Full Judgment Text
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CASE NO.:
Appeal (civil) 6319-6321 of 2003
PETITIONER:
M/s. Puma Ayurvedic Herbal (P) Ltd
RESPONDENT:
Commissioner, Central Excise, Nagpur
DATE OF JUDGMENT: 08/03/2006
BENCH:
Ashok Bhan & Arun Kumar
JUDGMENT:
JUDGMENT
WITH
CIVIL APPEAL NOS.1414-1416/2004
Arun Kumar, J.
The appellant claims to be a manufacturer of Ayurvedic products
which are intended to cure certain ailments of the human body. A question
has arisen as to whether the products manufactured by the appellant fall
within the category of medicaments or cosmetics. Answer to this question
determines as to whether the goods are classifiable under the Central Excise
Tariff Act, 1985 as cosmetics under Chapter 33 or as medicaments under
Chapter 30. As cosmetics the rate of excise duty is quite high while as
medicament the products attract nil duty. The following products
manufactured by the appellant are under consideration:
1. (xvii)Puma Neem Facial Pack (Neemal)
2. (xviii)Puma Anti-Pimple Herbal Powder (Pimplex)
3. (xix) Puma Herbal Facial Pack (Herbaucare)
4. (xx) Puma Herbal remedy for Facial Blemishes
5. (xxi) Puma Herbal Massage Oil
6. (xxii) Puma Herbal Massage Oil for Women
7. (xxiii) Puma Hair Tonic Powder (Sukeshi)
8. (xxiv) Puma Scalp Tonic Powder (Scalpton)
9. (xxv) Puma Anti-Dandruff Oil (Dandika)
10. (xxvi) Puma Shishu Rakshan Tel
11. (xxvii)Puma Neem Tulsi
The appellant has a licence to manufacture these and other products
from the Drug Controller under the Drugs and Cosmetics Act. According to
the learned counsel for the appellant all the above items are produced from
ingredients found in Ayurveda text books. They are manufactured as per the
Ayurveda pharmacopaeia and have curative, therapeutic or prophylactic
value. They are basically meant to give relief in body ailments. They are
not items of cosmetics. In order to determine whether a product is a
cosmetic or a medicament a twin test has found favour with the Courts. The
test has approval of this Court also vide Collector Vs. Richardson
Hindustan Ltd.[1989(42) ELT A100 (SC)/2004 (9) SCC 156. There is no
dispute about this as even the Revenue accepts that the test is determinative
for the issue involved. The tests are:
I. Whether the item is commonly understood as a medicament which is
called the common parlance test. For this test it will have to be seen whether
in common parlance the item is accepted as a medicament. If a product falls
in the category of medicament it will not be an item of common use. A user
will use it only for treating a particular ailment and will stop its use after the
ailment 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.
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II Are the ingredients used in the product mentioned in the authoritative
text books on Ayurveda?
The two tests are recognized even by the Central Board of Excise and
Customs and the Board had vide its letters dated 3rd October 1991 and 5th
December, 1991 directed the Assistant Collector to decide the classification
of the products in question by applying the aforesaid two tests.
The learned counsel for the appellant has argued that the products of
the appellant satisfy both the above tests and, therefore, the CEGAT was
wrong in classifying them under Chapter 33 as cosmetics. According to the
learned counsel the products in question have a special use. They are not
items of common use. Only those who want to treat a particular ailment will
go for the particular product of the appellant. The use of a product by the
customers i.e. how the consumers take to a product is a very useful method
of determining the classification of products. What is to be seen is whether
the products are likely to be in common use by normal consumers.
Common parlance meaning and understanding is a strong factor in the
determination of classification of products. One need not resort to scientific
or technical meaning of the terms used.
So far as the other test is concerned, the learned counsel for the
appellant has placed on record material from the Ayurvedic texts or
Pharmacopoeia in support of each product which is subject matter of the
present appeal to show that the ingredients of each product are
independently mentioned in the Ayurvedic texts. The ingredients are natural
Ayurvedic product like shrubs, herbs, leaves, fruits, nuts, flowers, wood and
bark of particular trees. In support of his contention the learned counsel for
the appellant placed before the departmental authorities lot of material in the
shape of certificates and letters from doctors, Ayurvedic practitioners,
experts and above all from the users of the products in question.
