This appeal is directed against the common judgment and order dated 31.01.2018, as passed by the Customs, Excise and Service Tax Appellate Tribunal, insofar as relating to Appeal By the aforesaid order dated 16.10.2015 in relation to the period from December 2013 to November 2014, the Adjudicating Authority held that the product in question, known as “ Aswini Homeo Arnica Hair Oil ” could not be classified as ‘medicament’ under Tariff Item 3003 90 14 or under any item stated in Chapter 30 of the First Schedule to the Central Excise Tariff Act, 1985 – ; and that the product in question, being “ Hair oil ”, was required to be classified as ‘cosmetic’ under Tariff Item 3305 90 19. The Adjudicating Authority expressed the view that because of material amendment of the tariff entries in Chapters 30 and 33 in the year 2012, classification of the product in question required re-examination. The appellant is aggrieved of the order so passed by the Tribunal and hence, has preferred this appeal while asserting that the product in question had rightly been classified by the Adjudicating Authority as ‘cosmetic’ in terms of Chapter 33 and hence, the demand in question deserves to be maintained.
It appears that even when classification of the product in question as ‘medicament’ had been accepted during the period 1994 -2004, this classification remained in doubt and, particularly after changes in the Act of 1985 in the year 2012, the respondent was served with different show- cause notices pertaining to different periods of consideration, essentially to the effect that the product in question was classifiable as ‘cosmetic or toi let preparations’ under Chapter 33, Tariff Item 3305 09 19. However, as per Chapter 33 of the Central Excise Tariff Act, 1985, preparations for use on the hair are rightly classifiable under Chapter Sub Heading No 33050919 and shall be liable for assessment under Section 4A of the Central Excise Act, 1944 @12% adv. No 170/2013- Adjn (Commr) CE, dt. It also appears that they are liable for payment of interest on the said amount of Central Excise duty under Section 11AA of the Central Excise Act, 1944. It also appears that they are liable for penal action under Rule 25 of the Central Excise Rules, 2002 for adopting incorrect classification and thus resorting to short payment of duty and for contravening the provisions of the Central Excise Act, 1944, and the rules made there under with intention to evade payment of duty.
If no cause is shown within the stipulated period or if they do not appear before the adjudicating authority when the case is posted for hearing, the case will be decided on merits on the basis of the evidence available on record. Reliance for the issuance is based on ER-1 returns furnished by the assessees during the period from December, 2013 to November, 2014 and Labels affixed to the containers cleared by the assessees.” The respondent-assessee, in its reply dated 07.04.2015, stated that the product was classified as ‘ medicament ’ under Chapter 30 by two successive Commissioner (Appeals) and two subordinate officers during 1994-2004; and the said orders were accepted by appellant, which had attained finality. (iii) That AHAHO was a medicament in terms of market parlance, evidenced by its use over a period of nearly 19 years; by its manufacturing license issued by the Drug Controller and by the Directorate of Ayush; and from listing of the drugs used, in authoritative text books like Materia Medica of Homeopathic Drugs. The respondent asserted that due to the absence of any change in its tariff description, ingredients, 9 process of manufacture and use, the question would not arise of re- classification of the product in question. Collector of Central Excise, New Delhi : (2001) 136 ELT 485, wherein a similar product named “ Sunny Arnica Hair Oil ” was held to be a medicament. 3003.10 – Patent or proprietary medicaments, other than those medicaments which are exclusively Ayurvedic Unani, Siddha, Homeopathic or Bio-chemic 3003.20 – Medicaments (other than patent or proprietary) other than those which are exclusively Ayurvedic, Unani, Siddha, Homeopathic or Biochemic systems: 3003.31 — Manufactured exclusively in accordance with the formulae described in the authoritative books specified in the First Schedule to the Drugs and Cosmetics Act, 1940 (23 of 1940) or Homeopathic Pharmacopeia of India or the United States of America or the United Kingdom or the German Homeopathic Pharmacopeia, as the case may be, and sold under the name as specified in such books or pharmacopeia 3003.32 —
