TaxTMI 
TaxTMI 
TaxTMI 
2008 (9) TMI 4
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....Revenue Department. The Revenue Department's claim was that these products were cosmetics such as skin beautification creams, lotions, moisturisers, shampoos, etc., and were as such the "cosmetics" and "toilet preparations" chargeable to 40% duty. The Tribunal further held that IRLP and M/s.Ishaan Marketing Private Limited (hereinafter referred to as "the IMPL") were not related persons in terms of Section 4(4)(c) of the Central Excise Act and as such the price at which IRLP sold the products was to be adopted as the basis for determining the assessable value. Similarly, the IRLP and IRL Marketing Pvt. Ltd. (hereinafter referred to as "IRL (M)") were also not related persons and as such the price at which the IRLP sold the goods would form the basis for determining the assessable value. The Tribunal further held that the extended period of limitation was not applicable in all the cases. Resultantly, the Tribunal held that the duty demand on the products which were held to be cosmetics by the Commissioner, Central Excise was to be re-quantified with the normal period of limitation of six months, adopting the price of IRLP as the basis of the computation of the assessable value. The ....
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....Thus, the Commissioner held that the classification would be under Chapter 33. He also held that IRLP and IMPL were related persons and further that the Revenue was entitled to the extended period of limitation. 6. On the appeals filed before the Tribunal, the Tribunal allowed the claim of the IRLP in respect of as many as 22 products out of the total 92 products in respect of which the Show Cause Notices were given, they were at Sl.Nos.3,8,9,10,17,20,21,23,25,27,28,29,34,35,36,38,39,42,45 and 46, The remaining 70 products were held to be the "cosmetic" and "toilet preparations" falling under Chapter 33 of the Scheduled under Central Excise Act. The Tribunal further held that IRLP and IMPL were not the related persons and further the extended period of limitation could not be made available to Revenue in all the cases. 7. In the present appeals we are concerned only with those 22 products which have been held by the Tribunal as falling under Sub-heading 3003.30. The appeals are basically filed by the Revenue challenging the above findings regarding the 22 products. 8. Shri K. Radhakrishnan, learned Senior Advocate, appearing on behalf of the Revenue initially very strenuously....
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....o-costus vi) Bio-kelp vii) Bio-milk viii) Bio-margosa ix) Bio-peach x) Bio-pro xi) Bio-quince xii) Bio-saffron xiii) Bio-soya xiv) Bio-wheat xv) Bio-wintergreen xvi) Bio-walnut 13. Shri Radhakrishnan, learned Senior Counsel, appearing on behalf of the Revenue took us through the various entries of Chapter 33 and more particularly Entries 3304 and 3305 which are as under: "3304 - Wadding, gauze, bandages and similar articles (for example, dressing, adhesive, plasters, poultices), impregnated or coated with pharmaceutical substances or put up in forms or packings for medical, surgical, dental or veterinary purpose. 3305 - Pharmaceutical goods, not elsewhere specified." Learned counsel contended that the said products contain certain other ingredients also which cannot be said to be "Ayurvedic medicines". In support of his claim he invited our attention to the Show Cause Notice dated 10.4.1996 and more particularly para 6(i) referring to the statement of one S.V. Rasalkar, Technical Director, M/s.IRLP who had furnished the list of about 29 ingredients used in the said 16 products. Our attention was also invited to para 6(vi) of the Show Cause Notice where ....
