TaxTMI 
TaxTMI 
2010 (8) TMI 1090
X X X X Extracts X X X X
X X X X Extracts X X X X
....he petitioner") is engaged in the manufacture of various kinds of pharmaceutical products. In its normal course of business and through research as well as on the basis of well known Ayurvedic Authorities like Arya Bhishak, the petitioner company sought to develop a product for treatment of ailments of scalp and hair. The petitioner developed a combination of oil and capsule which can be used for treatment of Alopecia and Dandruff, fungal and bacterial infection, itching, during and post-radiation therapy, premature greying of hair, etc. On the basis of its own research and on the basis of established authoritative books in the field of Ayurved like Arya Bhishak, the petitioner company developed Trichup oil and Trichup capsule. This petition pertains to Trichup oil (hereafter also referred to as "the said product"). Since the said product is an ayurvedic medicament, the petitioner obtained necessary licence from the Drug Administrator, Gandhinagar in relation to the said product. The said product was not sold as cosmetic product nor was it so sold in the market. It was generally sold only at chemists shops and was used by various Ayurved medical practitioners to treat diseased scal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aimed in the product were minor and in common trade parlance, the product was not known, recognised, bought and sold as medicine for prevention and cure of diseases but was meant for cure of the hair. He, accordingly, held that the product should be classified under sub-heading 3305.99 and confirmed the duty. 5. Being aggrieved, the petitioner preferred appeal before the Commissioner (Appeals). Before the Commissioner (Appeals), on behalf of the petitioner it was contended that in the alternative, in any view of the matter, the product would fall for classification under tariff sub-heading 3305.10 and not under tariff sub-heading 3305.99 as contended by the department. The Commissioner (Appeals) vide order dated 31st March, 1998 upheld the classification as per the order made by the adjudicating authority and failed to deal with the alternate classification under tariff sub-heading 3305.10. Being aggrieved the petitioner preferred second appeal before the Tribunal. According to the petitioner, during the course of hearing before the Tribunal it had been contended on behalf of the petitioner that demand can only be prospective in nature. Before the Tribunal could pronounce the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....roduct is claimed and offered to be providing nourishment to hair, it cannot be treated as merely made for routine type of perfumed hair oil but would fall in the category of products listed in Note 6 of Chapter 33 of the said Schedule. It was further pointed out that the adjudicating authority has held that the medical properties claimed are very minor and in common and trade parlance, the product is neither known, recognised, bought and sold as medicine for prevention/cure of diseases but is meant for cure of the hair. It was emphasized that the adjudicating authority has recorded a finding to the effect that the product in question is meant for use on the hair. However, it is neither perfumed hair oil nor hair fixer and has accordingly held that the same is covered in the category of 'other' under sub-heading 3305.99 of the Schedule. Attention was invited to the order made by the Commissioner (Appeals) wherein it has been recorded that the petitioner had supplied the therapeutic index book wherein, at Page 23, the details of the product had been given as enumerated thereunder. Attention was invited to the fact that the oil is stated to be meant for healthy, smooth, shining, long....
X X X X Extracts X X X X
X X X X Extracts X X X X
....otha, Jatichetika, Gunja, Yashtimadhu, Varunbark, Karanj Beej, Bruhati Laxmana, Indravaruni in fixed percentage. The product in question apart from being beneficial for the health of the hair from root to tip also takes care of falling hair and dandruff and checks alopecia, fungal and bacterial infections and helps re-growth of hair, etc. Thus, the mere fact that the product is sold across the counters and not under doctor's prescription only, would not lead to the conclusion that it is not a medicament. Besides, merely because the percentage of medicament is less also does not mean that the product is not a medicament. It was submitted that the main criteria for determining classification is normally the use it is put to by the customers who use it. That the product in question is normally prescribed by doctors and is emphasized to be a product that deals with and cures certain diseases. It is the intended use of the product which is significant. In the present case, the intended use of the product is for cure of the ailments referred to hereinabove. 9. Referring to Chapter 30 of the Central Excise Tariff Act, 1985 (Tariff Act), it was submitted that Note 2 thereof provides ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eme Court had followed its decision in the case of Commissioner of Central Excise, Calcutta v. M/s. Sharma Chemical Works (supra). Attention was invited to the various orders made by the Tribunal in the case of Herbal Products v. Commissioner of Central Excise, Calicut, 2002 (146) E.L.T. 126 (Tri.-Bang.), Commissioner of Central Excise, Allahabad v. Harbans Ram Bhagwan Das Ayurved Sansthan (P) Ltd., 2003 (151) E.L.T. 203 (Tri.-Del.), Commissioner of Central Excise, Chandigarh v. Saini Hair Product, 2004 (164) E.L.T. 305 (Tri.