Medicaments (including veterinary medicaments) used in bio-chemic system and not bearing a brand name 3003.39 — Other Chapter 33: 33.05 Preparations for use on the hair 3305.10 – Perfumed hair oils – Other 3305.91 — Hair fixer 3305.99 — Other PRESENT TARIFF HEADINGS (as per Central Excise Tariff, 2012); 3003 MEDICAMENTS (EXCLUDING GOODS OF HEADING 3002, 3005 OR 3006) CONSISTING OF TWO OR MORE CONSTITUENTS WHICH HAVE BEEN MIXED TOGETHER FOR THERAPEUTIC OR PROPHYLACTIC USES, NOT PUT UP IN MEASURED DOSES OR IN FORMS OR PACKINGS FOR RETAIL SALE 3003 90 – – Other : – – – Ayurvedic, Unani, Siddha, Homoeopathic or Bio-chemic systems medicaments: 3003 90 14 – – – – Of Homeopathic system 11 3305 PREPARATIONS FOR USE ON THE HAIR 3305 10 – Shampoos: 3305 10 10 – – – Containing spirit 3305 10 90 – – – Other 3305 20 00 – Preparations for permanent waving or straightening 3305 30 00 – Hair lacquers 3305 90 – In this Chapter 30, apart from heading 3003, medicaments have also been specified under heading 3004, the relevant contents whereof read as under: – “ 3004 Medicaments (excluding goods of heading 3002, 3005 or 3006) consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses (including those in the form of transdermal administration systems) or in forms or packings for retail sale 3004 90 – – Other : – – – Ayurvedic, Unani, Homoeopathic, Siddha or Bio-chemic systems medicaments, put up for retail sale : 12 3004 90 14 – – – – Of Homeopathic system ” 6.3. Similarly, under Chapter 33 also, the phrase Hair Oil became prominent under which, subsidiary headings of “perfumed hair oil” and “others” came to be specified. However, according to the learned Adjudicating Authority, the criteria and ideology in the matter of classification of such products was dynamic in character and hence, revision of classification in view of fresh facts coming to light could not be held to be improper. As regards second issue, the Adjudicating Authority in the first place observed that classification of the product in question under Tariff Item 13 3003 90 14 was itself questionable inasmuch that item covered only the medicaments not put up in measured doses or packing whereas AHAHO was indisputably put up for sale in packing of 50ml, 100ml, 200ml and 400ml bottles for retail sale. The Adjudicating Authority made reference 14 to the basis laid down by the Board to decide the classification of product to be a medicament or not in the following terms: – “ – whether the product has substantial therapeutic or prophylactic properties and whether it is prescribed as a medicine by a Medical Practitioner for curing of a disease and is prescribed for a limited time & use; – how the product is construed in the popular sense i.e., how it is advertized and how it is understood by the people who normally sell it or use it; – the drug license is only a guiding factor and not a decisive one since in terms of Chapter note under Chapter 33, goods falling under sub-headings 3303 to 3307 would merit classification under these headings, irrespective of the subsidiary therapeutic properties of the product.” The analysis of the learned Adjudicating Authority in relation to the ingredients of the product in question and its properties, leading to the finding that it cannot be categorised as medicament, read as under: – “11.6 I have perused the labels of the product which are on record. Alcohol 0.9/o V/V) 7
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On perusal of the label of AHAHO, it was observed that the front side of the label, there is a caption which reads “controls hair fall”; “prevents dandruff”. Non-mention of Alopecia or Insomnia on the labels indicates that the product is not meant for any substantial curative purpose. Moreover, by mentioning that there are no contra indications, it implies that irrespective of the quantum or duration of usage, there is no adverse effect on the scalp or skin, which is against the basic concept of a medicament, which is 16 prescribed or used for a limited period and overdose of a medicament is known to result in contra indications like diahorrea, acidity, ulceration, rashes etc.
If the intention is to identify the product as medicament, there was no need to label it is Hair Oil. Hence following the finding in the said case, I am inclined to hold that AHAHO cannot be categorized as a medicament but has to be classified as a Hair Oil. The Adjudicating Authority even proceeded to observe that ‘ Hair growth is at best a cosmetic necessity rather than a disease requiring immediate attention or treatment ’; and held that the product in question failed on the second criteria of common parlance too. While referring to the significance of general rules of interpretation as regards the Notes attached to the respective Chapters/Tariff Items in the First Schedule to the Act of 1985, the Adjudicating Authority observed that as per Note 1(e) to Chapter 30, the said Chapter did not cover preparation of the headings of Chapter 3303 to 3307, even if they have therapeutic or prophylactic properties. It may be observed, in all fairness to the learned Adjudicating Authority, that in his elaborate order dated 16.10.2015 (pp.
