Supreme Court of India
COMMISSIONER OF CENTRAL EXCISE, DELHIversusISHAAN RESEARCH LAB (P) LTD. & ORS.
- Citation
- 2008 INSC 1021
- Decided
- 8 September 2008
- Disposal
- Dismissed
- Bench
- ASHOK BHAN
Holding
The Tribunal’s classification of the products as Ayurvedic medicines under Chapter 30, the valuation methodology, and the finding that the extended period of limitation does not apply are affirmed.
Summary
The Revenue challenged the Customs, Excise and Gold (Control) Appellate Tribunal’s finding that 22 products of Ishan Research Lab were Ayurvedic medicines under Chapter 30 of the Central Excise Tariff, liable to 10% duty, rather than cosmetics under Chapter 33 at 40% duty. The Court examined whether the products should be classified as medicinal or cosmetic, whether the buyer‑seller relationship constituted ‘related persons’ under s.4(4)(c) of the Central Excise Act, the appropriate method of valuation, and whether the extended limitation period under s.11A(1) applied. Relying on expert opinion, the fact that the items were manufactured under a drug licence and bore medicinal claims on their labels, the Court held that the products are Ayurvedic medicines, the purchasers are not related persons, the Tribunal’s valuation scheme is proper, and the extended limitation does not apply. Consequently, the demand and penalties were set aside and the appeals dismissed.
Issues considered
- The correct classification of the 22 products – Ayurvedic medicine (Chapter 30) or cosmetic/toilet preparation (Chapter 33).
- Whether the assessee and the purchasers (IMPL, IRL) are ‘related persons’ within the meaning of s.4(4)(c) of the Central Excise Act for valuation purposes.
- The appropriate basis for determining the assessable value of the goods.
- Whether the proviso to s.11A(1) of the Central Excise Act (extended period of limitation) is applicable to the demand and penalties.
Legislation cited
- Central Excise Act, 1944s. 11-A(1), s. 4
- Drugs and Cosmetics Act, 1940s. 3(a), s. 3(h)
Subjects
classificationexcise dutyAyurvedic medicinescosmeticsCentral Excise Actvaluationrelated personslimitationSection 11AChapter 30Chapter 33drug licence
Judgment
[2008] 13 S.C.R. 208
A COMMISSIONER OF CENTRAL EXCISE, DELHI
V.
ISHAAN RESEARCH LAB (P) LTD. & ORS.
(Civil Appeal Nos.7357-7372 of 2001)
SEPTEMBER 8, 2008
B ...
[ASHOK BHAN AND V.S. SIRPURKAR, JJ]
Central Excise Act, 1944:
Third Schedule- Chapter 30, Sub-Heading 3003.30 and
c Chapter 33 - Classification - Bio-cucumber, Bio-coconut, Bio-
costus, Bio-kelp,Bio-milk, Bio-margosa, Bio-peach, Bio-quice,
Bio-saffron, Bio-soya, Bio-wheat, Bio-wintergreen and Bio-
walnut - HELD: Tribunal rightly classified these items as
medicinal products covered under Chapter 30 - Burden was
D on Revenue, but there has been no attempt on its part, to
prove that the products were cosmetics - Besides, before ~
Tribunal the expert analysed all the products as containing
the elements of Ayurvedic medicinal value and all the items
were produced under drug licence issued in terms of Drugs
and Cosmetics Act.
E
s. 4 - Valuation of excisable goods for purpose of
charging excise duty - Tribunal has rightly held that the
companies to whom the assessee sold its product were not
related person - Parties have further agreed to abide by the
guidelines provided for valuation of the products of assessee.
F ~
s. 11-A(1) - Proviso - Extended period of limitation for
raising the demand and imposing penalty - HELD: Products
in the instant case having been held to be covered under
Chapter 30, as 'Ayurvedic medicines', there is no need to go
G into the question of limitation - Additionally, the products were
comparable, if not identical to the products in a decided case
- There was no mis-statement of facts or suppression of
material facts and the Tribunal has rightly held that proviso to ....
s.11-A(1) is not applicable, and rightly set aside the demand.
H 208
COMM. OF CENTRAL EXCISE, DELHI v. ISHAAN 209
RESEARCH LAB (P) LTD. & ORS.
In the instant appeals the Revenue challenged the A
decision of the Customs, Excise and Gold (Control)
Appellate Tribunal holding that 22 items manufactured
by the assessee-respondents were classifiable as
"Ayurvedic Medicines" under Central Excise Sub-
~ Heading 3003.30, liable to excise duty at the rate of 10% B
advaloem, and not as "cosmetics" and "Toilet
preparations" under Chapter 33 of Central Excise Tariff,
liable to excise duty at the rate of 40% advalorem as was
claimed by the Revenue; that IMPL and ILL(Mfwere not
related persons and the price at which the assessee sold c
the items to the said two companies would form the basis
for determining the assessable value of the goods; and
that the extended period of limitation was not applicable
in all the cases. ·
During _the course of hearing, it was conceded on D
behalf of the assessee that two items, namely '.'Bio-
Henna" and "Bio-Henna Leaf" would not fall under the
classification "Ayurvedic Medicines" under Chapter 30;
and on behalf of the Revenue it was conceded that four
items, namely, "Bio-apple", "Bio-fruit", "Bio-mud" and E
"Bio-myristica" would not be classifiable as cosmetics
under Chapter 33. Further "Bio-Bhringraj" stood covered.
as "Ayurvedic Medicine" under Chapter 30 in view of the
decision of this Court. Thus, out of 22 items, the parties , ·
put forth their claims only with regard to 15 items, namely, F
Bio Aloevera, Bio-cucumber, Bio-coconut, Bio-costus,
\ Bio-kelp, Bio.milk, Bio-margosa, Bio-peach, Bio-pro, Bio-
I quince, Bio-saffron, Bio-soya, Bio·-wheat, Bio-wintergreen
and Bio-walnut
Dismissing the appeals, the Court G
HELD: 1.1 The products in question were rightly- held
by CEGAT to be covered under Chapter 30 and not Chapter
33 of the Central Excise Tariff. Before the Tribunal the expert
opinion was pressed into se~ice. The expert analysed in H
210 SUPREME COURT REPORTS [2008) 13 S.C.R.
A detail all these products and noted that the products
contained the elements having Ayurvedic medicinal value.
