Case: M/S.Naturalle Health Products (P)Ltd Vs. Collector Of Central Excise, Hyderabad

case of appellant in Civil Appeal No. 2072/1996, the products satisfy the definition in Section 2(h) of Drugs & Cosmetics Act as patent or proprietary Ayurvedic medicines also. Further, the manufacture of this medicament is being done under the Ayurvedic drug licence issued by competent authority. 39. The Vice-President and one of the Members of the Tribunal observed that the products in question are mentioned in Martindales "The Extra Pharmacopoeia" published in U.K. and it is also a patented medicine in USA and and marked there as Allopathic medicine. These facts were not alleged in the show-cause notice. 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 learned Members of the Tribunal are not warranted. 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. It is also relevant to note that after remand by the Tribunal in Richardson Hindustan case (which was confirmed by this Court), we are told that Vicks Vaporub and inhaler have been held to be Ayurvedic medicines coming under classification No. 3003.30. If those two products having the same brand name Vicks are treated as Ayurvedic medicines failing 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 present case. As submitted by the appellant, 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. We would also like to point out that the comment of one of the learned Members that admittedly, the assessee is not using genuine and pure Ayurvedic ingredients is wholly incorrect. There is no such admission anywhere. The assessee has been throughout contending that the ingredients used are mentioned in authoritative Ayurvedic text books and they are natural products from herbs and plants which were only refined. 40. In terms of the order passed by the CEGAT in the case of Richardson Hindustan Ltd. vs. Collector of Central Excise (1988 (35) 424 (Tribunal) which has been affirmed by this Court and similar view taken in other cases referred to supra, the following clear propositions and findings emerges: "(a) That the word Ayurvedic Medicine not having been defined in the Central Excise and Salt Act, 1944 or the Central Excise Tariff Act, 1985, the common parlance test would have to be resorted to find out whether a medicine is treated as an Ayurvedic medicine by the public;(b) That it is necessary that the ingredients of Ayurvedic Medicine should be mentioned in authoritative books on Ayurvedic Medicines." 41. We are also of the opinion that when there is no definition of 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 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 as mentioned in the authoritative books on Ayurveda. As rightly contended by the counsel for the appellants, 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 determination of classification under the Central Excise Act. As held in Amruthanjan case, the mere fact that the ingredients are purified or added with some preservatives does not really alter their character. 42. In C.A. No. 2072 of 1996, the affidavits of Ayurvedic practitioners were filed before the adjudicating authority to establish that these products are recognised and being used in Ayurvedic system of medicine. The Assistant Collector ignored them with a cryptic observation that they are self-serving. No other authorities including the Tribunal have considered such material. No evidence to the contra has been relied upon by the Department. When we come to the appeal of Akin Laboratories Pvt. Ltd., the assessee filed affidavits from doctors, users and stockists and also furnished clinical trial report from Government Ayurvedic Hospital, Hyderabad. The label of the product showing it as Ayurvedic medicine was also relied on. The Collector (Appeals) gave a finding that both the tests i.e. common parlance and ingredient tests are satisfied. The affidavit evidence was not rebutted by the Department by producing any contra evidence. As against the clear finding of the appellate Collector, the Tribunal merely commented that a few certificates given by a doctor or owner of a medical shop does not advance the case of the assessee. The Tribunal allowed the Revenuess appeal following the decision in Naturalle Health Products Pvt. Ltd. (Appellant in C.A. No. 2072 of 1996). 43. In our view, the Tribunal has completely misdirected itself in law and on facts by being influenced by the unimportant factors like the mention of similar names of goods in Martindale and patent of the same in USA and failed to take into account the relevant factors like the issue of licence to manufacture Ayurvedic drug under the Drugs Act, the popular understanding of the products, the law laid down by this Court in the cases referred to above and the circular issued by the Government of India in the light of Richardson Hindustan case. The Tribunal placed undue reliance on the definition of Ayurvedic medicament in Section 2(a) of the Drugs Act. In our opinion, all the products ought to be classified as Ayurvedic medicaments under sub-heading 3003.30 of the Central Excise Tariff. 44.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]30. It isseen from the above circular that the Government have accepted two tests for determining the classification of the products claimed to be the Ayurvedic medicines and the statutory authorities were directed to keep this in view while deciding similar pending assessments of the type indicated in the circular and be finalised on the above basis. It is also seen from the circular that the aforesaid two tests have been upheld by this Court in the case of C.A.No. 2127 of 1998 - C.C.E. Hyderabad, vs. M/s. Richardson Ltd. Order dated 10.1.1999.Thus, it is seen that the CEGATs decision and the circular of the Board does not lay down any tests regarding the formulae of manufacture as per authoritative Ayurvedic textalready noticed, the Government have issued a circular on the basis of the representations received from the manufacturers of Ayurvedic preparations and the doubts in regard to the question whether the products claimed to be Ayurvedic medicines, are, in fact, so and whether they would merit classification under sub-heading 3003.30 of the Schedule to the Central Excise Tariff Act, 1985. The Government of India after examining the matter in the light of the parameters prescribed by the Tribunal in their Order passed in M/s. Richardson Hindustan Ltd. vs. C.C.E., Hyderabad which has been upheld by this Court in C.A.No. 2127 of 1998 have issued the circular clarifying the correct position in regard to the classification and reiterating the said two test. The argument of Mr. Raju Ramachandran, therefore, has no force and is liable to be rejected.From the above, it is clear that a patent Ayuvedic medicament could be one where all the ingredients find mention in the authoritative text books on Ayurveda, though the formula for preparation of the medicament is not in accordance with the formula given in those text books. It is not in dispute that all the ingredients are mentioned in the authoritative text books on Ayurveda. In fact, in the case of appellant in Civil Appeal No. 2072/1996, the products satisfy the definition in Section 2(h) of Drugs & Cosmetics Act as patent or proprietary Ayurvedic medicines also. Further, the manufacture of this medicament is being done under the Ayurvedic drug licence issued by competent authority.We are also of the opinion that when there is no definition of 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 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 as mentioned in the authoritative books on Ayurveda. As rightly contended by the counsel for the appellants, 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 determination of classification under the Central Excise Act. As held in Amruthanjan case, the mere fact that the ingredients are purified or added with some preservatives does not really alter their character.In our view, the Tribunal has completely misdirected itself in law and on facts by being influenced by the unimportant factors like the mention of similar names of goods in Martindale and patent of the same in USA and failed to take into account the relevant factors like the issue of licence to manufacture Ayurvedic drug under the Drugs Act, the popular understanding of the products, the law laid down by this Court in the cases referred to above and the circular issued by the Government of India in the light of Richardson Hindustan case. The Tribunal placed undue reliance on the definition of Ayurvedic medicament in Section 2(a) of the Drugs Act. In our opinion, all the products ought to be classified as Ayurvedic medicaments under sub-heading 3003.30 of the Central Excise Tariff.