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

- **Citation:** [2023] 6 S.C.R. 281
- **Court:** Supreme Court of India
- **Decided:** 2023-05-03
- **Case number:** Civil Appeal No. 9525 of 2018
- **Bench:** Dinesh Maheshwari, Vikram Nath
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/commisssioner-of-customs-central-excise-and-service-tax-hyderabad-v-ashwani-37189
- **Pages:** 73

## Headnote

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 14
in Chapter 30 or as 'cosmetic or toilet preparations' under Tariff
Item 3305 90 19 in Chapter 33 - Held: Product Aswini Homeo Arnica
Hair Oil merits classification as 'medicament' under Chapter 30
and not as 'cosmetic or toilet preparations' under Chapter 33 - On
basis of the twin test-common parlance test as also the ingredients
test, it is rightly held to be medicament - Furthermore, when the
said product is intended to control hair fall, prevent dandruff and
to induce good sleep, which all carry their own therapeutic and
prophylactic connotations, the picture of a lady with long black
flowing hair cannot make the product a cosmetic one - Change in
tariff structure by way of amendment brought about in the year
2012 did not justify a re-look into the classification of the product
- Mere broad-basing of the entries in Chapter 30 and Chapter 33
of the First Schedule to the Act 1985, by itself, could not have been
the justification for an attempt at re-classification of the product.
Dismissing the appeal, the Court
HELD: 1. The product Aswini Homeo Arnica Hair OilAHAHO, merits classification as 'medicament' under Chapter
30 and not as 'cosmetic or toilet preparations' under Chapter 33
of the First Schedule to the Central Excise Tariff Act, 1985; and
the change in tariff structure by way of amendment brought about
in the year 2012 did not justify any re-look at the classification of
the product in question. [Para 34][353-F-G]
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2.1 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 toilet
preparations' under Chapter 33, the inquiry shall be directed
towards a couple of tests taken together, being the common/
commercial parlance test i.e., how the product is understood
commonly, including by the persons dealing in the same and by
the end- users; and the ingredients test i.e., whether the
ingredients used in the product are found mentioned in
authoritative textbooks. The connotations of common parlance
test could further be understood, that the primary object of such
taxing statute being to raise revenue and various products being
differently classified for that purpose, the entries are not to be
understood in their scientific and technical meaning; rather the
terms and expressions used in tariff have to be understood by
their popular meaning, that is the meaning attached to them by
those dealing with or using the product. Further, the words and
expressions, unless defined in the statute have to be construed
in the sense in which persons dealing with them understand i.e.,
as per trade understanding and usage. Yet further, there is no
fixed test or static parameter for correct classification of a product
and it essentially depends on the meaning assigned to it by the
persons concerned with it. One of the essential factors for
determining whether a product falls under Chapter 30 or not is
as to whether the product is understood as a pharmaceutical
product in common parlance. However, the quantity of
medicament used in a particular product is not a relevant factor
because, ordinarily, the extent of use of medical ingredients is
very low as a larger use may be harmful for the human body.
Moreover, the mere fact that a product is sold across the counters
and not under a doctor's prescription, does not by itself lead to a
conclusion that it is not a medicament; and that a product may be
medicinal without having been prescribed by a medical
practitioner. The items which may be sold under names bearing
a cosmetic connotation would nevertheless remain medicines
based on the composition. As regards the question as to whether
a particular product is classifiable under Chapter 30 as
'medicame

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[2023] 6 S.C.R. 281
281
COMMISSSIONER OF CUSTOMS, CENTRAL EXCISE AND
SERVICE 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 14
in Chapter 30 or as 'cosmetic or toilet preparations' under Tariff
Item 3305 90 19 in Chapter 33 - Held: Product Aswini Homeo Arnica
Hair Oil merits classification as 'medicament' under Chapter 30
and not as 'cosmetic or toilet preparations' under Chapter 33 - On
basis of the twin test-common parlance test as also the ingredients
test, it is rightly held to be medicament - Furthermore, when the
said product is intended to control hair fall, prevent dandruff and
to induce good sleep, which all carry their own therapeutic and
prophylactic connotations, the picture of a lady with long black
flowing hair cannot make the product a cosmetic one - Change in
tariff structure by way of amendment brought about in the year
2012 did not justify a re-look into the classification of the product
- Mere broad-basing of the entries in Chapter 30 and Chapter 33
of the First Schedule to the Act 1985, by itself, could not have been
the justification for an attempt at re-classification of the product.
