AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (5) TMI 191
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....ook at classification of the product in question justified ........ 72 Conclusion ................................................................................................ 76 Preliminary and brief outline 1. This appeal is directed against the common judgment and order dated 31.01.2018, as passed by the Customs, Excise and Service Tax Appellate Tribunal Hereinafter also referred to as 'the Tribunal', insofar as relating to Appeal No. E/30050/2016 The order bearing No. 30121 of 2018, whereby the Tribunal has disapproved and reversed the order dated 16.10.2015, as passed by the Commissioner of Customs and Central Excise, Hyderabad Hereinafter also referred to as 'the Adjudicating Authority' in HYD-EXCUS-004-COM-042-15-16. 1.1. By the aforesaid order dated 16.10.2015 in relation to the period from December 2013 to November 2014, the Adjudicating Authority held that the product in question, known as "Aswini Homeo Arnica Hair Oil" For short, 'AHAHO' could not be classified as 'medicament' under Tariff Item 3003 90 14 or under any item stated in Chapter 30 of the First Schedule to the Central Excise Tariff Act, 1985 Hereinafter also referred to as 'the Act of 1985'- In....
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....he primary question in this appeal is as to whether the product in question, AHAHO, would be classified as 'medicament' under Chapter 30 or as 'cosmetic' under Chapter 33 of the First Schedule to the Act of 1985. The other question is as to whether because of amendment of the entries in the said Chapters 30 and 33 in the year 2012, classification of the product in question required re-examination, even though the same was classified as 'medicament' under the said Chapter 30 since the year 1994. 2.1. With reference to the aforementioned questions, we may take note of the relevant background aspects and stand of the respective parties with reference to the show-cause notice to the respondent and its reply. The Background: Show-Cause Notice and Reply 3. The respondent, having registration number ADHPB1884HEM003 under the central excise, is engaged in the manufacture of the product in question, AHAHO, in its units at Moosapet (since the year 1994), Maheshwaram and Bala Nagar. Further, the respondent had classified the product under Tariff Item 3003 90 14 as 'medicament' and paid the excise duty at concessional rate accordingly. This classification of the product in question wa....
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.... 04. It appears that the assessees have contravened the provisions of Rule 4, 6, 8, 10 and 11 of the Central Excise Rules, 2002 in as much as they have wrongly classified 'Aswini Homeo Arnica Hair Oil' and short the duty of Rs. 2,72,14,266/- which appears to be recoverable from them under Section 11A of the Central Excise Act, 1944. It also appears that they are liable for payment of interest on the said amount of Central Excise duty under Section 11AA of the Central Excise Act, 1944. It also appears that they are liable for penal action under Rule 25 of the Central Excise Rules, 2002 for adopting incorrect classification and thus resorting to short payment of duty and for contravening the provisions of the Central Excise Act, 1944, and the rules made there under with intention to evade payment of duty. 05. Now, therefore, M/s Aswini Homeo Pharmacy, 6-48,49,6-50 Aswini Homeo Pharmacy Unit, Balanagar Hyderabad are hereby required to show cause to the Commissioner of Customs & Central Excise, Hyderabad-IV Commissionerate, Ground Floor, Posnett Bhavan, Tilak Road, Hyderabad within thirty (30) days of receipt of this notice, as to why; i) Central Excis....
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.... drugs namely, Arnica Montana, Cantharis, Pilocarpine and Cinchona in its preparation, which is to be applied to the scalp and not consumed orally. (ii) That its label indicated the words "Homeopathic Medicine" under Schedule K to the Drugs and Cosmetics Rules, 1945 Hereinafter also referred to as 'the Rules of 1945'; that the product would cure/prevent the lack of blood circulation to the hair roots, hair fall (alopecia), dandruff, headache and lack of sleep (insomnia); and that healing from the said diseases would lead to good health in terms of growth and maintenance of natural colour in the hair. (iii) That AHAHO was a medicament in terms of market parlance, evidenced by its use over a period of nearly 19 years; by its manufacturing license issued by the Drug Controller and by the Directorate of Ayush; and from listing of the drugs used, in authoritative text books like Materia Medica of Homeopathic Drugs. Thus, the twin tests as accepted by this Court for classification of the product as 'medicament' were duly satisfied. 5.2. The respondent further elaborated in its reply that the product was not 'cosmetic', as the ingredients used had prophylactic propert....
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....ES (as per Central Excise Tariff, 2004): Chapter 30: 30.03 Medicaments (including veterinary medicaments). 3003.10 - Patent or proprietary medicaments, other than those medicaments which are exclusively Ayurvedic Unani, Siddha, Homeopathic or Bio-chemic 3003.20 - Medicaments (other than patent or proprietary) other than those which are exclusively Ayurvedic, Unani, Siddha, Homeopathic or Biochemic systems: 3003.31 -- Manufactured exclusively in accordance with the formulae described in the authoritative books specified in the First Schedule to the Drugs and Cosmetics Act, 1940 (23 of 1940) or Homeopathic Pharmacopeia of India or the United States of America or the United Kingdom or the German Homeopathic Pharmacopeia, as the case may be, and sold under the name as specified in such books or pharmacopeia 3003.32 -- Medicaments (including veterinary medicaments) used in bio-chemic system and not bearing a brand name 3003.39 -- Other Chapter 33: 33.05 Preparations for use on the hair 3305.10 - Perfumed hair oils - Other 3305.91 -- Hair fixer 3305.99 -- Other PR....