-Del.), to point out that the facts involved in the said cases were similar to the facts of the present case. It was pointed out that the decisions of the Tribunal were carried before the Supreme Court and the Supreme Court following its earlier decisions had held in favour of the assessee and against the Revenue. Reliance was also placed upon various other decisions of the Supreme Court, however, with a view to avoid prolix the same are not reproduced herein. 11. The learned counsel for the petitioner accordingly submitted that in relation to this kind of hair oil, the consistent view of the Supreme Court is that it is an ayurvedic medicament, that the s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....med hair oils, hair lotions, pomades and creams, hair dyes (in whatever form), shampoos, whether or not containing soap or organic surface active agents." 14. It was submitted that the product in question falls under Heading No. 33.05 of Chapter 33 of the Tariff Act. Referring to Heading No. 33.05 which pertains to preparations for use on the hair, it was submitted that the product in question has rightly been classified under the category of 'other' under sub-heading No. 3305.99 and taxed accordingly. Referring to the definition of therapeutic and prophylactic in Ramnathan's Law Lexicon, it was submitted that both refer to diseases. However, in order to fall under Heading No. 30.03 of Chapter 30, the product should comprise of two or more constituents that have been mixed or compounded together for therapeutic or for prophylactic uses whereas, the product in question has neither therapeutic nor prophylactic characteristics. It was contended that Chapter 30 provides for pharmaceutical products and the notes thereunder provide as to how entries are to be interpreted. Referring to Note 1(d) thereunder which provides that the Chapter does not cover preparations of Chapter 33 eve....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tral Excise & others, 23 (2) G.L.R. 155. 16. This Court has perused the record of the case and has considered the submissions advanced by the learned advocates for the respective parties as well as the authorities cited at the bar. 17. Though, ordinarily, the Court would not entertain a writ petition where there is an efficacious alternative remedy available to the petitioners, in the facts of the present case, considering the period that has elapsed since the date of filing the petition, the Court at this stage, does not deem it appropriate to relegate the petitioner to avail of the alternative remedy of appeal more so, in the light of the reasons that follow. 18. For the purpose of understanding the controversy in issue, it may be germane to refer to certain statutory provisions. The Central Excise Tariff Act, 1985 has been enacted to provide for tariff for central duties of excise. Sub-section (2) thereof which provides for duties specified in the Schedule to be levied, lays down that the rates at which duties of excise shall be levied under the Central Excise Act, 1944 are specified in the Schedule. The Schedule to the Central Excise Tariff Act provides for ru....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ling within heading No. 30.02 or 30.04 which are either :- (a) products comprising two or more constituents which have been mixed or compounded together for therapeutic or prophylactic uses; or (b) unmixed products suitable for such uses put up in measured doses or in packings for retail sale or for use in hospitals. (ii) ...  ...  ... 21. The Central Board of Excise & Customs has issued various departmental clarifications. C.B.E. & C. Circular No. 333/49/97-CX., dated 10th September, 1997, inter alia, provides that for the purpose of assessment of products claimed to be ayurvedic medicaments under Chapter 30, it may be ascertained that the products claimed to be medicaments should have substantial therapeutic claims which are not subsidiary in nature and the mode of prescription and use should be similar to that of a medicine/drug. It may be noted that medicaments are normally prescribed in doses, for a limited time, and for specific conditions/ailments. The description of goods under Heading No. 30.03 of Chapter 30 is "medicaments (including veterinary medicaments)." 22. Notes 2 and 6 of Chapter 33 which are relevant for the present purpose rea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and nutritive. It is used as a combined therapy basically for treatment of diseases related to hair on human head. Its active ingredients reach through blood vessels at the root of the hair from external route and treat diseases like Alopecia, dandruff, premature greying and loss of hair after treatment like therapy. The medicine is neither for beautification of the hair not for daily use as a cosmetic. The medicament is generally prescribed by Physicians and Medical Practitioners for treatment and cure of diseases and for prevention thereof as well as to provide protection to hair. It is generally available with the Chemist in Medical stores. It was further the case of the petitioner that the oil content of the medicament acts as a vehicle through which the active ingredients are carried for treatment of diseases. All the active ingredients specified in the label and in the literature are specified in the standard Ayurvedic Books. The "til oil" has unique medicinal properties and is effective in the treatment of diseases Alopecia Aerata, Cicastrisatha, mild infection of scalp, greying hair, dandruff etc. In common trade parlance the product is recognised as Ayurvedic Medicine. The....
