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TMI Blog2003 (11) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... y at 15% ad valorem. 4.The facts briefly stated in Civil Appeal No. 2072 of 1996 leading to the filing of this appeal are as under :- The appellants - M/s. Naturalle Health Products (P) Limited, Hyderabad filed the classification list as required under Rule 173B of the Central Excise Rules, 1944 with the Assistant Collector of Central Excise claiming classification of their goods under sub-heading 3003.30 read with erstwhile Notification No. 32/89-C.E., dated 1-3-1989. The appellants were issued a loan licence to manufacture for sale of Ayurvedic drugs under the Drugs and Cosmetics Act, 1940 and the said loan licence was renewed from time to time. A show cause notice was issued by the Assistant Collector of Central Excise calling upon the appellants to show cause why the said goods should not be classified as Patent or Proprietary Medicaments under sub-heading 3003.10 of Central Excise Tariff attracting excise duty at the rate of 15% ad valorem. The appellants replied to the show cause notice and denied that the said goods are not Ayurvedic Medicaments and submitted that the grounds raised in the show cause notice were not relevant for determining the classification of the goods. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctor, Indian Medicines and Homoeopathy, Hyderabad for the manufacture of Ayurvedic Medicine, namely, "Sloan's Balm" and "Sloan's Rub". The appellants filed classification list in respect of the said products classifying the same under Chapter sub-heading 3003.30 as Ayurvedic Medicine attracting nil rate of duty. Two show cause notices were issued upon the appellants to show cause as to why the said products should not be classified under Chapter sub-heading 3003.10 as patent or proprietary medicine attracting duty at 15% ad valorem. The appellants replied to the show cause notice relying upon the Tribunal's decision in the case of Richardson Hindustan Limited (supra). The Assistant Collector, however, classified both the products under Chapter sub-heading 3003.10 chargeable to duty at 15% ad valorem. The appellants filed two appeals to the Collector of Central Excise (Appeals) and also filed before the Collector (Appeals), a report in respect of clinical trials conducted in respect of the said two products. The Collector of Central Excise remanded the case to the Assistant Collector for de novo adjudication. The Assistant Collector issued two revised show cause notices. The appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is useful to narrate certain facts in regard to the products manufactured by the appellants. We have already noticed that the appellants are, inter alia, engaged in the manufacture of ayurvedic drugs including medicated cough drops and vaporub throat drops on job work basis for Procter and Gamble India Limited (hereinafter referred to as PGIL) to market them under the brand name Vicks. The said goods are manufactured by the appellants in accordance with and under a loan licence issued to PGIL for manufacture of ayurvedic drugs under the Drugs and Cosmetics Act, 1940. 11.According to the appellants in Civil Appeal No. 2072 of 1996, the following are the ingredients for the manufacture of the cough drops and throat drops :- Vicks Medicated Vicks Vaporub Cough Drops Throat Drops Pudinah Arka Purdinah Arka Karpoor Nilgiri Tel Ajowan Ke Phool Sugar base Sugar base 12.In the two appeals, the classification of the medicines manufactured by them are in dispute. According to the appellants in both the appeals, the goods manufactured by them are classifiable under Chapter sub-heading 3003.30 (Heading 30.03). According to the Revenue, the goods manufactured by both the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act where it has a specific connotation for the purpose of that Act as it excludes Ayurvedic, Siddha or Unani drugs and includes not only medicines but other substances and devices; this is, however, not the case in the Central Excise Tariff. According to the appellants, the Tribunal failed to appreciate that the appellant's products which contained the Ayurvedic ingredients as aforesaid were prepared in accordance with the Ayurvedic principles. It is further urged that the formulations have been developed after referring to several authoritative Ayurvedic books and careful evaluation of actions, clinical trials, etc., and that the formulations have been approved by the Director of Indian Medicine and Homoeopathy, Government of Andhra Pradesh. It is further submitted that the Tribunal failed to appreciate that the onus of classification of a product is on the Excise Department and that the Excise Authorities are required to produce the evidence to support their stand. In the present case, no evidence whatsoever has been produced by the Excise Department and they have not even rebutted the evidence produced by the appellants. 