Holding

The products are Ayurvedic medicaments under Chapter 3003.30 and attract nil excise duty.

Summary

Mis Naturalle Health Products (P) Ltd. manufactured medicated cough drops, throat drops, Sloan's balm and Sloan's rub under an Ayurvedic drug licence and claimed that the products should be classified under Chapter 3003.30 of the Central Excise Tariff as Ayurvedic medicaments, attracting nil duty. The Central Excise authorities classified them under sub‑heading 3003.10 as patent or proprietary medicaments, imposing a 15% ad valorem duty, a decision upheld by the CEGAT. The Supreme Court examined whether the definition of Ayurvedic medicine in the Drugs and Cosmetics Act, the requirement of formulae from Ayurvedic texts, and the tests of "common parlance" and "ingredient mention" applied. Relying on earlier judgments (Amrutanjan, Richardson Hindustan, Himtaj) and a government circular, the Court held that the ingredients are listed in authoritative Ayurvedic texts, the products are treated as Ayurvedic medicines by practitioners and consumers, and the formulae need not follow textbook recipes. Consequently, the products fall within sub‑heading 3003.30 and are liable to nil duty. The tribunal’s classification under 3003.10 was set aside.

Issues considered

The correct tariff classification of the products: whether they are Ayurvedic medicaments under sub‑heading 3003.30 (nil duty) or patent/proprietary medicaments under sub‑heading 3003.10 (15% duty).
Whether Section 3(a) or Section 3(h) of the Drugs and Cosmetics Act governs the classification for excise purposes.
Whether the formulae must conform to Ayurvedic textbook recipes for a product to be deemed an Ayurvedic medicament.
The applicability of the "common parlance" and "ingredient" tests laid down in Richardson Hindustan and affirmed by the Supreme Court.
The allocation of the burden of proof for establishing exclusive Ayurvedic character.

Legislation cited

Central Excise and Salt Acts. 1944
Drugs and Cosmetics Acts. 3(a), s. 3(h)

Subjects

Ayurvedic medicamentCentral excise classificationSub‑heading 3003.30Patent proprietary medicamentDrugs and Cosmetics ActNil dutyCommon parlance testIngredient testBurden of proof

Judgment

MIS. NATURALLE HEAL TH PRODUCTS (P) LTD. A
v.
COLLECTOR OF CENTRAL EXCISE, HYDERABAD

NOVEMBER 11, 2003

[P. VENKATARAMA REDD! AND DR. AR. LAKSHMANAN, JJ.] B

Central Excises and Salt Act, 1944/Central Excise Tariff Act, 1985-
Drugs and Cosmetics Act, 1940-Section 3(a) and 3(h)-Medicated cough
drops and throat drops and sloan's balm and sloan's rub-Classification C
under tariff heading for levy of duty-Held: Products are manufactured under
Ayurvedic drug licence; the customers, practitioners, dealers, licensing
officials treat it as Ayurvedic medicines; all the ingredients are mentioned in
the authoritative text books on Ayurveda, though are purified or added with
some preservatives which does not alter their character-Hence, the products
are classifiable as Ayurvedic medicaments under Chapter Heading 3003.30 D
attracting nil rate of duty.

Appellant-assessee in the first appeal is engaged in the manufacture of
medicated cough drops and throat drops and in the other appeal the assessee
is engaged in manufacture of sloan's balm and sloan 's rub. They manufacture
these products under the Ayurvedic drug licence issued under Drugs and E
Cosmetics Act, 1940. Appellants claimed classification of their products as
Ayurvedic medicaments under sub heading 3003.30 of Central Excise Tariff
attracting nil rate of duty. They were issued show cause notice as to why the
goods should not be classifiable as Patent or Proprietary medicaments under
sub-heading 3003.10 attracting duty at the rate of 15% ad valorem. With p
regard to medicated cough drops and throat drops, authorities below relying
upon the tribunal's decision in Amrutanjan 's case that the product was not
ayurvedic medicines as ingredients were synthetic in nature, rejected the
appellant's claim and also since the products are not manufactured according
to the formula in authoritative ayurvedic text books. Regarding Sloan's balm
and Sloan's rub, appellant replied to the show cause notice relying upon the G
tribunal's decision in Richardson Hindustan's case laying down that the
product should be known as Ayurvedic medicament in the common parlance
and the ingredients should be mentioned in Ayurvedic text books. However,
the Assistant Collector classified the products under sub heading 3003.10
433 H
434 SUPREME COURT REPORTS [2003) SUPP. 5 S.C.R.

A and the tribunal upheld the same. Hence the present appeals.
Appellant-assessee contended that the goods manufactured by them are
classifiable under sub heading 3003.30; that with regard to medicated cough
drops and throat drops, authorities below rejected the appellant's claim relying
on the tribunal's decision in Amrutanjan 's case which is set aside by the
B judgment of this Court in Amrutanjan limited's case that the ingredients even
if they are used after refinement, they are not synthetic in nature, and the
instant issue is covered by the same; that as the goods are Patent or
Proprietary Ayurvedic medicaments within the definition given in Section 3(h)
of the Drugs and the Cosmetics Act, the definition of Ayurvedic medicine in
C Section 3(a) of the Drugs and Cosmetics Act cannot be applied to the instant
case on which the tribunal has based its order for the purposes of the
classification of a product for Central Excise duty; that when there is no
definition of any word in the relevant statute, the word must be construed in
its popular sense i.e. how the common man who uses it, understands it; that
the tribunal failed to appreciate that the appellant's products which contained
D the Ayurvedic ingredients were prepared in accordance with the Ayurvedic
principles; that the formulations have been developed after referring to several
authoritative Ayurvedic books and careful evaluation of actions, clinical trials
etc., and tllt Director of Indian Medicine and Homeopathy have approved the
same; that the tribunal failed to appreciate that the onus of classification of a
E product is on the Excise Department who are required to produce the evidence
to support their stand which was not produced and also did not rebut the
evidence produced by the appellants; that as the classification of the goods
was determined by the competent authority under the Drugs Act who issued
a licence for manufacture and sale of Ayurvedic drugs, the Central Excise
Authorities have to act on that basis and not to go beyond the same or sit in
F judgment thereon; and that the member of the tribunal erred in holding that
the formulae and patent of the appellant company is registered in America
which is without any evidence or material on record.

Respondents-revenue contended that the goods manufactured by the
appellants are to be classified under sub heading 3003.10 chargeable to duty
G at 15% ad valorem; that Amrutaly'an 's case does not preclude the submission
of the Revenue and the decision does not deal with the interpretation of sub-
heading 3003.30 vis-a-vis 3003.1 O; that the tribunal rightly held that the
cough drops and throat drops cannot be classified as Ayurvedic medicament
under sub-heading 3003.30 as it is not manufactured in accordance with the
...
H formulae prescribed in Ayurvedic texts and, therefore, though the ingredients

-
NATURALLE HEALTH PRODUCTS (P) LTD. v. C.C.E. 435
may be Ayurvedic, the formulation is not Ayurvedic; and that the onus of A
proving that the goods fall within the exception is on those who claim that
exception and in the instant case this onus has not been discharged inasmuch
as it has not been found that these are medicines used exclusively in the
Ayurvedic system of medicine.

