1999(08)LCX0284
IN THE CEGAT, COURT NO. III, NEW DELHI
S/Shri P.C. Jain, Vice President and P.G. Chacko, Member (J)
COLLECTOR OF CENTRAL EXCISE, PUNE
Final Order No. 847/99-C, dated 16-8-1999 in Appeal No. E/252/93-C
CASE QUOTED
BPL Pharmaceutical Ltd. v. Collector — 1995(05)LCX0135 Eq 1995 (077) ELT 0485 (S.C.) — Followed............... [Para 4]
DEPARTMENTAL CLARIFICATIONS QUOTED
C.B.E. & C. Circular No. 196/30/96-CX., dated 3-4-1996............................................. [Paras 4, 5]
C.B.E. & C. F. No. 103/1/88-CX. 3, dated 18-3-1988.......................................................... [Para 1]
Ministry’s Tariff Advice No. 27/74 vide F. No. 105/1/73-CX., dated 25-11-1974............. [Para 1]
REPRESENTED BY : Shri Ravinder Babu, JDR, for the Appellant.
Shri V. Lakshmikumaran, Advocate, for the Respondent.
[Order per : P.C. Jain, Vice President]. - In this appeal, we are faced with a question whether ‘Mahabhringaraj Hair Oil’ is to be classified as an ayurvedic medicine, as contended by the respondents herein or as a preparation for care of hair under Tariff Heading 14F under the old Tariff or preparations for use on the hair under Tariff Heading 33.05 under the new Tariff. The adjudicating authority has held that it is an ayurvedic medicine. The reasons given for reaching that finding are succinctly set out in CBEC’s order, dated 1st December, 1992 by which the Revenue seeks revision of the said adjudicating authority’s order :
(a) The product was manufactured as per the licence given by Commissioner, Food and Drugs, Maharashtra State for manufacture of Ayurvedic Medicine. Therefore, the product was basically in conformity with Ayurvedic Principles.
(b) As against the Deputy Chief Chemists report saying that the product had a pleasant odour, the notice have produced evidence in the form of a certificate of analysis from an independent Laboratory (M/s Ana Labs., Bombay) that it is free from any “Synthetic Smell” and has “natural odour” and had argued that vide Ministry’s Tariff Advice No. 27/74 vide F. No. 105/1/73-CX-Central Excise-3, dated 25-11-1974 it had been laid down that such natural odour would not make for a perfumed hair oil.
(c) The label on the bottle of the product clearly stated that it was useful for irritation in the eyes, insomnia, mental depression etc. also besides other details and it was recommended for use only at bed time. Therefore, the department had not been able to establish a preponderance of probability that the product was primarily for cosmetic use.
(d) Drug Controller, D.G.H.S., New Delhi had in the case of the product Ramtirath Brahmi Oil manufactured by a unit in the jurisdiction of Bombay-III Collectorate vide the U.O. No. X-11048/1/88-D, dated 24-2-1988 laid down five conditions, which would govern the decision as to why the said oil was classifiable as an Ayurvedic Medicine and not a cosmetic. All these conditions were satisfied in the instant case also and the Board had accepted this advice vide its F.No. 103/1/88-CX.3, dated 18-3-1988. On the basis of this the Collector of Central Excise, Bombay-II had classified a similar product under 3003.30.
(e) In another case, a similar product manufactured by a unit at Satara, had been classified under 3003.30 on the ground that they did not contain any perfume, added to them. The products covered under the above classification are (i) Brahmi Oil, (ii) Brahmi Amla Oil, (iii) Bhringaraj Oil, (iv) Maha-Bhringaraj Oil. Therefore, the established practice in Satara division of this Collectorate would also lead to the conclusion that the product in the instant case should also be similarly classified as an Ayurvedic Medicine under Chapter sub-heading no. 3003.30.
