TMI Blog2023 (5) TMI 191X X X X Extracts X X X X X X X X Extracts X X X X ..... t the entries are not to be understood in their scientific or technical sense, but by their popular meaning for the purpose of interpretation. In Sunny Industries [ 2003 (3) TMI 102 - SUPREME COURT ], this Court was dealing with the question whether Ad-Vitamin Massage Oil Forte was still classifiable as patent and proprietary medicine even after the change of tariff description after 1985 Budget. This Court dismissed the appeal of the assessee as the product in question was oil, used for massage to take care of the skin, and not to cure the skin and hence, was classifiable under cosmetics and not under medicaments . In Sharma Chemicals [ 2003 (4) TMI 102 - SUPREME COURT ], this Court was concerned with the issue as to whether the product Banphool Oil could be classified under as Ayurvedic medicament or as perfumed hair oil. This Court held that mere fact that a product is sold across the counter and not under a doctor s prescription, does not ipso facto lead to the conclusion that it is not a medicament. In the case Meghdoot [ 2004 (10) TMI 93 - SUPREME COURT ], while dealing with the question of classification of six items namely Bhringraj Tail, Trifla Brahmi Tail, N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly because of its label carrying the expression Hair Oil while ignoring the preceding significant expressions Homeo and Arnica . Whether re-look at classification of the product in question justified? - HELD THAT:- There had been no justification in the Department seeking to re-open the settled position in relation to the product in question merely with reference to certain changes made in Chapter 30 and Chapter 33, which had essentially broadened their ambit and scope and provided modified marginal notes and tariff entries with detailed specifications. These changes had otherwise no impact, so far as the product of the respondent, AHAHO, is concerned - there had been no justification for making any attempt to re-classify the product in question with reference to the amendments brought about in Chapters 30 and 33 in the year 2012. Thus, AHAHO, merits classification as medicament under Chapter 30 and not as cosmetic or toilet preparations under Chapter 33 of the First Schedule to the Central Excise Tariff Act, 1985; and the change in tariff structure by way of amendment brought about in the year 2012 did not justify any re-look at the classification of the product i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uired to be classified as cosmetic under Tariff Item 3305 90 19. Accordingly, the Adjudicating Authority confirmed the demand to the tune of Rs.2,72,14,266/- on the respondent for the differential duty payable in terms of Section 11-A (10) of the Central Excise Act, 1944 Hereinafter also referred to as the Act of 1944 ; ordered payment of interest on the said differential duty in terms of Section 11-AA of the Act of 1944; and imposed penalty in the sum of Rs.54,00,000/- under Rule 25 of the Central Excise Rules, 2002. 1.2. However, the appeal preferred by the respondent was allowed by the Tribunal by its impugned order dated 31.01.2018 and the aforesaid order dated 16.10.2015 passed by the Adjudicating Authority was set aside. The Tribunal held that the product in question, AHAHO, fell in the category of medicament and hence, was rightly classified under Chapter 30 of the First Schedule to the Act of 1985. 1.3. An ancillary but intertwined aspect of the matter had been that the product in question was being classified as medicament under the said Chapter 30 since the year 1994. According to the respondent, this classification was regularly accepted by the Department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the period 1994-2004, this classification remained in doubt and, particularly after changes in the Act of 1985 in the year 2012, the respondent was served with different show-cause notices pertaining to different periods of consideration, essentially to the effect that the product in question was classifiable as cosmetic or toilet preparations under Chapter 33, Tariff Item 3305 09 19. In the show-cause notice dated 26.12.2014, which forms the subject-matter of this appeal, the Adjudicating Authority, inter alia, stated as under: - 02. The assessees are engaged in the manufacture of 'Aswini Homeo Arnica Hair Oil' which was classified by them under Tariff Item No. 3003 9014 of the First Schedule to the Central Excise Tariff Act, 1985. However, as per Chapter 33 of the Central Excise Tariff Act, 1985, preparations for use on the hair are rightly classifiable under Chapter Sub Heading No. 33050919 and shall be liable for assessment under Section 4A of the Central Excise Act, 1944 @12% adv. creating them as 'Cosmetic or Toilet preparations'. Accordingly, show cause notices as under were issued to the assessees. Sr. No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Excise, Hyderabad-IV Commissionerate, Ground Floor, Posnett Bhavan, Tilak Road, Hyderabad within thirty (30) days of receipt of this notice, as to why; i) Central Excise duty of Rs. 2,72,14,266/ (Rupees Two Crores seventy two lakhs fourteen thousand two hundred sixty six only), should not be demanded from them under sub section (7A) of Section 11A read with sub section (1)(a) of Section 11A of the Central Excise Act, 1944- for the period from December, 2013 to November, 2014. ii) Interest on the amount of duty mentioned at SI. N. (i) above, should not be demanded from them at applicable rates, in terms of Section 11AA of the Central Excise Act 1944-and iii) Penalty under Rub 25 of the Central Excise Rules, 2002 should not be imposed on them for contravention of the Central Excise-Rules, 2002 mentioned supra. 06. M/s Aswini Homeo Pharmacy are further required to produce all the evidence upon which they intend to rely in support of their defense at the time of showing the cause. They are further required to mention in their written reply whether they wish to be heard in person before the case is adjudicated. If no cause is shown within the stipulated period or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 5.2. The respondent further elaborated in its reply that the product was not cosmetic , as the ingredients used had prophylactic properties and it was not applied for cleansing or beautifying or promoting attractiveness or altering the appearance. The depiction of a lady with long flowing hair on its label was only subjective and could be interpreted as indicative of good health evidenced by the long flowing hair upon being treated for hair fall and dandruff. 