It was also noted rightly by the Tribunal that all these items
were produced under the drugs licence issued under the
Drugs and Cosmetics Act. [para 29] [233-D-E]
B 1.2 It was obvious from the labels of the products
which were also inspected by the Court that there is a
claim made in each of the fable of the medicinal properties
of the product. It is also found that there was a specific
claim that the items in question were not cosmetic
C products. The common parlance test is not "be all and
end all" of the matter. Even otherwise, after the decision
in Shri Baidyanath Ayurved Bhavan's* case, the entry was
amended and in series of decisions this Court has held
that merely because the product could be put to cosmetic
D use that would not by itself make it a cosmetic product
provided there was a rightful claim made that it was an
Ayurvedic product on the factual basis, and it contained
the medicinal Ayurvedic medicament. The miniscule
percentage used is also not a deciding factor and this
E Court has, in series of decisions, held that the miniscule
percentage does not change the nature of the product
from medicament to the cosmetic products. In the wake
of all these decisions it would have fo be held that the
products in question, excepting in respect of which the
F assessee has conceded, were the medicinal products
and as such were covered by Chapter 30 and not under
Chapter 33 of the Schedule to the Central Excise Act,
1944. [para 30) [233-F-H; 234-A-C]
BPL Pharmaceuticals Ltd. V Collector of Central Excise,
G Vadodara [1995) (77) ELT 485 (SC); Commissioner of Central
Excise, Calcutta v. Sharma Chemical Works 2003 (154) ELT
328 (SC); Calcutta Chemicals Co. Ltd. v. Commissioner of
Central Excise, Chennai 2003 (154) ELT 326 (SC) ;
Commissioner of Central Excise, Calcutta-IV v. Pandit D.P
H Sharma 2003 (154) ELT 324 (SC); Meghdoot Gramodyog
COMM. OF CENTRAL EXCISE, DELHI v. ISHAAN 211
RESEARCH LAB (P) LTD. & ORS.
Sewa Sansthan v. Commissioner of Central Excise, Lucknow A
2004 (174) ELT 14 (SC); Commissioner of Central Excise,
Nagpur v. Vicco Laboratories 2005 (179) ELT 17 (SC); and
Puma Ayurvedic Herbal (P) Ltd v. Commissioner, Central
Excise, Nagpur (2006) 3 SCC 266 - relied on.
Shahnaz Ayurvedics v. Commissioner of Central Excise, 8
Noida 2004 (173) 338 (All.) - approved.
*Shri Baidyanath Ayurved Bhavan Ltd. V Collector of
Central Excise, Nagpur, etc. (1996) 9 SCC 402 - distinguished.
CCE v. Richardson Hindustan Ltd. (2004) 9 SCC 156; C
CCE v. Pandit DP Sharma (2003) 5 SCC 288; Natura/le Health
Products (P) Ltd. v. CCE (2004) 9 SCC 136; Amrutanjan Ltd.
v. CCE (1996) 9 SCC 413; BPL Pharmaceuticals Ltd. v. CCE
1995 Supp (3) SCC 1; Muller & Phipps (India) Ltd v. CCE
(2004) 4 sec 787; Dabur India Ltd. v. CCE (2004) 4 sec 9; D
Manish Pharma Plasto (P} Ltd. v. Union of India (1999) 112
ELT 22 (Del) - referred to.
1.3 The onus of establishing that the product falls
within a particular item is always on the Revenue and if
the Revenue did not lead evidence then the onus is not E
discharged. There has been no attempt on the part of the
Revenue to prove that the products in question are
cosmetics. In that view .of the matter, the Tribunal was
right in holding these products to be the medicinal
products and the findings of the Tribunal regarding the F
classification of the product are approved. [para 25 and
31] [229-C 234-D]
BPL Pharmaceuticals Ltd. V Collector of Central Excise,
Vadodara [1995] (77) ELT 485 (SC) - relied on.
G
2. As regards the valuation of the products in
question, the Tribunal has recorded a finding that IMPL
and IRL, the companies to whom the assessee sold its
products, were not related persons within the meaning
of s.4(4)(c) of the Central Excise Act, 1944. Therefore, as H
_,
212 SUPREME COURT RcPORTS [2008] 13 S.C.R.
A agreed to by the parties, the valuation would be
determined: (1) wherever IRPL had sold products to the
IMPL as also to independent third parties including Hotels,
the least price charged to the third parties may be taken as
the basis for the sales made by IRPL to IMPL for arriving
B at the assessable value for such products; (2) wherever
the products were never sold by IRPL to the independent
third parties, but only to IMPL, the wholesale price of IMPL
charged to the wholesale dealers for such products, may
be taken as the basis for arriving at the assessable value;
c and (3) while arriving at the assessable value, discounts,
freight excise duty, sales tax and other taxes and other
permissible deductions u/s 4 should be allowed in
accordance with the law: [para 32] [234 F-H 235-A]
3.1 In view of the findings that the products in
D · question were genuinely Ayurvedic medicaments, it would
not be necessary to go into the question of limitation.
[para 33] [235-C]
3.2 However, it is obvious that the products in the
instant case are comparable, if not identical, with the
E products in Shahnaz Ayurvedics case**. Therefore, the
extended period of limitation is not applicable. There was
no mis-statement of facts or suppression of material facts .
. , The Tribunal has considered all the facts brought before
it and has rightly held that the proviso to Section 11A(1)
F of the Central Excise Act, 1944 is not applicable to the
instant cases, and therefore, rightly set aside the demand
raised by the Revenue as time barred. [para 35] [236 D-F]
**Shahnaz Ayurvedics v. Commissioner of Central
G Excise, Naida 2004 (173) 338 (All.) - approved.
Case Law Refrence
(1996) 9 sec 402 distinguished para 13
[1995] (77) ELT 485 (SC) relied on para 13
H 2005 (179) IELT 17 (SC) relied on para 14
COMM. OF CENTRAL EXCISE, DELHI v. ISHAAN 213
t- RESEARCH LAB (P) LTD. & ORS.
2004 (174) ELT 14 (SC) relied on para 14 A
-
. 2003 (154) ELT 328 (SC) relied on para 26
(2006) 3 sec 266 relied on para 29
2003 (154) ELT 326 (SC) relied on para 27
2003 (154) ELT 324 (SC) relied on para 27 B
2005 (179) ELT 17 (SC) relied on Para 28
(2004) 9 sec 156 relied on para 29 i
(2003) 5 sec 288 relied on para 29
·. (2004) 9 sec 136 relied on para 29 c
(1996) 9 sec 413 relied on para 29
1995 Supp (3) sec 1 relied on para 29
. (2004) 4 sec 787 relied on para 29
. · · (2004) 4 sec 787 relied on para 29 D
(2004) 4 sec 9 relied on para 29
(1999) 112 ELT 22 (Del) relied on para 29
2004 (173) 338 (All.) approved para 36
E
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
7357-7372 of 2001
From the final Order No. 381-396/2000-C dated 28.8.2001
of the Customs, Excise and Gold (Control) Appellate Tribunal
in Appeal Nos. E/116, 2281, 3221/98-C & E/678/99/C, E/1117, F
2280., 3220, 3.226/98-C & E/680/99/C, E/1118, 3223, 3225/
98-C & E/679/99/C and E-2279, 3227/98-C
WITH
·: C.A. Nos. 2517 of 2002 G
· K. Radhakrishnan, Alka Sharma (for 8. Krishna Prasad)
~
for the Appellant.
·V. Lakshmikumaran, Alok Yadav (for Y. Balachandran) and
Rajesh Kumar for the Respondents.
t1
214 SUPREME COURT REPORTS [2008] 13 S.C.R
A The Judgment of the Court was delivered by
V.S. SIRPURKAR, J 1. This judgment will dispose of
Civil Appeal Nos.7357-7372 of 2001 as also the Civil Appeal
No.2517 of 2002.