2. CBEC now feels that the aforesaid impugned order passed by the Collector is not correct for the following reasons :
(a) While dropping the proceedings, the Collector had failed to take note of the clarification received from various Collectorates regarding the classification of similar products manufactured by other units. A similar product viz. ‘Ayurvedic Maaka Oil’ manufactured by M/s. Prakash Trading Co. falling under the jurisdiction of Bombay-III Collectorate is classified under Chapter 3305.10 attracting duty at the rate of 25% ad valorem. M/s. Ajmera Pharmaceuticals, Indore are manufacturing a similar product viz. K.7 brand hair tonic, which is classified under heading 3305.90. M/s. Aphali Pharmaceuticals Ltd., Ahmednagar is manufacturing a similar product in the same name viz. ‘Mahabhringaraj Tel’ which is classified under 3305.90. Also M/s. Zandu Pharma are manufacturing similar products viz. Amla oil, Brahmi oil etc. which are classified under Chapter heading no. 3305.10. Without considering these facts, the Collector had accepted the version of the assessee on face value that the product was an Ayurvedic Medicine and had recorded a finding that the product was non-excisable.
(b) Collector had also failed to appreciate the report of the Deputy Chief Chemist. It is clear from the report that the product in question has a pleasant report that the product in question has a pleasant odour and contains synthetic organic colour and the finding of the report had been accepted by the assessee. It is, therefore, not correct to hold that the hair oil in question is manufactured in accordance with the recognised text book on Ayurveda.
(c) Collector had also failed to appreciate the scheme of classification adopted under H.S.N. even if hair oil in question has certain therapeutic and prophylactic properties, they would continue to be classified under Chapter heading 3305 for the following reasons :
(i) Chapter Note 1(d) to Chapter 30 excludes preparation of Chapter 33, even if they have therapeutic or prophylactic properties from the scope of Chapter 30;
(ii) Hair oil of the type, even though manufactured by using certain preparations which find place in Ayurveda, would be excluded from Heading no. 30.03 in terms of Chapter Note 2 to Chapter 30 which defines the term ‘Medicaments’ and since the hair oil of the type in question is not meant primarily for therapeutic or prophylactic use;
(iii) Chapter Note 2 to Chapter 33 clearly specifies that the product suitable for use as goods of these heading and put up with indications that they are for use as cosmetics or toilet preparations, are covered by heading 33.03 to 33.07, even if they contain subsidiary pharmaceutical or antiseptic constituents and are held out as having subsidiary curative or prophylactic value.
(d) In the present case, the product has pleasant odour as reported by Deputy Chief Chemist and is being sold and advertised as hair oil for the better growth, texture and colour of the hair, as seen from the paper label pasted on the bottle. It is, therefore, clear that the product is correctly classifiable under sub-heading 3305.10. In view of the above, Collector should not have dropped case the proceedings on the ground that the product in question was to be classified as an Ayurvedic medicine under Chapter sub-heading no. 3003.30, but should have confirmed the demand and upheld all other actions as proposed in the show cause notice.
Hence, this appeal before us.
3. Ld. JDR Sh. Ravinder Babu for the Revenue submits that the said preparation though no doubt containing ayurvedic ingredients and prepared in accordance with ayurvedic formula as given in authoritative text of ayurvedic cannot be treated as an ayurvedic medicine for the reason that synthetic organic green colour has been added to the said product. He submitted that the synthetic organic green colour can by no stretch of imagination be treated as an ayurvedic ingredient. He also submits that the diseases, namely, dandruff, insomnia, irritation of eyes, falling of hair, headache which are claimed to be treated by application of the hair oil in question are not really diseases in themselves. They are merely diseases imagined by a person. In other words, according to the Ld. JDR these are psychological diseases. It is also submitted by the Ld. JDR, the impugned hair oil is dispensed to any person without any prescription. It is available at any store as a common merchandise. Ld. JDR, therefore, submits that the product in question is like any other hair oil, as are available in the market and therefore, its correct classification would be under Tariff heading 14F(2) under the old Tariff and it will be in the Tariff heading 33.05 under the new Tariff. For Tariff Heading 33.05 Ld. JDR also takes support from Chapter Note 2 of Chapter 33 as also Chapter Note 1(d) of Chapter 30. Later Chapter, i.e., Chapter Note 1(d) excludes specifically the preparations falling under Chapter 33 and Chapter Note 2 of Chapter 33 specifically includes products suitable for use as goods of these Headings (i.e. Heading no. 33.03 to 33.07) and put up in packings, labels, literature or other indications that these are for use as cosmetics or toilet preparations or put up in a form clearly specialised to such use and includes products whether or not they contain subsidiary pharmaceutical or antiseptic constituents or are held out as having subsidiary curative or prophylactic value. Ld. JDR submits that Chapter Note 2 of Chapter 33 makes it clear that even if any goods falling under Tariff heading 33.03 to 33.07 have some pharmaceutical or medicinal qualities, they would still be classified under this Chapter so long as they are put up in packings with labels, literature or other indications that they are for use as cosmetics or toilet preparations. Ld. JDR submits that by virtue of the fact that they are available as a merchandise in every store, they can be used as cosmetic, soap or toilet preparation and therefore by virtue of this note. Tariff heading 33.05 will take precedence over Tariff heading 30.03. In order to substantiate this proposition, ld. JDR draws our attention to the label available in the Revenue’s appeal paper book on page 63. The said label is in Marathi and its English translation has been provided by the Ld. Advocate for the respondents, which is not disputed before us :
SHUDH MAKYACHE (MAHA BHRINGARAJ) OIL
Stops premature falling of hair and turns grey hair jet black.