Dismissing the appeal, the Court
HELD: 1. The product Aswini Homeo Arnica Hair OilAHAHO, merits classification as 'medicament' under Chapter
30 and not as 'cosmetic or toilet preparations' under Chapter 33
of the First Schedule to the Central Excise Tariff Act, 1985; and
the change in tariff structure by way of amendment brought about
in the year 2012 did not justify any re-look at the classification of
the product in question. [Para 34][353-F-G]
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2.1 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 toilet
preparations' under Chapter 33, the inquiry shall be directed
towards a couple of tests taken together, being the common/
commercial parlance test i.e., how the product is understood
commonly, including by the persons dealing in the same and by
the end- users; and the ingredients test i.e., whether the
ingredients used in the product are found mentioned in
authoritative textbooks. The connotations of common parlance
test could further be understood, that the primary object of such
taxing statute being to raise revenue and various products being
differently classified for that purpose, the entries are not to be
understood in their scientific and technical meaning; rather the
terms and expressions used in tariff have to be understood by
their popular meaning, that is the meaning attached to them by
those dealing with or using the product. Further, the words and
expressions, unless defined in the statute have to be construed
in the sense in which persons dealing with them understand i.e.,
as per trade understanding and usage. Yet further, there is no
fixed test or static parameter for correct classification of a product
and it essentially depends on the meaning assigned to it by the
persons concerned with it. One of the essential factors for
determining whether a product falls under Chapter 30 or not is
as to whether the product is understood as a pharmaceutical
product in common parlance. However, the quantity of
medicament used in a particular product is not a relevant factor
because, ordinarily, the extent of use of medical ingredients is
very low as a larger use may be harmful for the human body.
Moreover, the mere fact that a product is sold across the counters
and not under a doctor's prescription, does not by itself lead to a
conclusion that it is not a medicament; and that a product may be
medicinal without having been prescribed by a medical
practitioner. The items which may be sold under names bearing
a cosmetic connotation would nevertheless remain medicines
based on the composition. As regards the question as to whether
a particular product is classifiable under Chapter 30 as
'medicament' or under Chapter 33 as 'cosmetic', one of the
essential features would be as to whether the preparation is
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essentially for cure or prevention of disease (medicament) or for
care (cosmetic); and the preparation having only subsidiary
curative or prophylactic value would fall under Chapter 33. [Para
18.1][338-F-H; 339-A-F]
2.2 In an overall comprehension of the matter, and with
application of the relevant principles to the facts of the instant
case, the product in question sails through the twin tests without
any 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, there
appears absolutely no reason to suggest that the product in
question, AHAHO, does not pass this test. It remains indisputable
that the product has been manufactured as a drug after being
duly licensed by the competent authorities and carries the
combination of as many as four Homeopathic medicines, Arnica
Montana, Cantharis, Pilocarpine, and Cinchona in its preparation.
These Homeopathic medicines are duly found mentioned in
Homeopathic Pharmacopoeia of India as also in the Dictionary of
Practical Materia Medica. [Para 22][344-H; 355-A-B]
2.4 The Adjudicating Authority in its elaborate order could
not otherwise doubt the recognition of other ingredients of
AHAHO as being Homeopathic drugs. The approach of the
Adjudicating Authority in his micro analysis of the contents of
label had also been in the nature of a fishing inquiry as if only to
find some gap or some loophole therein, without looking at the
substance of the matter that the product in question was clearly
indicated to be a Homeopathic medicine under Schedule K to
the Rules of 1945. Looking to the nature of the product and its
properties, the relevant indications have also been specified in
reasonable terms and looking to its nature and purpose, directions
for use have also been given in the manner that it was to be
massaged directly on the scalp and should be left overnight for
best results. Hence, the Adjudicating Authority's observations
about want of specification regarding the dosage to be used and
the duration for which it is to be used carry their own
shortcomings. The product in question is essentially meant for
dealing with the conditions arising in and on the scalp with hair
being the integral part thereof. The product consists of
COMMISSSIONER OF CUSTOMS, CENTRAL EXCISE AND SERVICE TAX,
HYDERABAD v. ASHWANI HOMEO PHARMACY
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Homeopathic medicines. Its manner of use is to put the same on
the scalp and to leave it overnight. Looking to the nature of the
product and its uses, the observations about want of specification
regarding the dosage do not take the product out of its
pharmaceutical value. Further, the Adjudicating Authority's
observations of dissatisfaction because of there being no contraindications have gone miles away from the reasonableness of
approach. If the respondent has stated in clear terms on the label
that the product carried nil contra- indications, looking to its
nature, purpose and the manner of use, it does not cease to be a
medicament. [Para 22.1][345-C-G; 346-A-B]
2.5 The perversity and unreasonableness of approach of
the Adjudicating Authority is also noticed from the observations
that, if the intention was to identify the product as medicament,
