to IMPL was 59.06% and in 1995-96, IRLP sold 42.35% of its goods to hotels and 53.38% to IMPL. Comparison of the price charged to IMPL with the price charged to various hotels would show that the pric....
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....t allowing for abatement of duty. Applying the ratio of the Larger Bench decision in the case of Sri Chakra Tyres reported in 1999 (108) E.L.T. 361, we hold that the sale price should be taken as the cum-duty price and duty payable should be abated therefrom. 5.2.2 In the case of show cause notice dated 2-5-97 (for the period 1-10-1996 to 31-3-1997) which culminated in Order-in-Original No. 51/98 dated 31-8-1998, the appellants paid duty under Chapter 33 under protest w.e.f. 3-10-1996 and, therefore, this issue has not been raised in the above mentioned show cause notice. In this case, the relationship between IRLP and IMPL would be relevant only for one clearance of value of Rs. 78,121/- and we have already held that IRLP and IMPL cannot be treated as related persons. In this case other than the solitary clearance of the above mentioned value, there was no other sale to IMPL. Sales were made to IRL marketing and there are no common Directors between IRLP and IRLM and there is also no common share-holding. Therefore, IRLP and IRL Marketing cannot be treated as related persons. Hence, the price at which IRLP sold the goods to IRL Marketing is to be adopted for the purpose of....
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....re under the existing licence and directed the appellants to specify on the label of the products that "the product is not a cosmetic item". The memorandum dated 17-4-96 of the Deputy Drugs Controller to the appellants in this connection is reproduced below : This has reference to the reply dated 9-4-96 received from the firm and their subsequent letters dated 15-4-96 and 16-4-96 and personal explanation given by Mrs. Vinita Jain, Managing Director of the firm in response to this Department show cause notice of even number dated 29-3-96. The same were considered in the light of the decision of Ayurvedic, Siddha and Unani Drugs Technical Advisory Board meeting held on 13-1-1995 communicated by Govt. of India, Ministry of Health & Family (Drugs Control Cell) (ISM), New Delhi vide their D.O. letter No. K.11024/2/95-DCC (ISM) dated 25-4-95 wherein use of preservative, excipient like starch, lactose and filling agents like Sodium Lauryl Sulphate etc. are allowed in the manufacture of Ayurvedic medicines. Decision of the Board needs further clarification whether use of other chemical ingredients as excipient base required as suspending agent, adsorbent, surfactant, humectant, emulsify....
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....ow cause notice alleging, inter alia, that presence in the products of ingredients which are not mentioned in the Ayurvedic Text Books is fatal to their claim for classification as ayurvedic medicines, the Collector of Central Excise, Delhi has issued Trade Notice No. 13/96 dated 22-4-96 permitting the presence of preservatives, excipients, binding agents, etc., even though those are not mentioned in the formulae prescribed in the authoritative text books. The Trade Notice is reproduced below : Trade Notice No. 13-CE (Misc.-13)/96 Dated : 22-4-96 Sub : Exemption from excise duty on Medicaments used in Ayurvedic system under Notf. No. 75/94-CE dated 29-3-94. The scope of exemption under Notf. No. 75/94-CE dated 29-3-94 in respect of Ayurvedic, Unani, Siddha, Homoeopathic and Biochemics systems has been examined. It was brought to the notice that in some cases, though the medicaments under the above systems prepared according to the formulae described in the relevant authoritative books or pharmacopoeia, as the case may be, and sold under the generic name described in such books or pharmacopoeia. The preparations also contained some ingredients having no theraupeutic v....