COMMISSSIONER OF CUSTOMS, CENTRAL EXCISE AND SERVICE TAX, HYDERABAD versus ASHWANI HOMEO PHARMACY on 3 May 2023

COMMISSSIONER OF CUSTOMS, CENTRAL EXCISE ANDSERVICE TAX, HYDERABAD

v.

ASHWANI HOMEO PHARMACY

(Civil Appeal No. 9525 of 2018)

MAY 03, 2023

[DINESH MAHESHWARI AND VIKRAM NATH, JJ.]

Central Excise Tariff Act, 1985: Chapter 30, First Schedule,Tariff Item 3003 90 14 – Product “Aswini Homeo Arnica Hair Oil”– Classification of, as ‘medicament’ under Tariff Item 3003 90 14in Chapter 30 or as ‘cosmetic or toilet preparations’ under TariffItem 3305 90 19 in Chapter 33 – Held: Product Aswini Homeo ArnicaHair Oil merits classification as ‘medicament’ under Chapter 30and not as ‘cosmetic or toilet preparations’ under Chapter 33 – Onbasis of the twin test-common parlance test as also the ingredientstest, it is rightly held to be medicament – Furthermore, when thesaid product is intended to control hair fall, prevent dandruff andto induce good sleep, which all carry their own therapeutic andprophylactic connotations, the picture of a lady with long blackflowing hair cannot make the product a cosmetic one – Change intariff structure by way of amendment brought about in the year2012 did not justify a re-look into the classification of the product– Mere broad-basing of the entries in Chapter 30 and Chapter 33of the First Schedule to the Act 1985, by itself, could not have beenthe justification for an attempt at re-classification of the product.

Dismissing the appeal, the Court

HELD: 1. The product Aswini Homeo Arnica Hair Oil-AHAHO, merits classification as ‘medicament’ under Chapter30 and not as ‘cosmetic or toilet preparations’ under Chapter 33of the First Schedule to the Central Excise Tariff Act, 1985; andthe change in tariff structure by way of amendment brought aboutin the year 2012 did not justify any re-look at the classification ofthe product in question. [Para 34][353-F-G]

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Conclusion

A2.1 As regards the question as to whether the product,Aswini Homeo Arnica Hair Oil-AHAHO, merits classification as‘medicament’ under Chapter 30 or as ‘cosmetic or toiletpreparations’ under Chapter 33, the inquiry shall be directedtowards a couple of tests taken together, being the common/commercial parlance test i.e., how the product is understoodBcommonly, including by the persons dealing in the same and bythe end- users; and the ingredients test i.e., whether theingredients used in the product are found mentioned inauthoritative textbooks. The connotations of common parlancetest could further be understood, that the primary object of suchCtaxing statute being to raise revenue and various products beingdifferently classified for that purpose, the entries are not to beunderstood in their scientific and technical meaning; rather theterms and expressions used in tariff have to be understood bytheir popular meaning, that is the meaning attached to them bythose dealing with or using the product. Further, the words andDexpressions, unless defined in the statute have to be construedin the sense in which persons dealing with them understand i.e.,as per trade understanding and usage. Yet further, there is nofixed test or static parameter for correct classification of a productand it essentially depends on the meaning assigned to it by theEpersons concerned with it. One of the essential factors fordetermining whether a product falls under Chapter 30 or not isas to whether the product is understood as a pharmaceuticalproduct in common parlance. However, the quantity ofmedicament used in a particular product is not a relevant factorbecause, ordinarily, the extent of use of medical ingredients isFvery low as a larger use may be harmful for the human body.Moreover, the mere fact that a product is sold across the countersand not under a doctor’s prescription, does not by itself lead to aconclusion that it is not a medicament; and that a product may bemedicinal without having been prescribed by a medicalGpractitioner. The items which may be sold under names bearinga cosmetic connotation would nevertheless remain medicinesbased on the composition. As regards the question as to whethera particular product is classifiable under Chapter 30 as‘medicament’ or under Chapter 33 as ‘cosmetic’, one of theessential features would be as to whether the preparation isH

essentially for cure or prevention of disease (medicament) or forcare (cosmetic); and the preparation having only subsidiarycurative or prophylactic value would fall under Chapter 33. [Para18.1][338-F-H; 339-A-F]

2.2 In an overall comprehension of the matter, and withapplication of the relevant principles to the facts of the instantcase, the product in question sails through the twin tests withoutany doubt and has rightly been held as medicament by the tribunal.[Para 21][344-G-H]

2.3 Taking up the test relating to the ingredients, thereappears absolutely no reason to suggest that the product inquestion, AHAHO, does not pass this test. It remains indisputablethat the product has been manufactured as a drug after beingduly licensed by the competent authorities and carries thecombination of as many as four Homeopathic medicines, ArnicaMontana, Cantharis, Pilocarpine, and Cinchona in its preparation.These Homeopathic medicines are duly found mentioned inHomeopathic Pharmacopoeia of India as also in the Dictionary ofPractical Materia Medica. [Para 22][344-H; 355-A-B]

2.4 The Adjudicating Authority in its elaborate order couldnot otherwise doubt the recognition of other ingredients ofAHAHO as being Homeopathic drugs. The approach of theAdjudicating Authority in his micro analysis of the contents oflabel had also been in the nature of a fishing inquiry as if only tofind some gap or some loophole therein, without looking at thesubstance of the matter that the product in question was clearlyindicated to be a Homeopathic medicine under Schedule K tothe Rules of 1945. Looking to the nature of the product and itsproperties, the relevant indications have also been specified inreasonable terms and looking to its nature and purpose, directionsfor use have also been given in the manner that it was to bemassaged directly on the scalp and should be left overnight forbest results. Hence, the Adjudicating Authority’s observationsabout want of specification regarding the dosage to be used andthe duration for which it is to be used carry their ownshortcomings. The product in question is essentially meant fordealing with the conditions arising in and on the scalp with hairbeing the integral part thereof. The product consists of A

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AHomeopathic medicines. Its manner of use is to put the same onthe scalp and to leave it overnight. Looking to the nature of theproduct and its uses, the observations about want of specificationregarding the dosage do not take the product out of itspharmaceutical value. Further, the Adjudicating Authority’sobservations of dissatisfaction because of there being no contra-Bindications have gone miles away from the reasonableness ofapproach. If the respondent has stated in clear terms on the labelthat the product carried nil contra- indications, looking to itsnature, purpose and the manner of use, it does not cease to be amedicament. [Para 22.1][345-C-G; 346-A-B]

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2.5 The perversity and unreasonableness of approach ofthe Adjudicating Authority is also noticed from the observationsthat, if the intention was to identify the product as medicament,there was no need to label it as “Hair Oil”. While the expression“Hair Oil” does appear on the label, the other integralDexpressions “Homeo” and “Arnica” preceding the expression“Hair Oil” could not have been ignored and could not have beenleft aside. The Adjudicating Authority had gone to the extent ofobserving that hair growth was at best a cosmetic necessity ratherthan a disease requiring immediate attention or treatment. Thetribunal rightly observed that when hair fall or baldness isErecognised as a medical condition, the Adjudicating Authoritycould not have taken a different view, which was not recognizedby any branch of medicine. The tribunal rightly pointed out thatthe product clearly mentioned that it could be used for otherailments like headache and that it induces good sleep. Moreover,Fthe Adjudicating Authority seems not to have given adequateattention to the contents of Chapter 30 and the fact that for beingaccepted as medicament, the product is not invariably requiredto carry only therapeutic use. A product having prophylactic useis also envisaged under the Headings 3003 and 3004. If theproduct claims to improve blood circulation to the hair roots andGthereby controlling hair fall, its prophylactic use cannot begainsaid. [Para 22.2-22.3][346-C-F]

2.6 The product in question, being undoubtedly coveredby Serial No. 35 of Schedule K to the Rules of 1945 and being H

manufactured in terms of the license issued under the Act of 1940,clearly satisfies the ingredients test. In other words, on itsingredients, the product is indeed a medicament carrying thecombination of Homeopathic medicines. [Para 22.4][346-G]

2.7 It is also apparent in the present case that the stand ofthe Department to classify the product in question as ‘cosmetic’under Chapter 33 is essentially based on the distinct entry “HairOil” occurring therein; and it appears that the expression “HairOil” occurring on the label of the product has been taken asdecisive by them. It would also follow as a natural corollary thatthe expression “Hair Oil” occurring on the label of the productis only indicating the medium through which Homeopathicmedicines comprising the product are to be applied. Thesubmissions and the efforts on the part of the appellant to takethe product in question to Chapter 33 merely because of its labelcarrying the expression “Hair Oil” while ignoring the precedingsignificant expressions “Homeo” and “Arnica” cannot beaccepted. Reference to Note 1(e) of Chapter 30 also turns out tobe of no relevance because the product in question cannot besaid to be a preparation of Heading 3305 and then havinginsignificant or subsidiary therapeutic or prophylactic properties.As regards the product in question, which is essentially made ofHomeopathic medicines which have therapeutic and prophylacticuses, it cannot be said to be carrying only subsidiary pharmaceuticalvalue. Putting it differently, the product in question, AHAHO, ispredominantly of pharmaceutical value and the item of cosmetictherein, i.e., hair oil, is nothing but a medium for appropriate useof that pharmaceutical value. [Para 23.1][345-C-G; 346-A-B]

2.8 The submissions about specific entry to be preferredto the general entry do not take the case of appellant any further.The referred entry of Chapter 33 relating to the Tariff Item ‘Hairoil’ under the Heading 3305 is itself to be taken as a generalentry and in any case, when hair oil is being used only as a mediumfor use/administration/application of the medicine, the case wouldfall in the specific entry pertaining to medicament under Headings3003 or 3004; and it being of the medicines of Homeopathic AB

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Asystem, it would fall either in Tariff Item 3003 90 14 or Item 300490 14. In any case, the product cannot fall under Chapter 33.[Para 23.3][348-B-D]

2.9 On the other features of common parlance test, i.e.,the manner in which the product in question is commonlyBunderstood, it is noticed that one of the grounds placed at theforefront by the appellants and the Adjudicating Authority hadbeen that AHAHO was accessible in both Medical and GeneralStores and could be bought across the counter. This feature ofavailability of the product in question has absolutely no relevance.Merely for being available across the counter, the product inCquestion, AHAHO, does not cease to be a medicament. [Para25][348-G-H; 349-A-C]

2.10 When the preparation is for cure or prevention, itwould be medicament but, if only for care, it would be cosmetic.Of course, a cosmetic would not become medicament even ifDhaving subsidiary curative or prophylactic value. However, theproduct in question, AHAHO, does not fail on this count for thereason that it is a preparation of Homeopathic medicine and whenit is marketed as carrying those medicines, in commercial as alsocommon parlance, with its name carrying the significantEexpressions “Homeo” and “Arnica”, the product could only beunderstood as the one carrying predominantly pharmaceuticalvalue and not mere cosmetic value. [Para 26][349-D-F]

2.11 When the product in question is intended to controlhair fall as also to prevent dandruff and to induce good sleep,Fwhich all carry their own therapeutic and prophylacticconnotations, the picture of a lady with long black flowing haircannot be said to be unrelated to the indications related with theproduct. In any case, such a picture, by itself, cannot make theproduct in question a cosmetic. Interestingly, right at the top ofthe said picture and below the name of the product, it proclaimsG“Controls hair fall. Prevents dandruff”. The AdjudicatingAuthority has taken his process of analysis to further illogicalheights by proclaiming that hair growth was at the best a cosmeticnecessity rather than a disease requiring immediate attention ortreatment. Such approach could only be disapproved. [ParaH27][349-G-H; 350-A-B]

2.12 The substance of the matter remains that in commonparlance, the product in question would be approached essentiallyfor its claimed medicinal qualities and not as another hair oil.The tribunal rightly dealt with the matter in accordance with thelaw applicable to the facts of the instant case. [Para 27.1][350-C-D]

2.13 The Adjudicating Authority also observed that druglicenses issued by respective authorities per se did not makeAHAHO a preparation of Homeopathic medicine. However, theAdjudicating Authority failed to consider that such drug licenseissued under Schedule K to the Rules of 1945 had not been afactor to be ignored altogether. Both in relation to commonparlance test as also the ingredients test, this factor carries itsown relevance even if not finally decisive of the matter. Thesubmission about want of condition of sale by authorised medicaldistributor or retailer under prescription has its own shortcomingsfor it has not been shown if such a preparation falling underSchedule K to the Rules of 1945 was also requiring such a mentionin terms of Rule 97. In any case, any such requirements foradherence to the Act of 1940 and the Rules of 1945 could only bea matter for consideration of the authorities dealing with licensingand regulating the manufacture and sale of drugs. The onlyrelevant aspect for the present purpose is that the product inquestion being manufactured as a Homeopathy medicine, andbeing marketed and used as a Homeopathic medicine for itspharmaceutical value, would fall in Chapter 30 and cannot bebranded as cosmetic, so as to fall under Chapter 33 of the FirstSchedule to the Act of 1985. [Para 28][350-D-G]

2.14 The very product in question, in relation to the entryin the Andhra Pradesh General Sales Tax Act, 1957, has beenaccepted by this Court to be answering the description of amedicine and not being a cosmetic product, after it was foundthat the respondent-assessee’s assertion about its ingredientsand thereby the product qualifying to be a drug within the meaningof Section 3 of the Act of 1940 could not be refuted by theRevenue. The said decision of this Court may not have a directbearing on the question of classification of the product in question AB

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Afor the purpose of the Act of 1985 but, it cannot be denied thatthe product in question has been found answering to thedescription of a ‘drug’ for the purpose of the Act of 1940 as alsofor the purpose of the said Andhra Pradesh General Sales TaxAct, 1957. Viewed from any angle, it remains a medicament. [Para29][350-H; 351-A-C]B

3.1 It is apparent that the product in question had rightlybeen classified as ‘medicament’ in the past and nothing materialhad changed so as to re-classify the same. However, the Revenuehas attempted to rely on the amendment of the tariff structure inthe year 2012 as justification for re-look at its classification. TheCAdjudicating Authority stated this justification in the manner thatthere were substantial changes in the tariff headings, particularlywhen Chapter 30 came to be reworded so as to remove thedistinction between patent/proprietary and generic medicamentsand to classify them according to whether they are put up in unitDcontainers for retail sale or not; the mention about the Act of1940 and the various Pharmacopeia came to be deleted; and underChapter 33, the phrase ‘Hair oil’ became prominent under which,subsidiary headings of ‘perfumed hair oil’ and ‘others’ came tobe specified. According to the Adjudicating Authority, all thesechanges merited interpretation of the new entries vis-à-vis theEproduct in question than what was decided or settled earlier.There had been no justification in the Department seeking to re-open the settled position in relation to the product in questionmerely with reference to certain changes made in Chapter 30and Chapter 33, which had essentially broadened their ambit and Fscope and provided modified marginal notes and tariff entrieswith detailed specifications. These changes had otherwise noimpact, so far as AHAHO, is concerned. [Para 30][351-C-G]

3.2 The change of classification cannot be accepted merelyon the ground of coming into force of different tax structureGwithout showing that the product has changed its character. Thus,mere broad-basing of the entries in Chapter 30 and Chapter 33of the First Schedule to the Act 1985, by itself, could not havebeen the justification for an attempt at re-classification of theproduct in question. [Para 31][352-B, D]

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3.3 Even as regards the amendment of the entries, the standof the appellant-Revenue has been that Chapter 30 was rewordedso as to remove the distinction between patent/proprietary andgeneric medicaments and to classify them according to whetherthey are put up in unit containers for retail sales or not. Further,it has been stated that reference to the Act of 1940 and variouspharmacopoeia had been deleted. Thirdly, it has been contendedthat in Chapter 33, the phrase hair oil had become prominentwith subsidiary entries of perfumed hair oils and other. This Courtcould only reject such an attempt on the part of the Revenue as ahair- splitting exercise, away and detached from the substance.This is apart from the fact that the specification of medicamentunder Heading 3004 would, in any case, cover the product inquestion in the form it is marketed for retail sale. [Para 32][352-E-G]

3.4 By way of the amendment of 2012, even if the relevantentries pertaining to preparation for use on the hair have beenprovided with micro classifications in comparison to the entriesstanding earlier (as could be seen from the entries, it could neverbe taken to mean that anything which is prepared for being usedon the hair and carries the name “Hair Oil”, would lose itscharacter as medicament if otherwise it has been prepared fortherapeutic or prophylactic uses. Moreover, rewording andregrouping of different entries in medicaments are hardly of anyimpact on the character of the product in question. [Para 32.1][352-G-H; 353-A-B]

3.5 Chapter 30, apart from Heading 3003 relating tomedicaments consisting of two or more constituents which havebeen mixed together for therapeutic or prophylactic uses not putup in measured doses or in forms or packing for retail sale,Heading 3004 pertains to the medicaments consisting of mixedor un-mixed product for therapeutic or prophylactic uses put upin measured doses or in form of packing for retail sale. Viewedthus, the submissions that even with reference to its packaging,the product AHAHO would remain a homeopathic medicamentand would be covered under Chapter 30, where it could be placedin Sub-Heading 3004 90 14 is accepted. Similarly, deletions ofthe reference to the Act of 1940 or to various pharmacopoeia AB

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Acannot be interpreted to mean that a product like the one inquestion, which is otherwise a medicament, has to be classifiedon the basis of the base through which the application of medicineis being provided. [Para 32.2][353-B-E]

3.6 Application of the relevant principles, the productBAHAHO, comes clean through the twin test. Therefore, therehad been no justification for making any attempt to re-classifythe product in question with reference to the amendments broughtabout in Chapters 30 and 33 in the year 2012. [Para 33][353-E-F]

CBakson Homeo Pharmacy (P) Ltd. v. Collector of CentralExcise, New Delhi (2001) 136 ELT 485; AlpineIndustries v. Collector of Central Excise, New Delhi(2003) 3 SCC 111 : [2003] 1 SCR 313; BPLPharmaceuticals v. Collector of Central Excise,Vadodara (1995) 3 Supp SCC 1 : [1995] 3 SCR 1235;DCommissioner of Central Excise, Calcutta v. SharmaChemical Works (2003) 5 SCC 60 : [2003] 3 SCR 1027;Meghdoot Gramodyog Sewa Sansthan, U.P. v.Commissioner of Central Excise, Lucknow (2005) 4SCC 15; Commissionerof Central Excise, Nagpur v.EShree Baidyanath Ayurved Bhavan Ltd. (2009) 12 SCC419 : [2009] 5 SCR 879; Commissioner of CentralExcise v. Wockhardt Life Sciences Limited (2012) 5 SCC585 – relied on.

