ORDER
Jeet Ram Kait, Member (T)
1. The Revenue by these appeals challenge the Orders-in-Appeal No. 135/2001-(CBE)(GV.) and No. 136/2001-(CBE)(GCN) both dated 21-6-2001 passed by the Commissioner, Central Excise (Appeals).
2. After hearing both sides the operative portion of the order rejecting the Revenue appeals was pronounced in the open Court on 5-3-2003.
3. The brief facts of the case are that the respondents are manufacturers of Krithika Hair Vitaliser, Saagar Capsules, Saagar Cream, Nimizyne Capsules. Krithika Hair Vitaliser and Saagar Capsules are manufactured by them on job work basis for M/s. Mothi Pharma Pvt. Ltd. who supply the various siddha ingredients to them free of cost while the other items are manufactured out of their own raw materials and sold to M/s. Mothi Pharma Pvt. Ltd. In the month of January, 1998 the officers of the DRI visited the factory premises of the assessee as well as M/s. Mothi Pharma Pvt. Ltd. and according to them the product Krithika Hair Vitaliser was a cosmetic preparation falling under Chapter 3305.10 as against the one claimed by the party under sub-heading 3003.39, and the other items were siddha medicaments. As a follow up action proceedings were initiated against the respondents by issue of show cause notice which culminated in the order of adjudication passed by the Additional Commissioner of Central Excise, where-by he has classified Krithika Hair Vitaliser and Saagar Capsules under heading 3003.10 and demanded duty under Rule 9(2) read with Sub-sections (1) and (2) of Section 11A of the CE Act, 1944 and also imposed penalty under various provisions of Central Excise Rules and also under Section 11AC of the CE Act, 1944. He has also ordered confiscation of the plant and machinery with option to redeem the same on payment of fine of Rs. 5,000/-. He has also demanded interest under Section 11AB of the Act.
4. Aggrieved by the said order of the original authority the assessee filed appeal before the Commissioner (Appeals) who vide Order-in-Appeal No. 135/2001(CBE)(GVN), dated 21-6-2001 held that the product Krithika Hair Vitaliser was also classifiable under Chapter Heading 3003.39 as claimed by the assessee. As regards Saagar capsules, he has noted that the original authority has traversed beyond the scope of the show cause notice by classifying the same under sub-heading 3003.10 when the show cause notice proposed classification under sub-heading 3003.39, as the dispute was only relating to Krithika Hair Vitaliser and not other products. The Commissioner (Appeals) also directed the lower authority to redetermine the value and demand duty at the rate applicable to the said product viz. Krithika Hair Vitaliser under sub-heading 3003.39. By the said order he has also set aside penalty imposed and the fine levied on the assessee.
5. Against the same order-in-original, the department also filed appeal before the Commissioner (Appeals) challenging the classification of the product Krithika Hair Vitaliser adopted by the original authority under subheading 3003.10 as patent or proprietary medicaments other than those medicaments which are exclusively Siddha and claimed classification of the same under sub-heading 3305.10 as perfumed hair oil. The department’s appeal was rejected by the Commissioner vide Order-in-Appeal No. 136/2001 (CBE)(GVN), dated 21-6-2001. It is in the above circumstances that the department has come in appeal. In the appeals, the department has, inter alia taken the following grounds :
(1) Krithika Hair Vitaliser is manufactured by 11 raw materials of plant origin in shade; and cleaning after which it is soaked in the ratio of one part with seven parts of coconut oil previously warmed, thoroughly stirred, heated for complete extracting filtered and mixed with suitable fragrance for packing in plastic containers. The raw materials are individually indicated in the Siddha Pharma formulary separately and no composition as prescribed in the formulary is followed during manufacture. The formulation is assessee's own. Krithika is a brand name owned by M/s. Mothi Pharma for which they have applied for registration with the Trade Marks Registry. (2) The preparation for use on hair are covered under tariff heading 33.05 to the CET, and the Note 2 of Chapter 33 of CET 1997-98 amply covers and include products whether or not mixed (other than aqueous distillates and aqueous solutions of essential oils) suitable for use as goods of these Headings 33.03 to 33.07 and put up in packing with labels, literature or other indications that the form clearly specialised to such use and includes products whether or not they contain subsidiary pharmaceutical or antiseptic constituents are held as having subsidiary curative or prophylactic value. (3) Medicaments are classifiable under Heading 30.03. However, as per Note 1(d) to Chapter 30, this Chapter will not cover preparations of Chapter 33, even if they have therapeutic or prophylactic properties. Thus this product would be classifiable under 33, if it is put up with such indication or is in such form specialised to use as a cosmetic or toilet preparation, even if it has subsidiary therapeutic of prophylactic property. (4) The product is only a Hair Oil and not a medicament though it is stated that the use of this product eradicates dandruff etc. This property is only of a subsidiary nature. (5) In the instant case the product is understood in the common parlance as a "hair preparation" and not as a medicine and this is not prescribed by medical practioners and is available in general stores and supermarkets and the common man buys this as a hair preparation and not as a medicament. (6) The brand name "Krithika" belongs to M/s. Mothi Pharma (P) Ltd. Therefore, the exemption contained in Notification No. 140/83-C.E., dated 5-5-83 as amended would not be applicable to this product, in terms of para 6 of the above Notification and therefore, the product merits classification under sub-heading 33.05 and is chargeable to duty at the tariff rate. 6. Shri A. Jayachandran, learned JDR for the department reiterated the grounds of appeal and submitted that the product "Krithika Hair Vitaliser" is classifiable under Heading 33.05. He has also invited our attention to the judgment of the Hon'ble Apex Court in the case of Baidyanath Ayurved Bhavan v. CCE, Nagpur reported in 1996 (83) E.L.T. 492 (S.C.) wherein it was held that resort should not be had to the scientific and technical meaning of the terms and expression used in the tax laws like Excise Act but according to the popular meaning attached to them by those using the product. The learned DR in the circumstances sought for allowing the Revenue appeals.