The respondent-assessee (appellant before the Tribunal) made various submissions, including that the product was made of four homeopathic medicines in coconut oil base with therapeutic use for curing alopecia (loss of hair) and insomnia (lack of sleep) amongst other diseases; that the product was being manufactured under the drug license issued by the Director, Indian Medicine and Homeopathy, subsequently renewed as a medicament by the Additional Director & Drug Controller (Homeo), Department of Ayush, Government of Telangana; that AHAHO was 19 mentioned at Serial No 35 of Schedule K to the Rules of 1945, which contains only drugs; that the label clearly listed the ingredients and composition, indications and contra-indications as also mode of use; that the product was commonly understood as homeopathic medicament by its users as well as dealers; that the issue had squarely been decided in Bakson Homeo Pharmacy (supra); and that there were no such changes, be it in the Act of 1985 or in the ingredients of the product or the manufacturing process, which would warrant a revision of its classification. We find that the adjudicating authority has mainly confirmed demand on the ground that since the AHAHO is not prescribed by a medical practitioner for the purpose of curing any disease and it is available in the medical shops as well as general stores and any persons desirous using it can purchase across the counter, hence the same is not Homeopathic medicine.
In the course of its analysis, the Tribunal, inter alia, observed and held that only for the reason of being sold over the counter and not on a medical prescription would not take the product out of the category of medicine; that when different branches of medicine and licensing authority recognized baldness or hair fall as disease, the Adjudicating Authority was not entitled to take a different view; that the product clearly mentioned its use for other ailments like sleep loss; that the contents of its label clearly mentioned the product as homeopathic medicine and the same was understood as such by its users and traders; and that the product in question indeed passed the common parlance test.
The Tribunal yet further observed that the Adjudicating Authority had not been adopting a uniform approach and referred to the fact that the respondent had been issued show-cause notices in the past too and the Adjudicating Authority, upon examining the common parlance test as also the contents and usage of product, had accepted AHAHO as a homeopathic medicine. Firstly when the different branches of medicine and the Licensing authorities recognize the baldness or hairfall as disease in that case the adjudicating authority cannot take a different view which is not recognized by the branches of medicine. It is not disputed about the fact that the product is made of four Homeopathic medicines as ingredients namely Arnica Mount, Cantharis, Pilocarpin and Cinchona and is used to treat the hair loss, insomnia, dandruff, headache and other ailments. We find that even before the subject cases, on many occasions in the past, Appellant were issued show cause notices for classification of goods as cosmetic and the Appellate Authority after going into all the aspects of common parlance as well as contents of the product and its usage held that the product is Homeopathic medicine. We are of the view that when the product is being sold as Homeopathic medicine and known as homeopathic medicine in the market the goods pass test of common parlance test as Homeopathic medicine. 16 (S.C.) as relied upon by the revenue is also not applicable as in the said case the drug licence obtained by the assessee under the Drugs and Cosmetics Act, 1940, itself mentioned that it is a licence for ointment and cream for external application as a non- pharmacopoeia item whereas in the present case the product is registered as Homeoptahic Medicine by the Additional Director, Indian Medicine and Homeopathy Department, Government of Andhra Pradesh.
18 (S.C.) is also not applicable as the product label clearly shows the product as Homeopathic medicine The Judgment of Hon’ble Apex Court in case of Sujanil Chemco Industries Vs. The adjudicating authority has held that though the there is no rationale behind applying the 1997 circular in the year 2012 but since the said circular has not been withdrawn or held to be inapplicable in these matter by any court or law, the same would be applicable as it was relied upon by the Courts of law in numerous cases and in the light of said circular the product is not prescribed by a medical practitioner for any disease. However it is to be observed that the Honble Apex Court in said case has relied upon its judgment in case of B.P.L. Adjudicating authority that the change in tariff entry would require relook into classification is absolutely erroneous as the product has remained same and it would remain classified as Homeopathic medicine. Vikramjit Banerjee has assailed the impugned judgment and order dated 31.01.2018 on a variety of grounds while asserting that the Tribunal has erred in holding that the product in question would fall under Chapter 30 and not under Chapter 33 of the First Schedule to the Central Excise Tariff Act, 1985 as amended in the year 2012.
