TMI Blog2021 (6) TMI 1026X X X X Extracts X X X X X X X X Extracts X X X X ..... operties. Thus, even before the amendment or after the amendment Chapter 30 would not cover preparation of Chapter 33 or preparation of Headings 3303 to 3307 of Chapter 33. It has, therefore, to be first established that the preparations fall in Chapter 33 or Headings 3303 to 3307 of Chapter 33. The Heading of Chapter 33 both before the amendment and after the amendment is essential oils and resinoids oils; perfumery, cosmetic or toilet preparations. The Headings 3303 to 3307 or 33.03 to 33.07 of Chapter 33 deal with cosmetic products. It would, therefore, have to be first established by the department that the products of the appellant fall under Chapter 33 as cosmetics. The requirement prior to 28.02.2005 was that the products should be 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 - the requirement of a product to be suitable for use as cosmetics or toilets preparation continues. Much emphasis has been placed by the Learned Authorised Representative of the Department that for a product to be cosmetics the requirement that the packing should have a label mentioning that the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HAT:- Clause 3 (c) of the General Rules would apply only when the goods cannot be classified by the reference to (a) or (b). So far as appellant is concerned there is no doubt that the products would be classifiable under (b). Thus, clause (c) of the General Rules would have no application in the facts and circumstances of the present case - there is no manner of doubt that the products manufactured and cleared by the appellant are not cosmetics under Chapter 33 or 34 of the Tariff Act and are medicaments falling under Chapter 30 of the Tariff Act. Appeal allowed - decided in favor of appellant. - E/21079/2015, E/21387/2016 E/ 20874/2017 & E/20762/2019 - FINAL ORDER NO. 20291-20294/2021 - Dated:- 25-6-2021 - MR. DILIP GUPTA, PRESIDENT AND MR. P.ANJANI KUMAR, MEMBER (TECHNICAL) Ms. D.S. Sangeetha, Authorized Representative for the Appellant Ms. Nisha Bineesh, Advocate for the Respondent ORDER The issue involved in all these four appeals is whether the products manufactured and cleared by M/s Mosons Extractions (P) Limited [the appellant ] would be classified as ayurvedic medicaments under Chapter 30 of the Central Excise Tariff Act 1985 [Tariff Act] (as cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Duty demanded 29.12.2011 (i) Indulekha Complete Skincare Oil (ii) Indulekha Gold Complete Hair Care Oil 33049990 33059019 ₹ 1,51,09,635/- 6.11.2012 (i) Indulekha Complete Skincare Oil (ii) Indulekha Gold Complete Hair Care Oil 33049990 33059019 ₹ 4,92,21,934/- 26.07.2013 (i) Indulekha Skin Care Oil (ii) Indulekha Hair Care Oil (iii) Indulekha Bringa Oil (iv) Vayodha Hair Care Oil (v) Indulekha Akrot Face Pack (vi) Indulekha Satapatri Skin Care Cream (vii) Indulekha First Touch Baby Oil 33049990 33059019 33059019 33059019 33049910 33049990 33049990 ₹ 4,16,14,903/- 01.05.2014 (i) Indulekha Skin Care Oil (ii) Indulekha Coconut Milk Shampoo (iii) Indulekha Bringa Hair Care Oil (iv) Vayodha Hair Ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der. The show cause notice, therefore, states that both the products were cosmetics under Chapter 33 of the Tariff Act. The relevant allegations contained in this show cause notice are as follows: 12 . In order to determine whether a product is to be classified as a medicament or a cosmetic, the perception of the product in popular parlance, whether as medicaments or cosmetics/toilet requisite has to be taken into consideration. The user s understanding is a strong factor in determination of the classification of the products. ****** 14. In order to ascertain whether the goods are marketed by the assessee as an ayurvedic medicine or a cosmetic, Indulekha Complete Skin Care Oil and Indulekha Gold Complete Hair Care Oil were purchased from the local market. On examination of the outer cover of the said goods, it is seen that the said goods do not contain the description ayurvedic medicine printed on their outer cover . Thus it is evident that the said goods are not marketed as ayurvedic medicine and it is not perceived as a medicine in popular parlance. ****** 15. It can be seen from the above advertisement that Indulekha Complete Skin Care Oil is portrayed and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es notice of the fact that there was an amendment in Chapter Note 2 of Chapter 33 from 28.02.2005 as a result with which the products must be suitable for use as goods of these Heading and put up in packing of a kind sold by retail for such use. This apart, the impugned order also records a finding that even if the products are classifiable under two different Headings, they would be classified under