B 2. All these appeals relate to the order passed by Customs
Excise and Gold (Control) Appellate Tribunal, New Delhi
whereby the Tribunal held that 22 products manufactured by M/
s.lshaan Research Lab Private Limited (hereinafter referred to
as "IRLP") are covered under the Central Excise Tariff Sub-
C heading 3003.30 and not under Chapter 33 of Central Excise
Tariff and thus the said products would invite the duty as
"Ayurvedic medicines" at the rate of 10% advalorem and not at
the rate of 40% advalorem as claimed by the Revenue
Department. The Revenue Department's claim was that these
D products were cosmetics such as skin beautification creams,
lotions, moisturisers, shampoos, etc., and were as such the
"cosmetics" and "toilet preparations" chargeable to 40% duty.
The Tribunal further held that IRLP and M/s.lshaan Marketing
Private Limited (hereinafter referred to as "the IMPL") were not
related persons in terms of Section 4(4)(c) of the Central Excise
E Act and as such the price at which IRLP sold the products was
to be adopted as the basis for determining the assessable
value. Similarly, the IRLP and IRL Marketing Pvt. Ltd. (hereinafter
referred to as "IRL (M)") were also not related persons and as
such the price at which the IRLP sold the goods would form the
F basis for determining the assessable value. The Tribunal further
held that the extended period of limitation was not applicable
in all the cases. Resultantly, the Tribunal held that the duty
demand on the products which were held to be cosmetics by
the Commissioner, Central Excise was to be re-quantified with
G the normal period of limitation of six months, adopting the price
of IRLP as the basis of the computation of the assessable
value. The Tribunal, however, left open the question of penalty
on IRLP to be decided by the Commissioner, Central Excise.
The Tribunal further set aside the penalities imposed upon IMPL,
H IRL (M) and Smt.Vinita Jain under Rule 209A of Central Excise
COMM. OF CENTRAL EXCISE, DELHI v. ISHAAN 215
RESEARCl-j
. .. (P) LTD. & ORS. [V.S. SIRPURKAR, J]
LAB
Rules in view of the finding that the IRLP, IRMP and IRL(M) are A
not the related persons as also the finding that the extended
period of limitation was not applicable. Lastly the Tribunal set
aside the coofiscation of land and machinery.
3.The proceedings in these cases were initiated by Show
Cause Notice dated 10.4.1996 covering the period of 1st April, B
1991 to 15th J~nuary, 1996, demanding a total duty of
Rs.3, 10, 17,993/~ and imposed a penalty of Rs.1 crore on IRLP,
Rs.25 lakhson IMPL and Rs.35 lakhs on one Ms.Vineeta Jain.
The s~.cond notice was given on 30.9.1996 covering a period
of 17.1.~996to.'3'1.3.1996 demanding a duty of Rs.60,16,359/ c
-. The Third Notice was dated 31.12.1996 whereby the duty of
Rs.1, 15,68, 744/- was demanded and a consolidated penalty
under Second and Third Show Cause Notices was imposed to
the tune of RsAO lakhs on IRLP, Rs.25 lakhs on IMPL and
,___. Rs.40 lakhs. on Ms.Vi11eeta Jain. Fourth Show Cause Notice D
was dated 4.5.1997 covering a period of 1.10.1996 to
31.3.19~7 whereby the duty demanded was Rs.92,82,309/-
· wherea~ the penalty imposed was Rs.20 lakhs on IRLP, Rs.15
lakhs on IMPL, Rs, 15 lakhs on IRL(M) and Rs.20 Lakhs on
Ms.Vineeta Jajn. The last Show C.ause Notice was dated E
2~.10.1997 co,11ering the period from 1.4.1997 to 30.6.1997
,' '~
where.in the duty demanded was Rs.68,26,881/- and the penalty
imposed was Rs.10 lakhs on IRPL, Rs.5 lakhs on IRL(M) and
Rs.2 lakhs
'
on Ms.Vineeta
.
Jain.
1,Commissioner, .Central Excise, New Delhi, in respect of F
-(
· the first Show Cause Notice, confirmed the demand of duty
amounting to Rs.3,06,68,074.78 as Basic Excise Duty and
Rs.34,39,918.89 as Special Excise Duty under Rule 9(2) of
Central Excise Act, 1944 read with proviso to Sub-section (1)
of Section 11 A of Central Excise Act on IRLP. He also directed G .. -
the confiscation of land, building, plant and machinery used by
... M/s.IRLP with an option to redeem the same on payment of
Rs_.25 lakhs. A further penalty of Rs.1 crore was imposed on
IRLP .under Rule 1730 of Central Excise Rules. A penalty of
Rs.25 lakhs was imposed on IMLP under Rule 209A of Central H
216 SUPREME COURT REPORTS [2008] 13 S.C.R.
, .
A Excise Rules. Lastly a penalty of Rs.35 lakhs was imposed on
Ms.Vineeta Jain. Thus, the Commissioner held that the
classification would be under Chapter 33. He also held that
IRLP and IMPL were related persons and further that the Revenue
was entitled to the extended period of limitation.
B 5. On the appeals filed before the Tribunal, the Tribunal
allowed the claim of the IRLP in respect of as many as 22
products out of the total 92 products in respect of which the
Show Cause Notices were given, they were at
Sl.Nos.3,8,9, 10, 17,20,21,23,25,27,28,29,34,35,36,38,39,42,45
C and 46, The remaining 70 products were held to be the
"cosmetic" and "toilet preparations" falling under Chapter 33 of
the Scheduled under Central Excise Act. The Tribunal further
held that IRLP and IMPL were not the related persons and
further the extended period of limitation could not be made
D available to Revenue in all the cases.
6. In the present appeals we are concerned only with those
22 products which have been held by the Tribunal as falling under
Sub-heading 3003.30. The appeals are basically filed by the
Revenue challenging the above findings regarding the 22 products.
E
7. Shri K. Radhakrishnan, learned Senior Advocate,
appearing on behalf of the Revenue initially very strenuously
urged before us that the Tribunal was in error in holding the 22
products as Ayurvedic medicines and those falling under Entry
F 3003.30. According to him all these products were bound to be
held as "cosmetics" and "toilet preparations" and were as such
covered by Chapter 33 inviting the duty at the rate of 40%.
•
Apart from the contentions raised in respect of classification of
these items, the learned counsel also addressed us on the
G question of valuation. The learned counsel also invited our
•
attention towards the aspect of limitation and urged that the
Tribunal was not right in holding that some show cause notices
were barred by limitation and that the Revenue would not be
entitled to the extended period of limitation under Section 11 A
of the Central Excise Act.
' '
n
------ ,,::;..--
COMM. OF CENTRAL EXCISE, DELHI v. ISHAAN 217
~ RESEARCH LAB (P) LTD. & ORS. [V.S. SIRPURKAR, J]
8. We have, therefore, to decide on the three aspects, A
they being the Classification, Valuation and the Limitation.
9: We shall first take up the aspect of classification.