5.3. It was further submitted that a close look at Circular No.333/49/97-CX dated 10.09.1997 would show that in popular parlance, AHAHO was a medicament in the light of its advertisement, marketing and claims on the label and, therefore, the said circular did not justify revising its classification to that of cosmetic or toilet preparations . The respondent asserted that due to the absence of any change in its tariff description, ingredients, process of manufacture and use, the question would not arise of re-classification of the product in question. The respondent also requested that the proceedings be dropped or be kept pending until the Tribunal had adjudicated on the pending issues concerning classification of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r oils - Other 3305.91 -- Hair fixer 3305.99 -- Other PRESENT TARIFF HEADINGS (as per Central Excise Tariff, 2012); 3003 MEDICAMENTS (EXCLUDING GOODS OF HEADING 3002, 3005 OR 3006) CONSISTING OF TWO OR MORE CONSTITUENTS WHICH HAVE BEEN MIXED TOGETHER FOR THERAPEUTIC OR PROPHYLACTIC USES, NOT PUT UP IN MEASURED DOSES OR IN FORMS OR PACKINGS FOR RETAIL SALE 3003 90 - - Other : - - - Ayurvedic, Unani, Siddha, Homoeopathic or Bio-chemic systems medicaments: 3003 90 14 - - - - Of Homeopathic system 3305 PREPARATIONS FOR USE ON THE HAIR 3305 10 Shampoos: 3305 10 10 - - - Containing spirit 3305 10 90 - - - Other 3305 20 00 Preparations for permanent waving or straightening 3305 30 00 Hair lacquers 3305 90 - Other: - - - Hair oil: 3305 90 11- - - - Perfumed 3305 90 19 - - - - Other 3305 90 20 - - - Brilliantines (spirituous) 3305 90 30 --- Hair cream 3305 90 40 --- Hair dyes (natural, herbal or synthetic) 3305 90 50 --- Hair fixers 3305 90 90 - - - Other 6.2. At this juncture, we may also take note of a few other contents of Chapter 30, which carries the heading Ph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that the impugned notice do not suffer from any imperfection on account of the said judgment. Hence the first question is answered in the negative 6.4. The Adjudicating Authority also observed that the impugned notice had been issued in the normal period and it was not a case where issue was sought to be reopened for the period for which it was settled. However, according to the learned Adjudicating Authority, the criteria and ideology in the matter of classification of such products was dynamic in character and hence, revision of classification in view of fresh facts coming to light could not be held to be improper. 6.5. As regards second issue, the Adjudicating Authority in the first place observed that classification of the product in question under Tariff Item 3003 90 14 was itself questionable inasmuch that item covered only the medicaments not put up in measured doses or packing whereas AHAHO was indisputably put up for sale in packing of 50ml, 100ml, 200ml and 400ml bottles for retail sale. The Adjudicating Authority observed that the claim of the respondent for classifying the product in question under the said heading remained baseless. However, the Adjudicating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e label; there were no specifications relating to its dosage and duration of use and no contra-indications were stated irrespective of quantum or duration of use, which was against the basic concept of a medicament whose overdose result in contra-indications like diarrhoea, acidity, ulceration, rashes, etc.; and it did not claim to cure any particular diseases like alopecia or insomnia but only claimed to be able to prevent and control such diseases. 6.7. The analysis of the learned Adjudicating Authority in relation to the ingredients of the product in question and its properties, leading to the finding that it cannot be categorised as medicament, read as under: - 11.6 I have perused the labels of the product which are on record. The contents are declared on the label as follows: i) Arnica Mont Q 0.5 ml ii) Cantharis Q 0.5 ml iii) Cinchona Q 0.2 ml iv) Piocarpine Q 0.2 ml (Q= lX in pure coconut oil q.s. Alcohol 0.9 /o V/V) 11.7 On perusal of the label of AHAHO, it was observed that the front side of the label, there is a caption which reads controls hair fall ; prevents dandruff . On the reverse of the label i.e. the bottle hind side, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y a consultation with the Doctor. Nothing of that sort is found herein. In any case, the point that becomes clear is that AHAHO is a neither a prescribed medicament of a medical practitioner nor it is claimed to have any substantial therapeutic or prophylactic properties. I also find that as regards labels, Hon'ble Supreme court observed in the case of Ishaan Laboratories (supra) that Further it was obvious from the labels of the products which we have ourselves inspected in the court that there is a claim made in each of the label of the medicinal properties of the product. It is also found that there was a specific claim that this is not a cosmetic product. Though in that case, the products were held to be medicaments, the label description on the basis of which such a conclusion was drawn (apart from other factors) indicates that the product should be projected and marketed in I such a manner so as to express the intention of the manufacturer that the product is a medicament and not a cosmetic. Such a situation does not exist in the present case inasmuch as the labels neither contain a positive indication that it is a medicament nor a negative indication that it is not a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assified under Tariff Item 3003 90 14 or under any item stated in Chapter 30. The Adjudicating Authority further observed that when the intention of the framers of the legislation was to tax Hair oil at a particular rate, any attempt to evade the same would result in disregarding the law. Accordingly, the Adjudicating Authority, by its order dated 16.10.2015, confirmed the demand and levied interest and penalty on the respondent, as noticed hereinbefore. 