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....roceeded to hold that the notice did not suffer from any imperfection while observing as under: - "10.6 It can be seen that there is substantial change in the tariff headings requiring a relook into the classification of the impugned product. Particularly, Chapter 30 came to be reworded so as to remove the distinction between Patent/proprietary and generic medicaments and classify them according to whether they are put up in unit containers for retail sale or not. Secondly, the mention about the Drugs and Cosmetics Act and the various Pharmacopeia came to be deleted. Similarly, under Chapter 33 also, the phrase Hair Oil became prominent under which, subsidiary headings of "perfumed hair oil" and "others" came to be specified. All these changes certainly merit interpretation of the new entries vis-à-vis the product in question, than what was decided or settled earlier. Thus, even by applying the very ratio of Vicco Laboratories judgment, a different interpretation of tariff can lead to change of classification of a product even though the constituents and use of the product has not undergone any change. Secondly, the additional evidence adduced in the notices certain....
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....by the Board to decide the classification of product to be a medicament or not in the following terms: - "- whether the product has substantial therapeutic or prophylactic properties and whether it is prescribed as a medicine by a Medical Practitioner for curing of a disease and is prescribed for a limited time & use; - how the product is construed in the popular sense i.e., how it is advertized and how it is understood by the people who normally sell it or use it; - the drug license is only a guiding factor and not a decisive one since in terms of Chapter note under Chapter 33, goods falling under sub-headings 3303 to 3307 would merit classification under these headings, irrespective of the subsidiary therapeutic properties of the product." 6.6. The Adjudicating Authority was of the view that AHAHO did not qualify the first criteria as specified by the Board as, though availability of AHAHO in General Stores cannot be sole criteria but, it was common knowledge that one was not required to go to Homeo Stores or Homeo Physician to buy AHAHO; it did not contain the mandatory conditions as prescribed under the Drugs and Cosmetics Act, 1940 Hereinaft....
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....at it can cure any particular disease like Alopecia (loss of hair). Medical conditions like Alopecia actually tend to happen all of a sudden with patches of baldness not only on the head but anywhere on the body. Similarly lack of sleep i.e. Insomnia is a medical condition which results in sleeplessness emanating from stress and other neurological disorders. Non-mention of Alopecia or Insomnia on the labels indicates that the product is not meant for any substantial curative purpose. Further, the kind of prevention or control claimed by AHAHO indicates a clear non-connection between the diseases and the product in question. Moreover, by mentioning that there are no contra indications, it implies that irrespective of the quantum or duration of usage, there is no adverse effect on the scalp or skin, which is against the basic concept of a medicament, which is prescribed or used for a limited period and overdose of a medicament is known to result in contra indications like diahorrea, acidity, ulceration, rashes etc. Even a medically prescribed skin cream or ointment has a limited use for the particular indication or symptom. We normally find a warning on such creams that prolonged usa....
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....ctive authorities, per se did not make AHAHO a preparation of homeopathic medicine, thereby failing the third criteria also. While referring to Materia Medica, the Adjudicating Authority expressed his reservations about one ingredient (Pilocarpine) and observed that there was no nexus of the said ingredient with Homeopathy. 6.10. While referring to the significance of general rules of interpretation as regards the Notes attached to the respective Chapters/Tariff Items in the First Schedule to the Act of 1985, the Adjudicating Authority observed that as per Note 1(e) to Chapter 30, the said Chapter did not cover preparation of the headings of Chapter 3303 to 3307, even if they have therapeutic or prophylactic properties. 6.11. The Adjudicating Authority also referred to the Board Circular No. 890/10/2009-CX dated 03.06.2009, clarifying its stance that coconut oil packaged in containers up to 200ml had to be classified as "Hair oil" due to the general view of public; and observed that AHAHO packed in bottles of 50ml, 100ml and 200ml, was to be treated as "Hair oil" and the 400ml pack cannot surpass this classification, merely because it was not fast-moving. 6.12. Hence, the ....