there was no need to label it as "Hair Oil". While the expression
"Hair Oil" does appear on the label, the other integral
expressions "Homeo" and "Arnica" preceding the expression
"Hair Oil" could not have been ignored and could not have been
left aside. The Adjudicating Authority had gone to the extent of
observing that hair growth was at best a cosmetic necessity rather
than a disease requiring immediate attention or treatment. The
tribunal rightly observed that when hair fall or baldness is
recognised as a medical condition, the Adjudicating Authority
could not have taken a different view, which was not recognized
by any branch of medicine. The tribunal rightly pointed out that
the product clearly mentioned that it could be used for other
ailments like headache and that it induces good sleep. Moreover,
the Adjudicating Authority seems not to have given adequate
attention to the contents of Chapter 30 and the fact that for being
accepted as medicament, the product is not invariably required
to carry only therapeutic use. A product having prophylactic use
is also envisaged under the Headings 3003 and 3004. If the
product claims to improve blood circulation to the hair roots and
thereby controlling hair fall, its prophylactic use cannot be
gainsaid. [Para 22.2-22.3][346-C-F]
2.6 The product in question, being undoubtedly covered
by Serial No. 35 of Schedule K to the Rules of 1945 and being
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manufactured in terms of the license issued under the Act of 1940,
clearly satisfies the ingredients test. In other words, on its
ingredients, the product is indeed a medicament carrying the
combination of Homeopathic medicines. [Para 22.4][346-G]
2.7 It is also apparent in the present case that the stand of
the Department to classify the product in question as 'cosmetic'
under Chapter 33 is essentially based on the distinct entry "Hair
Oil" occurring therein; and it appears that the expression "Hair
Oil" occurring on the label of the product has been taken as
decisive by them. It would also follow as a natural corollary that
the expression "Hair Oil" occurring on the label of the product
is only indicating the medium through which Homeopathic
medicines comprising the product are to be applied. The
submissions and the efforts on the part of the appellant to take
the product in question to Chapter 33 merely because of its label
carrying the expression "Hair Oil" while ignoring the preceding
significant expressions "Homeo" and "Arnica" cannot be
accepted. Reference to Note 1(e) of Chapter 30 also turns out to
be of no relevance because the product in question cannot be
said to be a preparation of Heading 3305 and then having
insignificant or subsidiary therapeutic or prophylactic properties.
As regards the product in question, which is essentially made of
Homeopathic medicines which have therapeutic and prophylactic
uses, it cannot be said to be carrying only subsidiary pharmaceutical
value. Putting it differently, the product in question, AHAHO, is
predominantly of pharmaceutical value and the item of cosmetic
therein, i.e., hair oil, is nothing but a medium for appropriate use
of that pharmaceutical value. [Para 23.1][345-C-G; 346-A-B]
2.8 The submissions about specific entry to be preferred
to the general entry do not take the case of appellant any further.
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
entry and 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 the specific entry pertaining to medicament under Headings
3003 or 3004; and it being of the medicines of Homeopathic
COMMISSSIONER OF CUSTOMS, CENTRAL EXCISE AND SERVICE TAX,
HYDERABAD v. ASHWANI HOMEO PHARMACY
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system, it would fall either in Tariff Item 3003 90 14 or Item 3004
90 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 commonly
understood, it is noticed that one of the grounds placed at the
forefront by the appellants and the Adjudicating Authority had
been that AHAHO was accessible in both Medical and General
Stores and could be bought across the counter. This feature of
availability of the product in question has absolutely no relevance.
Merely for being available across the counter, the product in
question, AHAHO, does not cease to be a medicament. [Para
25][348-G-H; 349-A-C]
2.10 When the preparation is for cure or prevention, it
would be medicament but, if only for care, it would be cosmetic.
Of course, a cosmetic would not become medicament even if
having subsidiary curative or prophylactic value. However, the
product in question, AHAHO, does not fail on this count for the
reason that it is a preparation of Homeopathic medicine and when
it is marketed as carrying those medicines, in commercial as also
common parlance, with its name carrying the significant
expressions "Homeo" and "Arnica", the product could only be
understood as the one carrying predominantly pharmaceutical
value and not mere cosmetic value. [Para 26][349-D-F]
2.11 When the product in question is intended to control
hair fall as also to prevent dandruff and to induce good sleep,
which all carry their own therapeutic and prophylactic
connotations, the picture of a lady with long black flowing hair
cannot be said to be unrelated to the indications related with the
product. In any case, such a picture, by itself, cannot make the
product in question a cosmetic. Interestingly, right at the top of
the said picture and below the name of the product, it proclaims
"Controls hair fall. Prevents dandruff". The Adjudicating
Authority has taken his process of analysis to further illogical
heights by proclaiming that hair growth was at the best a cosmetic
necessity rather than a disease requiring immediate attention or
treatment. Such approach could only be disapproved. [Para
27][349-G-H; 350-A-B]
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2.12 The substance of the matter remains that in common
parlance, the product in question would be approached essentially
for its claimed medicinal qualities and not as another hair oil.