6.13. It may be observed, in all fairness to the learned Adjudicating Authority, that in his elaborate order dated 16.10.2015 (pp. 96-253 of paper-book), several passages from a large number of decisions have also been reproduced, which we have not indicated hereinabove. The relevant of those decisions, as cited on behalf of the parties, shall be referred to and examined at the relevant stage hereafter. Before the Customs, Excise and Service Tax Appellate Tribunal 7. The assessee s appeal Being Appeal No. E/30050/2016 against the aforesaid order dated 16.10.2015 was taken up for consideration by the Tribunal along with a bunch of its other appeals involving the same issues but pertaining to different periods of cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k. 7.3. Having taken note of the background aspects of the case, the findings of the Adjudicating Authority, and various decisions cited by the parties in support of their respective contentions, the Tribunal found no reason for which the classification of the product in question was sought to be changed by the Adjudicating Authority. 7.4. In the course of its analysis, the Tribunal, inter alia, observed and held that only for the reason of being sold over the counter and not on a medical prescription would not take the product out of the category of medicine; that when different branches of medicine and licensing authority recognized baldness or hair fall as disease, the Adjudicating Authority was not entitled to take a different view; that the product clearly mentioned its use for other ailments like sleep loss; that the contents of its label clearly mentioned the product as homeopathic medicine and the same was understood as such by its users and traders; and that the product in question indeed passed the common parlance test. The Tribunal further referred to the four homeopathic medicines as being the ingredients of products and the same being covered by Serial No. 35 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aders as Homeopathic medicine. There is no advice on the label nor does it suggests that it can be used as hair oil. It is not disputed about the fact that the product is made of four Homeopathic medicines as ingredients namely Arnica Mount, Cantharis, Pilocarpin and Cinchona and is used to treat the hair loss, insomnia, dandruff, headache and other ailments. It is manufactured under Drug Licence issued under Rule 25 C of Drugs Cosmetic Rules 1945 and in terms of Rules 85D by the Director, Indian Medicine Homeopathy. The licence has been renewed from time to time by the Additional Director Drug Controller (Homeo), Department of Ayush, Government of Telangana State. Even as per analysis report Drug Controller, Department of Ayush the product is medicine. The product is covered by serial no. 35 of Schedule K of Drugs and Cosmetic Rules (Homeopathic Hair oils having active ingredients upto 3X potency) and the said schedule covers only drugs and not Cosmetics. The product has already been held to be Drug by the Hon'ble Andhra Pradesh High Court in reference to APGST as well as Commercial taxes. The Advance Ruling authority of Commercial Taxes, Government of Tamilnadu for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .) as relied upon by the revenue is also not applicable as in the said case the drug licence obtained by the assessee under the Drugs and Cosmetics Act, 1940, itself mentioned that it is a licence for ointment and cream for external application as a non-pharmacopoeia item whereas in the present case the product is registered as Homeoptahic Medicine by the Additional Director, Indian Medicine and Homeopathy Department, Government of Andhra Pradesh. Even the Hon'ble High Court of Andhra Pradesh held the product to be falling under the category of Drug and Medicine and is sold as medicine. The ratio of judgment in case of CCE Vs. ZANDU PHARMACEUTICAL WORKS LTD. 2006 (204) E.L.T. 18 (S.C.) is also not applicable as the product label clearly shows the product as Homeopathic medicine The Judgment of Hon'ble Apex Court in case of Sujanil Chemco Industries Vs. CCE, Pune 2005 (181) ELT 206 (SC) and Tribunal order in case of Bakson Homeo Pharmacy (P) Ltd. Vs. CCE, New Delhi 2001 (136) ELT 485 (TR- DEL) are absolutely applicable to the present case in view of our above findings and we do not find any reason to differ with those decisions. 10. We also find that the adjudicating au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LECTOR OF C. EXCISE, VADODARA 1995 (77) E.L.T. 485 (S.C.). wherein it was held that Merely because there is some difference in the tariff entries, the product will not change its character. Something more is required for changing the classification especially when the product remains the same. In the present appeals the product has remained same and the classification issue stands decided in favour of the Appellant in all four previous proceedings against the Appellant. In case of CCE Nagpur Vs. Vicco Laboratories 2005 (179) ELT 17, the Honble Apex Court has held that classification cannot be changed without a change in the nature of a product or a fresh interpretation of the tariff heading by such decision. In the present case the goods in question has remained same and there is no change of tariff heading. Thus the contention of the Ld. Adjudicating authority that the change in tariff entry would require relook into classification is absolutely erroneous as the product has remained same and it would remain classified as Homeopathic medicine. 11. After careful appreciation of the facts as narrated above we find no reason to classify the product as Cosmetic under Chapter 33 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... packaging of 50ml, 100ml, 200ml and 400ml bottles. According to learned ASG, Tariff Item 3305 90 19, specifically meant for Hair oils , directly covers the product in question, AHAHO. 8.3. Learned ASG has also argued that a specific entry would take precedence over a general entry, as held by this Court in Commissioner of Central Excise, Nagpur v. Shree Baidyanath Ayurved Bhavan Ltd.: (2009) 12 SCC 419; and when Hair oil is specifically mentioned in Chapter 33 and when AHAHO s common parlance is that of a general cosmetic requisite, classifying it as a medicament is a far-fetched proposition. 