2000(08)LCX0138

IN THE CEGAT, COURT NO. III, NEW DELHI

S/Shri S.K. Bhatnagar, Vice President and S.L. Peeran, Member (J)

Third Member on Reference : Shri P.G. Chacko, Member (J)

Majority Order : S/Shri S.S. Kang, Member (J) and G.R. Sharma, Member (T)

BAKSON HOMOEO PHARMACY (P) LTD.

Versus

COLLECTOR OF C. EX., NEW DELHI

Final Order Nos. 373-375/2000-C and Misc. Order Nos. 237-239/98-C, dated 22-8-2000 in Appeals Nos. E/379, 3429 & E/3009/91-C

Cases Quoted

B.P.L. Pharmaceuticals Ltd. v. Collector — 1995(05)LCX0135 Eq 1995 (077) ELT 0485 (S.C.) — Relied on... [Paras 8, 24]

Collector v. Kesarvardhini Products — 1995(11)LCX0097 Eq 1996 (081) ELT 0527 (Tribunal) — Referred.......... [Para 25]

Collector v. M.G. Shahani & Co. — 1995(11)LCX0154 Eq 1995 (080) ELT 0905 (Tribunal) — Distinguished...... [Para 8]

Collector v. Pharmasia (P) Ltd. — 1994 (047) ELT 0658 (Tribunal) —Relied on ........ [Paras 12, 24]

Food Specialities Ltd. v. Collector — 1985(09)LCX0027 Eq 1985 (022) ELT 0324 (S.C.) — Referred....................... [Para 5]

L.V.T. Products v. Collector — 1997(03)LCX0058 Eq 1997 (093) ELT 0134 (Tribunal) — Referred.......................... [Para8]

MRF Ltd. v. Collector — 1996 (083) ELT A-178 (S.C.) — Referred..................................... [Para 24]

Ramtirath Yogasharam v. State of Maharashtra — 1968 (22) STC 76 — Relied on............ [Para 26]

Richardson Hindustan Ltd. v. Collector — 1988(02)LCX0055 Eq 1988 (035) ELT 0424 (Tribunal) — Referred...... [Para 2]

Shree Baidyanath Ayurved Bhavan Ltd. v. Commissioner — 1995(03)LCX0046 Eq 1996 (083) ELT 0492 (S.C.) — Distinguished [Para 25]

Sidhosons v. U.O.I. — 1986(10)LCX0069 Eq 1986 (026) ELT 0881 (S.C.) — Referred.............................................. [Para 8]

U.O.I. v. Cibatul Ltd. — 1985(09)LCX0020 Eq 1985 (022) ELT 0302 (S.C.) — Referred........................................... [Para 5]

Veto Company v. Collector — 1992(07)LCX0047 Eq 1992 (062) ELT 0584 (Tribunal) — Not relevant................. [Para 25]

REPRESENTED BY :    Shri V. Lakshmikumaran, Advocate, for the Appellant.

Shri A.K. Madan, SDR, for the Respondent.

[Order per : S.L. Peeran, Member (J)]. - In all these appeals common question of law and facts are involved, hence they are taken up together for disposal as per law. Appeal E/379/91-C arises from order-in-appeal dated 31-12-1990 passed by Collector of Central Excise, New Delhi. By this order he allowed the revenue’s appeal filed against the order-in-original and set aside the Asstt. Collector’s order holding that “Sunny Arnica Hair Oil” as a Homoeopathic medicine and is appropriately classifiable under Chapter heading 30.03 and in view of the finding arrived at by him approved the classification list filed by the party. The revenue grievance was that the product was admittedly declared and sold as hair oil and hence it fell under Chapter 33 of Central Excise Tariff Act. Reliance was also placed on Chapter Note 1(d) of Chapter 30 and Note 2 of Chapter 33 in support of the plea that the product in question has to fall under Tariff Heading 33.05. It was also submitted by Revenue before Collector that even if such preparations are having therapeutic or prophylactic values, it will still be classifiable under Chapter 33.

2. The assessee on the other hand submitted that they do not hold out their product to be a cosmetic. They had a drug licence in their favour. The Arnica hair oil cannot be said to be having subsidiary prophylactic or therapeutic value but it is pre-dominantly having such values. These are sold only at the drug stores and not in the cosmetics shops. Therefore, they contended that the provisions of Chapter Note 2 of Chapter 33 will not be applicable to this product. The trade parlance is also a relevant factor in deciding the classification and accordingly this will not fall under Chapter 33. They placed the reliance on the judgment rendered in the case of Richardson Hindustan Ltd. v. Collector of Central Excise, Hyderabad as reported in 1988 (035) ELT 424.

3. Ld. Collector held that the product is sold and purchased and also known in the market as Arnica hair oil and the same is accepted by the consumer as a hair oil and that there is no dispute about the fact that it is a preparation for use on the hair. Therefore, he held that the appropriate classification of the product will be under Tariff heading 33.05 of the Central Excise Tariff unless it is specifically excluded from its purview. He has held that the expression “preparations for use on the hair” is undoubtedly a broad description and as per Chapter Note 6 of Chapter 33, this heading applies inter-alia to the perfumed hair oil. He has further observed that it has been stipulated in Chapter Note 2 of Chapter 33 that Heading Nos. 33.03 to 33.07 apply inter-alia to products, whether or not mixed, suitable for use as goods of these headings and put up in packings with labels, literature of other indications that they are for use as cosmetics or toilet preparations or put up in a form clearly specialised to use and includes products whether or not they contain subsidiary pharmaceutical or anticeptic constituents, or which are held out as having subsidiary curative or prophylactic value. He has held that Arnica hair oil is basically a preparation for use on the hair and its ingredients are such that it helps growth of healthy hair, prevention against dandruffs, against premature greying of hair etc. He has held that from the different constituents of this product as disclosed by the assessee, he finds that apart from Arnica it has got other elements like Brahmi, Amla, Cantharis etc. He has held that it is a common experience that virtually all hair oils marketed and sold are having one or more of such ingredients and every one of them claims and advertises that the hair oil promotes growth of healthy hair, prevents premature greying or remove baldness etc. He has held that by such claims, the product essentially does not go out of the category of a hair in particular or out of the general heading of preparations for use on the hair. He has held that these ingredients are for imparting subsidiary prophylactic or curative properties to the product. Therefore, he held that they will still continue to remain within the scope of Tariff Heading 33.05. He has held that the manufacturer is possessing a drug manufacturing licence or that the product is sold only at the drug store will not make any material difference in so far as classification of the product is concerned and also rejected the plea of trade parlance raised by the assessee. He has observed that from Chapter Note 1(d) under Chapter 30 of the Central Excise Tariff it is noticed that this chapter does not cover inter alia preparations of Chapter 33 even if they have therapeutic and prophylactic properties. He has held that this also supports the view that the item in question will go out of the scope of Chapter 30. He has held that this view also finds support from the note below the Heading 33.05 of the HSN where it has been clearly mentioned therein that this heading will cover, inter-alia hair oils. Therefore, he has held that Arnica hair oil has to necessarily fall under Tariff Heading 33.05 unless it is specifically excluded from there.