The learned ASG would further submit that “Hair oil” under Chap ter 33 garnered focus because of the subsidiary headings of “perfumed hair oil” and “others” having been specified. In the other limb of submissions, learned ASG has contended that the common parlance test of the product is not in favour of the respondent, as the product is not prescribed by any medical practitioner, is available freely without any prescription in Medical and General Stores, and could be purchased across the counter, as admitted by the respondent. Collector of Central Excise, New Delhi : (2003) 3 SCC 111 to submit that any subsidiary therapeutic or prophylactic use of the product would not change its nature as “ Hair oil ”, if in the common parlance, it is treated as a cosmetic. Learned ASG has again referred to common parlance test to submit that the product is advertised as hair oil and not a medicament; and is perceived by the public who purchase and sell the product as a hair oil (cosmetic) and not as medicament. Wockhardt Life Sciences Limited : (2012) 5 SCC 585 has been relied upon to submit that for classifying a taxable commodity, there is no fixed test and the decision on the classification of a particular article would depend on the tangible material or as to how it is comprehended in “common parlance” or “commercial world” or “trade circle”, or in its popular sense. Consequent to amendment of the First Schedule to the Central Excise Tariff Act, 1985 during the year 2005-06 introducing eight-digit classification system, the product became classifiable under Chapter heading 3004 90 14 (Medicaments consisting of two or more constituents which have been mixed together for Therapeutic or Prophylactic uses put up in doses or in forms or packings suitable for retail sale). According to the learned counsel, insertion of Sub-Headings in Chapter 33 makes no difference as the product in question does not fit into any of the revised descriptions of “Hair oil” in Chapter 33, for AHAHO is clearly covered by the definition of ‘medicament’. It has further been argued that the observations in Shree Baidyanath Ayurved Bhawan (supra) rather support the respondent’s case, because the ingredients, process of manufacture and uses of AHAHO having undergone no change from the beginning despite change in group of individual tariff entries. Learned senior counsel has submitted that there is no need for invoking the common parlance test as the nature of the product is certified by competent authority as a medicament and that the appellant had not made any market enquiries to establish that the product is a cosmetic besides not disproving the factual evidence in favour of the respondent. With reference to the majority decision of the Tribunal in the case of Bakson Homeo Pharmacy (supra) in respect of a similar product, “ Sunny Arnica Hair Oil ”, learned senior counsel has submitted that the said decision having attained finality, and in the case of respondent itself, the Department having four times accepted the classification of the product as medicament, the attempt to revisit the classification had been wholly unjustified and has rightly been disapproved by the Tribunal 9.7. For what has been noticed hereinabove, the point essentially arising for determination in this case is as to whether the product in question, AHAHO, merits classification as ‘ medicament ’ under Chapter 30 or as ‘cosmetic or toilet preparations’ under Chapter 33 of the First 32 Schedule to the Central Excise Tariff Act, 1985; and the interlaced point is as to whether the change in tariff structure by way of amendment brought about in the year 2012 justified a re-look into the classification of the product in question. The respondent, in order to support its assertion that AHAHO is a medicament, also placed reliance on the decision of the Tribunal in the case of Bakson Homeo Pharmacy (supra) wherein a similar product marketed in the name of “ Sunny Arnica Hair Oil ” was held to be medicament, covered under Chapter 30. In order to examine the root question as to whether the product in question is classifiable as ‘ medicament ’ under Chapter 30 or would fall in the classification of ‘cosmetic or toilet preparations’ under Chapter 33 as also the other question as regards justification for re-examination of the previous 33 classification of the product in question, we may, in the first place, take note of the principles discernible from the cited decisions. This Court held, having regard to the language and purpose of exemption Notification, that the said product acetic anhydride was covered by the expression ‘drug intermediate’ in the 34 Notification.