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....sification. On the other hand, the Department reiterated the findings of the Adjudicating Authority in opposition to the appeal. 7.2. The Tribunal summarised the substance of the order passed by the Adjudicating Authority as follows: - "6. We find that the adjudicating authority has mainly confirmed demand on the ground that since the AHAHO is not prescribed by a medical practitioner for the purpose of curing any disease and it is available in the medical shops as well as general stores and any persons desirous using it can purchase across the counter, hence the same is not Homeopathic medicine. He also held that the label does not indicate the condition of sale by the authorized medical distributor or retailer under prescription from medical practitioner even though it is mandatory requirement under section 97 (1) of the Drugs & Cosmetic Act, 1940. It also does not contain the dosage to be used or that the dosage as directed by the physician. That it does not contain any that it can cure any particular disease like alopecia (loss of hair) or insomnia (sleep loss). Further he also held that previous orders passed by the Appellate Authority were on the basis of tariff en....
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....findings of the Tribunal as follows: - "9. The above judgments of the Hon'ble Apex Court and the Tribunal clearly spells out that even though the goods are sold over the counter and not on a medical prescription, it would not lead to the goods being out of the category of medicine. The adjudicating authority has held that since the hair growth is cosmetic necessity and the product label shows the lady with long hair the goods are cosmetic product. We are not in agreement with the above views of the adjudicating authority. Firstly when the different branches of medicine and the Licensing authorities recognize the baldness or hairfall as disease in that case the adjudicating authority cannot take a different view which is not recognized by the branches of medicine. Secondly the product clearly mentions that the product in question is used for other ailments also such as sleep loss, increase of blood circulation and it nowhere depicts itself as for hair care or enhancing beauty of hair. The label indicates the product as Homeoptahic medicine under schedule K, ingredients and their composition, indications, contra indications and mode of application. The content of label t....
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....e product as Homeopathic medicine, its content and usage. It also says that it should be left overnight. We are of the view that when the product is being sold as Homeopathic medicine and known as homeopathic medicine in the market the goods pass test of common parlance test as Homeopathic medicine. In the light of our observations made in preceding paras, we hold that the reliance placed upon the judgment of Shree Baidyanth case supra is misplaced as the facts are entirely different. Further the adjudicating authority reliance upon the order of the Tribunal in case of Naturence Research Labs (P) LTD. Vs. CCE, DELHI-II. 2003 (154) E.L.T. 672 (Tri. -Del.) is not correct as in said case the product Forest Flower was sold as nourishment to the scalp and hair roots as per the matter mentioned on the packing and it also helped control hair loss and prevents scalp infection, encourages luxurious growth of hairwhereas in the present case the Drug/ licensing Authorities and even the Honble High Court, the Vat authorities and the medical practitioners all have certified the product to be falling under the category of schedule K as Drug and even the product is sold as medicine as known as me....
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....he meaning as understood by the people conversant therewith. The adjudicating authority has held that though the there is no rationale behind applying the 1997 circular in the year 2012 but since the said circular has not been withdrawn or held to be inapplicable in these matter by any court or law, the same would be applicable as it was relied upon by the Courts of law in numerous cases and in the light of said circular the product is not prescribed by a medical practitioner for any disease. We find that the adjudicating authority has chosen to apply pick and choose approach wherever it suited him for confirming demand against Appellant. We are not in agreement with the above approach and views of the adjudicating authority. We find that the Appellant were earlier issued demand notice on four different occasions and on each occasion the issue stands decided in favour of Appellant by the Appellate Authorities holding the goods to be Homeopathic medicine and liable to duty accordingly. The revenue has placed its reliance upon the judgment of Hon'ble Apex Court in case of M/s Shree Baidynath case supra to confirm the demands. However it is to be observed that the Honble Apex Cour....
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....e put in unit containers for retail sale or not; and the mention about the Act of 1940 as also various pharmacopeia has also been deleted. The learned ASG would further submit that "Hair oil" under Chapter 33 garnered focus because of the subsidiary headings of "perfumed hair oil" and "others" having been specified. The learned ASG has supported his submissions with reference to the decision in Collector of Central Excise, Guntur v. Andhra Sugar Ltd. Venkataraypuram: 1989 Supp (1) SCC 144 that the change in entries from 2012 of the Act of 1985 showed the legislative intent to bring the product within taxation bracket as "Hair oil", which was added under Chapter 33 as a distinct category. 8.2. Learned ASG has strenuously argued that the product in question does not meet the criteria laid down under Chapter 30. It has been submitted that on a reading of the relevant Notes, even if the product is stated to possess certain curative or prophylactic value, it would still be cosmetic, as it excludes those with subsidiary curative and prophylactic value. The learned ASG would submit that the respondent has classified the product under Tariff Item 3003 90 14 but, the said entry provides ....
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....ge.' Further the decision in Commissioner of Central Excise v. Wockhardt Life Sciences Limited: (2012) 5 SCC 585 has been relied upon to submit that for classifying a taxable commodity, there is no fixed test and the decision on the classification of a particular article would depend on the tangible material or as to how it is comprehended in "common parlance" or "commercial world" or "trade circle", or in its popular sense. 9. On the other hand, learned senior counsel for the respondent Mr. V.V.S. Rao has emphasised on the submissions that AHAHO's classification has attained finality, having been examined four times; its composition is of four homeopathic medicines in a base oil medium; it has been licensed for manufacture and sale as a homeopathic medicine by the Director, Indian Medicines and Homeopathy, Government of Andhra Pradesh; it cures/prevents alopecia, dandruff, hair fall, etc., due to its therapeutic and prophylactic properties; and its label indicates the nature of the product as a homeopathic medicine under Schedule K to the Rules of 1945 with ingredients, composition, indications, contra-indications and mode of application. 9.1. Learned senior counsel would su....
