Full Judgment Text
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CASE NO.:
Appeal (civil) 7907 of 2002
PETITIONER:
M/s Dabur India Limited
RESPONDENT:
Commissioner of Central Excise, Jamshedpur
DATE OF JUDGMENT: 01/04/2005
BENCH:
S. N. Variava,Dr. AR. Lakshmanan & S. H. Kapadia
JUDGMENT:
J U D G M E N T
[With C. A. No.6755/2003, 6867/2003 and 1591/2005]
All these Appeals can be disposed of by this common Judgment
as the point involved is the same. The dispute is regarding
classification of two items manufactured by the Appellants, namely,
(1) Lal Tail; and (2) Janam Ghunti. The Tribunal has held that the
product Lal Tail is classifiable under Chapter heading 33.04. As
regards ‘Janam Ghunti’, the matter has been remitted back to the
original authority for a fresh decision.
We have heard the parties. In our view, there is no infirmity in
the Order of the Tribunal insofar as it remits the matter back to the
original authority for a fresh decision on classification of the product
‘Janam Ghunti’. Chapter Note 1.(c) of Chapter 30 states that Chapter
30 does not apply to aqueous distillates or aqueous solutions of
essential oils even though they are suitable for medicinal uses.
Further, under Chapter Note 1.(d) of Chapter 30 preparations of
Chapter 33 would not fall under Chapter 30 even if they have
therapeutic or prophylactic properties.. The Tribunal has, therefore,
correctly held that if ‘Janam Ghunti’ is an aqueous distillates or
aqueous solutions of essential oils it would fall under Chapter 33 even
though it may have therapeutic or prophylactic properties. The
Appellants have claimed that their product ‘Janam Ghunti’ is neither a
distillate nor a solution but is an extraction. However, this is a matter
which requires inquiry into. We approve the finding of the Tribunal
that this would require looking into the process of manufacture, the
composition of the product and that classification of this product
cannot be decided upon without chemical test of the product. We,
therefore, see no infirmity in the Order of the Tribunal to this extent
and the same is upheld.
As regards ‘Lal Tail’, Mr. Lakshmikumaran has pointed out that
this product has all the ingredients mentioned in Ayurvedic Text
Books. The product also has a Drug Controller’s Licence. The
Appellants have also filed evidence by way of prescriptions of
Ayurvedic Doctors to show that their product has therapeutic or
prophylactic properties and is used as a drug. As against this the
Respondents have admittedly led no evidence or produced any
material to show that in the market this product is not considered to
be a drug.
The Tribunal has held against the Appellants mainly on the basis
of the decision of this Court in Shree Baidyanath Ayurved Bhavan
Ltd. vs. Collr. of C. Ex., Nagpur reported in 1996 (83) ELT 492
(S.C.). In this case the question was whether ‘Dunt Manjan Lal’
(Tooth powder) could be considered to be a medicament and as such
eligible for exemption under Notification No. 62/78-C.E. This Court
held that a medicine is ordinarily prescribed by a medical practitioner
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and is used for a limited time and not for every day use unless it is so
prescribed to deal with a specific disease like diabetes. This Court has
held that in interpreting taxing statute the scientific and technical
meaning of the terms and expressions used in the tax laws is not to be
resorted to and that goods are to be classifiable according to the
popular meaning attached to them by those using the product. The
Tribunal has held that from the Appellants literature it can be seen
that ‘Lal Tail’ is used for nourishing the babies skin and that the
product is not used under any prescription by a medical practitioner
and is not used for a limited period. The Tribunal has held that this
product is used regularly but not in connection with a special ailment.
On this basis, it is held that this product fails the test for a
medicament.
Whether a product can be considered to be a medicament or not
has also been considered by this Court in a number of other decisions,
some of which may usefully be referred to herein.
In the case of Commissioner of C. Ex., Calcutta-IV vs.
Pandit D.P. Sharma reported in 2003 (154) ELT 324 (SC), the
question was whether ‘Himtaj Oil‘ is a Ayurvedic medicament or not
classifiable under sub-heading 3003.30 or a ‘perfumed hair oil’
classifiable under sub-heading 3305.10. Even though reliance had
been placed upon the authority of this Court in Shree Baidyanath
Ayurved Bhavan’ case (supra), this Court negatived an argument that
the product would not be considered to be a drug because it was not
prescribed by a medical practitioner and was one which could be used
for a long period of time. It was held that the test was to see what
persons using the product understand it to be. On the basis of
evidence produced by the manufacturer that the common man
understood the product as a medicine it was held that the product was
a medicament.
