TMI Blog2012 (12) TMI 908X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the Officer In-charge. The Revenue thus failed to discharge their burden to properly classify the product. As such, the order dated 21.10.2011 is liable to be set aside and accordingly it is set aside. Since there is a controversy as regards the classification of the product or as regards the decision arrived at on the basis of the common parlance test, the Revenue is under obligation to adopt the twin test if the assessee approached for re-determination of the classification. But such approach was the basis of the revision as filed under Section 70 of the TVAT Act, 2004. The Revenue has utterly failed to discharge the said obligation. In view of this, the Commissioner of Taxes is directed to adopt the twin test for determining the classification, meaning thereby the common parlance test such as the functional utility and pre-dominance of the primary uses of the commodity apart from taking into account other understanding in common parlance such as to consider the product literature and label etc. and thereafter to determine the composition and character of the product on resorting to the scientific test. The Commissioner of Taxes shall also be at liberty to take aid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for revision under Section 70(2) of the TVAT Act, being Revision Case No.08/2011. In the said revision petition, the previous order dated 29.04.2011 (Annexure-P/6) and the report of the Deputy Drugs Controller dated 17.03.2011 passed in a previous proceeding were heavily relied by the petitioner and claimed that there was no mis-declaration inasmuch as the Deputy Drugs Controller had categorised the said Betonin AST Tonic as Drugs under the Drugs Cosmetics Act,1940 and therefore that product will not be covered by Entry No.183 of Schedule II(b) and also would not carry tax @ 13.5%. In short, in the revision petition, the petitioner claimed that he held the licence under the Drugs Cosmetics Act,1940 and since the seized materials being the scheduled drug fall under Entry No.67(i) of Schedule II(a) of the TVAT Act, it would carry VAT @ 4% (now 5%). 3. The Revisional Authority, however, did not find any substance in the contention of the petitioner and on assigning the reasons as extracted hereunder, rejected the revision petition by the order dated 21.10.2011 in Rev. Case No.60/2011. 5. . . Entry No. 67(i) of Schedule 11(a) taxable @ 5% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the adjudicator will have primacy over the other. In present case, the Entry No. 183 of Schedule II (b) clearly included the Tonics irrespective of its preparation method but the Entry 67(i) of Schedule only mentions drug, whose meaning scope has not been even defined in the Tax law. Therefore, in such case the contents of Entry No. 183 will be considered over the claim made under Entry No. 67(i) of Schedule 11(a). 4. It is apparent that the basis of rejection was that while two interpretations or explanations of a particular point are possible and the one has been explicitly mentioned in the tax statute will be preferred to the other interpretation which was derived on taking aid from the other statute. Interpretation as projected by the Revisional Authority is claimed to emanate from the TVAT Act and the Rules made thereunder and hence that would have primacy over any other laboured interpretation. However, no reference to a definite provision of the statute has been made in the impugned order. What surprises more that the Revisional Authority (the Commissioner of Taxes) in para-9 of the impugned order as excerpted hereinbefore has relegated the order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28.02.2011. The petitioner also has made reference to similar opinion of Inspector of Taxes, Kamrup, Guwahati as available at Annexure-P/4 to this petition. To demonstrate the correlation with the present case and the previous case, the petitioner has annexed the order of seizure and invoices of both the cases. 6. In a nutshell the petitioner contended that by declaring the products, which were seized by the order dated 25.03.2011, as H.L. medicines , the petitioner did not make any mis-declaration as alleged. Furthermore, it has been pointed out by Mr. Deb, learned senior counsel for the petitioner that even though the seizing authority has stated the seized materials as Appetite Tonic in the order of seizure dated 25.03.2011 as available at Annexure-P/6 but, nowhere in the label of those products such description would be available. Hence, the interpretation that was resorted to by the Revisional Authority (the Commissioner of Taxes) cannot be stated to be based on cogent reasons. 