7. Shri S.S. Radhakrishnan, learned Counsel for the respondents submitted that the lower appellate authority has passed a well reasoned order and has reached a correct conclusion holding that the product “Krithika Hair Vitalizer” merits classification under heading 3003.39, He has further submitted that the original authority has also very thoroughly discussed the issue in the order-in-original. He submitted that the product is a remedy for hair fall, graying of hair, dandruff and the dosage and the method of application etc. are indicated on the product and this position is not denied by the department. He submitted that a product manufactured out of the ingredients know to the Siddha system or any Indian system of medicine is a medicament of that system and it will attract duty of 8% and a medicament which is manufactured exclusively in accordance with the prescribed text book as mentioned in Drugs Act will not carry any duty. Therefore, irrespective of the fact whether the product is manufactured exclusively as per the prescribed text or is based on the manufacturer’s own formulation, it is a medicament. He has also invited our attention to the judgment of the Hon’ble Madhya Pradesh High Court in the case of Panama Chemical Works v. UOI reported in 1992 (62) E.L.T. 241 wherein it was held that ‘SWAD’ digestive tablets having 3% active ingredients as per Ayurvedic texts and 97% . sugar/liquid glucose for taste and as a preservative is classifiable under subheading 3003.30 of the CET as Ayurvedic medicine and not as a confectionery. He has also invited our attention to Govt. of Tamil Nadu Commercial Department letter dated 20-6-97 clarifying the position that Siddha medicines are exempt under Section 17 of the TNCT Act. Referring to ground (2) above, taken by the Revenue, he submitted that there is no indication in the product packing or in the label or literature that it is for use as cosmetic. The product is also not put up in a form clearly specialised to such use as cosmetic. He submitted that note 2 has not been correctly and fully reproduced in the appeal ground of the Revenue and in fact what is specifically stated in this note is that products “put up in packing with labels, literature or other indications, that they are for use as cosmetics, will be classified under Headings 33.03 to 33.07. Hence Note 2 of Chapter 33 is not applicable to the product in question. He also referred to the printed literature of the product as noted by the original authority which reads “Generally the healing of any diseases by Siddha Sytem of medicine will be felt gradually. But in the case of Krithika Hair Vitaliser the healing will be felt (coolness on the scalp) within 2/3 hours. As the above herbals are saturated (soaked) in purified coconut oil (totally seven times, it is processed) the concentration works effectively. He further submitted that in the grounds of appeal, the Revenue has also stated that as per Note 1(d) of Chapter 30, this Chapter will not cover preparations of Chapter 33 even if they have therapeutic or prophylactic properties. He submitted that what is stated in the note is that preparations of Chapter 33 i.e. cosmetics cannot be classified as medicament even if they have therapeutic or prophylactic properties. He has therefore, submitted that basically the product must be a cosmetic and such a cosmetic product in spite of having medicinal properties cannot be classified as medicament. But in the present case, the product is basically a medicament and the therapeutic or prophylactic properties are substantial and not subsidiary. He further submitted that there is no indication whatsoever either on the carton or in the literature or in the label that the product is a hair oil as contended by the Revenue. On the other hand what is indicated is that it is a unique formulation of ancient siddha medicine enriched with herbals that not only nourishes hair but also gives them natural protection to the hair to stay healthy and beautiful and vanish dandruff and premature grayness. He further submitted that the herbal content in the product is 42% which is in contrast with product known as medicinal hair oil wherein the herbal content is not more than 3% to 5%. Therefore, it is a herbal decoction in oil base and not a hair oil as such for grooming the hair. Further, the price of the product is three times more than the price of perfumed hair oil and this itself is a sufficient evidence that a common man buys this product for specific ailment and not for grooming the hair and good appearance. Further, the Director of Drug Control as per the licence issued in Form 25E which is specific for manufacture of drugs in contrast to the licence issued in Form 31 for manufacture of cosmetics. Referring to