4. Appeal No. E/3429/91-C arises from order-in-original No. 22/91, dated 19-7-1991 passed by Collector of Central Excise, New Delhi confirming the demand of Rs. 13,13,477.95 under Rule 9(2) of the Central Excise Rules, 1944 on the ground that M/s. Bakson Homeo Pharmacy have wilfully evaded Central Excise Duty and contravened the rules mentioned in the show cause notice. He has also imposed a penalty of Rs. one lakh under Rules 173Q, 9(2) and Rule 22 of the Central Excise Rules, 1944. This appeal also pertains to manufacture of “Sunny brand Arnica Hair Oil” and “Sunny brand Arnica Hair Shampoo”. In this case it was alleged that they manufactured and cleared the said goods without payment of Central Excise Duty in violation of provisions of Notification No. 140/83, dated 5-5-1983 as amended from time to time. It was alleged that they obtained Central Excise Licence for the manufacture of Sunny Arnica Hair Shampoo falling under Chapter sub-heading 3305.90 in the year 1987, but by mis-declaring the goods Arnica Hair oil manufactured by them in their classification list submitted to the department for homeopathic medicines under sub-heading 3303.30 attracting Nil rate of duty made it to appear as if they were entitled to the benefit of Notification No. 140/83, dated 5-5-1983. The period covered in this case is for clearances for the year 1984-85, 1985-86, 1986-87, 1987-88 and 1988-89. It was also alleged that during the year 1984-85 to 1988-89, they suppressed the fact of goods got manufactured on their own account under agreement from M/s. Bakson Laboratories and M/s. Neha Cosmetics. It was also alleged that during the year 1986-87, they had got the goods manufactured from M/s. Bakson Laboratories in their registered brand name under the contract and that the party had exceeded the duty free clearances of Rs. 5 lakhs in the month of June ‘86 and Rs. 15 lakhs in the month of Dec., 1986. The appellants had taken the plea that the items are Homeopathic medicine and seven ingredients of Sunny hair oil are covered under Homeopathic Pharmacopia of India (HPI) and that goods are manufactured under the Drugs Licence issued by the Drugs Controller and Licensing Authority, Delhi and therefore, they are to be classified as medicaments classifiable under sub-heading 3003.30 and chargeable to Nil rate of duty. In support of the defence they had produced the opinion of various Homeopathic consultants, inter alia stating that the goods are bought and sold as medicine in common parlance and trade practice. They also contested to the invokation of extended period beyond six months in terms of proviso to Section 11A on the ground that the department was well aware of the fact that they were engaged in the manufacturing of hair oil. In support they enclosed a letter dated 9-5-1985 of the Supdt. Central Excise MOR-VIII, MOD I, Rajendra Place, New Delhi and their reply to the letter date 1-6-1985. They also enclosed letter dated 1-7-1985 of Supdt. Central Excise having jurisdictional charge of the unit. They also pleaded that in February, 1988, they were issued show cause notice upon submission of classification list in November, 1987 of Arnica hair oil as medicament. The Asstt. Collector vide his order dated 22-9-1988 accepted their contentions by classifying the product as a homeopathic medicine. They had pleaded that since the department had not filed the appeal against the orders passed by the Asstt. Collector, the current show cause notice is bad in law. They also submitted that in the event of change of classification list, it cannot be given retrospective effect and can be applied prospectively only.

5. They also contended that all the three concerns are independent of each other. Mrs. Kulwant Kaur is the sole proprietor of M/s. Bakson Laboratories and Dr. Anil Baweja is the independent proprietor of M/s. Neha Cosmetics. There was a principal to principal relationship between the parties and they referred to Clauses 2, 7, 8 & 9 of the Agreement entered between the parties. They also relied on the several judgments rendered by Hon’ble Supreme Court and Tribunal in this regard as in the case of Union of India v. Cibatul Ltd. as reported in 1985(09)LCX0020 Eq 1985 (022) ELT 0302 (S.C.), M/s. Food Specialities Ltd. v. Union of India as reported in 1985(09)LCX0027 Eq 1985 (022) ELT 0324 (S.C.) etc. Ld. Collector in detailed order rejected the pleas in confirming the duty liability raised in the show cause notice.

