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DXN Manufacturing (India) Pvt. Ltd. [formerly DXN Herbal Manufacturing (India) Pvt. Ltd.] , Dr. Lim Siow Jin, C.E.O & Director, Daehsan Trading (India) Pvt. Ltd., Roshan Commercial Trades (P) Ltd., K. Thevaraja, Director, Dr. Lim Siow Jin, C.E.O & Director, A.M. Sulaiman, Managing Partner, The Madras Pharmaceuticals Versus Commissioner of Central Excise & Service Tax, Pondicherry

2017 (11) TMI 608 - CESTAT CHENNAI

Classification of goods - whether the product Reishi Gano and Ganocelium are classifiable under chapter 3003.39 of the First Schedule to the Central Excise Tariff Act, 1985, as contended by appellants or as food supplements under 2108.99 of CETA?. - Held that: - the appellants were taking great pains to emphasize the distributors that they should sell the items as food supplements only and not to misrepresent it as a drug. From the facts on record, it also emerges that the statements of vari .....

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d most certainly not as an ayurvedic drug. - The second clinical trial report which was submitted for issue of Drug Licence was in the name of Dr. S.S. Raviselvan, AMO, Aringnar Anna Government Hospital, Chennai. It emerges that the said Dr. Raviselvan though admits having issued such report nonetheless also admitted that the report was issued at the request of Daeshan without conducting any clinical test. Appellant did not seek examination of any of these two doctors. At the cost of repetit .....

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imary object of Excise Act being to raise revenue, the classification of the product so as to determine the rate of duty has to be considered independent from the Drugs and Cosmetics Act, 1940 and like legislations. - Correct classification of goods - Revenue have contended that said goods merit classification under sub heading 2108.99 of the CETA as food supplement requiring assessment of the goods under Section 4A for the purpose of payment of duty of excise in view of N/N. 13/2002-CE (NT) .....

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as food supplements, based on extracts from plant, fruit concentrates, honey, fructose etc. and containing added vitamins and sometimes minute quantities of iron compounds often put up in packagings with indication that they maintain general health or well being" would be included within that entry "FOOD PREPARATIONS NOT ELSEWHERE SPECIFIED OR INCLUDED.HSN further goes on to elucidate that such similar preparations however intended for the prevention of treatment of diseases or ailments are exc .....

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CETA and more specifically in 2108.99 as it stood at the appointed time, and assessed accordingly under Section 4A of the Act for discharge of duty liability. The issue of classification is thus held in favour of Revenue and against assessee. - Extended period of limitation - Held that: - the intention of changing the classification and claiming the products to be Ayurvedic Proprietary Medicines was only to evade payment of duty. The appellants have consciously declared on the labels that .....

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hat the invocation of extended period is justified, the provisions of Section 11AC will statutorily require to be invoked and hence penalty equal to the duty or differential duty determined will necessarily have to be imposed - penalty upheld. - Penalty u/r 25 - Held that: - as the equal penalty under Section 11AC has already been imposed, we hold that the same will meet the ends of justice and further penalty on DXN under Rule 25 is uncalled for - penalty u/r 25 set aside. - Appeal allo .....

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ikeyan, Advocate For the Appellant Shri A. Cletus, ADC (AR) For the Respondent ORDER Per Bench The moot issue for consideration in all these appeals is whether the product Reishi Gano and Ganocelium are classifiable under chapter 3003.39 of the First Schedule to the Central Excise Tariff Act, 1985 (CETA), as contended by appellants or as food supplements under 2108.99 of CETA. The facts of the appeal E/365 to E/369/2005 are summarized as follows : DXN Herbal Manufacturing (India) Pvt. Ltd. (DXN .....

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n E/366/2005, M/s.Daehsan Trading (India) Pvt. Ltd. (Daehsan, for short) and M/s.Roshan Commercial Trades (P) Ltd. (Roshan for short), marketing agents for the products of DXN are the appellants in Appeal Nos.E/367/2005 & E/368/2005. Appeal No.E/369/2005 has been filed by Shri K. Thevaraj, Director of Daehsan. 2. The controversy is a resultant of an investigation conducted by officers of the DGCEI, when the following apparent facts emerged : (i) that RG & GL were imported and marketed by .....

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Medicine (APM) in Kerala State. (iii) that from March 2002, RG and GL were marketed as APM all over India. (iv) that subsequently DXN established manufacturing unit at Pondicherry and filed applications to various Government organizations like Electricity Department, District Industry Centre, Pollution Control Board, Director of Industries and Commerce etc. declaring that they were manufacturing food supplement capsules made from natural mushrooms; that they had even obtained a No Objection Cer .....