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.... 3305 90 15); and, notwithstanding the change in sub-classification, the rate of duty would not change and the situation would remain revenue neutral. 9.2. It has further been argued that the observations in Shree Baidyanath Ayurved Bhawan (supra) rather support the respondent's case, because the ingredients, process of manufacture and uses of AHAHO having undergone no change from the beginning despite change in group of individual tariff entries. According to the learned counsel, no case is made for treating AHAHO as 'cosmetic' by ignoring its recognition as drug/medicament by the Government authorities as well as by this Court on 27.02.2019 in Commissioner of Commercial Taxes v. M/S Aswini Homeo Pharmacy: Civil Appeal No.9494-9495 of 2011. 9.3. Learned senior counsel has submitted that there is no need for invoking the common parlance test as the nature of the product is certified by competent authority as a medicament and that the appellant had not made any market enquiries to establish that the product is a cosmetic besides not disproving the factual evidence in favour of the respondent. 9.4. Learned senior counsel has relied upon the decision in Commissioner of Centra....
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....nder Chapter 30 or as 'cosmetic or toilet preparations' under Chapter 33 of the First Schedule to the Central Excise Tariff Act, 1985; and the interlaced point is as to whether the change in tariff structure by way of amendment brought about in the year 2012 justified a re-look into the classification of the product in question. 11. As noticed, it remains undeniable that the product in question, AHAHO, was classified as 'medicament' under Chapter 30 on at least four different occasions by the Department, including two orders passed by the successive Commissioner (Appeals) during 1994-2004; and the said orders had attained finality. The respondent, in order to support its assertion that AHAHO is a medicament, also placed reliance on the decision of the Tribunal in the case of Bakson Homeo Pharmacy (supra) wherein a similar product marketed in the name of "Sunny Arnica Hair Oil" was held to be medicament, covered under Chapter 30. However, the Department attempted to rely on the amendment of the tariff entries in the year 2012 as its justification for re-examination of the classification of the product in question. 12. We have closely examined the divergent findings recorded by....
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....ight to the interpretation put upon it at the time of its enactment and since, by those whose duty has been to construe, execute and apply the same enactment." 13.2. In the case of BPL Pharmaceuticals (supra), cited on behalf of the respondent, the issue before this Court was regarding the classification of "selenium sulfide lotion USP" manufactured and sold by the assessee under the brand name "Selsun Shampoo". This Court, inter alia, held that for a product to fall under Chapter 33, in terms of Note 2 therein, it must first be cosmetic and suitable to be used as such. This Court also examined the active ingredient of the product (albeit very small in quantity) and held that having regard to the preparation, label, literature, character, common and commercial parlance, the product was liable to be classified as a medicament. Further, this Court accepted the submission on behalf of the assessee that merely because of some difference in the tariff entries, the product will not change its character; and something more is required for changing the classification, especially when the product remains the same. The relevant observations and expositions of this Court read as under: - ....
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....g a particular brand of shampoo for beautifying his or her hair. Thus there are lot of favourable materials to treat the product in question as a medicine rather than cosmetic. In this connection the reliance placed by the learned counsel for the appellants on a decision of this Court report in case Indian Metals & Ferro Alloys Ltd. v. CCE [(1991) 51 ELT 165 (SC)] can be usefully referred to. In that case this Court held: "It (the Tribunal) seems to say that, even if the goods manufactured by the appellant had been rightly classified under manufactured by the appellant had been rightly classified under Item 26-AA before 1-3-1975, the introduction of Item 68 makes a difference to the interpretation of Item 26-AA. This is not correct. Item 68 was only intended as a residuary item. It covers goods not expressly mentioned in any of the earlier items. If, as assumed by the Tribunal, the poles manufactured were rightly classified under Item 26-AA, the question of revising the classification cannot arise merely because Item 68 is introduced to bring into the tax net items not covered by the various items set out in the Schedule. It does not and cannot affect the interpretation of....
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.... 37. On a perusal of the entire material we are satisfied that the product in question, having regard to the preparation label, literature, character, common and commercial parlance understanding and the earlier decisions of the Central Board of Excise and Customs, would fall under Sub-heading No. 3003.19 and there is no justifiable reason for changing the classification. As we have reached the above conclusion with reference to the materials placed before us on facts, we do not think it necessary to go into other decisions cited at the Bar. In the result the appeals are allowed holding that the product 'Selsun' will fall under Tariff Item 3003.19." (emphasis supplied) 13.3. In Vicco Laboratories (supra), this Court was dealing with the question of classifying turmeric skin cream, vajradanti toothpaste and tooth powder as under Chapter 30 with pharmaceutical products or as under Chapter 33 with essential oils and resinoids, perfumery, cosmetics or toilet preparations. After applying the common parlance test of classification, and while relying on BPL Pharmaceuticals (supra) and other decisions, this Court held against the attempt at re-classification in the follow....