Allowing the appeal, the Court B
HELD: I. 'Medicated cough drops' and 'throat drops' and "Sloan's Balm"
and "Sloan's Rub" manufactured in accordance with and under the licence
issued under the Drugs and Cosmetics Act, 1940 for the manufacture of
"Ayurvedic Drugs" are classifiable as ayurvedic medicines under Chapter
Heading 3003-30 attracting nil rate duty. The tribunal erred in holding that C
the goods manufactured by the appellants are to be classified under Chapter
sub-heading 3003.10 chargeable to duty at 15% ad valorem.
(438-C-E; 456-E-FJ

2.1. A patent Ayurvedic medicament could be one where all the
ingredients find mention in the authoritative text books on Ayurveda, though D
the formula for preparation of the medicament is not in accordance with the
formula given in those text books. In the instant case, all the ingredients are
mentioned in the authoritative text books on Ayurveda. The essential character
of the medicine and the primary function of the medicine is derived from the
active ingredients contained therein and it has certainly a bearing on the E
determination of classification under the Central Excise Act. Mere fact that
the ingredients are purified or added with some preservatives does not really
alter their character. The ingredients used in these products have sources
as natural herbs and extracts taken from such herbs and have been purified
to the pharmaceutical grade before using the same. It is incorrect to say that
the assessee is not using genuine and pure Ayurvedic ingredients. There is F
no such admission anywhere. The assessee has been submitting throughout
that the ingredients used are mentioned in authoritative Ayurvedic text books
and they are natural products from herbs and plants which were only relined.
Furthermore, in the first appeal, the products satisfy the definition in Section
3(h) of Drugs & Cosmetics Act as 'patent or proprietary' Ayurvedic medicines G
also. The manufacture of the medicament is being done under the Ayurvedic
drug licence issued by competent authority.
[454-B-C; 455-F-G; 454-G-H; 455-A; 454-C-DJ

Amrutanjan Limited v. Collector ofCentral Excise, (1995) 77 ELT 500
SC, relied on. H
-,
436 SUPREME COURT REPORTS [2003) SUPP. 5 S.C.R.

A 2.2. The Government of India examined the paramete~ prescribed by
the tribunal in Mis Richardson Hindustan case which was upheld by this Court
and issued the circular clarifying the correct position in regard to the
classification under sub heading 3003.30 and reiterated the two tests, namely,
that the product should be known as Ayurvedic medicament in the common
B parlance and ingredient should be mentioned in Ayurvedic text-books. The
submission that the circular only indicate that the Government has accepted
the two tests for determining a medicine as Ayurvedic medicine and acceptance
of these do not absolve the assessee from the onus of proving the exclusive
character of drug as Ayurvedic medicament and that the appellants have failed
to discharge the onus, cannot be accepted. (449-D-E; 451-8-C-D; E)
c Richardson Hindustan ltd. v. Collector of Central Excise, (1988) 35
ELT 424 T, approved.

2.3. In Richardson Hindustan case 'Vicks Vaporub' and inhaler have
been held to be Ayurvedic medicines coming under classification No.3003.30.
D If those two products having the same brand name 'Vicks' are treated as
Ayurvedic medicines falling under classification No.3003.30 after applying
the tests laid down by the tribunal, there is no reason why the same
classification should not apply to the products in the instant case. (454-F-G)

Richardson Hindustan Ltd v. Collector of Central Excise, (1989) 42
E ELT AlOO, relied on.

2.4. When there is no definition o,f any kind in the relevant taxing
statute, the articles enumerated in the tariff schedules must be construed as
far as possible in their ordinary or popular sense, that is, how the common
man and persons dealing with it understand it. If the customers and the
F practitioners in Ayurvedic medicine, the dealers and the licensing officials
treat the products in question as Ayurvedic medicines and not as Allopathic
medicines, that fact.gives an indication that they are exclusively ayurvedic
medicines or that they are used in Ayurvedic system of medicine, though it is
a patented medicine. This is especially so when all the ingredients used are
mentioned in the authoritative books on Ayurveda. [455-D-F)
G
2.5. In the first appeal, the affidavits of Ayurvedic practitioners were
filed before the adjudicating authority to establish that these products are
recognized and being used in Ayurvedic system of medicine. Assistant
Collector, and the other authorities including the tribunal did not consider
such material. Furthermore, the department did not rely on any contra
H evidence. In the other appeal, the assessee filed affidavit5 from doctors, users
NATURALLE HEAL TH PRODUCTS (P) LTD. v. C.C.E. 437
and stockists and also furnished clinical trial report from Government A
Ayurvedic Hospital, which was not rebutted by the Department by producing
. any contra evidence. The label of the product showing it as Ayurvedic medicine
was also relied on. Collector (Appeals) gave a finding that the common
parlance and ingredient tests are satisfied against which tribunal merely
commented that a few certificates given by a doctor or owner of a medical B
shop does not advance the case of the assessee and allowed the Revenue's
appeal following the impugned order in the abovesaid appeal.
[455-G-H; 456-A-C)

2.6. In the absence of any material on record as to how the products are
treated and understood in U.K., U.S.A etc. the observations of the Members of C
the Tribunal that there is mention of similar names of goods in Martindale
and patent of the same in USA and marketed there as allopathic medicine are
not warranted. The same was also not alleged in the show cause notice.
Further, even if it is a patented medicine in U.S.A., it does not cease to be an
exclusively Ayurvedic medicine if it has the characteristics of such medicine.
[454-D-EJ D
Richardson Hindustan Limited v. Collector of Central Excise, (1988)
35 ELT 424 T; CCE, Hyderabadv. Mis Richardson Ltd, (1989) 42 ELT A100
SC, CA No. 2127of1988, order dated 10.1.1989; Shri Baidyanath Ayurved
Bhawan Private Limitedv. Collector of Central Excise, (1991) 51 ELT 502;
Amrutanjan Limited v. Collector of Central Excise, (1991) 32 ECR 538 T; E
Amrutanjan Limited v. Collector of Central Excise, (1995) 77 ELT 500 SC;
Commissioner of Central Excise, Allahabad v. Himtaj Ayurvedic Udyog
Kendra, (2003) 154 ELT 323 SC; Himtaj Ayurvedic Kendra v. CCE, (2002)
139 ELT 610; Commissioner ofCentral Excise, Calcuttav. Pandit D.P. Sharma
(2003) 154 ELT 324 and Commissioner ofCentral Excise, Calcutta v. Sharma F
Chemical Works, (2003) 154 ELT 328 SC, referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2072 of 1996.

From the Judgment and Order dated 17 .10.95 of the Central Excise
Customs and Gold (Control) Appellate Tribunal, New Delhi in A. No. E/1062/
93-C in F.O. No. 294of1995-C. G
WITH
C.A. No. 10744 of 1996

Raju Ramachandran, Additional Solicitor General, Joseph Vellapally, V.
Lakshmikumaran, Alok, Ms. Pragya Bhagei, Ms. Meghna Mishra, Ankur, H
438 SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.

A Hrishikesh, R.N. Karanjawala, Ms. Ruby Singh Ahuja, Ms. Manik Karanjawala,
Ajay Aggarwal, Thomas Vellapally, Rajan Narain, Dalip Tandon, B.K. Prasad,
Sanjay Grover and Ms. K.Sumathi Rao for the appearing parties.