Since the oil is made of invaluable ayurvedic herbal medicinal plants and fresh green maka and brahmi leaves, it stops falling hair and greying of hair immediately.
A head massage with the oil makes the hair silken, soft and jet-black.
Excellent for burning of eyes, restless sleep, dandruff and patches of baldness.
Oil with ayurvedic medicines.
Instruction : A good head massage 10 to 15 minutes before bed time at night ensures peaceful sleep.
Manufacturer : Ramakrishna Ayurvedic Pharmacy, survey No. 25/4, Bafna, Hingne (Khurd), Pune-51
400 ml. price Rs. 48 only - Local and other taxes extra
Batch No.
Date of Manufacture.
Ld. JDR places strong emphasis on use of the expression “a head massage with the oil makes the hair silken, soft and jet black”. He, therefore, submits that whatever be the medicinal qualities of the hair oil, they are in any case subsidiary because this is held out as a cosmetic to the general public to which it is sold. He, therefore, submits that the correct classification of the product would be under Tariff Item 14F(2) of the old Tariff and Tariff Heading 3305.10 as perfumed hair oils (preparations for use on the hair).
4. Opposing the contentions, ld. Advocate Sh. V. Lakshmikumaran for the respondent submits that it is for the first time that an arguments has been taken by the ld. JDR that the said product does not have any medicinal qualities, i.e., it does not treat the diseases as mentioned above. He submits that it was never the case of the Revenue right from the stage of the show cause notice. It is not the case, submits ld. Advocate, even in the Board’s order on the basis of which this appeal has been filed. Dealing with the other plea of the ld. JDR, Sh. V. Lakshmikumaran, Ld. Advocate submits that mere addition of green colour in the form of a synthetic organic dye does not rob the product of its character as an ayurvedic medicine. For this proposition, he relies on 1996 (083) ELT T 50-51 (CBEC Circular No. 196/30/96-CX, dated 3-4-1996). In this connection. para 3 & 4 of the Board’s circular are reproduced below :-
‘3. The matter has been examined. There is no dispute that the medicaments remain ayurvedic medicines and are sold as ayurvedic medicines under generic name as stated in the standard text books even if preservatives or binding agents etc. are added but the question is whether in view of the existing conditions specified under the notification the concessional rate of duty will be available or not. A view has been expressed that as long as the ingredients are added in the ayurvedic medicaments which do not have any therapeutic value and the formulation is otherwise prepared as per the prescribed text books, it may not be proper to deny the benefit of full exemption to such of those ayurvedic medicaments from excise duty under Notification No. 75/94-CE. In this context, the Ayurvedic, Siddha and Unani Drugs Technical Advisory Board under the Ministry of Health and Family Welfare were consulted, who has opined that significant changes have taken place in the process of making of ayurvedic medicines and preservatives, inner excipients like starch, lactose and willing agents like sodium laurele sulphate are now a days widely used. They are in favour of allowing use of preservatives by the manufacturers of ayurvedic medicines.
4. Having regard to the above, the Board is of the view the benefit of exemption under S. No. 3 of Notification No. 75/94-C.E should not be denied to ayurvedic medicines if they are manufactured in accordance with the formulae prescribed in the authoritative text books and sold under the generic name mentioned in the said authoritative text books but contain preservatives, inner excipients, binding agents etc. not having any therapeutic value. In such cases the assessing officers may obtain a certificate to be produced by the manufacturers from the appropriate Drug Authorities that the drug satisfies the following conditions :-
(a) The medicament has been prepared in accordance with the formulae prescribed in the authoritative text books; and
(b) The ingredients added, other than those prescribed in the authoritative text books, should not have any therapeutic value.