14.Learned Counsel for the appellants contended that as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidual assessee and that this exclusivity is licensed by the Drug Controller and that as the said goods are marketed as Ayurvedic medicament in India, the same are "Exclusive Ayurvedic" qua that manufacturer. It is further argued that on a true and correct construction, sub-heading 3003.10 excludes Patent or Proprietary medicaments which are manufactured, sold and marketed as Ayurvedic medicaments in accordance with the license issued under the Drugs Act i.e. Patent Proprietary Ayurvedic medicaments falling under Section 3(h) of the Drugs Act and, therefore, Section 3(a) has no application at all in construction of sub-heading 3003.10 of CET. It is submitted that since the sub-heading 3003.10 excludes Patent or Proprietary Ayurvedic medicament as defined in Section 3(h) of the Drugs Act the word "Exclusively" does not and cannot have the same meaning as appearing in Section 3(a) of the Drugs Act which defines Ayurvedic Drugs and not Patent or Proprietary Ayurvedic drug and that as the goods are Patent or Proprietary Ayurvedic medicaments within the definition given in Section 3(h) of the Drugs Act, Section 3(a) of the Drugs Act does not apply at all in the present case. It is also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... what falls under 3003.30 is a "classical" Ayurvedic medicine (because that is what will be prescribed by an Ayurvedic practitioner practising the Ayurvedic system of medicine) then the expression "exclusively Ayurvedic" must again be the same classical Ayurvedic product which means it must fulfil both the ingredients of Section 3(a) of the Drugs and Cosmetics Act, namely that its ingredients must all be those specified in the authoritative text books, and the formulae of its manufacture must be strictly in accordance with the formulae prescribed in those text books. Admittedly, the said formulae are not followed in both the cases and, therefore, the products in question cannot fall under sub-heading 3003.30." 17.Replying to the argument of the Counsel for the appellant that since classical Ayurvedic products can never be patent or proprietary medicines, the exclusion clause in sub-heading 3003.10 would be meaningless unless it comprehends neo-Ayurvedic products such as theirs. Mr. Raju Ramachandran contends that this exclusion is by way of abundant caution only to indicate that classical Ayurvedic products falling under sub-heading 3003.30 would not fall under sub-heading 3003.10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Revenue and all that the decision holds is that the fact that certain ingredients were of a synthetic nature would not mean that the products became non-Ayurvedic and that the said decision do not deal with the interpretation of sub-heading 3003.30 vis-à-vis 3003.10. 20.We have given our anxious consideration to the points urged by the learned Counsel for the appellants and learned Counsel for the respondent with reference to the pleadings, provisions of law and the decisions of the Tribunal and of this Court. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the order passed by the Tribunal in the case of Richardson Hindustan v. CCE reported at 1998 (35) E.L.T. 424. The Tribunal in that case held that there is no definition of Ayurvedic medicaments in the Central Excises and Salt Act or in the Central Excise Tariff Act. Although Ayurvedic medicines have been defined in Section 3(a) of the Drugs and Cosmetics Act, the same cannot be applied for the purpose of classification of a product for Central Excise duty in view of the judicial pronouncements on the subject. The Tribunal held as under :- " It is now a settled principle of law that when there is no definition of any word in the relevant statute, the word must be construed in its popular sense i.e. the meaning as understood by the people conversant therewith. The appellants have produced opinions from physicians, certificates from consumers and certificates from retail sellers to show that, in the common parlance, Vicks Vaporub and Vicks Inhaler are treated as Ayurvedic medicines. The registration certificate issued by the D.G.T.D. and the manufacturing licence issued by the licensing authority also show the appellants' product as Ayurvedic medicines. The categorisation made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of identification/classification of such products. The doubts relate to the question as to whether the products claimed to be Ayurvedic medicine, are in fact so, and whether those would merit classification under Sub-heading No. 3003.30 of the Schedule to the Central Excise Tariff Act, 1985. According to the guidelines already in2. vogue, each medicament used in the various systems of treatments e.g. Ayurvedic, Unani and Siddha, has to be examined on merits and, in specific cases of doubts, the Collectors are required to make a reference to the Board, who take us the matter with the Drugs Controller of India. The Government have further examined the3. matter in the light of parameters prescribed by the Tribunal in their Order No. 116/88-C, dated 10-2-1988 in the case of M/s. Richardson Hindustan Ltd. v. C.C.E., Hyderabad. The Tribunal held that a preparation would merit classification as an Ayurvedic medicine, if in the common parlance, it is known as an Ayurvedic medicine and all its ingredients are mentioned in the authoritative book(s) on Ayurvedic medicines. It has also been observed that the aforesaid two tests been upheld by the Hon'ble Supreme Court in the case of Civil Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der passed in M/s. Richardson Hindustan Ltd. v. C.C.E., Hyderabad which has been upheld by this Court in C.A. No. 2127 of 1998 have issued the circular clarifying the correct position in regard to the classification and reiterating the said two tests. This argument of Mr. Raju Ramachandran, therefore, has no force and is liable to be rejected. 