7. On the other hand, Mr. N.C. Pal, learned Govt. Advocate stoutly opposed the contention of Mr. S. Deb, learned senior counsel for the petitioner. He submitted that there is no illegality o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence. On the point of not following the previous order dated 29.04.2011 as passed in Rev. Case No.08/2011 by the Revisional Authority, Mr. Pal contended that in the impugned order the statutory provisions have been followed and the Revisional Authority was not confronted with any ambiguity in those provisions and as such he did not feel persuaded to consider any previous order for the precedental value. However, he fairly conceded that the term Medicines and Drugs have not been defined in the TVAT Act, 2004. He further submitted on the basis of the affidavit-in-opposition filed by the Revisional Authority that what is exigible to tax and what would fall under which Entry cannot be understood in the context of its use and cannot be understood in strict scientific and technical sense or meaning or definition imported from other Acts. When a particular item is specifically mentioned in the entry, mere fact that the article is used or manufactured as medicine, shall not require that the specific entry would be ignored. He further contended that when the legislature has clearly included a particular commodity under an Entry and prescribed rate of tax, no injustice can be complained of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for further interpretation. 10. Referring to the provisions of Entry No.183 of Schedule II(b) of the TVAT Act, Mr. Pal, learned Govt. Advocate would contend that the Tonic is covered by Entry 183 of Schedule II(b) of the TVAT Act, irrespective of whether that was prepared according to pharmacopial standards or otherwise. As such, even if the pharmacopial standards were followed in preparation of such Tonic that would be covered by Entry 183 of Schedule II(b) of the TVAT Act. In other words, he would contend that the order dated 29.04.2011 as relied on by the petitioner is per contra to the statutory provisions and as such that cannot have any binding effect or precedental value whatsoever. 11. The controversy as emerged requires a serious, not a short circuited, exercise. In view of this, a brief survey of the law enunciated by the Apex Court in regard to the common parlance test for classification as be all and end all of the matter cannot be dispensed with. 12. In Delhi Cloth and General Mills Co. Ltd. Vs. State of Rajasthan Ors., as reported in (1980) 4 SCC 71, the Apex Court examined the question of classification of rayon tyre cord fabric vis- -vis rayon fab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the seller, who in his turn passes it on to the consumer. As purchase tax, the liability falls directly on the purchaser. A long train of authorities supports that view, and we need refer only to the recent Judgment of this Court in Porritts and Spencer (Asia) Ltd v. State of Haryana, in which reference has been made to some of them. Thereafter, on considering the connotations and the common parlance in the trade as well as considering the components of the tyre cord fabric, it was held by the Apex Court in para-12 of Delhi Cloth and General Mills Co. Ltd. (supra) as under : 12. On a comprehensive consideration of the material before us, there is no escape from the conclusion that by and large a tyre cord fabric is regarded as a textile fabric. The peculiar feature that the tyre cord constitutes the dominating element indicating the use to which the fabric is put and the close concentration in which it is packed in contrast to the light density with which the weft thread is woven does not detract from the conclusion that what we have is a textile fabric. We are concerned with the product manufactured and sold by the appellant. It is wholly immaterial that once tyre cord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia; Dunlop India Ltd. v. Union of India; State of UP. v. M/s. Kores (India) Ltd. and Delhi Cloth and General Mills Co. Ltd. v. State of Rajasthan). The difficulty in applying the principle of these decisions to the instant case is that the contention of the appellant itself in the earlier revision application which was filed by it before the Government of India, was that Properzi Rods had no commercial markets such. That is clear from the Remand Order No. 764 of 1972 dated May 16, 1972 passed by the Joint Secretary to the Government of India. After the remand, the appellant contended once again before the Appellate Collector of Central Excise and Customs. New Delhi, that Properzi Rods are not goods within the meaning of the Central Excise Act since they are neither marketed as such nor marketable. Commercial parlance assumes importance when goods are marketable. It is therefore not possible to hold that the goods in question are not wire rods. There is preponderating evidence on records to show that they are nothing but a species of wire rods despite the special method of their manufacture and the use to which they are put. We may also add that the statements contained in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terials are also used in manufacturing the said suit cases and it may also be that their value is substantial - and in some cases more than the value of the plastics - but having regard to the several circumstances aforementioned and applying the common parlance test and the test of usage in trade circles, these goods must be called 'plastic articles'.