6. Appeal No. E/3009/91 arises from order in original passed by Collector of Central Excise, New Delhi confirming the demand of Rs. 10,88,440.70 under Rule 9(2) of the Central Excise Rules, 1944 read with Section 11A of the Central Excises & Salt Act, 1944. He has also ordered for confiscation of seized goods valued at Rs.1428/- but has granted redemption on payment of fine of Rs. 200/-. He has also imposed a penalty of Rs. 50,000/- under Rules 173Q, 9(2) and 226 of the Central Excise Rules, 1944. This order has been confirmed by M/s. Bakson Laboratories on the allegation that they were manufacturing Arnica Hair Shampoo under the brand name of ‘Sunny’ for M/s. Bakson Homeopharmacy Pvt. Ltd. situated in the same premises as that of the party. It is stated that it was observed that the brand name ‘Sunny’ was the registered brand name of M/s. Bakson Homeopharmacy Pvt. Ltd. who are not entitled for benefits of exemption notification No. 140/83, dated 5-5-1983 as amended from time to time. It was also alleged that the clearances in respect of ‘Sunny’ brand hair oil and hair shampoo (which were classifiable under chapter heading 33.05) manufactured by them and on their account from other manufacturers in the preceding financial year and in the current financial year 1987-88 had exceeded the Rs. 15 lakhs clearance limit. The party had taken a contention that the goods had been manufactured and supplied on a principal to principal basis, that both the units are different entities and that M/s. Bakson Laboratories, being a new unit, and keen to establish itself in the market approached and M/s. BHPL to use ‘Sunny’ brand name owned by them. They cited clauses 2, 7, 8, 9 of their agreement with the second party in support of their defence which according to them proves that the relationship between the parties was on a principal to principal basis. They also denied the allegation that there was suppression of facts. They pleaded that they were holding a Central Excise licence that there is no requirement under the law to intimate to the department that an agreement existed between them and M/s. BHPL that there is no suppression with regard to the selling price because there is no law which states that the assessable value of such items would be the price at which such goods are supplied by the manufacturer/seller to their customers. The agreement entered into by them has been stated to be a legal agreement and the goods manufactured by them do not tentamount to manufacturing goods for on behalf of the customer. They pleaded that as there was no suppression on the their part and therefore the extended period beyond six months cannot be invoked. Ld. Principal Collector had decided the issue which on appeal to Tribunal was remanded for de novo consideration. On de novo consideration, the Principal Collector rejected their pleas and upheld the allegations made in the show cause notice and confirmed the duty amount.

In view of the issue being common in all the cases, the appeals were heard together for disposal as per law.

7. We have heard Shri V. Lakshmikumaran, ld. Advocate for the appellants and Shri A.K. Madan, ld. SDR, for the revenue.

8. Ld. Advocate submits that a similar issue has been decided by Hon’ble Supreme Court in the case of M/s. B.P.L. Pharmaceuticals Ltd. v. Collector of Central Excise, Vadodara as reported in 1995 (077) ELT 485 wherein also the Tribunal had held that the hair oil is required to be classified under heading 33.05 as preparations for use on the hair while the assessee had contended that the said preparations had got therapeutic or prophylactic use and they are required to be considered only as medicament under heading 3003. Hon’ble Supreme Court accepted the plea of the assessee and allowed by setting aside the Tribunal’s order. It is his contention that the Collector had taken the same view, as adopted by the Tribunal which now has been set aside by the Supreme Court judgment. It is his submission that the oil is merely a media for treatment of dandruff which causes skin disease and ingredients in the products are homeopathic in nature. It is his submission that the manufacture of the items are in terms of Homeopathic Pharmacopia of India and it has been manufactured under the Drug Licence and under the guidance of homeopathic experts in terms of the homeopathic science. He points out to the certificate issued by Homeopaths certifying its effective use for curing dandruff and for loss of hair. They have also certified that the item is a homeopathic medicine. He also submits that the manufacturers were independently carrying out the business and the relationship was principal to principal, therefore, the question of clubbing the clearances does not arise. In this regard, he relied on the following judgments :

1.       M/s. Sidhosons & Another etc. etc. v. Union of India & Others etc. etc., 1986 (026) ELT 881

2.       Collector of Central Excise, New Delhi v. M.G. Shahani & Co., 1995 (080) ELT 905

3.       M/s. L.V.T. Products Ltd. v. Collector of Central Excise, Belgaum, 1997 (093) ELT 134.

He submits that all the three units are independent entities and there is no flow back of financial interest between them and as such the question of clubbing up clearances does not arise. He further submits that merely because some pharmacopieal ingredients are added in the oil that by itself does not make it or preparation of a perfumed oil. He submits that addition of perfumary ingredients does not decide the item to be a medicine or not. It is his submission that even the item shampoo is not a preparation for use on hair but it is meant to wash of the dandruff as a cure for skin disease. Therefore, Hon’ble Supreme Court has held that the shampoo is required to be considered as a medicament. He points out that all the ingredients are all exclusively homeopathic in nature therefore, it satisfies the terms exclusively appearing in sub-heading 3003.20.

9. Ld. DR arguing for the revenue reiterates the findings given by the Collector and stated that the item is only a preparation for use as a hair oil and nothing beyond that. It is not a homeopathic medicine and the party himself is claiming it so in the advertisements. He also pointed out that party had made a false claim in the advertisement that the item helps in growth of the hair in bald people which is scientifically impossible. He pointed out that they are using “Black Heena”, which gives the colour to the hair but does not prevent the hair from greying. Therefore, the claim that it is a homeopathic medicine for cure of dandruff is belied and there is no basis for their claim. He submits that the item is not an “exclusively” homeopathic item and that the same is not prepared in terms of Homeopathic Pharmacopia of India and the evidence is not sufficient to establish the fact of the item being a medicament so also taking a drug licence.

10. On a careful consideration of the submissions made by both the sides, it is seen that in Appeal E/379/93-C the Asstt. Collector had approved the classification under heading 3003.30 as homeopathic medicine. The department being aggrieved with the said classification filed before the Collector, who on review by his order held the item Arnica Hair Oil as classifiable under heading 33.05. In Appeal 3429/91 pertaining to Bakson Homeo Pharmacy, the classification pertains to Arnica Hair Oil and Arnica Shampoo pertaining to the period 1984-85 to 1988-89 (upto June, 1988). The classification pertains to old tariff and new tariff, the department has classified both the items under TI 14F (for the period prior to March, 1986). In this appeal also it is claimed that both the items are not classifiable under the headings suggested by the department but as the items are homeopathic medicine used for curing and preventing disease as dandruff, falling of hair and dryness and, as such, the ingredients used in manufacture as found in the official Homeopathic Pharmacopia of India and under Drug Licence and hence their classification is more appropriately to be under sub-heading 3003.30 in respect of new tariff and under TI 14F of old tariff. In Appeal 3009/91-C, the items are also the same and it pertains to the clearances of 1986-87 and also of clubbing up of clearances of all the three units.