Further, this Court accepted the submission on behalf of the assessee that merely because of some difference in the tariff entries, the product will not change its character; and something more is required for changing the classification, especially when the product remains the same. 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 Tariff Act, 1985 is without substance. Again it is without substance the reason given by the authorities that the product contains 2.5% w/v of Selenium Sulfide which is only of a subsidiary curative or prophylactic value. In that case this Court held: “It (the Tribunal) seems to say that, even if the goods manufactured by the appellant had been rightly classified under manufactured by the appellant had been rightly classified under Item 26-AA before 1-3-1975, the introduction of Item 68 makes a difference to the interpretation of Item 26-AA. If, as assumed by the Tribunal, the poles manufactured were rightly classified under Item 26-AA, the question of revising 36 the classification cannot arise merely because Item 68 is introduced to bring into the tax net items not covered by the various items set out in the Schedule. Yet another reason given by the CEGAT for not accepting the case of the appellants was that the product is sold with a pleasant odour and, therefore, it must be treated as a cosmetic. The Tribunal has held that the product is cosmetic because it is packed in an attractive plastic bottle.
The 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 interpretation of the tariff heading by such decision.” In the said previous decision, being the case of Shree Baidyanath Ayurved Bhavan Ltd. After going through various texts, definition of ‘drug’ under the Act of 1940 and ayurvedic books as well as opinion of experts in this behalf, the Tribunal concluded that the product in question could not be described as a medicinal preparation and, accordingly, rejected the claim of the appellant. It is for this reason that the Tribunal came to the conclusion that 39 scientific and technical meanings would not advance the case of the appellants if the same runs counter to how the product is understood in popular parlance. Having heard the learned counsel at length and having perused the line of reasoning adopted by the Tribunal with which we are in general agreement, we see no reason to interfere with the conclusion reached by the Tribunal and, therefore, we dismiss these appeals, but make no order as to costs. These propositions led to different decisions where the assessee contended that the product DML was a medicament under Chapter Sub- 40 Heading 3003.31 of the Act of 1985 whereas, stand of the Department had been that the said product was a cosmetic/toiletry preparation/tooth powder classifiable under Chapter Heading 3306. However, the Larger Bench of the Tribunal, to which the issue of classification of DML was referred, held that DML was classifiable under Chapter Sub-Heading 3306.10. CCE [(2006) 3 SCC 266] this Court observed that in order to 41 determine whether a product is a cosmetic or medicament, a twin test (common parlance test being one of them) has found favour with the courts. Applying the twin tests for determination of classification of products (including common parlance test), this Court in Puma Ayurvedic Herbal (P) Ltd. We endorse the view that in order to determine whether a product is cove red by “cosmetics” or “medicaments” or in other words whether a product falls under Chapter 30 or Chapter 33 the twin tests noticed in Puma Ayurvedic Herbal (P) Ltd. Resort should, in the circumstances, be had to popular meaning and understanding attached to such products by those using the product and not to be had to the scientific and technical meaning of the terms and expressions used. The approach of the consumer or user towards the product, thus, assumes significance.
We have already held above that Sub-Heading 3003.31 does not define ayurvedic medicine and, therefore, there cannot be any justification enough for changing the classification of the product DML which has not been held to be ayurvedic medicine by this Court. The learned Senior Counsel for Baidyanath relied upon the judgment of this Court in Vicco Laboratories [(2005) 4 SCC 17 : (2005) 179 ELT 17] to show that in Baidyanath I [(1996) 9 SCC 402], no tests for classification were laid down. Vicco 43 Laboratories [(2005) 4 SCC 17: (2005) 179 ELT 17] is of no help to the assessee.” As regards the test to be applied for determination of the proper classification of a product and construction of the tariff entries with reference to a product, we may refer to the other cited decisions as infra. See the decision of the Supreme Court on the dispute regarding classification for excise duty, the product — Lal Dant Manjan manufactured by Shree Baidyanath Ayurved Bhavan Ltd.
It is true that 44 the entire supply by the appellant of its product “Lip Salve” has been to the Defence Department for use of military personnel but that would also not be determinative of the nature of the product for classifying it. The appellant seeks classification of the product as a pharmaceutical product under Chapter 30 and as a “medicament” under Heading 30.03. On a reading of Note 1( d ) with Note 2( i ) of Chapter 30 under the heading “ Pharmaceutical Products ”, it is clear that preparations which fall under Chapter 33 even if they have therapeutic or prophylactic properties are not covered under Heading 30.03 as “medicaments” *** *** 13.