the Heading which occurs last in numerical order. The said findings recorded in the order are as follows: 8(i). I find that the products contain ingredients which are ayurvedic in as much as these are ingredients are mentioned in the ayurvedic texts, which is not disputed by either the Noticee nor the Department. It is pertinent to note and also mention that both Ayurvedic Medicines and Herbal Cosmetics are more or less similar products and that are separated, if so, by a thin line. The classification of products under the CETA, 1985 is governed by the description of the products and the Chapter/Section Notes. ****** The products of the Noticee are having specific headings under Chapter 33 the CETA, 1985. Even if the products of the Noticee like hair oils, body oils, soaps, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Chapter 33, classification is to be done under Chapter 33 as it occurs last in the numerical order. 09(i). It has been argued that during the period of the Notice the Products manufactured are Ayurvedic Medicines and not Cosmetics. They have referred to the Drug Licence, Commercial Taxes Registration, Export Certificates, Products Certificates, revised trademark application, etc. issued by the Drug Controller, Commercial Taxes Department, etc. I find that these certificates, permission, etc. are bound by the rules of interpretations provided under the laws applicable therein and therefore, are of no relevance in the present case. The issue is to be decided based on the provisions relating to central excise and I find that the Chapter notes and the descriptions in the CETA are sufficient to classify the product. 09(e). It has been contended that the manner of Advertisement of a product cannot determine the correct classification and has quoted certain judgments in this regard . I agree with the ratio of the judgments that advertisement and packing material cannot be considered for determining the real nature and character of the product for classification, especially when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases of the skin and scalp. 14. Ms. Nisha Bineesh learned counsel for the appellant made the following submissions; (i) The appellants are admittedly manufacturing ayurvedic products and all the products are manufactured using ayurvedic/medicinal plants as referred in authoritative books. The Department has not disputed this fact at any stage of the investigation or during the adjudication; (ii) The provisions contained in Chapter Note 1(d) of Chapter 30, both prior to and subsequent to the amendment, refer to preparations of headings 3303 to 3307 (of Chapter 33) even if they have therapeutic or prophylactic properties. This provision is not applicable to the products of the appellant as they are not preparations of Headings 3303 to 3307. The Department has no evidence to prove the contrary that the said products are cosmetics. In this connection reliance has been placed on the decision of the Supreme Court in B.P.L Pharmaceuticals Ltd. vs. Collector of C. Excise, Vadodara [1995 (77) E.L.T. 485 (S.C.) ], in which it was held that in order to attract Note 2 to Chapter 33, the product must first be a cosmetic; that the product should be suitable for use as goods of Heading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uted that the ingredients used in the products of the appellant are ayurvedic products only having therapeutic or prophylactic or curative properties. The Courts have held what is important is the curative attributes of such ingredients that render the products as medicament; and (viii) The need to apply clause 3(c) of the General Rules of Interpretation of the Schedule to the Central Excise Tariff Act 1985 [General Rules ] arises only when goods cannot be classified by reference to sub-clauses (a) or (b). As far as the products of the appellant are concerned, sub clause (b) of the General Rules would apply. 15. Ms. D. S. Sangeetha learned Authorised Representative of the Department made the following submissions: (i) The products manufactured by the appellant are without doubt suitable to be used as goods under Headings 3303 to 3307 of Chapter 33. The labels of the product in the relied upon document clearly state how to use them for normal skin and hair conditions. It is beyond doubt that they are sold in retail packs. Hence, they become classifiable under Chapter 33. Once they are eligible to be classifiable under Chapter 33, they are automatically excluded from Chapter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to be used; Malayalam, Sanskrit and Botanical names; the parts of the plants to be used; the quantum of each of the ingredients; and the ayurvedic text reference. Subsequently, the Deputy Drugs Controller (Ayurveda) and Licensing Authority issued a letter stating that the approval