# MIS. NATURALLE HEAL TH PRODUCTS (P) LTD v. COLLECTOR OF CENTRAL EXCISE, HYDERABAD

- **Citation:** [2003] Supp. 5 S.C.R. 433
- **Court:** Supreme Court of India
- **Decided:** 2003-11-11
- **Case number:** Civil Appeal No. 2072 of 1996
- **Bench:** P. Venkatarama Redd!, Dr. Ar. Lakshmanan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/mis-naturalle-heal-th-products-p-ltd-v-collector-of-central-excise-hyderabad-19452
- **Pages:** 24

## Headnote

A
B
Central Excises and Salt Act, 1944/Central Excise Tariff Act, 1985Drugs and Cosmetics Act, 1940-Section 3(a) and 3(h)-Medicated cough
drops and throat drops and sloan's balm and sloan's rub-Classification C
under tariff heading for levy of duty-Held: Products are manufactured under
Ayurvedic drug licence; the customers, practitioners, dealers, licensing
officials treat it as Ayurvedic medicines; all the ingredients are mentioned in
the authoritative text books on Ayurveda, though are purified or added with
some preservatives which does not alter their character-Hence, the products
are classifiable as Ayurvedic medicaments under Chapter Heading 3003.30 D
attracting nil rate of duty.
Appellant-assessee in the first appeal is engaged in the manufacture of
medicated cough drops and throat drops and in the other appeal the assessee
is engaged in manufacture of sloan's balm and sloan 's rub. They manufacture
these products under the Ayurvedic drug licence issued under Drugs and E
Cosmetics Act, 1940. Appellants claimed classification of their products as
Ayurvedic medicaments under sub heading 3003.30 of Central Excise Tariff
attracting nil rate of duty. They were issued show cause notice as to why the
goods should not be classifiable as Patent or Proprietary medicaments under
sub-heading 3003.10 attracting duty at the rate of 15% ad valorem. With p
regard to medicated cough drops and throat drops, authorities below relying
upon the tribunal's decision in Amrutanjan 's case that the product was not
ayurvedic medicines as ingredients were synthetic in nature, rejected the
appellant's claim and also since the products are not manufactured according
to the formula in authoritative ayurvedic text books. Regarding Sloan's balm
and Sloan's rub, appellant replied to the show cause notice relying upon the G
tribunal's decision in Richardson Hindustan's case laying down that the
product should be known as Ayurvedic medicament in the common parlance
and the ingredients should be mentioned in Ayurvedic text books. However,
the Assistant Collector classified the products under sub heading 3003.10
433
H
434
SUPREME COURT REPORTS [2003) SUPP. 5 S.C.R.
A and the tribunal upheld the same. Hence the present appeals.
Appellant-assessee contended that the goods manufactured by them are
classifiable under sub heading 3003.30; that with regard to medicated cough
drops and throat drops, authorities below rejected the appellant's claim relying
on the tribunal's decision in Amrutanjan 's case which is set aside by the
B judgment of this Court in Amrutanjan limited's case that the ingredients even
if they are used after refinement, they are not synthetic in nature, and the
instant issue is covered by the same; that as the goods are Patent or
Proprietary Ayurvedic medicaments within the definition given in Section 3(h)
of the Drugs and the Cosmetics Act, the definition of Ayurvedic medicine in
C Section 3(a) of the Drugs and Cosmetics Act cannot be applied to the instant
case on which the tribunal has based its order for the purposes of the
classification of a product for Central Excise duty; that when there is no
definition of any word in the relevant statute, the word must be construed in
its popular sense i.e. how the common man who uses it, understands it; that
the tribunal failed to appreciate that the appellant's products which contained
D the Ayurvedic ingredients were prepared in accordance with the Ayurvedic
principles; that the formulations have been developed after referring to several
authoritative Ayurvedic books and careful evaluation of actions, clinical trials
etc., and tllt Director of Indian Medicine and Homeopathy have approved the
same; that the tribunal failed to appreciate that the onus of classification of a
E product is on the Excise Department who are required to produce the evidence
to support their stand which was not produced and also did not rebut the
evidence produced by the appellants; that as the classification of the goo

## Text

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MIS. NATURALLE HEAL TH PRODUCTS (P) LTD.
v.
COLLECTOR OF CENTRAL EXCISE, HYDERABAD
NOVEMBER 11, 2003
[P. VENKATARAMA REDD! AND DR. AR. LAKSHMANAN, JJ.]
A
B
Central Excises and Salt Act, 1944/Central Excise Tariff Act, 1985Drugs and Cosmetics Act, 1940-Section 3(a) and 3(h)-Medicated cough
drops and throat drops and sloan's balm and sloan's rub-Classification C
under tariff heading for levy of duty-Held: Products are manufactured under
Ayurvedic drug licence; the customers, practitioners, dealers, licensing
officials treat it as Ayurvedic medicines; all the ingredients are mentioned in
the authoritative text books on Ayurveda, though are purified or added with
some preservatives which does not alter their character-Hence, the products
are classifiable as Ayurvedic medicaments under Chapter Heading 3003.30 D
attracting nil rate of duty.