The tribunal rightly dealt with the matter in accordance with the
law applicable to the facts of the instant case. [Para 27.1][350-CD]
2.13 The Adjudicating Authority also observed that drug
licenses issued by respective authorities per se did not make
AHAHO a preparation of Homeopathic medicine. However, the
Adjudicating Authority failed to consider that such drug license
issued under Schedule K to the Rules of 1945 had not been a
factor to be ignored altogether. Both in relation to common
parlance test as also the ingredients test, this factor carries its
own relevance even if not finally decisive of the matter. The
submission about want of condition of sale by authorised medical
distributor or retailer under prescription has its own shortcomings
for it has not been shown if such a preparation falling under
Schedule K to the Rules of 1945 was also requiring such a mention
in terms of Rule 97. In any case, any such requirements for
adherence to the Act of 1940 and the Rules of 1945 could only be
a matter for consideration of the authorities dealing with licensing
and regulating the manufacture and sale of drugs. The only
relevant aspect for the present purpose is that the product in
question being manufactured as a Homeopathy medicine, and
being marketed and used as a Homeopathic medicine for its
pharmaceutical value, would fall in Chapter 30 and cannot be
branded as cosmetic, so as to fall under Chapter 33 of the First
Schedule to the Act of 1985. [Para 28][350-D-G]
2.14 The very product in question, in relation to the entry
in the Andhra Pradesh General Sales Tax Act, 1957, has been
accepted by this Court to be answering the description of a
medicine and not being a cosmetic product, after it was found
that the respondent-assessee's assertion about its ingredients
and thereby the product qualifying to be a drug within the meaning
of Section 3 of the Act of 1940 could not be refuted by the
Revenue. The said decision of this Court may not have a direct
bearing on the question of classification of the product in question
COMMISSSIONER OF CUSTOMS, CENTRAL EXCISE AND SERVICE TAX,
HYDERABAD v. ASHWANI HOMEO PHARMACY
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for the purpose of the Act of 1985 but, it cannot be denied that
the product in question has been found answering to the
description of a 'drug' for the purpose of the Act of 1940 as also
for the purpose of the said Andhra Pradesh General Sales Tax
Act, 1957. Viewed from any angle, it remains a medicament. [Para
29][350-H; 351-A-C]
3.1 It is apparent that the product in question had rightly
been classified as 'medicament' in the past and nothing material
had changed so as to re-classify the same. However, the Revenue
has attempted to rely on the amendment of the tariff structure in
the year 2012 as justification for re-look at its classification. The
Adjudicating Authority stated this justification in the manner that
there were substantial changes in the tariff headings, particularly
when Chapter 30 came to be reworded so as to remove the
distinction between patent/proprietary and generic medicaments
and to classify them according to whether they are put up in unit
containers for retail sale or not; the mention about the Act of
1940 and the various Pharmacopeia 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 the Adjudicating Authority, all these
changes merited interpretation of the new entries vis-à-vis the
product in question than what was decided or settled earlier.
There had been no justification in the Department seeking to reopen the settled position in relation to the product in question
merely with reference to certain changes made in Chapter 30
and Chapter 33, which had essentially broadened their ambit and
scope and provided modified marginal notes and tariff entries
with detailed specifications. These changes had otherwise no
impact, so far as AHAHO, is concerned. [Para 30][351-C-G]
3.2 The change of classification cannot be accepted merely
on the ground of coming into force of different tax structure
without showing that the product has changed its character. Thus,
mere broad-basing of the entries in Chapter 30 and Chapter 33
of the First Schedule to the Act 1985, by itself, could not have
been the justification for an attempt at re-classification of the
product in question. [Para 31][352-B, D]
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3.3 Even as regards the amendment of the entries, the stand
of the appellant-Revenue has been that Chapter 30 was reworded
so as to remove the distinction between patent/proprietary and
generic medicaments and to classify them according to whether
they are put up in unit containers for retail sales or not. Further,
it has been stated that reference to the Act of 1940 and various
pharmacopoeia had been deleted. Thirdly, it has been contended
that in Chapter 33, the phrase hair oil had become prominent
with subsidiary entries of perfumed hair oils and other. This Court
could only reject such an attempt on the part of the Revenue as a
hair- splitting exercise, away and detached from the substance.