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.... "3. .... The Tribunal rightly points out that in interpreting statutes like the Excise Act the primary object of which is to raise revenue and for which purpose various products are differently classified, resort should not be had to the scientific and technical meaning of the terms and expressions used but to their popular meaning, that is to say the meaning attached to them by those using the product. It is for this reason that the Tribunal came to the conclusion that scientific and technical meanings would not advance the case of the appellants if the same runs counter to how the product is understood in popular parlance. That is why the Tribunal observed in para 86 of the judgment as under: "So certificates and affidavits given by the Vaidyas do not advance the case of Shri Baidyanath Ayurved Bhawan Limited in the absence of any evidence on record to show and prove that the common man who uses this Dant Manjan daily to clean his teeth considers this Dant Manjan as a medicine and not a toilet requisite." It is this line of reasoning with which we are in agreement. The Tribunal rejected the claim of the appellant holding that ordinarily a medicine is prescribed....
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....n rendered on 30.03.1995 [mentioned as the decision of Baidyanath I] and held that since the product in its composition, character and uses continued to be the same, even after insertion of new Sub-Heading 3301.30, change in classification was not justified. This Court elaborated on the twin test for determination of classification of products (common parlance test being one of them) and also held that specific heading shall prevail over the general one. The relevant observations and expositions of this Court could be usefully reproduced as under: - "46. As a matter of fact, this Court has consistently applied common parlance test as one of the well-recognised tests to find out whether the product falls under Chapter 30 or Chapter 33. In a recent decision in Puma Ayurvedic Herbal (P) Ltd. v. CCE [(2006) 3 SCC 266] this Court observed that in order to determine whether a product is a cosmetic or medicament, a twin test (common parlance test being one of them) has found favour with the courts. This is what this Court observed: (SCC pp. 269-70, para 2) "2. ... In order to determine whether a product is a cosmetic or a medicament a twin test has found favour with the ....
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....** *** 52. The approach of the West Regional Bench is fallacious in what we have indicated above as it overlooks and ignores common parlance test which is one of the well-recognised tests to determine whether the product is classifiable as medicament or cosmetic and that has been consistently followed by this Court including with regard to this very product. It also overlooks the well-settled legal position that without a change in the nature or a change in the use of the product and in the absence of a statutory definition, the product will not change its character. The product DML remains the same in its composition, character and uses. We have already held above that Sub-Heading 3003.31 does not define ayurvedic medicine and, therefore, there cannot be any justification enough for changing the classification of the product DML which has not been held to be ayurvedic medicine by this Court. *** *** *** 56. There is no doubt that a specific entry must prevail over a general entry. This is reflected from Rule 3(a) of the general Rules of interpretation that states that Heading which provides the most specific description shall be preferred to Headings pro....
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....g with common parlance theory, held that the entries are not to be understood in their scientific or technical sense, but by their popular meaning for the purpose of interpretation. This Court said: - "5. It is well established that in interpreting tariff entries in taxation statute like the Excise Act, where the primary object is to raise revenue and for that purpose various products are differently classified, the entries are not to be understood in their scientific and technical meaning. The terms and expressions used in tariff have to be understood by their popular meaning that is the meaning that is attached to them by those using the product. See the decision of the Supreme Court on the dispute regarding classification for excise duty, the product - Lal Dant Manjan manufactured by Shree Baidyanath Ayurved Bhavan Ltd. reported in the case of Shree Baidyanath Ayurved Bhavan Ltd. v. CCE [(1996) 9 SCC 402]. The manufacturer claimed the product to be an Ayurvedic medicinal preparation product for dental care. The view of the Tribunal was upheld by this Court by holding (at SCC pp. 404-05, para 3) that "ordinarily a medicine is prescribed by a medical practitioner and it i....
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....gether for therapeutic or prophylactic use". On a reading of Note 1(d) with Note 2(i) of Chapter 30 under the heading "Pharmaceutical Products", it is clear that preparations which fall under Chapter 33 even if they have therapeutic or prophylactic properties are not covered under Heading 30.03 as "medicaments" *** *** *** 13. ........Note 2 and Note 5 with Entry 33.04, we find ourselves in agreement with the majority opinion of the Tribunal that the product "Lip Salve" is a kind of "barrier cream" or a protective cream against skin irritants. It, therefore, clearly falls under Entry 33.04 and conforms to the description "preparations for the care of the skin (other than medicaments)". The learned counsel of the appellant has not been able to persuade us to take a different view from the one taken in the majority opinion of the Tribunal. We confirm that the product "Lip Salve" is essentially a preparation for protection of lips and skin and is not a "medicament". Such preparations which have a subsidiary curative or prophylactic value clearly fall under Entries 33.03 to 33.07 as per Note 2 under Chapter 33. The product clearly is covered by Entry 33.04 read with N....