Appellant-assessee in the first appeal is engaged in the manufacture of
medicated cough drops and throat drops and in the other appeal the assessee
is engaged in manufacture of sloan's balm and sloan 's rub. They manufacture
these products under the Ayurvedic drug licence issued under Drugs and E
Cosmetics Act, 1940. Appellants claimed classification of their products as
Ayurvedic medicaments under sub heading 3003.30 of Central Excise Tariff
attracting nil rate of duty. They were issued show cause notice as to why the
goods should not be classifiable as Patent or Proprietary medicaments under
sub-heading 3003.10 attracting duty at the rate of 15% ad valorem. With p
regard to medicated cough drops and throat drops, authorities below relying
upon the tribunal's decision in Amrutanjan 's case that the product was not
ayurvedic medicines as ingredients were synthetic in nature, rejected the
appellant's claim and also since the products are not manufactured according
to the formula in authoritative ayurvedic text books. Regarding Sloan's balm
and Sloan's rub, appellant replied to the show cause notice relying upon the G
tribunal's decision in Richardson Hindustan's case laying down that the
product should be known as Ayurvedic medicament in the common parlance
and the ingredients should be mentioned in Ayurvedic text books. However,
the Assistant Collector classified the products under sub heading 3003.10
433
H
434
SUPREME COURT REPORTS [2003) SUPP. 5 S.C.R.
A and the tribunal upheld the same. Hence the present appeals.
Appellant-assessee contended that the goods manufactured by them are
classifiable under sub heading 3003.30; that with regard to medicated cough
drops and throat drops, authorities below rejected the appellant's claim relying
on the tribunal's decision in Amrutanjan 's case which is set aside by the
B judgment of this Court in Amrutanjan limited's case that the ingredients even
if they are used after refinement, they are not synthetic in nature, and the
instant issue is covered by the same; that as the goods are Patent or
Proprietary Ayurvedic medicaments within the definition given in Section 3(h)
of the Drugs and the Cosmetics Act, the definition of Ayurvedic medicine in
C Section 3(a) of the Drugs and Cosmetics Act cannot be applied to the instant
case on which the tribunal has based its order for the purposes of the
classification of a product for Central Excise duty; that when there is no
definition of any word in the relevant statute, the word must be construed in
its popular sense i.e. how the common man who uses it, understands it; that
the tribunal failed to appreciate that the appellant's products which contained
D the Ayurvedic ingredients were prepared in accordance with the Ayurvedic
principles; that the formulations have been developed after referring to several
authoritative Ayurvedic books and careful evaluation of actions, clinical trials
etc., and tllt Director of Indian Medicine and Homeopathy have approved the
same; that the tribunal failed to appreciate that the onus of classification of a
E product is on the Excise Department who are required to produce the evidence
to support their stand which was not produced and also did not rebut the
evidence produced by the appellants; that as the classification of the goods
was determined by the competent authority under the Drugs Act who issued
a licence for manufacture and sale of Ayurvedic drugs, the Central Excise
Authorities have to act on that basis and not to go beyond the same or sit in
F judgment thereon; and that the member of the tribunal erred in holding that
the formulae and patent of the appellant company is registered in America
which is without any evidence or material on record.
Respondents-revenue contended that the goods manufactured by the
appellants are to be classified under sub heading 3003.10 chargeable to duty
G at 15% ad valorem; that Amrutaly'an 's case does not preclude the submission
of the Revenue and the decision does not deal with the interpretation of subheading 3003.30 vis-a-vis 3003.1 O; that the tribunal rightly held that the
cough drops and throat drops cannot be classified as Ayurvedic medicament
under sub-heading 3003.30 as it is not manufactured in accordance with the
H formulae prescribed in Ayurvedic texts and, therefore, though the ingredients
... -
NATURALLE HEALTH PRODUCTS (P) LTD. v. C.C.E.
435
may be Ayurvedic, the formulation is not Ayurvedic; and that the onus of A
proving that the goods fall within the exception is on those who claim that
exception and in the instant case this onus has not been discharged inasmuch
as it has not been found that these are medicines used exclusively in the
Ayurvedic system of medicine.
Allowing the appeal, the Court
B
HELD: I. 'Medicated cough drops' and 'throat drops' and "Sloan's Balm"
and "Sloan's Rub" manufactured in accordance with and under the licence
issued under the Drugs and Cosmetics Act, 1940 for the manufacture of
"Ayurvedic Drugs" are classifiable as ayurvedic medicines under Chapter
Heading 3003-30 attracting nil rate duty. The tribunal erred in holding that C
the goods manufactured by the appellants are to be classified under Chapter
sub-heading 3003.10 chargeable to duty at 15% ad valorem.
(438-C-E; 456-E-FJ
2.1. A patent Ayurvedic medicament could be one where all the
ingredients find mention in the authoritative text books on Ayurveda, though D
the formula for preparation of the medicament is not in accordance with the
formula given in those text books. In the instant case, all the ingredients are
mentioned in the authoritative text books on Ayurveda. The essential character
of the medicine and the primary function of the medicine is derived from the
active ingredients contained therein and it has certainly a bearing on the E
determination of classification under the Central Excise Act. Mere fact that
the ingredients are purified or added with some preservatives does not really
alter their character. The ingredients used in these products have sources
as natural herbs and extracts taken from such herbs and have been purified
to the pharmaceutical grade before using the same. It is incorrect to say that
the assessee is not using genuine and pure Ayurvedic ingredients. There is F
no such admission anywhere. The assessee has been submitting throughout
that the ingredients used are mentioned in authoritative Ayurvedic text books
and they are natural products from herbs and plants which were only relined.