The Judgment of the Court was delivered by

B DR. AR. LAKSHMANAN, J. The points involved in both the appeals
are one and the same and, therefore, they were heard together by consent of
parties.

The issue involved in Civil Appeal No. 2072 of 1996 is:

C Whether or not medicated cough drops and throat drops manufactured
by the appellants in accordance with and under the licence issued under the
Drugs and Cosmetics Act, 1940 forthe manufacture of"Ayurvedic Drugs" are
classifiable as Ayurvedic Medicaments for the purpose of levy of central
excise duty.

D The issue for determination in Civil Appeal No. 10744 of 1996 is:

Whether the products "Sloan's Balm" and "Sloan's Rub" are ayurvedic
medicines and are classifiable under Chapter Heading 3003-30 as contended
by the appellants attracting nil rate duty OR Classified under Chapter sub-
E heading 3003.10 chargeable to duty at 15% ad valorem.

The facts briefly stated in Civil Appeal No. 2072 of 1996 leading to the
filing of this appeal are as under:-

The appellants - Mis Naturalle Health Products (P) Limited, Hyderabad
filed the classification list as required under Rule 173-B of the Central Excise
F Rules, 1944 with the Assistant Collector of Central Excise claiming classification
of their goods under sub-heading 3003.30 read with erstwhile notification No.
32/89-CE dated 01.03 .1989. The appellants were issued a loan licence to
manufacture for sale of Ayurvedic drugs under the Drugs and Cosmetics Act,
1940 and the said loan licence was renewed from time to time. A show-cause
G notice was issued by the Assistant Collector of Central Excise calling upon
the appellanis to show cause why the said goods should not be classified
as Patent or Proprietary Medicaments under sub-heading 3003. l 0 of Central
Excise Tariff attracting excise duty at the rate of 15% ad valorem. The
appellants replied to the show-cause notice and denied that the said goods
are not Ayurvedic Medicaments and submitted that the grounds raised in the
H
NATURAL LE HEALTH PRODUCTS (P) LTD. v. C.C.E. [LAKSHMANAN, J.] 439
show-cause notice were not relevant for determining the classification of the A
goods. The Assistant Collector, after giving a personal hearing, vide Order
dated 14.03.1991 held that the said goods are classifiable as Patent or
Proprietary Medicaments under sub-heading 3003.10 of the Central Excise
Tariff and accordingly is assessable to duty thereon. The appeal filed by the
appellants before the Collector of Central Excise was dismissed on 21.02.1992 B
upholding the Order dated 14.03.1991 of the Assistant Collector. The appellants
challenged the said Order by filing Writ Petition No. 4030 of 1992 in the High
Court of Andhra Pradesh which was dismissed on 12.03.1993 on the ground
of alternative remedy. The appellants filed an appeal to the CEGAT on the
grounds set out in their memorandum of appeal. The CEGAT, New Delhi by
its final order dated 17.10.1995 by a majority of2:1 dismissed the appeal and C
upheld the classification of the said goods as Patent or Proprietary
Medicaments under sub-heading 3003.10 instead of appellant's claim as
Ayurvedic medicine under sub-heading 3003.30. The Vice-President opined
that the matter needs to be referred to a larger Bench keeping in view the
importance of the issue involved in the industry as. a whole. However, he
agreed with the Member (Technical) on many points. Aggrieved by the said D
order, the appellants preferred the present appeal under Section 35 L(B) of the
Central Excise and Salt Act, 1944.

Civil Appeal No. 10744 of 1996

The short facts are: E

The appellants manufactured two medicaments known as "Sloan's Balm"
and "Slaon's Rub" out of the ingredients which are mentioned in the texts on
the Ayurvedic system of medicine and in accordance with the principles
therein. According to the appellants, the issues in their appeal stand covered F
by the decisions in the case of Richardson Hindustan Limited v. 'Collector
a/Central Excise, (1988) 35 ELT 424 (T) as confirmed by this Court reported
in 1989 (42) ELT AIOO and the ·decision in the case of Shri Baidyanath
Ayurved Bhawan Private Limited. v. Collector of Central Excise reported in
1991 (51) ELT 502 and 1985 (22) ELT 844 which decisions have been confirmed
by this Court in 1996 (83) EL T 492. The appellants filed Exhibit B l-B3 list of G
'authoritative texts' in En'glish, Hindi and TeIJgu on the Ayurvedic system of
Medicament in which the ingredients of the two products are mentioned.
They also filed Exhibits C 1 and C2 Licences issued by the Director, Indian
Medicines and Homeopathy, Hyderabad for the manufacture of Ayurvedic
Medicine, namely, "Sloan's Balm and "Sloan's Rub". The appellants filed H
440 SUPREME COURT IL PORTS (2003] SUPP. 5 S.C.R.

A classification list in respect of the said products classifying the same under
Chapter sub-heading 3003.30 as Ayurvedic Medicine attracting nil rate of
duty. Two Show-cause notices were issued upon the appellants to show
cause as to why the said products should not be classified under Chapter
sub-heading 3003.10 as patent or proprietary medicine attracting duty at 15
% ad va/orem. The appellants replied to the show-cause notice relying upon
B the Tribunal's decision in the case of Richardson Hindustan Limited (supra).
The Assistant Collector, however, classified both the products under Chapter
sub-heading 3003.10 chargeable to duty at 15% ad va/orem. The appellants
filed two appeals to the Collector of Central Excise (Appeals) and also filed
before the Collector (Appeals), a report in respect of clinical trials conducted
C in respect of the said two products. The Collector of Central Excise remanded
the case to the Assistant Collector. for de novo adjudication. The Assistant
Collector issued two revised show-cause notices. The appellants sent a reply
to the show-cause notices. The Assistant Collector by two separate orders
rejected the contentions of the appellants. Two appeals were filed before the
Collector Central Excise (Appeals). The Collector of Central Excise allowed the
D appeals and set aside both the orders of the Assistant Collector and upheld
that the products are ayurvedic medicines and are classifiable under Chapter
heading 3003.30. Aggrieved by the said order, the Collector of Central Excise
filed an appeal to the CEGAT, which by its order allowed the appeal. Aggrieved
by the said decision of the Tribunal, the present appeal has been preferred
E by the appellants - Akin Laboratories Ltd.
We heard Mr. V. Lakshmikumaran, learned counsel and Mr. Joseph
Vellapally, learned senior counsel for the respective appellants and Mr. Raju
Ramachandran, learned Additional Solicitor General for the respondent in
both the appeals.
F
Mr. Lakshmikumaran, learned counsel took us through the pleadings,
exhibits marked and the relevant provisions of law and of the orders passed
by the authorities concerned including the Tribunal and of this Court both
for and against. Mr. Joseph Vellapally, learned senior counsel, also invited our
attention to the relevant records and of the orders passed by the statutory
G authorities and of this Court in various decisions.
We have perused the pleadings, annexures and the decisions cited by
both sides and heard elaborate arguments advanced by the counsel for both
the parties.
H Mr. Lakshmikumaran submitted that the authorities below rejected the
NA TURALLE HEALTH PRODUCTS (P) LTD. v. C.C.E. [LAKSHMANAN, J.] 44 J
appellant's claim on the basis of decision of the "Tribunal in the case of A
Amrutanjan limited v. Collector ofCentral Excise, (1991) (32) ECR 538. The
order of the Tribunal in Amrutanjan Limited is, however, set aside by this
Court in the case of Amrutanjan Limited v. Collector of Central Excise,
reported in 1995 (77) ELT 500. He would, therefore, contend that the issue
involved in the present case is covered by the judgement of this Court in the
case of Amrutanjan Limited (supra). Notwithstanding the judgment of this B
Court in Amrutanjan Limited (supra), the Tribunal by a majority of two
members to one dismissed the appeal and upheld the order of the lower
authorities classifying the cough drops and throat drops as patent or
proprietary medicines.