Collector of Central Excise, Guntur v. Andhra SugarFLtd. Venkataraypuram (1989) 1 Supp SCC 144 : [1988]3 Suppl. SCR 543; Sunny Industries (P) Ltd. v. Collectorof Central Excise, Calcutta (2003) 4 SCC 280 : [2003]3 SCR 18; Commissioner of Customs, Calcutta v. G.C.Jain and Anr. (2011) 12 SCC 713 : [2011] 8 SCR 798;Commissioner of Central Excise, Nagpur v. ViccoGLaboratories (2005) 4 SCC 17; Commissioner ofCommercial Taxes v. M/s Aswini Homeo Pharmacy CivilAppeal No. 9494-9495 of 2011; Shree BaidyanathAyurved Bhavan Ltd. v. Collector of Central Excise,Nagpur (1996) 9 SCC 402 – referred to.

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COMMISSSIONER OF CUSTOMS, CENTRAL EXCISE AND SERVICE TAX,HYDERABAD v. ASHWANI HOMEO PHARMACY

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CIVIL APPELLATE JURISDICTION: Civil Appeal No. 9525of 2018.

From the Judgment and Order dated 31.01.2018 of the CustomsExcise And Service Tax Appellate Tribunal, Circuit Bench Hyderabadin EA No. 30050 of 2016.

Vikramjit Banerjee, ASG, Akshay Amritanshu, Abhishek, AditKhorana, Prashant Rawat, Tathagat Sharma, Shivam Singhania, SunilKumar Srivastava, Brajesh Kumar, Sudhakar Kulwant, Mukesh KumarMaroria, Advs. for the Appellant.

V. V. S. Rao, Sr. Adv., D. Bharat Kumar, Tadimalla BhaskarGowtham, Aman Shukla, Siddhartha Sinha, Gopal Jha, Advs. for theRespondent.

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292SUPREME COURT REPORTS

AThe Judgment of the Court was delivered by DINESH MAHESHWARI, J.

Table of Contents*

BPreliminary and brief outline ............................................................... 2

The Background: Show-Cause Notice and Reply .............................. 4

Before the Commissioner of Customs and Central Excise ................ 9

CBefore the Customs, Excise and Service Tax Appellate Tribunal ............................................................................................. 18Rival Submissions ............................................................................. 24Points for determination .................................................................... 31

DThe principles in the cited decisions ................................................. 33Application of the principles and twin test ........................................ 55Whether re-look at classification of the product in questionjustified .............................................................................................. 72EConclusion ......................................................................................... 76Preliminary and brief outline

1. This appeal is directed against the common judgment and orderdated 31.01.2018, as passed by the Customs, Excise and Service TaxFAppellate Tribunal[1], insofar as relating to Appeal No. E/30050/2016[2],whereby the Tribunal has disapproved and reversed the order dated16.10.2015, as passed by the Commissioner of Customs and CentralExcise, Hyderabad[3] in HYD-EXCUS-004-COM-042-15-16.

1.1. By the aforesaid order dated 16.10.2015 in relation to theGperiod from December 2013 to November 2014, the AdjudicatingAuthority held that the product in question, known as “Aswini HomeoArnica Hair Oil”[4] could not be classified as ‘medicament’ under Tariff 1 Hereinafter also referred to as ‘the Tribunal’.

2 The order bearing No. 30121 of 2018.

3 Hereinafter also referred to as ‘the Adjudicating Authority’.

H4 For short, ‘AHAHO’.*Ed. Note : Pagination in the table is as per the original judgment.

Item 3003 90 14 or under any item stated in Chapter 30 of the FirstSchedule to the Central Excise Tariff Act, 1985[5]-[6]; and that the productin question, being “Hair oil”, was required to be classified as ‘cosmetic’under Tariff Item 3305 90 19. Accordingly, the Adjudicating Authorityconfirmed the demand to the tune of Rs.2,72,14,266/- on the respondentfor the differential duty payable in terms of Section 11-A (10) of theCentral Excise Act, 1944[7]; ordered payment of interest on the saiddifferential duty in terms of Section 11-AA of the Act of 1944; andimposed penalty in the sum of Rs.54,00,000/- under Rule 25 of the CentralExcise Rules, 2002.

1.2. However, the appeal preferred by the respondent was allowedby the Tribunal by its impugned order dated 31.01.2018 and the aforesaidorder dated 16.10.2015 passed by the Adjudicating Authority was setaside. The Tribunal held that the product in question, AHAHO, fell in thecategory of ‘medicament’ and hence, was rightly classified under Chapter30 of the First Schedule to the Act of 1985.

1.3. An ancillary but intertwined aspect of the matter had beenthat the product in question was being classified as ‘medicament’ underthe said Chapter 30 since the year 1994. According to the respondent,this classification was regularly accepted by the Department in the pastwith at least two successive orders of the Commissioner (Appeals) andhence, there was no justification in re-examining the issue. TheAdjudicating Authority expressed the view that because of materialamendment of the tariff entries in Chapters 30 and 33 in the year 2012,classification of the product in question required re-examination. TheTribunal, however, did not approve of this proposition of the AdjudicatingAuthority.

1.4. The appellant is aggrieved of the order so passed by theTribunal and hence, has preferred this appeal while asserting that theproduct in question had rightly been classified by the AdjudicatingAuthority as ‘cosmetic’ in terms of Chapter 33 and hence, the demandin question deserves to be maintained. On the other hand, the respondent 5 Hereinafter also referred to as ‘the Act of 1985’.

6 In the discussion hereinafter, reference to the relevant Chapter or the relevant TariffItem is always pertaining to the ‘First Schedule to the Act of 1985’, unless indicatedotherwise.

7 Hereinafter also referred to as ‘the Act of 1944’.

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Asupports the order impugned while asserting that the product in questionhas rightly been classified as ‘medicament’ in terms of Chapter 30.

2. In view of the above, the primary question in this appeal is as towhether the product in question, AHAHO, would be classified as‘medicament’ under Chapter 30 or as ‘cosmetic’ under Chapter 33 ofBthe First Schedule to the Act of 1985. The other question is as to whetherbecause of amendment of the entries in the said Chapters 30 and 33 in the year 2012, classification of the product in question required re-examination, even though the same was classified as ‘medicament’ underthe said Chapter 30 since the year 1994.

C2.1. With reference to the aforementioned questions, we may takenote of the relevant background aspects and stand of the respectiveparties with reference to the show-cause notice to the respondent andits reply.

The Background: Show-Cause Notice and ReplyD3. The respondent, having registration numberADHPB1884HEM003 under the central excise, is engaged in themanufacture of the product in question, AHAHO, in its units at Moosapet(since the year 1994), Maheshwaram and Bala Nagar. Further, therespondent had classified the product under Tariff Item 3003 90 14 asE‘medicament’ and paid the excise duty at concessional rate accordingly.This classification of the product in question was examined as many asfour times during the period 1994-2004 and, according to the respondent,was duly accepted by the Department.

4. It appears that even when classification of the product in questionFas ‘medicament’ had been accepted during the period 1994-2004, thisclassification remained in doubt and, particularly after changes in theAct of 1985 in the year 2012, the respondent was served with differentshow-cause notices pertaining to different periods of consideration,essentially to the effect that the product in question was classifiable as‘cosmetic or toilet preparations’ under Chapter 33, Tariff Item 3305 09G19. In the show-cause notice dated 26.12.2014, which forms the subject-matter of this appeal, the Adjudicating Authority, inter alia, stated asunder: - “02. The assessees are engaged in the manufacture of ‘AswiniHomeo Arnica Hair Oil’ which was classified by them under TariffHItem No. 3003 9014 of the First Schedule to the Central Excise

Tariff Act, 1985. However, as per Chapter 33 of the Central ExciseTariff Act, 1985, preparations for use on the hair are rightlyclassifiable under Chapter Sub Heading No. 33050919 and shallbe liable for assessment under Section 4A of the Central ExciseAct, 1944 @12% adv. creating them as ‘Cosmetic or Toiletpreparations’. Accordingly, show cause notices as under wereissued to the assessees.

03. The present show cause notice is a statement under Section11A (7A) of the Act covering the demand of duty for thesubsequent period, and the grounds are the same as are mentionedin the earlier show cause notices. The details of the short paymentof duty for the period from December, 2013 to November, 2014are as under: - (Amount in Rs.)

04. It appears that the assessees have contravened the provisionsof Rule 4, 6, 8, 10 and 11 of the Central Excise Rules, 2002 in as A

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much as they have wrongly classified ‘Aswini Homeo ArnicaHair Oil’ and short the duty of Rs. 2,72,14,266/- which appears tobe recoverable from them under Section 11A of the Central ExciseAct, 1944. It also appears that they are liable for payment ofinterest on the said amount of Central Excise duty under Section11AA of the Central Excise Act, 1944. It also appears that theyare liable for penal action under Rule 25 of the Central ExciseRules, 2002 for adopting incorrect classification and thus resortingto short payment of duty and for contravening the provisions ofthe Central Excise Act, 1944, and the rules made there underwith intention to evade payment of duty.

05. Now, therefore, M/s Aswini Homeo Pharmacy, 6-48,49,6-50Aswini Homeo Pharmacy Unit, Balanagar Hyderabad are herebyrequired to show cause to the Commissioner of Customs & CentralExcise, Hyderabad-IV Commissionerate, Ground Floor, PosnettBhavan, Tilak Road, Hyderabad within thirty (30) days of receiptof this notice, as to why;

i) Central Excise duty of Rs. 2,72,14,266/ (Rupees Two Croresseventy two lakhs fourteen thousand two hundred sixty sixonly), should not be demanded from them under sub section(7A) of Section 11A read with sub section (1)(a) of Section11A of the Central Excise Act, 1944- for the period fromDecember, 2013 to November, 2014.

ii) Interest on the amount of duty mentioned at SI. N. (i) above,should not be demanded from them at applicable rates, in termsof Section 11AA of the Central Excise Act 1944-and

iii) Penalty under Rub 25 of the Central Excise Rules, 2002should not be imposed on them for contravention of the CentralExcise-Rules, 2002 mentioned supra.

06. M/s Aswini Homeo Pharmacy are further required to produceall the evidence upon which they intend to rely in support of theirdefense at the time of showing the cause. They are further requiredto mention in their written reply whether they wish to be heard inperson before the case is adjudicated. If no cause is shown withinthe stipulated period or if they do not appear before the adjudicatingauthority when the case is posted for hearing, the case will bedecided on merits on the basis of the evidence available on record.

07. The Department reserves its right to amend, modify orsupplement or do addition to this notice on the basis of furtherevidence made available to it prior to the adjudication of this case.This notice is issued without prejudice to any other action thatmay initiated under the provisions of the Central Excise Act, 1944and the rules made there under or any other law for the timebeing in force in India.

08. Reliance for the issuance is based on ER-1 returns furnishedby the assessees during the period from December, 2013 toNovember, 2014 and Labels affixed to the containers cleared bythe assessees.”

5. The respondent-assessee, in its reply dated 07.04.2015, statedthat the product was classified as ‘medicament’ under Chapter 30 bytwo successive Commissioner (Appeals) and two subordinate officersduring 1994-2004; and the said orders were accepted by appellant, whichhad attained finality.

5.1. The respondent, inter alia, stated the following reasons forwhich its product, AHAHO, was required to be, and had rightly been,classified as ‘medicament’:

(i) That the manufacturing process would indicate the presenceof four homeopathic drugs namely, Arnica Montana, Cantharis,Pilocarpine and Cinchona in its preparation, which is to be applied to thescalp and not consumed orally.

(ii) That its label indicated the words “Homeopathic Medicine”under Schedule K to the Drugs and Cosmetics Rules, 1945[8]; that theproduct would cure/prevent the lack of blood circulation to the hair roots,hair fall (alopecia), dandruff, headache and lack of sleep (insomnia);and that healing from the said diseases would lead to good health interms of growth and maintenance of natural colour in the hair.

(iii) That AHAHO was a medicament in terms of market parlance,evidenced by its use over a period of nearly 19 years; by itsmanufacturing license issued by the Drug Controller and by theDirectorate of Ayush; and from listing of the drugs used, in authoritativetext books like Materia Medica of Homeopathic Drugs. Thus, the twintests as accepted by this Court for classification of the product as‘medicament’ were duly satisfied.

8 Hereinafter also referred to as ‘the Rules of 1945’.

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A5.2. The respondent further elaborated in its reply that the productwas not ‘cosmetic’, as the ingredients used had prophylactic propertiesand it was not applied for cleansing or beautifying or promotingattractiveness or altering the appearance. The depiction of a lady withlong flowing hair on its label was only subjective and could be interpretedas indicative of good health evidenced by the long flowing hair uponBbeing treated for hair fall and dandruff.

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5.3. It was further submitted that a close look at Circular No.333/49/97-CX dated 10.09.1997 would show that in popular parlance,AHAHO was a medicament in the light of its advertisement, marketingand claims on the label and, therefore, the said circular did not justifyCrevising its classification to that of ‘cosmetic or toilet preparations’. Therespondent asserted that due to the absence of any change in its tariffdescription, ingredients, process of manufacture and use, the questionwould not arise of re-classification of the product in question. Therespondent also requested that the proceedings be dropped or be keptDpending until the Tribunal had adjudicated on the pending issuesconcerning classification of the product in question.

5.4. The respondent, in order to support its assertion that AHAHOis a medicament, placed reliance on a decision of the Tribunal in BaksonHomeo Pharmacy (P) Ltd. v. Collector of Central Excise, New Delhi:E(2001) 136 ELT 485, wherein a similar product named “Sunny ArnicaHair Oil” was held to be a medicament.

Before the Commissioner of Customs and Central Excise6. The Adjudicating Authority framed two issues for its adjudicationas follows: -F

“(i) Whether the notice has disturbed the settled position of lawby reagitating the classification matter, and if not

(ii) whether the impugned product viz. AHAHO meritsclassification as a medicament under chapter sub-heading30039014 or as Hair oil under chapter sub-heading 33059019.”

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6.1. In the first issue, it was observed by the Adjudicating Authoritythat the notices were not issued on account of any given judgment butthose judgments were mentioned to point out that the classification wouldneed a revision. It was further observed that the changes incorporated H

in the Act of 1985 from the year 2012 strengthened the view that theclassification required reconsideration. The Adjudicating Authorityproceeded to reproduce the old tariff entries and the new tariff entriesunder Chapters 30 and 33 as under: - A

“OLD ENTRIES (as per Central Excise Tariff, 2004):

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Chapter 30:

30.03 Medicaments (including veterinary medicaments).

3003.10 – Patent or proprietary medicaments, other than thosemedicaments which are exclusively Ayurvedic Unani, Siddha,Homeopathic or Bio-chemic C

3003.20 – Medicaments (other than patent or proprietary) otherthan those which are exclusively Ayurvedic, Unani, Siddha,Homeopathic or Biochemic systems:

3003.31 — Manufactured exclusively in accordance with theformulae described in the authoritative books specified in the FirstSchedule to the Drugs and Cosmetics Act, 1940 (23 of 1940) orHomeopathic Pharmacopeia of India or the United States ofAmerica or the United Kingdom or the German HomeopathicPharmacopeia, as the case may be, and sold under the name asspecified in such books or pharmacopeia D

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3003.32 — Medicaments (including veterinary medicaments) usedin bio-chemic system and not bearing a brand name 3003.39 — Other PRESENT TARIFF HEADINGS (as per Central Excise Tariff,2012); H

A3003 MEDICAMENTS (EXCLUDING GOODS OF HEADING3002, 3005 OR 3006) CONSISTING OF TWO OR MORECONSTITUENTS WHICH HAVE BEEN MIXED TOGETHERFOR THERAPEUTIC OR PROPHYLACTIC USES, NOT PUTUP IN MEASURED DOSES OR IN FORMS OR PACKINGSFOR RETAIL SALE

B3003 90 - - Other :

- - - Ayurvedic, Unani, Siddha, Homoeopathic or Bio-chemicsystems medicaments:

3003 90 14 - - - - Of Homeopathic system C3305 PREPARATIONS FOR USE ON THE HAIR

3305 10 – Shampoos:

3305 10 10 - - - Containing spirit

3305 10 90 - - - Other

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3305 20 00 – Preparations for permanent waving or straightening 3305 30 00 – Hair lacquers 3305 90 - Other:

- - - Hair oil:

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3305 90 11- - - - Perfumed

3305 90 19 - - - - Other

3305 90 20 - - - Brilliantines (spirituous)

F3305 90 30 — Hair cream

3305 90 40 — Hair dyes (natural, herbal or synthetic)

3305 90 50 — Hair fixers

3305 90 90 - - - Other”

G6.2. At this juncture, we may also take note of a few other contentsof Chapter 30, which carries the heading ‘Pharmaceutical Products’.