Furthermore, in the first appeal, the products satisfy the definition in Section
3(h) of Drugs & Cosmetics Act as 'patent or proprietary' Ayurvedic medicines G
also. The manufacture of the medicament is being done under the Ayurvedic
drug licence issued by competent authority.
[454-B-C; 455-F-G; 454-G-H; 455-A; 454-C-DJ
Amrutanjan Limited v. Collector of Central Excise, (1995) 77 ELT 500
SC, relied on.
H
-,
436
SUPREME COURT REPORTS [2003) SUPP. 5 S.C.R.
A
2.2. The Government of India examined the paramete~ prescribed by
the tribunal in Mis Richardson Hindustan case which was upheld by this Court
and issued the circular clarifying the correct position in regard to the
classification under sub heading 3003.30 and reiterated the two tests, namely,
that the product should be known as Ayurvedic medicament in the common
B parlance and ingredient should be mentioned in Ayurvedic text-books. The
submission that the circular only indicate that the Government has accepted
the two tests for determining a medicine as Ayurvedic medicine and acceptance
of these do not absolve the assessee from the onus of proving the exclusive
character of drug as Ayurvedic medicament and that the appellants have failed
c
to discharge the onus, cannot be accepted. (449-D-E; 451-8-C-D; E)
Richardson Hindustan ltd. v. Collector of Central Excise, (1988) 35
ELT 424 T, approved.
2.3. In Richardson Hindustan case 'Vicks Vaporub' and inhaler have
been held to be Ayurvedic medicines coming under classification No.3003.30.
D If those two products having the same brand name 'Vicks' are treated as
Ayurvedic medicines falling under classification No.3003.30 after applying
the tests laid down by the tribunal, there is no reason why the same
classification should not apply to the products in the instant case. (454-F-G)
Richardson Hindustan Ltd v. Collector of Central Excise, (1989) 42
E ELT AlOO, relied on.
2.4. When there is no definition o,f any kind in the relevant taxing
statute, the articles enumerated in the tariff schedules must be construed as
far as possible in their ordinary or popular sense, that is, how the common
man and persons dealing with it understand it. If the customers and the
F practitioners in Ayurvedic medicine, the dealers and the licensing officials
treat the products in question as Ayurvedic medicines and not as Allopathic
medicines, that fact.gives an indication that they are exclusively ayurvedic
medicines or that they are used in Ayurvedic system of medicine, though it is
a patented medicine. This is especially so when all the ingredients used are
mentioned in the authoritative books on Ayurveda. [455-D-F)
G
2.5. In the first appeal, the affidavits of Ayurvedic practitioners were
filed before the adjudicating authority to establish that these products are
recognized and being used in Ayurvedic system of medicine. Assistant
Collector, and the other authorities including the tribunal did not consider
such material. Furthermore, the department did not rely on any contra
H evidence. In the other appeal, the assessee filed affidavit5 from doctors, users
NATURALLE HEAL TH PRODUCTS (P) LTD. v. C.C.E.
437
and stockists and also furnished clinical trial report from Government A
Ayurvedic Hospital, which was not rebutted by the Department by producing
. any contra evidence. The label of the product showing it as Ayurvedic medicine
was also relied on. Collector (Appeals) gave a finding that the common
parlance and ingredient tests are satisfied against which tribunal merely
commented that a few certificates given by a doctor or owner of a medical B
shop does not advance the case of the assessee and allowed the Revenue's
appeal following the impugned order in the abovesaid appeal.
[455-G-H; 456-A-C)
2.6. In the absence of any material on record as to how the products are
treated and understood in U.K., U.S.A etc. the observations of the Members of C
the Tribunal that there is mention of similar names of goods in Martindale
and patent of the same in USA and marketed there as allopathic medicine are
not warranted. The same was also not alleged in the show cause notice.
Further, even if it is a patented medicine in U.S.A., it does not cease to be an
exclusively Ayurvedic medicine if it has the characteristics of such medicine.
[454-D-EJ D
Richardson Hindustan Limited v. Collector of Central Excise, (1988)
35 ELT 424 T; CCE, Hyderabadv. Mis Richardson Ltd, (1989) 42 ELT A100
SC, CA No. 2127of1988, order dated 10.1.1989; Shri Baidyanath Ayurved
Bhawan Private Limitedv. Collector of Central Excise, (1991) 51 ELT 502;
Amrutanjan Limited v. Collector of Central Excise, (1991) 32 ECR 538 T; E
Amrutanjan Limited v. Collector of Central Excise, (1995) 77 ELT 500 SC;
Commissioner of Central Excise, Allahabad v. Himtaj Ayurvedic Udyog
Kendra, (2003) 154 ELT 323 SC; Himtaj Ayurvedic Kendra v. CCE, (2002)
139 ELT 610; Commissioner of Central Excise, Calcuttav. Pandit D.P. Sharma
(2003) 154 ELT 324 and Commissioner of Central Excise, Calcutta v. Sharma F
Chemical Works, (2003) 154 ELT 328 SC, referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2072 of 1996.