10.To begin with, we are concerned with the following 22
items: B
i) Bio-Apple
ii) Bio Aloevera
iii) Bio Bhringraj
iv) Bio-cucumber c
.v) Bio-coconut
vi) Bio-costus
vii) Bio-fruit
viii) Bio-henna D
-i·
ix) Bio-Henna leaf
x) Bio~kelp
x~-- Bio-milk
E
xii) Bio-mud
xiii) Bio-myristica
xiv) Bio-margosa
xv) Bio-peach
F
xvi) Bio-pro
xvii) Bio-quince
xviii) Bio-saffron
l ...
xix) Bio-soya
xx)
xxi)
Bfo-wheat
Bio-wintergreen
G
(
xxii) Bio-walnut
H
218 SUPREME COURT REPORTS [2008] 13 S.C.R.
A During the debate Sh;i V. Lakshmikumaran, learned
counsel for the Assessee fairly conceded that the products "Bio-
Heena" and "Bio Heena Leaf' may not be called as Ayurvedic
medicines and hence gave up his claim of the classification of
these products under Chapter 30 and more precisely under
B Entry 3003.30. We are, therefore, not considering these
products.
11. Again the learned Senior Counsel for the Revenue
Shri Radhakrishnan very fairly conceded at the beginning of the
debate itself that the following products would not be
c "cosmetics", they being:
i) Bio-apple
ii) Bio-fruit
iii) Bio-mud
D
iv) Bio-myristica
and as such would not fall under Chapter 33 and instead
would be covered under Chapter 30, Entry 3003.30 inviting
10% duty and not 40%. We, therefore, leave these four more
E products out of consideration, barring 16 products, which we
have to consider, they being:
i) Bio Aloevera
ii) Bio Bhringraj
iii) Bio-cucumber
F
iv) Bio-coconut
v) Bio-costus
vi) Bio-kelp
G vii) Bio-milk
viii) Bio-margosa
ix) Bio-peach ~
x) Bio-pro
H xi) Bio-quince
COMM. OF CENTRAL EXCISE, DELHI v. ISHMN 219
~ RESEARCH LAB (P) LTD. & ORS. [V.S. SIRPURKAR, J]
xii) Bio-saffron A
xiii) Bio-soya
xiv) Bio-wheat
xv) Bio-wintergreen
xvi) Bio-walnut B
12. Shri Radhakrishnan, learned Senior Counsel,
appearing on behalf of the Revenue took us through the various
entries of Chapter 33 and more particularly Entries 3304 and
3305 which are as under:
c
"3304 - Wadding, gauze, bandages and similar articles
(for example, dressing, adhesive, plasters, poultices),
impregnated or coated with pharmaceutical substances
or put up in forms or packings fo~ medical, surgical, dental
or veterinary purpose. D
3305 - Pharmaceutical goods, not elsewhere specified."
Learned counsel contended thatthe said products contain
certain other ingredients also which cannot be said to be
"Ayurvedic medicines". In support of his claim he invited our E
attention to the Show Cause Notice dated 10.4.1996 and more
particularly para 6(i) referring to the statement of one S.V.
Rasalkar, Technical Director, M/s.IRLP who had furnished the
list of about 29 ingredients used in the said 16 products. Our
attention was also invited· to para 6(vi) of the Show Cause F
Notice where the statement of Mr.Yakub Usman Kapadia is
also referred. He also relied on the statement of one S.K. Handa,
Manager (Account). Learned counsel also heavily relied on other
paras of the Show Cause Notice like para 10 to suggest that
these products were generally being sold to the Hotels like
G
Park Hotel, Hotel Taj Mansingh, Hotel Taj Palace, New Delhi,
etc. Further a reference was also made by the learned counsel ·
).c
and more particularly para 12 which refers to the literature
published by M/s.IRLP on the Skin .Care Naturals wherein it is
suggested that the use of Biotique Products would make the
H
220 SUP~EfvJE COURT REPORTS [2008] 13 S C.R.
A skin beautiful and would help the user retain the bloom of youth.
From this the main argument was that all these products were
only helpful as the cosmetics or toiletries and they were also
understood to be the same. Learned counsel took us
painstakingly to Show Cause Notice to suggest that even IRLP
B was treating all these products as the products for enhancement
of beauty and not as medicines much less Ayurvedic medicines.
It was also contended that the user of non-Ayurvedic products
in these products would essentially take these products out of
the caption of "Ayurvedic Medicines". Learned counsel very
C heavily relied on a decision of this Court in Shri Baidyanath
Ayurved Bhavan Ltd. V Collector of Central Excise, Nagpur,
etc. [(1996) 9 sec 402). In short, the main contention of the
learned counsel is that we must apply common parlance test
for all these products which was accepted by this Court in that
decision. According to the learned counsel the Tribunal should
0
have followed the law laid down to the effect that since all these
products were understood to be the "cosmetics" in common
parlance and not actually the "Ayurvedic medicines" for various
reasons, the said products should have been held to be covered
under Chapter 33. Learned Counsel, during his address, also
E referred to the leading decision of this Court in BPL
Pharmaceuticals Ltd. V Collector of Central Excise, Vadodara
[1995 (77) ELT 485 (SC)].
13. As against this, the learned counsel appearing on
F behalf of the Assessee Shri Lakshmikumaran heavily relied on
the decision of BPL Pharmaceutica/'s case (supra). He urged
that there is a line of decisions following BPL Pharmaceutical's
case and pointed out that the decision in Shri Baidyanath
Ayurved Bhavan's case and BPL Pharmaceutical's case were
G dealt with in another decision in Commissioner of Central
Excise, Nagpur v. Vicco Laboratories [2005 (179) ELT 17
(SC)]. He also invited our attention to the decision in Megthdoot
Gramodyog Sewa Sansthan v. Commissioner of Central
Excise, Lucknow [2004 (17 4) ELT 14 (SC)] following the
decision in Commissioner of Central Excise, Allahabad v.
H
COMM. OF CENTRAL EXCISE, DELHI v. ISHAAN 221
._
RESEARCH LAB (P) LTD. & ORS. [V.S. SIRPURKAR, J]
Himtaj Ayurvedi Udyog Kendra [2003 (154) ELT 323 (SC)]. A
Our attention was also invited to some other decisions to which
we would make reference hereinafter.
14. Shri Lakshmikumaran, during his address, took us
through the Notes as also the definitions, more particularly
~ B
covered under Section 3(a) and 3(h) of Drugs and Cosmetics
Act defining drug and patent of proprietary medicines. Relying
on these provisions and further relying on the provisions of
Chapter 30 Note No.2, the learned counsel further pointed out
that this controversy as to when a particular product should be
covered under the "cosmetics" and as to when it should be held c
as "medicament" has been set at rest in BPL Pharinaceutica/'s
case where the Court has crystallized the guiding principles.
He pointed out that each of the product was having Ayurvedic
medicinal herbs in it and even the labels on these products
.... claim specifically the medicinal properties of the product. This D
is apart from the fact that on labels the product was specifically
"NOT' described as "cosmetic product". He further pointed out
that the reliance on the decision of Shri Baidyanath Ayurved
Bhavan's case by the Revenue was also uncalled for as the
relevant Entry at the relevant .time in that case was: E
"All drugs, medicines, pharmace-uticals and drug
intermediaries not elsewhere specified".
He further pointed out that there was no definition of
"medicaments" under Tariff Item 68 as it stood then unlike the F
definition contained in Note 2 to Chapter 30 which is applicable
.to the present case. He further contended that in Shri Baidyanath
Ayurved Bhavan's case Tribunal has held that in common
parlance the product in question could not .
be described
.
as
"medicinal preparation" and could only be described as "toilet
G
preparation" on account of the fact that one of the ingredients
Geru (red earth) was largely used as a filler or colouring agent
and was not described as a medicine in common parlance.
