2001(08)LCX0132

IN THE CEGAT, COURT NO. III, NEW DELHI

S/Shri P.G. Chacko, Member (J) and K.K. Bhatia, Member (T)

SHREE BAIDYANATH AYURVED

Versus

COMMISSIONER OF C. EX., ALLAHABAD

Misc. Order No. 36/2001-C, dated 31-8-2001 in Appeal Nos. E/546-553, 1252, 1095/98-C, E/2717/99-C and E/514/2000-C

Cases Quoted

Bajaj Auto Ltd. v. Collector — 1996(10)LCX0041 Eq 1996 (088) ELT 0355 (Tribunal-LB) — Referred................... [Para 6]

Commissioner v. Shree Baidyanath Ayurved — 2000(12)LCX0069 Eq 2001 (133) ELT 0792 (Tribunal) — Referred [Para 7]

Shree Baidyanath Ayurved Bhavan Ltd. v. Collector — 1995(03)LCX0046 Eq 1996 (083) ELT 0492 (S.C.) — Followed [Paras 4, 6, 9, 10.1, 10.2]

Shree Baidyanath Ayurved v. Commissioner — 2000(12)LCX0213 Eq 2001 (138) ELT 0218 (Tribunal) — Dissented [Para 7]

DEPARTMENTAL CLARIFICATIONS CITED

C.B.E. & C. Circular No. 103/10/90-CX, dated 25-9-1991.................................................. [Para 6]

C.B.E. & C. Circular, dated 31-10-1996................................................................................. [Para 9]

C.B.E. & C. Circular, dated 27-5-1997............................................................................. [Paras 6, 9]

C.B.E. & C. Circular, dated 10-9-1997................................................................................... [Para 9]

Advocated By :   Shri Vivek Kohli, Advocate, for the Appellant.

Shri M.D. Singh, SDR, for the Respondent.

[Order per : P.G. Chacko, Member (J)]. - M/s. Shree Baidyanath Ayurved Bhawan Limited have their manufacturing units at Patna, Hajipur, Jhansi and other places. One of the commodities manufactured and marketed by them is what they call (in Hindi) “Dant Manjan Lal”. “Dant Manjan” means “tooth powder” and “Lal” means “red”. This is what the appellants also mean by the above name of the product.

2.1 During the period June, 1991 to December, 1993, M/s. Shree Baidyanath Ayurved Bhawan cleared from their Patna unit certain quantity of “Dant Manjan Lal” (in short, DML) without payment of duty of excise, claiming classification of the product under CSH 3003.30 of the Central Excise Tariff Schedule and further claiming the benefit of Exemption Notifications. The department, in 1996 invoked the extended period of limitation under the proviso to Section 11A(1) of the Central Excise Act and issued show cause notice [SCN] to the company demanding duty on the above clearances at the rate applicable to CSH 3306.00 of the Tariff Schedule. The SCN also proposed to impose penalties on the company and some of its functionaries. The SCN was contested. The dispute was adjudicated by the jurisdictional Commissioner of Central Excise, who, by Order dated 20-11-1997, confirmed the demand of duty (Rs. 93,79,303.65) against the company and imposed penalties on the company and two of its functionaries (Rs. 5 lacs and Rs. 2 lacs each). Appeal Nos. E/547/98-C, E/552/98-C and E/553/98-C are against that order of the adjudicating authority.

2.2 A similar dispute had arisen between the company and the department in respect of clearances of DML effected by the former from its Hajipur unit during June, 1993 - March, 1996. The jurisdictional Commissioner confirmed the demand of duty (Rs. 75,69,466.63) against the company and imposed penalties on the company and four of its functionaries (Rs. 5 lacs and Rs. one lac each). The present appeal Nos. E/546/98-C and E/548 to 551/98-C are against that adjudication.

2.3 The similar dispute in respect of clearances made by the company from its Jhansi unit during November, 1995 to April, 1996 and May, 1996 to September, 1996 were adjudicated against them by the jurisdictional Assistant Commissioner by separate orders for the aforesaid two periods. The company preferred appeals against those orders. The Commissioner (Appeals), in his common order, upheld the orders of the original authority on the main issue of classification and duty liability but granted the benefit of rebate of duty to the appellant in terms of Section 4(4)(d)(ii) of the Act. The company has challenged the lower appellate authority’s decision on the main issue, in the present appeals, E/1095/98/C and E/1252/98/C.