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o stated in the application that they had already got a drug license for manufacturing the same products in Tamil Nadu. (vi) that to declare RG & GL as APM, Daehsan had submitted clinical trial reports to the Drug Control Authority, Tamil Nadu which subsequently were found to be forged/issued without any actual clinical trials. (vii) that drug licence issued by Drug Control Authority, Pondicherry was apparently based on the licence granted to Daehsan in Tamil Nadu.; (viii) that only in India .....

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RG and GL have no reference in Ayurvedic texts; (xiii) that RG & GL capsules have no therapeutic or prophylactic value and are not used in hospitals as medicaments. 3.1 Based on the above apparent findings, department took the view that that RG & GL are not Ayurvedic Proprietary Medicine and did not merit classification under CETA 3003.39, but fall under CETA 2108.99 as food supplements, and in consequence assessment of the goods should be under Section 4A of the Central Excise Act 1944 .....

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otice dated 30.08.2004 was issued proposing to vacate the protest lodged while paying duty of ₹ 3,42,91,224/- for the period September 2002 to June 2003. 3.4 After due process of adjudication, vide impugned order dt. 22.03.2005, the adjudicating authority confirmed demand of duty proposed in the notices with interest thereon, regularized / appropriated the amounts paid towards differential duty liability, ordered confiscation of excisable goods seized by the department however, gave option .....

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ribunal which was disposed of vide Final Order No.25 to 29/2006 dt. 30.12.2005 and as reported in 2006 (199) ELT 533 (Tribunal). 4.2 The appellant however preferred appeals to the Honble Apex Court vide Civil Appeal No.1215 of 2006 inter alia contending that although plethora of materials was given to the Commissioner as well as CESTAT to support the argument that RG & GL are Ayurvedic Proprietary Medicines used in curing many diseases, however said material has not been taken into considera .....

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of appeals. 5.2 The appellant M/s.Roshan Commercial Trades Pvt. Ltd. (Roshan) in E/331/2006 is manufacturer of RG & GL. They did not have manufacturing facility of their own and therefore undertook manufacture through loan licensee M/s.Madras Pharmaceuticals (MP) (appellant in E/405/2006) 5.3 Roshan had classified the products under chapter 3003.39 of CETA, 1985 as Ayurvedic Propriety Medicines. 5.4 As part of search operations at Daeshan, search was conducted in the premises of these appell .....

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evealed that Roshan had relabelled some stocks of RG & GL capsules (which were imported as food supplements) at the loan licence premises of MP by repacking the original contents into new containers. 5.7 Investigations at Daeshan as well as stock registers recovered from Daeshan showed that there had been no movement of RG & GL powder from Daeshan and only filled bottles of RG & GL were issued to Roshan & MP who marketed them as APM; that Roshan had never imported or purchased sh .....

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nal authority vide order dated 28.02.2006 ordered classification of RG & GL under CETA 2108.99 and confirmed the differential duty demand of ₹ 53,79,870 as well as other demands being duty on inputs removed as such. Penalties were imposed on Roshan, MP, Daeshan, Dr.Lim Siow Jin, Ms.Liew Sheue Liang, Sh. A.M.Suhaman, Sh.Thevaraja) and Sh. Abdul Rahmat Puvarsan. Hence these appeals. 6. When the matter came up for hearing, on behalf of appellant in appeal nos.E/365 to E/269/2005, Ld. Seni .....

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ting tariff entries and the only difference is that products classifiable under Chapter Heading 2108 are liable to be assessed under Section 4A of the Excise Act as compared to Section 4 for products falling under Chapter Heading 3003. (ii) Reishi Gano and Ganocelium are both parts of the mushroom Ganoderma lucidum. RG and GL are the top portion and bottom portion of the mushroom respectively. (iii) Mushroom is described in the Ayurvedic textbook Bhavaprakasha as Bhumichatra. Both these parts ar .....

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imports bulk powder of RG and GL from Malaysia, repacks them in capsules and sells them to stockists. Initially, the product was sold by Daehsan as a food supplement. The Drug Authorities in Gujarat and Kerala took objection to the same and seized the products, holding that they are Ayurvedic medicines and could not be marketed without a drug licence. Subsequently, the Appellant applied for a drug licence which was granted. (vi) The question for consideration whether the product is a food supple .....