(Emphasis Supplied) 5. In its order T.A. No.566 of 1984, followed in the present case, the Tribunal has given more importance to the respective value of the plastic and the other materials (like steel including locks and other fixtures) and opined that since the value of other components is more than the value of plastic used therein, they cannot be called 'plastic articles'. It gave certain illustrations to emphasise that value is the determining factor. The Tribunal pointed out that in the case of a diamond ring, the major component may be gold or silver and the diamond may represent a small portion of it, yet nobody would call it gold or silver ring; it would be called a diamond ring. It is undoubtedly so. But this only shows that there is no one single universal test in these matters. The several decided case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing, beautifying, promoting attractiveness, or altering the appearance, and includes any article intended for use as a component of cosmetic. and A drug includes all medicines for internal or external use of human beings or animals and all substances, intended to be used for or in the diagnosis, treatments, mitigation or prevention of any disease or disorder in human being or animals, including preparations applied on human body for the purpose of repelling insects. 27. We cannot ignore the above broad classification while considering the character of the product in question. Certainly, the product in question is not intended for cleansing, beautifying, promoting attractiveness or altering appearance. On the other hand it is intended to cure certain diseases as mentioned supra. 28. The fact that the appellants have previously described the product as 'Selsun Shampoo' will not conclude the controversy when the true nature of the product falls for determination. In fact, notwithstanding the fact that the appellants have described the product as Selsun Shampoo, the Central Board of Excise and Customs, as noticed earlier, has classified the same as patent and p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We have also seen that the Central Board of Excise and Customs have given numerous points in support of its conclusions for holding the product in question as patent and proprietary medicine. Principal among them at the risk of repetition can be recalled. They are as follows: (a) It was used for the treatment of a disease known as Seborrhoeic Dermatitis, commonly known as dandruff. (b) It was manufactured under a Drug licence. (c) The Food and Drugs Administration had certified it as a drug. (d) That the Drug Controller had categorically opined that Selenium Sulphide present in Selsun was in a therapeutic concentration. (f) It was included as a drug in the National formularly, U.S. Pharmacoepia and the Merck Index. (g) It fulfilled the requirements of a drug as understood in common parlance, (h) Selenium Sulfide was sold only on medical prescription and used as a medicine; (i) Selsun was not a medicated shampoo, which was recommended as conditioners which subsidiary medicinal effect. Selsun was on the contrary being recommended by physicians, (j) Various standard books and treaties such as (i) The pharmacological Basis of therapeutics by Goodman and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Paragraph 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 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. We are, therefore, of the opinion that the Tribunal applied the correct principles in concluding that the product in question was not a m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 purpose 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. 6. The Court also noted (SCC pp. 404-05, para 3) 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 Ltd. v. CCE has upheld the classification of 'Selsun' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, function and use of the goods. When a commodity falls within a tariff entry by virtue of the purpose for which it is put to (sic produced), the end use to which the product is put to, cannot determine the classification of that product. (Emphasis supplied) 16. Revenue is classifying the impugned chillers as parts of the air-conditioning system as the same is used in central air-conditioning plant of star hotels, airport, hospital, large office complexes and large establishments. The use of the chillers in the air-conditioning system would not take away the primary or basic function of the chiller which is to produce chilled water by using a refrigerating circuit. Heading 84.18 covers refrigerators, freezers and other refrigerating or freezing equipment. Accordingly, the chillers in question shall fall under specific heading 84.18 of the Tariff Act. This view is supported by the explanatory notes of HSN below heading 84.15. HSN provides that: If presented as separate elements, the components of air-conditioning machines are classified in accordance with the provisions of Note 2(a) to Section 16 (Heading 84.14, 84.18, 84.19, 84.21, 84.79, etc).... Chillers manufact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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. II. Are the ingredients used in the product mentioned in the authoritative textbooks on ayurveda? 47. 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayurvedic Medicine and there is no requirement to look beyond. (Emphasis supplied) 51. West Regional Bench of the Tribunal in its order dated 13.12.2000 which is subject matter of Civil Appeal 4048/2001 observed thus: The Drugs and Cosmetic Act, 1940 provides for a licence to be obtained for manufacture of Ayurvedic, 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: 3.