15.Further contention raised by Shri Lakshmikumaran is
that all the products in question have been manufactured under H
222 SUPREME COURT REPORTS [2008] 13 S.C.R.
A the Drugs Licence under the Drugs and Cosmetics Act and,
therefore, the learned counsel says that grant of Drugs licence
for the manufacture of these products would answer that test in
favour of the assessee. Learned counsel also invited our
attention to the decision of this Court in Commissioner of
B Central Excise, Calcutta v Sharma Chemical Works [2003
(154) ELT 328 (SC)] as also the Puma Ayurvedic Herbal {P)
Ltd v Commissioner, Central Excise, Nagpur [(2006) 3 SCC
266] to which decision one of us (Ashok Bhan, J.) was a party.
Learned counsel, therefore, urges that even if the user of product
c leads to improvement in appearance of a person, that by itself
cannot bring it into the category of "cosmetics" if otherwise the
product is having a medicinal value and is claimed and
marketed as such.
16. The learned counsel also invited our attention to the
D decision of the Tribunal delivered in CCE, Pune v. Ramakrishna
Vidyut Ltd. (Final Order No.847199-C dated 16.8.1999 of
Tribunal) which was affirmed by this Court in Civil Appeal
No.2353 of 2000 Oudgment delivered on 15.3.2005) holding
that Mahabringaraj Hair Oil is classifiable under Tariff Item 3003
E and not as a "cosmetic".
17. Going back to the List of Items in para 11, Item No.(ii)
Bio Bhringraj would stand covered by that decision. On this
backdrop we are thus left with 15 items. Shri Radhkrishnan also
did not dispute this position regarding item No.(ii) Bio Bhringraj.
F
18.ln BPL Pharmaceutical's case a clear cut distinction
was made in the "cosmetics" and the "drugs". Observations
made in para 31 are:
"The contention based on Chapter notes is also not correct.
G One of the reasons given by the Authorities below for
holding that Selsun would fall under Chapter 33 was that
having regard to the composition the product will come
within the purview of note 2 to Chapter 33 of the Schedule
to Central Excise lariff Act, 1985 is without substance.
H According to the Authorities the product contains only
COMM. OF CENTRAL EXCISE, DELHI v. ISHAAN 223
;..
I
RESEARCH LAB (P) LTD. & ORS. [V.S. SIRPURKAR, J)
subsidiary pharmaceutical value and, therefore, A
notwithstanding the product having a medicinal value will
fall under Chapter 33. We have already set out Note 2 to
Chapter 33. In order to attract Note 2 to Chapter 33 the
product must first be a cosmetic, that the product should
'1- be suitable for use as goods ofHeadings 33. 03 to 33. 08 B
and they must be put in packing as labels, literature and
other indications showing that they are for use as
cosmetic or toilet preparations. Therefore, Note 2 to
Chapter 33 is not attracted."
(emphasis supplied) c
19. This Court in BPL Pharmaceutica/'s case (supra) was
considering the question as to whether a product called Selsun
Shampoo was a "cosmetic" and/or "toilet preparation" or a
"medicament". The Court noted the main objections by Revenue
_.,, D
as under:
"(a) That the other manufacturers of similar type of product
were holding the licence for cosmetics and bore the
tag of cosmetics on the respective bottles.
(b) That the medicinal properties, i.e. Selenium Sulfide E
which was claimed to prevent Dandruff was only 2.5%
and was only a minor constituent against the total
composition of the product while the percentage of
the remainder were of forming agent, flavouring agent,
thickening agent and buffer etc. F
(c) That in fact Selsun Suspension was an Anti Dandruff
Shampoo.
(d) That its usage was also comparable to the other
shampoos available in the market. G
(e) That in common parlance the said product was
~-·
known as Selsun Shampoo and was sold as such.
(f) That the product was not sold by the owner of the
medical shop on presentation of Doctor's prescription. H
-
224 SUPREiVlE COURT REPORTS [2008) 13 S.C.R.
A (g) That the words" Dandruff Treatment Shampoo" were
deleted which were there in the old bottles only with
an intention to evade Central Excise duty and were
substituted by the words "Selenium Sulfide Lotion
USP Selsun the medical treatment for Dandruff'.
B 20. This Court noted firstly the definitions in Chapter 30
and the language of Entry 3003 as also the relevant provisions
in Chapter 33 and more particularly the HSN Notes under the
heading "Essential Oils and Resin Oils: perfumuery, cosmetic
or toilet preparation". It also took into account the Entries at
C 33.05, 3305.90, 33.06, 3306.00 and 33.08. In para 17 it noted
the previous Tariff Items as they stood prior to 1.3.1986 i.e.,
314E and 14F - 14E being "Patent or Proprietary Medicines"
and 14-F being "Cosmetics and Toilet Preparations". The Court
also noted the label, literature and medicinal properties
D concerning the product in question and noted that the label
gave out specifically that:
"Firstly, it was a poison;
Secondly, there was a cautionary note that it should be
E used for external use and should be kept out of the eyes
and away from children and also that it should be used
immediately after bleaching, tinting or permanent waving
of hair or on inflamed scalp;
Thirdly, it should be used twice weekly initially and then as
F often as necessary;
Fourthly, that it was a medical treatment for dandruff;
Fifthly, it contains Selenium Sulphide USP 2.5% w/v;
Sixthly, the hairs should be washed first and then the Selsun
G
should be massaged into the scalp.
The Court· also perused the literature which suggested
that it was for the use of registered Medical Practitioner or a
Hospital or Laboratory and that it further indicated that the
H product controls Dandruff and has beneficia! effect on the scalp
COMM. OF CENTRAL EXCISE, DELHI v. ISHAAN 225
RESEARCH LAB (P) LTD. & ORS. [V.S. SIRPURKAR, J]
as it is helpful in controlling acne, otitis externa and Bleph~aritis. A
The Court also relied on the affidavits filed by the appellants.
The Court found that the product was classified by the Excise
Authorities as a patent and proprietary medicine accepting the
decision of the Central Board of Excise and Customs rendered
~
on 17.1.1981 and it was only because of the new Central Excise B
Tariff Act, 1985 that the entry was sought to be changed.
21. In para 26 of the above judgment there is a specific
reference to the argument by the learned counsel for the
Revenue that the relevant chapter applicable would be Chapter
33 and not Chapter 30. The Court went on to distinguish between c
the terms "cosmetic" and "drug". It noted the definition of
cosmetics and drugs which is as under:
"A 'cosmetic' means any article intended to be rubbed,
poured, sprinkled or sprayed on, or introduced into, or
., otherwise applied to the human body or any part thereof D
"of for cleansing, beautifying, promoting attractiveness, or
altering the appearance, and includes any article intended
for use as a component of cosmetic."
AND
E
"A 'drug' includes all medicines for internal or external use
of human beings or animals and all substances intended
to be used for or in the diagnosis, treatments, mitigation
or prevention of any disease or disorder in human being
or animals, including preparations applied on human body F
""' for the purpose of repelling insects".