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ent in the common parlance and, (ii) the ingredients should be mentioned in Ayurvedic text books. (viii) For applying the common parlance test, the adjudicating authority has relied on the past practice followed by the Appellant and has ignored the relevant practice followed by the Appellant in classifying the products. (ix) For applying the second test referred to hereinabove, the adjudicating authority has given a finding that the botanical name of the impugned product is not found in the Ayur .....

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c manner, it is submitted that all species and varieties are also covered. (xii) Adjudicating Authority, at internal page 25 and Para. 57.2 of the Order-in-Original dated 22.03.2005, has noted that the opinion of Dr.Sharma nowhere says that the products in question are ayurvedic. This observation is incorrect as Dr.Sharma, vide the last para of his opinion has concluded that the product is an Ayurvedic oushadham. (xiii) Therefore, the relevant material like the expert opinion, drug licences, lit .....

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or Ayurvedic Medicaments. By application of Chapter Notes and Chapter Headings, the product is classifiable under Chapter Heading 3003. Even otherwise, by application of Rule 3(a) as also Rule 3(c) of the Rules of Interpretation, the product in question is classifiable under Chapter Heading 3003 and not under Chapter Heading 2108. (xv) The records would show that appellant changed its stand on classification due to the directions given by the Drug Authorities and not with any nefarious intention .....

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enalty under Section 11 AC of the Excise Act. 7. The Learned Counsel Shri S.Muthuvenkataraman appeared on behalf of appellants in E/331 to E/334/2006 and Shri M. Karthikeyan, Ld. Advocate appeared for appellants in E/404-405/2006. They adopted the arguments advanced by the Learned Senior Counsel Shri Lakshmi Kumaran. It was submitted that following the action taken by drug control authorities, the appellants had to review the classification of the subject items. Thus the marketing company had ob .....

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nt. The allegation that the drug license was forged was countered by stating that till date the authorities have not cancelled the licence. The products would pass the twin test laid by the Hon'ble Supreme Court in the case of Richardson Hindustan Ltd 1988 (35) E.L.T. 424. Learned Counsels pleaded that the extended period is not invokable and that penalties imposed are unwarranted. 8. The Department was represented by Shri A. Cletus (ADC) who supported the adjudication and opposed the appeal .....

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tend that products are Ayurvedic Proprietary Medicines they do not claim classification under Chapter 3003.31 which attracts Nil rate of duty. Therefore the issue whether the products are APM is not an issue for consideration in the case. (ii) Prior to manufacture in India, the impugned goods were imported into India by classifying them under Customs Tariff Heading (CTH) 2108 as food supplements and not under 3003 as medicines. According to appellant, a case is said to have been booked by Kerala .....

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supplements, under 2108 as alleged by department. 9.3 The matter is once again before this forum in consequence of the order dt. 07.08.2015 of the Hon'ble Supreme Court in C.A. No.1215/2016 filed by appellant. Relevant portion of the order of Hon'ble Apex Court in appeals E/365-369/2005 is reproduced for ready reference : "It is pointed out by Mr. V. Lakshmikumaran, learned counsel for the appellants, that plethora of material was given to the Commissioner as well as CESTAT in supp .....

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de the order passed by the CESTAT and remand the case to the CESTAT for fresh examination considering the material placed by the assessee. We make it clear that insofar as this Court is concerned, no opinion on the merits of the case is expressed. It would be open to the Tribunal to examine the issue afresh after considering the submissions of both the parties. Since the matter is old, we request the Tribunal to decide the case within six months from the date of receipt of a copy of this order.& .....

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sts laid down in the decision of Richardson Hindustan Ltd. Vs CCE Hyderabad - 1988 (35) ELT 424 (Tribunal) (maintained by Hon''ble Supreme Court in 1989 (42) ELT A100 (SC), namely, (1) product should be known as medicament in the common parlance (2) ingredients should be mentioned in Ayurvedic text books. Various documents have been submitted by appellant to justify their stand that the impugned goods are classifiable as Ayurvedic medicaments and Ayurvedic text books mention mushrooms in .....

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vit in this Tribunal on 30.02.2017 wherein, they have affirmed that following evidences have been placed before Commissioner during adjudication proceedings : S. No. Particulars Acknowledgment 1. Opinion of Dr. K.S. Viswanatha Sharma (Vaidya Visarada Ayurveda Siromani) Acknowledged on 22.11.2004 by CCE, Pondicherry. 2. Ganotherapy Treatment against disease with RG & GL (Old version) Acknowledged on 19.11.2004 by the Central Excise Department. Annexure B.1/Sl.no:1 3. Ganotherapy Treatment aga .....