8.4. In the other limb of submissions, learned ASG has contended that the common parlance test of the product is not in favour of the respondent, as the product is not prescribed by any medical practitioner, is available freely without any prescription in Medical and General Stores, and could be purchased across the counter, as admitted by the respondent. Additionally, the label does not indicate the condition of sale by authorised medical distributor or retailer under prescription as mandated under the Act of 1940; it does not cure any particular disease; and the claims on the lab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... twithstanding the amendments, AHAHO has remained classifiable under Chapter 30, as its ingredients or manufacturing process did not undergo any change warranting its classification as a cosmetic under Chapter 33. Elaborating on these aspects, learned senior counsel has submitted that until 2004-05 the tariff entry was only 3003 39 for Homeopathic medicines and from 2005-06, 3003.39 was divided into 3003 for wholesale and 3004 for retail sale. Consequent to amendment of the First Schedule to the Central Excise Tariff Act, 1985 during the year 2005-06 introducing eight-digit classification system, the product became classifiable under Chapter heading 3004 90 14 (Medicaments consisting of two or more constituents which have been mixed together for Therapeutic or Prophylactic uses put up in doses or in forms or packings suitable for retail sale). It has been argued with reference to the decisions in BPL Pharmaceuticals v. Collector of Central Excise, Vadodara: 1995 Supp (3) SCC 1 and Commissioner of Central Excise, Nagpur v. Vicco Laboratories: (2005) 4 SCC 17 that some differences in the tariff entries would not change its character when the product remains the same. According to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a product is sold across counters and without a prescription, it would not per se lead to the conclusion of it being not a medicament. The method of usage of AHAHO is clearly stated on its label; and Materia Medica clearly states the therapeutic properties of ingredients used. It has also been submitted that several drugs like Anacin, Dolo 650, Cough syrups, etc. are available across the counter; and none of the Homeo drugs require any prescription for purchasing. Another decision of this Court in the case of Meghdoot Gramodyog Sewa Sansthan, U.P. v. Commissioner of Central Excise, Lucknow: (2005) 4 SCC 15 has also been relied upon. 9.5. Learned senior counsel has distinguished the facts of the present case from the case of Alpine Industries (supra), as AHAHO is a therapeutic/prophylactic medicament in the medium of oil for the diseases relating to the scalp. The product is not advertised as Hair Oil but is marketed only as Aswini Homeo Arnica Hair Oil . 9.6. With reference to the majority decision of the Tribunal in the case of Bakson Homeo Pharmacy (supra) in respect of a similar product, Sunny Arnica Hair Oil , learned senior counsel has submitted that the said decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ands taken by the parties. In order to examine the root question as to whether the product in question is classifiable as medicament under Chapter 30 or would fall in the classification of cosmetic or toilet preparations under Chapter 33 as also the other question as regards justification for re-examination of the previous classification of the product in question, we may, in the first place, take note of the principles discernible from the cited decisions. The principles in the cited decisions 13. As regards justification for re-examination of the classification of the product in question, the Adjudicating Authority observed that there were substantial changes in the tariff entries, particularly when Chapter 30 came to be reworded so as to remove the distinction between patent/proprietary and generic medicaments and classify them according to whether they are put up in unit containers for retail sale or not; the mention about the Act of 1940 and the various Pharmacopeia came to be deleted; and under Chapter 33, the phrase Hair oil became prominent under which, subsidiary headings of perfumed hair oil and others came to be specified. Learned ASG has also relied up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the authorities below for holding that Selsun would fall under Chapter 33 was that having regard to the composition, the product will come within the purview of Note 2 to Chapter 33 of the Schedule to Central Excise Tariff Act, 1985 is without substance. According to the authorities the product contains only subsidiary pharmaceutical value and. Therefore, notwithstanding the product having medicinal value will fall under Chapter 33. We have already set out Note 2 to Chapter 33. In order to attract Note 2 to Chapter 33 the product must first be cosmetic, that the product should be suitable for use as goods under Headings Nos. 33.03 to 33.08 and they must be put in packing as labels, literature and other indications showing that they are for uses cosmetic or toilet preparation. Contrary to the above in the present case none of the requirements are fulfilled. Therefore, Note 2 to Chapter 33 is not attracted. Again it is without substance the reason given by the authorities that the product contains 2.5% w/v of Selenium Sulfide which is only of a subsidiary curative or prophylactic value. The position is that therapeutic quantity permitted as per technical differences including US Ph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t supports the case of the appellant when it is contended that there is no good reason to change the classification merely on the ground of coming into force of the new Central Excise Tariff Act, 1985 without showing more that the product has changed its character. 35. The learned counsel also placed reliance on a number of judgments to support his argument that in common and commercial parlance the product is known as medicine rather than cosmetic. As pointed out already and in support of that submission, affidavits and letters from chemists, doctors and customers are filed to show that the product is sold under prescription only in chemists' shops unlike shampoos sold in any shop including provision shops. This conclusion, namely, that the product is understood in the common and commercial parlance as a patent and proprietary medicine was also found by the Central Board of Excise and Customs as early as in 1981 and accepted by the Excise authorities and in the absence of any new material on the side of the respondents there is no difficulty in accepting this contention without referring to decision cited by the counsel for the appellants. 