Needless to say that for availing the benefit of exemption, the ayurvedic medicament should be sold under the benefit of exemption, the ayurvedic medicament should be sold under the generic name as specified in the authoritative text books.’
Ld. Advocate submits that it is not the Revenue’s case that synthetic organic green colour which has been added to the product in any way has any therapeutic value. He, therefore, submits that the addition of green colour does not have any effect on the classification of the product as an ayurvedic medicine. As regards the plea on the basis of label, ld. Advocate submits that on the reading of the whole of the label as produced above, not doubt is left that it has been held out only as an ayurvedic medicine and not at all as a cosmetic. He submits that it has not been advertised that it is an ordinary hair oil. It also indicates, apart from making the hair silken, soft and jet black, that it treats a number of diseases such as irritation of eyes, restless sleep, dandruff and patches of baldness. It also like most of the medicines, give an instruction that how the product has to be used. It indicates that a good head massage 10-15 minutes before bedtime at night ensures peaceful sleep. Ld. Advocate, therefore, submits that on the basis of label it cannot be held that it is a hair oil. He points out that label itself does not say that it is a hair oil; it only says “Tel” (Oil). On the scope of Chapter Note 2 to Chapter 33, ld. Advocate places reliance on Supreme Court’s judgment in the case of BPL Pharmaceutical reported in 1995(05)LCX0135 Eq 1995 (077) ELT 0485 (S.C.)]. He places reliance on paras 31 and 35 of the above said order.
Another interesting argument taken by the Ld. Advocate is on the expression of tariff description in Tariff Heading 33.05. The description reads as - “Preparations for use on the hair”. He submits that the preparations which would fall under Tariff Heading 33.05 are meant for use on the hair and not on the scalp. He submits that a glance at the label relied upon by the Revenue, clearly indicates that it is used on the head, i.e., the scalp and not the hair. It is unlike an ordinary perfumed hair oil or normal hair oil, which are used only on the hair which are mentioned in Chapter Note 6 of Chapter 33 like brilliantines, perfumed hair oils, hair lotions, pomades and creams, hair dyes (in whatever form), shampoos, whether or not containing soap or organic surface active agents. The product in question is not indicated for use on the hair but on the scalp as a massage of the head and only by such a use that the results are expected. In the light of the aforesaid submissions, Ld. Advocate, therefore, submits Revenue’s appeal deserves to be dismissed. At this stage ld. Advocate has also drawn attention to the various admitted facts such as the respondents herein was having an Ayurvedic Drug Licence from the Food and Drugs Administration, Maharashtra.
5. We have carefully considered the pleas advanced from both sides. From the pleadings of the ld. JDR, it is clear that only two points have been taken by the Revenue to urge that the product is not an ayurvedic medicine - (i) addition of synthetic organic green colour, (ii) label of the product. As regards the first plea, we are inclined to agree with the submission of the ld. Advocate for the respondents basing his contention on the Circular of the CBEC as mentioned above. In the face of the Board’s Circular we cannot hold that addition of synthetic organic green colour will make any distinction to the classification of the product inasmuch as it is nobody’s case that the said synthetic organic green colour has any therapeutic value.
As regards the second contention based on the label of the product, we are again inclined to agree with the submission of the ld. Advocate that reading the label as a whole, it cannot be said that the product in any way is advertise (held-out) as cosmetic or as a preparation for use on the hair. Reading of the said label clearly indicates that it is an ayurvedic medicine. An English translation of the label has already been set out above. Reference to a message that the oil makes the hair silken, soft and jet-black, in any way, cannot take away the affect of other messages given in the label. The label, as rightly pointed out by the ld. Advocate for the respondents does not even say that it is a hair oil. It has been prominently said as pure Mahabringaraj Oil. We are, therefore, satisfied on the basis of the various legal propositions as settled by the Apex Court in the case of BPL Pharmaceutical that the product would be correctly classified under Tariff Heading 14E as Ayurvedic Medicine and is not to be classifiable under Tariff Heading 14F(2) under the old Tariff and 33.05 under the new Tariff. Under the new Tariff its proper classification would be under Tariff sub-heading 3003.30 (relevant Tariff). In short the appeal of Revenue is dismissed.
Equivalent 2000 (125) ELT 748 (Tribunal)