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re B.3/Sl.no:2 7. Therapeutic Goods Administration (TGA) Certificate, Australia & Certificate of Medicine Listing Acknowledged on 19.11.2004 by Central Excise Department Annexure B.3/Sl.no:3 8. Extract from Growing Gourmet and Medicinal Mushroomsby Paul Stamets Acknowledged on 19.11.2004 by Central Excise Department Annexure B.4/Sl.no:1 9. Extract from MycoMedicinals An Informational Treatise on Mushroomby Paul Stamets. Acknowledged on 19.11.2004 by Central Excise Department Annexure B.4/Sl. .....

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slaus Acknowledged on 19.11.2004 by Central Excise Department Annexure B.4/Sl.no:5 13. Copies of Bills of Entry Acknowledged on 19.11.2004 by Central Excise Department Annexure D.1/Sl.no:1 14. Letter of Port Health Officer dated 14.02.2002 Acknowledged on 19.11.2004 by Central Excise Department Annexure D.1/Sl.no:3 15. Drug License (License to Manufacture for Sale of Ayurveda drug) from 13.03.2002 till 31.12.2003 Acknowledged on 19.11.2004 by Central Excise Department Annexure D.2/Sl.no:1 16. Ce .....

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) Opinion of Dr. K.S. Viswanatha Sharma: This opinion found in pages 81-91 of paper book submitted by appellant on 26.10.2005 has been issued on 18.11.2004. The perusal of the same indicates that learned Shri K.S. Viswanatha Sharma has discussed the properties of Ganoderma lucidum from a ayurvedic viewpoint in which he inter alia states as follows on page 88 : "Mushrooms have been mentioned in ancient texts, very sporadically and broadly as Chatraka and Bhuchatras. Botanical terms and Latin .....

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m. Lack of specific terminology for naming different species of mushrooms in ancient texts, does not in any way obscure the fact, that Ganoderma lucidum, which is found very much in India and, having tremendous healing properties have not been considered in the wisdom of the ancient sages." The elucidation by Dr. Sharma, while highlighting the medicinal properties of mushrooms however, admits that specific entries on medicinal mushrooms are not named in ayurvedic texts like Charaka, Sushrut .....

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any specific ayurvedic usage of the said mushrooms for any specific human ailment or conditions as laid down by Ayurvedic protocol. 2) Ganotherapy Treatment against disease with RG & GL This is the booklet called "Ganotherapy Ganoderma (Linghzhi) The Miraculous King of Herbs" authored by Dr. Lim Siow Jin. Interestingly, this author is also the Chief Executive Officer and Director of M/s.Daeshan Trading (India) Pvt. Ltd. who is the appellant in Appeal E/366/2005. Dr. Lim Siow Jin hi .....

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of such treatable ailments is as unending as a list of English alphabets, purportedly treating any sick condition in every part of the body, from eyes to nostrils, throat, skin to joint ankle feet, urination, diarrhoea as well as constipation, body pain, kidney function etc. In one page of the booklet, contents of GL are shown as (1) Polysaccharide (2) Organic germanium (3) A whole spectrum of vitamins (4) A whole spectrum of minerals. Interestingly, in the last page of the booklet, it has been .....

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he contents of RG have been indicated as (1) Polysaccharides (2) Organic germanium (3) Adenosine (4) Triterpenoids (5) Ganoderic Essence (6) Protein (7) Fibre. The very first page of the booklet claims that the product is effective in (1) Scanning diseases (2) Cleansing Toxins (3) Regulating body functions (4) Ensuring recovery of health (5) Preserving youthfulness. Second page of the booklet shows the contents of Ganocelium as (1) Polysaccharide (2) Organic germanium (3) A whole spectrum of Vit .....

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are touted as a toxin cleaner, for regulating body functions, for preserving youthfulness and the like. Certainly, there is no reference or claim made therein that RG and GL are Ayurvedic products or for that matter, that they have Ayurvedic properties and functionalities. Nonetheless, from the photocopy of the label found in page 54 of the paper book, the products RG & GL get christened as Chatrakh and Bhuchatras and termed as Ayurvedic Proprietary Medicines. Interestingly, both Ganoderma a .....

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f best fruit grape. There is also a reference to mushrooms and opinion of "Sushrut" that mushrooms will grow up during rain reason, stops cough and clears the toxins from stool and urine, that its vegetable is sweet when cooked and has the quality of clearing the cough; that it causes a bit of pitta and cough and is also flatulent. The very same mushroom has been claimed to clear cough and at the same time there is assertion that it causes cough. In the event, no further analysis of th .....