This is apart from the fact that the specification of medicament
under Heading 3004 would, in any case, cover the product in
question in the form it is marketed for retail sale. [Para 32][352E-G]
3.4 By way of the amendment of 2012, even if the relevant
entries pertaining to preparation for use on the hair have been
provided with micro classifications in comparison to the entries
standing earlier (as could be seen from the entries, it could never
be taken to mean that anything which is prepared for being used
on the hair and carries the name "Hair Oil", would lose its
character as medicament if otherwise it has been prepared for
therapeutic or prophylactic uses. Moreover, rewording and
regrouping of different entries in medicaments are hardly of any
impact on the character of the product in question. [Para 32.1][352G-H; 353-A-B]
3.5 Chapter 30, apart from Heading 3003 relating to
medicaments consisting of two or more constituents which have
been mixed together for therapeutic or prophylactic uses not put
up in measured doses or in forms or packing for retail sale,
Heading 3004 pertains to the medicaments consisting of mixed
or un-mixed product for therapeutic or prophylactic uses put up
in measured doses or in form of packing for retail sale. Viewed
thus, the submissions that even with reference to its packaging,
the product AHAHO would remain a homeopathic medicament
and would be covered under Chapter 30, where it could be placed
in Sub-Heading 3004 90 14 is accepted. Similarly, deletions of
the reference to the Act of 1940 or to various pharmacopoeia
COMMISSSIONER OF CUSTOMS, CENTRAL EXCISE AND SERVICE TAX,
HYDERABAD v. ASHWANI HOMEO PHARMACY
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cannot be interpreted to mean that a product like the one in
question, which is otherwise a medicament, has to be classified
on the basis of the base through which the application of medicine
is being provided. [Para 32.2][353-B-E]
3.6 Application of the relevant principles, the product
AHAHO, comes clean through the twin test. Therefore, there
had been no justification for making any attempt to re-classify
the product in question with reference to the amendments brought
about in Chapters 30 and 33 in the year 2012. [Para 33][353-E-F]
Bakson Homeo Pharmacy (P) Ltd. v. Collector of Central
Excise, New Delhi (2001) 136 ELT 485; Alpine
Industries v. Collector of Central Excise, New Delhi
(2003) 3 SCC 111 : [2003] 1 SCR 313; BPL
Pharmaceuticals v. Collector of Central Excise,
Vadodara (1995) 3 Supp SCC 1 : [1995] 3 SCR 1235;
Commissioner of Central Excise, Calcutta v. Sharma
Chemical Works (2003) 5 SCC 60 : [2003] 3 SCR 1027;
Meghdoot Gramodyog Sewa Sansthan, U.P. v.
Commissioner of Central Excise, Lucknow (2005) 4
SCC 15; Commissionerof Central Excise, Nagpur v.
Shree Baidyanath Ayurved Bhavan Ltd. (2009) 12 SCC
419 : [2009] 5 SCR 879; Commissioner of Central
Excise v. Wockhardt Life Sciences Limited (2012) 5 SCC
585 - relied on.
Collector of Central Excise, Guntur v. Andhra Sugar
Ltd. Venkataraypuram (1989) 1 Supp SCC 144 : [1988]
3 Suppl. SCR 543; Sunny Industries (P) Ltd. v. Collector
of 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. Vicco
Laboratories (2005) 4 SCC 17; Commissioner of
Commercial Taxes v. M/s Aswini Homeo Pharmacy Civil
Appeal No. 9494-9495 of 2011; Shree Baidyanath
Ayurved Bhavan Ltd. v. Collector of Central Excise,
Nagpur (1996) 9 SCC 402 - referred to.
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Case Law Reference
[1988] 3 Suppl. SCR 543
referred to
Para 8.1
[2009] 5 SCR 879
referred to
Para 8.3
[2003] 3 SCR 18
referred to
Para 8.4
[2011] 8 SCR 798
referred to
Para 8.4.1
(2012) 5 SCC 585
referred to
Para 9.1
(2005) 4 SCC 17
referred to
Para 9.4
(1996) 9 SCC 402
referred to
Para 14.1
[1995] 3 SCR 1235
relied on
Para 18.1, 23.2
[2003] 3 SCR 1027
relied on
Para 18.1, 25
(2005) 4 SCC 15
relied on
Para 18.1, 25
[2003] 1 SCR 313
relied on
Para 18.1, 26
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 9525
of 2018.