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.... body. [Puma Ayurvedic Herbal (P) Ltd. v. CCE [(2006) 3 SCC 266], State of Goa v. Colfax Laboratories Ltd. [(2004) 9 SCC 83] and B.P.L. Pharmaceuticals Ltd. v. CCE [1995 Supp (3) SCC 1].] 35. However, there cannot be a static parameter for the correct classification of a commodity. This Court in Indian Aluminium Cables Ltd. v. Union of India: (1985) 3 SCC 284 has culled out this principle in the following words: (SCC p. 291, para 13) "13. To sum up the true position, the process of manufacture of a product and the end use to which it is put, cannot necessarily be determinative of the classification of that product under a fiscal schedule like the Central Excise Tariff. What is more important is whether the broad description of the article fits in with the expression used in the Tariff." 36. Moreover, the functional utility and predominant or primary usage of the commodity which is being classified must be taken into account, apart from the understanding in common parlance. [See O.K. Play (India) Ltd. v. CCE [(2005) 2 SCC 460] , Alpine Industries v. CCE [(2003) 3 SCC 111] , Sujanil Chemo Industries v. CCE & Customs [(2005) 4 SCC 189] , ICPA Health Products....
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...., the Tribunal rightly arrived at the conclusion that the product in question is oil used for massage and would be covered by Heading 33.04. Similar contention was raised in Alpine Industries v. CCE [(2003) 3 SCC 111: JT (2003) 1 SC 130] . The Court observed (at SCC p. 116, para 8) that "medicament" has been defined in Note 2(i) to mean "goods which are either products comprising two or more constituents which have been mixed or compounded together for therapeutic or prophylactic use". On a reading of Note 1(d) with Note 2(i) of Chapter 30 under the heading "Pharmaceutical Products", it is clear that preparations which fall under Chapter 33 even if they have therapeutic or prophylactic properties are not covered under Heading 30.03 as "medicaments". The Court thereafter held thus: (SCC p. 115, para 7) "The certificate issued by the Army Authorities and the chemical ingredients of the product are not decisive on the question of classification of the product for levy of excise duty. It is firmly established that on the question of classification of a product under the Central Excise Tariff Act, 'commercial parlance theory' has to be applied. It is true that the entire supply....
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....oprietary formula. The main criterion 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 a 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 the Drug Controller and is being manufactured under a drug licence." (emphasis supplied) 15.6. In the case Meghdoot (supra), while dealing with the question of classification of six items namely Bhringraj Tail, Trifla Brahmi Tail, Neem Herbal Sat, Sat Reetha, Meghdoot Herbal Sat, Meghdoot Herbal Powder and following the decision in BPL Pharmaceuticals (supra), this Court classified the items under the heading of 'medicaments' and held that items which may be sold under names bearing a cosmetic connotation but would remain medicines based on the composition of the items, in the following terms: - "5..... A product may....
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....urt, therefore, reversed the conclusion reached by the Commissioner after noting the aforementioned contention of the respondent and, instead, held that the respondent had produced sufficient material to show that the product manufactured by the respondent was a medicine and not a cosmetic product. 7. The fact that the respondent is using the Homeopathic Pharmacopoeia referred to earlier in manufacturing of the hair oil has not been traversed by the appellant. Neither has the Commissioner dealt with that contention of the respondent nor was such a plea taken before the High Court by the appellant. Considering this, we see no reason to deviate from the conclusion reached by the High Court that the product manufactured by the respondent was rightly assessed at the relevant point of time in the assessment years 1994-1995 and 1995-1996, as covered by Entry 37 of Schedule-I of the APGST Act. 8. We once again make it amply clear that the view taken in these appeals is in the fact situation of this case and confined to the assessment years 1994- 1995 and 1995-1996 only and would not apply or be of any avail to the respondent for the subsequent assessment years, in view o....
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.... Hair Oil is not a cosmetic preparation or for use on hair under sub-heading 3505.90 of the Central Excise Tariff, as they are not intended for cleansing, beautifying, promoting attractiveness or altering appearance in terms of the Hon'ble Supreme Court judgment in the case of B.P.L. Pharmaceuticals Ltd. but they are meant for specific treatment for dandruff of other skin and hair problem. Therefore, the appellant's contention for treatment as a medicament having homoeopathic ingredients and considered as homoeopathic medicine is required to be accepted for classification under TI 14E of erstwhile tariff and under sub-heading 3003.30 of the new tariff." (emphasis supplied) 18. We may usefully summarise the discernible principles from the cited decisions as also the other referred orders, so far relevant for the purpose of determination of points arising in this appeal as follows: 18.1. As regards the question as to whether the product in question, AHAHO, merits classification as 'medicament' under Chapter 30 or as 'cosmetic or toilet preparations' under Chapter 33, the inquiry shall be directed towards a couple of tests taken together, being the common/commer....
