TaxTMI 
TaxTMI 
2026 (3) TMI 739
X X X X Extracts X X X X
X X X X Extracts X X X X
....penalties of Rs.50,00,000/- (April 2008 to May 2013) and Rs.1,29,64,862/- (March 2013 to May 2014) on the Director under Rule 26 of the Central Excise Rules, 2002, covering the period from April 2008 to May 2014, has been confirmed. 2. The facts of the case are that M/s. Anupama Ayurvedic Drug Company Private Limited (hereinafter referred to as the appellant/company) is a private limited company engaged in the manufacture of proprietary Ayurvedic medicines and drugs classifiable under Chapter Heading 30 of the Central Excise Tariff Act, 1985 (CETA). During the period 2008-2011, the appellant-company did not have its own manufacturing facility and operated under a loan licence arrangement with B.D. Enterprises (Job Worker), as permitted under Rule 153A of the Drugs and Cosmetics Rules, 1945 (Drug Rules). The Drug Control Authority granted Loan Licence No. AL-48-M(L), authorizing manufacture of proprietary Ayurvedic medicines at the premises of the Job Worker. The manufacturing activities were undertaken by the Job Worker at its own manufacturing facility, using its own workforce, under the supervision of qualified technical staff in terms of the said licence. The appellant suppli....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(30)05/CE/AE/ AADCPL/Kol-III/2014-15/246 dated 05.02.2015 [SCN-3 and SCN-4] were issued reiterating the misclassification allegations. In response to SCN-4, the appellant deposited duty amounting to Rs. 1,09,803/-. 5.3. The matters were adjudicated and the demands raised against the appellants were confirmed, along with interest and penalties. 6. In the present cases, across the aforesaid four Show Cause Notices, classification of a total of 34 products is under dispute in the present Appeals. The details of the Show Cause Notices issued to the appellant/(s) during the relevant period and the duty demand culminating therefrom have been tabulated in the Table given below: - Appeal No. Period involved SCNs Order appealed against Amount of duty involved E/75133/ 2016 April 2008 to March 2013 V(12)12/Anupama /CE/AE/KolV/2012/13706 dated 06.11.2013 (SCN-1) O-I-O No. 23/COMMR/CE/Kol V/Adjn/2015 dated 20.10.2015 passed by Ld. Commissioner, Central Excise (Ld. Adjudicating Authority), confirmed the demand classifying the products in question as cosmetics and appropriated only Rs. 71,34,295/- out of Rs. 1,40,48,276/- already depos....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ms as approved by the State Government. Thus, a product manufactured under a valid Ayurvedic drug licence stands recognised by the competent statutory authority as a medicament under the Ayurvedic system. Therefore, products falling under Excise Tariff Heading 3004 (medicaments having therapeutic/prophylactic properties) necessarily require such licence. (iii) In the present case, the products in question qualify as Ayurvedic Proprietary Medicines (APM) as defined under clause (a) read with clause (h) of Section 3 of the Drugs Act. Accordingly, all 34 products were duly approved by the ISM Drug Control (Drug Licensing Authority), Government of West Bengal, under Drug Licence Nos. AL-930-M and AL-48-M(L) and were manufactured strictly in terms thereof. (iv) The appellants had obtained certificate dated 16.03.2015 from the Directorate of Drug Licensing Authority, certifying that the impugned products are Ayurvedic medicines. The said authority is the competent expert body empowered to issue licences for Ayurvedic drugs, whereas a different authority regulates cosmetics. In Commr Vs Sharma Chemical Works [2003 (4) TMI 102] the Hon'ble Supreme Court classified Banphoo....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... [2006 (3) TMI 141-SC] Baldness is a medical condition. If a product enables hair growth and cures baldness, it cannot be termed a cosmetic merely because it improves appearance. Its primary purpose is to treat baldness, not to enhance appearance. Commissioner Vs Ashwani Homeo Pharmacy [2023 (385) ELT 6 (SC)] It was noted that the product 'Aswini Homeo Arnica Hair Oil' was intended to control hair fall, prevent dandruff and to induce good sleep, therefore, having therapeutic and prophylactic use. The product was clearly indicated to be Homeopathic medicine and accordingly, classified as a medicament. 2. Arish Hair Plus (Premium) Heps to cure different types of Senile Alopecia and growth of hair on bald CC/Pg - 16 3. Arish Anti-Dandruff Solution Helps to cure and cleanse irritated oily scalp, psoriasis, eczema, yeast like fungus malassezia CC/Pg - 20 4. Arish Anti-Dandruff Shampoo Heps to cure and cleanse irritated oily scalp, psoriasis, eczema, yeast like fungus malassezia CC/Pg - 37 5. Arish Hald....