given to the products in the Licence dated 17.08.2010 was for Ayurvedic Proprietory Drugs namely: (a) Indulekha Skin Care Oil (b) Indulekha Hair care Oil (c) Indulekha Bringa Oil (d) Indulekha Tulsi Hair Cream (e) Indulekha Brahmi Amalaki Oil (f) Indulekha Akrot Face Pack (g) Indulekha Satapatri Skin Care Cream (h) Indulekha Mehandi Oil (i) Monolaurin (j) Firstrouch Baby Oil 18. The appellant classified the products as ayurvedic medicaments under Chapter 30 of the Tariff Act but the Department believed that the products were cosmetics under Chapter 33 of the Tariff Act. Show cause notices were, therefore, issued to the appellant demanding differential duty by treating the products manufactured and cleared by the appellant as cosmetics instead of drugs. While four show cause notices were adjudicated upon by a common order dated 20.01.2015, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case as held by the Adjudicating Authority. A 21. The Adjudicating Authority placed much emphasis on the amendments made in the Tariff Act w.e.f. 28.02.2005 in regard to classification of the products. The Adjudicating Authority observed that the products could be classified as drugs under Chapter 30 of the Tariff Act prior to 28.02.2005, but the amendments made in Chapter Note 2 to Chapter 33 w.e.f. 28.02.2005 changed the situation because the requirement that the label in the packing should mention that the product is for use as cosmetics or toilet preparations does not exist after 28.02.2005 as the requirement is only that the product is suitable for use as goods of these Headings and put up in packings of a kind sold by retail for such use. 22. It would, therefore, be useful to reproduce Chapter Note 1(d) of Chapter 30 and Chapter Note 2 of Chapter 33 of the Tariff Act as they stood prior to 28.02.2005 and subsequent to 28.02.2005. They are as follows: Prior to 28.02.2005 CHAPTER 30 PHARMACEUTICAL PRODUCTS 1. (a) to (c) ************ (d) Preparations of Chapter 33 even if they have therapeutic or prophylactic properties; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. This Chapter does not cover: (a) to (c) ************ (d) Preparations of Heading 3303 to 3307, even if they have therapeutic or prophylactic properties; ************** CHAPTER 33 ESSENTIAL OILS AND RESINOIDS; PERFUMERY COSMETICS OR TOILET PREPARATIONS NOTES 1. ********* 2. ********* 3. Headings 3303 to 3307 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 of a kind sold by retail for such use. 24. A perusal of Chapter Note 1(d) of Chapter 30 prior to 28.02.2005 shows that the said Chapter would not cover preparations of Chapter 33 even if they have therapeutic or prophylactic properties. Even after amendment, Chapter Note 1(d) shows that Chapter 30 would not cover preparations of Headings 3303 to 3307 even if they have therapeutic or prophylactic properties. Thus, even before the amendment or after the amendment Chapter 30 would not cover preparation of Chapter 33 or preparation of Headings 3303 to 3307 of Chapter 33. It has, therefore, to be first established that the preparations fall in Chapter 33 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as cosmetic or toilet preparation. 26. It was, therefore, absolutely necessary for the Adjudicating Authority to record a finding that the products were cosmetics under Chapter 33 even after the amendment was made in Chapter Note 1(d) of Chapter 30 w.e.f. 28.02. 2005. B 27. Thus, what has to be seen is whether Department has discharged its burden of proving that the products were classifiable as cosmetics under Chapter 33 of the Tariff Act. The contention of the learned Counsel for the appellant is that the Department did not produce any evidence to establish that disputed products were cosmetics under Chapter 33 of the Tariff Act. It is seen that the Adjudicating Authority had noted that the products of the appellant contained ingredients which were ayurvedic in as much as they were mentioned in ayurvedic texts. The Department, however, failed to establish conclusively that the products manufactured by the appellant were cosmetics and only an inference that the products were cosmetics has been drawn because of the amendments made on 28.02.2005. C 28. The Third issue is as to whether the products of the appellant are classifiable as medicament under Chapter 30 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Similarly availability of the products across the counter in shops is not relevant as it makes no difference either way. (emphasis supplied) 30. Learned Counsel for the appellant submitted that in order to classify a product as cosmetics or medicament, the principle of twin tests formulated by the courts have to be applied. These two test are (i) the common parlance test and (ii) whether the ingredients used for making the product find mention in the authoritative text books on ayurveda. 