Before considering the arguments advanced by Mr. Lakshmikumaran, it
c
is useful to narrate certain facts in regard to the products manufactured by
the appellants. We have already noticed that the appellants are, inter alia,
engaged in the manufacture of ayurvedic drugs including medicated cough
drops and vaporet throat drops on job work basis for Procter and Gamble
India Limited (hereinafter referred to as PGIL) to market them under the brand D
name Vicks. The said goods are manufactured by the appellants in accordance
with and under a Joan licence issued to PGIL for manufacture of ayurvedic
drugs under the Drugs and Cosmetics Act, I 940.

According to the appellants in Civil Appeal No. 2072 of 1996, the
following are the ingredients for the manufacture of the cough drops and E
throat drops:
Vicks Medicated Vicks Vaporat
Cough Drops Throat Drops

Pudinah Arka Pudinah Arka F
Karpoor Nilgiri Tel
Ajowan Ke Phool Sugar base
J ~~.
Sugar base
In the two appeals, the classification of the medicines manufactured by
them are in dispute. According to the appellants in both the appeals, the G
goods manufactured by them are classifiable under Chapter sub-heading
3003.30 (heading 30.03). According to the Revenue, the goods manufactured
by both the appellants are to be classified under Chapter sub-heading 3003.10
chargeable to duty at I 5 % ad va/orem.

H
442 SUPREME COURT REF0RTS [2003] SUPP. 5 S.C.R.

A For ready reference heading 30.03 i:; reproduced hereunder:

Heading Sub- Description of Goods Rate of
No. Heading No. Duty
30.03 Medicaments (including
veterinary Medicaments)
B
3003.10 Patent or proprietary Medicaments, 15%
other than those Medicaments
which are exclusively Ayurvedic,
Unani, Siddha, Homoeopathic or
Bio-Chemic
c
300320 Medicaments (other than patent
or proprietary) other than
those which are exclusively used 15%
in Ayurvedic, Unani, Siddha,
Homoeopathic or Bio-Chemic
D systems

300330 Medicaments, including those
used in Ayurvedic, Unani, Siddha, Nil
Homoeopathic or Bio-Chemic
systems
E
The effective rate of excise duty under Tariff sub - heading 3003.30 read with
Notification 32/89- C.E., dated 1.3.1989, is NIL.

Mr. Lakshmikumaran, learned counsel for the appellant, submitted that
the defmition of Ayurvedic medicine in Section 3(a) of the Drugs and Cosmetics
F Act cannot be applied for the purposes of the classification of a product for
Central Excise duty under the Central Excise and Salt Act I944 and the Central
Excise Tariff Act 1985 and that when there is no definition of any word in the
relevant statute, the word must be construed in its popular sense i. e. how
the common man who uses it, understands it. Arguing further the learned
G counsel for the appellant submitted that the Tribunal has not only ignored
both the tests but has on the contrary based its order on the definition of
Ayurvedic Medicine in Section 3(a) of the Drugs and Cosmetics Act. It is
submitted the Chapter Note.2 which indicates the meaning of "medicament"
and "patent" and "proprietary medicament" and "drugs" does not refer to
Drugs and Cosmetics Act 1940 and that there is every reason to believe that
H the Legislature has intentionally adopted a different definition for medicament,
NA TURALLE HEALTH PRODUCTS (P) LTD. v. C.C.E. [LAKSHMANAN, J.] 443
drug and patent and proprietary medicament etc. It is further submitted that A
when the phrase 'pharmaceutical product' is peculiar to Central Excise Schedule
and does not mean medication in the Drugs and Cosmetics Act and even the
word 'drugs' used in Note 2(ii) has been used in the Central Excise Schedule
only to show that it falls within the ambit of medicament and that too in a
sense different from the one used in the Drugs and Cosmetics Act where it B
has a specific connotation for the purpose of that Act as it excludes Ayurvedic,
Siddha or Unani drugs and includes not only medicines but other substances
and devices; this is, however, not the case in the Central Excise Tariff.
According to the appellants, the Tribunal failed to appreciate that the
appellant's products which contained the Ayurvedic ingredients as aforesaid
were prepared in accordance with the Ayurvedic principles. It is further urged C
that the formulations have been developed after referring to several authoritative
Ayurvedic books and careful evaluation of actions, clinical trials etc., and that
the formulations have been approved by the Director of Indian Medicine and
Homeopathy, Government of Andhra Pradesh. It is further submitted that the
Tribunal failed to appreciate that the orlus of classification of a product is on
the Excise Department and that the Excise Authorities are required to produce D
the evidence to support their stand. In the present case, no evidence
whatsoever has been produced by the Excise Department and they have not
even rebutted the evidence produced by the appellants.

Learned counsel for the appellants contended that as the classification E
of the goods in question has been determined by the competent authority
under the Drugs Act who on application for licence to manufacture Ay.urvedic
drugs in the prescribed statutory form has issued a licence for manufacture
and sale of Ayurvedic drugs, the Central Excise Authorities have to act on
that basis and it is not open to the Central Excise Authorities to go beyond
the same or sit in judgment thereon. According to Mr. Lakshmikumaran the F·
expression "Ayurvedic drug" is not defined in the Act and the rules made
thereunder, assistance of the Drugs Act can be taken to understand the scope
of sub-heading 3003.30 ofCET. It is submitted that the Tribunal has failed to
appreciate that sub-heading 3003. I 0 excludes patent or proprietary medicaments
other than those medicaments which are exclusively Ayurvedic, Unani, Siddha, G
Homeopathic or Bio-Chemic from the class of patent or proprietary medicaments
covered thereunder. According to the appellant that merely because the word
"Exclusively" appeared in sub-heading 3003.10, it does not mean that the
same would take colour and have the same meaning as the word "Exclusively"
appearing in definition of"Ayurvedic drug" in Section 3(a) of the Drugs Act.
In this context, it is submitted that the Tribunal has failed to appreciate that H
444 SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.