The product clearly is covered by Entry 33.04 read with Note 5 of Chapter 33, it essentially being a preparation for protection of lips or skin. In Wockhardt Life Sciences (supra), this Court further elaborated on the common parlance test as under: – “ 33. This is probably the reason why the “common parlance test” or the “commercial usage test” are the most common (see A. CCE [(2006) 3 SCC 266], State of Goa v. CCE [1995 Supp (3) SCC 1].] 35.
Union of India : (1985) 3 SCC 284 has culled out this principle in the following words: (SCC p. CCE [(2004) 4 SCC 481], Ayurvedic Herbal [(2006) 3 SCC 266], Ishaan Research Lab (P) Ltd.
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In our view, as we have already stated, the combined factors that require to be taken note of for the purpose of the classification of the goods are the composition, the product literature, the label, the character of the product and the user to which the product is put. Hence, in our view, after verification of the entire evidence and the certificates produced on record as well as the report of the Chemical Analyser, the Tribunal rightly arrived at the conclusion that the product in question is oil used for massage and would be covered by Heading 33.04.
On a reading of Note 1( d ) with Note 2( i ) of Chapter 30 under the heading “Pharmaceutical Products”, it is clear that preparations which fall under Chapter 33 even if they have therapeutic or prophylactic properties are not covered under Heading 30.03 as “medicaments”. It is true that the entire supply by the appellant of its product ‘Lip Salve’ has been to the Defence Department for use of military personnel but that would also not be determinative of the nature of the product for classifying it. This Court held that mere fact that a product is sold across the counter and not under a doctor’s prescription, does not ipso facto lead to the conclusion that it is not a medicament. The burden of proving that Banphool Oil is understood by the customers as a hair oil was on the Revenue. This Court has in similar matters come to the conclusion that items which may be sold under names bearing a “cosmetic” connotation would nevertheless remain medicines based on the composition of the items in B.P.L. Ayurvedic Udyog Kendra [(2003) 5 SCC 290 : (2003) 154 ELT 323] in connection with Banphool Oil and Himtaj Oil held that the Ayurvedic hair oils, were medicines and should be properly classified under Tariff Sub- Heading 3003.30, rather than under Tariff Sub-Heading 3305.10 or 3305.50….
Considering this, we see no reason to deviate from the conclusion reached by the High Court that the product manufactured by the respondent was rightly assessed at the relevant point of time in the assessment years 1994-1995 and 1995-1996, as covered by Entry 37 of Schedule-I of the APGST Act. As regards the issue concerning the product shampoo, the Tribunal remanded the matter to the lower authority for decision afresh but, as regards hair oil, the Tribunal upheld the contention of the assessee in terms of the opinion of the majority and held that the said product was answering to the description of Homeopathic medicine while predominantly applying the tests pertaining to the ingredients.
The learned Member further underscored the connotations of Homeopathy system of medical treatment as also the therapeutic and prophylactic properties of the ingredients and observed as under: – “ On a careful consideration and examination of the materials produced and referred to above, we notice that the ingredients utilised in the manufacture of Arnica Hair Oil are exclusively natural substances and their reference has been found in Homoeopathic Pharmacopia of India. Therefore, the appellant’s contention for treatment as a medicament having homoeopathic ingredients and considered as homoeopathic medicine is required to be accepted for classification under TI 14E of erstwhile tariff and under sub-heading 3003.30 of the new tariff. The connotations of common parlance test could further be understood from the case of Alpine Industries (supra), that the primary object of such taxing statute being to raise revenue and various products being differently classified for that purpose, the entries are not to be understood in their scientific and technical meaning; rather the terms and expressions used in tariff have to be understood by their popular meaning, that is the meaning attached to 53 them by those dealing with or using the product. Moreover, as held in Sharma Chemicals (supra), the mere fact that a product is sold across the counters and not under a doctor’s prescription, does not by itself lead to a conclusion that it is not a medicament; and in Meghdoot (supra), that a product may be medicinal without having been prescribed by a medical practitioner. Ordinarily, we would not have delved into another decision of the Tribunal but have found it appropriate to refer to the said decision in the case of Bakson Homeo Pharmacy (supra), which had all through been relied upon by the respondent, for the reason that it related to a similar product marketed in the name of “ Sunny Arnica Hair Oil ”, which was held to be a ‘medicament’. (supra), this Court rejected the contentions seeking reclassification of the product in question therein, DML, after enactment of new Tariff Act because the product in its composition, character and uses continued to remain the same even after insertion of new Sub-Heading 3301.30. Before applying twin tests for the purpose of the product in question, we may usefully recapitulate the divergent propositions presented in this case, where the findings of the Adjudicating Authority and the submissions made on behalf of the appellant stand on one side whereas, the findings of the Tribunal with the submissions made on behalf of the respondent stand on the other. The Adjudicating Authority yet further observed that there was no claim that the product could cure any particular disease like Alopecia (loss of hair); that the medical conditions like Alopecia actually tend to happen all of a sudden with patches of baldness not only on the head but anywhere on the body; and that Insomnia was a medical condition resulting in sleeplessness due to stress and other neurological disorders. Hence, the Adjudicating Authority held that AHAHO could not be categorized as a medicament but had to be classified as “ Hair oil ”.
