TaxTMI 
TaxTMI 
2009 (4) TMI 6
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....Appellate Tribunal (for short, 'Tribunal'). West Regional Bench of the Tribunal decided the classification in favour of Baidyanath and held that DML is classifiable under Chapter Sub-heading 3003.31. The similar view has been taken by East Regional Bench of the Tribunal. However, the larger bench of the Tribunal to which the issue of classification of DML was referred, has held that DML is classifiable under Chapter Sub-heading 3306.10. It is for this reason that the Department as well as Baidyanath have preferred separate appeals. 3. The litigative journey with regard to classification of this product has reached this Court earlier in Shree Baidyanath Ayurved Bhawan Ltd. Vs. Collector of Central Excise, Nagpur (1996) 9 SCC 402. We shall refer to that decision a little later. First we shall advert to the sequence of facts leading to the present controversy. 4. Baidyanath is engaged in the activity of manufacturing medicines adopting Indian systems. They have their works situate at Calcutta (now Kolkata), Naini, Patna, Nagpur and Jhansi. One of the products being manufactured by Baidyanath is DML. The product is a powder compounded with Geru, Peepall, Sonth, Kali Mirch....
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....aried. While some of the adjudicating authorities held that DML was an Ayurvedic Medicine; the others took the view that it was not so. All these matters ultimately found their way to the Tribunal. On July 14, 1985, the Tribunal delivered its judgment in the matter and held that in common trade parlance, DML is neither treated nor understood as an Ayurvedic Medicine and hence could not be classified as such. The Tribunal, thus, held that the product DML was not eligible for the benefit extended under Notification No.62/78-CE as it was not covered by the category of goods mentioned at Sr.No.19 of the schedule to the said notification. Pertinently, the goods mentioned in the said category included 'drugs, medicines, pharmaceuticals and drug intermediates' not elsewhere defined. 10. The aforesaid order of the Tribunal came to be challenged at the instance of Baidyanath before this Court in various appeals. The appeals were admitted and finally disposed of on March 30, 1995 (referred to hereinafter as Baidyanath I) . This Court held that the product DML would have to be classified on the basis of the common trade parlance test and applying that test, the Tribunal was correct in ....
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....ication of the product in the light of opinion of Drug Controller of India as well as instructions contained in the circulars dated March 29, 1994 and April 3, 1996. 14. On September 10, 1997, the Board withdrew its circular dated May 27, 1997 and directed classification of DML in terms of judgment of this Court in Baidyanath 1 with regard to this very product. 15. In pursuance of the circular issued by the Board on October 31, 1996, several notices came to be issued to Baidyanath by various Excise Authorities at Patna; Allahabad (Naini); Jhansi and Nagpur asking them to show cause as to why DML should not be classified as a toiletry under Chapter 33 of the New Tariff Act and duty be demanded accordingly. The show cause notices were resisted and contested by Baidyanath and the matter reached the Tribunal. As stated above, West Regional Bench and East Regional Bench of the Tribunal decided the classification in favour of Baidyanath. Thereafter, the classifiability issue of DML came up for consideration before the Principal Bench of the Tribunal at New Delhi and the Bench doubted the correctness of the decisions of West Regional Bench and East Regional Bench and referre....
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....iff Act, that definition alone shall prevail and common trade parlance test is not applicable. The common trade parlance test is to be applied only in the absence of definition; (iv) that therapeutic and prophylactic uses of DML as pharmacopoeial Ayurvedic Medicine clearly stand established as the formulae has been in existence for the past several 100 years which is contained in the book 'Ayurved Sar Sangraha' and the said book is notified in the First Schedule of the Drugs and Cosmetics Act, 1940 and the product is accepted as a medicine under the Drugs Act; (v) that entry in Chapter Sub-heading 3003.31 being more specific entry, it must be preferred over general residuary entry of 3306.10. By applying general rules of interpretation to the Schedule and the New Tariff Act, a specific entry must prevail over a general entry; (vi) that Note 1(d) of Chapter 30 does not cover -"preparations of Chapter 33 even if they have therapeutic or prophylactic properties" and for a product to be excluded by this Note 1(d), it must be a product covered in Chapter 33 while DML is an Ayurvedic Medicine specifically covered under Chapter 30; and (vii) that the product DML does not qualify Note 2 of....
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....tic or prophylactic. The common parlance test, the learned senior counsel would submit, is inbuilt in the definition of 'medicament' in Note 2 of Chapter 30 as the emphasis is on the word 'uses'. In the submission of the learned senior counsel for the Department, common parlance test is well recognized as one of the twin tests which should be applied to classify a product as medicament or cosmetic even post 1996. Without satisfying the common parlance test, the classification cannot be applied. Mr. K. adhakrishnan submitted that as to whether the product described against the Sub-heading 3003.31 is a medicament or not can be ascertained only after resorting to Note 2 of Chapter 30 and the common parlance test inbuilt in it. Rule 1 of the Rules for the interpretation of the Schedule to the New Tariff Act mandates that classification shall be determined according to the terms of the Heading and any relative Section or Chapter Notes, hence Chapter Note 2 dealing with medicaments cannot be by-passed. 21. The learned senior counsel for the Department would urge that the classification cannot be finalized by looking at the description of the goods provided against Sub-heading 3003....