A the word "Exclusively" appearing in sub-heading 3003. IO is used to cover
Patent or Proprietary Allopathic Medicaments as distinct from Patent or
Proprietary Ayurvedic, Unani and Siddha medicaments. On the other hand,
the word "Exclusively" appearing in Section 3(a) of the Drugs Act was to
distinguish the Ayurvedic medicaments from Patent or Proprietary Ayurvedic
B medicaments defined in Section 3(h) of the Drugs Act and not to distinguish
between the Allopathic medicines on one hand and Ayurvedic, Unani and
Siddha medicaments on the other hand. Therefore, it is submitted that the
word "Exclusively" appeared in different context and for different purposes
and under sub-heading 3003. IO and Section 3(a) of the Drugs Act and,
therefore, the meaning of the word "Exclusively" appearing in 3(a) of the said
C Act cannot be borrowed or applied for the purpose of determining the scope
and.ambit of sub-heading 3003.10 as opined by the learned Member (Technical).
It is also submitted that the Tribunal has failed to appreciate that the word
"Exclusive" means exclusiveness qua the individual assessee and that this
. exclusivity is licensed by the Drug Controller and that as the said goods are
marketed as Ayurvedic medicament in India, the same are "Exclusively
D Ayurvedic" qua that manufacturer. It is further argued that on a true and
correct construction, sub-heading 3003.10 excludes Patent or Proprietary
medicaments which are manufactured, sold and marketed as Ayurvedic
medicaments in accordance with the license issued under the Drugs Act i.e.
Patent or Proprietary Ayurvedic medicaments falling under Section 3(h) of the
E Drugs Act and, therefore, Section 3(a) has no application at all in construction
of sub-heading 3003.10 of CET. It is submitted that since the sub-heading
3003.10 excludes Patent or Proprietary Ayurvedic medicament as defined in
Section 3(h) of the Drugs Act, the word "Exclusively" does not and cannot
have the same meaning as appearing in Section 3(a) of th1: Drugs Act which
defines Ayurvedic Drugs and not Patent or Proprietary Ayurvedic drug and
F that as the goods are Patent or Proprietary Ayurvedic medicaments within the
definition given in Section 3(h) of the Drugs Act, Section 3(a) of the Drugs
Act does not apply at all in the present case. II' is also submitted that the
Tribunal (Member (J)) has erred in holding that the formulae and patent of
the appellant company is registered in America which is without any evidence
G or material on record and that the Tribunal has proceeded on an erroneous
footing by recording the alleged admission regarding the method of
manufacture and/or marketing of the said goods as Allopathic medicine in
America and thereby misdirected itself in law and on facts and that the
formula of goods bearing the name "Vicks' as manufactured in America is
different and, therefore, the same cannot be compared to the said goods as
H was apparent from the reference to Martindale.
NATURALLE HEALTH PRODUCTS (P) LTD. v. C.C.E. [LAKSHMANAN, J.] 445

Mr. Raju Ramachandran, learned Additional Solicitor General in reply to A
the arguments advanced by the counsel for the appellant submitted that the
Tribunal has rightly held that the cough drops and throat drops cannot be
classified as "Exclusively" Ayurvedic medicaments as its product is not
manufactl!red in accordance with the formulae prescribed in Ayurvedic texts
and, therefore, the Tribunal has rightly held that though the ingredients may B
be Ayurvedic, the formulation is not Ayurvedic and, therefore, cannot be
classified under sub-heading 3003.30. According to Mr. Raju Ramachandran,
a bare perusal of the three sub-headings, namely, 3003.10, 3003.20 and 3003.30
would indicate that the first sub-heading covers all patent or proprietary
medicaments, the second sub-heading covers other medicaments which are
not patent or proprietary and the third sub-heading covers medicaments used C
in Ayurvedic, Unani, etc. systems and, therefore, it is important to ~ote that
sub-heading 3003.30 uses the word "used in" ....."systems". It is submitted
that a system of medicine pre-supposes a systematic practice of medicine
where there is a patient and practitioner. For a medicament to qualify to fall
under this sub-heading it is necessary to establish that a .practitioner of
Ayurvedic medicine prescribes the medicine in question in the normal course D
of his treatment and in both the present appeals, the Tribunal has not found
that this has been established and, therefore, this Court would not interfere
with question of facts.

In regard to the word "Exclusive" which is used both in sub-headings E
3003.10 and 3003.20 Mr. Raju Ramachandran would submit as follows:-

"The word "exclusive" is used both in sub headings 3003. I 0 and
3003.20. If what falls under 3003.30 is a "classical" Ayurvedic medicine
(because that is what will be prescribed by an Ayurvedic practitioner
practising the Ayurvedic system of medicine) then the expression p
"exclusively Ayurvedic" must again be the same classical Ayurvedic
product which means it must fulfill both the ingredients of Section 3
(a) of the Drugs and Cosmetics Act, namely that its ingredients must
all be those specified in the authoritative text books, and the formulae
of its manufacture must be strictly in accordance with the formulae
prescribed in those text books. Admittedly, the said formulae are not G
followed in both the cases and, therefore, the· products in question
cannot fall under sub heading 3003.30."

Replying to the argument of the counsel for the appellant that since
classical Ayurvedic products can never be patent or proprietary medicines,
H
446 SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.

A the exclusion clause in sub-heading 3003.10 would be meaningless unless it
comprehends neo-Ayurvedic products such as theirs. Mr. Raju Ramachandran
contends that this exclusion is by way of abundant caution only to indicate
that classical Ayurvedic products falling under sub-heading 3003.30 would
not fall under sub-heading 3003. I0, and it is well known that often expressions
B are used by way of abundant caution or clarification which does not mean
that they are surplusage. In any event, even if the Court were to come to the
conclusion that these words are surplusage, there need not be any inhibition
in this regard. It is further submitted that these words occur not in a substantive
section of the statute but in a sub-heading of a classification, which is part
of a statute and if it is accepted that it is only classical Ayurvedic medicaments
C which would fall under sub-heading 3003.30, the interpretation placed by the
Revenue on 3003.10 must also be correct. It is submitted that the onus of
proving that the goods fall within the exception would surely be on those
who claim that exception and in the instant case this onus has not been
discharged inasmuch as it has not been found that these are medicines used
exclusively in the Ayurvedic system of medicine. Referring to the judgment
D of this Court in the Commissioner of Central Excise, Allahabad v. Himtaj
Ayurvedic Udyog Kendra, reported in 2003 {154) ELT 323 (SC), it is submitted
by learned counsel for the respondent that the said cases were decided as
a culmination of show cause notices issued by the Revenue seeking to
classify the product in question as a perfumed hair oil and not as a medicament.
E There was, therefore, no occasion for the Revenue to ever argue on their
appropriate classification within Chapter heading 3003, namely, 3003.10 or
3003.30. It is, therefore, submitted that the observation both of the Tribunal
and of this Court in the Himtaj Hair Oil cases have to be understood as
obiter dicta, do not preclude this Court from arriving at an independent
conclusion.
F
Referring to the case of Vicks Vapourub which confim1s the judgement
of the Tribunal it is submitted by the learned counsel for the respondent that
it does not again militate against the contention of the Revenue. In that case,
the matter was remanded to see whether in common parlance the product in
G question was an Ayurvedic medicine and as already stated the common
parlance test is accepted by the Revenue itself, but what is required to be
seen is whether the said test is satisfied in the present case and the answer
to that question must be in the negative.

Referring to the judgment of this Court in Amrutanjan case, Mr. Raju
H Ramachandran submitted that the said decision does not preclude the
NATURALLE HEALTH PRODUCTS (P) LTD. v. C.C.E. [LAKSHMANAN, J.] 447
contention of the Revenue and a.II that the decision holds is that the fact that A
certain ingredients were of a synthetic nature would not mean that the products
became non-Ayurvedic and that the said decision do not deal with the
interpretation of sub-heading 3003.30 vis-a-vis 3003.10.

We have given our anxious consideration to the points urged by the
learned counsel for the appellants and learned counsel for the respondent B
with reference to the pleadings, provisions of law and the decisions of the
Tribunal and of this Court.