11. The first issue is pertaining to the item being an exclusively Homeopathic medicine or not for classifying the same under TI 14F of the erstwhile tariff and under sub-heading 3003.30 as claimed by the appellants or under TI 14F of the erstwhile tariff and under heading 33.05 of the new tariff as claimed by Revenue. The department has basically proceeded on the basis that the item is a preparation for use on hair and in this context they relied on Note 1(d) of Chapter 30 which excludes preparation of Chapter 33 even they have therapeutic or prophylactic properties. It is the contention of the appellants that the item is a medicament in terms of Note 2 of Chapter 30 and as all the ingredients are used are natural substances and find place in the Homeopathic Pharmacopia of India and it has been certified to have curative and prophylactic properties for skin disease, therefore, they are required to be classified under TI 14F of erstwhile tariff as a medicament and under sub-heading 3003.30 of new tariff. In this regard reliance has been placed on technical literature as well as certificates issued by the Homeopaths & Drug Licence.

12. We notice from the record that the appellants have produced certificates from Dr. Anil Kumar Sharma, B.Sc., D.H.M.S.(DLI). Ex-Senior Physician, Nehru Homeopathic Medical College & Hospital, New Delhi, Examiner : Board of Homeopathic System of Medicine, Delhi and Treasure of All India Homeopathic Research Foundation, New Delhi who has certified that Arnica Hair Oil (Sunny) manufactured by M/s. Bakson Homeo Pharmacy is prescribed by him to his patient and it has been found to have effect in combact dandruff and in preventing loss of hair. On the same lines, the certificate has been issued by Dr. R.S. Ghai, D.H.M.S., M.H.M. Homeopathic Physician, Specialist in Chronic & Female Diseases, Life Member of Homeopathic Medical Association of India. Another certificate has been issued by Dr. (MS) J.K. Narula, D.H.M.S. (DLI). There is another certificate issued by Dr. Wadhwa R.P., D.H.M.S., Homeopathic Consultant. The appellants have given the details of the ingredients in their appeal memo in respect of Arnica Hair Oil. The same is reproduced :

“Arnica Hair Oil is a homoeopathic medicament used to cure and prevent falling of hair, dandruff, premature greying and dryness. Arnica Hair Oil has actual extracts of Arnica, Jaboraodi, Cantharis, China, Amla, Sandalwood, Bhringray and other herbs in a base of vegetable oil.

Arnica Hair Oil has the following ingredients :

The base is double refined vegetable oil. The individual properties of the above ingredients are described herein below :

1. ARNICA MONTANA (Official in HPI)

(a) Root Extract as hair tonic pg. 28

Ref. Reconomic Plants of India

V.S. Agarwal

(b) Stimulates scalp pg. 77

Ref. Materia Medica “Boaricks”

(c) Local stimulant, antiseptic, antiphlogistic action, for dermatological diseases.

pg. 430

Ref. The Wealth of India-Raw Materials Vol. 1A Revised edition 1985

2. JABORANOI (Official in HPI)

Alkaloid pilocarpine for treatment of baldness.

Res : Roia, F.C. Jr.

Use of Plants in hair and scalp preparations

Econ. Bot. 20(1): 17-30-1986

3. CANTHARIS (Official in HPI)

(a) It is used in hair tonic preparations

pg.249

A text book of Pharmacognesy by Shah & Quantry

(b) Preparations of Cantharidine used in hair lotion for hair rebefacient action Martindale’s extra Pharmacopoeia - pg. 1989.

4. CHINE (Official in HPI)

(a) Cinchons Extract prepared from dried bark of stem & root, used for the treatment of baldness & acts as an anti dandruff asent.

Ref. : Roia; C.C. Jr.

use of plants in hair and scalp preparation,

Econ Bot, 20(1) : 17-30-1986

5. AMLA (Official in HPI)

Extract of whole plant used as a hair tonic and cooling agent.

Ref: Indian Materia Medica Vol. Ist

6. SANDAL WOOD (Official in HPI)

Refereshes and excellent subtle perfume

7. BHRINGRAJ

Whole plant Extract.

(a) Good for hair and skin. It is believed that the herb taken internally and applied externally will not only promote hair growth but also restore grey hair to the original colour

Ref: Satish Chandra

Auart 3, Crude Drug

Res. 9(4): 1461, 1969

8. NEEM (Official in HPI)

Essential Oil used as a hair tonic

Ref : Martindale the extra pharmacopeia

pg. 317

9. HEENA

Its action is to coat the hair follicles temporarily. Acts as a conditioner to thicken the hair follicles and give more body and lustre to the hair.

Ref: Meer C. Gotanicals for drige & cosmetics.

Drug and Cosmetic

131 (1) : 36-38.40 1962

10. BRAHMI (Official in HP!)

Extract of the whole plant helps in stimulating hair growth and functions as an antiseptic and antidandruff agent.

Ref : Indian Materia Medica Vol. 1st. pg. 662.

The definition of “Homeopathy” in Dictionary of Nursing at page 228 states that

“HOMEOPATHY (Homoeopathy) (hoh-mi-op-a-thi) n. a system of medicine based on the theory that ‘like cures like’. The patient is treated with extremely small quantities of drugs that are themselves capable of producing symptoms of his particular disease. The system was founded by Samuel Hahnemann (1755-1843). See also alternative medicine - homeopathist n.”

The definition of homeopathy appearing in Family Health & Medical Guide at pages 366 to 367 is also reproduced below :

“Homeopathy - A system of medical treatment based on the principle that “like (in small does) cures like”.

“Homeopathy was introduced in Europe at the beginning of the 19th century by a German Physician. Samuel Hahnemann (1755-1843). Its basic tenet quoted as “similia similibus curentur,” was that the cure of a disease could be effected by very small amounts of a drug capable in a larger doses of producing, in a healthy subject, symptoms similar to those of the disease to be treated.

Dr. Hahnemann’s original treatise. “Organon” (1796), provoked considerable controversy. It obtained that this type of therapy had been recommended by Hippocrates, its principles were contrary to those of its day. Minute does were recommended, the agent being distilled and diluted until its final concentration might be less than a millionth part of the solution. Only a single drug was to be given at a time and many current practices were forbidden.

