Regarding classification of various Ayurvedic medicines.

PJ/CASE LAW/2016-17/3063

Case-M/s MAYAR INDIA LTD Vs COMMISSIONER OF CENTRAL EXCISE, DELHI-II
Citation-2016-TIOL-899-CESTAT-DEL
Issue-Regarding classification of various Ayurvedic medicines.
Brief Facts-These three appeals are dealing with the same issue and are taken up together for disposal. The appellant/assessee are engaged in the manufacture of various Ayurvedic medicines like Neem, Boswellia, Serrata, Ashwagandha, Gymnema, etc. They classified these items under tariff heading 3003.31 and claimed full exemption. Revenue felt that these products are rightly classifiable under tariff heading 3003.39 and liable to duty as "Patent or Proprietary Medicament". The reason for such claim is that these products carried trade name "Sivananda" and "Om" and hence appeared to have been sold as P or P medicines. Proceeding initiated against the appellant/assessee for the period 2002-03 to 28.11.2004 resulted in order dated 30.03.2005. The original authority classified these products under tariff heading 3003.39 and confirmed duty liability and imposed equal amount of penalty also. On appeal, the ld. Commissioner (Appeals) rejected the appeal. Aggrieved by this order the appellant/assessee is in appeal before tribunal. In two other proceedings the ld. Commissioner (Appeals) upheld the appellant/ assessee's claim for classification under tariff heading 3003.31 for Chawanprash and other Ayurvedic medicines mentioned earlier in the order. Aggrieved, the Revenue filed two appeals.
Appelants Contention-Ld. Counsel for the appellant/assessee submitted that
a) all the Ayurvedic medicines now under consideration are manufactured as per the formula prescribed in authoritative text books of Ayurveda.
b) For a product to be classified under tariff heading 3003.31, the conditions are that
(i) the product should be manufactured in accordance with formula described in the texts
(ii) all ingredients used are to be mentioned in the said books and
(iii) the product should be sold under the name as specified in such books. The appellants satisfy all these conditions.
c) the ld. Commissioner (Appeals) has not dealt with any of the submissions made by the appellant/ assessee with reference to scope of tariff classification under heading 3003.31. The decisions relied upon by the Commissioner (Appeals) are not at all relevant to their case.
d) reliance was placed on Tribunal's decisions in Zandu Pharmaceuticals2004 (172) E.L.T. 457 (Tri.Mum.); 2006 (198) E.L.T. 257 (tri. Mum.) = 2006-TIOL-155-CESTAT-MUM, Dabur India Ltd. 2007 (218) E.L.T. 211 (Tri.Del.)= 2007-TIOL-2160-CESTAT-DEL and Hon'ble Supreme Court's decision in Astar Pharmaceuticals (P) Ltd.1995 (75) E.L.T. 214 (S.C.) = 2002-TIOL-248-SCCX
Respondents Contention-Ld. A.R. submitted that apart from name of the medicines the product labels clearly mentioned the trade name 'Sivananda' with a registered design of 'Om'. Such trade mark is meant to link the product with the company and the products are to be considered as proprietary medicines.
Reasoning Of Judgement-The tribunal have heard both the sides and examined appeal records. The point for decision in these appeals is that the Ayurvedic medicines manufactured by the appellant / assessee are to be classified either under Tariff Heading 3003.31 or 3003.39. The admitted facts of the case are that the appellant/ assessee are manufacturing these various Ayurvedic medicines in accordance with the formulae described in the authoritative books of Ayurveda. Further, it is also an admitted fact that the products carry the name as specified in such books. However, the point of dispute is whether or not the said medicines which are sold under the name as specified in such books are sold in effect in proprietary name of the appellant/ assessee. They find that patent or proprietary medicaments other than Ayurvedic, Unani etc. are specifically mentioned under tariff heading 3003.10. However, there is no specific heading for patent or proprietary medicaments which are exclusively Ayurvedic. Such medicines are sought to be classified under Tariff Heading 3003.39 as "other" under the main heading 'medicaments'. It is clear that such nonspecific residual heading can be invoked only when specific headings are not found applicable to the products in question. As pointed out by the appellant / assessee that the conditions to be fulfilled for classifying the product under Tariff Heading 3003.31 are satisfied in the present case. The area of dispute is with reference to the name in which the said Ayurvedic medicines are sold by the appellant /assessee. The Original Authority observed that the goods are not sold exclusively under the name as specified in such authoritative textbooks. Since these medicines are sold with the registered trademark/ brandname "Shivananda" and "Om", these are to be considered as patent or proprietary medicaments classifiable under residual Heading 3003.39. We find that there is no such condition of the product to be sold exclusively in the name mentioned in the textbooks. Heading 3003.31 stipulates that medicaments to be manufactured exclusively in accordance with the formulae described in authoritative books specified in the First Schedule to the Drugs and Cosmetics Act, 1940 etc., and sold under the name as specified in such books. There is no dispute that the impugned goods are manufactured in accordance with the formulae of the authoritative text and name as mentioned in the text are mentioned in the packing of the product. We have also perused copies of labels used for marketing these medicaments. The mention of the house name/ brandname "Shivananda"/ "Om" cannot lead to the conclusion that these products are not sold in the name specified in Ayurvedic text. In Zandu Pharmaceuticals (supra) the Tribunal held that the word "Zandu" appearing on the label of Ayurvedic medicines will not disentitle the assessee from claiming the exemption available to Ayurvedic medicaments. Reliance was placed on C.B.E.C. clarification dated 29.03.1994. The Board clarified that Chavanprash prepared as per Ayurvedic Text Books and sold as Chavanaprash but the manufacturer's name or mark, logo, symbol etc. is also prominently displayed, in such situation also full exemption as available to Ayurvedic medicines is to be extended. They also notice that the Hon'ble Supreme Court in Astra Pharmaceuticals Pvt. Ltd. (supra) held that there is distinction between house mark and product mark. A monograph which only identifies the manufacturer would not make the medicine patent or proprietary. Considering the above analysis, they find that the appellant / assessee are right in classifying these products under Tariff Heading 3003.31 and claimed exemption available to Ayurvedic medicaments. Accordingly, the appeal filed by the appellant / assessee is allowed. On the same reasoning the appeals filed by the Department are dismissed.
Decision-Assessee's appeal allowed
Comment-The analogy of the case is that as in the given case the assessee is manufacturing various Ayurvedic medicines likeNeem, Boswellia, Serrata, Ashwagandha and Gymnema and classified them under tariff heading 3003.31 and claimed full exemption. And, the conditions require to classify Ayurvedic medicines under tariff heading 3003.31 are that the product should be manufactured in accordance with formula described in the texts, all ingredients used are to be mentioned in the said books and the product should be sold under the name as specified in such books. But in the given case there is no dispute regarding first 2 conditions and regarding third condition mentioning of house name/ brandname "Shivananda"/ "Om" cannot lead to conclusion that products are not sold in name specified in Ayurvedic text. Therefore ,assessee is right in classifying products under Tariff Heading 3003.31.This was based on the landmark decisions in the case of Zandu Pharmaceuticals and Astra Pharmaceuticals Pvt. Ltd.
Prepared By-Neelam Jain

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PJ/CASE LAW/2016-17/3063

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