It is not in dispute that the products in question are Vicks Medicated
cough drops and Vicks Vaporub throat drops. The appellants manufacture
these products under Ayurvedic Drug Licence. All the ingredients contained C
in these products are admittedly mentioned in authoritative Ayurvedic Text
Books mentioned in Schedule III to the Drugs and Cosmetics Act. However,
the formula of preparing the products is proprietary to the appellant in
C.A.No.2072/1996. The appellant submitted that the ingredients contained in
the products are manufactured from natural herbs like menthol etc., but D
purified to the pharmaceutical grade. The appellant claims the classification
of the products in question as patented/proprietary Ayurvedic medicaments
under heading 3003.30 while the Central Excise Department seeks to classify
the said products under heading 3003.10.

We have perused the orders passed by the Assistant Commissioner and E
the Commissioner (Appeals) who decide the appeals against the assessee in
C.A.No.2072/1996 on two grounds, namely:

(i) The products are not manufactured according to the formula in any
authoritative text books on Ayurved; and
F
(ii) The judgment of the CEGAT in the case of Amrutanjan Ltd
Madras v. CCE Madras, reported in [1991] 32 ECR 538 is applicable
to the appellant.

We have perused the order in Amrutanjan case passed by the CEGAT
wherein the Tribunal held that the products were having pharmaceutical name G
but the assessee was using Hindi name only to claim classification as
Ayurvedic Medicine. This order of the Tribunal was overruled by this Court
in the case of Amrutanjan Ltd v. CCE, reported in (1995) 77 ELI 500 SC.
Unfortunately, the Assistant Commissioner and the Commissioner (Appeals)
relied on the overruled judgment of the CEGA T, because the judgment of this H
448 SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.

A Court was not available at the time they decided the matter. The Tribunal
distinguished the same. It was held by this Court in Amrutanjan 's case that
the ingredients, which are used in preparation of ayurvedic medicines even
if they are used after refinement or bringing them to phannaceutical quality,
they do not become synthetic in nature. It is immaterial that the same articles
B bearing a different nomenclature are also known and used in allopathic system.
Though the question whether the formula for preparation should be in
accordance with authoritative ayurvedic texts was not dealt with by Their
Lordships, the appellant's claim gets considerable support from this decision.
By the same token of reasoning, the drugs in question can also be treated
as ayurvedic medicaments as there is no dispute that all the ingredients find
C place in the books on Ayurvedic medicine.

Extensive arguments were advanced by the counsel appearing on either
side on the heading 30.03 and sub-headings 3003.10, 3003.20 and 3003.30 we
have reproduced the arguments advanced by them in the paragraphs (supra).

D Learned counsel for the appellant invited our attention to the order
passed by the Tribunal in the case of Richardson Hindustan Ltd. v. CCE,
reported at (1998) 35 ELT 424. The Tribunal in that case held that there is no
definition of Ayurvedic medicaments in the Central Excise and Salt Act or in
the Central Excise Tariff Act. Although Ayurvedic medicines have been defined
in Section 3 (a) of the Drugs and Cosmetics Act, the same cannot be applied
E for the purpose of classification of a product for Central Excise duty in view
of the judicial pronouncements on the subject. The Tribunal held as under:

"It is now a settled principle of law that when there is no definition
of any word in the relevant statute, the word must be construed in
its popular sense i.e. the meaning as understood by the people
F conversant therewith. The appellants have produced opinions from
physicians, certificates from consumers and certificates from retail
sellers to show that, in the common parlance, Vicks Vaporub and Vicks
Inhaler are treated as Ayurvedic medicines. The registration certificate
issued by the D.G.T.D. and the manufacturing licence issued by the
G licensing authority also show the appellants' product as Ayurvedic
medicines. The categorisation made by these authorities have
persuasive value. Further, the ingredients ov Vicks Vaporub are Pudine
ke phool, Kapur, Banafshah and Sarala Drava. The ingredients and
other quantum are mentioned on the product's labels. In the case of
Vicks Inhaler, the appellants have also filed photocopies of certain
H slokas from the books of Ayurvedic medicines describing the nasal
NATURALLE HEALTH PRODUCTS (P) LTD. v. C.C.E. [LAKSHMANAN, J.] 449
inhaler device. The products will, therefore, merit classification under A
Tariff Heading "3003 .30 - Medicaments including those used in the
Ayurvedic system of medicines" if all the ingredients of the products
find mention in authoritative book(s) on Ayurvedic medicines. The
matter is, accordingly, remanded to the Assistant Collector for de
novo examination from this aspect."
B
This decision has been affirmed by this Court while dismissing the
appeal filed by the Revenue. The order reads thus:-

"Having regard to the facts and the circumstances of the case and in
view of the findings made by the Tribunal and the points upon which
it has remanded the matter to the Assistant Collector, we are of the C
opinion that the Tribunal has proceeded in the facts of this case on
a correct basis and the order of the Tribunal does not call for any
interference. The appeal fails and is, therefore, dismissed accordingly."

We are told that after remand, the adjudicating authority classified Vicks D
Vaporub and Inhaler under sub-heading 3003.30.

At the time of hearing, our attention was drawn to circular No.25/91
dated 3. I 0.1991 issued by the Department after the decision in Richardson
Hindustan's case (supra) laying down the twin tests, namely (i) that the
product should be known as Ayurvedic medicament in the common parlance E
and (ii) the ingredients should be mentioned in Ayurvedic text books. It is
beneficial to reproduce the circular for better understanding of the case. The
circular reads thus:-

"Circular: 25/91 dated 03-0ct-1991

Ayurvedic medicine Classification of[Chapter 30] F

Circular No.25/91, dated 3-10-1991
Government oflndia
Central Board of Excise & Customs
. New Delhi G
Subject: Central Excise - Chapter 30 - Classification of the products
claimed as Ayurvedic medicine under the C.E.T.A., 1985 -
Classification regarding

I. Representation have been received from manufacturer of
Ayurvedic preparations that they have been facing problems in H
Ii
450 SUPREME COURT REPORTS (2003] SUPP. 5 S.C.R.

A different Central Excise Collectorates in the matter of identification/
classification of such products. The doubts relate to the question as
to whether the products claimed to be Ayurvedic medicine, are in fact
so, and whether those would merit classification under Sub-heading
No.3003.30 of the Sch~dule to the Central Excise Tariff Act, 1985.

B 2 According to the guidelines already in vogue, each medicament
used in the various systems of treatments eg. Ayurvedic, Unani and
Siddha, has to be examined on merits and, in specific cases of doubts,
the Collectors are required to make a reference to the Board, who take·
up the matter with the Drugs Controller of India.

C 3. The Government have f. ;rther examined the matter in the light
of parameters prescribed by the Tribunal in their Order No.116/88-C
dated I 0-2-1988 in the case of Mis Richardson Hindustan Ltd. v.
C. C. E., Hyderabad. The Tribunal held that a preparation would merit
classification as an Ayurvedic medicine, if in the common parlance, it
is known as an Ayurvedic medicine and all its ingredients are mentioned
D
in the authoritative book(s) on Ayurvedic medicines. It has also been
observed that the aforesaid two tests been upheld by the Hon 'ble
Supreme Court in the case of Civil Appeal No.2127 of 1988-C.C.E.,
Hyderabad v. .Mis Richardson Hindustan Ltd. - Supreme Court's
Order dated 10-1-1989.
E
4. The Government have accepted the above referred two tests for
determining the classification of the products claimed to be as
Ayurvedic medicine (excluding herbal or ayurvedic cosmetic) and
these may accordingly, be kept in view while deciding similar cases.

p 5. The classification may be brought to the notice of the lower
field formations and the trade interests may also be suitably advised.