While referring to the significance of general rules of interpretation as regards the Notes attached to the respective Chapters/Tariff Items in the First Schedule to the Act of 1985, the Adjudicating Authority observed that as per Note 1(e) to Chapter 30, the said Chapter did not cover preparation of the headings of Chapter 3303 to 3307, even if they have therapeutic or prophylactic properties. The ASG has contended that the common parlance test of the product is not in favour of the respondent, as the product is not prescribed by any medical practitioner, is available freely without any prescription in Medical and General Stores, and could be purchased across the counter, as admitted by the respondent. In contrast to what has been observed by the Adjudicating Authority and what has been argued by learned ASG, it is noticed that in the very first response to the show-cause notice, the respondent asserted that the 59 twin tests for classification of the product as ‘medicament’ were duly satisfied in relation to its product AHAHO in view of the facts and factors: (i) that the manufacturing process, undertaken in terms of the manufacturing license issued by the Drug Controller and by the Directorate of Ayush, would indicate the presence of four homeopathic drugs in the product namely, Arnica Montana, Cantharis, Pilocarpine and Cinchona; (ii) that the drugs so used are mentioned in the authoritative text books like Materia Medica of Homeopathic Drugs; (iii) that its label indicated the words “Homeopathic Medicine” under Schedule K to the Rules of 1945; (iv) that the product is to be applied to the scalp and not consumed orally; it would cure/prevent the lack of blood circulation to the hair roots, hair fall (alopecia), dandruff, headache and lack of sleep (insomnia), and healing from the said diseases would lead to good health in terms of growth and maintenance The Tribunal took note of the observation and findings in the order impugned as also the evidence placed before it and the cited decisions and held, inter alia, that even though the goods were sold over the counter and not on a medical prescription, it would not lead to the goods being out of the category of medicine; that when different branches of medicine and the Licensing Authorities recognized baldness or hair fall as disease, the Adjudicating Authority could not take a different view which was not recognized by the branches of medicine; that the product clearly mentioned that it could be used for other ailments also such as sleep loss, increase of blood circulation and it nowhere depicted itself as for hair care or enhancing beauty of hair; that the label indicated the product as Homeopathic medicine under Schedule K to the Rules of 1945, ingredients and their composition, indications, contra-indications and mode of application and such contents of label itself showed that even in common parlance, it was understood by the users and the traders as Homeopathic medicine; that there was no advice on the label nor did it suggest that it could be used as hair oil; and indisputably, the product was made of four Homeopathic medicines as ingredients namely Arnica Montona, Cantharis The Tribunal also took note of the fact that even in the past, the respondent was issued show-cause notices for classification of the product as cosmetic and the Appellate Authority, after going into all the aspects of common parlance as well as contents of the product and its usage, held that the product was a Homeopathic medicine.
While supporting the findings of the Tribunal, learned senior counsel for the respondent has contended that AHAHO is a therapeutic or prophylactic medicament in the medium of oil for curing diseases relating to the scalp.
Having gone through the elaborate order passed by the Adjudicating Authority, we are constrained to observe that in the over- 63 anxiety to somehow hold the product in question as cosmetic, the Adjudicating Authority even attempted to suggest his reservations as regards the utility of Pilocarpine as a Homeopathic drug contrary to the authoritative texts. 64
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Looking to the nature of the product and its uses, the observations about want of specification regarding the dosage do not take the product out of its pharmaceutical value. The perversity and unreasonableness of approach of the Adjudicating Authority is also noticed from the observations that, if the intention was to identify the product as medicament, there was no need to label it as “ Hair Oil ”.