2.4 The company’s appeal No. E/514/2000-C is against another order of the Commissioner (Appeals) upholding the adjudicating authority’s decision on a similar dispute in respect of clearances made from the company’s Jhansi unit during October, 1996 to 6-1-1997.

2.5 In respect of their clearances, from the Jhansi unit for the period January, 1997 to May, 1997, the company had paid duty under protest. Later, they claimed refund of the duty, which the Assistant Commissioner rejected. The appeal preferred by the party to the Commissioner (Appeals) was also dismissed. The present appeal No. E/2717/99-C of the party is against the rejection of the refund claim.

3. Examined the records and heard both sides.

4. In these appeals, we are primarily concerned with the classification of “Dant Manjan Lal” for the period June, 1991 to May, 1997. The lower authorities held the product to be appropriately classifiable under CH 33.06 following the Hon’ble Supreme Court’s decision rendered in the appellants’ own case vide Shree Baidyanath Ayurved Bhavan Ltd. v. C.C.E., Nagpur [1995(03)LCX0046 Eq 1996 (083) ELT 0492 (S.C.)]. Ld. Advocate Sh. Vivek Kohli has argued that the ratio of the Apex Court’s decision is not applicable to classification of DML for any period subsequent to 28-8-1987, the date on which “Ayurved Sar Sangrah” was included in the First Schedule to the Drugs & Cosmetics Act, 1940. This argument is based on the premise that the product is covered by the term ‘medicaments’ as defined in Note (2) of Chapter 30 of the Tariff Schedule. It aims at bringing the product within the coverage of CSH 3003.30 for a part of the period of dispute and CSH 3003.31 for the remaining part of the period, having regard to the fact that total exemption from payment of duty of excise was available (under Exemption Notification) during 1994 to 1996 to medicaments (falling under CSH 3003.30) manufactured exclusively in accordance with the formulae described in the authoritative books specified in the First Schedule to the Drugs & Cosmetics Act and sold under the names specified in such books, and the further fact that, for the subsequent period, such medicaments were chargeable to Nil rate of duty in terms of CSH 3003.31. (In 1996-97, medicaments of CSH 3003.30 were sub-divided into three categories and placed under CSH 3003.31, 3003.32 and 3003.39. The medicaments manufactured and sold as above fell under CSH 3003.31).

5. Ld. Counsel has submitted that DML was manufactured exclusively in accordance with the formula prescribed in “Ayurved Sar Sangrah” specified in the First Schedule to the Drugs & Cosmetics Act and was sold under the name specified in the said book. It comprised several constituents viz. Geru Mitty (Red earth), Tamala patra, kali mirch, Babul, Pippali, Akarkara, Lavanga, Kapur, Peppermint etc. mixed/compounded together for therapeutic/prophylactic uses in terms of the above formula and was, therefore, an Ayurvedic medicament falling under CSH 3003.30/3003.31 read with Chapter Note 2(i)(a). The appellants manufactured the product under Drug Licence issued by the competent authority. Ld. counsel has further contended that the above facts pleaded by the appellants in their replies to SCNs have not been disputed by the departmental authorities in the impugned orders and, therefore, it was not justifiable for the authorities to classify the product outside CSH 3003.30/31.