31.Strong reliance was also placed by the appellant's Counsel on the decision of the Larger Bench of the CEGAT in the case of Himtaj Ayurvedic Kendra v. C.C.E. reported in 2002 (139) E.L.T. 610. In that case the Revenue contended that Himtaj Oil will be classified under Heading 33.05 as Perfumed Hair Oil. The Larger Bench of the Tribunal held that it is a medicament falling under Chapter 30 and it is a patented Ayurvedic medicament falling under sub-heading 3003.30. The Larger Bench after considering number of orders passed by the CEGAT including the order passed in Naturalle Health Products [impugned order in the present appeal reported in 2000 (125) E.L.T. 765] came to the conclusion that sub-heading 3003.30 took in both classical as well as patent or proprietary Ayurvedic medicaments. Tribunal observed thus :- "We are not able to agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... testing Report of the Chief Chemist, New Delhi which stated that no Ayurvedic perfumery could be detected in "Himtaj oil". (f) SSI Registration Certificate obtained for manufacturing Ayurvedic oil under a drug licence. 34.The Revenue filed an appeal to the Commissioner (Appeals) who allowed the appeal of the Revenue and held that there was no evidence to prove that the product was being ordinarily prescribed by medical practitioners or that it was used to deal with specific disease. The Commissioner (Appeals) held that there was nothing to show that common man used the product as medicine. A further appeal was filed by the assessee before the CEGAT which allowed the appeal. Considering the report of the Range Officer, this Court held that the dealers, wholesalers, retailers, customers, chemists and druggists all considered "Himtaj oil" to be an Ayurvedic medicament and apart from that, the other material relied upon by the Assistant Collector also clearly shows that "Himtaj oil" is an Ayurvedic medicament. In this view of the matter, this Court dismissed the appeal filed by the Revenue. 35.The same ratio has been laid down in the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ingredients are mentioned in the authoritative text books on Ayurveda. In fact, in the case of appellant in Civil Appeal No. 2072/1996, the products satisfy the definition in Section 2(h) of Drugs & Cosmetics Act as "patent or proprietary" Ayurvedic medicines also. Further, the manufacture of this medicament is being done under the Ayurvedic drug licence issued by competent authority. 37.The Vice-President and one of the Members of the Tribunal observed that the products in question are mentioned in Martindale's "The Extra Pharmacopoeia" published in U.K. and it is also a patented medicine in USA and marketed there as Allopathic medicine. These facts were not alleged in the show cause notice. In the absence of any material on record as to how the products are treated and understood in U.K., U.S.A. etc. the observations of the learned Members of the Tribunal are not warranted. Even if it is a patented medicine in U.S.A., it does not cease to be an exclusively Ayurvedic medicine if it has the characteristics of such medicine. It is also relevant to note that after remand by the Tribunal in Richardson Hindustan case (which was confirmed by this Court), we are told that 'Vicks Va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Ayurvedic system of medicine, though it is a patented medicine. This is especially so when all the ingredients used are mentioned in the authoritative books on Ayurveda. As rightly contended by the Counsel for the appellants, the essential character of the medicine and the primary function of the medicine is derived from the active ingredients contained therein and it has certainly a bearing on the determination of classification under the Central Excise Act. As held in Amruthanjan case, the mere fact that the ingredients are purified or added with some preservatives does not really alter their character. 40.In C.A. No. 2072 of 1996, the affidavits of Ayurvedic practitioners were filed before the adjudicating authority to establish that these products are recognised and being used in Ayurvedic system of medicine. The Assistant Collector ignored them with a cryptic observation that they are 'self-serving'. No other authorities including the Tribunal have considered such material. No evidence to the contra has been relied upon by the Department. When we come to the appeal of Akin Laboratories Pvt. Ltd., the assessee filed affidavits from doctors, users and stockists and also furni ..... X X X X Extracts X X X X X X X X Extracts X X X X
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