From the Judgment and Order dated 17 .10.95 of the Central Excise
Customs and Gold (Control) Appellate Tribunal, New Delhi in A. No. E/1062/
93-C in F.O. No. 294of1995-C.
G
WITH
C.A. No. 10744 of 1996
Raju Ramachandran, Additional Solicitor General, Joseph Vellapally, V.
Lakshmikumaran, Alok, Ms. Pragya Bhagei, Ms. Meghna Mishra, Ankur, H
438
SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.
A Hrishikesh, R.N. Karanjawala, Ms. Ruby Singh Ahuja, Ms. Manik Karanjawala,
Ajay Aggarwal, Thomas Vellapally, Rajan Narain, Dalip Tandon, B.K. Prasad,
Sanjay Grover and Ms. K.Sumathi Rao for the appearing parties.
The Judgment of the Court was delivered by
B
DR. AR. LAKSHMANAN, J. The points involved in both the appeals
are one and the same and, therefore, they were heard together by consent of
parties.
The issue involved in Civil Appeal No. 2072 of 1996 is:
C
Whether or not medicated cough drops and throat drops manufactured
by the appellants in accordance with and under the licence issued under the
Drugs and Cosmetics Act, 1940 forthe manufacture of"Ayurvedic Drugs" are
classifiable as Ayurvedic Medicaments for the purpose of levy of central
excise duty.
D
The issue for determination in Civil Appeal No. 10744 of 1996 is:
Whether the products "Sloan's Balm" and "Sloan's Rub" are ayurvedic
medicines and are classifiable under Chapter Heading 3003-30 as contended
by the appellants attracting nil rate duty OR Classified under Chapter subE heading 3003.10 chargeable to duty at 15% ad valorem.
The facts briefly stated in Civil Appeal No. 2072 of 1996 leading to the
filing of this appeal are as under:-
The appellants - Mis Naturalle Health Products (P) Limited, Hyderabad
filed the classification list as required under Rule 173-B of the Central Excise
F Rules, 1944 with the Assistant Collector of Central Excise claiming classification
of their goods under sub-heading 3003.30 read with erstwhile notification No.
32/89-CE dated 01.03 .1989. The appellants were issued a loan licence to
manufacture for sale of Ayurvedic drugs under the Drugs and Cosmetics Act,
1940 and the said loan licence was renewed from time to time. A show-cause
G notice was issued by the Assistant Collector of Central Excise calling upon
the appellanis to show cause why the said goods should not be classified
as Patent or Proprietary Medicaments under sub-heading 3003. l 0 of Central
Excise Tariff attracting excise duty at the rate of 15% ad valorem. The
appellants replied to the show-cause notice and denied that the said goods
are not Ayurvedic Medicaments and submitted that the grounds raised in the
H
NATURAL LE HEALTH PRODUCTS (P) LTD. v. C.C.E. [LAKSHMANAN, J.]
439
show-cause notice were not relevant for determining the classification of the A
goods. The Assistant Collector, after giving a personal hearing, vide Order
dated 14.03.1991 held that the said goods are classifiable as Patent or
Proprietary Medicaments under sub-heading 3003.10 of the Central Excise
Tariff and accordingly is assessable to duty thereon. The appeal filed by the
appellants before the Collector of Central Excise was dismissed on 21.02.1992 B
upholding the Order dated 14.03.1991 of the Assistant Collector. The appellants
challenged the said Order by filing Writ Petition No. 4030 of 1992 in the High
Court of Andhra Pradesh which was dismissed on 12.03.1993 on the ground
of alternative remedy. The appellants filed an appeal to the CEGAT on the
grounds set out in their memorandum of appeal. The CEGAT, New Delhi by
its final order dated 17.10.1995 by a majority of2:1 dismissed the appeal and C
upheld the classification of the said goods as Patent or Proprietary
Medicaments under sub-heading 3003.10 instead of appellant's claim as
Ayurvedic medicine under sub-heading 3003.30. The Vice-President opined
that the matter needs to be referred to a larger Bench keeping in view the
importance of the issue involved in the industry as. a whole. However, he
agreed with the Member (Technical) on many points. Aggrieved by the said D
order, the appellants preferred the present appeal under Section 35 L(B) of the
Central Excise and Salt Act, 1944.
Civil Appeal No. 10744 of 1996
The short facts are:
E
The appellants manufactured two medicaments known as "Sloan's Balm"
and "Slaon's Rub" out of the ingredients which are mentioned in the texts on
the Ayurvedic system of medicine and in accordance with the principles
therein. According to the appellants, the issues in their appeal stand covered F
by the decisions in the case of Richardson Hindustan Limited v. 'Collector
a/Central Excise, (1988) 35 ELT 424 (T) as confirmed by this Court reported
in 1989 (42) ELT AIOO and the ·decision in the case of Shri Baidyanath
Ayurved Bhawan Private Limited. v. Collector of Central Excise reported in
1991 (51) ELT 502 and 1985 (22) ELT 844 which decisions have been confirmed
by this Court in 1996 (83) EL T 492. The appellants filed Exhibit B l-B3 list of G
'authoritative texts' in En'glish, Hindi and TeIJgu on the Ayurvedic system of
Medicament in which the ingredients of the two products are mentioned.
