TaxTMI 
TaxTMI 
2021 (6) TMI 1026
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....AA of the Excise Act and penalties under rules 25, 26 and 27 of the Central Excise Rules 2002. 3. The first four show cause notices dated 29.12.2011 (for the period 01.10.2010 to 30.09.2011), 06.11.2012 (for the period 01.10.2011 to 30.06.2012), 26.07.2013 (for the period 01.07.2012 to 31.03.2013) and 01.05.2014 (for the period 01.04.2013 to 31.03.2014) were adjudicated upon by a common order dated 20.01.2015 holding that the products mentioned in the show cause notices were cosmetics falling under Chapters 33/34 of the Tariff Act. This order dated 20.01.2015 has been assailed by the appellant in Excise Appeal No. 21079 of 2015. 4. The fifth show cause notice dated 24.04.2015 (for the period 01.04.2014 to 31.03.2015) was adjudicated upon by an order dated 11.04.2016 holding that the products mentioned in the show cause notice would be classified under Chapters 33/34 of the Tariff Act. This order has been assailed by the appellant in Excise Appeal No. 21387 of 2016. 5. The sixth show cause notice dated 19.04.2016 (for the period 01.04.2015 to 31.03.2016) was adjudicated upon by an order dated 27.02.2017 holding that the products mentioned in the show cause notices would be ....
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....Oil (vi) Coconut Milk Shampoo (vii) Hair Care Oil 33049990 33059019 33049910 33049990 33049990 33049990 33059019 Rs. 4,02,55,010/- 20.02.2018 (i) Indulekha Skin Care Oil (ii) Bringha Oil (iii) Akrot Face Pack (vi) Skin Care Cream (v) Baby Oil (vi) Coconut Milk Shampoo (vii) Hair Care Oil 33049990 33059019 33049910 33049990 33049990 33049990 33059019 Rs. 8,06,50,304/- 9. The first show cause notice dated 29.12.2011 mentions that the outer covers of the two products namely Indulekha Complete Skin Care Oil and Indulekha Gold Complete Hair Care Oil do not contain the description "ayurvedic medicine"; from the advertisements it can be seen that Indulekha Complete Skin Care Oil was portrayed and perceived as a product that enhances the beauty and not as an ayurvedic medicine; and the disclaimer in the advertisement issued for Indulekha Gold Complete Hair Care Oil would show that it cannot be used in diagnosis, treatment or prevention of any disease or disorder. The show cause notice, therefore, states that both the products were cosmetics under Chapter 33 of the Tariff Act. The relevant allegations contained....
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....in same allegations by making reference to the products manufactured and cleared by the appellant. 11. The aforesaid show cause notice dated 29.12.2011 and the next three show cause notices dated 6.11.2012, 26.07.2013 and 01.05.2014 were adjudicated upon by a common order dated 20.01.2015. The products manufactured and cleared by the appellant were classified as cosmetics under Chapters 33/34 and not as ayurvedic medicaments under Chapter 30 of the Tariff Act and accordingly, the demands have been confirmed with interest and penalty. 12. The impugned order records a finding that though the products contain ingredients which are ayurvedic as they are mentioned in the ayurvedic texts but the products have specific Headings under Chapter 33 of the Tariff Act and so even if the products have therapeutic value, they would be classified under Chapter 33. The impugned order also mentions that even if the license issued to the appellant recognizes the products as ayurvedic drugs, still the classification has to be made as per the rules of interpretation. The impugned order also takes notice of the fact that there was an amendment in Chapter Note 2 of Chapter 33 from 28.02.2005 as a r....
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....fect from 28.02.2005, such a condition is not prescribed in the Chapter Note. With effect from 28.02.2005, the products must only be suitable for use as goods of these headings and put up in packings of a kind sold in retail for such use to merit classification under Chapter 33. 08(vi). Further, the description under Chapter 30.03 prior to 28.02.2005 stood as Medicaments (including veterinary medicaments) Patent or proprietary medicaments, other than those medicaments which are exclusively Ayurvedic, Unani, Siddha, Homeopathic or Bio-chemic. Erstwhile Chapter Note 2 (ii) of Chapter Heading 30 defines "Patent or proprietary medicament' Presently, there is no definition of Patent or Proprietary Medicines. In fact there is no mention of Patent or proprietary medicaments. 08(vii). Relevant rules for the interpretation of the schedule are set out below:- ****** Accordingly, even if the products are classifiable under two different headings, then they shall be classified under the heading which occurs last in the numerical order. In terms of this rule also in case of a dispute between Chapter 30 and Chapter 33, classification is to be done under Chapte....