The Collector (Appeals) who decided the issue in favour of the
appellant among other things, relied on the opinion obtained by the Assistant
Collector as per Board’s Circular from the Directorate of Ayurveda
Maharashtra, Bombay vide their letter No.AYURVEDIC-
2/Misc/PUMA/1989/10563 dated 1.12.89 which is quoted as under:
"With reference to your letter dated 12.9.89 on the subject
opted above, the samples of products of M/s. Puma Ayurvedic
Herbals (P) Ltd., Nagpur (i.e.11 items) were referred to
Dravyaguna Department of one of our institution for carrying
out tosts. These items were tested by Organoloptic Method.
2/- Now the Professor and Incharge of Dravyaguna Department
has opined that the raw materials used for preparation of the
above items are described in Ayurvedic texts. As such, all
ingredients are Ayurvedic raw material. Treatment of certain
skin diseases is done by Lep, Pralep and Pradheh. This type of
treatment is described in Ayurvedic Texts.
3/- In view of the above, the samples of 11 items sent by you
vide your letter under reference can be classified as
"Proprietary Ayurvedic Medicines".
This opinion coming from a competent and authorised source, is of
great relevance so far as the case in hand is concerned. Besides this the
evidence produced by the appellant before the authorities in the shape of
letters from consumers, from doctors and from Ayurvedic physicians
satisfies the common parlance test.
On the other hand the revenue led no evidence of any sort to rebut the
evidence led by the assessee. It is settled law that burden of showing correct
classification lies on the revenue. The revenue has done precious little in
this case to discharge this burden. The Collector (Appeals) further relied on
the following evidence in support of his finding that the products in question
fall in the category of medicaments:
(i) licence No.A/40/888 granted by the Drug Controllers,
Maharashtra.
(ii) The inscription of the words on the wrapper "Ayurvedic
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Proprietory medicines or and Ayurvedic licence No.A/888 on
the wrapper mentioning of percentage of ingredients as
approved by the Drug Controller.
(iii) Circulation of Therapeutic Index of the products for the use of
Doctors/Vaidyas.
(iv) Certificate issued by Dr. Narendra Agashe, M.D. Medical
Superintendent, Dr. Dalvi Memorial Hospital, Nagpur, the
relevant extract of which is reproduced below:
"This is to certify that we in this hospital have
extensively tried the following Ayurvedic Medicinal
Products from Puma Ayurvedic & Herbal Cosmetics Co.,
Nagpur. We have found them to be of good therapeautic
value and prescribe them regularly whenever the need
arises."
We may note here that the Chief Chemist had opined about the
classification of these products under the Chapter 233 i.e. "Cosmetic" but
the opinion of the Chief Chemist on the question of classification has no
relevance. We agree with the Collector (Appeals) that the opinion of the
Chief Chemist has no relevance for determining classification of the
products. The role of the Chief Chemist is only to supply the analytical data.
On the other hand the opinion of the Directorate of Ayurved, Maharashtra
referred to above is of great relevance. The said Directorate has clearly and
unambiguously stated that the products in question are meant for treatment
of certain skin diseases and the type of ingredients used in the products are
described in Ayurvedic texts, being useful in such treatments.
The learned counsel for the appellant drew our attention to certain
decisions of this Court wherein Ayurvedic products have been held to be
falling in Chapter 30 of the Central Excise Tariff Act, 1985 and not under
Chapter 33. In C.C.E. vs. Sharma Chemical Works 2003 (154) ELT 328 it
was held that the onus to prove that a particular product falls under a
particular head of the Central Excise Tariff is on the Revenue. It was for the
Revenue to show and establish that the product in question was not a
medicament or that the common man did not understand the product as a
medicament. In the present case the Revenue has miserably failed to
discharge this burden.
In C.C.E. vs. Sharma Chemicals Works 2003 (154) ELT 328 this
Court was considering whether "Banphool oil" could be classified as
medicament. The product was a hair oil and all its ingredients were said to
be Ayurvedic which were found in Ayurveda text books. It had 98% Til oil
and 2% Camphor, Amla and Chandan (sandalwood). It was found that all
the ingredients of the hair oil were mentioned in Ayurveda text books and,
therefore, the product was liable to be classified as medicament.
C.C.E. vs. Pandit D.P. Sharma 2003 (154) ELT 324 was again a case
of hair oil named "Himtaj Hair Oil". The Court emphasized the common
parlance test and found that a common man understood the said hair oil as a
medicinal hair oil and not hair oil of common use as a hair oil. Accordingly,
this Court upheld its classification as a medicament.
Naturalle Health Product (P) Ltd. vs. C.C.E. 2003 (158) ELT 257.