36. Yet another reason give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out a change in the nature of a product or a change in the use of the product, or a fresh interpretation of the tariff heading by such decision. 14. At this juncture, it shall be apposite to refer to the two decisions pertaining to the assessee Shree Baidyanath Ayurved Bhavan Ltd. 14.1. In the decision rendered on 13.04.2009, which has been referred to by the learned counsel for the parties [reported in (2009) 12 SCC 419], extensive reference has been made to the previous decision rendered on 30.03.1995 in relation to the same assessee and concerning the classification of the same product namely Dant Manjan Lal DML , for short . In the said previous decision, being the case of Shree Baidyanath Ayurved Bhavan Ltd. v. Collector of Central Excise, Nagpur: (1996) 9 SCC 402, the issue was as to whether DML manufactured by the assessee was falling within the meaning of an Ayurvedic Medicine to qualify for exemption from payment of excise duty under Notification No. 62/78-CE dated 01.03.1978 issued in exercise of power conferred by Rule 8(1) of the Central Excise Rules, 1944. The relevant entry introduced by amendment was reading as all drugs, medicines, pharmaceuticals and dru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e are, therefore, of the opinion that the Tribunal applied the correct principles in concluding that the product in question was not a medicinal preparation ( Ayurvedic ) and, therefore, the appellant was not entitled to the benefit of the exemption notification. Having heard the learned counsel at length and having perused the line of reasoning adopted by the Tribunal with which we are in general agreement, we see no reason to interfere with the conclusion reached by the Tribunal and, therefore, we dismiss these appeals, but make no order as to costs. 14.2. The aforesaid case related to the Rules framed under the Act of 1944 and the Notification issued thereunder. During the pendency of appeal before this Court, the Act of 1985 was enacted which replaced the Schedule to the Act of 1944; and Chapter 30 of the Act of 1985 dealt with pharmaceutical products. With reference to the new enactment and its amendments in the year 1996-1997, the assessee approached the Board with a plea that now, there was specific definition of Ayurvedic medicines and hence, its product DML should be classified on the basis of that definition. This led to the Board sending communication to the Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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. II. Are the ingredients used in the product mentioned in the authoritative textbooks on ayurveda? *** *** *** 48. Applying the twin tests for determination of classification of products (including common parlance test), this Court in Puma Ayurvedic Herbal (P) Ltd. [(2006) 3 SCC 266] held that Items 1, 2, 3, 4, 7, 9, 10 and 11 were medicaments while Items 5, 6 and 8 were liable to be classified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that common parlance test continues to be one of the determinative tests for classification of a product whether medicament or cosmetic. There being no change in the nature, character and uses of DML, it has to be held to be a tooth powder as held in Baidyanath 1. DML is used routinely for dental hygiene. Since tooth powder is specifically covered by Chapter Sub-Heading 3306, it has to be classified thereunder. By virtue of Chapter Note 1(d) of Chapter 30 even if the product DMLhas some therapeutic or medicinal properties, the product stands excluded from Chapter 30. 58. The learned Senior Counsel for Baidyanath relied upon the judgment of this Court in Vicco Laboratories [(2005) 4 SCC 17 : (2005) 179 ELT 17] to show that in Baidyanath I [(1996) 9 SCC 402], no tests for classification were laid down. First, in Baidyanath I [(1996) 9 SCC 402] common parlance test applied by the Tribunal has been approved. Second, and more importantly, with regard to the very same product (DML), this Court held that it could not be classified as ayurvedic medicine and rather the product is a toilet requisite. Baidyanath I [(1996) 9 SCC 402] , no doubt relates to the old Tariff period i.e. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification of a product under the Central Excise Tariff Act, commercial parlance theory has to be applied. It is true that the entire supply by the appellant of its product Lip Salve has been to the Defence Department for use of military personnel but that would also not be determinative of the nature of the product for classifying it. It is not disputed that the product Lip Salve is used for the care of the lips. It is a product essentially for care of skin and not for cure of skin . It is, therefore, classifiable as a skin-care cream and not a medicament. From the nature of the product and the use to which it is put, we do not find that the claim of the appellant is acceptable that it is primarily for therapeutic use. What we find from the material produced before the Tribunal is that essentially the product is a protective/preventive preparation for chapping of lips. It is not a curative product, maybe, that incidentally on cracked and chapped lips, it has some curative effect. It is also not denied that the product Lip Salve is not suitable for use only for soldiers operating in high-altitude areas but it is of use for everyone as protection from dry, cold weather or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us on behalf of the appellant. For the reasons aforesaid, we are unable to agree with the minority view. In the result, we find no merit in these appeals and the same are hereby dismissed. (emphasis supplied) 15.2. In G.C. Jain (supra), this Court held that the words and expressions have to be construed as per trade and understanding usage, unless defined in the statute. This Court said: - 18. Admittedly, the expression adhesive is not defined in the Act. It is now well settled that the words and expressions, unless defined in the statute have to be construed in the sense in which persons dealing with them understand i.e. as per trade and understanding and usage. 