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.... in another decision in Commissioner of Central Excise, Nagpur v. Vicco Laboratories [2005 (179) ELT 17 (SC)]. He also invited our attention to the decision in Megthdoot Gramodyog Sewa Sansthan v. Commissioner of Central Excise, Lucknow [2004 (174) ELT 14 (SC)] following the decision in Commissioner of Central Excise, Allahabad v. Himtaj Ayurvedi Udyog Kendra [2003 (154) ELT 323 (SC)]. Our attention was also invited to some other decisions to which we would make reference hereinafter. 15. Shri Lakshmikumaran, during his address, took us through the Notes as also the definitions, more particularly covered under Section 3(a) and 3 (h) of Drugs and Cosmetics Act defining drug and patent of proprietary medicines. Relying on these provisions and further relying on the provisions of Chapter 30 Note No.2, the learned counsel further pointed out that this controversy as to when a particular product should be covered under the "cosmetics" and as to when it should be held as "medicament" has been set at rest in BPL Pharmaceutical's case where the Court has crystallized the guiding principles. He pointed out that each of the product was having Ayurvedic medicinal herbs in it and even the la....
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.... not as a "cosmetic". 13 18. Going back to the List of Items in para 11, Item No.(ii) Bio Bhringraj would stand covered by that decision. On this backdrop we are thus left with 15 items. Shri Radhkrishnan also did not dispute this position regarding item No.(ii) Bio Bhringraj. 19. In BPL Pharmaceutical's case a clear cut distinction was made in the "cosmetics" and the "drugs". Observations made in para 31 are: "The contention based on Chapter notes is also not correct. One of the reasons given by the Authorities below 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, ....
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.... be used immediately after bleaching, tinting or permanent waving of hair or on inflamed scalp; Thirdly, it should be used twice weekly initially and then as often as necessary; Fourthly, that it was a medical treatment for dandruff; Fifthly, it contains Selenium Sulphide USP 2.5% w/v; Sixthly, the hairs should be washed first and then the Selsun should be massaged into the scalp. The Court also perused the literature which suggested that it was for the use of registered Medical Practitioner or a Hospital or Laboratory and that it further indicated that the product controls Dandruff and has beneficial effect on the scalp as it is helpful in controlling acne, otitis externa and Bleph-aritis. The Court also relied on the affidavits filed by the appellants. The Court found that the product was classified by the Excise Authorities as a patent and proprietary medicine accepting the decision of the Central Board of Excise and Customs rendered on 17.1.1981 and it was only because of the new Central Excise Tariff Act, 1985 that the entry was sought to be changed. 22. In para 26 of the above judgment there is a specific reference to the argument by the learned counsel for the Re....
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....red under a drug licence; Thirdly, it held that the Foods and Drugs Administration had certified it as a drug; Fourthly, that the Drug Controller had opined that Selenium Sulphide present in Selsun was in a therapeutic concentration; Fifthly, that it was included as a drug in the National formulary, US Pharmacoepia and the Merck Index; Sixthly, that it fulfils the requirement of a drug as understood in the common parlance; Seventhly, that it was certified in standard books and treaties; Eighthly, it was marketed as a patent; and Ninthly, that its literature referred to it as drug and the literature was addressed to the physician. The Court on this basis went on to hold the product as medicinal product and further held that it would fall under Tariff Item 3003.19. A very heavy reliance was placed and since this happens to be a leading judgment which was followed throughout for more than 10 years, we are specifically referring to the details of the judgment. 24. We need not dilate on the judgment further in view of our observations and our detailed references made but we must reiterate that the judgment does consider the relevant Entries of Chapter 30 includin....
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....y chemists but even by ordinary grocers. In short, it was submitted that in common parlance it was not called as perfumed hair oil. The court also referred to the law laid down in Shri Baidyanath Ayurved Bhavan's case (supra) and Alpine Industries v. Collector of Central Excise, New Delhi [(2003) 3 SCC 111] and took stock of the arguments that the common parlance test as laid down in these two cases was the only relevant test. On the other hand it was pointed out by the assessee that Chapter 30 dealt with all types of medicines and not only Ayurvedic medicines. It was further urged that the medicaments could be as per the formula set out in various pharmacopoeias or they could be under some patented formula of a particular party and further the product having medicinal properties in very small percentage did not matter. If the percentage of such ingredients having medicinal properties was more, it could be harmful to the human body. It was also argued directly on the lines of the BPL Pharmaceutical's case (supra) that merely because there were fillers/vehicles in order to make that medicament palatable and/or usable did not take it out of the entry of medicament. Example was ....