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....re, in conjunction with the discussion above and the specific tariff heading, I find that the product is classifiable under Chapter Heading 34011110 of the Central Excise Tariff Act, 1985. (emphasis supplied) 13. As noticed above, the proceedings initiated by the seventh show cause notice dated 16.02.2018 were dropped by the adjudicating authority by order dated 19.06.2019. In so far as the advertisement and packing material is concerned, the impugned order records a finding that they cannot be considered for determining the real nature and character of the product and that the opinion given by the Superintendent of a District Hospital would have no relevance for determining the classification of the products. The order mentions that the preparation of the products meet the requirements of medicaments prescribed under Chapter 30 and all that has to be seen is whether they are used for therapeutic purpose or beauty enhancement purpose. A finding has thereafter been recorded that the products would not fall under the category of cosmetics but would deserve classification under Chapter 30 of the Tariff Act. Since they are used for disorder/ diseases of the skin and scalp. 14.....
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....s. Sharma Chemical Works [ 2003 (154) E.L.T. 328 (S.C.) ]; (b) Puma Ayurvedic Herbal (P) Ltd. vs. Commissioner of C. Ex., Nagpur [ 2006 (196) E.L.T. 3 (S.C.)]; (c) Dabur (India) Ltd. vs. Commissioner of Central Excise, Jamshedpur [ 2005 (182) E.L.T 290 (S.C.)]; (d) Commissioner of Central Excise, Delhi vs. Ishaan Research Lab (P) Ltd [ 2008 (230) E.L.T. 7 (S.C.)]; (e) Himani Ltd. vs. Commissioner of Commercial Taxes, Lucknow [ 2011 (263) E.L.T. 335 (All)]; and (f) Commissioner of Central Excise, Chennai-IV vs. Hindustan Lever Ltd. [ 2015 (323) E.L.T. 209 (S.C.)]; (vi) In order to classify a product as cosmetics or medicament, the principle of Twin Test as drawn by the Courts has to be applied. The principle employs a common parlance test and also a determination as to whether the ingredients used for making the product are mentioned in the authoritative texts books on Ayurveda.; (vii) The Department has not rebutted the contention of the appellant that people use or treat the products as a medicament. The license that the appellant has been holding is a Drug license. The Sales Tax departmen....
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....tive text books of ayurveda. The interpretation of this aspect has been widened and in a number of cases it can be held that even if the products are mentioned in the ayurvedic texts, they will not classify as medicaments, if the products are used as a normal routine; and (vi) The preparations are not marketed as ayurvedic medicines and are not perceived as medicines in popular parlance. On an enquiry by the Department, the Superintendent District Ayurvedic Hospital, Kannur, by letter dated 01.09.2011 informed that the Indulekha brand preparations are cosmetics and not Ayurvedic. 16. The submissions advanced by the learned Counsel for the appellant and the learned Authorized Representative of the Department have been considered. 17. The appellant claims to be engaged in the manufacture and clearance of various ayurvedic products. It classified them under Chapter 30 of the Tariff Act. Initially when the appellant had started manufacturing the products by the name of Indulekha Hair and Skin Care Oil in 2009, the appellant held a cosmetics licence dated 15.06.2009 but the appellant surrendered this licence and was granted a licence by the ASU Drugs Controller w.e.f. 17.08.201....
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....under Chapter 30 of the Tariff Act since Chapter Note 2 to Chapter 33 as its stood upto the said date was interpreted to mean that the products were suitable for use as goods of Headings 3303 to 3308 and put in packings showing that they were for use as cosmetics; (iii) The advertisement and packing material cannot be considered for determining the real nature and character of the product for classification; and (iv) The opinion of the Superintendent of the District Ayurveda Hospital is not relevant for determining the classification of the product. 20. The following four issues, therefore, would arise for consideration in these appeals: (A) Whether the amendments made in the provisions of the Tariff Act w.e.f. 28.02.2005 have effected any change in the classification of the products in dispute as claimed by the department; (B) Whether the department has discharged its burden to prove that the products are classifiable under Chapter 33 of the Tariff Act; (C) Whether the products of the appellant are classifiable as medicament under Chapter 30 or as cosmetics under Chapter 33 of the Tariff Act; and (D) Whether Clause 3(c) of the General Rules can be applied in t....
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....e hair 16% 33.06 Preparations for oral or hygiene, including dentifrices (for example, toothpaste and tooth-powder) and denture fixative pastes and powders 16% 33.07 Pre-shave, shaving or after-shave preparations [Not containing substances specified in Note 1(d) to this chapter], personal deodorants, bath preparations, depilatories and other perfumery, cosmetics or toilet preparations, not elsewhere specified or included; prepared room deodorisers, whether or not perfumed or having disinfectant properties After amendment from 28.02.2005 CHAPTER 30 PHARMACEUTICAL PRODUCTS NOTES 1. This Chapter does not cover: (a) to (c) ************ (d) Preparations of Heading 3303 to 3307, even if they have therapeutic or prophylactic properties; ************** CHAPTER 33 ESSENTIAL OILS AND RESINOIDS; PERFUMERY COSMETICS OR TOILET PREPARATIONS NOTES 1. ********* 2. ********* 3. Headings 3303 to 3307 apply, inter alia, to products, whether or not mixed (other than aqueous distillates and aqueous solutions of essential oils), suita....