It then recorded a finding that the product in question was
not intended for cleansing, beautifying, promoting attractiveness
or altering appearance and held that it was intended to cure
certain diseases as mentioned. The court came to the further G
conclusion that merely because the product was described as
"Selsun Shampoo" it would not conclude the controversy.
22. In para 31 the contention raised on the basis of the
Chapter Notes was considered wherein the court gave an
H
226 SUPREME COURT REPORTS (2008] 13 S.C.R.
A unequivocal finding that in order to attract Note 2 to Chapter 33,
the product must first be a cosmetic product and that it should
be used as such and it should also be put in such packing as
declaring it to be a cosmetic product. We have already quoted
the part of the finding in para 31 in para 19 of this judgment. The
B · emphasized portion is more than telling. In that very para the
court also rejected the claim that merely because there was a
very small percentage of medicament and. the rest of the contents
were not having medicinal value would also be of no use. The
court again relied on the earlier decision by the Central Excise
c Authorities in accepting the decision of the Central Excise Board
and Excise and Customs wherein the product was treated as
patent and proprietary medicines. The Court relied on as many
as 13 reasons, some of these reasons are extremely relevant
for our case also, e.g.:
D Firstly, the court held that the product was useful for a
treatment of a disease;
Secondly, it held that it was manufactured under a drug
licence;
E Thirdly, it held that the Foods and Drugs Administration
had certified it as a drug;
Fourthly, that the Drug Controller had opined that Selenium
Sulphide present in Selsun was in a therapeutic concentration;
F Fifthly, that it was included as a drug in the National
formulary, US Pharmacoepia and the Merck Index;
Sixthly, that it fulfils the requirement of a drug as understood
in the common parlance;
G
Seventhly, that it was certified in standard books and
treaties;
Eighthly, it was marketed as a patent; and
Ninth!y, that its literature referred to it as drug and the
literature was addressed to the physician.
H
COMM. OF CENTRAL EXCISE, DELHI v. ISHAAN 227
,\. RESEARCH LAB (P) LTD. & ORS. [VS. SIRPURKAR, J]
The Court on this basis went on to hold the product as A
medicinal product and further held that it would fall under Tariff
Item 3003.19. A very heavy reliance was placed and since this
happens to be a leading judgment which was followed
throughout for more than 10 years, we are specifically referring
to the details of the judgment. B
23.We need not dilate on the judgment further in view of
our observations and our detailed references made but we
must reiterate that the judgment does consider the relevant
Entries of Chapter 30 including the Entry under the heading
3003 as also 3003.19. It also refers to the HSN Notes in detail c
and also notes the pre-amendment position, i.e., before 1.3.1986
when the relevant entries came on the anvil. The judgment is
also very relevant to note that the labels on the bottles are
extremely relevant in coming to the conclusion as to whether
,; the product is cosmetic or a drug. It further reiterates that merely D
because there is very small percentage of ingredients having
therapeutic or prophylactic value and merely because the
product can be used otherwise for beautification, it does not
ipso facto become a cosmetic preparation.
24. Shri Radhakrishnan, however, wanted to use this E
judgment in the light of the earlier referred judgment in Shri
Baidyanath Ayurved Bhavan's case (supra). His argument was
that the common parlance test was accepted as one of the relevant
tests in this judgment though the product was manufactured as a
drug under the drug licence. It is true that the common parlance F
test has been referred to in this judgment, however, it is in entirely
different context and again the judgment does not entirely depend
upon the common parlance test as in Shri Baidyanath Ayurved
Bhavan's case (supra). The judgment instead notes and holds
that even if the product is known as Shampoo and could be used G
as shampoo that by itself will not be a deciding factor. We would
:;. have a further opportunity to compare this judgment and refer to its
findings as the judgment has been referred to and followed right
till today in number of decisions.
H
228 SUPREME COURT REPORTS [2008] 13 S.C.R.
A 25. On the heels of this judgment came the further judgment
of this Court in Commissioner of Central Excise, Calcutta v.
Sharma Chemical Works [2003 (154) ELT 328 (SC)}. In that
judgment the product called Banphool Oil was in question.
CEGAT had held it to be classified under Tariff Item 3003.30,
B i.e., Ayurvedic Medicament. This was challenged by the
Revenue. It is to be noted that after the judgment in BPL
Pharmaceutica/'s case (supra) which did not relate toAyurvedic
product, this was by far the first judgment in respect of the
product claimed as Ayurvedic Medicament. This Court went
c into the questions in detail. It was argued that 98% of Bhan pool
Oil consists of "til oil" and remaining 2% are Ayurvedic
ingredients-like amla, chandan camphor, etc., and also that it
was being sold across the counter and was not stored just by
chemists but even by ordinary grocers. In short, it was submitted
that in common parlance it was not called as perfumed hair oil.
0
The court also referred to the law laid down in Shri Baidyanath
Ayurved Bhavan's case (supra) and Alpine Industries v.
Collector of Central Excise, New Delhi [(2003) 3 SCC 111]
and took stock of the arguments that the common parlance test
as laid down in these two cases was the only relevant test. On
E the other hand it was pointed out by the assessee that Chapter
30 dealt with all types of medicines and not only Ayurvedic
medicines. It was further urged that the medicaments could be
as per the formula set out in various pharmacopoeias or they
could be under some patented formula of a particular party and
F further the product having medicinal properties in very small
percentage did not matter. If the percentage of such ingredients
having medicinal properties was more, it could be harmful to
the human body. It was also argued directly on the lines of the
BPL Pharmaceutical's case (supra) that merely because there
G were fillers/vehicles in order to make that medicament palatable
and/or usable did not take it out of the entry of medicament.
Example was given of Vicks Vaporub which contained 98%
Paratin Wax and only 2% of methol. It was also pointed out that
every ingredient in Banphool Oil was contained in various
H pharmacopoeias and text books which deal with Ayurvedic
COMM. OF CENTRAL EXCISE, DELHI v. ISHAAN 229
RESEARCH LAB (P) LTD. & ORS. [V.S. SIRPURKAR, J]
medicines and further pointed out that even in "Bhavaprakash", A
"til oil" was mentioned as Ayurvedic ingredient. It was also pointed
out that there was a Board Circular dated 5.12.1991 providing
that in case of any doubt, the matter should be referred to the
State Drug Licensing Authority concerned with Ayurveda and
that if a further reference is necessary then it should be sent to B
Advisor, Ayurveda/Sub Commissioner in the office of the Drug
Controller of India. It was also pointed out that accordingly
Banphool oil was sent for the opinion of the Drug Controller and
that the Drug Controller by his letter dated 13.5.1985 opined
that Banphool Oil was an "Ayurvedic preparation". The Court c
also approved of the further arguments that the onus of
establishing that the product falls within a particular item is
always on the Revenue and ifthe Revenue did not lead evidence
then the onus is not discharged. The argument raised in BPL
Pharmaceutica/'s case (supra) about the label claiming that it
0
was a medicament was also pressed in service. The Court
also took note of Chapter Notes 2 and 6 of Chapter 33. The
Court thereafter extensively quoted from the BPL
Pharmaceutica/'s case (supra) which was heavily relied upon
in the present case. Even the decision in Amrutanjan Ltd. v.