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....oses, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the provisions hereinafter contained. 2. (a) ……………………………………………….. (b) ……The classification of goods consisting of more than one material or substance shall be according to the principles contained in rule 3. 3. When an application of sub-rule(b) of rule 2 or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows: (a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods. (b) Mixture, composite goods consisting of different materials or made up of different components, and goods....
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.... products suitable for such uses. 3. ………….. 4. ………….. 5. ………….. 6. ………….. 27. Relevant portions in Chapter 33 is thus: CHAPER 33 ESSENTIAL OILS RESINOIDS; PERFUMERY, COSMETIC OR TOILET PREPARATIONS NOTES 1. …………………………………………………. 2. Heading Nos. 33.03 to 33.08 apply, inter alia, to products, whether or not mixed (other than aqueous distillates and aqueous solutions of essential oils), suitable for use as goods of these headings and put up in packings with labels, literature of other indications that they are for use as cosmetics or toilet preparations or put up in a form clearly specialized to such use and includes products whether or not they contain subsidiary pharmaceutical or antiseptic constituents, or are held out as having subsidiary curative or prophylactic value. 3. ……………… 4. ……………… Heading No. Sub- heading No. Description of goods Rate of duty (1) (2) (3) (4) 33.06 3306.00 Preparations for oral or dental Hygiene, including dentifrices (for example toothpaste and Tooth powder) and denture Fixative pastes and powders" 15% 28. In 1996-97, Chapter 30 t....
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.... in interpreting statutes like the Excise Act the primary object of which is to raise Department 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 in 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 Dam 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 by a medical practitioner and it is used for a limited....
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....and Cosmetics Act, 1940 and sold under the name as specified. 34. Does Chapter Sub-heading 3003.31 contain specific definition of Ayurvedic Medicine? We do not think so. What is provided in column 3 of Schedule is description of goods against sub-heading 3003.31. We are afraid description of goods cannot be treated as definition. There is merit in the contention of the learned senior counsel for the Department that Chapter Sub-heading 3003.31 provides process for manufacture of certain medicaments including those used in Ayurvedic system and sale of the same; it is not a definition clause. Classification of a product, interpretative Rule 1 of rules for interpretation of the Schedule says, is to be determined according to the terms of the heading and any relative Section or Chapter Notes and provided such headings or Notes do not otherwise require. Chapter Sub-heading 3003.31 is an entry double dash (--) occurring under the single dash (-) heading for medicament including those in Ayurvedic Systems. As per general explanatory Note 1 appended to rules for interpretation, single dash (-) indicates the said article or group of articles to be a sub-classification of the article o....
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....nt is cured. The approach of the consumer towards the product is very material . One may buy any of the ordinary soaps available in the market. But if one has a skin problem, he may have to buy a medicated soap. Such a soap will not be an ordinary cosmetic. It will be medicament falling in Chapter 30 of the Tariff Act. II. Are the ingredients used in the product mentioned in the authoritative textbooks on Ayurveda?" 36. In Puma Ayurvedic Herbal (P) Ltd., the question that arose for consideration before this Court was whether the products manufactured by the appellant therein were covered under the category of medicaments or cosmetics. The following products were under consideration: 1. Puma neem facial pack (Neemal), 2. Puma anti-pimple herbal powder (Pimplex), 3. Puma herbal facial pack (Herbaucare), 4. Puma herbal remedy for facial blemishes, 5. Puma herbal massage oil, 6. Puma herbal massage oil for women, 7. Puma hair tonic powder (Sukeshi), 8. Puma scalp tonic powder (Scalpton), 9. Puma anti-dandruff oil (Dandika), 10. Puma shishu rakshan tel, 11. Puma neem tulsi. This Court referred to various decisions of this Court and held: "From the above judgments it follo....
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....dic, Sidha, Homoeopathic and Unani medicines. Technical Advisory Board to advise Central and State Government on technical matters. Among the members of this Board are persons well versed in ayurvedic medicines, including teacher in Dravya Guna and Kalplana and a practitioner in ayurvedic medicine. It also provides for a Ayurvedic, Sidha, and Unani Drugs Consultant Committee. The manufacture of ayurvedic medicament is subject to supervision and checks by officers appointed to carry out the provisions under the Drugs and Cosmetic Act, 1940. Section 3 (a) of the Drugs and Cosmetics Act, 1940 defines "Ayurvedic, Sidha or Unani Drug" as follows: Ayurvedic, Sidha or Unani drug" includes all medicines intended for internal or external use for or in the diagnosis, treatment, mitigation or prevention of disease or disorder inhuman beings or animals and manufactured exclusively in accordance with the formulae described in the authoritative books of "Ayurvedic, Sidha or Unani Tibb system of medicine, specified in the First Schedule." A comparison of this definition and the entry now contained in heading 3003.30 of the Tariff shows that the two are virtually identical for the purpose of b....
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....e 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. 40. The learned senior counsel for Baidyanath heavily relied upon the statement of the Finance Minister during the parliamentary debate on the question of levy of excise duty on Ayurvedic medicines. In the entire debate there is no reference to the product DML with which we are concerned. The part of statement of Finance Minister reads, '………..there is no excise duty on Ayurvedic Medicines manufactured according to the Ayurvedic formulae, some medicines appears to be Ayurvedic medicines.' The Finance Minister also stated, '……..he must raise the dispute on that. It will be decided by the Collector. It will be decided by the appellate authority. There is a method to decide it……….'. We are afraid the statement made by the Finance Minister ....