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sp;pigmentation and dark spots CC/Pg - 41 10 .Arish Clear Mark Serum Helps to control acne causing bacteria, pimples and reduce dark spots and skin soothing CC/Pg - 29 11 .Arish Fair Secret Lotion Helps to cure skin hyper pigmentation, blemishes, suntan caused by UV Rays CC/Pg - 22 12 .Arish Fair Secret Scrub Helps to cure skin hyper pigmentation, blemishes, suntan by exfoliation of skin CC/Pg - 23 13 .Arish Fair Serum Helps to reduce pigmentation, skin irritation, redness, blemishes, dullness and also improve skin glow and complexion CC/Pg - 40 14 .Arish Hair Plus Vitalizer Helps to cure hair loss, dandruff and makes the roots stronger CC/Pg - 36 Commr. Vs Pee Gee Pharma [2003 (155) ELT 341 - CEGAT] Krithika Hair Vitaliser was classified as a medicament considering the product's therapeutic properties, drug license, and higher price point compared to regular hair oils. 15 .Arish Hydra ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....an ancillary cosmetic effect does not dilute the primary therapeutic character of a product. If a product cures, mitigates or prevents a disorder, it qualifies as a medicament notwithstanding any cosmetic benefit. Reliance in this regard is placed on Ciens Laboratories (supra). Further, in Ishaan Research (supra) it was noted that merely because a product could be used for beautification did not make it a cosmetic if it had medicinal properties and was marketed as such. In the present case, consumer testimonials demonstrate that the products cure disorders such as severe hair fall and acne vulgaris. 4. The products are cosmetics based on the description on the labels. Rule 161(3) of the Drugs Rules mandates that the label of an Ayurvedic drug shall bear the words "Ayurvedic Medicine." The labels of the products in question clearly describe them as APM. Therefore, the label declaration is not a unilateral claim but a reflection of the licensed category of the product. In Commr. Of C. Ex. & S.T. Vs Multani Pharmaceutical [2018 (15) GSTL 278] it was held that a product, having therapeutic & prophylactic properties, shall be classified as APM if the ingredients are as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s obtained from the Drug Controller and the product in question was of general use. Therefore, the said decision is distinguishable and inapplicable to the present case, where expert certification from the Drug Licensing Authority is available. (xi) In view of the statutory licensing framework, expert certification, labeling compliance under Rule 161, judicial precedents, and absence of contrary evidence from the Revenue, the products in question clearly merit classification as medicaments under Heading 3004. The finding of the Ld. Adjudicating Authority to the contrary is therefore unsustainable in law and on facts. B. The Appellant is not liable to pay duty on goods manufactured by its Job Workers under a loan license agreement for the period April 2008 to February 2012, as the Appellant was not the manufacturer of such goods. (i) The Ld. adjudicating authority has alleged that since the manufacturing unit of the Job Worker was situated in rural area and as such they do not have any duty liability as per Notification No. 8/2003-CE dated 01.03.2003 and therefore, the duty liability in respect of the goods manufactured under the loan licence arrangement w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....by the Job Worker during the period April 2008 to February 2012. C. The Appellant is entitled to the concessional rate of duty under Notification No. 1/2011-CE dated 01.03.2011 and consequential refund in these appeals. (i) Since the products in question are correctly classifiable as medicaments, the appellant is entitled to the benefit of Notification No. 1/2011-CE and, consequently, to refund of the excess duty paid. (ii) The said notification prescribed a concessional rate of 1%/2% ad valorem on specified excisable goods, subject to the condition that such goods are manufactured from inputs or by utilising input services on which appropriate duty/service tax has been paid and no CENVAT credit of such duty or tax has been availed by the manufacturer. Serial No. 37 of the notification specifically covers "Medicament" as eligible goods. (iii) After obtaining Central Excise registration, the Appellant discharged duty at 1%/2%, as applicable, by availing the benefit of the said notification. However, as evident from the letter dated 31.12.2012 issued by the Superintendent, the appellant, at the instance of the Department, started paying duty @6% fr....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Simplex Infrastructure Limited [2016 (4) TMI 548 - Cal HC]. Accordingly, the demand for the overlapping period (from March 2013 to May 2013 and May 2014) is not sustainable in law and is liable to be set aside. E. The extended period of limitation has been wrongly invoked for the period March 2013 to May 2013 in the absence of any suppression of facts or wilful misstatement with intent to evade duty. (i) The Ld. adjudicating authority has erred in alleging wilful misstatement with intent to evade duty. The record itself shows that the Department was fully aware of the appellant's classification and duty payment. Vide letter dated 31.12.2012 issued by the Superintendent, it is evident that the Department knew that duty was being discharged @6%. Further, during the investigation conducted in March 2012, the Anti-Evasion wing was aware that the products were being classified as medicaments. The appellant-company was also regularly filing VAT returns describing the goods as "Drugs & Medicines" and had fully cooperated during departmental visits by producing all relevant records. Hence, there was complete disclosure and no suppression of facts. (ii) It is set....