15.3. In Wockhardt Life Sciences (supra), this Court further elaborated on the common parlance test as under: - 33. 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 Bros. 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 e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted, the combined factors that require to be taken note of for the purpose of the classification of the goods are the composition, the product literature, the label, the character of the product and the user to which the product is put. However, the miniscule quantity of the prophylactic ingredient is not a relevant factor. In the instant case, it is not in dispute that this is used by the surgeons for the purpose of cleaning or degerming their hands and scrubbing the surface of the skin of the patient before that portion is operated upon. The purpose is to prevent the infection or disease. Therefore, the product in question can be safely classified as a medicament which would fall under Chapter Sub-Heading 3003 which is a specific entry and not under Chapter Sub-Heading 3402.90 which is a residuary entry. (emphasis supplied) 15.4. In Sunny Industries (supra), this Court was dealing with the question whether Ad-Vitamin Massage Oil Forte was still classifiable as patent and proprietary medicine even after the change of tariff description after 1985 Budget. This Court dismissed the appeal of the assessee as the product in question was oil, used for massage to take care ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e care of the lips. It is a product essentially for care of skin and not for cure of skin . It is, therefore, classifiable as a skin-care cream and not a medicament. From the nature of the product and the use to which it is put, we do not find that the claim of the appellant is acceptable that it is primarily for therapeutic use. 13. The same would be the position in the present case. The oil is not used for cure of skin but is oil for massage and it takes care of the skin. 14. In this view of the matter, we find no substance in these appeals and they are accordingly dismissed. There shall be no order as to costs. (emphasis supplied) 15.5. In Sharma Chemicals (supra), this Court was concerned with the issue as to whether the product Banphool Oil could be classified under as Ayurvedic medicament or as perfumed hair oil. This Court held that mere fact that a product is sold across the counter and not under a doctor s prescription, does not ipso facto lead to the conclusion that it is not a medicament. This Court, inter alia, observed and held as under: - 12. .It is settled law that the onus or burden to show that a product falls within a particular tar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in controlled situations or that the outcome had not been tested for effectiveness. This would be particularly true in the cases where the products are claimed to be based on traditional Ayurvedic formulae. *** *** *** 7. This Court has in similar matters come to the conclusion that items which may be sold under names bearing a cosmetic connotation would nevertheless remain medicines based on the composition of the items in B.P.L. Pharmaceuticals Ltd. v. CCE [1995 Supp (3) SCC 1 : (1995) 77 ELT 485]. 8. As far as the first three items listed earlier are concerned, this Court has in CCE v. Pandit D.P. Sharma [(2003) 5 SCC 288 : (2003) 154 ELT 324] and CCE v. Himtaj Ayurvedic Udyog Kendra [(2003) 5 SCC 290 : (2003) 154 ELT 323] in connection with Banphool Oil and Himtaj Oil held that the Ayurvedic hair oils, were medicines and should be properly classified under Tariff Sub-Heading 3003.30, rather than under Tariff Sub-Heading 3305.10 or 3305.50 . 9. As far as Items (4), (5) and (6) are concerned, for the reasons stated earlier, we are of the view that they are also properly classifiable under medicaments under Tariff Sub-Heading 3003.30. (emphasis suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubstantially similar product was held to be a medicament. In fact, in the said decision, the Tribunal examined the questions relating to two products namely, Sunny Arnica Hair Oil and Sunny Arnica Shampoo . As regards the issue concerning the product shampoo, the Tribunal remanded the matter to the lower authority for decision afresh but, as regards hair oil, the Tribunal upheld the contention of the assessee in terms of the opinion of the majority and held that the said product was answering to the description of Homeopathic medicine while predominantly applying the tests pertaining to the ingredients. In the leading opinion, the learned Member of the Tribunal extensively referred to the individual properties of Homeopathic medicines as also the other natural ingredients of the product. The learned Member further underscored the connotations of Homeopathy system of medical treatment as also the therapeutic and prophylactic properties of the ingredients and observed as under : - On a careful consideration and examination of the materials produced and referred to above, we notice that the ingredients utilised in the manufacture of Arnica Hair Oil are exclusively natural subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otations of common parlance test could further be understood from the case of Alpine Industries (supra), that the primary object of such taxing statute being to raise revenue and various products being differently classified for that purpose, the entries are not to be understood in their scientific and technical meaning; rather the terms and expressions used in tariff have to be understood by their popular meaning, that is the meaning attached to them by those dealing with or using the product. Further, as observed in G.C. Jain (supra), the words and expressions, unless defined in the statute have to be construed in the sense in which persons dealing with them understand i.e., as per trade understanding and usage. Yet further, there is no fixed test or static parameter for correct classification of a product and it essentially depends on the meaning assigned to it by the persons concerned with it. One of the essential factors for determining whether a product falls under Chapter 30 or not is as to whether the product is understood as a pharmaceutical product in common parlance. However, the quantity of medicament used in a particular product is not a relevant factor because, ordina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gy, Cinchona Officinalis is also termed as China Officinalis; and Pilocarpine is essentially isolated from Jaborandi. The similar product involved in Bakson Homeo Pharmacy (supra) was said to be containing the ingredients Arnica Mont, Jaborandi, Cantharis and China, apart from other ingredients . 