Two appeals were under consideration in this case. One was with respect to
Vicks Vapo Rub and Vicks Cough Drops while the other was with respect to
Sloan’s Balm and Sloan’s Rub. Both the appeals were allowed holding that
the items in question were classifiable under the Chapter dealing with
medicament in the Central Excise Tariff Act. In this case this Court
followed the twin test earlier upheld by this Court in C.C.E vs. Richardson
Hindustan Ltd. 1989 (42) ELT A100. Further this Court observed:
"39 We are also of the opinion that when there is no
definition of any kind in the relevant taxing statute, the
articles enumerated in the tariff schedules must be
construed as far as possible in their ordinary or popular
sense, that is, how the common man and persons dealing
with it understand it. If the customers and the
practitioners in Ayurvedic medicine, the dealers and the
licensing officials treat the products in question as
Ayurvedic medicines and not as Allopathic medicines,
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that fact gives an indication that they are exclusively
Ayurvedic medicines or that they are used in Ayurvedic
system of medicine, though it is a patented medicine.
This is especially so when all the ingredients used are
mentioned in the authoritative books on Ayurveda. As
rightly contended by the Counsel for the appellants, the
essential character of the medicine and the primary
function of the medicine is derived from the active
ingredients contained therein and it has certainly a
bearing on the determination of classification under the
Central Excise Act. As held in Amruthanjan case, the
mere fact that the ingredients are purified or added with
some preservatives does not really alter their character."
In Amritanjan vs. C.C.E. 1995 (77) ELT 500(SC) this Court held that
Amritanjan Pain Balm having Menthol IP, Camphor IP, Turpantine IP and
Methyl IP, Salicylate IP as main ingredients, was classifiable as Ayurvedic
medicine under Chapter 30 of the Tariff. It was noticed that the ingredients
were known both to Ayurvedic and western sciences. Still the classification
as medicament was upheld.
BPL Pharmaceuticals vs. C.C.E. (1995) Suppl.3 SCC 1 was a case in
which "Selsun Shampoo" was under consideration for purposes of
classification under the Tariff Act. According to the manufacturers this
shampoo was a medicated shampoo meant to treat dandruff which is a
disease of the hair. This Court held that having regard to the preparation,
label, literature, character, common and commercial parlance, the product
was liable to be classified as a medicament. It was not an ordinary shampoo
which could be of common use by common people. The shampoo was
meant to cure a particular disease of hair and after the cure it was not meant
to be used in ordinary course.
Muller & Phipps (India) Ltd .vs. C.C.E. 2004 (167) ELT374 was a
case of Johnson Prickly Heat Powder. This powder was again held to be a
medicament because it was not an ordinary talcum powder but a powder to
be used to get rid of the problem of prickly heat. Similar was the case
reported in 1999 (112) ELT 22 Manisha PharmaPlasto Pvt. Ltd. vs. .Union
of India. In this case the product under consideration was Nycil Prickly
Heat Powder. The ingredients whereof were
Chlorphensesin IP - 1% w/w
Zinc Oxide IP - 16% w/w
Starch IP - 51% w/w
Talc Purified IP to - 100% w/w
The powder was held to be not an ordinary talcum powder but one falling in
the category of medicament.
Lastly we were referred to Dabur (India) Ltd. vs. C.C.E. 2005 (182)
ELT 290 (SC). This is a judgment of three Judge Bench of this Court and
the products under consideration were Janam Ghunti and Lal Tail.
Regarding Lal Tail, this Court held that it was liable to be classified as
medicament under Chapter 30 as all its imgredients were found to be in
Ayurvedic texts. However, regarding other product the matter was
remanded for further consideration on basis of evidence to be recorded.
From the above judgments it follows that the law is settled on the
applicability of the twin test for determination of classification of a product.
We have already found that the twin test is satisfied in the present case
regarding most of the items under consideration.
The word ’medicament’ is not defined anywhere while the word
"cosmetic" is defined in the Drugs and Cosmetics Act, 1940 as under:
"A ’cosmetic’ means any article intended to be rubbed, poured,
sprinkled or sprayed on, or introduced into, or otherwise
applied to, the human body or any part thereof for cleansing,
beautifying, promoting attractiveness, or altering the
appearance, and includes any article intended for use as a
component of cosmetic."
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It will be seen from the above definition of cosmetic that the cosmetic
products are meant to improve appearance of a person, that is, they enhance
beauty. Whereas a medicinal product or a medicament is meant to treat
some medical condition. It may happen that while treating a particular
medical problem, after the problem is cured, the appearance of the person
concerned may improve. What is to be seen is the primary use of the
product. To illustrate, a particular Ayurvedic product may be used for
treating baldness. Baldness is a medical problem. By use of the product if a
person is able to grow hair on his head, his ailment of baldness is cured and
the person’s appearance may improve. The product used for the purpose
cannot be described as cosmetic simply because it has ultimately led to
improvement in appearance of the person. The primary role of the product
was to grow hair on his head and cure his baldness.