X X X X Extracts X X X X
X X X X Extracts X X X X
....what is stated in the brochure and the carton in which the product is packed. The carton directs "gentle massage on dry hair". It does not say a word about the application on the scalp. (4) The document at Exhibit M is stated to be used by medical professionals but does not indicate what category of medical professionals it has been circulated to. (5) In addition to the instructions on the carton for massage on hair, there is no indication whatsoever with regard to its duration or frequency of application. A medicament of whatever origin is reasonably expected to have an optimum frequency and duration of use. The total absence of any indication of any such limits is a strong pointer to the product not being a medicament. (6) It may be true, as claimed, that its ingredients figure in the ayurvedic text books cited as ayurvedic medicament. However, there is absence of material to show that in the quantities in which the ingredients are present, they have any medicinal effect. (7) The product is supposed to contain of 80% til oil and 20% Trangraj oil, "made siddhi" with various other ingredients. The meaning of term 'made siddhi' was not clearly explained. It however, appears that....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l the ingredients used in Banphool Oil are those which are set out in the Ayurveda text books. Of course the formula may not be as per the text books but a medicament can also be under a patented or proprietary formula. The main criteria for determining classification is normally the use it is put to by the customers who use it. The burden of proving that Banphool Oil is understood by the customers as an hair oil was on the Revenue. This burden is not discharged as no such proof is adduced. On the contrary we find that the oil can be used for treatment of headache, eye problem, night blindness, reeling, head weak memory, hysteria, amnesia, blood pressure, insomnia, etc. The dosages required are also set out on the label. The product is registered with Drug Controller and is being manufactured under a drug licence. 13. Another aspect to be kept in mind is that the Revenue is bound by the circulars issued by the Board. The Board circular dated 5th December, 1991 clearly stipulates that in case of doubt the matter should be referred to the Drug Controller. The matter was referred to the Drug Controller who, as stated above, has opined that it is an Ayurvedic medicament. If the d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tity of medicament used in a particular product will also not be a relevant factor. Normally, the extent of use of medicinal ingredients is very low because a larger use may be harmful for the human body. The medical ingredients are mixed with what is in the trade parlance called fillers, or vehicles in order to make the medicament useful. To illustrate an example of Vicks Vaporub is given in which 98% is said to be paraffin wax, while the medicinal part i.e. Menthol is only 2%. Vicks Vaporub has been held to be medicament by this Court in CCE v. Richardson Hindustan Ltd. - 1989 (42) E.L.T. A100. Therefore, the fact that use of medicinal element in a product was minimal does not detract from it being classified as a medicament. 22. In order to be a medicinal preparation or a medicament it is not necessary that the item must be sold under a doctor's prescription. Similarly availability of the products across the counter in shops is not relevant as it makes no difference either way. 29. The Supreme Court in the case of Commissioner of Central Excise, Delhi v. Ishaan Research Lab (P) Ltd. (supra) [2008 (230) E.L.T. 7 (S.C.)] after considering the above referred as well as ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....decisions of the Supreme Court the following principles can be culled out : (i) It is a settled law that the onus or burden to show that a product fall within a particular Tariff Item is always on the Revenue. (ii) Mere fact that a product is sold across the counters and not under a Doctor's prescription, does not by itself lead to the conclusion that it is not a medicament. (iii) The main criteria for determining classification are normally the use it is put to by the customers who use it. The burden of proving that the product is understood by the customers as hair oil is on the Revenue. (iv) The Board circular dated 5th December, 1991 clearly stipulates that in case of doubt the matter should be referred to the Drug Controller. If the Drug Controller opines that it is an Ayurvedic medicament and the department still entertains any doubts, they could have referred the matter to the Adviser, Ayurveda/Sub-Commissioner. (v) Cosmetic products are meant to improve appearance of a person, that is, they enhance beauty. Whereas a medicinal product or a medicament is meant to treat some medical condition. It may happen that while treating a particular medical problem, after the probl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that the same has to be massaged gently with finger tips on scalp and hair. Another reason for the lower authorities in holding against the petitioner is the quantity of medicinal element used in the product. As held by the Supreme Court the fact that use of medicinal element in a product is minimal does not detract from it being classified as a medicament. Another ground for holding against the petitioner is that it is not the case of the petitioner that the product is being sold only at chemists and that the product is available across the counter. In this regard the Apex Court has held that the mere fact that a product is sold across the counters and not under a Doctor's prescription, does not by itself lead to the conclusion that it is not a medicament. According to the Tribunal the product is supposed to contain of 80% til oil and 20% Trangraj oil, "made siddhi" with various other ingredients. The meaning of term 'made siddhi' was not clearly explained. It however, appears that these are ingredients that give the product its medical properties. With the exception of dhatura (15%), other ingredients contained therein are 1% or 0.5%. There is no material to show that in these pr....