6. Ld. Counsel has further submitted that subsequent to inclusion of “Ayurvedic Sar Sangrah” in the First Schedule to the Drugs & Cosmetics Act, the appellants filed fresh Classification List effective from 1-3-1988 claiming classification of DML as Ayurvedic medicine; that the said C/List was approved by the Assistant Collector on 4-8-1989; that the department’s appeal against such approval of classification was rejected by the Collector (Appeals) in 1992 and that the order of the appellate Collector became final in the absence of department’s challenge thereagainst. Counsel has also relied on the Board’s circular dated 25-9-1991 (issued in File No. 103/10/90-CX. 3) which held the product classifiable as Ayurvedic medicine and directed Central Excise field authorities to finalise pending assessments of the goods accordingly. Though the Board, following the Apex Court’s decision dated 30-3-1995 vide 1995(03)LCX0046 Eq 1996 (083) ELT 0492 (S.C.), withdrew the above circular on 31-10-1996 and directed classification of DML in terms of that decision, it changed its stand later and issued circular dated 27-5-1997 in the light of Tariff changes holding that the Apex Court’s judgement, rendered in the context of the old Tariff (pre-28-2-1986), was not relevant for classification under the new Tariff and that DML was an Ayurvedic medicine. Ld. Advocate has placed strong reliance on the view taken in the Board’s circular dated 27-5-1997. In any case, according to Counsel, the demand of duty on DML confirmed by the authorities for the period from 25-9-1991 to 31-10-1996 is unsustainable on account of the binding effect of Board’s circular dated 25-9-1991 on the authorities during that period. In this connection Counsel has sought to draw support from the decision of the Tribunal’s Larger Bench in Bajaj Auto Ltd. v. C.C.E., Pune [1996 (088) ELT 355].

7. Shri Kohli has, further, submitted that the classification issue in these appeals has been squarely covered in favour of the appellants by Order No. CI/4292/WZB/2000, dated 13-12-2000 [2000(12)LCX0213 Eq 2001 (138) ELT 0218 (Tribunal)] passed by the West Regional Bench (WRB) of the Tribunal in the appellant’s own case viz. Appeal No. E/2237/99-Bom. He has also cited Order No. A/2035-2036/CAL/2000, dated 14-12-2000 [2000(12)LCX0069 Eq 2001 (133) ELT 0792 (Tribunal)] which was passed by the Tribunal East Regional Bench (ERB) in the Revenue’s appeals Nos. E/R-95-96/2000. The ERB was following the WRB’s decision. The WRB held that DML was rightly classifiable as Ayurvedic medicament under Heading 30.03. Counsel wants us to follow suit.

8. Ld. SDR Sh. M.D. Singh has vehemently opposed the Counsel’s arguments. His argument is that, since tooth powder is specifically covered by Heading 33.06 of the Tariff, one need not labour to classify it elsewhere in the Tariff. The product in question is, admittedly, tooth powder. It is marketed under that name [Dant Manjan = Tooth Powder] and is known as such in common parlance. Ld. DR has further contended that DML cannot be considered to be a medicine as it is not normally dispensed on medical prescription but used routinely by even those who have healthy teeth. The DR has also relied on Note 1(d) of the same chapter. Tooth powder is a preparation covered by Heading 33.06 of Chapter 33 and, as such, it stands excluded from Chapter 30 by virtue of Chapter Note 1(d) of the latter chapter. Without prejudice to these arguments, DR submits that the appellants have not adduced any evidence to show that the product is a ‘medicament’ in terms of Note 2(i)(a) of Chapter 30.

9. Ld. DR has further argued that there is nothing in the new Tariff to justify the appellants’ view that the Apex Court’s judgement under reference is not relevant for classification of tooth powder under the said Tariff. He has contextually referred to Board’s Circular dated 10-9-1997 whereby the stand taken in Circular dated 27-5-1997 was reversed and the earlier view taken in Circular dated 31-10-1996 was reinstated. Thus the Board has also ultimately accepted the Apex Court’s ruling contained in its judgement dated 30-3-1995 vide 1995(03)LCX0046 Eq 1996 (083) ELT 0492 (S.C.). Ld. DR has also submitted that WRB’s decision on the classification issue has to be treated as per incuriam inasmuch as the Bench erroneously distinguished the Supreme Court’s decision and had no occasion to consider the Board’s Circular dated 10-9-1997.

10.1 We have considered the submissions. The Revenue has contended that the Hon’ble Supreme Court’s decision rendered in the appellants’ own case still holds good for the classification of the product. The assessee has argued to the contrary. That decision of the Apex Court was given in the appeals preferred by the present appellants against the Tribunal’s orders holding DML to be a toilet preparation and not an Ayurvedic medicine under the old Tariff. The court upheld the Tribunal’s decision. The Tribunal, for its conclusion, had reasoned that it was the popular meaning, rather than scientific/technical meaning, of terms and expressions used in the Excise Act that had to be adopted for interpretting the statute. It had, therefore, gone by how Dant Manjan was understood in popular parlance. It observed that ordinarily a medicine was prescribed by a medical practitioner and was taken by a patient for only a limited time. That was not the case of Dant Manjan. The Tribunal also found no evidence on record to prove that the common man who used the Dant Manjan daily to clean his teeth considered it as a medicine and not a toilet requisite. This reasoning of the Tribunal based on common parlance (popular meaning) test for classifying DML as a toilet preparation and not an Ayurvedic medicine was approved by the Apex Court in its judgement dated 30-3-1995.