“Homeopathy” wrote Hahnemann, “sheds not a drop of blood, administers no emetics, purgatives or laxatives.......and applies no mustard plasters”.

At the time, leeches were being applied by orthodox doctors in cases of pneumonia, massive doses of opium were given to children, mercury was used as a teething powder and many other bizarre remedies - now known to be highly toxic - were prescribed by the most respected physicians.

In that context, it can be seen how the revolutionary philosophy of homeopathy as a purification of attitudes managed to attract its devotees. Hospitals for homeopathic treatment were established in Leipzig. Vienna and London.

The remedies have not, however, stood the test of modern scientific pharmacology. Some, like iodine for goiter, are established orthodox treatments today. But many others are regarded by majority of the medical profession as pointless”.

The definition of Homoeopathy given in the Oxford Companion to Medicine at page 417 is also noted below :

“Homoeopathy. The founder of homoeopathy was a German physician Samuel (Thristian Friedrich “Hahnemann (1755-1843) who stated the principle similia similibus curantur (‘like is cured by like’) although this phrase had been used by “Paraeelsus in 1658. First, various single drugs (not mixtures) are proved’, that is they are given to normal persons and the symptoms produced are noted. The remedy for that symptom in a patient is a very small dose of the drug in question. Moreover, it is held that the smaller the dose, the greater the effect. This may seem strange when in the highest “potencies’ the patient may not receive a single molecule of the drug, but as Hahnemann himself said’.......only by the spiritual operation of medicines can health be restored’. There is no doubt that the first beneficial effect of Hahnemann’s work was to save patients from the gross over prescribing then prevalent.

There are different sects of homoeopathies; some adhere strictly to the founder’s principles, while others allow ordinary doses of drugs in certain circumstances. Homoeopathy is more popular in continental Europe and the USA than in the U.K. As C.E. Wheeler in his book The Case for Homoeopathy has said, the medical profession ‘regards Homoeopathy as a poor relation, eccentric and embarrassing, but still lover by some of the best people’. He also stated that after 200 years ‘Homoeopathy is left, like Mahomel’s coffin, between the heaven of general acceptance and the earth of final confutation’.

Homoeopathic treatment can be obtained under the National Health Service if the practitioner works in that Service. One centre of British homoeopathy is the Royal London Homoeopathic Hospital; this and other centres in the UK organize regular courses for general practitioners. However, no sound scientific evidence has yet emerged to validate the efficacy of this system of treatment about which most doctors remain seeptical.

Bone-setting goes back to the mists of history. There have always been practitioners who have learnt the various ways of reducing dislocations of different joints, and the value of “manipulation in breaking down ‘adhesions’ which occur after certain types of injury. A noted bone-setter of modern times was Herbert Arkinson Barker (1869-1950), who preferred to describe himself as a manipulative surgeon. He was undoubtedly skilled and acquired large practice. In 1911 the name of his anaesthetist, Dr. F.W. Axham, was erased from the Medical Register for working with an unqualified practitioner. The event moved public opinion strongly in favour not only of Harker and Axham, but of the former’s methods, and in 1922 Barker was knighted. (On 23rd July, 1936 he demonstrated his methods on 18 patients to over 100 members of the British Orthopaedic Association at “St. Thomas’s Hospital. It is of interest that in only one case was the treatment different from standard orthopaedic practice. As Barker said, “I cannot tell you exactly what I do, I just do it”.

Osteopathy is a descendant of bone-setting and was founded by an American, Andrew Taylor Still (1828-1917) in 1874. The basic principle is that ‘the living body is a vital machine that will make the remedies necessary to protest itself against disease, so long as it is in correct mechanical adjustment’. Most disorders are held to be due to small dislocations of the spine, which result in pressure on ‘nerves’ or blood vessels. The treatment is largely manipulative, sometimes supplemented by other measures”.

In terms of the definition of the term Homoeopathy, it is claimed by the appellant that the ingredients used by them in the manufacture of Arnica hair oil, are nothing but medicament and their references are found in the respective books and in the Homoeopathic Pharmacopia of India. It is their contention that these ingredients are manufactured under the Drug Licence issued by the Drug Controller and it is a product which has been mixed together for therapeutic and prophylactic use and they satisfy with the definition of medicaments.