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protectant." In conclusion of part of the report at page 84, inter alia, states that "there is a tremendous amount of data on the chemistry and pharmacology of reishi mushroom, but relatively little information on its clinical applications. Much of the research has focused on the ability of the reishi polysaccharides to enhance specific and nonspecific immune responses, as a result, a wide array of medical indications associated with immune functions have been claimed but remain to be .....

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of China (2000). Approved for the treatment of dizziness, insomnia, palpitations, shortness of breath, and cough and asthma due to consumption. Japan Not included in the Japanese pharmacopoeia. Not used in Kampo medicines." Thus the above write up, while dwelling into the claimed benefits of Reishi mushroom, has however cautioned that there is relatively little information on its clinical applications. It also states that much of the research has focused on the ability of the polysaccharid .....

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main product is otherwise known in most western countries as a dietary supplement. 6. Pharmacopoeia of the Peoples Republic of China This relied upon document is found in pages 92 to 93 of the paper book. The extract, inter alia, concerns the entry of Ganoderma (Lingzhi). In the Chinese Pharmacopoeia, the action and indications of the Ganoderma are given as follows : Action : To replenish qi and ease the mind, to relieve cough and asthma, Indications : Dizziness, insomnia, palpitation, short br .....

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medicine but the fact thereof will not make all the items listed in the Chinese Pharmacopoeia as products eligible to be also classified as Ayurvedic product. 7. Therapeutic Goods Administration (TGA) Certificate, Australia & Certificate of Medicine Listing This document is found at pages 94 to 100 of the paper book. The document, issued by Department of Health and Ageing, Therapeutic Goods Administration, Australian Government, certifies that both RG and GL are listed in the "Australi .....

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se documents as to whether RG and GL are sold in Australia specifically for certain therapeutic values or for specific ailments or merely as an dietary or food supplement as contended by Revenue. In the circumstances, we are unable to glean any worthwhile information that would be useful in deciding upon the issue at hand. 8. Extract from Growing Gourmet and Medicinal Mushrooms by Paul Stamets These documents are found in pages 102 to 112 of the paper book. The said publications appears to be is .....

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une system. Article makes a reference to studies on modulating effects on blood pressure and lipid levels, glucose levels and presence of immuno-modulating proteins. Various other claims of cure have been reported in the article. However, what is interesting to note that the article predominantly concentrates on the aspects of cultivation and harvesting mushroom. In any case, while the claims of the said mushroom having properties of curing many health conditions may well be true, that would not .....

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ormational Treatise on Mushroom by Paul Stamets. This extract found in pages 111 to 125 of the per book, is yet another write up by the same Mr.Paul Stamets, which is another treatise on mushrooms. The book carries the tag line "Informational Treatise on Mushroom" and contains information on "Forest fungi, Activities of medicinal mushrooms in the treatment of disease, Types of poly pores and mushrooms etc". While discussing GL, its medicinal properties have been indicated as .....

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ontains "Recipes for Health and Healing". GL has been listed under Chinese name Ling-zhi and various healing actions and indications have been listed. 11. Reishi Mushroom Herb of Spiritual Potency and Medical Wonder, Terry Willard, Ph.D. Research by Kenneth Jones 12. GanodermaLucidum, Ling Zhi Mystical Remedy of the Ancientsby Dr. Clarence S. Stanislaus The appeals were heard on 20.04.2017 and 24.06.2017 and reserved for orders. Thereafter since certain clarification were needed these .....

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quot; have been classified by importer-appellant under CTH 30039090. Bill of Entry under CTH 30039090 that has been studied is B/E No.705256 dt. 28.10.2004 (available at page 303 in Annexure D1). The goods have been declared as falling under Customs Tariff Heading 30039090 and CETH Heading 3003.10. The tariff headings are the same even at final assessment. Interestingly, the CETH 3003.10 covered "Patent or proprietary Medicaments, other than those medicaments which are exclusively, Ayurvedi .....

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Health Officer dated 14.02.2002 This document is found in page 354 of the paper book (Annexure-D1) submitted by the appellant. This is a certificate issued only for the purpose of customs clearance certifying that sample from consignments of Reishi Gano Powder is not an Article of food and hence it does not come under the purview of PFA Act, 1954 and that it may be referred to as Asst. Drugs Controller. In this regard, we find that efforts of the department is to classify the impugned item as &q .....