A product having prophylactic use is also envisaged under the Headings 3003 and 3004. For what has been discussed hereinabove, it would also follow as a natural corollary that the expression “ Hair Oil ” occurring on the label of the product is only indicating the medium through which Homeopathic medicines comprising the product are to be applied. As regards the product in question, which is essentially made of Homeopathic medicines which have therapeutic and prophylactic uses, it cannot be said to be carrying only subsidiary pharmaceutical value. The observations in BPL Pharmaceuticals in this regard correlates with ingredient test as also the common parlance test; and in our view, fortify the case of the respondent. As observed, we have considered it appropriate to refer to the said decision of the Tribunal in the case of Bakson Homeo Pharmacy (supra), which had all through been relied upon by the respondent for the reason that it related to a similar product market ed in the name of “ Sunny Arnica 68 Hair Oil ”.
On the other features of common parlance test, i.e., the manner in which the product in question is commonly understood, it is noticed that one of the grounds placed at the forefront by the appellants and the Adjudicating Authority had been that AHAHO was accessible in both Medical and General Stores and could be bought across the counter. In Meghdoot, this Court has also made it clear with reference to other decided cases that the items which may be sold under names bearing a cosmetic connotation would nevertheless remain medicines based on the composition. However, the product in question, AHAHO, does not fail on this count for the reason that it is a preparation of Homeopathic medicine and when it is marketed as carrying those medicines, in commercial as also common parlance, with its name carrying the significant expressions “Homeo” and “Arnica”, the product could only 70 be understood as the one carrying predominantly pharmaceutical value and not mere cosmetic value. A treatment or prevention of hair fall by way of medication was sought to be rejected by the Adjudicating Authority by his impression that hair growth was only a cosmetic necessity.
Both in relation to common parlance test as also the ingredients test, this factor carries its own relevance even if not finally decisive of the matter. In the passing, we may also observe that the very product in question, in relation to the entry in the Andhra Pradesh General Sales Tax Act, 1957, has been accepted by this Court to be answering the description of a medicine and not being a cosmetic product, after it was found that the respondent- assessee’s assertion about its ingredients and thereby the product qualifying to be a drug within the meaning of Section 3 of the Act of 1940 could not be refuted by the Revenue. The said decision of this Court may not have a direct bearing on the question of classification of the product in question for the purpose of the Act of 1985 but, it cannot be denied that the product in question has been found answering to the description of a ‘drug’ for the purpose of the Act of 1940 as also for the purpose of the said Andhra Pradesh General Sales Tax Act, 1957. Whether re-look at classification of the product in question justified 30.
We have extracted the relied upon paragraph of the said decision hereinbefore and it is difficult to accept that the proposition therein, to the effect that the meaning ascribed by the authorities issuing Notification is a good guide of a contemporaneous composition of exposition of law, has any application 74 to the present case. The decision in Shree Baidyanath Ayurved Bhawan (supra) is pertinent to the point wherein, after an unsuccessful attempt to have the product DML accepted as a medicinal preparation (in Baidyanath I ), the assessee-company made another attempt for change of classification after coming into force of the Act of 1985. Thus, mere broad-basing of the entries in Chapter 30 and Chapter 33 of the First Schedule to the Act 1985, by itself, could not have been the justification for an attempt at re-classification of the product in question. As noticed, in Chapter 30, apart from Heading 3003 relating to medicaments consisting of two or more constituents which have been mixed together for therapeutic or prophylactic uses not put up in measured doses or in forms or packing for retail sale, Heading 3004 pertains to the medicaments consisting of mixed or un-mixed product for therapeutic or prophylactic uses put up in measured doses or in form of packing for retail 76 sale.
Viewed thus, we are inclined to accept the submissions on behalf of the respondent that even with reference to its packaging, the product AHAHO would remain a homeopathic medicament and would be covered under Chapter 30, where it could be placed in Sub-Heading 3004 90 14. No costs.
Case Title: COMMISSIONER OF CUSTOMS CENTRAL EXCISE AND SERVICE TAX HYDERABAD Vs. ASHWANI HOMEO PHARMACY (2023 INSC 483)
Case Number: C.A. No.-009525 / 2018
