Classification of the product

PJ/ Case Law/2013-14/1622

Case:-M/s LYKA LABS LTD Vs COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, SURAT-II

Citation:-2013-TIOL-904-CESTAT-AHM

Brief facts:-This stay application is filed by the appellant in appeal No. E/10218/12 with respect to the OIA No. CCEA-SRI-II/SSP 85/U/S/35A (3) dt. 26/10/2012 passed by Commr. (A), Surat-II. The issue involved is whether applicant's product "sensur Rubefacient & Herbyl Skin Ointment" is classified under 3003.39 of CETA 1985 as Ayurvedic Medicine claimed by the appellant or under 3003.10 of the CETA 1985 as P. or P Medicines (other than Ayurvedic Medicines) as claimed by the Revenue.

Appellants contention:-The Appellant argued that all the ingredients alleged to be allopathic in nature are known to the ayurvedic science and applicant has given the relevant references of the disputed ingredients as given in Sanskrit/Indian Languages and ayurvedic literature. That the classification was initially provisionally approved and later approved finally after verification of the facts and due application of mind. They relied upon the case of CEE vsMuzzaffarnagar Steels [1989 (44] ELT 552 (Tri.)]. Appellant also relied upon the following case laws:-

(i) Amurtanjan Ltd. Vs. CEE [1995 (77) ELT 500 (SC)]
(ii) Naturelle Health Products vs. CCE [2003 (158) ELT 257 (SC)] = (2003-TIOL-19-SCCX)
(iii) Medoplarm vs. CCE [2005 (189) ELT 33 (Tri.)]
(iv) Himani Ltd. vs CCT [2011(263) ELT 335 (ALL)]

In view of the above judgments it was argued that there are products like B-Tex Superointment, Softheel ointment, B-Tex white ointment, Scabitex ointment etc which are marketed as ayurvedic medicaments and accordingly their product also merits classification as ayurvedic medicament under Tariff heading 3003.39.

Respondents Contention:-Therespondent on the other hand relied upon the case of Velvette International Pharma products Ltd. Vs. Dy. CCE, Chennai [2006 (196) ELT 143 (Mad.) He also brought to our notice various circulars issued by CBEC on this issue as reflected in paras 15,15.1 to 15.3 of the OIO No. 45 to 62/NAV-ADC/DEM/2010 at 29/06/2010 passed by the original authority which was upheld by the OIA dt. 26.10.2012.

Reasoning of Judgement:- It transpires that the issue required to be decided in these proceedings is the classification of a product which is claimed by appellant as Ayurvedic Medicament when it contained both the Ayurvedic ingredients and those ingredients having therapeutic value which are of synthetic origin. Appellant has claimed that the chemicals said to be allopathic by the revenue infact has plant origin and have been mentioned in the Ayurvedic texts. Appellant, interalia, has relied upon Allahabad High Court's order in the case of Himani Ltd. Vs. Commn. of Commercial Taxes [2011 (263) ELT 335 (ALL). Wherein it has been, inter-alia, held by the high court that liquid paraffin is used as a filler or vehicle. However, in the present case the lower authorities have brought out in their orders that the synthetic chemicals used by the appellants in their product does have therapeutic value. It is not brought out on record by the appellant as to how the chemicals used in the manufacture of their product has got vegetable origin, because the same chemical can be extracted both from a material of vegetable origin and could also be chemically synthesised in the laboratory. In this regard para-12 of the Madras HC order in the case of Velvette International Pharma ProductsLtd. Vs. CCE., Chennai [2006 (196) 143 (Mad.)] is very relevant and is reproduced below:-

"By relying upon the above propositions, learned counsel for the petitioners submitted that even though some synthetic materials are naturally found available in the ayurvedic preparation manufactured by the petitioners that will not make the herb to loose its ayurvedic character. What is to be noted here is that such synthetic materials found in the manufacturing premises of petitioners were not the extracts derivated from the Herbs; but only directly purchased synthetics as probabilised by statements of its sellers. It is not also the case of petitioners that they extracted the Herbs and by which process gathered the synthetics contained in such Herbal plants. While such is the case, the proposition in the above case laws cannot be made applicable to the present facts."

In this regard CBEC circulars mentioned in para 15.2 to 15.3 of the original Adjudicating order dt. 19/05/11 become very relevant. The nature of the product and how it is perceived by the buyers is also required to be gone into for proper appreciation of the issue. As these details are required to be gone into at the time of regular hearing, we are of the opinion that appellant has not made out a prima facia case for complete waiver and are required to be put to certain conditions. Appellants is directed to deposit an amount of Rs. 25 lakhs within a period of 8 weeks and report compliance to the Deputy Registrar by 4/7/13 Deputy Registrar on verifying the same will put up the papers to the bench or suitable orders. After pre-deposit of the above amount, the remaining amounts of duties and penalties shall be stayed till the disposal of the appeal.

Decision:-Part pre deposit ordered.

Comment:- The analogy drawn from this case is that for classification of a product, apart from the ingredients used, the nature of the product and how it is perceived by the buyers is also required to be examined in detail.

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