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 substances and their reference has been found in Homoeopathic Pharmacopia of India. The manufacturers have obtained drug licence and the use of the Hair oil, as a medicament, has been recommended by the Homeopaths. The appellants have shown that the ingredients are homoeopathic in nature and having therapeutic and prophylactic. Therefore, their contention cannot be rejected in the light of the evidence produced. In the case of B.P.L. Pharmaceuticals Ltd. the question of classification of “Selsun”, an anti-dandruff preparation containing 2.5% selenium sulfide with therapeutic limit permissible as per pharmacopoeia came up for consideration before the Tribunal. The Tribunal rejected the plea of the appellants for classifying the goods under Chapter 30 as medicament and under erstwhile tariff 14E. However, Hon’ble Supreme Court on due consideration of the entire literature found that the item is used only by Registered Medical Practitioners or in a Hospital or in a Laboratory. The literature indicated that Selsun effectively controls Dandruff and clears scalp and seborrhea and thereby controls Acne, otitis externa and Bleph-aritis. It was also found that ‘Selsun’ is an effective and safe treatment for the disease Tinea Versicolor and Pityriasis Versicolour which are infection of the skin and appears frequently on the trunk, neck, face and prominal portions of the arms and legs. The literature also informed physicians of the results of various studies relating to the effectiveness of ‘Selsun’ for curing the above diseases. The literature stated that, if neglected. Dandruff can lead to itching, scaling, falling of hair, acne and blepharitis. Hon’ble Supreme Court considering this literature as well as the Chapter Note 2 to Chapters 30, 33 & 34 held that in order to attract Chapter Note 2 to Chapter 33, the product must first be a cosmetic, that the product should be suitable for use as goods of headings 33.03 to 33.08 and they must be put up in packings with labels, literature or other indications showing that are for use as cosmetics or toilet preparations. Hon’ble Supreme Court found that case none of the requirements were fulfilled. Therefore, Hon’ble Supreme Court held that Note 2 to Chapter 33 is not attracted. Again it has been held that the product contains 2.5% w/v of Selenium Sulfide, which has only curative or prophylactic value. Hon’ble Supreme Court held that this is a main ingredient and is the only active ingredient. After a detailed consideration of the matter, Hon’ble Supreme Court negatived the classification of the item under chapter 33 and held to be classifiable under sub-heading 3003.19 as a medicament. Hon’ble Supreme Court held that while examining the definition of the term “cosmetic and drug” the broad classification of the same cannot be ignored and held that the product in question is not intended for cleansing, beautifying, promoting attractiveness or altering the appearance. On the other hand, it is intended to cure certain disease as mentioned. The item included for the purpose of classification was “Selsun shampoo”. In the present case, we are concerned with Arnica Hair Oil, which is claimed to be medicament in terms of the ingredients having necessary antiseptic, antiphlogistic action for dermatological diseases. It is also used for treatment of baldness and acts as an anti-dandruff agent and as cooling agent. In view of each of the ingredients having one or the other therapeutic or prophylectic functions in terms of homoeopathic science, therefore, it has to be held that the Arnica Hair Oil is not a cosmetic preparation or for use on hair under sub-heading 3505.90 of the Central Excise Tariff, as they are not intended for cleansing, beautifying, promoting attractiveness or altering appearance in terms of the Hon’ble Supreme Court judgment in the case of B.P.L. Pharmaceuticals Ltd. but they are meant for specific treatment for dandruff of other skin and hair problem. Therefore, the appellant’s contention for treatment as a medicament having homoeopathic ingredients and considered as homoeopathic medicine is required to be accepted for classification under TI 14E of erstwhile tariff and under sub-heading 3003.30 of the new tariff. The appellants claim for classification of Arnica hair oil as a homoeopathic medicine is also supported by the judgment rendered by three member bench in the case of Collector of Central Excise v. Pharmasia (P) Ltd. as reported in 1990 (047) ELT 658 which held that the item ‘Mediker’ is a anti-lice treatment classifiable under heading 30.03 of Central Excise Tariff Act, 1985 as a treatment of lice. In that view of the matter the appellants succeed on the aspect of classification pertaining to Arnica hair oil which carries nil rate of duty.

13. The demands raised on Arnica Hair Oil, is also time barred, as all the details had been declared and the classification list had been approved from time to time and that there is no suppression of facts with an intent to evade duty.

14. As regards classification of “Arnica shampoo”, it is the claim of the appellants that Arnica shampoo is also a homoeopathic medicine and not a preparation for use on hair or a cosmetic properations. However, we notice that the appellants have not disclosed the ingredients of this item anywhere either in response to the show cause notice; in their reply or in appeal memo before Collector (Appeals) or in appeal memo in the present appeals or in the written submissions filed at the time of hearing. We have carefully checked all the three appeals files page to page and nowhere we find the appellants disclosing the ingredients of “Arnica Shampoo” nor any evidence of any sort that it is a homoeopathic medicine. The drug licence produced pertains to “Sunny Homoeo Dental Care or Sunny Arnica Hair Oil”. The letters from the various homoeopaths are all pertaining to Arnica Hair Oil. Hence it is not possible to come to a conclusion that the item Arnica shampoo is a medicament in terms of the Hon’ble Supreme Court judgment rendered in the case of B.P.L. Pharmaceuticals Ltd. The Hon’ble Supreme Court noticed the main ingredient was Selenium Di Sulfide. The Hon’ble Supreme Court considered the evidence pertaining to this ingredient to come to the conclusion that the item is not a cosmetic but anti-dandruff preparation having full therapeutic limit permissible as per pharmacopoeia manufactured under Drug Licence. In this item there is no averment of use of Selenium Di Sulfide, and hence, this judgment of Hon’ble Supreme Court is clearly distinguishable. We also notice that even the lower authorities have not examined the ingredients of Arnica Shampoo to reject their claim. Therefore, the aspect pertaining to classification of “Arnica Shampoo” is required to be remanded to the original authorities for de novo consideration. The appellants shall disclose the evidence including the details of its preparation and other technical details to support their claim. The authorities shall redetermine the question of classification and also the aspect pertaining to demands on this item being time barred. The present findings pertains to only “Arnica Hair Oil”.

15. In view of the classification having been held in their favour, the question of clubbing of the clearances of three units does not arise. However, we have examined the issue also. It has been held time and again by the Tribunal that there has to be financial flow back or the units should be dummy ones. We do not notice such a situation in the present case. All these three units are admittedly owned by different persons and the manufacturer of the items are on the basis of principal to principal and hence the question of clubbing the clearances cannot be done in terms of the judgment rendered in the case of M.G. Shahani & Co. (supra), which has referred to previous judgment of the Supreme Court as rendered in the case of Union of India v. Plyworld Electronics Pvt. Ltd. as reported in 1989 (041) ELT 368.

16. In that view of the matter, the appellants succeed in these appeals and impugned orders are set aside and appeals are allowed in so far as “Arnica Hair Oil” is concerned and as regards, the item “Arnica Shampoo”, the matter is remanded for de novo consideration in the light of the findings noted supra.

17. [Dissent per : S.K. Bhatnagar, Vice President]. - With due respect to be the Honourable Member (Judicial), my views and orders are as follows :-

17.1. I observe that in this case, the basic dispute relates to classification of Arnica Hair Oil and Shampoo. In so far as Arnica Shampoo is concerned, I entirely agree with the learned Member (J) and in view of the observations made in the earlier paragraphs, the matter is required to be remanded to the Assistant Commissioner.

17.2. In so far as the Arnica Hair Oil is concerned, I find that there is no doubt or dispute that Arnica is a well-known homoeopathic medicine by itself, mentioned in the Homoeopathic Pharmacopoeia for treatment and cure of ailments.