From the Judgment and Order dated 31.01.2018 of the Customs
Excise And Service Tax Appellate Tribunal, Circuit Bench Hyderabad
in EA No. 30050 of 2016.
Vikramjit Banerjee, ASG, Akshay Amritanshu, Abhishek, Adit
Khorana, Prashant Rawat, Tathagat Sharma, Shivam Singhania, Sunil
Kumar Srivastava, Brajesh Kumar, Sudhakar Kulwant, Mukesh Kumar
Maroria, Advs. for the Appellant.
V. V. S. Rao, Sr. Adv., D. Bharat Kumar, Tadimalla Bhaskar
Gowtham, Aman Shukla, Siddhartha Sinha, Gopal Jha, Advs. for the
Respondent.
COMMISSSIONER OF CUSTOMS, CENTRAL EXCISE AND SERVICE TAX,
HYDERABAD v. ASHWANI HOMEO PHARMACY
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The Judgment of the Court was delivered by
DINESH MAHESHWARI, J.
Table of Contents*
Preliminary and brief outline ............................................................... 2
The Background: Show-Cause Notice and Reply .............................. 4
Before the Commissioner of Customs and Central Excise ................ 9
Before the Customs, Excise and Service Tax Appellate
Tribunal ............................................................................................. 18
Rival Submissions ............................................................................. 24
Points for determination .................................................................... 31
The principles in the cited decisions ................................................. 33
Application of the principles and twin test ........................................ 55
Whether re-look at classification of the product in question
justified .............................................................................................. 72
Conclusion ......................................................................................... 76
Preliminary and brief outline
1. This appeal is directed against the common judgment and order
dated 31.01.2018, as passed by the Customs, Excise and Service Tax
Appellate Tribunal1, insofar as relating to Appeal No. E/30050/20162,
whereby the Tribunal has disapproved and reversed the order dated
16.10.2015, as passed by the Commissioner of Customs and Central
Excise, Hyderabad3 in HYD-EXCUS-004-COM-042-15-16.
1.1. By the aforesaid order dated 16.10.2015 in relation to the
period from December 2013 to November 2014, the Adjudicating
Authority held that the product in question, known as "Aswini Homeo
Arnica Hair Oil"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'.
4 For short, 'AHAHO'.
*Ed. Note : Pagination in the table is as per the original judgment.
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Item 3003 90 14 or under any item stated in Chapter 30 of the First
Schedule to the Central Excise Tariff Act, 19855-6; and that the product
in question, being "Hair oil", was required to be classified as 'cosmetic'
under Tariff Item 3305 90 19. Accordingly, the Adjudicating Authority
confirmed the demand to the tune of Rs.2,72,14,266/- on the respondent
for the differential duty payable in terms of Section 11-A (10) of the
Central Excise Act, 19447; ordered payment of interest on the said
differential duty in terms of Section 11-AA of the Act of 1944; and
imposed penalty in the sum of Rs.54,00,000/- under Rule 25 of the Central
Excise Rules, 2002.
1.2. However, the appeal preferred by the respondent was allowed
by the Tribunal by its impugned order dated 31.01.2018 and the aforesaid
order dated 16.10.2015 passed by the Adjudicating Authority was set
aside. The Tribunal held that the product in question, AHAHO, fell in the
category of 'medicament' and hence, was rightly classified under Chapter
30 of the First Schedule to the Act of 1985.
1.3. An ancillary but intertwined aspect of the matter had been
that the product in question was being classified as 'medicament' under
the said Chapter 30 since the year 1994. According to the respondent,
this classification was regularly accepted by the Department in the past
with at least two successive orders of the Commissioner (Appeals) and
hence, there was no justification in re-examining the issue. The
Adjudicating Authority expressed the view that because of material
amendment of the tariff entries in Chapters 30 and 33 in the year 2012,
classification of the product in question required re-examination. The
Tribunal, however, did not approve of this proposition of the Adjudicating
Authority.
1.4. The appellant is aggrieved of the order so passed by the
Tribunal and hence, has preferred this appeal while asserting that the
product in question had rightly been classified by the Adjudicating
Authority as 'cosmetic' in terms of Chapter 33 and hence, the demand
in question deserves to be maintained. 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 Tariff
Item is always pertaining to the 'First Schedule to the Act of 1985', unless indicated
otherwise.
7 Hereinafter also referred to as 'the Act of 1944'.
COMMISSSIONER OF CUSTOMS, CENTRAL EXCISE AND SERVICE TAX,
HYDERABAD v. ASHWANI HOMEO PHARMACY [DINESH MAHESHWARI, J.]