18.3. As regards the question of justification for re-classification or re-examination of the classification, this Court has clearly held that there is no good reason to change the classification merely on the ground of change of tax structure or tariff entries without showing a change in the nature and character of a product or a change in the use of the product [vide the decisions in BPL Pharmaceuticals and Vicco Laboratories (supra)]. As noticed in Shree Baidyanath Ayurved Bhavan Ltd. (supra), this Court rejected the contentions seeking reclassification of the product in question therein, DML, after enactment of new Tariff Act because the product in its composition, character and uses continued to remain the same even after insertion of new Sub-Heading 3301.30. 19. Having thus summarised the discernible principles, so far as relevant for the present purpose, we may take up the poi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the label neither contained a positive indication that it was a medicament nor a negative indication that it was not a cosmetic but it was certainly labelled as a Hair Oil ; and if the intention was to identify the product as medicament, there was no need to label it as Hair Oil . Hence, the Adjudicating Authority held that AHAHO could not be categorized as a medicament but had to be classified as Hair oil . As regards common parlance test, the Adjudicating Authority observed that AHAHO was accessible in both Medical and General Stores and could be bought across the counter. Moreover, the depiction of a lady with long, black flowing hair on its label indicated its categorisation as cosmetic and not as a medicament. The Adjudicating Authority even proceeded to observe that Hair growth is at best a cosmetic necessity rather than a disease requiring immediate attention or treatment . The Adjudicating Authority also observed that the drug licenses issued by respective authorities, per se did not make AHAHO a preparation of homeopathic medicine. While referring to Materia Medica, the Adjudicating Authority noted his reservations about one ingredient (Pilocarpine) and observed tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and factors: (i) that the manufacturing process, undertaken in terms of the manufacturing license issued by the Drug Controller and by the Directorate of Ayush, would indicate the presence of four homeopathic drugs in the product namely, Arnica Montana, Cantharis, Pilocarpine and Cinchona; (ii) that the drugs so used are mentioned in the authoritative text books like Materia Medica of Homeopathic Drugs; (iii) that its label indicated the words Homeopathic Medicine under Schedule K to the Rules of 1945; (iv) that the product is to be applied to the scalp and not consumed orally; it would cure/prevent the lack of blood circulation to the hair roots, hair fall (alopecia), dandruff, headache and lack of sleep (insomnia), and healing from the said diseases would lead to good health in terms of growth and maintenance of natural colour in the hair; and (v) that the product was a medicament in terms of market parlance, evidenced by its use over a period of nearly 19 years. The respondent also submitted that the product was not cosmetic , as the ingredients used had prophylactic properties and it was not applied for cleansing or beautifying or promoting attractiveness or altering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the purpose of TNVAT Act 2006, held the product to be a Homeopathic medicine. The Tribunal also took note of the fact that even in the past, the respondent was issued show-cause notices for classification of the product as cosmetic and the Appellate Authority, after going into all the aspects of common parlance as well as contents of the product and its usage, held that the product was a Homeopathic medicine. The Tribunal distinguished the case of Shree Baidyanath Ayurved Bhavan (supra) while observing that the product in question therein did not satisfy the common parlance test and the said product DML was known as toilet preparation in common parlance and not as Ayurvedic medicine. The Tribunal further pointed out that the decision of this Court in the case of Alpine Industries (supra) was not applicable as in the said case, the drug license obtained by the assessee under the Drugs and Cosmetics Act, 1940, itself mentioned that it was a license for ointment and cream for external application as a non-pharmacopoeia item whereas in the present case, the product was registered as Homeopathic Medicine. 20.2.2. While supporting the findings of the Tribunal, learned senior counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been in the nature of a fishing inquiry as if only to find some gap or some loophole therein, without looking at the substance of the matter that the product in question was clearly indicated to be a Homeopathic medicine under Schedule K to the Rules of 1945. Looking to the nature of the product and its properties, the relevant indications have also been specified in reasonable terms and looking to its nature and purpose, directions for use have also been given in the manner that it was to be massaged directly on the scalp and should be left overnight for best results. Hence, the Adjudicating Authority s observations about want of specification regarding the dosage to be used and the duration for which it is to be used carry their own shortcomings. As noticed, the product in question is essentially meant for dealing with the conditions arising in and on the scalp with hair being the integral part thereof. The product consists of Homeopathic medicines. Its manner of use is to put the same on the scalp and to leave it overnight. Looking to the nature of the product and its uses, the observations about want of specification regarding the dosage do not take the product out of its ph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses of the medicines in question would invariably require some medium of administration. Learned counsel for the respondents has rightly submitted that in relation to the product in question, hair oil is only a medium through which the medicine is to be applied on the scalp, particularly when it is meant for nourishing the hair roots. 