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....e as to whether the preparation is essentially for cure or prevention of disease (medicament) or for care (cosmetic); and the preparation having only subsidiary curative or prophylactic value would fall under Chapter 33 [vide Alpine Industries and Sunny Industries (supra)]. 18.2. Ordinarily, we would not have delved into another decision of the Tribunal but have found it appropriate to refer to the said decision in the case of Bakson Homeo Pharmacy (supra), which had all through been relied upon by the respondent, for the reason that it related to a similar product marketed in the name of "Sunny Arnica Hair Oil", which was held to be a 'medicament'. The said decision has also been relied upon by the Tribunal in the order impugned. The significant feature of the said decision is that therein, in the leading opinion of majority, ingredient test has extensively been dealt with and the medicinal qualities; and therapeutic/prophylactic use of several of the ingredients have been analysed, which include all the ingredients of the product involved in the present case It appears from the facts of the present case and the observations occurring in the said case of Bakson Homeo Pharmacy (....
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.... the Adjudicating Authority examined the contents of the product as also its label and observed that it did not contain any condition like "to be sold by authorized medical distributor or retailer under prescription from medical practitioner" even though such a mention was a mandatory requirement under the Act of 1940; and it did not contain any specification regarding the dosage to be used and the duration for which it is to be used, which is the norm for a medicament. The Adjudicating Authority yet further observed that there was no claim that the product could cure any particular disease like Alopecia (loss of hair); that the medical conditions like Alopecia actually tend to happen all of a sudden with patches of baldness not only on the head but anywhere on the body; and that Insomnia was a medical condition resulting in sleeplessness due to stress and other neurological disorders. According to these observations, non-mention of Alopecia or Insomnia on the labels indicated that the product was not meant for any substantial curative purpose. The Adjudicating Authority also observed that by mentioning no contra-indications, it implied that irrespective of the quantum or duration ....
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....ff Item 3305 90 19, specifically meant for "Hair oil", directly covers the product in question for, a specific entry would take precedence over a general entry. The ASG has contended that the common parlance test of the product is not in favour of the respondent, as the product is not prescribed by any medical practitioner, is available freely without any prescription in Medical and General Stores, and could be purchased across the counter, as admitted by the respondent. Moreover, the label does not indicate the condition of sale by authorised medical distributor or retailer under prescription; it does not cure any particular disease; and the claims on the label are for marketing purposes only. The learned ASG has relied upon the decision in Alpine Industries (supra) to submit that any subsidiary therapeutic or prophylactic use of the product would not change its nature as "Hair oil" if in the common parlance, it is treated as a cosmetic. Learned ASG has also submitted that the product is advertised as hair oil and not a medicament; and is perceived by the public who purchase and sell the product as hair oil (cosmetic) and not as medicament. 20.2. In contrast to what has been ob....
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....ss, increase of blood circulation and it nowhere depicted itself as for hair care or enhancing beauty of hair; that the label indicated the product as Homeopathic medicine under Schedule K to the Rules of 1945, ingredients and their composition, indications, contra-indications and mode of application and such contents of label itself showed that even in common parlance, it was understood by the users and the traders as Homeopathic medicine; that there was no advice on the label nor did it suggest that it could be used as hair oil; and indisputably, the product was made of four Homeopathic medicines as ingredients namely Arnica Mont, Cantharis, Pilocarpine and Cinchona and was used to treat hair loss, insomnia, dandruff, headache and other ailments; and the product was manufactured under Drug Licence issued under the relevant rules which had been renewed from time to time by the Additional Director & Drug Controller (Homeo), Department of Ayush, Government of Telangana; that even as per analysis report of Drug Controller, Department of Ayush, the product was medicine; the product was covered by Serial No. 35 of Schedule K to the Rules of 1945 (Homeopathic Hair oils having active ing....
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....athic medicines, Arnica Montana, Cantharis, Pilocarpine, and Cinchona in its preparation. These Homeopathic medicines are duly found mentioned in Homeopathic Pharmacopoeia of India Volume I 1971 ed. and Vol. V 1986 ed. as also in the Dictionary of Practical Materia Medica A Dictionary of Practical Materia Medica by John Henry Clarke; B. Jain publishers (P) Ltd., New Delhi. placed before us by the learned counsel for the respondent. 22.1. Having gone through the elaborate order passed by the Adjudicating Authority, we are constrained to observe that in the over-anxiety to somehow hold the product in question as cosmetic, the Adjudicating Authority even attempted to suggest his reservations as regards the utility of Pilocarpine as a Homeopathic drug contrary to the authoritative texts As explained at p. 821 of the extract of Materia Medica placed before us, "Pilocarpine is one of the most characteristic of several alkaloids which have been isolated from Jaborandi (Pilocarpus pinnalus)". In the decision by the Tribunal in the case of Bakson Homeo Pharmacy (supra), the properties of this ingredient have been distinctly indicated, including that "for treatment of baldness" with refer....