6. All pending assessments of the type indicated above, may be
finalised on the above details."

It is seen from the above circular that the Government have accepted
G two tests for determining the classification of the products claimed to be the
Ayurvedic medicines and the statutory authorities were directed to keep this
in view while deciding similar pending assessments of the type indicated in
the circular and be finalised on the above basis. It is also seen from the
circular that the aforesaid two tests have been upheld by this Court in the
•
H case ofC.A. No. 2127 of(l988)- C.C.E., Hyderabadv. Mis Richardson Ltd.,
NATURALLE HEAITH PROD\ 1CTS (P) LTD. v. C.C.E. [LAKSHMANAN, J] 451

Order dated I 0.01.1989. A
Thus, it is seen that the CEGAT's decision and the circular of the Board
does not lay down any tests regarding the fonnulae of manufacture as per
authoritative Ayurved text books.

However, Mr. Raju Ramachandran argued that the circulars of the B
Department on which the appellants place reliance do not advance their case
and that the circulars only indicate that the Government has accepted the two
tests for detennining a medicine as Ayurvedic medicine and that the acceptance
of these tests do not absolve the assessee from the onus of proving the
exclusive character of drug as Ayurvedic medicament and that the said onus C
the appellants have failed to discharge, we are unable to countenance the said
submission. As already noticed, the Government have issued a circular on the
basis of the representations received from the manufacturers of Ayurvedic
preparations and the doubts in regard to the question whether the products
claimed to be Ayurvedic medicines are, in fact, so and whether they would
merit classification under sub-heading 3003.30 of the Schedule to the Central D
Excise Tariff Act, 1985. The Government of India after examining the matter
in the light of the parameters prescribed by the Tribunal in their Order passed
in Mis Richardson Hindustan Ltd. v. C.C.E., Hyderabad which has been
upheld by this Court in C.A. No. 2127 of 1988 have issued the circular
clarifying the correct position in regard to the classification and reiterating the
said two tests. This argument of Mr. Raju Ramachandran, therefore, has no E
force and is liable to be rejected.

Strong reliance was also placed by the appellant's counsel on the
decision of the larger Bench of the CEGAT in the case of Himtaj Ayurvedic
Kendra v. CCE reported in (2002) 139 ELT 610. In that case the Revenue F
contended that Himtaj Oil will be classified under Heading 33.05 as Perfumed
Hair Oil. The larger Bench of the Tribunal held that it is a medicament falling
under Chapter 30 and it is a patented Ayurvedic medicament falling under
sub-heading 3003.30. The Larger Bench after considering number of orders
passed by the CEGAT including the order passed in Naturalle Health Product
(Impugned order in the present appeal reportt>d in 125 ELT 765) came to the G
conclusion that sub-heading 3003.30 took in both classical as well as patent
or proprietary Ayurvedic medicaments.

The Tribunal observed thus:-

"We are not able to agree with the view taken in 2000 (125) ELT H
452 SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.

A 765 that sub-heading 3003.10 would take in patent or proprietary
ayurvedic medicaments. According to us, subheading 3003.30 took in
both classical as well as patent or proprietary ayurvedic medicaments.

The larger Bench of the Tribunal have thus interpreted the word
"Exclusively Ayurvedic" occurring in sub-heading 3003.30 to say that it
B means those ayurvedic medicaments whose ingredients are mentioned in
authoritative text books on Ayurveda mentioned in Annexure to the Drugs
and Cosmetics Act, 1940. This decision has been affirmed by this Court in
CCEA/lahabadv. Himtaj Udyog Kendra, reported in (2003) 154 ELT 323 SC.
In this case the question was whether Himtaj Oil was classifiable under sub-
C heading 3003.30, that is, Ayurvedic medicament or 3003.10, that is, Perfumed
Hair Oil. The CEGAT has held that Himtaj Oil is classifiable as an Ayurvedic
medicament. In doing so, it has followed the decision of the larger Bench of
CEGAT reported in 2002 (139) ELT 610. This Court in the judgment in
C.A.No.1512 of2001 reported in 2003 (154) ELT 324 Commissioner ofCentral
Excise, Calcutta v. Pandit D.P. Sharma held that Himtaj Oil is classifiable as
D an Ayurvedic medicament and thus approved the larger Bench decision of
CEGAT.

In D.P. Sharma 's case, the Assistant Collector accepted the respondents'
case that the Oil fall under sub-heading 3003.30 but so holding the Assistant
Collector, inter alia, relied on the following material:
E
(a) Drug licence issued by the Drug Controller.
(b) A letter issued by the Superintendent of Ayurvedic Department,
Benaras which stated that the product was an Ayurvedic medicine.
(c) A study report of the institute of Postgraduate Education and
F Research in Ayurved, Calcutta on "Himtaj oil" which classified
this oil as an Ayurvedic protluct which relieved pain in headaches
and migraine and also provided relief against dandruff.
(d) A report prepared by the Range Officer, based on market inquiries
conducted by him with dealers, wholesalers, retailers, customers,
G chemists and druggist, which showed that all treated "Himtaj oil"
as an Ayurvedic Medicament.
(e) A re-testing Report of the Chief Chemist, New Delhi which stated
that no Ayurvedic perfumery could be detected in "Himtaj oil".
(t) SSI Registration Certificate obtained for manufacturing Ayurvedic
H
oil under a drug licence.
NATURALLE HEALTH PRODUCTS (P) LTD. v. C.C.E. [LAKSHMANAN, J.] 453

The Revenue filed an appeal to the Commissioner (Appeals) who allowed A
the appeal of the Revenue and held that there was no evidence to prove that
the product was being ordinarily prescribed by medical practitioners or that
it was used to deal with specific disease. The Commissioner (Appeals) held
that there was nothing to show that common man used the product as
medicine. A further appeal was filed by the assessee before the CEGA T which
allowed the appeal. Considering the report of the Range Officer, this Court B
held that the dealers, wholesalers, retailers, customers, chemists and druggists
all considered "Himtaj oil" to be an Ayurvedic medicament and apart from
that, the other material relied upon by the Assistant Collector also clearly
shows that "Himtaj oil" is an Ayurvedic medicament. In_ this view of the
matter, this Court dismissed the appeal filed by the Revenue. C
The same ratio has been laid down in the other judgment of this Court
in the case of Commissioner ofCentral Excise, Calcutta v. Sharma Chemical
Works, reported in (2003) 154 ELT 328 SC. In that case, this Court held that
the mere fact that a product is sold across the counters and not under a
Doctor's prescription, does not by itself lead to the conclusion that it is not D
a medicament and that merely because the percentage of medicament in a
product is less, does not also ipso facto mean that the product is not a
medicament. This Court further held as under:-

It is settled law that the onus or burden to show that a product fall
within a particular Tariff Item is always on the revenue. Mere fact that E
a product is sold across the counters and not under a Doctors
prescription, does not by itself lead to the conclusion that it is not
a medicament. We are also in agreement with the submission of Mr.
Lakshmikumaran that merely because the percentage of medicament in
a product is less, does not also ipso fact mean that the product is not F
a medicament. Generally the percentage or dosage of the medicament
will be such as can be absorbed by the human body. The medicament
would necessarily be covered by fillers/vehicles in order to make the
product usable. It could not be denied that all the ingredients used
in Banphool Oil are those which are set out in the Ayurveda text
books. Of course the fonnula may not be as per the text books but G
a medicament can also be under a patented or proprietary fonnula. The
main criteria for detennining classification is nonnally the use it is put
by the customers who use ir The burden of proving that Bhanphool
Oil is understood by the customers as an hair oil was on the revenue.
This burden is not discharged as no such proof is adduced. On the H
454 SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.