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....w for holding that Selsun would fall under Chapter 33 was that having regard to the composition the product will come within the purview of note 2 to Chapter 33 of the Schedule to Central Excise Tariff Act, 1985 is without substance. According to the Authorities the product contains only subsidiary pharmaceutical value and, therefore, notwithstanding the product having a medicinal value will fall under Chapter 33. We have already set out Note 2 to Chapter 33. In order to attract Note 2 to Chapter 33 the product must first be a cosmetic, that the product should be suitable for use as goods of Headings 33.03 to 33.08 and they must be put in packing as labels, literature and other indications showing that they are for use as cosmetic or toilet preparation. 26. It was, therefore, absolutely necessary for the Adjudicating Authority to record a finding that the products were "cosmetics" under Chapter 33 even after the amendment was made in Chapter Note 1(d) of Chapter 30 w.e.f. 28.02. 2005. B 27. Thus, what has to be seen is whether Department has discharged its burden of proving that the products were classifiable as cosmetics under Chapter 33 of the Tariff Act. The contention ....
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....used for the purpose cannot be described as cosmetic simply because it has ultimately led to improvement in appearance of the person. The primary role of the product was to grow hair on his head and cure his baldness. 21. The extent or the quantity 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. 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. (emphasis supplied) 30. Learned Counsel for the appellant submitted that in order to classify a product as cosmetics or medicament, the principle of twin tests formulated by the courts have to be applied. These two test are (i) the common parlance test and (ii) whether the ingredients used for making the product find mention in th....
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....n 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. (emphasis supplied) 33. The Supreme Court in Naturalle Health Products (P) Ltd. vs. Collector of C. Ex., Hyderbad [2003 (158) E.L.T.257 (S.C.)] also pointed out that the articles enumerated in the tariff schedules must be construed as far as possible in the sense a common man understands it. The relevant potion of order is reproduced below: 39. We are also of the opinion that when ....
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....edication under common parlance, but it has been found as a fact that the people use or treat the products manufactured by the appellant as medicament as the products do address the medical issues faced by them. It will also not be possible to accept the contention of the learned Authorized Representative of the Department that even if the products find mention in the Ayurvedic text they would not be medicament. 36. The second test is to determine whether the ingredients used for making the products are mentioned in the authoritative text books on ayurveda. As noticed above, the list of drugs approved and attached to the drug licence describe in detail the ingredients to be used; the botanical name; the parts of the plants to be used and the quantum of each ingredient; and the ayurveda text reference. It also provides the purpose for which the medicine are to be used and the dosage. 37. It will be useful to refer to the decision of Supreme Court in Naturalle Health Products. The Supreme Court pointed out that the products prepared from natural herbs mentioned in authenticated ayurvedic text books would be classifiable under Chapter 30. The observations are: 21. It is....
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....ons manufactured by the noticee are mixtures consisting of different ayurvedic components prescribed in the ayurvedic classical texts. Further, admittedly these are presented in measured doses and in packings for retail sale. On a very close scrutiny, I am of the considered opinion that, in so far as the making of the preparations and presentation thereof are concerned, the preparations meet the requirements of medicaments prescribed under chapter 30. The only doubt is regarding the intended purpose of these preparations: Whether these are used for therapeutic/prophylactic purpose or beauty enhancement purposes? The noticee has claimed that the preparations are meant to treat various diseases or disorders such as alopecia (baldness), seborrhoec dermatitis (commonly known as dandruff), etc. I find that the department has not denied this claim of the noticee. (emphasis supplied) 39. The Commissioner thereafter examined whether the products were used for therapeutic/prophylactic purposes or beauty enhancement and on examination of the documents and submissions advanced on behalf of the appellant concluded that the products manufactured and cleared by the appellant were not meant....
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....ions of chapter 3303 to 3307 are excluded from chapter 30 even if they have prophylactic or therapeutic properties. However, in order to enforce the provisions of this chapter note, the preparations should be first classifiable under chapter 33 as cosmetics. On the other hand, as held above, the preparations are primarily classifiable under chapter 30 as medicaments, and, therefore, this chapter note would not be applicable. Same is the case of chapter note 3 to chapter 33. To attract chapter note 3 also, the goods should be suitable for use as goods of the headings 3303 to 3307. However, as already held above, the goods are primarily classifiable under chapter 30 and therefore should be regarded as suitable for use as goods under the chapter heading 30. Thus, note 3 to chapter 33 also would also not apply in the instant case. (emphasis supplied) 40. The aforesaid findings of the Commissioner are based on appreciation of the legal and factual position emerging from examination of the products manufactured and cleared by the appellant. The Commissioner also observed that the products were neither meant for daily use nor they were cosmetics and were ayurvedic medicines classifi....