M/S Dabur
India Limited Vs. Commissioner of Central Excise, Jamshedpur [2005] Insc 217 (1 April 2005)
S.
N. Variava, Dr. Ar. Lakshmanan & S. H. Kapadia
[With
C. A. No.6755/2003, 6867/2003 and 1591/2005] All these Appeals can be disposed
of by this common Judgment as the point involved is the same. The dispute is
regarding classification of two items manufactured by the Appellants, namely,
(1) Lal Tail; and (2) Janam Ghunti. The Tribunal has held that the product Lal
Tail is classifiable under Chapter heading 33.04. As regards `Janam Ghunti',
the matter has been remitted back to the original authority for a fresh
decision.
We
have heard the parties. In our view, there is no infirmity in the Order of the
Tribunal insofar as it remits the matter back to the original authority for a
fresh decision on classification of the product `Janam Ghunti'. Chapter Note 1.(c)
of Chapter 30 states that Chapter 30 does not apply to aqueous distillates or
aqueous solutions of essential oils even though they are suitable for medicinal
uses.
Further,
under Chapter Note 1.(d) of Chapter 30 preparations of Chapter 33 would not
fall under Chapter 30 even if they have therapeutic or prophylactic
properties.. The Tribunal has, therefore, correctly held that if `Janam Ghunti'
is an aqueous distillates or aqueous solutions of essential oils it would fall
under Chapter 33 even though it may have therapeutic or prophylactic
properties. The Appellants have claimed that their product `Janam Ghunti' is
neither a distillate nor a solution but is an extraction. However, this is a
matter which requires inquiry into. We approve the finding of the Tribunal that
this would require looking into the process of manufacture, the composition of
the product and that classification of this product cannot be decided upon
without chemical test of the product. We, therefore, see no infirmity in the
Order of the Tribunal to this extent and the same is upheld.
As
regards `Lal Tail', Mr. Lakshmikumaran has pointed out that this product has
all the ingredients mentioned in Ayurvedic Text Books. The product also has a
Drug Controller's Licence. The Appellants have also filed evidence by way of
prescriptions of Ayurvedic Doctors to show that their product has therapeutic
or prophylactic properties and is used as a drug. As against this the
Respondents have admittedly led no evidence or produced any material to show
that in the market this product is not considered to be a drug.
The
Tribunal has held against the Appellants mainly on the basis of the decision of
this Court in Shree Baidyanath Ayurved Bhavan Ltd. vs. Collr. of C. Ex., Nagpur reported in 1996 (83) ELT 492
(S.C.). In this case the question was whether `Dunt Manjan Lal' (Tooth powder)
could be considered to be a medicament and as such eligible for exemption under
Notification No. 62/78-C.E. This Court held that a medicine is ordinarily
prescribed by a medical practitioner and is used for a limited time and not for
every day use unless it is so prescribed to deal with a specific disease like
diabetes. This Court has held that in interpreting taxing statute the
scientific and technical meaning of the terms and expressions used in the tax
laws is not to be resorted to and that goods are to be classifiable according
to the popular meaning attached to them by those using the product. The
Tribunal has held that from the Appellants literature it can be seen that `Lal
Tail' is used for nourishing the babies skin and that the product is not used
under any prescription by a medical practitioner and is not used for a limited
period. The Tribunal has held that this product is used regularly but not in
connection with a special ailment.
On
this basis, it is held that this product fails the test for a medicament.
Whether
a product can be considered to be a medicament or not has also been considered
by this Court in a number of other decisions, some of which may usefully be
referred to herein.
In the
case of Commissioner of C. Ex., Calcutta-IV vs. Pandit D.P. Sharma reported in
2003 (154) ELT 324 (SC), the question was whether `Himtaj Oil` is a Ayurvedic
medicament or not classifiable under sub-heading 3003.30 or a `perfumed hair
oil' classifiable under sub-heading 3305.10. Even though reliance had been
placed upon the authority of this Court in Shree Baidyanath Ayurved Bhavan'
case (supra), this Court negatived an argument that the product would not be
considered to be a drug because it was not prescribed by a medical practitioner
and was one which could be used for a long period of time. It was held that the
test was to see what persons using the product understand it to be. On the
basis of evidence produced by the manufacturer that the common man understood
the product as a medicine it was held that the product was a medicament.
In the
case of Commissioner of C. Ex., Calcutta vs. Sharma Chemical Works reported in
2003 (154) ELT 328 (SC) the question was whether `Banphool oil` was a Ayurvedic
medicament or a perfumed hair oil. This Court, after considering Shree Baidyanath
Ayurved Bhavan' case (supra), held that the onus or burden to show that a
product falls within a particular Tariff Item is always on the Revenue. It has
been held that merely because a product is sold across the counters and not
under a Doctor's prescription does not by itself lead to the conclusion that it
is not a medicament. It was also held that in the product the percentage of
medicament may be small but that by itself did not ipso facto mean that the
product is not a medicament. It was held that generally the percentage or
dosage of the medicament will be such as can be absorbed by the human body and
that the medicament would necessarily be covered by fillers/vehicles in order
to make the product usable. It was noted that all the ingredients used in Banphool
Oil were those which were set out in the Ayurveda Text Books. It was held that
the Revenue had not discharged the burden to show as to how the customers who
used this product understood it and on the contrary there was evidence to show
that the product was being used for treatment of headache, eye problem, night
blindness, reeling, head weak memory, hysteria, ammenesia, blood pressure,
insomnia etc. the product was a medicament.