(a) 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 manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nores common parlance test which is one of the well recognized 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. 21. It is noteworthy that in Shree Baidyanath Ayurved Bhavan Ltd.(II)(supra), the Apex Court had taken recourse to the Drugs and Cosmetics Act,1940 to have an effective meaning of the ayurvedic medicament in the tariff schedule and held that the term ayurvedic medicament in the tarrif will have the same meaning as the meaning in the Drugs and Cosmetics Act. Therefore, if the product under consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Himtaj Oil. Thus in the aforementioned judgment this Court followed the law laid down in BPL Pharmaceutical's case (supra) even after noting the judgment in Shri Baidyanath Ayurved Bhavan's case(supra). We, therefore, cannot and would not accept the argument by Shri Radhakrishnan that we must ignore all these judgments in preference to Shri Baidyanath Ayurved Bhavan's case(supra). These judgments were then followed in Meghdoot Gramodyog Sewa Sansthan v. Commissioner of Central Excise, Lucknow [2004 (174) ELT 14 (SC)]. Again the product in question was Ayurvedic hair oils like Bhringraj Tail, Trifla Brahmi tail and Neem herbal sat. The aforementioned judgments by Variava,J as also the judgment in BPL Pharmaceutical's case(supra) were approved. This was an appeal by the assessee against the Tribunal's judgment holding that these products were the cosmetic products and were, therefore, covered by Chapter 33 where the Tribunal had held that the appellant- assessee had not produced any evidence to show except for certain letters from the doctors that the products were prescribed by the medical practitioners as medicines; secondly there was nothing to show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se(supra) and ultimately held in favour of the assessee and against the Revenue. 28. Lastly the same question came to be considered in details in Puma Ayurvedic Herbal (P) Ltd. v. Commissioner Central Excise, Nagpur [2006(196)ELT3(SC)] though on the question of valuation. One of us (Ashok Bhan, J) was a party to this decision. The products which fell for consideration were namely, 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, Puma neel tulsi, etc. After referring to the decisions referred to above and other decisions like CCE v. Richardson Hindustan Ltd. [(2004) 9 SCC 156]; CCE v. Pandit D.P. Sharma [2003(154)ELT324(SC)]; Naturalle Health Products (P) Ltd. v. CCE [2003ECR513(SC)], Amrutanjan Ltd. v. CCE [(1996) 9 SCC 413], BPL Pharmaceuticals Ltd. v. CCE [1995 Supp (3) SCC 1], Muller Phipps (India) Ltd. v. CCE [(2004) 4 SCC 787]; Dabur India Ltd. v. CCE [(2005) 4 SCC 9], Manish Pharma Plasto (P) Ltd. v. Union of India [(1999) 112 ELT 22(Del)], the court came to the conclusion tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich the product is put. However, the miniscule quantity of the prophylactic ingredient is not a relevant factor. 26. It has been further held in M/s Wockhardt Life Sciences Ltd.(supra) as follows: 30. There is no fixed test for classification of a taxable commodity. This is probably the reason why the 'common parlance test' or the 'commercial usage test' are the most common [see A. Nagaraju Bors. v. State of A.P.: 1994 Supp (3) SCC 122]. Whether a particular article will fall within a particular Tariff heading or not has to be decided on the basis of the tangible material or evidence to determine how such an article is understood in 'common parlance' or in 'commercial world' or in 'trade circle' or in its popular sense meaning. It is they who are concerned with it and it is the sense in which they understand it that constitutes the definitive index of the legislative intention, when the statute was enacted [see D.C.M. v. State of Rajasthan : (1980) 4 SCC 71]. One of the essential factors for determining whether a product falls within Chapter 30 or not is whether the product is understood as a pharmaceutical product in common parlance [se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther urged that even if the user of product leads to improvement in appearance of a person that by itself cannot bring it into the category of cosmetics if otherwise the product is having a medicinal value and is marketed as such. According to the revenue, all these products were understood to be the cosmetics in common parlance and not actually the ayurvedic medicines for various reasons, the said products should have been held to be covered under Chapter 33. This Court after inspecting the labels of the product has held that the Assessee had claimed in each of the label regarding its medicinal properties and, the product is not a cosmetic. This Court also observed that the common parlance test is not be all and end all , and held that the miniscule percentage used is also not a deciding factor. This Court concluded that the products in question are medicinal products and, therefore, are covered by Chapter 30 and not under Chapter 33. That case would not assist revenue as this Court after taking into account the labels on the products observed that these products have medicinal ingredients and are marketed as ayurvedic medicines not cosmetics, however it incidentally i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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