6.2.1. Note 1 of Chapter 30 specifies the items not coveredthereunder. Clause (e) of this Note 1 has been referred to by theAdjudicating Authority, which reads as under: - H

“Notes:

1. This Chapter does not cover :

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(e) preparations of headings 3303 to 3307, even if they havetherapeutic or prophylactic properties; ——-”

6.2.2. In this Chapter 30, apart from heading 3003, medicamentshave also been specified under heading 3004, the relevant contentswhereof read as under: - “3004 Medicaments (excluding goods of heading 3002, 3005 or3006) consisting of mixed or unmixed products for therapeutic orprophylactic uses, put up in measured doses (including those inthe form of transdermal administration systems) or in forms orpackings for retail sale 3004 90 - - Other :

- - - Ayurvedic, Unani, Homoeopathic, Siddha or Bio-chemicsystems medicaments, put up for retail sale :

3004 90 14 - - - - Of Homeopathic system”

6.3. Reverting to the analysis by the Adjudicating Authority, it isnoticed that the Adjudicating Authority referred to the changes made inChapters 30 and 33 and proceeded to hold that the notice did not sufferfrom any imperfection while observing as under: - “10.6 It can be seen that there is substantial change in the tariffheadings requiring a relook into the classification of the impugnedproduct. Particularly, Chapter 30 came to be reworded so as toremove the distinction between Patent/proprietary and genericmedicaments and classify them according to whether they areput up in unit containers for retail sale or not. Secondly, the mentionabout the Drugs and Cosmetics Act and the various Pharmacopeiacame to be deleted. Similarly, under Chapter 33 also, the phraseHair Oil became prominent under which, subsidiary headings of“perfumed hair oil” and “others” came to be specified. All thesechanges certainly merit interpretation of the new entries vis-à-visthe product in question, than what was decided or settled earlier.

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AThus, even by applying the very ratio of Vicco Laboratoriesjudgment, a different interpretation of tariff can lead to change ofclassification of a product even though the constituents and useof the product has not undergone any change. Secondly, theadditional evidence adduced in the notices certainly meritconsideration. Accordingly, I hold that the impugned notice do notBsuffer from any imperfection on account of the said judgment.Hence the first question is answered in the negative”

6.4. The Adjudicating Authority also observed that the impugnednotice had been issued in the normal period and it was not a case whereissue was sought to be reopened for the period for which it was settled.CHowever, according to the learned Adjudicating Authority, the criteriaand ideology in the matter of classification of such products was dynamicin character and hence, revision of classification in view of fresh factscoming to light could not be held to be improper.

6.5. As regards second issue, the Adjudicating Authority in theDfirst place observed that classification of the product in question underTariff Item 3003 90 14 was itself questionable inasmuch that item coveredonly the medicaments not put up in measured doses or packing whereasAHAHO was indisputably put up for sale in packing of 50ml, 100ml,200ml and 400ml bottles for retail sale. The Adjudicating AuthorityEobserved that the claim of the respondent for classifying the product inquestion under the said heading remained baseless. However, theAdjudicating Authority proceeded to observe that Tariff Item 3004 9014 was covering similar goods put up in measured doses and packingsand hence, the matter required consideration vis-à-vis Tariff Item 330590 19. Thereafter, the Adjudicating Authority pointed out that the mainFprerequisite for the classification as a ‘medicament’ was that the productmust be for ‘therapeutic’ or ‘prophylactic’ use; and with reference tothe dictionary meaning, observed that a medicament with ‘therapeutic’or ‘prophylactic’ use would mean that it was for healing or for preventinga disease. The Adjudicating Authority also referred to Circular No. 333/G49/97-CX dated 10.09.1997 issued by the Central Board of Excise andCustoms[9], which laid down certain criteria for the classification ofproducts under the Act of 1985, which are claimed by the manufacturersas ayurvedic medicines whereas claimed by Department as cosmetics.The Board gave overriding effect to this circular over all previous H9 Hereinafter also referred to as ‘the Board’.

circulars/instructions unless specified otherwise by Courts/Tribunal. TheAdjudicating Authority made reference to the basis laid down by theBoard to decide the classification of product to be a medicament or notin the following terms: - “- whether the product has substantial therapeutic or prophylacticproperties and whether it is prescribed as a medicine by a MedicalPractitioner for curing of a disease and is prescribed for a limitedtime & use;

- how the product is construed in the popular sense i.e., how it isadvertized and how it is understood by the people who normallysell it or use it;

- the drug license is only a guiding factor and not a decisive onesince in terms of Chapter note under Chapter 33, goods fallingunder sub-headings 3303 to 3307 would merit classification underthese headings, irrespective of the subsidiary therapeutic propertiesof the product.”

6.6. The Adjudicating Authority was of the view that AHAHOdid not qualify the first criteria as specified by the Board as, thoughavailability of AHAHO in General Stores cannot be sole criteria but, itwas common knowledge that one was not required to go to HomeoStores or Homeo Physician to buy AHAHO; it did not contain themandatory conditions as prescribed under the Drugs and Cosmetics Act,1940[10] on contents of the label; there were no specifications relating toits dosage and duration of use and no contra-indications were statedirrespective of quantum or duration of use, which was against the basicconcept of a medicament whose overdose result in contra-indicationslike diarrhoea, acidity, ulceration, rashes, etc.; and it did not claim tocure any particular diseases like alopecia or insomnia but only claimedto be able to prevent and control such diseases.

6.7. The analysis of the learned Adjudicating Authority in relationto the ingredients of the product in question and its properties, leading tothe 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.The contents are declared on the label as follows:

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i) Arnica Mont Q 0.5 ml

ii) Cantharis Q 0.5 ml

iii) Cinchona Q 0.2 ml

iv) Piocarpine Q 0.2 ml

(Q= lX in pure coconut oil q.s. Alcohol 0.9°/o V/V)

11.7 On perusal of the label of AHAHO, it was observed that thefront side of the label, there is a caption which reads “controlshair fall”; “prevents dandruff”. On the reverse of the label i.e. thebottle hind side, it is mentioned that “Indication: Improves blood ,circulation to the hair roots, thereby stops hair fall and promoteshair growth. Also controls dandruff, removes headache, inducesgood sleep and maintains natural color of the hair; “ContraIndications: NIL”. “Directions for use: Massage directly on thescalp, for best results leave it on overnight.” The label also reads“Aswini Homeo Arnica Hair Oil”. It does not contain any conditionlike “to be sold by authorized medical distributor or retailer underprescription from medical practitioner” even though such mentionis a mandatory requirement under Section 97(1) of the Drugs &Cosmetics Act, 1940. Secondly, it does not contain any specificationregarding the dosage to be used and the duration for which it is tobe used, which is the norm for a medicament. In case of a drug ormedicament, we certainly find a direction with regard to prescribedamount of dosage to be used and in addition a direction that “ ...or as directed by the physician”. These specifications are not tobe found on the product labels in this case. Thirdly, it does notclaim that it can cure any particular disease like Alopecia (loss ofhair). Medical conditions like Alopecia actually tend to happen allof a sudden with patches of baldness not only on the head butanywhere on the body. Similarly lack of sleep i.e. Insomnia is amedical condition which results in sleeplessness emanating fromstress and other neurological disorders. Non-mention of Alopeciaor Insomnia on the labels indicates that the product is not meantfor any substantial curative purpose. Further, the kind of preventionor control claimed by AHAHO indicates a clear non-connectionbetween the diseases and the product in question. Moreover, bymentioning that there are no contra indications, it implies thatirrespective of the quantum or duration of usage, there is no

adverse effect on the scalp or skin, which is against the basicconcept of a medicament, which is prescribed or used for a limitedperiod and overdose of a medicament is known to result in contraindications like diahorrea, acidity, ulceration, rashes etc. Even amedically prescribed skin cream or ointment has a limited use forthe particular indication or symptom. We normally find a warningon such creams that prolonged usage will result or cause irritationalsymptoms, which if persist, should be remedied by a consultationwith the Doctor. Nothing of that sort is found herein. In any case,the point that becomes clear is that AHAHO is a neither aprescribed medicament of a medical practitioner nor it is claimedto have any substantial therapeutic or prophylactic properties. Ialso find that as regards labels, Hon’ble Supreme court observedin the case of Ishaan Laboratories (supra) that “Further it wasobvious from the labels of the products which we have ourselvesinspected in the court that there is a claim made in each of thelabel of the medicinal properties of the product. It is also foundthat there was a specific claim that this is not a cosmetic product.”Though in that case, the products were held to be medicaments,the label description on the basis of which such a conclusion wasdrawn (apart from other factors) indicates that the product shouldbe projected and marketed in I such a manner so as to expressthe intention of the manufacturer that the product is a medicamentand not a cosmetic. Such a situation does not exist in the presentcase inasmuch as the labels neither contain a positive indicationthat it is a medicament nor a negative indication that it is not acosmetic. However, it is certainly labeled as a Hair Oil,prominently. If the intention is to identify the product asmedicament, there was no need to label it is Hair Oil. Hencefollowing the finding in the said case, I am inclined to hold thatAHAHO cannot be categorized as a medicament but has to beclassified as a Hair Oil. Accordingly, AHAHO does not fit intothe first criteria prescribed under the said Circular.”

6.8. As regards the common parlance criteria i.e., the way theproduct was marketed, it was observed that AHAHO was accessible inboth Medical and General Stores and could be bought across the counter.Moreover, depiction of a lady with long, black flowing hair on its labelindicated its categorisation as cosmetic and not as a medicament. TheAdjudicating Authority even proceeded to observe that ‘Hair growth is A

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Aat best a cosmetic necessity rather than a disease requiring immediateattention or treatment’; and held that the product in question failed onthe second criteria of common parlance too.

6.9. The Adjudicating Authority also observed that the drug licensesissued by respective authorities, per se did not make AHAHO aBpreparation of homeopathic medicine, thereby failing the third criteriaalso. While referring to Materia Medica, the Adjudicating Authorityexpressed his reservations about one ingredient (Pilocarpine) andobserved that there was no nexus of the said ingredient with Homeopathy.

6.10. While referring to the significance of general rules ofCinterpretation as regards the Notes attached to the respective Chapters/Tariff Items in the First Schedule to the Act of 1985, the AdjudicatingAuthority observed that as per Note 1(e) to Chapter 30, the said Chapterdid not cover preparation of the headings of Chapter 3303 to 3307, evenif they have therapeutic or prophylactic properties.

D6.11. The Adjudicating Authority also referred to the BoardCircular No. 890/10/2009-CX dated 03.06.2009, clarifying its stance thatcoconut oil packaged in containers up to 200ml had to be classified as“Hair oil” due to the general view of public; and observed that AHAHOpacked in bottles of 50ml, 100ml and 200ml, was to be treated as “Hairoil” and the 400ml pack cannot surpass this classification, merely becauseEit was not fast-moving.

6.12. Hence, the Adjudicating Authority was of the view that theproduct in question could not be classified under Tariff Item 3003 90 14or under any item stated in Chapter 30. The Adjudicating Authority furtherobserved that when the intention of the framers of the legislation was toFtax “Hair oil” at a particular rate, any attempt to evade the same wouldresult in disregarding the law. Accordingly, the Adjudicating Authority,by its order dated 16.10.2015, confirmed the demand and levied interestand penalty on the respondent, as noticed hereinbefore.

6.13. It may be observed, in all fairness to the learned AdjudicatingGAuthority, that in his elaborate order dated 16.10.2015 (pp. 96-253 ofpaper-book), several passages from a large number of decisions havealso been reproduced, which we have not indicated hereinabove. Therelevant of those decisions, as cited on behalf of the parties, shall bereferred to and examined at the relevant stage hereafter.

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Before the Customs, Excise and Service Tax AppellateTribunal

7. The assessee’s appeal[11] against the aforesaid order dated16.10.2015 was taken up for consideration by the Tribunal along with abunch of its other appeals involving the same issues but pertaining todifferent periods of consideration.

7.1. The respondent-assessee (appellant before the Tribunal) madevarious submissions, including that the product was made of fourhomeopathic medicines in coconut oil base with therapeutic use for curingalopecia (loss of hair) and insomnia (lack of sleep) amongst otherdiseases; that the product was being manufactured under the drug licenseissued by the Director, Indian Medicine and Homeopathy, subsequentlyrenewed as a medicament by the Additional Director & Drug Controller(Homeo), Department of Ayush, Government of Telangana; that AHAHOwas mentioned at Serial No. 35 of Schedule K to the Rules of 1945,which contains only drugs; that the label clearly listed the ingredientsand composition, indications and contra-indications as also mode of use;that the product was commonly understood as homeopathic medicamentby its users as well as dealers; that the issue had squarely been decidedin Bakson Homeo Pharmacy (supra); and that there were no suchchanges, be it in the Act of 1985 or in the ingredients of the product orthe manufacturing process, which would warrant a revision of itsclassification. On the other hand, the Department reiterated the findingsof the Adjudicating Authority in opposition to the appeal.

7.2. The Tribunal summarised the substance of the order passedby the Adjudicating Authority as follows: - “6. We find that the adjudicating authority has mainly confirmeddemand on the ground that since the AHAHO is not prescribedby a medical practitioner for the purpose of curing any diseaseand it is available in the medical shops as well as general storesand any persons desirous using it can purchase across the counter,hence the same is not Homeopathic medicine. He also held thatthe label does not indicate the condition of sale by the authorizedmedical distributor or retailer under prescription from medicalpractitioner even though it is mandatory requirement under section97 (1) of the Drugs & Cosmetic Act, 1940. It also does not contain A

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Athe dosage to be used or that the dosage as directed by thephysician. That it does not contain any that it can cure any particulardisease like alopecia (loss of hair) or insomnia (sleep loss). Furtherhe also held that previous orders passed by the Appellate Authoritywere on the basis of tariff entry before 2012 and after the saidperiod the entries has changed hence needs relook.”B

7.3. Having taken note of the background aspects of the case, thefindings of the Adjudicating Authority, and various decisions cited by theparties in support of their respective contentions, the Tribunal found noreason for which the classification of the product in question was soughtto be changed by the Adjudicating Authority.C

7.4. In the course of its analysis, the Tribunal, inter alia, observedand held that only for the reason of being sold over the counter and noton a medical prescription would not take the product out of the categoryof medicine; that when different branches of medicine and licensingauthority recognized baldness or hair fall as disease, the AdjudicatingDAuthority was not entitled to take a different view; that the productclearly mentioned its use for other ailments like sleep loss; that thecontents of its label clearly mentioned the product as homeopathicmedicine and the same was understood as such by its users and traders;and that the product in question indeed passed the common parlanceEtest. The Tribunal further referred to the four homeopathic medicines asbeing the ingredients of products and the same being covered by SerialNo. 35 of Schedule K to the Rules of 1945, which only related to drugsand not cosmetics. The Tribunal yet further observed that the AdjudicatingAuthority had not been adopting a uniform approach and referred to thefact that the respondent had been issued show-cause notices in the pastFtoo and the Adjudicating Authority, upon examining the common parlancetest as also the contents and usage of product, had accepted AHAHOas a homeopathic medicine. The Tribunal observed that the productremained the same and its classification as previously accepted was notrequired to be altered. The Tribunal also observed that on one hand, theGAdjudicating Authority noted that the classification made before theamendment had to be re-looked but on the other hand, relied upon thedecisions before 2012 along with the circular issued by the Board in1997.