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classification under Customs or Central Excise Tariff Headings. 15. Drug License (License to Manufacture for Sale of Ayurveda drug) from 13.03.2002 till 31.12.2003 16. Certificate of Renewal of License to Manufacture for Sale of Ayurveda Drug from 01.01.2004 to 31.12.2005 We find that this is the copy of the licence on page 379 of paper book (Annexure-D1). It is seen that the licence has been issued to manufacture following ayurvedic products (i) Reishi Gano (RG) capsules (2) Ganocelium (GL) ca .....

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rala Sales Tax Appellate Tribunal This decision dt. 31.05.2004 is found in page 70 of the paper book. The decision thereon is not passed by Karnataka Sales Tax Tribunal as mentioned in the affidavit but by Kerala Sales Tax Appellate Tribunal. Possibly, a typographical mistake may have occurred while submitting the affidavit. However, in the synopsis submitted by the appellant on the date of hearing, the order of Sales Tax Appellate Tribunal, Kerala has been indicated. We find that the issue in t .....

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ations as claimed by the appellant and directed the assessing authority to treat the items as Ayurvedic preparations accordingly. While this may be so, what is important is whether this decision, rendered in a sales tax issue, by another Tribunal, can have precedential, or for that matter, persuasive application. The facts that have been gone into by the Tribunal are those relating to the capsules sold as Ayurvedic medicine and dispute having arisen thereon on their taxability. Surely, the Hon&# .....

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s. In such circumstances, before we take a final call in the matter it would be prudent and also in the interests of justice to carefully consider other facts and evidences of this case. 10. The twin test laid down by the Hon'ble Apex Court in the Richardson Hindustan case judgment cited by the Ld. Advocate for the appellant has indeed laid down the following tests to justify classification as product under Ayurvedic Medicament under Chapter Heading 3003 : (i) that the product should be know .....

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ind anything suggesting so. Bottles of the products GL were placed before us by Ld. Sr. Advocate. For ready reference, a scanned copy of the bottle label is reproduced below: This space is purposely put blank. The label indicates the product to be an Ayurvedic Proprietary Medicine. It is shown that each capsule contains Chatrakh and Shiitake. The dosage is mentioned as one capsule three times daily. The label however does not indicate that it would cure any particular disease. The label also doe .....

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label is that the product is only meant for general well being. As stated earlier, it is also a fact that the products were originally sold as food supplements. Though the Learned Sr. Counsel Sh. Lakshmi Kumaran took assistance of various literature, reports of clinical studies and other documents, which we have analyzed herein above, to canvass the argument that these products cure many an ailment and has therapeutic properties, however on the labels there is nothing to indicate that they cure .....

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s how the consumer looks at the product, and what is his perception in respect of the product. 11.2 The goods which were imported earlier from Malaysia were marketed as "food supplements". In fact, from the record it emerges that they were then called as "The Miraculous King of Herbs". 11.3 While marketing the said products, appellant had issued a advisory "What all DXN distributors should know", which made the following caution : "Do not make any claims. Herba .....

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pplement and that you do not intend to be misconstrued as a recommending a drug." From the investigations conducted with distributors and stockists, it is seen that a number of stockists / distributors from whom statements were taken categorically stated that the RG and GL are not used to prevent any specific diseases but are only used to improve general health; that the company had informed them to promote the product as food supplement only; that these capsules basically are used as food .....

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ive elements divided into three categories consisting 30% water soluble elements, 65% organic soluble elements and 5% volatile elements. The contents were indicated as Polysaccharides, Organic germanium, Adenosine, Triterpenoids, Ganoderic Essence, Protein, Fibre. Nowhere in these pamphlets was a claim made that they were ayurvedic medicines, or for that matter that they had any ayurvedic preparations. The pamphlets also do not make any claim that the items are Ayurvedic preparations. On the oth .....

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ned to make the claim that RG and GL were Ayurvedic Proprietary Medicines and Ayurvedic Preparations. Still, the pamphlets do not convey that it cures any specific disease. The scan of the redesigned pamphlets are reproduced below : This space is purposely put blank. 11.6 Evidently, the appellants have redesigned these pamphlets to counter the department's finding that the goods were not sold as ayurvedic medicine but only as a food supplement. Notwithstanding all these efforts, it will be s .....

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s stockists had been taken who have admitted that the impugned goods were sold only as food supplement. Appellants have themselves registered the trade mark REISHI and GANO with the Trade Mark Registry under the category of food supplements even while they have obtained license for manufacture of Ayurvedic drugs. All these facts go to prove that inasmuch as in common parlance test, the impugned goods are definitely products sold and known only as food supplements and certainly not as a drug and .....