In the case of Commissioner of C. Ex., Calcutta vs. Sharma
Chemical Works reported in 2003 (154) ELT 328 (SC) the question
was whether ‘Banphool oil‘ was a Ayurvedic medicament or a
perfumed hair oil. This Court, after considering Shree Baidyanath
Ayurved Bhavan’ case (supra), held that the onus or burden to show
that a product falls within a particular Tariff Item is always on the
Revenue. It has been held that merely because a product is sold
across the counters and not under a Doctor’s prescription does not by
itself lead to the conclusion that it is not a medicament. It was also
held that in the product the percentage of medicament may be small
but that by itself did not ipso facto mean that the product is not a
medicament. It was held that generally the percentage or dosage of
the medicament will be such as can be absorbed by the human body
and that the medicament would necessarily be covered by
fillers/vehicles in order to make the product usable. It was noted that
all the ingredients used in Banphool Oil were those which were set out
in the Ayurveda Text Books. It was held that the Revenue had not
discharged the burden to show as to how the customers who used this
product understood it and on the contrary there was evidence to show
that the product was being used for treatment of headache, eye
problem, night blindness, reeling, head weak memory, hysteria,
ammenesia, blood pressure, insomnia etc. the product was a
medicament.
In the case of Commissioner of Central Excise, Nagpur vs.
Vicco Laboratories reported in 2005 (179) ELT 17 (SC), this Court
whilst considering whether turmeric skin cream and vajradanti
toothpaste and tooth powder were to be classifiable under Chapter 30
or Chapter 33, noted Shree Baidyanath Ayurved Bhavan’s case and
held as follows:-
"2.................... The basis of the show
cause notices was the decision of this Court
in Shree Baidyanath Ayurved Bhavan Ltd.
vs. Collector of Central Excise, Indore
reported in 1996 (9) SCC 402 and the tests
allegedly laid down in that decision for
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determining whether a product should be
classified under Chapter 33 or Chapter 30.
3. The two tests according to the show
cause notice for determining whether a
product was classifiable as a pharmaceutical
product under Chapter 30 of the Central
Excise Tariff were (1) Whether the products
are being used daily and are sold without
prescription by a medical practitioner; and
(2) whether the products are available in
General Store Department / Grocery shops.
The department’s case in the show cause
notice is that as these two tests were not
fulfilled the product failed to come within
the prescription of pharmaceutical products
in Chapter 30.
4. The 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. It is not the appellant’s case that
any of these circumstances were present in
this case, besides the decision in Shree
Baidyanath’s case (supra) does not lay
down, the test of classification as concluded
by the Department at all. In that case the
Tribunal had considered the evidence
produced before it with regard to the sale
and purchase of the product in question. It
was found as a matter of fact that in
common parlance the product was not
described as a medicinal preparation but
was described as a toilet preparation. This
Court affirmed the tests laid down by the
Tribunal, namely, that since the primary
object of the Excise Act was to raise
revenue, resort should not be had, for the
purppose of classification, to the scientific
and technical meaning of the terms and
expressions used therein but to their
popular meaning, that is to say, the
meaning attached to that by those using the
product.
5. The Court also noted that the Tribunal
had rejected the assessee’s claim in that
case holding that "ordinarily" a medicine is
prescribed by a medical practitioner and it is
used for a limited time and not every day
unless it is so prescribed to deal with a
specific disease like diabetes." It may be
noted that the court affirmed this line of
reasoning of the Tribunal on the ground that
it was "in general agreement with it". 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.
Indeed this Court in BPL Pharmaceuticals
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Ltd. vs. CCE reported in 1995(Suppl.) 3 SCC
1 has upheld the classification of ‘Selsun’
medicated shampoo as a medicine and not
as a cosmetic and held that in order to
attract Note 2 to Chapter 33 the product
was first proved to be a cosmetic and
"that the product should be suitable
for use as goods under Heading Nos.
33.03 to 33.08 and they must be put
in packing as labels, literature and
other indications showing that they
are for use as cosmetic or toilet
preparation."
6. These observations however were not
made in connection with Chapter Note 1(d)
of Chapter 30 the impact and purport of
which may have to be considered in an
appropriate case.
7. This Court in Commissioner of Central
Excise, Calcutta v. Sharma Chemical Works
reported in 2003 (5) SCC 60 has also
disapproved the approach of the
Department in holding that the product was
a cosmetic only because it was not sold by
chemists or under doctors prescription.
This, according to the decision, does not by
itself lead to the conclusion that it is not a
medicament. The Court reaffirmed the test
as categorically laid down in Shree
Baidyanath, namely, that the burden of
proof that a product is classifiable under a
particular tariff head is on the revenue and
must be discharged by proving that it is so
understood by consumers of the product or
in common parlance. [See also Meghdoot
v. Commisisoner of Central Excise : 2004
(174) ELT 14 (S.C.)]."
From the above mentioned authorities, it is clear that in
classifying a product the scientific and technical meaning is not to be
resorted to. The product must be classifiable according to the popular
meaning attached to it by those using the product. As stated above,
in this case the Appellants have shown that all the ingredients in the
product are those which are mentioned in Ayurvedic Text Books. This
by itself may not be sufficient but the Appellants have shown that they
have a Drug Controller’s Licence for the product and they have also
produced evidence by way of prescriptions of Ayurvedic Doctors, who
have prescribed these for treatment of rickets. As against this, the
Revenue has not made any effort and not produced any evidence that
in common parlance the product is not understood as a medicament.
In view of the above, the decision of the Tribunal on this aspect
cannot be sustained and is accordingly set aside. It is held that the
product would be a medicament and classifiable as such under Chapter
30.
Therefore, the Appeals partly succeed and stand disposed of as
such. There will be no order as to costs.