7.5. Thus, in sum and substance, the Tribunal found no reason forHthe classification now sought to be adopted by the Department; and proceeded to disapprove the order so passed by the Adjudicating Authority.For ready reference, we may reproduce the relevant parts of the findingsof the Tribunal as follows: -

“9. The above judgments of the Hon’ble Apex Court and theTribunal clearly spells out that even though the goods are soldover the counter and not on a medical prescription, it would notlead to the goods being out of the category of medicine. Theadjudicating authority has held that since the hair growth iscosmetic necessity and the product label shows the lady with longhair the goods are cosmetic product. We are not in agreementwith the above views of the adjudicating authority. Firstly whenthe different branches of medicine and the Licensing authoritiesrecognize the baldness or hairfall as disease in that case theadjudicating authority cannot take a different view which is notrecognized by the branches of medicine. Secondly the productclearly mentions that the product in question is used for otherailments also such as sleep loss, increase of blood circulation andit nowhere depicts itself as for hair care or enhancing beauty ofhair. The label indicates the product as Homeoptahic medicineunder schedule K, ingredients and their composition, indications,contra indications and mode of application. The content of labelthus itself shows that even in common parlance it is understoodby the users and the traders as Homeopathic medicine. There isno advice on the label nor does it suggests that it can be used ashair oil. It is not disputed about the fact that the product is madeof four Homeopathic medicines as ingredients namely ArnicaMount, Cantharis, Pilocarpin and Cinchona and is used to treatthe hair loss, insomnia, dandruff, headache and other ailments. Itis manufactured under Drug Licence issued under Rule 25 C ofDrugs & Cosmetic Rules 1945 and in terms of Rules 85D by theDirector, Indian Medicine & Homeopathy. The licence has beenrenewed from time to time by the Additional Director & DrugController (Homeo), Department of Ayush, Government ofTelangana State. Even as per analysis report & Drug Controller,Department of Ayush the product is medicine. The product iscovered by serial no. 35 of Schedule K of Drugs and CosmeticRules (Homeopathic Hair oils having active ingredients upto 3Xpotency) and the said schedule covers only drugs and notCosmetics. The product has already been held to be Drug by the AB

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Hon’ble Andhra Pradesh High Court in reference to APGST aswell as Commercial taxes. The Advance Ruling authority ofCommercial Taxes, Government of Tamilnadu for the purpose ofTNVAT Act 2006 held that product to be a homeopathic medicine.We find that even before the subject cases, on many occasions inthe past, Appellant were issued show cause notices forclassification of goods as cosmetic and the Appellate Authorityafter going into all the aspects of common parlance as well ascontents of the product and its usage held that the product isHomeopathic medicine. The adjudicating authority has relied uponthe judgment of Hon’ble Supreme Court in case of CCE, NagpurVs. M/s Shree Baidyanath Ayurved Bhavan Ltd. 2009 (237) E.L.T.225 (S.C.) to state that the product in question does not satisfythe common parlance test. We find that the ratio of said judgmentis not applicable as in the said case, the product Lal Dant Manjanwas known as toilet preparation in common parlance and not asAyurvedic medicine. Whereas in the present case the facts areentirely different as the Appellant has sold the goods asHomeopathic medicine and it is known as Homeopathic medicinein the common parlance. Even as apparent from facts the label ofthe product clearly shows the product as Homeopathic medicine,its content and usage. It also says that it should be left overnight.We are of the view that when the product is being sold asHomeopathic medicine and known as homeopathic medicine inthe market the goods pass test of common parlance test asHomeopathic medicine. In the light of our observations made inpreceding paras, we hold that the reliance placed upon the judgmentof Shree Baidyanth case supra is misplaced as the facts are entirelydifferent. Further the adjudicating authority reliance upon the orderof the Tribunal in case of Naturence Research Labs (P) LTD.Vs. CCE, DELHI-II. 2003 (154) E.L.T. 672 (Tri. -Del.) is notcorrect as in said case the product Forest Flower was sold asnourishment to the scalp and hair roots as per the matter mentionedon the packing and it also helped control hair loss and preventsscalp infection, encourages luxurious growth of hairwhereas inthe present case the Drug/ licensing Authorities and even theHonble High Court, the Vat authorities and the medical practitionersall have certified the product to be falling under the category ofschedule K as Drug and even the product is sold as medicine as known as medicine in common parlance, The judgment of AlpineIndustries 2003 (152) E.L.T. 16 (S.C.) as relied upon by the revenueis also not applicable as in the said case the drug licence obtainedby the assessee under the Drugs and Cosmetics Act, 1940, itselfmentioned that it is a licence for ointment and cream for externalapplication as a non-pharmacopoeia item whereas in the presentcase the product is registered as Homeoptahic Medicine by theAdditional Director, Indian Medicine and HomeopathyDepartment, Government of Andhra Pradesh. Even the Hon’bleHigh Court of Andhra Pradesh held the product to be falling underthe category of Drug and Medicine and is sold as medicine. Theratio of judgment in case of CCE Vs. ZANDUPHARMACEUTICAL WORKS LTD. 2006 (204) E.L.T. 18(S.C.) is also not applicable as the product label clearly shows theproduct as Homeopathic medicine The Judgment of Hon’ble ApexCourt in case of Sujanil Chemco Industries Vs. CCE, Pune 2005(181) ELT 206 (SC) and Tribunal order in case of Bakson HomeoPharmacy (P) Ltd. Vs. CCE, New Delhi 2001 (136) ELT 485(TR- DEL) are absolutely applicable to the present case in viewof our above findings and we do not find any reason to differ withthose decisions.

10. We also find that the adjudicating authority at the one handhas held that the classification done before amendment in CentralExcise Tariff in the year 2012 would require relook into theclassification of the product in question and thus refused to acceptthe settled classification of goods under chapter 30 in terms ofAppellate Orders passed in favour of Appellant. However on theother hand the adjudicating authority has relied upon the judgmentsrendered in the context of Central Excise Tariff before year 2012and the Board Circular issued in year 1997 which clearly showsthat there is no uniformity adopted by him to decide the issue. Theadjudicating authority has relied upon the Circular No. 333/49/97CX dt. 10.09.1997 to hold that the medicine is prescribed by amedical practitioner, used for limited time and not every day unlessit is prescribed to deal with specific disease. He also relied uponthe judgments in case of Alpine Industries Vs. CCE, Delhi 1997(92) ELT 53 (TRI), CCE, Mumbai Vs. M/s Muller & Phipps,Richardson Hindustan Ltd. 1998 (35) ELT 424 (TRI) to hold thatthe word must be construed in popular sense i.e the meaning as AB

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understood by the people conversant therewith. The adjudicatingauthority has held that though the there is no rationale behindapplying the 1997 circular in the year 2012 but since the saidcircular has not been withdrawn or held to be inapplicable in thesematter by any court or law, the same would be applicable as itwas relied upon by the Courts of law in numerous cases and inthe light of said circular the product is not prescribed by a medicalpractitioner for any disease. We find that the adjudicating authorityhas chosen to apply pick and choose approach wherever it suitedhim for confirming demand against Appellant. We are not inagreement with the above approach and views of the adjudicatingauthority. We find that the Appellant were earlier issued demandnotice on four different occasions and on each occasion the issuestands decided in favour of Appellant by the Appellate Authoritiesholding the goods to be Homeopathic medicine and liable to dutyaccordingly. The revenue has placed its reliance upon the judgmentof Hon’ble Apex Court in case of M/s Shree Baidynath casesupra to confirm the demands. However it is to be observed thatthe Honble Apex Court in said case has relied upon its judgmentin case of B.P.L. PHARMACEUTICALS LTD. Vs.COLLECTOR OF C. EXCISE, VADODARA 1995 (77) E.L.T.485 (S.C.). wherein it was held that Merely because there is somedifference in the tariff entries, the product will not change itscharacter. Something more is required for changing theclassification especially when the product remains the same. Inthe present appeals the product has remained same and theclassification issue stands decided in favour of the Appellant in allfour previous proceedings against the Appellant. In case of CCENagpur Vs. Vicco Laboratories 2005 (179) ELT 17, the HonbleApex Court has held that classification cannot be changed withouta change in the nature of a product or a fresh interpretation of thetariff heading by such decision. In the present case the goods inquestion has remained same and there is no change of tariffheading. Thus the contention of the Ld. Adjudicating authoritythat the change in tariff entry would require relook intoclassification is absolutely erroneous as the product has remainedsame and it would remain classified as Homeopathic medicine.

11. After careful appreciation of the facts as narrated above wefind no reason to classify the product as Cosmetic under Chapter 33 of the CETA, 1985. We thus hold that the goods are classifiableunder chapter 30 of the Central Excise Tariff as Homeopathicmedicine and liable to duty accordingly. There is no reason todemand the duties and penalties adjudged against the Appellant.”

Rival Submissions

8. In the present appeal, the learned Additional Solicitor GeneralMr. Vikramjit Banerjee has assailed the impugned judgment and orderdated 31.01.2018 on a variety of grounds while asserting that the Tribunalhas erred in holding that the product in question would fall under Chapter30 and not under Chapter 33 of the First Schedule to the Central ExciseTariff Act, 1985 as amended in the year 2012.

8.1. Learned ASG has stressed upon the necessity for re-lookinto the classification of the product in question with the submissionsthat due to the change in tariff structure, the orders prior to 2012 had losttheir precedential value. The learned ASG would submit that Chapter 30has been reworded to remove the distinction between patent/proprietaryand generic medicaments and to classify them in terms of whether theyare put in unit containers for retail sale or not; and the mention about theAct of 1940 as also various pharmacopeia has also been deleted. Thelearned ASG would further submit that “Hair oil” under Chapter 33garnered focus because of the subsidiary headings of “perfumed hairoil” and “others” having been specified. The learned ASG has supportedhis submissions with reference to the decision in Collector of CentralExcise, Guntur v. Andhra Sugar Ltd. Venkataraypuram: 1989 Supp(1) SCC 144 that the change in entries from 2012 of the Act of 1985showed the legislative intent to bring the product within taxation bracketas “Hair oil”, which was added under Chapter 33 as a distinct category.

8.2. Learned ASG has strenuously argued that the product inquestion does not meet the criteria laid down under Chapter 30. It hasbeen submitted that on a reading of the relevant Notes, even if the productis stated to possess certain curative or prophylactic value, it would stillbe cosmetic, as it excludes those with subsidiary curative and prophylacticvalue. The learned ASG would submit that the respondent has classifiedthe product under Tariff Item 3003 90 14 but, the said entry provides formedicaments not put in measured doses or packaging whereas, AHAHOis admittedly sold in packaging of 50ml, 100ml, 200ml and 400ml bottles.According to learned ASG, Tariff Item 3305 90 19, specifically meantfor “Hair oils”, directly covers the product in question, AHAHO.

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A8.3. Learned ASG has also argued that a specific entry wouldtake precedence over a general entry, as held by this Court inCommissioner of Central Excise, Nagpur v. Shree BaidyanathAyurved Bhavan Ltd.: (2009) 12 SCC 419; and when “Hair oil” isspecifically mentioned in Chapter 33 and when AHAHO’s commonparlance is that of a general cosmetic requisite, classifying it as aB‘medicament’ is a far-fetched proposition.

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8.4. In the other limb of submissions, learned ASG has contendedthat the common parlance test of the product is not in favour of therespondent, as the product is not prescribed by any medical practitioner,is available freely without any prescription in Medical and General Stores,Cand could be purchased across the counter, as admitted by the respondent.Additionally, the label does not indicate the condition of sale by authorisedmedical distributor or retailer under prescription as mandated under theAct of 1940; it does not cure any particular disease; and the claims onthe label are for marketing purposes only. Learned ASG has relied uponDthe decision in Alpine Industries v. Collector of Central Excise, New

Delhi: (2003) 3 SCC 111 to submit that any subsidiary therapeutic orprophylactic use of the product would not change its nature as “Hairoil”, if in the common parlance, it is treated as a cosmetic. Anotherdecision of this Court in Sunny Industries (P) Ltd. v. Collector of CentralExcise, Calcutta: (2003) 4 SCC 280 has also been relied upon.

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8.4.1. Learned ASG has again referred to common parlance testto 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 ahair oil (cosmetic) and not as medicament. For the purpose of construingthe words in a statute, the learned ASG has referred to the decision inFCommissioner of Customs, Calcutta v. G.C. Jain and Anr.: (2011)12 SCC 713 to submit that unless the statute defined the words andexpressions, they ‘have to be construed in the sense in which personsdealing with them understand i.e., as per trade and understandingand usage.’ Further the decision in Commissioner of Central ExciseGv. Wockhardt Life Sciences Limited: (2012) 5 SCC 585 has beenrelied upon to submit that for classifying a taxable commodity, there isno fixed test and the decision on the classification of a particular articlewould depend on the tangible material or as to how it is comprehendedin “common parlance” or “commercial world” or “trade circle”, or in itspopular sense.H

9. On the other hand, learned senior counsel for the respondentMr. V.V.S. Rao has emphasised on the submissions that AHAHO’sclassification has attained finality, having been examined four times; itscomposition is of four homeopathic medicines in a base oil medium; ithas been licensed for manufacture and sale as a homeopathic medicineby the Director, Indian Medicines and Homeopathy, Government ofAndhra Pradesh; it cures/prevents alopecia, dandruff, hair fall, etc., dueto its therapeutic and prophylactic properties; and its label indicates thenature of the product as a homeopathic medicine under Schedule K tothe Rules of 1945 with ingredients, composition, indications, contra-indications and mode of application.

9.1. Learned senior counsel would submit that although there werechanges in the tariff structure in the year 2012 but then, notwithstandingthe amendments, AHAHO has remained classifiable under Chapter 30,as its ingredients or manufacturing process did not undergo any changewarranting its classification as a cosmetic under Chapter 33. Elaboratingon these aspects, learned senior counsel has submitted that until 2004-05 the tariff entry was only 3003 39 for Homeopathic medicines andfrom 2005-06, 3003.39 was divided into 3003 for wholesale and 3004 forretail sale. Consequent to amendment of the First Schedule to the CentralExcise Tariff Act, 1985 during the year 2005-06 introducing eight-digitclassification system, the product became classifiable under Chapterheading 3004 90 14 (Medicaments consisting of two or more constituentswhich have been mixed together for Therapeutic or Prophylactic usesput up in doses or in forms or packings suitable for retail sale). It hasbeen argued with reference to the decisions in BPL Pharmaceuticalsv. Collector of Central Excise, Vadodara: 1995 Supp (3) SCC 1 and Commissioner of Central Excise, Nagpur v. Vicco Laboratories:(2005) 4 SCC 17 that some differences in the tariff entries would notchange its character when the product remains the same. According tothe learned counsel, insertion of Sub-Headings in Chapter 33 makes nodifference as the product in question does not fit into any of the reviseddescriptions of “Hair oil” in Chapter 33, for AHAHO is clearly coveredby the definition of ‘medicament’.

9.1.1. In regard to the question of re-look at the classification, ithas also been submitted that the contention on the part of appellant thatthe respondent classified the product under 3003 90 14, which providesfor medicaments not put up in measured doses or packaging, whereas AB

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Aadmittedly AHAHO is sold in packaging of 50ml, 100ml etc., is a newground which was not a part of the show-cause notice; rather therespondent was never called upon to show-cause as to why theclassification should not be changed. Therefore, all the proceedings arevitiated. It has, however, been submitted that even in relation to theassertions of the appellant, AHAHO would still remain under ChapterB30 (Traffic Item 3004 90 14) which is meant for HomeopathicMedicament packed in packages for retail sale and, in any case, it wouldnot fall under Chapter 33 (Tariff Item 3305 90 15); and, notwithstandingthe change in sub-classification, the rate of duty would not change andthe situation would remain revenue neutral.C

9.2. It has further been argued that the observations in ShreeBaidyanath Ayurved Bhawan (supra) rather support the respondent’scase, because the ingredients, process of manufacture and uses ofAHAHO having undergone no change from the beginning despite changein group of individual tariff entries. According to the learned counsel, noDcase is made for treating AHAHO as ‘cosmetic’ by ignoring itsrecognition as drug/medicament by the Government authorities as wellas by this Court on 27.02.2019 in Commissioner of Commercial Taxesv. M/S Aswini Homeo Pharmacy: Civil Appeal No.9494-9495 of2011.

E9.3. Learned senior counsel has submitted that there is no needfor invoking the common parlance test as the nature of the product iscertified by competent authority as a medicament and that the appellanthad not made any market enquiries to establish that the product is acosmetic besides not disproving the factual evidence in favour of therespondent.F

9.4. Learned senior counsel has relied upon the decision inCommissioner of Central Excise, Calcutta v. Sharma ChemicalWorks: (2003) 5 SCC 60 to submit that merely because a product issold across counters and without a prescription, it would not per se leadto the conclusion of it being not a medicament. The method of usage ofGAHAHO is clearly stated on its label; and Materia Medica clearly statesthe therapeutic properties of ingredients used. It has also been submittedthat several drugs like Anacin, Dolo 650, Cough syrups, etc. are availableacross the counter; and none of the Homeo drugs require any prescriptionfor purchasing. Another decision of this Court in the case of Meghdoot Gramodyog Sewa Sansthan, U.P. v. Commissioner of Central Excise,Lucknow: (2005) 4 SCC 15 has also been relied upon.

9.5. Learned senior counsel has distinguished the facts of thepresent case from the case of Alpine Industries (supra), as AHAHO isa therapeutic/prophylactic medicament in the medium of oil for thediseases relating to the scalp. The product is not advertised as “HairOil” but is marketed only as “Aswini Homeo Arnica Hair Oil”.

9.6. With reference to the majority decision of the Tribunal in thecase of Bakson Homeo Pharmacy (supra) in respect of a similarproduct, “Sunny Arnica Hair Oil”, learned senior counsel has submittedthat the said decision having attained finality, and in the case of respondentitself, the Department having four times accepted the classification ofthe product as medicament, the attempt to revisit the classification hadbeen wholly unjustified and has rightly been disapproved by the Tribunal

9.7. It has, thus, been contended on behalf of the respondent thatin the impugned order dated 31.01.2018, the Tribunal has rightly set asidethe demands raised by the Department after appreciating the facts andthe law applicable to the case inasmuch as, during the relevant period,there was no change in the said Chapter 30; and there was no change inthe manufacturing process or ingredients of AHAHO. As such, the productremained a medicament under Chapter 30 of the First Schedule to theCentral Excise Tariff Act, 1985 prior to 2012 and even thereafter. Hence,this appeal deserves to be dismissed.

Points for determination

10. For what has been noticed hereinabove, the point essentiallyarising for determination in this case is as to whether the product inquestion, AHAHO, merits classification as ‘medicament’ under Chapter30 or as ‘cosmetic or toilet preparations’ under Chapter 33 of the FirstSchedule to the Central Excise Tariff Act, 1985; and the interlaced pointis as to whether the change in tariff structure by way of amendmentbrought about in the year 2012 justified a re-look into the classificationof the product in question.

11. As noticed, it remains undeniable that the product in question,AHAHO, was classified as ‘medicament’ under Chapter 30 on at leastfour different occasions by the Department, including two orders passedby the successive Commissioner (Appeals) during 1994-2004; and thesaid orders had attained finality. The respondent, in order to support its ABC

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Aassertion that AHAHO is a medicament, also placed reliance on thedecision of the Tribunal in the case of Bakson Homeo Pharmacy (supra)wherein a similar product marketed in the name of “Sunny Arnica HairOil” was held to be medicament, covered under Chapter 30. However,the Department attempted to rely on the amendment of the tariff entriesin the year 2012 as its justification for re-examination of the classificationBof the product in question.