23.1. It is also apparent in the present case that the stand of the Department to classify the product in question as cosmetic under Chapter 33 is essentially based on the distinct entry Hair Oil occurring therein; and it appears that the expression Hair Oil occurring on the label of the product has been taken as decisive by them. For what has been discussed hereinabove, it would also follow as a natural corollary that the expression Hair Oil occurring on the label of the product is only indicating the medium through which Homeopathic medicines comprising the product are to be applied. We are unable to accept the submissions and the efforts on the part of the appellant to take the product in question to Chapter 33 merely because of its label carrying the expression Hair Oil while ignoring the preceding significant expressions Homeo and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uct in question cannot fall under Chapter 33. 24. As observed, we have considered it appropriate to refer to the said decision of the Tribunal in the case of Bakson Homeo Pharmacy (supra), which had all through been relied upon by the respondent for the reason that it related to a similar product marketed in the name of Sunny Arnica Hair Oil . The said decision clearly makes out the ingredient test in favour of the respondent and we are satisfied with the detailed analysis of the same ingredients by the Tribunal while holding the product to be a medicament. The ingredient test, as extensively dealt with in the leading opinion of majority of the Tribunal in the case of Bakson Homeo Pharmacy (supra), with reference to the fundamental principles of Homeopathy and the medicinal properties and therapeutic/prophylactic use of several of the ingredients, inspires confidence and when AHAHO is found carrying all such Homeopathic medicines which were the ingredients of the product under consideration of the Tribunal, we find it just and proper to endorse the views of the majority of the Tribunal in Bakson Homeo Pharmacy (supra) and there appears no requirement to re-analyse the medicinal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority and the appellant, relating to the common parlance test with reference to the depiction of a lady with long black flowing hair on its label and thereby treating it as cosmetic, is also stretching the matter to the brink of absurdity. When the product in question is intended to control hair fall as also to prevent dandruff and to induce good sleep, which all carry their own therapeutic and prophylactic connotations, the picture of a lady with long black flowing hair cannot be said to be unrelated to the indications related with the product. In any case, such a picture, by itself, cannot make the product in question a cosmetic. Interestingly, right at the top of the said picture and below the name of the product, it proclaims Controls hair fall. Prevents dandruff . The Adjudicating Authority has taken his process of analysis to further illogical heights by proclaiming that hair growth was at the best a cosmetic necessity rather than a disease requiring immediate attention or treatment. We have reproduced these expressions of the Adjudicating Authority verbatim to show the irrationality of reasoning and want of logic. A treatment or prevention of hair fall by way of medicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act of 1940 could not be refuted by the Revenue. The said decision of this Court may not have a direct bearing on the question of classification of the product in question for the purpose of the Act of 1985 but, it cannot be denied that the product in question has been found answering to the description of a drug for the purpose of the Act of 1940 as also for the purpose of the said Andhra Pradesh General Sales Tax Act, 1957. Viewed from any angle, it remains a medicament. Whether re-look at classification of the product in question justified 30. For what has discussed hereinabove, it is apparent that the product in question had rightly been classified as medicament in the past and nothing material had changed so as to re-classify the same. However, the Revenue has attempted to rely on the amendment of the tariff structure in the year 2012 as justification for re-look at its classification. The Adjudicating Authority stated this justification in the manner that there were substantial changes in the tariff headings, particularly when Chapter 30 came to be reworded so as to remove the distinction between patent/proprietary and generic medicaments and to classify them a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aph 58 of the decision in Shree Baidyanath Ayurved Bhawan, reproduced hereinbefore). Thus, mere broad-basing of the entries in Chapter 30 and Chapter 33 of the First Schedule to the Act 1985, by itself, could not have been the justification for an attempt at re-classification of the product in question. 32. Even as regards the amendment of the entries, as noticed, the stand of the appellant-Revenue has been that Chapter 30 was reworded so as to remove the distinction between patent/proprietary and generic medicaments and to classify them according to whether they are put up in unit containers for retail sales or not. Further, it has been stated that reference to the Act of 1940 and various pharmacopoeia had been deleted. Thirdly, it has been contended that in Chapter 33, the phrase hair oil had become prominent with subsidiary entries of perfumed hair oils and other. We could only reject such an attempt on the part of the Revenue as a hair-splitting exercise, away and detached from the substance. This is apart from the fact that the specification of medicament under Heading 3004 would, in any case, cover the product in question in the form it is marketed for retail sale. 32.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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