the judgment in the case of Shri Baidhyanath Ayurvedic Bhavan (supra) he submitted that the classification has to be decided on the popular meaning and how the product is understood in popular parlance. He submitted that in popular parlance and in the understanding of the common man the product in question is nothing but a medicament and they have also submitted evidence to this effect before the original authority which was taken on file. As regards the ground taken by the Revenue that brand name “Krithika” belongs to another person i.e. M/s. Mothi Pharma Pvt. Ltd. and hence the exemption in terms of Notification No. 140/83-C.E. will not be applicable to the respondents, he submitted that the manufacturer of the impugned product was by M/s. Mothi Pharma Pvt. Ltd. in terms of Section 2(f) of the C.E. Act, 1944 as they were licenced by the Drug authorities to manufacture the product in question. He has also submitted a paper book containing various case laws in support of his plea and prayed for dismissing the appeals of the Revenue.
8. We have carefully considered the rival submissions, and gone through the entire case records and perused the various case laws cited by both sides. We find that the issue that arises for determination in this appeal is as to whether the product “Krithika Hair Vitalizer” is a cosmetic item viz. hair oil falling under CET 3305.10 as claimed by the Revenue or is a patent medicine of Siddha system falling under CET 3009.39 as held by the lower appellate authority and as claimed by the respondents herein. We observe that in the impugned order the Commissioner (Appeals) has noted the plea taken by the respondents that they have taken licence in Form 25E and this proved that the product is exclusively a siddha drug as defined in Section 3(a) of the Drugs and Cosmetics Act. He has also noted that there was no wilful suppression on the part of the assessee as they were under the bona fide belief that siddha medicines manufactured by them was exempted from levy of excise duty. We find that in the Hon’bl’e High Court of Delhi in the case of Manisha Pharma Plasto Pvt. Ltd. v. U.O.I. reported in 1999 (112) E.L.T. 22 (Del.) held that the product “Nycil Prickly heat powder” was a product normally used for the purpose of prickly heat and as soon as the ailment was treated, the use for the product was discontinued and accordingly it was held that the prickly heat powder is to be treated as a medicament and not as a cosmetic intended for care of skin under Chapter 33. We also find that the CEGAT in the case of Himtaj Ayurvedic Udyog Kendra v. CCE, Allahabad reported in 2002 (139) E.L.T. 610 has held that Himtaj Oil having ingredients exclusively mentioned in authoritative text books on Ayurveda and understood in common parlance as an Ayurvedic medicament, is classifiable under sub-heading 3003.30 of the CET as an ayurvedic medicine even though not manufactured exclusively in accordance with formulae described in such books and sold under name specified therein and not under sub-heading 3305.10 as a perfumed oil. We observe that the Revenue has pleaded that the product in the present case “Krithika Hair Vitalizer” is available in Supermarkets and in all general stores along with hair preparation and it is not promoted with or prescribed by medical practitioners and hence cannot be considered as a medicament. We are not able to countenance this plea of the Revenue that a product just because it is available in general stores and supermarket cannot be considered as a medicament inasmuch as there is no such statutory requirement that a medicament should be sold only in medical shop as prescribed by a medical practitioner. As already noted above, it is common knowledge that prickly heat powder which is held to be a medicament is available in general stores and supermarkets. It is also common knowledge that Medical shops also sell not only medicines, but also general stores such as soap, cosmetics, tooth pastes, milk products, chocolates, toffy, hair oil etc. In short there is no such restriction that a general store or supermarket cannot sell medicament. In view of our discussion above, we are of the considered opinion that having regard to the licence issued by the Director of Drugs Control in Form 25E which is specific for manufacture of drugs, the ingredients of the impugned product including its herbal content, label, literature, character and common commercial parlance understanding and the price which is claimed to be three times more than hair oil, the view taken by the lower appellate authority that it is a medicament falling under sub-heading 3003.39 cannot be found fault with and we uphold the order impugned and reject the Revenue appeals as devoid of merits. Ordered accordingly.