A contrary we find that the oil can be used for treatment of headache,
eye problem, night blindness, reeling, head weak memory, hysteria,
ammenesia, blood pressure, insomnia etc. The dosage required are
also set out on the label. The product is registered with Drug Controller
and is being manufactured under a drug licence.

B From the above, it is clear that a patent Ayurvedic medicament could
be one where all the ingredients find mention in the authoritative text books
on Ayurveda, though the formula for preparation of the medicament is not in
accordance with the formula given in those text books. It is not in dispute
that all the ingredients are mentioned in the authoritative text books on
C Ayurveda. In fact, in the case of appellant in Civil Appeal No. 2072/1996, the
products satisfy the definition in Section 3(h) of Drugs & Cosmetics Act as
"patent or proprietary" Ayurvedic medicines also. Further, the manufacture of
this medicament is being done under the Ayurvedic drug licence issued by
competent authority.

D The Vice-President and one of the Members of the Tribunal observed
that the products in question are mentioned in Martindale' s "The Extra
Pharmacopoeia" published in U.K. and it is also a patented medicine in USA
and marketed there as Allopathic medicine. These facts were not alleged in
the show-cause notice. In the absence of any material on record as to how
the products are treated and understood in U.K., U.S.A. etc. the observations
E of the learned Members of the Tribunal are not warranted. Even if it is a
patented medicine in U.S.A., it does not cease to be an exclusively Ayurvedic
medicine if it has the characteristics of such medicine. It is also relevant to
note that after remand by the Tribunal in Richardson Hindustan case (which
was confirmed by this Court), we are told that 'Vicks Vaporub' and Inhaler
p have been held to be Ayurvedic medicines coming under classification
No.3003.30. If those two products having the same brand name 'Vicks' are
treated as Ayurvedic medicines falling under classification No. 3003.30 after
applying the tests laid down by the Tribunal, there is no reason why the same
classification should not apply to the products in the present case. As
submitted by the appellant, the ingredients used in these products have
G sources as natural herbs and extracts taken from such herbs and have been
purified to the pharmaceutical grade before using the same. We would also
like to point out that the comment of one of the learned Members that,
admittedly, the assessee is not using genuine and pure Ayurvedic ingredients
is wholly incorrect. There is no such admission anywhere. The assessee has
H been throughout contending that the ingredients used are mentioned in
NATURALLE HEALTH PRODUCTS (P) LTD. v. C.C.E. [LAKSHMANAN, J.] 455

authoritative Ayurvedic text books and they are natural products from herbs A
and plants which were only refined.

In terms of the order passed by the CEGAT in the case of Richardwn
Hindustan Ltd. v. Collector of Central Excise, (1988) (35) 424 (Tribunal)
which has been affirmed by this Court and similar view taken in other cases
referred to supra, the following clear propositions and findings emerge:- B
"(a) That the words 'Ayurvedic Medicine' not having been defined
in the Central Excise and Salt Act, 1944 or the Central Excise Tariff
Act, 1985, the common parlance test would have to be resorted
to find out whether a medicine is treated as an Ayurvedic medicine
by the public; C
(b) That it is necessary that the ingr~dients of Ayurvedic Medicine
should be mentioned in authoritative books on Ayurvedic
Medicines."

We are also of the opinion that when there is no definition of any kind D
in the relevant taxing statute, the articles enumerated in the tariff schedules
must be construed as far as possible in their ordinary or popular sense, that
is, how the common man and persons dealing with it understand it. If the
customers and the practitioners in Ayurvedic medicine, the dealers and the
licensing officials treat the products in question as Ayurvedic medicines and
not as Allopathic medicines, that fact gives an indication that they are E
exclusively ayurvedic medicines or that they are used in Ayurvedic system
of medicine, though it is a patented medicine. This is especially so when all
the ingredients used are mentioned in the authoritative books on Ayurveda.
As rightly contended by the counsel for the appellants, the essential character
of the medicine and the primary function of the medicine is derived from the F
active ingredients contained therein and it has certainly a bearing on the
determination of classification under the Central Excise Act. As held in
Amrutanjan case, the mere fact that the ingredients are purified or added with
some preservatives does not really alter their character.

In C.A. No. 2072 of 1996, the affidavits of Ayurvedic practitioners were G
filed before the adjudicating authority to establish that these products are
recognised and being used in Ayurvedic system of medicine. The Assistant
Collector ignored them with a cryptic observation that they are 'self-serving'.
No other authorities including the Tribunal have considered such material. No
evidence to the contra has been relied upon by the Department. When we H
456 SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.

A come to the appeal of Akin Laboratories Pvt. Ltd., the assessee filed affidavits
from doctors, users and stockists and also furnished clinical trial report from
Government Ayurvedic Hospital, Hyderabad. The label of the product showing
it as Ayurvedic medicine was also relied on. The Collector (Appeals) gave a
finding that both the tests i.e., common parlance and ingredient tests are
satisfied. The affidavit evidence was not rebutted by the Department by
B producing any contra evidence. As against the clear finding of the appellate
Collector, the Tribunal merely commented that a few certificates given by a
doctor or owner of a medical shop does not advance the case of the assessee.
The Tribunal allowed the Revenue's appeal following the decision in Naturalle
Health Products Pvt. Ltd. (Appellant in C.A.No. 2072 of 1996)
c In our view, the Tribunal has completely misdirected itself in law and
on facts by being influenced by the unimportant factors like the mention of
similar names 9f goods in Martindale and patent of the same in USA and
failed to take into account the relevant factors like the issue of licence to
manufacture Ayurvedic drugs under the Drugs Act, the popular understanding
D of the products, the law laid down by this Court in the cases referred to above
and the circular issued by the Government of Intlia in the light of Richardson
Hindustan case. The Tribunal placed undue reliance on the definition of
Ayurvedic medicament in Section 2(a) of the Drugs Act. In our opinion, all
the products ought to be classified as Ayurvedic medicaments under sub-
E heading 3003 .30 of the Central Excise Tariff.
For the foregoing reasons, we have no hesitation to allow both the
appeals and set aside the orders impugned in these appeals passed by the
CEGAT, New Delhi, in appeal No. E/1062/93-C and the Appeal No. E/53195-
C.
F
While admitting the appeal, this Court stayed the impugned order on
condition that the bank guarantee given pending the disposal of the appeal
before the CEGAT be kept alive. Now that the appeals by the appellants are
allowed, the appellants are at liberty to get the bank guarantee discharged
with immediate effect. In the facts and circumstances of the case, we say no
G orders as to costs.
NJ. Appeals allowed.