17.3. There is also no doubt or dispute that the product in question is Hair Oil. In fact, the very name and description of the product under which it is being marketed itself shows that it is a Hair Oil of which Arnica is one of the main ingredients. I also observe that Homoeopathy is a well-known system of medicine and I consider that for the purpose of this case, it is not necessary to examine as to what constitutes homoeopathy and who discovered it and what are its principles and uses except to a very limited extent to find out as to whether the product in question can be considered as a Homoeopathic Medicine. In this connection, I find that as well-known Homoeopathic Items are also used as ingredients, it is not surprising if the Drug Control Authorities required a licence under their provisions and for the same reason, some Homoeopaths also prescribed them in certain conditions or circumstances. What is important from our point of view is the language of the rival tariff headings and the Chapter Notes of the rival Chapters which we are concerned. Thus in order to classify the goods in question under Chapter Heading:3003.20, it is necessary inter alia to show and see that it is ‘a medicament used in Homoeopathic System’ whereas for classification under 30.05, it must be ‘a preparation for use on the hair’ and therefore, in cases where a preparation or the product in question has both prophylactic or therapeutic properties and is also (simultaneously) a preparation for use on the hair, merely showing that it has some prophylactic or therapeutic properties and is being also prescribed by some doctors or that it was a preparation for use of the hair because this by itself does not resolve the problem. Whether the product in question is being sold from this shop or that shop also does not matter because these days, many shops sell both cosmetics as well as medicaments. There are many hair oils which are preparations made according to the ayurvedic formula, which are available on all sorts of shops including those dealing with cosmetics and at the same time they are also being prescribed by Vaidyas. The same is true of homoeopathic as well as other modern preparations. The doctors or Vaidyas may prescribe them because of their medicinal content or effect and the general public may purchase them because these are basically hair oils in the nature of preparation for use on the hair. In this type of situation, the problem is rather ticklish and in my opinion, one has to go by pre-ponderance of evidence collected with reference to the criteria prescribed in the Chapter Notes and the Rules for interpretation of the Tariff. In this respect, the Chapter Notes 2, 4 and 6 of Chapter 33 are very important and are required to be kept in view. In this connection, I find that sufficient material has not been produced before us. There is no report of any market-enquiry. There is also no discussion as to what is the effect of incorporation of traditional ancient Indian ingredients (including those prescribed in Ayurvedas and used in Ayurvedic preparations along with Arnica in the hair oil in question). This is an important aspect, but has not engaged attention of the lower authorities as well as Bench during the hearing at the Tribunal stage. In view of this position, I consider that the issue relating to hair oil may also be remanded for being considered along with that of Arnica Shampoo.

17.4. The other questions which have arisen relate to and depend upon the basic decision regarding classification, which is at the root of the matter and therefore, it may be premature to make any observation with reference to them.

17.5. I, therefore, consider that the entire case has to be remanded to the Assistant Collector for de novo consideration in accordance with law.

17.6. I may mention at this stage that the Supreme Court judgment (supra) is specific to the product. In view of the nature of the items and the Tariff Entries, it is, in my opinion, not appropriate to generalise or to draw ratios where Orders and Judgments are with reference to the special features of a particular product or situation. In fact, in view of the contents of the rival Chapters, there are always cases where the evidence tilts the scale in favour of the classification under one or the other and therefore, we have to deal with each case on its own merits.

POINT OF DIFFERENCE

In view of the difference of opinion between Hon’ble Member Judicial and the Vice President, the matter is submitted to the President for reference to a Third Member on the following point :

“Whether in view of the findings of the Hon’ble Member Judicial the impugned orders are required to be set aside and the appeals are required to be allowed in so far as “Arnica Hair Oil” are concerned and the matter is required to be remanded in respect of “Arnica Shampoo” or the entire case as regards both the items is required to be remanded in view of the observations and findings of the Vice President.”

19. [Order per : P.G. Chacko, Member (J)]. - Third Member on Reference, agreering with Member (J)] - I have carefully examined the records. The dispute in appeal No. E/379/91-C is one of classification simpliciter. The appellants wanted to classify their product “Arnica Hair Oil” as Homoeopathic medicament under Chapter Sub-Heading 3003.30 of the Schedule to the Central Excise Tariff Act, while the department required it to be classified as “other preparations for use on the hair” under Chapter Sub-Heading 3305.90 of the said Schedule. The Assistant Collector adjudicated the dispute in favour of the assessees. The Collector (Appeals) allowed the appeal filed by the Department by holding the product to be classifiable under Chapter Heading 33.05.

20. In appeal No. E/3429/91-C filed by the same assessees, the main dispute is on the classification [under both old and new Tariffs] of their two products, viz. “Arnica Hair Oil” and “Arnica Shampoo”. Department classified both the products under TI No. 14F (for the period prior to March, 1986) and Chapter Heading No. 33.05 (for the period from March, 1986) and demanded duty on the clearances of the period 1984-85 to 1988-89 by invoking the proviso to Section 11A of the Central Excises & Salt Act. The Collector of Central Excise, who adjudicated the matter, confirmed the demand and imposed penalty on the party after holding the products to be classifiable under Chapter Heading 33.05. The appeal is against the order of the Collector.

21. Appeal No. E/3009/91-C is by another party who, under an agreement with the above assessees, had manufactured and sold to them “Arnica Shampoo” affixed with the buyer’s brand name. Department sought to deny the benefit of Exemption Notification 140/83-C.E., dated 5-5-1983 (as amended) by clubbing the clearances of the appellants and the buyer on the basis of alleged facts and raised a demand of duty on the appellants. The party contested the matter and the Collector, as adjudicating authority, confirmed the demand of duty against the former. The appeal is against the Collector’s order.

22. I have perused the orders recorded by learned Member (Judicial) and learned Vice-President. I have also heard learned Counsel for the appellants Shri V. Lakshmi Kumaran and learned SDR, Shri H.K. Jain who have reiterated their respective submissions made before the regular Bench. The submissions, having been recorded in the order of learned Member (Judicial), need not be re-stated.

23. The principal issue is whether “Arnica Hair Oil” and “Arnica Hair Shampoo” are to be classified as ‘homeopathic medicaments’ under erstwhile Tariff Item 14F and Chapter Sub-Heading 3003.30 of the new Tariff as claimed by the appellants or as (cosmetic) ‘preparations for use on the hair’ under TI-14F of old Tariff and Chapter Heading 33.05 of the new Tariff as claimed by the Department.