They also filed Exhibits C 1 and C2 Licences issued by the Director, Indian
Medicines and Homeopathy, Hyderabad for the manufacture of Ayurvedic
Medicine, namely, "Sloan's Balm and "Sloan's Rub". The appellants filed H
440
SUPREME COURT IL PORTS (2003] SUPP. 5 S.C.R.
A classification list in respect of the said products classifying the same under
Chapter sub-heading 3003.30 as Ayurvedic Medicine attracting nil rate of
duty. Two Show-cause notices were issued upon the appellants to show
cause as to why the said products should not be classified under Chapter
sub-heading 3003.10 as patent or proprietary medicine attracting duty at 15
% ad va/orem. The appellants replied to the show-cause notice relying upon
B the Tribunal's decision in the case of Richardson Hindustan Limited (supra).
The Assistant Collector, however, classified both the products under Chapter
sub-heading 3003.10 chargeable to duty at 15% ad va/orem. The appellants
filed two appeals to the Collector of Central Excise (Appeals) and also filed
before the Collector (Appeals), a report in respect of clinical trials conducted
C in respect of the said two products. The Collector of Central Excise remanded
the case to the Assistant Collector. for de novo adjudication. The Assistant
Collector issued two revised show-cause notices. The appellants sent a reply
to the show-cause notices. The Assistant Collector by two separate orders
rejected the contentions of the appellants. Two appeals were filed before the
Collector Central Excise (Appeals). The Collector of Central Excise allowed the
D appeals and set aside both the orders of the Assistant Collector and upheld
that the products are ayurvedic medicines and are classifiable under Chapter
heading 3003.30. Aggrieved by the said order, the Collector of Central Excise
filed an appeal to the CEGAT, which by its order allowed the appeal. Aggrieved
by the said decision of the Tribunal, the present appeal has been preferred
E by the appellants - Akin Laboratories Ltd.
F
We heard Mr. V. Lakshmikumaran, learned counsel and Mr. Joseph
Vellapally, learned senior counsel for the respective appellants and Mr. Raju
Ramachandran, learned Additional Solicitor General for the respondent in
both the appeals.
Mr. Lakshmikumaran, learned counsel took us through the pleadings,
exhibits marked and the relevant provisions of law and of the orders passed
by the authorities concerned including the Tribunal and of this Court both
for and against. Mr. Joseph Vellapally, learned senior counsel, also invited our
attention to the relevant records and of the orders passed by the statutory
G authorities and of this Court in various decisions.
H
We have perused the pleadings, annexures and the decisions cited by
both sides and heard elaborate arguments advanced by the counsel for both
the parties.
Mr. Lakshmikumaran submitted that the authorities below rejected the
NA TURALLE HEALTH PRODUCTS (P) LTD. v. C.C.E. [LAKSHMANAN, J.]
44 J
appellant's claim on the basis of decision of the "Tribunal in the case of A
Amrutanjan limited v. Collector of Central Excise, (1991) (32) ECR 538. The
order of the Tribunal in Amrutanjan Limited is, however, set aside by this
Court in the case of Amrutanjan Limited v. Collector of Central Excise,
reported in 1995 (77) EL T 500. He would, therefore, contend that the issue
involved in the present case is covered by the judgement of this Court in the
case of Amrutanjan Limited (supra). Notwithstanding the judgment of this B
Court in Amrutanjan Limited (supra), the Tribunal by a majority of two
members to one dismissed the appeal and upheld the order of the lower
authorities classifying the cough drops and throat drops as patent or
proprietary medicines.
c
Before considering the arguments advanced by Mr. Lakshmikumaran, it
is useful to narrate certain facts in regard to the products manufactured by
the appellants. We have already noticed that the appellants are, inter alia,
engaged in the manufacture of ayurvedic drugs including medicated cough
drops and vaporet throat drops on job work basis for Procter and Gamble
India Limited (hereinafter referred to as PGIL) to market them under the brand D
name Vicks. The said goods are manufactured by the appellants in accordance
with and under a Joan licence issued to PGIL for manufacture of ayurvedic
drugs under the Drugs and Cosmetics Act, I 940.
According to the appellants in Civil Appeal No. 2072 of 1996, the
following are the ingredients for the manufacture of the cough drops and E
throat drops:
Vicks Medicated
Vicks Vaporat
Cough Drops
Throat Drops
Pudinah Arka
Pudinah Arka
F
Karpoor
Nilgiri Tel
Ajowan Ke Phool
Sugar base
J ~~.
Sugar base
In the two appeals, the classification of the medicines manufactured by
them are in dispute. According to the appellants in both the appeals, the G
goods manufactured by them are classifiable under Chapter sub-heading
3003.30 (heading 30.03). According to the Revenue, the goods manufactured
by both the appellants are to be classified under Chapter sub-heading 3003.10
chargeable to duty at I 5 % ad va/orem.
H
442
SUPREME COURT REF0RTS [2003] SUPP. 5 S.C.R.
A
For ready reference heading 30.03 i:; reproduced hereunder:
B
c
D
E
Heading SubDescription of Goods
Rate of
No.