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.... 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, ammenesia, 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) 27. Following the above judgment this Court held in favour of the assessee in Calcutta Chemicals Co. Ltd. v. Commissioner of Central Excise, Chennai reported in 2003 (154) ELT 326 (SC) in respect of Maha Bringaraj Oil to which we have already made a reference and also in the decision in Commissioner of Central Excise, Calcutta-IV v. Pandit D.P. Sharma reported in 2003 (154) ELT 324 (SC) in case of Himtaj Oil. Thus in the aforementioned judgment this Court followed the law laid down in BPL Pharmaceutical's case (supra) even after noting the judgment in Shri Baidyanath Ayurved Bhavan's case (supra). We, therefore, cannot and would n....
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....ops. In para 4, the Court came to the conclusion that a mere decision of a court of law without more cannot be justification enough for changing the classification without a change in the nature of a product or a change in the use of the product, or a fresh interpretation of the tariff heading by such decision. The said decision was distinguished on the ground that the aforementioned tests were not applicable there. In para 5 it is pointed out by the court in the following words: "The court did not itself affirmatively hold that what was laid down by the Tribunal as a test to be `ordinarily' followed was invariably to be the sole test for determining whether a product is to be proved as a medicine or as a cosmetic. " The Court then went on to approve the law laid down in BPL Pharmaceutical's case (supra) and other cases, namely, Sharma Chemical Works (supra) and Meghdoot Gramodyog Sewa Sansthan' case (supra) and ultimately held in favour of the assessee and against the Revenue. 29. Lastly the same question came to be considered in details in Puma Ayurvedic Herbal (P) Ltd. v. Commissioner Central Excise, Nagpur [(2006) 3 SCC 266] though on the question of valuation. One of us (As....
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.... had in details analysed all these products and noted that the products contained the elements having Ayurvedic medicinal value. It was also noted rightly by the Tribunal that all these products were produced under the drugs licence issued under the Drugs and Cosmetics Act. Shri Radhakrishnan could not dispute this fact. 31. Further it was obvious from the labels of the products which we have ourselves inspected in the court that there is a claim made in each of the lable of the medicinal properties of the product. It is also found that there was a specific claim that this is not a cosmetic product. In this behalf Shri Radhakrishnan took us through the show cause notice and tried to point out that the products were sold to the Hotels, Beauty Parlours etc. Our attention was also invited to various orders as also to the literature and it was tried to be suggested that these products were treated to be the cosmetic products, if not by the assessee, at least by the customers. We have already pointed out that the common parlance test is not "be all and end all" of the matter on the basis of which the case of Shri Baidyanath Ayurved Bhavan's case (supra) was decided. We have further po....
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....necessary for us to go into that question. However, since the parties have argued the question, we would consider the same. 35. The Show Cause Notices in this case were given on 10.4.1996, 30.9.1996, 31.12.1996, 2.5.1997 and 28.10.1997. The Revenue sought to take advantage of the extended period of limitation. On 10.4.2008 this Court had passed the following order in respect of limitation: "As far as the question of limitation is concerned, following the decision of High Court of Allahabad in the case of Shahnaz Ayurvedics Vs. Commissioner of Central Excise, Noida 2004 (173) ELT 337, it was held that the extended period of limitation is not applicable. Against the said decision of the High Court of Allahabad, a petition being SLP (C) No. 21585 of 2004 [CC 8996/04] was filed in this Court in the case of Commissioner of Central Excise, Noida Vs. M/s. Shahnaz Ayurvedics & Anr. 2004(174) ELT A34 which was dismissed on 8th October, 2004. To enable us to compare the similarity between the products in question in the present case and the products which were in question before the High Court of Allahabad in the case of Shahnaz Ayurvedics (supra), we direct counsel for the respondents....