The extent or the quantity of medicament used in a particular product
will also not be a relevant factor. Normally, the extent of use of medicinal
ingredients is very low because a larger use may be harmful for the human
body. The medical ingredients are mixed with what is in the trade parlance
called fillers or vehicles in order to make the medicament useful. To
illustrate an example of Vicks Vaporub is given in which 98% is said to be
paraffine wax, while the medicinal part i.e. Menthol is only 2%. Vicks
Vaporub has been held to be medicament by this Court in CCE vs.
Richardson Hindustan Ltd. 1989 (42) ELT A100. Therefore, the fact that
use of medicinal element in a product was minimal does not detract from it
being classified as a medicament.
In order to be a medicinal preparation or a medicament it is not
necessary that the item must be sold under a doctor’s prescription. Similarly
availability of the products across the counter in shops is not relevant as it
makes no difference either way.
The learned counsel for the respondent drew our attention to Note 2 of
Chapter 33 of the Central Excise Tariff which is as under:
"Note 2. Heading Nos.33.03 to 33.07 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 or 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."
On the basis of this Note it was argued that even if a product had some
curative or prophylactic value, it will still be cosmetic. We cannot accept
this argument. The learned counsel has overlooked the use of the word
’subsidiary’ in the said note from which it follows that a subsidiary curative
or prophylactic use will not convert a cosmetic into medicament. We have
tried to illustrate this by giving the example of bald man treating his
baldness by use of Ayurvedic product. The curative use of the product is
primary in that example and not subsidiary. The subsidiary result is
improvement in appearance. Therefore, in our view, Note 2 to Chapter 33
does not help the respondent. Rather Note 5 to the said Chapter, makes it
clear that the products which fall under heading 33.04 are primarily beauty
or make up preparations. They may incidentally help in protection against
skin irritants. They may also help as a skin tonic, yet they are cosmetics
because skin protection is subsidiary benefit.
In this connection reference may also be made to Note 1(d) to Chapter 30
of the Central Excise Tariff. The said Note reads as under:
Note 1 starts with "This Chapter does not cover".
(a) \005\005\005\005\005\005\005
(b) \005\005\005\005\005\005\005
(c) \005\005\005\005\005\005\005
(d) "Preparations of Chapter 33 even if they have therapeutic
or prophylactic properties."
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Thus preparations falling in Chapter 33 even if they have therapeutic or
prophylactic properties will not fall under Chapter 30 which deals with
pharmaceutical products. The reasons for this appears to be that even
cosmetics may have something to improve skin or other parts of the body
where they are used. In that sense they may have some therapeutic value yet
they remain cosmetic.
From the above discussion it is clear to us that the Revenue has failed
to make out any case in support of its stand that all the products in question
fall under Chapter 33 i.e. under Heading Note 33.04.
Now we will take up each item of the products of appellant and
examine as to under which classification they fall. The products at Serial
Nos.1,2,3,4,7,9,10 & 11 viz. Puma Neem Facial Pack (Neemal),Puma Anti-
Pimple Herbal Powder (Pimplex), Puma Herbal Facial Pack (Herbaucare),
Puma Herbal remedy for Facial Blemishes, Puma Hair Tonic Powder
(Sukeshi), Puma Anti-Dandruff Oil (Dandika), Puma Shishu Rakshan Tel
and Puma Neem Tulsi are clearly medicinal products and are intended to
treat certain medical conditions of the human body and therefore, in view of
the above tests, are liable to be classified as medicaments falling under
Chapter 30 and Note 3003.20/3003.30 Items at Serial No.5,6 and 8 viz.
Puma Herbal Massage Oil, Puma Herbal Massage Oil for Women and Puma
Scalp Tonic Powder (Scalpton) however do not appear to be of any
medicinal property and it is difficult to classify them under the head of
medicament. I n fact the learned counsel for appellant conceded that these
three items do not qualify to be treated as medicaments. Therefore, the same
will be liable to be classified as "cosmetic" under Chapter head 33.04.
Regarding these 3 items the matter will have to go to the Assistant Collector
for quantification of the duty for the relevant period. Subject to this, the
appeals are allowed. No costs.
Civil Appeals No.1414-1416/2004
In view of the above these appeals stand dismissed.