24. The appellants’ contention is that the hair oil contains ingredients with therapeutic/prophylatic properties mentioned in the Homeopathic Pharmacopoeia of India; that on account of such properties the item is used for treatment/prevention of various skin diseases; that the item has been manufactured under Drug Licence; that it is marketed through medical shops only and that the hair oil is a “medicament” in terms of Chapter Note (2) to Chapter 30 of the Central Excise Tariff. Technical literature and certificates from Homoeopathic experts are available on record to substantiate the facts pleaded by the appellants. In their memo of appeal, the appellants have mentioned the names, uses etc. of the various ingredients of the hair oil. On a careful examination of all these materials on record (the authenticity of which is not challenged) I am inclined to accept the product viz. Arnica Hair Oil as a homeopathic medicament classifiable under Tariff Item 14F/Chapter Sub-Heading 3003.30. I have also found that the product did not satisfy the requirements of Chapter Note (2) to Chapter 33 of the Central Excise Tariff. Learned SDR’s arguments in this connection are not supported by the facts and evidence on record. He has not been able to disprove the appellants’ case that therapeutic/prophylatic function of the product is its dominant function and not subsidiary to its cosmetic function. On the other hand the appellants’ case is one which stands proved substantially by the facts and evidence on record. They have also successfully drawn support from the Tribunal’s decision in CCE v. Pharmasia (P) Limited [1994 (047) ELT 0658 (T)] as aptly noted by learned Member (Judicial). I have taken note of learned Advocate’s submission, in this connection that the Department’s appeal against the Tribunal’s decision in Pharmasia’s case was dismissed by the Supreme Court vide 1996 (083) ELT A-178. The reliance placed by the appellants on the apex court’s decision in B.P.L. Pharmaceuticals Ltd. v. CCE [1995(05)LCX0135 Eq 1995 (077) ELT 0485 (S.C.)] in support of their claim for classifying the hair oil under Chapter Heading 30.03 of the Tariff has further strengthened their case. Learned Member (Judicial) has also examined this aspect elaborately. I agree with his findings.

25. I have also noted the case law cited by learned SDR. In the case of Shree Baidyanath Ayurved Bhavan Limited v. C.C.E. [1995(03)LCX0046 Eq 1996 (083) ELT 0492 (S.C.)], Supreme Court held that Dant Manjan Lal (tooth powder) was not classifiable as medicine (Ayurved). The apex court upheld the Tribunal’s finding, based on popular parlance test that the tooth powder (used by the common men daily to clean his teeth) was a toilet preparation and not a medicinal preparation. The hair oil under consideration in the instant case has not been shown (by the Revenue) to be a product used by the common man for routine toilet purposes and not one used as medicament. The Apex Court’s decision, therefore, does not advance the Revenue’s case. In Veto Company v. C.C.E. [1992(07)LCX0047 Eq 1992 (062) ELT 0584 (T)] cited by learned SDR, the Tribunal applied the trade parlance test and held that the appellants’ product marketed as “perfumed hair oil” was classifiable as such under erstwhile Tariff Item 14F(ii)(b) and not as a concentrate or compound under Tariff Item 68. The Tribunal so held after finding that certain essential oils had been deliberately added to the product to impart perfume and that the appellants themselves had held out the product as “perfumed” hair oil. The decision is not found to be applicable to the present appellants’ case inasmuch as there is no evidence of deliberate addition of any perfume to their product or of the manufacturers having held out the product in market as “perfumed” hair oil. In CCE v. Kesavardhini Products [1995(11)LCX0097 Eq 1996 (081) ELT 0527 (T)] cited by learned SDR, the earlier decision in Veto Company was followed. My observations on the applicability of the ratio of the decision in Veto Company to the instant case would equally apply to Kesavardhini Products.

26. Learned SDR has submitted that Arnica Hair Oil is a perfumed hair oil and must, therefore, belong to Chapter Heading 33.05 in terms of Chapter Note (6) to Chapter 33 of the Tariff. Learned Advocate has, in his rejoinder, countered this contention by submitting that the Department has not shown that any perfume was deliberately added to the product to make it a “perfumed” hair oil. He has also drawn support from the Bombay High Court’s decision in Ramtirth Yogashram v. State of Maharashtra [1968 (22) STC 76] wherein it was observed that the expression perfumed oil must connote an oil to which perfume had been added by way of a positive and deliberate act and not as meaning an article which just happened to have a perfume. I have already noted that the respondents have not proved any deliberate act (on the part of the appellants) of imparting perfume to the product. Learned Advocate’s argument, supported by the High Court’s decision in Ramtirth Yogashram, has therefore to be accepted. The product in question would not attract Chapter Note (6) ibid.

27. I am in complete agreement with learned Judicial Member’s findings on the question of classification of ‘Arnica Hair Oil’. Any remand of the issue to the lower authority as suggested by learned Vice-President is not warranted. The power of remand is one which must be exercised with circumspection. Sufficient materials for deciding the classification dispute are already on record. If, inspite of this, the matter is remanded to the lower authority, the same will, in all likelihood, be at the risk of the Tribunal being charged with shirking its own function.

28. I have also found that the Department has not been able to prove suppression of facts by the assessees to evade payment of duty. Invocation of the proviso to Section 11A of the Act to raise demand of duty, in the appellants’ case, is not justifiable. Learned Judicial Member’s decision on the point is also concurred with.

29. In respect of the issues touching Arnica Hair Shampoo, there is no difference of opinion between learned Member (Judicial) and learned Vice-President.

30. The point of difference referred to me stands answered as follows :-

The appeals are to be allowed insofar as ‘Arnica Hair Oil’ is concerned and the disputes relating to ‘Arnica Shampoo’ require to be remanded to the lower authority for the purpose stated by the regular Bench.

Registry shall take appropriate steps to formalise the final order in the appeal.

MAJORITY ORDER

31. The majority order is that appeals are to be allowed in so far as Arnica Hair oil is concerned and the dispute relating to Arnica Shampoo requires to be remanded to the lower authority.

Equivalent 2001 (136) ELT 485 (Tri. - Del.)