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[2023] 6 S.C.R.
supports the order impugned while asserting that the product in question
has rightly been classified as 'medicament' in terms of Chapter 30.
2. In view of the above, the primary question in this appeal is as to
whether the product in question, AHAHO, would be classified as
'medicament' under Chapter 30 or as 'cosmetic' under Chapter 33 of
the First Schedule to the Act of 1985. The other question is as to whether
because of amendment of the entries in the said Chapters 30 and 33 in
the year 2012, classification of the product in question required reexamination, even though the same was classified as 'medicament' under
the said Chapter 30 since the year 1994.
2.1. With reference to the aforementioned questions, we may take
note of the relevant background aspects and stand of the respective
parties with reference to the show-cause notice to the respondent and
its reply.
The Background: Show-Cause Notice and Reply
3.
The
respondent,
having
registration
number
ADHPB1884HEM003 under the central excise, is engaged in the
manufacture of the product in question, AHAHO, in its units at Moosapet
(since the year 1994), Maheshwaram and Bala Nagar. Further, the
respondent had classified the product under Tariff Item 3003 90 14 as
'medicament' and paid the excise duty at concessional rate accordingly.
This classification of the product in question was examined as many as
four 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 question
as 'medicament' had been accepted during the period 1994-2004, this
classification remained in doubt and, particularly after changes in the
Act of 1985 in the year 2012, the respondent was served with different
show-cause notices pertaining to different periods of consideration,
essentially to the effect that the product in question was classifiable as
'cosmetic or toilet preparations' under Chapter 33, Tariff Item 3305 09
19. In the show-cause notice dated 26.12.2014, which forms the subjectmatter of this appeal, the Adjudicating Authority, inter alia, stated as
under: -
"02. The assessees are engaged in the manufacture of 'Aswini
Homeo Arnica Hair Oil' which was classified by them under Tariff
Item No. 3003 9014 of the First Schedule to the Central Excise
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Tariff Act, 1985. However, as per Chapter 33 of the Central Excise
Tariff Act, 1985, preparations for use on the hair are rightly
classifiable under Chapter Sub Heading No. 33050919 and shall
be liable for assessment under Section 4A of the Central Excise
Act, 1944 @12% adv. creating them as 'Cosmetic or Toilet
preparations'. Accordingly, show cause notices as under were
issued to the assessees.
Sr.
No.
O.R. No.
Period
Duty
1
O.R. No. 21/2013Adjn (Commr) CE
dt. 31.1.2013 OC No.
33/2013 (GGP/S-II)
April' 2012
to
Sept'
2012
Rs. 73,71,267/-
2
O.R. No. 170/2013Adjn (Commr) CE,
dt. 6.9.2013 C. No.
V/15/14/CE/Adjn/20
13 Divn. M)
Sept' 2012
to
March'
2013
Rs. 1,33,21,827/-
3
O.R. No.49/2014 -
Adjn (Commr) CE,
dt. 14.3.2014 C. No.
V/15/02/CE/Adjn/20
14-CE(Divn-M)
April' 2013
to
Nov'
2013
Rs. 1,73,17,151/-
03. The present show cause notice is a statement under Section
11A (7A) of the Act covering the demand of duty for the
subsequent period, and the grounds are the same as are mentioned
in the earlier show cause notices. The details of the short payment
of duty for the period from December, 2013 to November, 2014
are as under: -
(Amount in Rs.)
04. It appears that the assessees have contravened the provisions
of Rule 4, 6, 8, 10 and 11 of the Central Excise Rules, 2002 in as
COMMISSSIONER OF CUSTOMS, CENTRAL EXCISE AND SERVICE TAX,
HYDERABAD v. ASHWANI HOMEO PHARMACY [DINESH MAHESHWARI, J.]
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[2023] 6 S.C.R.
much as they have wrongly classified 'Aswini Homeo Arnica
Hair Oil' and short the duty of Rs. 2,72,14,266/- which appears to
be recoverable from them under Section 11A of the Central Excise
Act, 1944. It also appears that they are liable for payment of
interest on the said amount of Central Excise duty under Section
11AA of the Central Excise Act, 1944. It also appears that they
are liable for penal action under Rule 25 of the Central Excise
Rules, 2002 for adopting incorrect classification and thus resorting
to short payment of duty and for contravening the provisions of
the Central Excise Act, 1944, and the rules made there under
with intention to evade payment of duty.