10.2 No doubt, the above decision of the court was on the question whether DML manufactured by the appellants fell within the meaning of ‘Ayurvedic medicine’ during the old Tariff period. During that period, there was no definition of “medicine” or “medicament” in or under the Excise Act, though a specialised definition was available under that Act for “patent or proprietary medicines”. In contrast to this position, “medicaments” have been defined in Chapter 30 of the new Tariff, apart from the specialised definition of “patent or proprietary medicaments” provided in the same chapter. Ld. Counsel argued that, for the new Tariff period, any popular meaning of medicines/medicaments should be treated as having been superseded by the statutory definition of “medicaments”. Obviously, this proposition was advanced to obviate any application of the ‘common parlance rule’ to the appellants’ instant case. But it does not appear to advance the appellants’ case. Nonetheless, we think, we can take the cue for making a view of ours. The Dant Manjan (tooth powder) in question is one which was not a medicine in common parlance but a preparation used routinely for dental hygiene during the old Tariff period as found by the Tribunal and the Apex Court in the appellants’ own old cases (vide supra). In the new Tariff period, tooth powders are covered by Heading No. 33.06, which reads as under :-

It thus appears that the meaning of tooth powder as laid down under Heading 33.06 of the new Tariff is hardly different from its meaning as understood in popular parlance in the old Tariff period. In other words, the popular meaning in vogue during the old Tariff period appears to have attained statutory recognition under the new Tariff through Heading 33.06. If that be so, in our view, the Apex Court’s judgement laying down the common parlance rule has to be accepted as relevant for classification of Dant Manjan under the new Tariff as well. We are, with great respect, unable to persuade ourselves to endorse the contrary view taken by the WRB.

10.3 We also note that the WRB has relied on the provisions of the Drugs & Cosmetics Act to expound the meaning of “Ayurvedic medicament” under the Central Excise Tariff. Those provisions were, in fact, considered by the Supreme Court too while examining the question whether Dant Manjan could be held to be an Ayurvedic medicine. That was in the present appellants’ own old cases. We are afraid, we may not be able to accept the WRB’s exposition of “Ayurvedic medicament” in preference to that of the Apex Court.

10.4 We are also unable to agree with the WRB’s following observation (vide para (18) of their order) :-

“There would be no requirement that the Central Excise authorities must independently test it for its efficacy as medicament by apply the provisions of Note (2) to the Chapter”.

Any product, in order to be classified under CSH 3003.30/31 of the new Tariff, has to fall, at the outset, within the meaning of “medicament” under Chapter Note (2). Once it answers the test of that Chapter Note positively, it is at once under Heading 30.03. For placing the product under CSH 3003.30/31 as on Ayurvedic medicament, one has got to make further enquiries in terms of the sub-heading. Classification being the Revenue’s burden, we don’t think that the Central Excise authorities can shirk their responsibility of putting to the test of Chapter Note (2), a product which is claimed to be an Ayurvedic medicament.

10.5 Above all, as rightly submitted by ld. DR, the product being specifically covered by Heading 33.06 and excluded from Chapter 30 (vide Note 1(d) of this Chapter), there appears to be, in our view, hardly any scope of enquiry into the question as to whether the goods would merit classification elsewhere in the Tariff, in view of Interpretative Rule 1. This is particularly so as, apparently, it has not been disputed by the appellants that their product is suitable for use as tooth powder and put up in a form clearly specialised to such use vide Note (2) of Chapter 33.

11. Having disagreed with our learned brothers of WRB on the classification of Dant Manjan Lal, we direct the Registry to place the papers before the Hon’ble President for the purpose of constituting a Larger Bench to sort out the issue.

Equivalent 2001 (135) ELT 127 (Tri. - Del.)

Equivalent 2001 (046) RLT 0756