12. We have closely examined the divergent findings recorded bythe Adjudicating Authority and the Tribunal and have also taken note ofthe competing stands taken by the parties. In order to examine the rootquestion as to whether the product in question is classifiable asC‘medicament’ under Chapter 30 or would fall in the classification of‘cosmetic or toilet preparations’ under Chapter 33 as also the otherquestion as regards justification for re-examination of the previousclassification of the product in question, we may, in the first place, takenote of the principles discernible from the cited decisions.DThe principles in the cited decisions

13. As regards justification for re-examination of the classificationof the product in question, the Adjudicating Authority observed that therewere substantial changes in the tariff entries, particularly when Chapter30 came to be reworded so as to remove the distinction between patent/Eproprietary and generic medicaments and classify them according towhether they are put up in unit containers for retail sale or not; themention about the Act of 1940 and the various Pharmacopeia came tobe deleted; and under Chapter 33, the phrase “Hair oil” became prominentunder which, subsidiary headings of “perfumed hair oil” and “others”Fcame to be specified. Learned ASG has also relied upon the reasonsadopted by the Adjudicating Authority in support of his contentions andhas cited the decision in Andhra Sugar Ltd. (supra) as regardsconstruction of statute with reference to the legislative intent.

13.1. In the case of Andhra Sugar Ltd. (supra), essentially, theGissue involved had been as to whether acetic anhydride manufacturedby the respondent and sold to drug manufacturers was eligible to benefitof exemption as drug intermediate. This Court held, having regard to thelanguage and purpose of exemption Notification, that the said productacetic anhydride was covered by the expression ‘drug intermediate’ inthe Notification. In that context, this Court, observed in the referredHparagraph as follows: - “5. …It is well settled that the meaning ascribed by the authorityissuing the notification, is a good guide of a contemporaneousexposition of the position of law. Reference may be made to theobservations of this Court in K. P. Varghese v. ITO [(1981) 4SCC 173]. It is a well settled principle of interpretation that courtsin construing a statute will give much weight to the interpretationput upon it at the time of its enactment and since, by those whoseduty has been to construe, execute and apply the same enactment.”

13.2. In the case of BPL Pharmaceuticals (supra), cited onbehalf of the respondent, the issue before this Court was regarding theclassification of “selenium sulfide lotion USP” manufactured and soldby the assessee under the brand name “Selsun Shampoo”. This Court,inter alia, held that for a product to fall under Chapter 33, in terms ofNote 2 therein, it must first be cosmetic and suitable to be used as such.This Court also examined the active ingredient of the product (albeitvery small in quantity) and held that having regard to the preparation,label, literature, character, common and commercial parlance, the productwas liable to be classified as a medicament. Further, this Court acceptedthe submission on behalf of the assessee that merely because of somedifference in the tariff entries, the product will not change its character;and something more is required for changing the classification, especiallywhen the product remains the same. The relevant observations andexpositions of this Court read as under: - “29. The contention based on chapter notes is also not correct.One of the reasons given by the authorities below for holding thatSelsun would fall under Chapter 33 was that having regard to thecomposition, the product will come within the purview of Note 2to Chapter 33 of the Schedule to Central Excise Tariff Act, 1985is without substance. According to the authorities the productcontains only subsidiary pharmaceutical value and. Therefore,notwithstanding the product having medicinal value will fall underChapter 33. We have already set out Note 2 to Chapter 33. Inorder to attract Note 2 to Chapter 33 the product mustfirst be cosmetic, that the product should be suitable foruse as goods under Headings Nos. 33.03 to 33.08 and theymust be put in packing as labels, literature and otherindications showing that they are for uses cosmetic or toiletpreparation. Contrary to the above in the present case none of AB

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the requirements are fulfilled. Therefore, Note 2 to Chapter 33 isnot attracted. Again it is without substance the reason given bythe authorities that the product contains 2.5% w/v of SeleniumSulfide which is only of a subsidiary curative or prophylactic value.The position is that therapeutic quantity permitted as per technicaldifferences including US Pharmacopoeia is 2.5%. Anything inexcess is likely to harm or result in adverse effect. Once thetherapeutic quantity of the ingredient used, is accepted,thereafter it is not possible to hold that the constituent issubsidiary. The important factor is that this constituent(Selenium Sulfide) is the main ingredient and is the onlyactive ingredient.

30. As rightly contended by the learned Senior Counsel forthe appellants that merely because there is some differencein the tariff entries, the product will not change its character.Something more is required for changing the classificationespecially when the product remains the same……

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33. The labels which give the warning, precaution and directionsfor use do make a difference from that of ordinary shampoo whichwill not contain such warning or precautions for use. Further noindividual would be prepared to say in a social gatheringthat he or she is using Selsun to get rid of dandruff or othersimilar diseases whereas nobody would hesitate to state ina similar gathering that he or she is using a particular brandof shampoo for beautifying his or her hair. Thus there are lotof favourable materials to treat the product in question as amedicine rather than cosmetic. In this connection the relianceplaced by the learned counsel for the appellants on a decision ofthis Court report in case Indian Metals & Ferro Alloys Ltd. v.CCE [(1991) 51 ELT 165 (SC)] can be usefully referred to. Inthat case this Court held:

“It (the Tribunal) seems to say that, even if the goodsmanufactured by the appellant had been rightly classified undermanufactured by the appellant had been rightly classified underItem 26-AA before 1-3-1975, the introduction of Item 68 makesa difference to the interpretation of Item 26-AA. This is not correct. Item 68 was only intended as a residuary item. It coversgoods not expressly mentioned in any of the earlier items. If,as assumed by the Tribunal, the poles manufactured wererightly classified under Item 26-AA, the question of revisingthe classification cannot arise merely because Item 68 isintroduced to bring into the tax net items not covered by thevarious items set out in the Schedule. It does not and cannotaffect the interpretation of the items enumerated in theSchedule. This logic of the Tribunal is, therefore, clearly wrong.”

34. This judgment supports the case of the appellant whenit is contended that there is no good reason to change theclassification merely on the ground of coming into force ofthe new Central Excise Tariff Act, 1985 without showingmore that the product has changed its character.

35. The learned counsel also placed reliance on a number ofjudgments to support his argument that in common and commercialparlance the product is known as medicine rather than cosmetic.As pointed out already and in support of that submission, affidavitsand letters from chemists, doctors and customers are filed to showthat the product is sold under prescription only in chemists’ shopsunlike shampoos sold in any shop including provision shops. Thisconclusion, namely, that the product is understood in the commonand commercial parlance as a patent and proprietary medicinewas also found by the Central Board of Excise and Customs asearly as in 1981 and accepted by the Excise authorities and in theabsence of any new material on the side of the respondents thereis no difficulty in accepting this contention without referring todecision cited by the counsel for the appellants.

36. Yet another reason given by the CEGAT for not accepting thecase of the appellants was that the product is sold with a pleasantodour and, therefore, it must be treated as a cosmetic. SeleniumSulfide has an unpleasant odour and to get rid of it insignificantamount of perfume is used and make it acceptable to theconsumers. A medicine, for example, sugar-coated pill willnevertheless be medicine notwithstanding the sugar-coating.Likewise the addition of insignificant quantity of perfume tosuppress the smell will not take away the character of the productas a drug or medicine. Again one other reason given by the Tribunal AB

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is regarding the packing. The Tribunal has held that the product iscosmetic because it is packed in an attractive plastic bottle. Thisby itself will not change the character, as cosmetic is put up forsale with some indication on the bottle or label that it is to be usedas cosmetic or it is held out to be used as a cosmetic. As alreadynoted the label here gives warnings. The fact that it is packed in aplastic bottles is a wholly irrelevant criteria.

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37. On a perusal of the entire material we are satisfied that theproduct in question, having regard to the preparation label,literature, character, common and commercial parlanceunderstanding and the earlier decisions of the Central Board ofCExcise and Customs, would fall under Sub-heading No. 3003.19and there is no justifiable reason for changing the classification.As we have reached the above conclusion with reference to thematerials placed before us on facts, we do not think it necessaryto go into other decisions cited at the Bar. In the result the appealsDare allowed holding that the product ‘Selsun’ will fall under TariffItem 3003.19.”

13.3. In Vicco Laboratories (supra), this Court was dealing withthe question of classifying turmeric skin cream, vajradanti toothpasteEand tooth powder as under Chapter 30 with pharmaceutical products oras under Chapter 33 with essential oils and resinoids, perfumery, cosmeticsor toilet preparations. After applying the common parlance test ofclassification, and while relying on BPL Pharmaceuticals (supra) andother decisions, this Court held against the attempt at re-classification inFthe following words: - “4. The mere decision of a court of law without more cannot bejustification enough for changing the classification without a changein the nature of a product or a change in the use of the product, ora fresh interpretation of the tariff heading by such decision.”

G14. At this juncture, it shall be apposite to refer to the two decisionspertaining to the assessee Shree Baidyanath Ayurved Bhavan Ltd.

14.1. In the decision rendered on 13.04.2009, which has beenreferred to by the learned counsel for the parties [reported in (2009) 12SCC 419], extensive reference has been made to the previous decision H

rendered on 30.03.1995 in relation to the same assessee and concerningthe classification of the same product namely Dant Manjan Lal[12]. In thesaid previous decision, being the case of Shree Baidyanath AyurvedBhavan Ltd. v. Collector of Central Excise, Nagpur: (1996) 9 SCC402, the issue was as to whether DML manufactured by the assesseewas falling within the meaning of an Ayurvedic Medicine to qualify forexemption from payment of excise duty under Notification No. 62/78-CE dated 01.03.1978 issued in exercise of power conferred by Rule8(1) of the Central Excise Rules, 1944. The relevant entry introduced byamendment was reading as ‘all drugs, medicines, pharmaceuticals anddrug intermediates not elsewhere specified’. The appellant contendedthat the product in question was a scientific medicine which would attractthe aforesaid entry and would, therefore, be exempt from the paymentof excise duty. The Tribunal disagreed with these submissions and heldthat the product in question could rightly be described as a toiletpreparation. In that regard, after noticing that the ingredient for the productwas stated to be Geru (red earth) to the extent of 70% having a coolingquality, the Tribunal observed that the same was largely used as a filleror coloring agent and was not described as a medicine in commonparlance. After going through various texts, definition of ‘drug’ underthe Act of 1940 and ayurvedic books as well as opinion of experts in thisbehalf, the Tribunal concluded that the product in question could not bedescribed as a medicinal preparation and, accordingly, rejected the claimof the appellant. This Court approved the reasoning and findings of theTribunal while observing, inter alia, as under:- “3. …. The Tribunal rightly points out that in interpreting statuteslike the Excise Act the primary object of which is to raise revenueand for which purpose various products are differently classified,resort should not be had to the scientific and technical meaning ofthe terms and expressions used but to their popular meaning, thatis to say the meaning attached to them by those using the product.It is for this reason that the Tribunal came to the conclusion thatscientific and technical meanings would not advance the case ofthe appellants if the same runs counter to how the product isunderstood in popular parlance. That is why the Tribunal observedin para 86 of the judgment as under:

12 ‘DML’, for short.

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A“So certificates and affidavits given by the Vaidyas do notadvance the case of Shri Baidyanath Ayurved Bhawan Limitedin the absence of any evidence on record to show and provethat the common man who uses this Dant Manjan daily to cleanhis teeth considers this Dant Manjan as a medicine and not atoilet requisite.”B

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It is this line of reasoning with which we are in agreement. TheTribunal rejected the claim of the appellant holding that ordinarilya medicine is prescribed by a medical practitioner and it is usedfor a limited time and not every day unless it is so prescribed todeal with a specific disease like diabetes. We are, therefore, ofCthe opinion that the Tribunal applied the correct principles inconcluding that the product in question was not a medicinalpreparation (‘Ayurvedic’)and, therefore, the appellant was notentitled to the benefit of the exemption notification. Having heardthe learned counsel at length and having perused the line ofDreasoning adopted by the Tribunal with which we are in generalagreement, we see no reason to interfere with the conclusionreached by the Tribunal and, therefore, we dismiss these appeals,but make no order as to costs.”

14.2. The aforesaid case related to the Rules framed under theEAct of 1944 and the Notification issued thereunder. During the pendencyof appeal before this Court, the Act of 1985 was enacted which replacedthe Schedule to the Act of 1944; and Chapter 30 of the Act of 1985 dealtwith pharmaceutical products. With reference to the new enactmentand its amendments in the year 1996-1997, the assessee approached theBoard with a plea that now, there was specific definition of AyurvedicFmedicines and hence, its product DML should be classified on the basisof that definition. This led to the Board sending communication to theCommissioner of Central Excise, Nagpur concerning the classificationof DML. These propositions led to different decisions where the assesseecontended that the product DML was a medicament under Chapter Sub-GHeading 3003.31 of the Act of 1985 whereas, stand of the Departmenthad been that the said product was a cosmetic/toiletry preparation/toothpowder classifiable under Chapter Heading 3306. West Regional Benchof the Tribunal decided the classification in favour of the assessee andheld that DML was classifiable under Chapter Sub-Heading 3003.31. Asimilar view was taken by East Regional Bench of the Tribunal. However,H

the Larger Bench of the Tribunal, to which the issue of classification ofDML was referred, held that DML was classifiable under Chapter Sub-Heading 3306.10.

14.3. In the above backdrop, the second decision concerning theassessee Shree Baidyanath Ayurved Bhavan Ltd. was rendered bythis Court, which has been referred to by the learned counsel for theparties. Therein, this Court took note of the said previous decision renderedon 30.03.1995 [mentioned as the decision of Baidyanath I] and heldthat since the product in its composition, character and uses continued tobe the same, even after insertion of new Sub-Heading 3301.30, changein classification was not justified. This Court elaborated on the twin testfor determination of classification of products (common parlance testbeing one of them) and also held that specific heading shall prevail overthe general one. The relevant observations and expositions of this Courtcould be usefully reproduced as under: - “46. As a matter of fact, this Court has consistently appliedcommon parlance test as one of the well-recognised teststo find out whether the product falls under Chapter 30 orChapter 33. In a recent decision in Puma Ayurvedic Herbal(P) Ltd. v. CCE [(2006) 3 SCC 266] this Court observed that inorder to determine whether a product is a cosmetic or medicament,a twin test (common parlance test being one of them) has foundfavour with the courts. This is what this Court observed: (SCCpp. 269-70, para 2)

“2. … In order to determine whether a product is a cosmeticor a medicament a twin test has found favour with the courts.The test has approval of this Court alsovide CCE v. Richardson Hindustan Ltd. [(2004) 9 SCC 156]There is no dispute about this as even the Revenue acceptsthat the test is determinative for the issue involved. The testsare:

I. Whether the item is commonly understood as amedicament which is called the common parlance test.For this test it will have to be seen whether in common parlancethe item is accepted as a medicament. If a product falls in thecategory of medicament it will not be an item of common use.A user will use it only for treating a particular ailment and will AB

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stop its use after the ailment is cured. The approach of theconsumer towards the product is very material. One may buyany of the ordinary soaps available in the market. But if onehas a skin problem, he may have to buy a medicated soap.Such a soap will not be an ordinary cosmetic. It will bemedicament falling in Chapter 30 of the Tariff Act.

II. Are the ingredients used in the product mentioned inthe authoritative textbooks on ayurveda?”

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48. Applying the twin tests for determination of classification ofproducts (including common parlance test), this Court in PumaAyurvedic Herbal (P) Ltd. [(2006) 3 SCC 266] held that Items 1,2, 3, 4, 7, 9, 10 and 11 were medicaments while Items 5, 6 and 8were liable to be classified as cosmetics under Chapter Sub-Heading 33.04. We endorse the view that in order todetermine whether a product is covered by “cosmetics” or“medicaments” or in other words whether a product fallsunder Chapter 30 or Chapter 33 the twin tests noticed inPuma Ayurvedic Herbal (P) Ltd. [(2006) 3 SCC 266]continue to be relevant.

49. The primary object of the Excise Act is to raise revenue forwhich various products are differently classified in the new TariffAct. Resort should, in the circumstances, be had to popularmeaning and understanding attached to such products by thoseusing the product and not to be had to the scientific and technicalmeaning of the terms and expressions used. The approach ofthe consumer or user towards the product, thus, assumessignificance. What is important to be seen is how theconsumer looks at a product and what is his perception inrespect of such product. The user’s understanding is astrong factor in determination of classification of theproducts.

52. The approach of the West Regional Bench is fallacious inwhat we have indicated above as it overlooks and ignores common parlance test which is one of the well-recognised tests to determinewhether the product is classifiable as medicament or cosmeticand that has been consistently followed by this Court includingwith regard to this very product. It also overlooks the well-settled legal position that without a change in the nature ora change in the use of the product and in the absence of astatutory definition, the product will not change its character.The product DML remains the same in its composition,character and uses. We have already held above that Sub-Heading 3003.31 does not define ayurvedic medicine and,therefore, there cannot be any justification enough forchanging the classification of the product DML which hasnot been held to be ayurvedic medicine by this Court.

56. There is no doubt that a specific entry must prevail over ageneral entry. This is reflected from Rule 3(a) of the general Rulesof interpretation that states that Heading which provides themost specific description shall be preferred to Headingsproviding a more general description. DML is a tooth powderwhich has not been held to be ayurvedic medicine in commonparlance in Baidyanath I [(1996) 9 SCC 402].

57. We have already observed that common parlance test continuesto be one of the determinative tests for classification of a productwhether medicament or cosmetic. There being no change in thenature, character and uses of DML, it has to be held to be a toothpowder – as held in Baidyanath 1. DML is used routinely fordental hygiene. Since tooth powder is specifically covered byChapter Sub-Heading 3306, it has to be classified thereunder. Byvirtue of Chapter Note 1(d) of Chapter 30 even if the productDMLhas some therapeutic or medicinal properties, the productstands excluded from Chapter 30.