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....ving that hair growth was at best a cosmetic necessity rather than a disease requiring immediate attention or treatment! The Tribunal has rightly observed that when hair fall or baldness is recognised as a medical condition, the Adjudicating Authority could not have taken a different view, which was not recognized by any branch of medicine. The Tribunal has also rightly pointed out that the product clearly mentioned that it could be used for other ailments like headache and that it induces good sleep. 22.3. Moreover, the Adjudicating Authority seems not to have given adequate attention to the contents of Chapter 30 and the fact that for being accepted as medicament, the product is not invariably required to carry only therapeutic use. A product having prophylactic use is also envisaged under the Headings 3003 and 3004. If the product claims to improve blood circulation to the hair roots and thereby controlling hair fall, its prophylactic use cannot be gainsaid. 22.4. The product in question, being undoubtedly covered by Serial No. 35 of Schedule K to the Rules of 1945 and being manufactured in terms of the license issued under the Act of 1940, in our view, clearly satisfies t....
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....tion of this Court in the case of BPL Pharmaceuticals (supra) to be apposite to the questions before us. Therein, this Court was considering a product sold by the assessee under the brand name "Selsun shampoo". This Court found it to be medicament with reference to a variety of tests applied from different angles and after finding that its active ingredient was selenium sulfide. In that context, this Court also indicated that an individual using such product may not be prepared to say that he or she was using a particular compound to get rid of dandruff or other similar diseases but would not hesitate to state that he or she was using a particular brand of shampoo. The observations in BPL Pharmaceuticals in this regard correlates with ingredient test as also the common parlance test; and in our view, fortify the case of the respondent. 23.3. The submissions about specific entry to be preferred to the general entry do not take the case of appellant any further. In the present case, in fact, the referred entry of Chapter 33 relating to the Tariff Item 'Hair oil' under the Heading 3305 is itself to be taken as a general entry and in any case, when hair oil is being used only as a m....
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....g been prescribed by a medical practitioner. In Meghdoot, this Court has also made it clear with reference to other decided cases that the items which may be sold under names bearing a cosmetic connotation would nevertheless remain medicines based on the composition. Viewed from any angle, merely for being available across the counter, the product in question, AHAHO, does not cease to be a medicament. 26. Another essential feature while examining the question as to whether a particular product is classifiable as medicament under Chapter 30 or as cosmetic under Chapter 33 would be as to whether the preparation is essentially for cure or prevention of disease i.e., with therapeutic or prophylactic properties or only for care. Tersely put, when the preparation is for cure or prevention, it would be medicament but, if only for care, it would be cosmetic. Of course, a cosmetic would not become medicament even if having subsidiary curative or prophylactic value, as held by this Court in Alpine Industries (supra). However, the product in question, AHAHO, does not fail on this count for the reason that it is a preparation of Homeopathic medicine and when it is marketed as carrying those....
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....o the Rules of 1945 had not been a factor to be ignored altogether. Both in relation to common parlance test as also the ingredients test, this factor carries its own relevance even if not finally decisive of the matter. The submission about want of condition of sale by authorised medical distributor or retailer under prescription has its own shortcomings for it has not been shown if such a preparation falling under Schedule K to the Rules of 1945 was also requiring such a mention in terms of Rule 97. In any case, any such requirements for adherence to the Act of 1940 and the Rules of 1945 could only be a matter for consideration of the authorities dealing with licensing and regulating the manufacture and sale of drugs. The only relevant aspect for the present purpose is that the product in question being manufactured as a Homeopathy medicine, and being marketed and used as a Homeopathic medicine for its pharmaceutical value, would fall in Chapter 30 and cannot be branded as cosmetic, so as to fall under Chapter 33 of the First Schedule to the Act of 1985. 29. In the passing, we may also observe that the very product in question, in relation to the entry in the Andhra Pradesh Ge....
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....iff entries with detailed specifications. These changes had otherwise no impact, so far as the product of the respondent, AHAHO, is concerned. 31. In support of the proposition for re-classification, the decision in Andhra Sugar Ltd. (supra) has been cited on behalf of the appellant. We have extracted the relied upon paragraph of the said decision hereinbefore and it is difficult to accept that the proposition therein, to the effect that the meaning ascribed by the authorities issuing Notification is a good guide of a contemporaneous composition of exposition of law, has any application to the present case. The applicable principles, as noticed from the decisions in BPL Pharmaceuticals and Vicco Laboratories (supra) remain that change of classification cannot be countenanced merely on the ground of coming into force of different tax structure without showing that the product has changed its character. The decision in Shree Baidyanath Ayurved Bhawan (supra) is pertinent to the point wherein, after an unsuccessful attempt to have the product DML accepted as a medicinal preparation (in Baidyanath I), the assessee-company made another attempt for change of classification after comin....