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CE Nagpur Vs Shree Baidyanath Ayurved Bhawan Ltd. [2009 (237) ELT 225 (SC)]. Para 38 of the judgment makes for illuminating reading : "38. We endorse the view that in order to determine whether a product is covered by cosmetics or medicamentsor in other words whether a product falls under Chapter 30 or Chapter 33 : twin test noticed in Puma Ayurvedic Herbal (P) Ltd., continue to be relevant. The primary object of the Excise Act is to raise revenue for which various products are differently .....

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g factor in determination of classification of the products. We find it difficult to accept the contention of the learned senior counsel for Baidyanath that because DML is manufactured exclusively in accordance with the formulae described in Ayurveda Sar Sangrah which is authoritative text on Ayurvedic system of treatment and is notified in the First Schedule to the Drugs and Cosmetics Act, 1940 and the said product is sold under the name Dant Manjan Lal which is the name specified for the said .....

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Shiitake (Bhuchatra) and in respect of GL also, ingredient Shiitake (Bhuchatra) has been shown and another ingredient Ganomycelium has also been indicated as Chatrakh. To counter this, Revenue have obtained a statement from Dr. D.Athisayaraj, Head of Section of Siddha/Auurveda, Aringnar Anna Hospital of Indian Medicine who has deposed that Bhuchatra does not mean Shiitake and he does not know botanical name for Ganoderma Lucidum and Ganoderma Mycelium. In cross examination, Dr. Athisayaraj stat .....

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ne who had earlier recommended classification of RG and GL capsules as ayurvedic proprietary medicines but later had admitted that his recommendation was incorrect since it was based on bogus clinical reports. It further appears that Dr. D. Athisaya Raj was cross examined before the adjudicating authority, on which occasion also, he deposed that he did not consider 'Ganoderma' and 'Shiitake' as ayurvedic medicines. It also emerges that in response to a letter from the Director of .....

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herein above, Dr. Lim Siow Jin is the Chief Executive Officer and Director of Daeshan Trading (India) Ltd., who is the appellant in E/3662005. From the statement of Dr. Jin, which was never retracted, it has been admitted that there is no difference between RG & GL in capsules (goods under consideration) and RG and GL powder imported from Malaysia. Dr. Jin has also stated that there was no change in nutritional contents of the products even when their classification was changed as ayurvedic .....

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onal proprieties and not for any specific therapeutic purpose of diseases. 12.4 Even in respect of purported addition of shitake in the product Shri D. Prem Kumar, Assistant Factory Manager, in his statement dt. 18.1.2003, has admitted that there are no methods for analysis available with the appellant for identification of Shitake. Shri D.Premkumar also admitted that appellants have no pharmacopoeial standards for the products RG and GL. 12.5 This being so, we are not able to find any infirmity .....

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as APM. It further appears that the drug licence obtained from Food and Drugs Administration (FDA), Pondicherry was based on clinical report purported to have been given by one Dr. P. Selvakumar, Asst. Medical Officer, Nagapattinam. This clinical report has turned out to be a forged one. In a statement, Dr. P.Selvakumar has unequivocally stated that no such clinical report has been issued by him and that it was a forged one and that it was not signed by him. Dr. P.Selvakumar has also affirmed th .....

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, FDA, Pondicherry, admitted that he had not verified the RG and GL formula with the prescribed ayurvedic texts. As discussed earlier, the licence issued by FDA Pondicherry was based on forged clinical trials and the recommendation of Dr. D. Athisaya Raj which was subsequently retracted. 12.7 In any case, based on the information as garnered by Revenue and conveyed in the written submissions dt. 22.6.2017, the said drug license has been cancelled by the FDA Pondicherry. The relevant portion of t .....

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fter it was not renewed as the firm did not comply with the norms of Schedule M of Drugs and Cosmetics Act and Rules for the memo vide No.DDC/Drugs/U.II/2015/2128 dt.30.03.2015" With regard to M/s.Roshan Commercial Traders Pvt. Ltd. and M/s.Daeshan Trading India Pvt. Ltd., enquiry was made with the Director of Drugs Control, Tamil Nadu. It was learned from them that licensing pertaining to Indian Medicine has been separated from Director of Drugs Control and has been vested with a newly cre .....