58. The learned Senior Counsel for Baidyanath relied upon thejudgment of this Court in Vicco Laboratories [(2005) 4 SCC 17: (2005) 179 ELT 17] to show that in Baidyanath I [(1996) 9SCC 402], no tests for classification were laid down. First,in Baidyanath I [(1996) 9 SCC 402] common parlance test appliedby the Tribunal has been approved. Second, and more importantly, ABC

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Awith regard to the very same product (DML), this Court held thatit could not be classified as ayurvedic medicine and rather theproduct is a toilet requisite. Baidyanath I [(1996) 9 SCC 402] ,no doubt relates to the old Tariff period i.e. prior toenactment of the new Tariff Act but since the product in itscomposition, character and uses continues to be the same,Beven after insertion of new Sub-Heading 3301.30, we havealready held that change in classification is not justified ascommon parlance test continues to be relevant forclassification. Vicco Laboratories [(2005) 4 SCC 17: (2005) 179ELT 17] is of no help to the assessee.”

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15. As regards the test to be applied for determination of theproper classification of a product and construction of the tariff entrieswith reference to a product, we may refer to the other cited decisions asinfra.D

15.1. The case of Alpine Industries (supra) essentially related tothe question of classification of the product ‘Lip Salve’, manufactured inaccordance with the defence services specifications and supplied entirelyto military personnel, as a ‘medicament’ under Chapter 30 or as ‘apreparation for care of skin’ under Chapter 33. This Court, while dealingEwith common parlance theory, held that the entries are not to be understoodin their scientific or technical sense, but by their popular meaning for thepurpose of interpretation. This Court said: - “5. It is well established that in interpreting tariff entries intaxation statute like the Excise Act, where the primaryFobject is to raise revenue and for that purpose variousproducts are differently classified, the entries are not to beunderstood in their scientific and technical meaning. Theterms and expressions used in tariff have to be understoodby their popular meaning that is the meaning that is attachedGto them by those using the product. See the decision of theSupreme Court on the dispute regarding classification for exciseduty, the product — Lal Dant Manjan manufactured by ShreeBaidyanath Ayurved Bhavan Ltd. reported in the case of ShreeBaidyanath Ayurved Bhavan Ltd. v. CCE [(1996) 9 SCC 402].The manufacturer claimed the product to be an Ayurvedic H

medicinal preparation product for dental care. The view of theTribunal was upheld by this Court by holding (at SCC pp. 404-05,para 3) that “ordinarily a medicine is prescribed by a medicalpractitioner and it is used for a limited time and not every dayunless it is so prescribed to deal with a specific disease likediabetes”.

7. ….. It is firmly established that on the question ofclassification of a product under the Central Excise TariffAct, “commercial parlance theory” has to be applied. It istrue that the entire supply by the appellant of its product “LipSalve” has been to the Defence Department for use of militarypersonnel but that would also not be determinative of the natureof the product for classifying it. It is not disputed that the product“Lip Salve” is used for the care of the lips. It is a product essentiallyfor “care of skin” and not for “cure of skin”. It is, therefore,classifiable as a skin-care cream and not a medicament. Fromthe nature of the product and the use to which it is put, we do notfind that the claim of the appellant is acceptable that it is primarilyfor therapeutic use. What we find from the material producedbefore the Tribunal is that essentially the product is a protective/preventive preparation for chapping of lips. It is not a curativeproduct, maybe, that incidentally on cracked and chapped lips, ithas some curative effect. It is also not denied that the product“Lip Salve” is not suitable for use only for soldiers operating inhigh-altitude areas but it is of use for everyone as protection fromdry, cold weather or sunrays. The product, therefore, essentiallyis protective of skin of lips. It is a lip-care product and not a“medicament”. It is neither prescribed by any doctor nor obtainablefrom the chemist or pharmaceutical shops in the market.

8. The appellant seeks classification of the product asa pharmaceutical product under Chapter 30 and as a“medicament” under Heading 30.03. Under the Rules forInterpretation of the Schedule under the Central Excise TariffAct, 1985, for the purpose of classification chapter notes can betaken as an aid for understanding their various entries under variousheadings of the tariff. What is to be noted from Chapter 30 of theTariff Act is that under Note 1(d) preparations covered by Chapter AB

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33 even if they have “therapeutic or prophylactic properties” areexcluded from Chapter 30. “Medicament” has been defined inNote 2(i) to mean “goods which are either products comprisingtwo or more constituents which have been mixed or compoundedtogether for therapeutic or prophylactic use”. On a reading ofNote 1(d) with Note 2(i) of Chapter 30 under the heading“Pharmaceutical Products”, it is clear that preparations whichfall under Chapter 33 even if they have therapeutic orprophylactic properties are not covered under Heading 30.03as “medicaments”

13. ……..Note 2 and Note 5 with Entry 33.04, we find ourselvesin agreement with the majority opinion of the Tribunal that theproduct “Lip Salve” is a kind of “barrier cream” or a protectivecream against skin irritants. It, therefore, clearly falls under Entry33.04 and conforms to the description “preparations for the careof the skin (other than medicaments)”. The learned counsel ofthe appellant has not been able to persuade us to take a differentview from the one taken in the majority opinion of the Tribunal.We confirm that the product “Lip Salve” is essentially apreparation for protection of lips and skin and is not a“medicament”. Such preparations which have a subsidiarycurative or prophylactic value clearly fall under Entries 33.03to 33.07 as per Note 2 under Chapter 33. The productclearly is covered by Entry 33.04 read with Note 5 of Chapter33, it essentially being a preparation for protection of lipsor skin. We have also gone through the minority opinion expressedby one of the members of the Tribunal and the reasoning thereinsupported before us on behalf of the appellant. For the reasonsaforesaid, we are unable to agree with the minority view. In theresult, we find no merit in these appeals and the same are herebydismissed.”

15.2. In G.C. Jain (supra), this Court held that the words andexpressions have to be construed as per trade and understanding usage,unless defined in the statute. This Court said: - “18. Admittedly, the expression “adhesive” is not defined in theAct. It is now well settled that the words and expressions, unlessdefined in the statute have to be construed in the sense in whichpersons dealing with them understand i.e. as per trade andunderstanding and usage.”

15.3. In Wockhardt Life Sciences (supra), this Court furtherelaborated on the common parlance test as under: - “33. There is no fixed test for classification of a taxablecommodity. This is probably the reason why the “common parlancetest” or the “commercial usage test” are the most common (see A.Nagaraju Bros. v. State of A.P. [1994 Supp (3) SCC 122] ).Whether a particular article will fall within a particular tariffheading or not has to be decided on the basis of the tangiblematerial or evidence to determine how such an article isunderstood in “common parlance” or in “commercial world”or in “trade circle” or in its popular sense meaning. It isthey who are concerned with it and it is the sense in which theyunderstand it that constitutes the definitive index of the legislativeintention, when the statute was enacted (see Delhi Cloth andGeneral Mills Co. Ltd. v. State of Rajasthan [(1980) 4 SCC71].

34. One of the essential factors for determining whether aproduct falls within Chapter 30 or not is whether the productis understood as a pharmaceutical product in commonparlance [see CCE v. Shree Baidyanath Ayurved BhavanLtd. [(2009) 12 SCC 419] and CCE v. Ishaan Research Lab (P)Ltd. [(2008) 13 SCC 349]]. Further, the quantity of medicamentused in a particular product will also not be a relevant factor for,normally, the extent of use of medicinal ingredients is very lowbecause a larger use may be harmful for the human body. [PumaAyurvedic Herbal (P) Ltd. v. CCE [(2006) 3 SCC 266], State ofGoa v. Colfax Laboratories Ltd. [(2004) 9 SCC 83] and B.P.L.Pharmaceuticals Ltd. v. CCE [1995 Supp (3) SCC 1].]

35. However, there cannot be a static parameter for thecorrect classification of a commodity. This Court in IndianAluminium Cables Ltd. v. Union of India: (1985) 3 SCC 284has culled out this principle in the following words: (SCC p. 291,para 13)

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“13. To sum up the true position, the process of manufactureof a product and the end use to which it is put, cannot necessarilybe determinative of the classification of that product under afiscal schedule like the Central Excise Tariff. What is moreimportant is whether the broad description of the article fits inwith the expression used in the Tariff.”

36. Moreover, the functional utility and predominant orprimary usage of the commodity which is being classifiedmust be taken into account, apart from the understandingin common parlance. [See O.K. Play (India)Ltd. v. CCE [(2005) 2 SCC 460] , AlpineIndustries v. CCE [(2003) 3 SCC 111] , Sujanil ChemoIndustries v. CCE & Customs [(2005) 4 SCC 189] , ICPA HealthProducts (P) Ltd. v. CCE [(2004) 4 SCC 481] , Puma AyurvedicHerbal [(2006) 3 SCC 266] , Ishaan Research Lab (P)Ltd. [(2008) 13 SCC 349] and CCE v. Uni Products IndiaLtd. [(2009) 9 SCC 295] ]

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39. In our view, as we have already stated, the combined factorsthat require to be taken note of for the purpose of the classificationof the goods are the composition, the product literature, the label,the character of the product and the user to which the product isput. However, the miniscule quantity of the prophylacticingredient is not a relevant factor. In the instant case, it isnot in dispute that this is used by the surgeons for thepurpose of cleaning or degerming their hands and scrubbingthe surface of the skin of the patient before that portion isoperated upon. The purpose is to prevent the infection ordisease. Therefore, the product in question can be safelyclassified as a “medicament” which would fall under ChapterSub-Heading 3003 which is a specific entry and not under ChapterSub-Heading 3402.90 which is a residuary entry.”

15.4. In Sunny Industries (supra), this Court was dealing withthe question whether ‘Ad-Vitamin Massage Oil Forte’ was still classifiableas patent and proprietary medicine even after the change of tariffdescription after 1985 Budget. This Court dismissed the appeal of the assessee as the product in question was oil, used for massage to takecare of the skin, and not to cure the skin and hence, was classifiableunder ‘cosmetics’ and not under ‘medicaments’. This Court observedand held as under: - “11. From the aforesaid chapter notes, it is clear that Heading33.03 would include products whether or not they contain subsidiarypharmaceutical or antiseptic constituents, or are held out as havingsubsidiary curative or prophylactic value and Heading 33.04would inter alia include the products specified therein and otherpreparations for use in manicure or chiropody and barrier creamsto give protection against skin irritants. Therefore, the product,mainly oil containing some A and D vitamins which is usedfor massage, even if it prevents ailment of rickets and treatsthe same cannot be held to be a medicament.

12. Hence, in our view, after verification of the entire evidenceand the certificates produced on record as well as the report ofthe Chemical Analyser, the Tribunal rightly arrived at the conclusionthat the product in question is oil used for massage andwould be covered by Heading 33.04. Similar contention wasraised in Alpine Industries v. CCE [(2003) 3 SCC 111: JT (2003)1 SC 130] . The Court observed (at SCC p. 116, para 8) that“medicament” has been defined in Note 2(i) to mean “goods whichare either products comprising two or more constituents whichhave been mixed or compounded together for therapeutic orprophylactic use”. On a reading of Note 1(d) with Note 2(i) ofChapter 30 under the heading “Pharmaceutical Products”, it isclear that preparations which fall under Chapter 33 even if theyhave therapeutic or prophylactic properties are not covered underHeading 30.03 as “medicaments”. The Court thereafter held thus:(SCC p. 115, para 7)

“The certificate issued by the Army Authorities and thechemical ingredients of the product are not decisive on thequestion of classification of the product for levy of excise duty.It is firmly established that on the question of classification ofa product under the Central Excise Tariff Act, ‘commercialparlance theory’ has to be applied. It is true that the entiresupply by the appellant of its product ‘Lip Salve’ has been tothe Defence Department for use of military personnel but that A

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Awould also not be determinative of the nature of the productfor classifying it. It is not disputed that the product ‘Lip Salve’is used for the care of the lips. It is a product essentially for‘care of skin’ and not for ‘cure of skin’. It is, therefore,classifiable as a skin-care cream and not a medicament. Fromthe nature of the product and the use to which it is put, we doBnot find that the claim of the appellant is acceptable that it isprimarily for therapeutic use.”

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13. The same would be the position in the present case.The oil is not used for cure of skin but is oil for massageand it takes care of the skin.

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14. In this view of the matter, we find no substance in these appealsand they are accordingly dismissed. There shall be no order as tocosts.”

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15.5. In Sharma Chemicals (supra), this Court was concernedwith the issue as to whether the product Banphool Oil could be classifiedunder as Ayurvedic medicament or as perfumed hair oil. This Court heldthat mere fact that a product is sold across the counter and not under adoctor’s prescription, does not ipso facto lead to the conclusion that it isEnot a medicament. This Court, inter alia, observed and held as under: - “12. ….It is settled law that the onus or burden to showthat a product falls within a particular tariff item is alwayson the Revenue. Mere fact that a product is sold acrossthe counters and not under a doctor’s prescription, doesFnot by itself lead to the conclusion that it is not a medicament.We are also in agreement with the submission of MrLakshmikumaran that merely because the percentage ofmedicament in a product is less, does not ipso facto[13] meanthat the product is not a medicament. Generally thepercentage or dosage of the medicament will be such asGcan be absorbed by the human body. The medicament wouldnecessarily be covered by fillers/vehicles in order to makethe product usable. It could not be denied that all the ingredientsused in Banphool Oil are those which are set out in the Ayurveda 13 As per Corrigendum issued by Supreme Court of India No. F.3/Ed. B.J./92/2003dated 9-9-2003.H

textbooks. Of course the formula may not be as per the textbooksbut a medicament can also be under a patented or proprietaryformula. The main criterion for determining classification isnormally the use it is put to by the customers who use it. Theburden of proving that Banphool Oil is understood by the customersas a hair oil was on the Revenue. This burden is not discharged asno such proof is adduced. On the contrary, we find that the oilcan be used for treatment of headache, eye problem, nightblindness, reeling head, weak memory, hysteria, amnesia,blood pressure, insomnia etc. The dosages required arealso set out on the label. The product is registered withthe Drug Controller and is being manufactured under a druglicence.”

15.6. In the case Meghdoot (supra), while dealing with thequestion of classification of six items namely Bhringraj Tail, Trifla BrahmiTail, Neem Herbal Sat, Sat Reetha, Meghdoot Herbal Sat, MeghdootHerbal Powder and following the decision in BPL Pharmaceuticals(supra), this Court classified the items under the heading of ‘medicaments’and held that items which may be sold under names bearing a cosmeticconnotation but would remain medicines based on the composition ofthe items, in the following terms: -

“5….. A product may be medicinal without having beenprescribed by a medical practitioner. It was also notnecessary for a person manufacturing medical products toclaim classification under Tariff Sub-Heading 3003.30without establishing that the product had in fact been testedon patients in controlled situations or that the outcome hadnot been tested for effectiveness. This would be particularlytrue in the cases where the products are claimed to be basedon traditional Ayurvedic formulae.

7. This Court has in similar matters come to the conclusionthat items which may be sold under names bearing a“cosmetic” connotation would nevertheless remainmedicines based on the composition of the items in B.P.L.

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Pharmaceuticals Ltd. v. CCE [1995 Supp (3) SCC 1 : (1995) 77ELT 485].

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8. As far as the first three items listed earlier are concerned, thisCourt has in CCE v. Pandit D.P. Sharma [(2003) 5 SCC 288 :(2003) 154 ELT 324] and CCE v. Himtaj Ayurvedic UdyogBKendra [(2003) 5 SCC 290 : (2003) 154 ELT 323] in connectionwith Banphool Oil and Himtaj Oil held that the Ayurvedic hair oils,were medicines and should be properly classified under TariffSub-Heading 3003.30, rather than under Tariff Sub-Heading3305.10 or 3305.50….

9. As far as Items (4), (5) and (6) are concerned, for the reasonsstated earlier, we are of the view that they are also properlyclassifiable under medicaments under Tariff Sub-Heading3003.30.”

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16. Apart from the above, on behalf of the respondent, referencehas also been made to a decision of this Court dated 27.02.2019 concerningits product in relation to the entry in the Andhra Pradesh General SalesTax Act, 1957 and it has been asserted that therein, this Court acceptedthat the product in question was a medicine and not a cosmetic product.This Court observed and held as under: -E

“6. Notably, the Commissioner had failed to address the specificplea of the respondent that the hair oil manufactured by therespondent contains ‘Arnica Mount Q, Cantharis Q, Cinchona Qand Pilocarpine Q’ and would, therefore, qualify to be a drug withinFthe meaning of Section 3 of The Drugs and Cosmetics Act, 1940,and if so, would be covered under Entry 37 of Schedule-I of theAPGST Act; and not Entry 36 which is for general hair tonics,hair oils or hair lotions, as such. The High Court, therefore,reversed the conclusion reached by the Commissioner after notingthe aforementioned contention of the respondent and, instead, heldGthat the respondent had produced sufficient material to show thatthe product manufactured by the respondent was a medicine andnot a cosmetic product.

7. The fact that the respondent is using the HomeopathicPharmacopoeia referred to earlier in manufacturing of the hair oilhas not been traversed by the appellant. Neither has the H

Commissioner dealt with that contention of the respondent norwas such a plea taken before the High Court by the appellant.Considering this, we see no reason to deviate from the conclusionreached by the High Court that the product manufactured by therespondent was rightly assessed at the relevant point of time inthe assessment years 1994-1995 and 1995-1996, as covered byEntry 37 of Schedule-I of the APGST Act.

8. We once again make it amply clear that the view taken in theseappeals is in the fact situation of this case and confined to theassessment years 1994- 1995 and 1995-1996 only and would notapply or be of any avail to the respondent for the subsequentassessment years, in view of the amendment effected in theAPGST Act.”