Heading No.
Duty
30.03
Medicaments (including
veterinary Medicaments)
3003.10
Patent or proprietary Medicaments,
15%
other than those Medicaments
which are exclusively Ayurvedic,
Unani, Siddha, Homoeopathic or
Bio-Chemic
300320
Medicaments (other than patent
or proprietary) other than
those which are exclusively used
15%
in Ayurvedic, Unani, Siddha,
Homoeopathic or Bio-Chemic
systems
300330
Medicaments, including those
used in Ayurvedic, Unani, Siddha,
Nil
Homoeopathic or Bio-Chemic
systems
The effective rate of excise duty under Tariff sub - heading 3003.30 read with
Notification 32/89- C.E., dated 1.3.1989, is NIL.
Mr. Lakshmikumaran, learned counsel for the appellant, submitted that
the defmition of Ayurvedic medicine in Section 3(a) of the Drugs and Cosmetics
F Act cannot be applied for the purposes of the classification of a product for
Central Excise duty under the Central Excise and Salt Act I 944 and the Central
Excise Tariff Act 1985 and that when there is no definition of any word in the
relevant statute, the word must be construed in its popular sense i. e. how
the common man who uses it, understands it. Arguing further the learned
G counsel for the appellant submitted that the Tribunal has not only ignored
both the tests but has on the contrary based its order on the definition of
Ayurvedic Medicine in Section 3(a) of the Drugs and Cosmetics Act. It is
submitted the Chapter Note.2 which indicates the meaning of "medicament"
and "patent" and "proprietary medicament" and "drugs" does not refer to
Drugs and Cosmetics Act 1940 and that there is every reason to believe that
H the Legislature has intentionally adopted a different definition for medicament,
NA TURALLE HEALTH PRODUCTS (P) LTD. v. C.C.E. [LAKSHMANAN, J.]
443
drug and patent and proprietary medicament etc. It is further submitted that A
when the phrase 'pharmaceutical product' is peculiar to Central Excise Schedule
and does not mean medication in the Drugs and Cosmetics Act and even the
word 'drugs' used in Note 2(ii) has been used in the Central Excise Schedule
only to show that it falls within the ambit of medicament and that too in a
sense different from the one used in the Drugs and Cosmetics Act where it B
has a specific connotation for the purpose of that Act as it excludes Ayurvedic,
Siddha or Unani drugs and includes not only medicines but other substances
and devices; this is, however, not the case in the Central Excise Tariff.
According to the appellants, the Tribunal failed to appreciate that the
appellant's products which contained the Ayurvedic ingredients as aforesaid
were prepared in accordance with the Ayurvedic principles. It is further urged C
that the formulations have been developed after referring to several authoritative
Ayurvedic books and careful evaluation of actions, clinical trials etc., and that
the formulations have been approved by the Director of Indian Medicine and
Homeopathy, Government of Andhra Pradesh. It is further submitted that the
Tribunal failed to appreciate that the orlus of classification of a product is on
the Excise Department and that the Excise Authorities are required to produce D
the evidence to support their stand. In the present case, no evidence
whatsoever has been produced by the Excise Department and they have not
even rebutted the evidence produced by the appellants.
Learned counsel for the appellants contended that as the classification E
of the goods in question has been determined by the competent authority
under the Drugs Act who on application for licence to manufacture Ay.urvedic
drugs in the prescribed statutory form has issued a licence for manufacture
and sale of Ayurvedic drugs, the Central Excise Authorities have to act on
that basis and it is not open to the Central Excise Authorities to go beyond
the same or sit in judgment thereon. According to Mr. Lakshmikumaran the F ··
expression "Ayurvedic drug" is not defined in the Act and the rules made
thereunder, assistance of the Drugs Act can be taken to understand the scope
of sub-heading 3003.30 ofCET. It is submitted that the Tribunal has failed to
appreciate that sub-heading 3003. I 0 excludes patent or proprietary medicaments
other than those medicaments which are exclusively Ayurvedic, Unani, Siddha, G
Homeopathic or Bio-Chemic from the class of patent or proprietary medicaments
covered thereunder. According to the appellant that merely because the word
"Exclusively" appeared in sub-heading 3003.10, it does not mean that the
same would take colour and have the same meaning as the word "Exclusively"
appearing in definition of"Ayurvedic drug" in Section 3(a) of the Drugs Act.
In this context, it is submitted that the Tribunal has failed to appreciate that H
444
SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.
A the word "Exclusively" appearing in sub-heading 3003. IO is used to cover
Patent or Proprietary Allopathic Medicaments as distinct from Patent or
Proprietary Ayurvedic, Unani and Siddha medicaments. On the other hand,
the word "Exclusively" appearing in Section 3(a) of the Drugs Act was to
distinguish the Ayurvedic medicaments from Patent or Proprietary Ayurvedic
B medicaments defined in Section 3(h) of the Drugs Act and not to distinguish
between the Allopathic medicines on one hand and Ayurvedic, Unani and
Siddha medicaments on the other hand. Therefore, it is submitted that the
word "Exclusively" appeared in different context and for different purposes
and under sub-heading 3003. IO and Section 3(a) of the Drugs Act and,
therefore, the meaning of the word "Exclusively" appearing in 3(a) of the said
C Act cannot be borrowed or applied for the purpose of determining the scope
and.ambit of sub-heading 3003.10 as opined by the learned Member (Technical).