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vide No.DDC/Drugs/U.II/2015/2128 dt.30.03.2015. Revenue has also informed in the written submissions that licence pertaining to Indian medicine has been separated from Director of Drugs Control and has been vested with newly created State Licensing Authority (Indian Medicine) by a Government Order dt. 7.11.2007. It is further confirmed that no manufacturing licence was given either to Roshan Commercial Traders Pvt. Ltd. or Daeshan Trading India Pvt. Ltd. from 2007 till date. 12.9 From the facts .....

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to be noted that even Dr. Athisayaraj has confessed that he had wrongly recommended issuance of drug license to the appellant for manufacture of the impugned products as Ayurvedic medicine. We find from the record that Dr. Athisayaraj even wrote to the Drug Control Authority to cancel the license. The Honble Apex Court has observed in various judgments that "Fraud vitiates everything. Such view was reiterated by the Honble Apex Court in New India Assurance Co. Vs Kamla & Others - 2001 .....

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, 1940 and like legislations. The Honble Apex Court in the case of Shree Baidyanath Ayurved Bhawan Ltd. (supra) opined in para 41 as under : "41. True it is that Section 3(a) of the Drugs and Cosmetics Act, 1940 defines Ayurvedic, Sidha or Unani Drugbut that definition is not necessary to be imported in New Tariff Act. The definition of one statute having different object, purpose and scheme cannot be applied mechanically to another statute. As stated above, the object of Excise Act is to r .....

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of the CETA as food supplement requiring assessment of the goods under Section 4A for the purpose of payment of duty of excise in view of Notification 13/2002-CE (NT) dt. 1.3.2002 notifying the goods falling under that sub heading for assessment under Section 4A. In this regard, entries under heading 2108 of the CET, are reproduced for ready reference : Heading No. Sub-heading No. Description of goods Rate of duty (1) (2) (3) (4) 21.08 Edible preparations, not elsewhere specified or included 210 .....

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, milk or other liquids), for human consumption". From the HSN Chapter Note 16 of the Harmonised System of Nomenclature (HSN), it is indicated that "Preparations often referred to as food supplements, based on extracts from plant, fruit concentrates, honey, fructose etc. and containing added vitamins and sometimes minute quantities of iron compounds often put up in packagings with indication that they maintain general health or well being" would be included within that entry " .....

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ion that has resulted is that the products in question are nothing but a food supplement promoted mainly only for general health or well being and therefore meriting classification only under 2108 of the CETA and more specifically in 2108.99 as it stood at the appointed time, and assessed accordingly under Section 4A of the Act for discharge of duty liability. The issue of classification is thus held in favour of Revenue and against assessee. So ordered. 14. The Ld. Counsels appearing for appell .....

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Ayurvedic Proprietary Medicines was only to evade payment of duty. The appellants have consciously declared on the labels that the products contain Chatrakh & Bhuchatra as an endeavour to create an impression that the products are different from that what was earlier imported by them. The facts and evidence placed in the case of E/331/2006 to E/405/2006 would prove otherwise. It is categorically established that the bulk powder imported was made into capsules, repacked and relabelled by M/s .....

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n 11AC will statutorily require to be invoked and hence penalty equal to the duty or differential duty determined will necessarily have to be imposed. In arriving at this conclusion, we draw sustenance from the ratio laid down by the Honble Apex Court in the landmark judgment of UOI Vs Dharamendra Textile Processors 2008 (231) ELT 3 (SC) and the subsequent judgment in UOI Vs Rajasthan Spinning & Weaving Mills 2009 (238) ELT 3 (SC). Accordingly, we hold that appellants M/s.DXN Herbal Manufact .....

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efore set aside. 17. Thus in respect of Appeal E/365/2005 filed by DXN, Duty demand with interest and Penalty imposed under Section 11AC is upheld. Penalty under Rule 25 of Central Excise Rules, 2002 is set aside. 18. Coming to other penalties in respect of first batch of appeals E/366-369/2005, imposed under Rule 26 of Central Excise Rules, 2002, ₹ 25 lakhs each on Dr. Lim Siow Jin (E/366/05), M/s.Daeshan Trading (India) Pvt. Ltd. (E/367/05) and M/s.Roshan Commercial Traders (P) Ltd. (E/3 .....

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ned order. Evidently, these goods have been detained / seized at the warehouse / branch office of the appellants. However, no evidence has been put forth by the department to indicate that DXN kept these goods in the warehouse with the expressed intent of removing them clandestinely. There is also no allegation that clearance of these goods have not been accounted for in the concerned records. At the most, if these goods had not been seized, they would have possibly been removed as APM, and henc .....

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