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d on account of an error in quantification. (i) It had been specifically submitted that, due to an inadvertent clerical error in the quarterly return for the period ending September 2012, the sales value of the product Hair Plus Premium was erroneously declared as Rs. 9,33,32,153/- instead of Rs. 93,32,153/-. This typographical mistake resulted in an artificial inflation of turnover by approximately Rs. 8.4 crores and consequently led to an additional duty demand of about Rs. 67.49 lakhs. (refer para 4.1.13 of the O-I-O dated 20.10.2015) (ii) The Ld. adjudicating authority rejected this explanation on the ground that the appellant had sufficient time to rectify the error and that the mistake cannot be considered after a lapse of two years (refer para 12 of the O-I-O dated 20.10.2015). It is respectfully submitted that a manifest clerical error affecting quantification cannot be sustained merely on the ground of delay, particularly when the correct figures are borne out from the books of accounts and supporting records. A demand based on an arithmetical or typographical mistake is unsustainable in law. 8. On the other hand, the Ld. Authorized Representative of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on the goods manufactured by M/s. B.D. Enterprises, who is the job worker under the Loan Licence Agreement with the appellant, or not. (iii) Whether for the period from September, 2011 to February, 2012, the appellant is entitled to SSI exemption in terms of Notification No. 08/2003-C.E. dated 01.03.2003, or not. 13. In this case, the appellant has obtained registration from March, 2012 and started paying duty at the rate of 2% on the said products, classifying the said goods under Chapter 30 of the Central Excise Tariff Act, 1985, as Ayurvedic medicines. The Revenue wants to demand duty at the rate of 6% on the said products in terms of Chapter 33 of the Central Excise Tariff Act, 1985. Therefore, the main issue that arises before us is whether the items in question are Ayurvedic medicines or cosmetics / toilet preparations. 13.1. Admittedly, the said items have been manufactured in terms of the Licence/Certificate No.1410-06(G.M.P.)154-10 dated 13.07.2011 for the categories viz. "Taila" and "Prabahi Kwath". The details of the products thereof are enclosed along with the certificate, some of which have also been extracted hereinabove under paragraph 10 of this order....
X X X X Extracts X X X X
X X X X Extracts X X X X
....actured only under a legal licence issued by the licensing authorities in terms of the Drugs and Cosmetics Rules, 1945. In the impugned order, the ld. adjudicating authority itself has held that since M/s. B.D. Enterprises, the manufacturer, is located in a rural area, M/s. B.D. Enterprises is not liable to pay duty. However, on the basis of the above finding in the impugned order that M/s. B.D. Enterprises being located in a rural area is not liable to pay duty on the said products, the duty liability cannot be fastened on the appellant-company, being the Loan Licensee, for the licence to manufacture the Ayurvedic Medicines / Medicaments in question. 14.1. Therefore, we hold that the demand pertaining to the period prior to August, 2011 is not sustainable in the eyes of law and accordingly, the same is set aside. 15. We also take note of the submission made by the Ld. Counsel for the appellant that for the period from September, 2011 to February, 2012, the total turnover of the appellant was less than Rs.1.5 crore, which is well within the limits of SSI exemption as per Notification No. 08/2003-C.E. dated 01.03.2003. In these circumstances, the appellant-company is not liabl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tices of Ayurveda/Siddha/t/nant drugs as laid down in Schedule"T" of the Drugs and Cosmetic Rules, 1945. 14 This certificate is valid for the period from 23.06.2021 to 22.06.2016. The Good Manufacturing Practices (GMP) is valid for the various dosage forms or Rasausbadbis as follows: 1. "Taila". 2."Prabahi Kwath". Directing 13/2/10 Directorate of ISM Drugs Control of West Bengal Directe 3. Document 2 GOVT.OF WEST BENGAL DIRECTORATE OF ISM DRUGS CONTROL DEPTT. OF HEALTH AND FAMILY WELFARE 205,VIVEKANANDA ROAD,3ºº FLOOR, KOLKATA-700006. LIST OF APPROVED AYURVEDIC DRUGS BY THE DIRECTORATE OF ISM DRUGS CONTROL, WEST BENGAL TO BE MANUFACTURED BY M/S ANUPAMA AYURVEDIC DRUG CO.PVT.LTD.OF 128/13,EAST MALL ROAD,KOLKATA-700080 UNDER MFG.LICENSE NO.AL-48M(L) VALID UPTO 22-06-2016 LOAN ON M/S B.D.ENTERPRISES, 24 -PARGANA(S). SLNO. |CATEGORY NAME OF THE PRODUCT COMPOSITION QTY REFERENCE PACKING SIZE 1. TAI (OIL) 13 ARISH HAIR PLUS(NORMAL) EACH 10ML CONTAINS [AYURVEDIC PROPRIETARY OIL OF LEMON(C.LIMONUM) OIL OF JATAMANSI[N_JATAMANSI) 0.25ML 0.1ML API,PART-I,VOL-IV,P75 API,PART-I,VOL-I,P5] 50ML, 100ML,200ML PET BOTTLE. MEDICINE] FOR EXTERNAL USE ONL....