17. Before concluding this segment pertaining to the decided cases,we may also take note of the decision of the Tribunal in the case ofBakson Homeo Pharmacy (supra) which had all through been reliedupon by the respondent for the reason that therein, a substantially similarproduct was held to be a medicament. In fact, in the said decision, theTribunal examined the questions relating to two products namely, “SunnyArnica Hair Oil” and “Sunny Arnica Shampoo”. As regards the issueconcerning the product shampoo, the Tribunal remanded the matter tothe lower authority for decision afresh but, as regards hair oil, the Tribunalupheld the contention of the assessee in terms of the opinion of themajority and held that the said product was answering to the descriptionof Homeopathic medicine while predominantly applying the testspertaining to the ingredients. In the leading opinion, the learned Memberof the Tribunal extensively referred to the individual properties ofHomeopathic medicines as also the other natural ingredients of theproduct. The learned Member further underscored the connotations ofHomeopathy system of medical treatment as also the therapeutic andprophylactic properties of the ingredients and observed as under: - “On a careful consideration and examination of the materialsproduced and referred to above, we notice that the ingredientsutilised in the manufacture of Arnica Hair Oil are exclusivelynatural substances and their reference has been found inHomoeopathic Pharmacopia of India. The manufacturers haveobtained drug licence and the use of the Hair oil, as a medicament,has been recommended by the Homeopaths. The appellants have AB

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Ashown that the ingredients are homoeopathic in nature and havingtherapeutic and prophylactic. Therefore, their contention cannotbe rejected in the light of the evidence produced……In the presentcase, we are concerned with Arnica Hair Oil, which is claimed tobe medicament in terms of the ingredients having necessaryantiseptic, antiphlogistic action for dermatological diseases.BIt is also used for treatment of baldness and acts as an anti-dandruff agent and as cooling agent. In view of each of theingredients having one or the other therapeutic orprophylectic functions in terms of homoeopathic science,therefore, it has to be held that the Arnica Hair Oil is not aCcosmetic preparation or for use on hair under sub-heading3505.90 of the Central Excise Tariff, as they are notintended for cleansing, beautifying, promotingattractiveness or altering appearance in terms of the Hon’bleSupreme Court judgment in the case of B.P.L. PharmaceuticalsLtd. but they are meant for specific treatment for dandruff ofDother skin and hair problem. Therefore, the appellant’scontention for treatment as a medicament havinghomoeopathic ingredients and considered as homoeopathicmedicine is required to be accepted for classification underTI 14E of erstwhile tariff and under sub-heading 3003.30Eof the new tariff.”

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18. We may usefully summarise the discernible principles fromthe cited decisions as also the other referred orders, so far relevant forthe purpose of determination of points arising in this appeal as follows:

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18.1. As regards the question as to whether the product in question,AHAHO, merits classification as ‘medicament’ under Chapter 30 or as‘cosmetic or toilet preparations’ under Chapter 33, the inquiry shall bedirected towards a couple of tests taken together, being the common/commercial parlance test i.e., how the product is understood commonly,Gincluding by the persons dealing in the same and by the end-users; andthe ingredients test i.e., whether the ingredients used in the product arefound mentioned in authoritative textbooks [vide Shree BaidyanathAyurved Bhavan Ltd. (supra)]. The connotations of common parlancetest could further be understood from the case of Alpine IndustriesH(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 technicalmeaning; rather the terms and expressions used in tariff have to beunderstood by their popular meaning, that is the meaning attached tothem by those dealing with or using the product. Further, as observed inG.C. Jain (supra), the words and expressions, unless defined in thestatute have to be construed in the sense in which persons dealing withthem understand i.e., as per trade understanding and usage. Yet further,there is no fixed test or static parameter for correct classification of aproduct and it essentially depends on the meaning assigned to it by thepersons concerned with it. One of the essential factors for determiningwhether a product falls under Chapter 30 or not is as to whether theproduct is understood as a pharmaceutical product in common parlance.However, the quantity of medicament used in a particular product is nota relevant factor because, ordinarily, the extent of use of medicalingredients is very low as a larger use may be harmful for the humanbody [vide Wockhardt Life Sciences (supra)]. Moreover, as held inSharma Chemicals (supra), the mere fact that a product is sold acrossthe counters and not under a doctor’s prescription, does not by itselflead to a conclusion that it is not a medicament; and in Meghdoot (supra),that a product may be medicinal without having been prescribed by amedical practitioner. It is held by this Court in BPL Pharmaceuticals(supra) and reiterated in Meghdoot (supra) that the items which may besold under names bearing a cosmetic connotation would neverthelessremain medicines based on the composition. As regards the question asto whether a particular product is classifiable under Chapter 30 as‘medicament’ or under Chapter 33 as ‘cosmetic’, one of the essentialfeatures would be as to whether the preparation is essentially for cureor prevention of disease (medicament) or for care (cosmetic); and thepreparation having only subsidiary curative or prophylactic value wouldfall under Chapter 33 [vide Alpine Industries and Sunny Industries(supra)].

18.2. Ordinarily, we would not have delved into another decisionof the Tribunal but have found it appropriate to refer to the said decisionin the case of Bakson Homeo Pharmacy (supra), which had all throughbeen relied upon by the respondent, for the reason that it related to asimilar product marketed in the name of “Sunny Arnica Hair Oil”,which was held to be a ‘medicament’. The said decision has also beenrelied upon by the Tribunal in the order impugned. The significant feature ABC

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Aof the said decision is that therein, in the leading opinion of majority,ingredient test has extensively been dealt with and the medicinal qualities;and therapeutic/prophylactic use of several of the ingredients have beenanalysed, which include all the ingredients of the product involved in thepresent case[14].

B18.3. As regards the question of justification for re-classificationor re-examination of the classification, this Court has clearly held thatthere is no good reason to change the classification merely on the groundof change of tax structure or tariff entries without showing a change inthe nature and character of a product or a change in the use of theproduct [vide the decisions in BPL Pharmaceuticals and ViccoCLaboratories (supra)]. As noticed in Shree Baidyanath AyurvedBhavan Ltd. (supra), this Court rejected the contentions seekingreclassification of the product in question therein, DML, after enactmentof new Tariff Act because the product in its composition, character anduses continued to remain the same even after insertion of new Sub-DHeading 3301.30.

19. Having thus summarised the discernible principles, so far asrelevant for the present purpose, we may take up the points arising fordetermination. As noticed, the principal point arising for determination inthis case is as to whether the product in question, AHAHO, meritsEclassification as a ‘medicament’ under Chapter 30 or as ‘cosmetic ortoilet preparations’ under Chapter 33 of the First Schedule to the CentralExcise Tariff Act, 1985. For determination of this point, the inquiry wouldbe directed towards the twin tests as noticed above.

Application of the principles and twin testF20. Before applying twin tests for the purpose of the product inquestion, we may usefully recapitulate the divergent propositionspresented in this case, where the findings of the Adjudicating Authority 14 It appears from the facts of the present case and the observations occurring in thesaid case of Bakson Homeo Pharmacy (supra) that all the ingredients of the productGinvolved in the present case (AHAHO) were equally the ingredients of the productunder consideration therein, namely, Arnica Montana, Cantharis, Pilocarpine, Cinchona.As noticed from the relevant pages of Materia Medica placed before us, in theHomeopathic terminology, Cinchona Officinalis is also termed as China Officinalis;and Pilocarpine is essentially isolated from Jaborandi. The similar product involved inBakson Homeo Pharmacy (supra) was said to be containing the ingredients ArnicaHMont, Jaborandi, Cantharis and China, apart from other ingredients.

and the submissions made on behalf of the appellant stand on one sidewhereas, the findings of the Tribunal with the submissions made on behalfof the respondent stand on the other.

20.1. As noticed, the Adjudicating Authority examined the contentsof the product as also its label and observed that it did not contain anycondition like “to be sold by authorized medical distributor or retailerunder prescription from medical practitioner” even though such a mentionwas a mandatory requirement under the Act of 1940; and it did notcontain any specification regarding the dosage to be used and the durationfor which it is to be used, which is the norm for a medicament. TheAdjudicating Authority yet further observed that there was no claim thatthe product could cure any particular disease like Alopecia (loss of hair);that the medical conditions like Alopecia actually tend to happen all of asudden with patches of baldness not only on the head but anywhere onthe body; and that Insomnia was a medical condition resulting insleeplessness due to stress and other neurological disorders. Accordingto these observations, non-mention of Alopecia or Insomnia on the labelsindicated that the product was not meant for any substantial curativepurpose. The Adjudicating Authority also observed that by mentioningno contra-indications, it implied that irrespective of the quantum or durationof usage, there was no adverse effect on the scalp or skin, which wasagainst the basic concept of a medicament, which is prescribed or usedfor a limited period and overdose is known to result in contra-indicationslike diarrhoea, acidity, ulceration, rashes etc. The Adjudicating Authorityfurther observed that the label neither contained a positive indicationthat it was a medicament nor a negative indication that it was not acosmetic but it was certainly labelled as a “Hair Oil”; and if the intentionwas to identify the product as medicament, there was no need to label itas “Hair Oil”. Hence, the Adjudicating Authority held that AHAHOcould not be categorized as a medicament but had to be classified as“Hair oil”. As regards common parlance test, the Adjudicating Authorityobserved that AHAHO was accessible in both Medical and GeneralStores and could be bought across the counter. Moreover, the depictionof a lady with long, black flowing hair on its label indicated itscategorisation as cosmetic and not as a medicament. The AdjudicatingAuthority even proceeded to observe that ‘Hair growth is at best acosmetic necessity rather than a disease requiring immediateattention or treatment’. The Adjudicating Authority also observed thatthe drug licenses issued by respective authorities, per se did not make AB

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AAHAHO a preparation of homeopathic medicine. While referring toMateria Medica, the Adjudicating Authority noted his reservations aboutone ingredient (Pilocarpine) and observed that there was no nexus ofthe said ingredient with Homeopathy. While referring to the significanceof general rules of interpretation as regards the Notes attached to therespective Chapters/Tariff Items in the First Schedule to the Act of 1985,Bthe Adjudicating Authority observed that as per Note 1(e) to Chapter 30,the said Chapter did not cover preparation of the headings of Chapter3303 to 3307, even if they have therapeutic or prophylactic properties.

20.1.1. Learned ASG, while supporting the aforesaid findings ofthe Adjudicating Authority and while assailing the findings of the Tribunal,Chas argued that the product in question does not meet the criteria laiddown under Chapter 30; that even if the product is stated to possesscertain curative or prophylactic value, it would still be cosmetic as itexcludes those with subsidiary curative and prophylactic value; and TariffItem 3305 90 19, specifically meant for “Hair oil”, directly covers theDproduct in question for, a specific entry would take precedence over ageneral entry. The ASG has contended that the common parlance testof the product is not in favour of the respondent, as the product is notprescribed by any medical practitioner, is available freely without anyprescription in Medical and General Stores, and could be purchased acrossthe counter, as admitted by the respondent. Moreover, the label does notEindicate the condition of sale by authorised medical distributor or retailerunder prescription; it does not cure any particular disease; and the claimson the label are for marketing purposes only. The learned ASG has reliedupon the decision in Alpine Industries (supra) to submit that anysubsidiary therapeutic or prophylactic use of the product would not changeFits nature as “Hair oil” if in the common parlance, it is treated as acosmetic. Learned ASG has also submitted that the product is advertisedas hair oil and not a medicament; and is perceived by the public whopurchase and sell the product as hair oil (cosmetic) and not asmedicament.

G20.2. In contrast to what has been observed by the AdjudicatingAuthority and what has been argued by learned ASG, it is noticed that inthe very first response to the show-cause notice, the respondent assertedthat the twin tests for classification of the product as ‘medicament’ wereduly satisfied in relation to its product AHAHO in view of the facts andfactors: (i) that the manufacturing process, undertaken in terms of theH

manufacturing license issued by the Drug Controller and by theDirectorate of Ayush, would indicate the presence of four homeopathicdrugs in the product namely, Arnica Montana, Cantharis, Pilocarpineand Cinchona; (ii) that the drugs so used are mentioned in the authoritativetext books like Materia Medica of Homeopathic Drugs; (iii) that its labelindicated the words “Homeopathic Medicine” under Schedule K to theRules of 1945; (iv) that the product is to be applied to the scalp and notconsumed orally; it would cure/prevent the lack of blood circulation tothe hair roots, hair fall (alopecia), dandruff, headache and lack of sleep(insomnia), and healing from the said diseases would lead to good healthin terms of growth and maintenance of natural colour in the hair; and (v)that the product was a medicament in terms of market parlance,evidenced by its use over a period of nearly 19 years. The respondentalso submitted that the product was not ‘cosmetic’, as the ingredientsused had prophylactic properties and it was not applied for cleansing orbeautifying or promoting attractiveness or altering the appearance; anddepiction of a lady with long flowing hair on its label was only subjectiveand could be interpreted as indicative of good health evidenced by thelong flowing hair upon being treated for hair fall and dandruff.

20.2.1. The Tribunal took note of the observation and findings inthe order impugned as also the evidence placed before it and the citeddecisions and held, inter alia, that even though the goods were soldover the counter and not on a medical prescription, it would not lead tothe goods being out of the category of medicine; that when differentbranches of medicine and the Licensing Authorities recognized baldnessor hair fall as disease, the Adjudicating Authority could not take a differentview which was not recognized by the branches of medicine; that theproduct clearly mentioned that it could be used for other ailments alsosuch as sleep loss, increase of blood circulation and it nowhere depicteditself as for hair care or enhancing beauty of hair; that the label indicatedthe product as Homeopathic medicine under Schedule K to the Rules of1945, ingredients and their composition, indications, contra-indicationsand mode of application and such contents of label itself showed thateven in common parlance, it was understood by the users and the tradersas Homeopathic medicine; that there was no advice on the label nor didit suggest that it could be used as hair oil; and indisputably, the productwas made of four Homeopathic medicines as ingredients namely ArnicaMont, Cantharis, Pilocarpine and Cinchona and was used to treat hairloss, insomnia, dandruff, headache and other ailments; and the product AB

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Awas manufactured under Drug Licence issued under the relevant ruleswhich had been renewed from time to time by the Additional Director &Drug Controller (Homeo), Department of Ayush, Government ofTelangana; that even as per analysis report of Drug Controller, Departmentof Ayush, the product was medicine; the product was covered by SerialNo. 35 of Schedule K to the Rules of 1945 (Homeopathic Hair oilsBhaving active ingredients upto 3X potency) and the said Schedule coveredonly drugs and not cosmetics. The Tribunal also observed that the producthad already been held to be drug by the Andhra Pradesh High Court inreference to Commercial Taxes; and the Advance Ruling Authority ofCommercial Taxes, Government of Tamil Nadu for the purpose ofCTNVAT Act 2006, held the product to be a Homeopathic medicine. TheTribunal also took note of the fact that even in the past, the respondentwas issued show-cause notices for classification of the product ascosmetic and the Appellate Authority, after going into all the aspects ofcommon parlance as well as contents of the product and its usage, heldthat the product was a Homeopathic medicine. The Tribunal distinguishedDthe case of Shree Baidyanath Ayurved Bhavan (supra) while observingthat the product in question therein did not satisfy the common parlancetest and the said product DML was known as toilet preparation in commonparlance and not as Ayurvedic medicine. The Tribunal further pointedout that the decision of this Court in the case of Alpine Industries (supra)Ewas not applicable as in the said case, the drug license obtained by theassessee under the Drugs and Cosmetics Act, 1940, itself mentionedthat it was a license for ointment and cream for external application as anon-pharmacopoeia item whereas in the present case, the product wasregistered as Homeopathic Medicine.

F20.2.2. While supporting the findings of the Tribunal, learned seniorcounsel for the respondent has contended that AHAHO is a therapeuticor prophylactic medicament in the medium of oil for curing diseasesrelating to the scalp. The product is not advertised as “Hair Oil” but ismarketed only as “Aswini Homeo Arnica Hair Oil”.

G21. In an overall comprehension of the matter, and with applicationof the relevant principles to the facts of the present case, we are clearlyof the view that the product in question sails through the twin tests withoutany doubt and has rightly been held as medicament by the Tribunal.

22. Taking up the test relating to the ingredients, there appearsHabsolutely no reason to suggest that the product in question, AHAHO,

does not pass this test. It remains indisputable that the product has beenmanufactured as a drug after being duly licensed by the competentauthorities and carries the combination of as many as four Homeopathicmedicines, Arnica Montana, Cantharis, Pilocarpine, and Cinchona in itspreparation. These Homeopathic medicines are duly found mentioned inHomeopathic Pharmacopoeia of India[15] as also in the Dictionary ofPractical Materia Medica[16] placed before us by the learned counsel forthe respondent.

22.1. Having gone through the elaborate order passed by theAdjudicating Authority, we are constrained to observe that in the over-anxiety to somehow hold the product in question as cosmetic, theAdjudicating Authority even attempted to suggest his reservations asregards the utility of Pilocarpine as a Homeopathic drug contrary to theauthoritative texts[17]. Be that as it may, the Adjudicating Authority in itselaborate order could not otherwise doubt the recognition of otheringredients of AHAHO as being Homeopathic drugs. The approach ofthe Adjudicating Authority in his micro analysis of the contents of labelhad also been in the nature of a fishing inquiry as if only to find some gapor some loophole therein, without looking at the substance of the matterthat the product in question was clearly indicated to be a Homeopathicmedicine under Schedule K to the Rules of 1945. Looking to the natureof the product and its properties, the relevant indications have also beenspecified in reasonable terms and looking to its nature and purpose,directions for use have also been given in the manner that it was to bemassaged directly on the scalp and should be left overnight for bestresults. Hence, the Adjudicating Authority’s observations about want ofspecification regarding the dosage to be used and the duration for whichit is to be used carry their own shortcomings. As noticed, the product inquestion is essentially meant for dealing with the conditions arising inand on the scalp with hair being the integral part thereof. The productconsists of Homeopathic medicines. Its manner of use is to put the sameon the scalp and to leave it overnight. Looking to the nature of the product 15 Volume I 1971 ed. and Vol. V 1986 ed.