31. For the first test it has to be seen how the people who actually use the products, think or understand the product to be. According to the appellant, people use or treat the products as medicament as the products address the medical issues faced by them. For this reliance has been placed on a Malayalam Daily where people have considered the products as medicament and not as cosmetics. No evidence has been led by the Department to controvert this statement of the appellant. The impugned order also recognizes that the products contain ingredient which are ayurvedic in as much as these are ingredients mentioned in ayurvedic text. The list of drugs attached to the drugs licence describes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Controller and is being manufactured under a drug licence. (emphasis supplied) 33. The Supreme Court in Naturalle Health Products (P) Ltd. vs. Collector of C. Ex., Hyderbad [2003 (158) E.L.T.257 (S.C.)] also pointed out that the articles enumerated in the tariff schedules must be construed as far as possible in the sense a common man understands it. The relevant potion of order is reproduced below: 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, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the quantum of each ingredient; and the ayurveda text reference. It also provides the purpose for which the medicine are to be used and the dosage. 37. It will be useful to refer to the decision of Supreme Court in Naturalle Health Products. The Supreme Court pointed out that the products prepared from natural herbs mentioned in authenticated ayurvedic text books would be classifiable under Chapter 30. The observations are: 21. It is not in dispute that the products in question are Vicks Medicated cough drops and Vicks Vaporub throat drops. The appellants manufacture these products under Ayurvedic Drug Licence. All the ingredients contained in these products are admittedly mentioned in authoritative Ayurvedic Text Books mentioned in Schedule III to the Drugs and Cosmetics Act. However, the formula of preparing the products is proprietary to the appellant in C.A. No. 2072/1996. The appellant submitted that the ingredients contained in the products are manufactured from natural herbs like menthol etc., but purified to the pharmaceutical grade. The appellant claims the classification of the products in question as patented/proprietary Ayurvedic medicaments under Heading 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermatitis (commonly known as dandruff), etc. I find that the department has not denied this claim of the noticee. (emphasis supplied) 39. The Commissioner thereafter examined whether the products were used for therapeutic/prophylactic purposes or beauty enhancement and on examination of the documents and submissions advanced on behalf of the appellant concluded that the products manufactured and cleared by the appellant were not meant for daily use or as a substitute for regular cosmetic products. The contention on behalf of the appellant that they were meant for therapeutic/prophylactic purposes was, therefore, accepted. The relevant findings of the Commissioner are as follows: 17. Let me now examine the character of the preparations manufactured by the - noticee, whether these are intended as medicaments or as cosmetics. It is also the submission of the noticee that the products manufactured and sold by them are not used as a substitute for any other products as its price is very high compared to the ordinary products in the respective categories. Thus, it is not meant for a daily use or as a substitute for the regular cosmetic products. On the other hand, the products ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 3 to chapter 33 also would also not apply in the instant case. (emphasis supplied) 40. The aforesaid findings of the Commissioner are based on appreciation of the legal and factual position emerging from examination of the products manufactured and cleared by the appellant. The Commissioner also observed that the products were neither meant for daily use nor they were cosmetics and were ayurvedic medicines classifiable under Chapter 30 of the Tariff Act. D 41. The fourth issue is as to whether clause 3(c) of the General Rules would be applicable as has been held in the impugned order. The relevant General Rules are as follows: 2. General rules for the interpretation of this Schedule Classification of goods in this Schedule shall be governed by the following principles: 1. ********* 2. ********* 3. When by application of rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows: (a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part onl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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