In the
case of Commissioner of Central Excise, Nagpur vs. Vicco Laboratories reported in 2005 (179) ELT 17 (SC), this Court
whilst considering whether turmeric skin cream and vajradanti toothpaste and
tooth powder were to be classifiable under Chapter 30 or Chapter 33, noted Shree
Baidyanath Ayurved Bhavan's case and held as follows:-
"2....................
The basis of the show cause notices was the decision of this Court in Shree Baidyanath
Ayurved Bhavan Ltd. vs. Collector of Central Excise, Indore reported in 1996
(9) SCC 402 and the tests allegedly laid down in that decision for determining
whether a product should be classified under Chapter 33 or Chapter 30.
3. The
two tests according to the show cause notice for determining whether a product
was classifiable as a pharmaceutical product under Chapter 30 of the Central
Excise Tariff were
(1)
Whether the products are being used daily and are sold without prescription by
a medical practitioner; and
(2) whether
the products are available in General Store Department / Grocery shops.
The
department's case in the show cause notice is that as these two tests were not
fulfilled the product failed to come within the prescription of pharmaceutical
products in Chapter 30.
4. The
mere decision of a court of law without more cannot be justification enough for
changing the classification without 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. It is not the appellant's case that any of these
circumstances were present in this case, besides the decision in Shree Baidyanath's
case (supra) does not lay down, the test of classification as concluded by the
Department at all. In that case the Tribunal had considered the evidence
produced before it with regard to the sale and purchase of the product in
question. It was found as a matter of fact that in common parlance the product
was not described as a medicinal preparation but was described as a toilet
preparation. This Court affirmed the tests laid down by the Tribunal, namely,
that since the primary object of the Excise Act was to raise revenue, resort
should not be had, for the purppose of classification, to the scientific and
technical meaning of the terms and expressions used therein but to their
popular meaning, that is to say, the meaning attached to that by those using
the product.
5. The
Court also noted that the Tribunal had rejected the assessee's claim in that
case holding that "ordinarily" a medicine is prescribed by a medical
practitioner and it is used for a limited time and not every day unless it is
so prescribed to deal with a specific disease like diabetes." It may be
noted that the court affirmed this line of reasoning of the Tribunal on the
ground that it was "in general agreement with it". The court did not
itself affirmatively hold that what was laid down by the Tribunal as a test to
be "ordinarily" followed was invariably to be the sole test for
determining whether a product is to be proved as a medicine or as a cosmetic.
Indeed
this Court in BPL Pharmaceuticals Ltd. vs. CCE reported in 1995(Suppl.) 3 SCC 1
has upheld the classification of `Selsun' medicated shampoo as a medicine and
not as a cosmetic and held that in order to attract Note 2 to Chapter 33 the
product was first proved to be a cosmetic and "that the product should be
suitable for use as goods under Heading Nos.
33.03
to 33.08 and they must be put in packing as labels, literature and other
indications showing that they are for use as cosmetic or toilet
preparation."
6.
These observations however were not made in connection with Chapter Note 1(d)
of Chapter 30 the impact and purport of which may have to be considered in an
appropriate case.
7.
This Court in Commissioner of Central Excise, Calcutta v. Sharma Chemical Works
reported in 2003 (5) SCC 60 has also disapproved the approach of the Department
in holding that the product was a cosmetic only because it was not sold by
chemists or under doctors prescription.
This,
according to the decision, does not by itself lead to the conclusion that it is
not a medicament. The Court reaffirmed the test as categorically laid down in Shree
Baidyanath, namely, that the burden of proof that a product is classifiable
under a particular tariff head is on the revenue and must be discharged by
proving that it is so understood by consumers of the product or in common
parlance. [See also Meghdoot v. Commisisoner of Central Excise : 2004 (174) ELT
14 (S.C.)]." From the above mentioned authorities, it is clear that in
classifying a product the scientific and technical meaning is not to be
resorted to. The product must be classifiable according to the popular meaning
attached to it by those using the product. As stated above, in this case the
Appellants have shown that all the ingredients in the product are those which
are mentioned in Ayurvedic Text Books. This by itself may not be sufficient but
the Appellants have shown that they have a Drug Controller's Licence for the
product and they have also produced evidence by way of prescriptions of Ayurvedic
Doctors, who have prescribed these for treatment of rickets. As against this,
the Revenue has not made any effort and not produced any evidence that in
common parlance the product is not understood as a medicament.
In
view of the above, the decision of the Tribunal on this aspect cannot be
sustained and is accordingly set aside. It is held that the product would be a
medicament and classifiable as such under Chapter 30.
Therefore,
the Appeals partly succeed and stand disposed of as such. There will be no
order as to costs.
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