05. Now, therefore, M/s Aswini Homeo Pharmacy, 6-48,49,6-50
Aswini Homeo Pharmacy Unit, Balanagar Hyderabad are hereby
required to show cause to the Commissioner of Customs & Central
Excise, Hyderabad-IV Commissionerate, Ground Floor, Posnett
Bhavan, Tilak Road, Hyderabad within thirty (30) days of receipt
of this notice, as to why;
i) Central Excise duty of Rs. 2,72,14,266/ (Rupees Two Crores
seventy two lakhs fourteen thousand two hundred sixty six
only), should not be demanded from them under sub section
(7A) of Section 11A read with sub section (1)(a) of Section
11A of the Central Excise Act, 1944- for the period from
December, 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 terms
of Section 11AA of the Central Excise Act 1944-and
iii) Penalty under Rub 25 of the Central Excise Rules, 2002
should not be imposed on them for contravention of the Central
Excise-Rules, 2002 mentioned supra.
06. M/s Aswini Homeo Pharmacy are further required to produce
all the evidence upon which they intend to rely in support of their
defense at the time of showing the cause. They are further required
to mention in their written reply whether they wish to be heard in
person before the case is adjudicated. If no cause is shown within
the stipulated period or if they do not appear before the adjudicating
authority when the case is posted for hearing, the case will be
decided on merits on the basis of the evidence available on record.
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07. The Department reserves its right to amend, modify or
supplement or do addition to this notice on the basis of further
evidence made available to it prior to the adjudication of this case.
This notice is issued without prejudice to any other action that
may initiated under the provisions of the Central Excise Act, 1944
and the rules made there under or any other law for the time
being in force in India.
08. Reliance for the issuance is based on ER-1 returns furnished
by the assessees during the period from December, 2013 to
November, 2014 and Labels affixed to the containers cleared by
the assessees."
5. The respondent-assessee, in its reply dated 07.04.2015, stated
that the product was classified as 'medicament' under Chapter 30 by
two successive Commissioner (Appeals) and two subordinate officers
during 1994-2004; and the said orders were accepted by appellant, which
had attained finality.
5.1. The respondent, inter alia, stated the following reasons for
which its product, AHAHO, was required to be, and had rightly been,
classified as 'medicament':
(i) That the manufacturing process would indicate the presence
of four homeopathic drugs namely, Arnica Montana, Cantharis,
Pilocarpine and Cinchona in its preparation, which is to be applied to the
scalp and not consumed orally.
(ii) That its label indicated the words "Homeopathic Medicine"
under Schedule K to the Drugs and Cosmetics Rules, 19458; that the
product 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 in
terms 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 its
manufacturing license issued by the Drug Controller and by the
Directorate of Ayush; and from listing of the drugs used, in authoritative
text books like Materia Medica of Homeopathic Drugs. Thus, the twin
tests 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'.
COMMISSSIONER OF CUSTOMS, CENTRAL EXCISE AND SERVICE TAX,
HYDERABAD v. ASHWANI HOMEO PHARMACY [DINESH MAHESHWARI, J.]
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5.2. The respondent further elaborated in its reply that the product
was not 'cosmetic', as the ingredients used had prophylactic properties
and it was not applied for cleansing or beautifying or promoting
attractiveness or altering the appearance. The depiction of a lady with
long flowing hair on its label was only subjective and could be interpreted
as indicative of good health evidenced by the long flowing hair upon
being treated for hair fall and dandruff.
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, marketing
and claims on the label and, therefore, the said circular did not justify
revising its classification to that of 'cosmetic or toilet preparations'. The
respondent asserted that due to the absence of any change in its tariff
description, ingredients, process of manufacture and use, the question
would not arise of re-classification of the product in question. The
respondent also requested that the proceedings be dropped or be kept
pending until the Tribunal had adjudicated on the pending issues
concerning classification of the product in question.
5.4. The respondent, in order to support its assertion that AHAHO
is a medicament, placed reliance on a decision of the Tribunal in Bakson
Homeo Pharmacy (P) Ltd. v. Collector of Central Excise, New Delhi:
(2001) 136 ELT 485, wherein a similar product named "Sunny Arnica
Hair Oil" was held to be a medicament.
Before the Commissioner of Customs and Central Excise
6. The Adjudicating Authority framed two issues for its adjudication
as follows: -
"(i) Whether the notice has disturbed the settled position of law
by reagitating the classification matter, and if not
(ii) whether the impugned product viz. AHAHO merits
classification as a medicament under chapter sub-heading
30039014 or as Hair oil under chapter sub-heading 33059019."
6.1. In the first issue, it was observed by the Adjudicating Authority
that the notices were not issued on account of any given judgment but
those judgments were mentioned to point out that the classification would
need a revision. It was further observed that the changes incorporated
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in the Act of 1985 from the year 2012 strengthened the view that the
classification required reconsideration.