Collector of Central Excise [(1996) 9 s9c· 413] was also E
referred to. It is to be remembered that in that decision this
Court had come to the conclusion that merely because a product
contained the ingredients not known to Ayurveda would not by
itself make it a non-Ayurvedic product. The following observation
in para 12 are extremely relevant in the present controversy: F
"Generally the percentage or dosage of the medicament
will be such as can be absorbed by the human body. The
medicament would necessary be covered by fillers/
vehicles in order to make the product usable. It could not G
be denied that all the ingredients used in Banphool Oil are
those which are set out in the Ayurveda text books. Of
course the formula may not be as per the text book b.ut
a medicament can also be under a patented· or
proprietary formula. The main criteria for determining
H
•
230 SUPREME COURT REPORTS [2008] 13 S. C.R.
A classification is normally the use it is put to by the
customers who use it. The burden of proving that
Banphool oil is understood by the customers as an hgir
oil was on the revenue. This burden is not discharged as
no such proof is adduced. On the contrary we find that the
B oil can be used for treatment of headache, eye problem
night blindness. reeling, head weak memory, hysteria,
ammenesia, blood pressure insomnia etc. The dosages
required are also set out on the label. The product is
registered with Drug Controiler and is being manufactured
c under a drug licence."
(EMPHASIS SUPPLIED)
26. Fo!lowing the above judgment this Court held in favour
of the assessee in Calcutta Chemicals Co. Ltd. v.
Commissioner of Central Excise, Chennai reported in 2003
0
(154) ELT 326 (SC) in respect of Maha Bnngaraj Oil to which
we have already made a reference and also in the decision in
Commissioner of Central Excise, Calcutta-IV v. Pandit D.P
Sharma reported in 2003 (154) ELT 324 (SC) in case of Himtaj
Oil. Thus in the aforementioned judgment this Court followed
E the law laid down in BPL Pharmaceutical's case (supra) even
after noting the judgment in Shri Baidyanath Ayurved Bhavan's
case (supra). We, therefore, cannot and would not accept the
argument by Shri Radhakrishnan that we must ignore all these
judgments in preference to Shri Baidyanath Ayurved Bhavan's
F case (supra). These judgments were then followed in Meghdoot
Gramodyog Sewa Sansthan v. Commissioner of Central
Excise, Lucknow [2004 (174) ELT 14 (SC)]. Again the product
in question was Ayurvedic hair oils like" Bhringraj Tail, Trifla
Brahmi tail and Neem herbal sat. The aforementioned
G judgments by Variava, J as also the judgment in BPL
Pharmaceutical's case 1.;;upra) were approved. This was an
appeal by the assessee against the Tribunal's judgment holding
that these products were the "cosmetic products" and were,
therefore, covered by Chapter 33 where the Tribunal had held
H that the appellant-assessee had not produced any evidence to
COMM. OF CENTRAL EXCISE, DELHI v. ISHAAN 231
RESEARCH LAB (P) LTD. & ORS. [V.S. SIRPURKAR, J]
show except for certain letters from the doctors that the products A
were prescribed by the medical practitioners as medicines;
secondly there was nothing to show that the patients were kept
under observation and/or the results said to have been achieved
by the use of the products were obtained by keeping the patients
in hospitals over a period of time and thirdly the packing of the B
products would indicate that the products were cosmetic and
not medicines or drugs. All these three arguments were rejected
by this Court and the law laid down in the aforementioned
judgments by Variava, J. was followed.
27. On the heels of judgment in Meghdoot Gramodyog C
Sewa Sansthan' case (supra) came the judgment in
Commissioner of Central Excise, Nagpur v. Vicco Laboratories
[2005 (179) ELT 17 (SC)]. This was the closest decision given
by the Three Judge Bench of this ,Court. Same question came
for consideration. The products which fell for consideration were D
the turmeric skin cream and vajradanti toothpaste and tooth
powder. The products in this case were initially classified as
patent or proprietary medicines not containing alcohol, ·opium,
Indian hemp or other narcotic drugs or other narcotics other
than those medicines under heading 14-E of the First Schedule E
of the 1944 Act. Again the basis of show cause notice was the
decision in Shri Baidyanath Ayurved Bhavan's case (supra).
The test applied by the Revenue was: firstly, whether the products
were being used daily and were sold without prescription by a
medical practitioner and secondly, whether the products were F
available in General Store Department/Grocery Shops. In para
4, the Court came to the conclusion that a mere decision of a
court of law without more cannot be justification enough for
changing the classification without a change in the nature of a
product or a change in the use of the product, or a fresh G
interpretation of the tariff headir]g by such decision. The said
decision was distinguished on the ground that the
,,. aforementioned tests were not applicable there. In para 5 it is
pointed out by the court in the following words:
"The court did not itself affirmatively hold that what was H
232 SUPREME COURT REPORTS [2008] B S.C.R.
A laid down by the Tribunal as a test to be 'ordinarily' followed
was invariably to be the sole test for determining whether
a product is to be proved as a medicine or as a cosmetic."
The Court then went on to approve the law laid down in
BPL Pharmaceutica/'s case (suprC!) and other cases, namely,
B Sharma Chemical Works (sl:lpra) and Meghdoot Gramodyog
Sewa Sansthan' case (supra) and ultimately held in favour of
the assessee and against the Revenue.
28. Lastly the same question came to be considered in
c details in Puma Ayurvedic Herbal (P) Ltd. v. Commissioner
Central Excise, Nagpur [(2006) 3 SCC 266} though on the
question of valuation. One of us (Ashok Bhan, J) was a party to
this decision. The products which fell for consideration were
namely, Puma neem facial pack (Neemal), Puma Anti-pimple
herbal powder (Pimplex), Puma herbal facial pack (Herbaucare),
0
Puma herbal remedy for facial blemishes, Puma hair tonic
powder (Sukeshi), Puma anti-dandruff oil (Dandika), Puma
Shishu Rakshan tel, Puma nee! tulsi, etc. After referring to the
decisions referred to above and other decisions like CCE v.
E Richardson Hindustan Ltd. [(2004) 9 SCC 156; CCE v. Pandit
D.P Sharma[(2003) 5 SCC 288; Naturalle Health Products
(P) Ltd. v. CCE [(2004) 9 SCC 136}, Amrutanjan Ltd. v. CCE
[(1996) 9 SCC 413}, BPL Pharmaceuticals Ltd. v. CCE {1995
Supp (3) SCC 1], Muller & Phipps (India) Ltd v. CCE [(2004)
4 SCC 787]; Dabur India Ltd. v. CCE [(2004) 4 SCC 9], Manish
F Pharma Plasto (P) Ltd. v. Union of India {(1999) 112 ELT 22
(Del)], the court came to the conclusion that the word
"medicament" was not defined anywhere while the word
"cosmetic" is defined in the Drugs and Cosmetics Act, 1940.