It is also submitted that the Tribunal has failed to appreciate that the word
"Exclusive" means exclusiveness qua the individual assessee and that this
. exclusivity is licensed by the Drug Controller and that as the said goods are
marketed as Ayurvedic medicament in India, the same are "Exclusively
D Ayurvedic" qua that manufacturer. It is further argued that on a true and
correct construction, sub-heading 3003.10 excludes Patent or Proprietary
medicaments which are manufactured, sold and marketed as Ayurvedic
medicaments in accordance with the license issued under the Drugs Act i.e.
Patent or Proprietary Ayurvedic medicaments falling under Section 3(h) of the
E Drugs Act and, therefore, Section 3(a) has no application at all in construction
of sub-heading 3003.10 of CET. It is submitted that since the sub-heading
3003.10 excludes Patent or Proprietary Ayurvedic medicament as defined in
Section 3(h) of the Drugs Act, the word "Exclusively" does not and cannot
have the same meaning as appearing in Section 3(a) of th1: Drugs Act which
defines Ayurvedic Drugs and not Patent or Proprietary Ayurvedic drug and
F that as the goods are Patent or Proprietary Ayurvedic medicaments within the
definition given in Section 3(h) of the Drugs Act, Section 3(a) of the Drugs
Act does not apply at all in the present case. II' is also submitted that the
Tribunal (Member (J)) has erred in holding that the formulae and patent of
the appellant company is registered in America which is without any evidence
G or material on record and that the Tribunal has proceeded on an erroneous
footing by recording the alleged admission regarding the method of
manufacture and/or marketing of the said goods as Allopathic medicine in
America and thereby misdirected itself in law and on facts and that the
formula of goods bearing the name "Vicks' as manufactured in America is
different and, therefore, the same cannot be compared to the said goods as
H was apparent from the reference to Martindale.
NATURALLE HEALTH PRODUCTS (P) LTD. v. C.C.E. [LAKSHMANAN, J.]
445
Mr. Raju Ramachandran, learned Additional Solicitor General in reply to A
the arguments advanced by the counsel for the appellant submitted that the
Tribunal has rightly held that the cough drops and throat drops cannot be
classified as "Exclusively" Ayurvedic medicaments as its product is not
manufactl!red in accordance with the formulae prescribed in Ayurvedic texts
and, therefore, the Tribunal has rightly held that though the ingredients may B
be Ayurvedic, the formulation is not Ayurvedic and, therefore, cannot be
classified under sub-heading 3003.30. According to Mr. Raju Ramachandran,
a bare perusal of the three sub-headings, namely, 3003.10, 3003.20 and 3003.30
would indicate that the first sub-heading covers all patent or proprietary
medicaments, the second sub-heading covers other medicaments which are
not patent or proprietary and the third sub-heading covers medicaments used C
in Ayurvedic, Unani, etc. systems and, therefore, it is important to ~ote that
sub-heading 3003.30 uses the word "used in" ..... "systems". It is submitted
that a system of medicine pre-supposes a systematic practice of medicine
where there is a patient and practitioner. For a medicament to qualify to fall
under this sub-heading it is necessary to establish that a .practitioner of
Ayurvedic medicine prescribes the medicine in question in the normal course D
of his treatment and in both the present appeals, the Tribunal has not found
that this has been established and, therefore, this Court would not interfere
with question of facts.
In regard to the word "Exclusive" which is used both in sub-headings E
3003.10 and 3003.20 Mr. Raju Ramachandran would submit as follows:-
"The word "exclusive" is used both in sub headings 3003. I 0 and
3003.20. If what falls under 3003.30 is a "classical" Ayurvedic medicine
(because that is what will be prescribed by an Ayurvedic practitioner
practising the Ayurvedic system of medicine) then the expression p
"exclusively Ayurvedic" must again be the same classical Ayurvedic
product which means it must fulfill both the ingredients of Section 3
(a) of the Drugs and Cosmetics Act, namely that its ingredients must
all be those specified in the authoritative text books, and the formulae
of its manufacture must be strictly in accordance with the formulae
prescribed in those text books. Admittedly, the said formulae are not G
followed in both the cases and, therefore, the· products in question
cannot fall under sub heading 3003.30."
Replying to the argument of the counsel for the appellant that since
classical Ayurvedic products can never be patent or proprietary medicines, H
446
SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.