16 A Dictionary of Practical Materia Medica by John Henry Clarke; B. Jain publishers(P) Ltd., New Delhi.

17 As explained at p. 821 of the extract of Materia Medica placed before us, “Pilocarpineis one of the most characteristic of several alkaloids which have been isolated fromJaborandi (Pilocarpus pinnalus)”. In the decision by the Tribunal in the case of BaksonHomeo Pharmacy (supra), the properties of this ingredient have been distinctly indicated,including that “for treatment of baldness” with reference to the relevant medical texts.

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Aand its uses, the observations about want of specification regarding thedosage do not take the product out of its pharmaceutical value. Further,the Adjudicating Authority’s observations of dissatisfaction because ofthere being no contra-indications have gone miles away from thereasonableness of approach. If the respondent has stated in clear termson the label that the product carried nil contra-indications, looking to itsBnature, purpose and the manner of use, it does not cease to be amedicament.

22.2. The perversity and unreasonableness of approach of theAdjudicating Authority is also noticed from the observations that, if theintention was to identify the product as medicament, there was no needCto label it as “Hair Oil”. While the expression “Hair Oil” does appear onthe label, the other integral expressions “Homeo” and “Arnica” precedingthe expression “Hair Oil” could not have been ignored and could nothave been left aside. The Adjudicating Authority had gone to the extentof observing that hair growth was at best a cosmetic necessity ratherDthan a disease requiring immediate attention or treatment! The Tribunalhas rightly observed that when hair fall or baldness is recognised as amedical condition, the Adjudicating Authority could not have taken adifferent view, which was not recognized by any branch of medicine.The Tribunal has also rightly pointed out that the product clearly mentionedthat it could be used for other ailments like headache and that it inducesEgood sleep.

22.3. Moreover, the Adjudicating Authority seems not to havegiven adequate attention to the contents of Chapter 30 and the fact thatfor being accepted as medicament, the product is not invariably requiredto carry only therapeutic use. A product having prophylactic use is alsoFenvisaged under the Headings 3003 and 3004. If the product claims toimprove blood circulation to the hair roots and thereby controlling hairfall, its prophylactic use cannot be gainsaid.

22.4. The product in question, being undoubtedly covered by SerialNo. 35 of Schedule K to the Rules of 1945 and being manufactured inGterms of the license issued under the Act of 1940, in our view, clearlysatisfies the ingredients test. In other words, on its ingredients, the productis indeed a medicament carrying the combination of Homeopathicmedicines.

23. In regard to the overt reliance of the appellant on the expressionH“Hair Oil” used for the product by the respondent, it may also be observed that small doses of the medicines in question would invariably requiresome medium of administration. Learned counsel for the respondentshas rightly submitted that in relation to the product in question, hair oil isonly a medium through which the medicine is to be applied on the scalp,particularly when it is meant for nourishing the hair roots.

23.1. It is also apparent in the present case that the stand of theDepartment to classify the product in question as ‘cosmetic’ underChapter 33 is essentially based on the distinct entry “Hair Oil” occurringtherein; and it appears that the expression “Hair Oil” occurring on thelabel of the product has been taken as decisive by them. For what hasbeen discussed hereinabove, it would also follow as a natural corollarythat the expression “Hair Oil” occurring on the label of the product isonly indicating the medium through which Homeopathic medicinescomprising the product are to be applied. We are unable to accept thesubmissions and the efforts on the part of the appellant to take the productin question to Chapter 33 merely because of its label carrying theexpression “Hair Oil” while ignoring the preceding significant expressions“Homeo” and “Arnica”. As observed by this Court in BPLPharmaceuticals (supra), for a product to be taken to Chapter 33, ithas first to be a ‘cosmetic’. Similarly, reference to Note 1(e) of Chapter30 also turns out to be of no relevance because the product in questioncannot be said to be a preparation of Heading 3305 and then havinginsignificant or subsidiary therapeutic or prophylactic properties. Asregards the product in question, which is essentially made of Homeopathicmedicines which have therapeutic and prophylactic uses, it cannot besaid to be carrying only subsidiary pharmaceutical value. Putting itdifferently, we are satisfied that the product in question, AHAHO, ispredominantly of pharmaceutical value and the item of cosmetic therein,i.e., hair oil, is nothing but a medium for appropriate use of thatpharmaceutical value.

23.2. In regard to the above, we find the consideration of thisCourt in the case of BPL Pharmaceuticals (supra) to be apposite tothe questions before us. Therein, this Court was considering a productsold by the assessee under the brand name “Selsun shampoo”. ThisCourt found it to be medicament with reference to a variety of testsapplied from different angles and after finding that its active ingredientwas selenium sulfide. In that context, this Court also indicated that anindividual using such product may not be prepared to say that he or she A

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Awas using a particular compound to get rid of dandruff or other similardiseases but would not hesitate to state that he or she was using aparticular brand of shampoo. The observations in BPL Pharmaceuticalsin this regard correlates with ingredient test as also the common parlancetest; and in our view, fortify the case of the respondent.B23.3. The submissions about specific entry to be preferred to thegeneral entry do not take the case of appellant any further. In the presentcase, in fact, the referred entry of Chapter 33 relating to the Tariff Item‘Hair oil’ under the Heading 3305 is itself to be taken as a general entryand in any case, when hair oil is being used only as a medium for use/administration/application of the medicine, the case would fall in theCspecific entry pertaining to medicament under Headings 3003 or 3004;and it being of the medicines of Homeopathic system, it would fall eitherin Tariff Item 3003 90 14 or in Tariff Item 3004 90 14. In any case, theproduct in question cannot fall under Chapter 33.

24. As observed, we have considered it appropriate to refer to theDsaid decision of the Tribunal in the case of Bakson Homeo Pharmacy(supra), which had all through been relied upon by the respondent forthe reason that it related to a similar product marketed in the name of“Sunny Arnica Hair Oil”. The said decision clearly makes out theingredient test in favour of the respondent and we are satisfied with theEdetailed analysis of the same ingredients by the Tribunal while holdingthe product to be a medicament. The ingredient test, as extensively dealtwith in the leading opinion of majority of the Tribunal in the case ofBakson Homeo Pharmacy (supra), with reference to the fundamentalprinciples of Homeopathy and the medicinal properties and therapeutic/prophylactic use of several of the ingredients, inspires confidence andFwhen AHAHO is found carrying all such Homeopathic medicines whichwere the ingredients of the product under consideration of the Tribunal,we find it just and proper to endorse the views of the majority of theTribunal in Bakson Homeo Pharmacy (supra) and there appears norequirement to re-analyse the medicinal properties of the ingredients.GSuffice it would be to observe that the product in question, AHAHO,passes the ingredients test beyond any doubt.

25. On the other features of common parlance test, i.e., the mannerin which the product in question is commonly understood, it is noticedthat one of the grounds placed at the forefront by the appellants and theHAdjudicating Authority had been that AHAHO was accessible in both Medical and General Stores and could be bought across the counter.This feature of availability of the product in question has absolutely norelevance. In Sharma Chemical (supra), this Court clearly held thatmerely for a product being sold across the counter and not on doctor’sprescription, does not by itself lead to a conclusion that it is not a‘medicament’. Similarly, in Meghdoot (supra), this Court made it clearthat a product may be medicinal without having been prescribed by amedical practitioner. In Meghdoot, this Court has also made it clearwith reference to other decided cases that the items which may be soldunder names bearing a cosmetic connotation would nevertheless remainmedicines based on the composition. Viewed from any angle, merely forbeing available across the counter, the product in question, AHAHO,does not cease to be a medicament.

26. Another essential feature while examining the question as towhether a particular product is classifiable as medicament under Chapter30 or as cosmetic under Chapter 33 would be as to whether thepreparation is essentially for cure or prevention of disease i.e., withtherapeutic or prophylactic properties or only for care. Tersely put, whenthe preparation is for cure or prevention, it would be medicament but, ifonly for care, it would be cosmetic. Of course, a cosmetic would notbecome medicament even if having subsidiary curative or prophylacticvalue, as held by this Court in Alpine Industries (supra). However, theproduct in question, AHAHO, does not fail on this count for the reasonthat it is a preparation of Homeopathic medicine and when it is marketedas carrying those medicines, in commercial as also common parlance,with its name carrying the significant expressions “Homeo” and “Arnica”,the product could only be understood as the one carrying predominantlypharmaceutical value and not mere cosmetic value.

27. The other suggestion on behalf of the Adjudicating Authorityand the appellant, relating to the common parlance test with referenceto the depiction of a lady with long black flowing hair on its label andthereby treating it as cosmetic, is also stretching the matter to the brinkof absurdity. When the product in question is intended to control hair fallas also to prevent dandruff and to induce good sleep, which all carrytheir own therapeutic and prophylactic connotations, the picture of alady with long black flowing hair cannot be said to be unrelated to theindications related with the product. In any case, such a picture, by itself,cannot make the product in question a cosmetic. Interestingly, right atthe top of the said picture and below the name of the product, it proclaims ABC

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A“Controls hair fall. Prevents dandruff”. The Adjudicating Authority hastaken his process of analysis to further illogical heights by proclaimingthat hair growth was at the best a cosmetic necessity rather than adisease requiring immediate attention or treatment. We have reproducedthese expressions of the Adjudicating Authority verbatim to show theirrationality of reasoning and want of logic. A treatment or prevention ofBhair fall by way of medication was sought to be rejected by theAdjudicating Authority by his impression that hair growth was only acosmetic necessity. We could only disapprove such an approach.

27.1. The substance of the matter remains that in commonparlance, the product in question would be approached essentially for itsCclaimed medicinal qualities and not as another hair oil. This aspect, inour view, is itself sufficient to reject the contentions of the appellant andthe observations of the Adjudicating Authority. The Tribunal has rightlydealt with the matter in accordance with the law applicable to the factsof the present case.D28. The Adjudicating Authority has also observed that drug licensesissued by respective authorities per se did not make AHAHO apreparation of Homeopathic medicine. However, the AdjudicatingAuthority has failed to consider that such drug license issued underSchedule K to the Rules of 1945 had not been a factor to be ignoredaltogether. Both in relation to common parlance test as also the ingredientsEtest, this factor carries its own relevance even if not finally decisive ofthe matter. The submission about want of condition of sale by authorisedmedical distributor or retailer under prescription has its own shortcomingsfor it has not been shown if such a preparation falling under Schedule Kto the Rules of 1945 was also requiring such a mention in terms of Rule F97. In any case, any such requirements for adherence to the Act of 1940and the Rules of 1945 could only be a matter for consideration of theauthorities dealing with licensing and regulating the manufacture andsale of drugs. The only relevant aspect for the present purpose is thatthe product in question being manufactured as a Homeopathy medicine,and being marketed and used as a Homeopathic medicine for itsGpharmaceutical value, would fall in Chapter 30 and cannot be brandedas cosmetic, so as to fall under Chapter 33 of the First Schedule to theAct of 1985.

29. In the passing, we may also observe that the very product inquestion, in relation to the entry in the Andhra Pradesh General SalesHTax Act, 1957, has been accepted by this Court to be answering the

description of a medicine and not being a cosmetic product, after it wasfound that the respondent-assessee’s assertion about its ingredients andthereby the product qualifying to be a drug within the meaning of Section3 of the Act of 1940 could not be refuted by the Revenue. The saiddecision of this Court may not have a direct bearing on the question ofclassification of the product in question for the purpose of the Act of1985 but, it cannot be denied that the product in question has been foundanswering to the description of a ‘drug’ for the purpose of the Act of1940 as also for the purpose of the said Andhra Pradesh General SalesTax Act, 1957. Viewed from any angle, it remains a medicament.

Whether re-look at classification of the product in questionjustified

30. For what has discussed hereinabove, it is apparent that theproduct in question had rightly been classified as ‘medicament’ in thepast and nothing material had changed so as to re-classify the same.However, the Revenue has attempted to rely on the amendment of thetariff structure in the year 2012 as justification for re-look at itsclassification. The Adjudicating Authority stated this justification in themanner that there were substantial changes in the tariff headings,particularly when Chapter 30 came to be reworded so as to remove thedistinction between patent/proprietary and generic medicaments and toclassify them according to whether they are put up in unit containers forretail sale or not; the mention about the Act of 1940 and the variousPharmacopeia came to be deleted; and under Chapter 33, the phrase‘Hair oil’ became prominent under which, subsidiary headings of‘perfumed hair oil’ and ‘others’ came to be specified. According to theAdjudicating Authority, all these changes merited interpretation of thenew entries vis-à-vis the product in question than what was decided orsettled earlier. Learned ASG has also relied upon these very reasons insupport of his contentions. In our view, there had been no justification inthe Department seeking to re-open the settled position in relation to theproduct in question merely with reference to certain changes made inChapter 30 and Chapter 33, which had essentially broadened their ambitand scope and provided modified marginal notes and tariff entries withdetailed specifications. These changes had otherwise no impact, so faras the product of the respondent, AHAHO, is concerned.

31. In support of the proposition for re-classification, the decisionin Andhra Sugar Ltd. (supra) has been cited on behalf of the appellant.

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AWe have extracted the relied upon paragraph of the said decisionhereinbefore and it is difficult to accept that the proposition therein, tothe effect that the meaning ascribed by the authorities issuing Notificationis a good guide of a contemporaneous composition of exposition of law,has any application to the present case. The applicable principles, asnoticed from the decisions in BPL Pharmaceuticals and ViccoBLaboratories (supra) remain that change of classification cannot becountenanced merely on the ground of coming into force of different taxstructure without showing that the product has changed its character.The decision in Shree Baidyanath Ayurved Bhawan (supra) is pertinentto the point wherein, after an unsuccessful attempt to have the productCDML accepted as a medicinal preparation (in Baidyanath I), theassessee-company made another attempt for change of classificationafter coming into force of the Act of 1985. While rejecting such anattempt on the part of the assessee-company, this Court held that sincethe product in its composition, character and uses continued to be thesame, even after insertion of new Sub-Heading 3301.30, change inDclassification was not justified (vide paragraph 58 of the decision inShree Baidyanath Ayurved Bhawan, reproduced hereinbefore). Thus,mere broad-basing of the entries in Chapter 30 and Chapter 33 of theFirst Schedule to the Act 1985, by itself, could not have been thejustification for an attempt at re-classification of the product in question.E32. Even as regards the amendment of the entries, as noticed, thestand of the appellant-Revenue has been that Chapter 30 was rewordedso as to remove the distinction between patent/proprietary and genericmedicaments and to classify them according to whether they are put upin unit containers for retail sales or not. Further, it has been stated thatFreference to the Act of 1940 and various pharmacopoeia had been deleted.Thirdly, it has been contended that in Chapter 33, the phrase hair oil hadbecome prominent with subsidiary entries of perfumed hair oils and other.We could only reject such an attempt on the part of the Revenue as ahair-splitting exercise, away and detached from the substance. This isapart from the fact that the specification of medicament under HeadingG3004 would, in any case, cover the product in question in the form it ismarketed for retail sale.

32.1. By way of the amendment of 2012, even if the relevantentries pertaining to preparation for use on the hair have been providedwith micro classifications in comparison to the entries standing earlierH(as could be seen from the entries extracted hereinbefore), it could never be taken to mean that anything which is prepared for being used on thehair and carries the name “Hair Oil”, would lose its character asmedicament if otherwise it has been prepared for therapeutic orprophylactic uses. Moreover, rewording and regrouping of different entriesin medicaments are hardly of any impact on the character of the productin question.

32.2. As noticed, in Chapter 30, apart from Heading 3003 relatingto medicaments consisting of two or more constituents which have beenmixed together for therapeutic or prophylactic uses not put up in measureddoses or in forms or packing for retail sale, Heading 3004 pertains to themedicaments consisting of mixed or un-mixed product for therapeutic orprophylactic uses put up in measured doses or in form of packing forretail sale. Viewed thus, we are inclined to accept the submissions onbehalf of the respondent that even with reference to its packaging, theproduct AHAHO would remain a homeopathic medicament and wouldbe covered under Chapter 30, where it could be placed in Sub-Heading3004 90 14. Similarly, deletions of the reference to the Act of 1940 or tovarious pharmacopoeia cannot be interpreted to mean that a productlike the one in question, which is otherwise a medicament, has to beclassified on the basis of the base through which the application of medicineis being provided.

33. We have already discussed hereinabove that with applicationof the relevant principles, the product in question, AHAHO, comes cleanthrough the twin test. Therefore, in the ultimate analysis, we are clearlyof the view that there had been no justification for making any attemptto re-classify the product in question with reference to the amendmentsbrought about in Chapters 30 and 33 in the year 2012.

Conclusion

34. For what has been discussed hereinabove, answers to thepoints arising for determination are that the product in question, AHAHO,merits classification as ‘medicament’ under Chapter 30 and not as‘cosmetic or toilet preparations’ under Chapter 33 of the First Scheduleto the Central Excise Tariff Act, 1985; and the change in tariff structureby way of amendment brought about in the year 2012 did not justify anyre-look at the classification of the product in question.

35. In view of the above, this appeal fails and is, therefore,dismissed. No costs.

Appeal dismissed.

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