The court specifically held that the extent of the quantity of
G medicament used in a particular product and the fact that the
use of the medicinal element in the product was minimal does
not detract from it being classified as a medicament. It also
held in para 22 that it was not necessary that the item must be
sold under a doctor's prescription. Similarly, availability of the
H product across the counter in shops is not relevant as it makes
COMM. OF CENTRAL EXCISE, DELHI v. ISHAAN 233
i; RESEARCH LAB (P) LTD. & ORS. [V.S. SIRPURKAR, J]
no difference either way. As regards the Chapter Notes, the A
court found that the use of the word "subsidiary" in the said
note, i.e., Note No.2 of Chapter 22 was overlooked by the
Revenue. It was also held that Revenue had failed to make any
case in support of its stand that all the products fell under Chapter
33. However, the court rejected the claim of the assessee in B
respect of some of the products like herbal massage for women
and Puma scalp tonic powder. We have gone through this
judgment in extensor and even at the cost of repetition we may
note that the judgment in BPL Pharmaceutical's case (supra)
was approved and relied upon. c
29. All these cases would, therefore, suggest that the
products in question were found to be and rightly held to be
covered under Chapter 30 and not Chapter 33. We must
immediately point out that the expert opinion was pressed into
service before the Tribunal of Dr.V.N. Pandey who had in details D
analysed all these products and noted that the products contained
the elements having Ayurvedic medicinal value. It was also noted
rightly by the Tribunal that all these products were produced under
the drugs licence issued under the Drugs and Cosmetics Act.
Shri Radhakrishnan could not dispute this fact. E
30.Further it was obvious from the labels of the products
which we have ourselves inspected in the court that there is a
claim made in each of the lable of the medicinal properties of
the product. It is also found that there was a specific claim that
this is not a cosmetic product. In this behalf Shri Radhakrishnan F
took us through the show cause notice and tried to point out that
the products were sold to the Hotels, Beauty Parlours etc. Our
attention was also invited to various orders as also to the
literature and it was tried to be suggested that these products
were treated to be the cosmetic products, if not by the assessee, G
atleast by the customers. We have already pointed out that the
· common parlance test is not "be all and end all" of the matter
on the basis of which the case of Shri Baidyanath Ayurved
Bhavan's case (supra) was decided. We have further pointed
·out that thereafter firstly the entry was amended and in series H
234 SJPREME COURT REPORTS [2008] 13 3.C R.
A of decisions this Court has held that merely because the product
could be put to cosmetic use that would not by itself make it a
cosmetic product provided there was a rightful claim made that
it was an AyuNedic product on the factual basis, and it contained
the medicinal AyuNedic medicament. The miniscule percentage
B used is also not a deciding factor and this court has, in series
of decisions. held that the miniscule percentage does not change
the nature of the product from medicament to the cosmetic
products. In the wake of all these decisions it would have to be
held that the products referred to above, excepting in respect
C of which Shri Lakshmikumaran has conceded, were the
medicinal products and as such were covered by Chapter 30
and not under Chapter 33.
31. Even at the cost of repetition we must obseNe that
there has been no attempt on the part of the Revenue to prove
D that these products are cosmetic as has been held in BPL
Pharmaceutical's case (supra). In that view we are of the clear
opinion that the Tribunal was right in holding these products to
be the medicinal products and we approve of the findings of the
Tribunal in that behalf regarding the classification of the product.
E 32.That brings us to the second aspect of "valuation". Shri
Lakshmikumaran has specifically made a statement as regards
the valuation in the following terms:
"(1) Wherever IRPL had sold products to the IMPL as also
F to independent third parties including Hotels, the least
price charged to the third parties may be taken as the
basis for the sales made by IRPL to IMPL for arriving
at the assessable value for such products.
(2) Wherever the products were never sold by IRPL to
G the independent third parties, but only to IMPL, the
wholesale price of IMPL charged to the wholesale
dealers for such products, may be taken as the basis
for arriving at the assessable value.
(3) While arriving at the assessable value, discounts,
H
COMM. OF CENTRAL EXCISE, DELHI v. ISHAAN 235
RESEARCH LAB {P) LTD. & ORS. [V.S. SIRPURKAR, J]
freight excise duty, sales tax and other taxes and A
other permissible deductions under Section 4 should
be allowed in accordance with the law."
To this Shri Radhakrishnan has no objection. We, therefore,
hold accordingly.
1 -1 • B
33.Lastly, the question was raised regarding the limitation.
In view of our findings that these products were genuinely
Ayurvedic medicaments, it would not be necessary for us to go
into that question. However, since the parties have argued the
question, we would consider the same. c
;
' 34.The Show Cause Notices in this case were given on
10.4.1996, 30.9.1996, 31.12.1996, 2.5.1997 and 28.10.1997.
The Revenue sought to take advantage of the extended period
of limitation. On 10.4.2008 this Court had passed the following
order in respect of limitation: ·, D
+
"As far as the question of limitation is concerned, following
the decision of High Court of Allahabad in the case of
Shahnaz Ayurvedics Vs. Commissioner of Central Excise,
Noida 2004(173) ELT 337, it was held that the extended
period of limitation is not applicable. Against the said E
decision of the High Court of Allahabad, a petition being
SLP (C) No. 21585 of 2004 [CC 8996/04] was filed in this
Court in the case of Commissioner of Central Excise,
Noida Vs. M/s. ShahnazAyurvedics &Anr. 2004(174) ELT
... A34 which was dismissed on 81h October, 2004 . F
To enable us to compare the similarity between the
products in question in the present case and the products
whi('.h were in question before the High Court of Allahabad
in the case of Shahnaz Ayurvedics (supra), we direct
G
counsel for the respondents to produce the literature of
the 22 products in question. We also direct counsel for the
appellant to place on record the literature of the products
which were in question in the case of ShahnazAyurvedics
(supra) in the High Court."
H
236 SUPREME COURT REPORTS [2008) 13 S.C.R.
A 35. Accordingly, the counsel produced the literature of the
product which was comparable to the products in Shahnaz
Ayurvedics v. Commissioner of Central Excise, Noida [2004
(173) 338 (All.)). We have seen the literature ourselves. Though
Shri Radhakrishnan contends that there is no similarity between
B the products mentioned in Shahnaz Ayurvedics case (supra)
and the products of the IRPL, we do not agree. It is obvious that
the products in the present case are comparable, if not identical
with the products in Shahnaz Ayurvedics case (supra). We,
therefore, have no reason to take a different view that was
c taken by the Allahabad High Court and against which the Special
Leave Petition was dismissed by this Court. We also do not
agree that there was any mis-statement of facts or suppression
of material facts. It was contended that since the appellants sold
their products to boutiques, beauty parlours, hotels and traders,
they should be held as "cosmetics". We have already taken stock
0
of this argument and rejected the same. In that view we affirm the
findings of the Tribunal regarding the limitation. In our opinion the
Tribunal has considered all the facts brought before it and has
come to the final findings in the following words:
E "This would also go to show that a dispute prevailed in the
matter of classification of such products. In the above
circumstances, the appellants cannot be held to be guilty
of suppression or mis-statement and hence the charge of
suppression is not sustainable. We, therefore, hold that
F the proviso to Section 11A(1) of the Central Excise is not
applicable to these 3 cases, and hence set aside the
demand covered by adjudication order No.5/98 as time
barred."
We are satisfied with the reasoning given by the Tribunal
G and affirm the same.
36. Accordingly all the above Appeals are dismissed.
However, in the facts and circumstances of the case we do not
propose to inflict any costs.
H R.P. Appeals dismissed.
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