A the exclusion clause in sub-heading 3003.10 would be meaningless unless it
comprehends neo-Ayurvedic products such as theirs. Mr. Raju Ramachandran
contends that this exclusion is by way of abundant caution only to indicate
that classical Ayurvedic products falling under sub-heading 3003.30 would
not fall under sub-heading 3003. I 0, and it is well known that often expressions
B are used by way of abundant caution or clarification which does not mean
that they are surplusage. In any event, even if the Court were to come to the
conclusion that these words are surplusage, there need not be any inhibition
in this regard. It is further submitted that these words occur not in a substantive
section of the statute but in a sub-heading of a classification, which is part
of a statute and if it is accepted that it is only classical Ayurvedic medicaments
C which would fall under sub-heading 3003.30, the interpretation placed by the
Revenue on 3003.10 must also be correct. It is submitted that the onus of
proving that the goods fall within the exception would surely be on those
who claim that exception and in the instant case this onus has not been
discharged inasmuch as it has not been found that these are medicines used
exclusively in the Ayurvedic system of medicine. Referring to the judgment
D of this Court in the Commissioner of Central Excise, Allahabad v. Himtaj
Ayurvedic Udyog Kendra, reported in 2003 {154) ELT 323 (SC), it is submitted
by learned counsel for the respondent that the said cases were decided as
a culmination of show cause notices issued by the Revenue seeking to
classify the product in question as a perfumed hair oil and not as a medicament.
E There was, therefore, no occasion for the Revenue to ever argue on their
appropriate classification within Chapter heading 3003, namely, 3003.10 or
3003.30. It is, therefore, submitted that the observation both of the Tribunal
and of this Court in the Himtaj Hair Oil cases have to be understood as
obiter dicta, do not preclude this Court from arriving at an independent
conclusion.
F
Referring to the case of Vicks Vapourub which confim1s the judgement
of the Tribunal it is submitted by the learned counsel for the respondent that
it does not again militate against the contention of the Revenue. In that case,
the matter was remanded to see whether in common parlance the product in
G question was an Ayurvedic medicine and as already stated the common
parlance test is accepted by the Revenue itself, but what is required to be
seen is whether the said test is satisfied in the present case and the answer
to that question must be in the negative.
Referring to the judgment of this Court in Amrutanjan case, Mr. Raju
H Ramachandran submitted that the said decision does not preclude the
NATURALLE HEALTH PRODUCTS (P) LTD. v. C.C.E. [LAKSHMANAN, J.]
447
contention of the Revenue and a.II that the decision holds is that the fact that A
certain ingredients were of a synthetic nature would not mean that the products
became non-Ayurvedic and that the said decision do not deal with the
interpretation of sub-heading 3003.30 vis-a-vis 3003.10.
We have given our anxious consideration to the points urged by the
learned counsel for the appellants and learned counsel for the respondent B
with reference to the pleadings, provisions of law and the decisions of the
Tribunal and of this Court.
It is not in dispute that the products in question are Vicks Medicated
cough drops and Vicks Vaporub throat drops. The appellants manufacture
these products under Ayurvedic Drug Licence. All the ingredients contained C
in these products are admittedly mentioned in authoritative Ayurvedic Text
Books mentioned in Schedule III to the Drugs and Cosmetics Act. However,
the formula of preparing the products is proprietary to the appellant in
C.A.No.2072/1996. The appellant submitted that the ingredients contained in
the products are manufactured from natural herbs like menthol etc., but D
purified to the pharmaceutical grade. The appellant claims the classification
of the products in question as patented/proprietary Ayurvedic medicaments
under heading 3003.30 while the Central Excise Department seeks to classify
the said products under heading 3003.10.
We have perused the orders passed by the Assistant Commissioner and E
the Commissioner (Appeals) who decide the appeals against the assessee in
C.A.No.2072/1996 on two grounds, namely:
(i) The products are not manufactured according to the formula in any
authoritative text books on Ayurved; and
(ii) The judgment of the CEGAT in the case of Amrutanjan Ltd
Madras v. CCE Madras, reported in [1991] 32 ECR 538 is applicable
to the appellant.
F
We have perused the order in Amrutanjan case passed by the CEGAT
wherein the Tribunal held that the products were having pharmaceutical name G
but the assessee was using Hindi name only to claim classification as
Ayurvedic Medicine. This order of the Tribunal was overruled by this Court
in the case of Amrutanjan Ltd v. CCE, reported in (1995) 77 ELI 500 SC.
Unfortunately, the Assistant Commissioner and the Commissioner (Appeals)
relied on the overruled judgment of the CEGA T, because the judgment of this H
448
SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.
A Court was not available at the time they decided the matter. The Tribunal
distinguished the same. It was held by this Court in Amrutanjan 's case that
the ingredients, which are used in preparation of ayurvedic medicines even
if they are used after refinement or bringing them to phannaceutical quality,
they do not become synthetic in nature. It is immaterial that the same articles
B bearing a different nomenclature are also known and used in allopathic system.
Though the question whether the formula for preparation should be in
accordance with authoritative ayurvedic texts was not dealt with by Their
Lordships, the appellant's claim gets considerable support from this decision.
By the same token of reasoning, the drugs in question can also be treated
as ayurvedic medicaments as there is no dispute that all the ingredients find
C place in the books on Ayurvedic medicine.
Extensive arguments were advanced by the counsel appearing on either
side on the heading 30.03 and sub-headings 3003.10, 3003.20 and 3003.30 we
have reproduced the arguments advanced by them in the paragraphs (supra).
D
Learned counsel for the appellant invited our attention to the order
passed by the Tribunal in the case of Richardson Hindustan Ltd. v. CCE,
reported at (1998) 35 ELT 424. The Tribunal in that case held that there is no
definition of Ayurvedic medicaments in the Central Excise and Salt Act or in
the Central Excise Tariff Act.