IMPORTANT POINT
Medicated cough drops and throat drops manufactured by the assessee in accordance with and under the licence issued under the Drugs and Cosmetics Act for the manufacture of Ayurvedic Drugs are classifiable as Ayurvedic Medicaments for the purpose of levy of central excise duty.

Headnote:Central Excise and Salt Act, 1944 -Section 35L(B)-Central Excise Rules, 1944-Rule 173-B-Sub-heading 3003.10 and 3003.30 of Central Excise Tariff-Medicated cough drops and throat drops manufactured by appellants under licence issued under Drugs and Cosmetics Act-Classification of-Appellants filed classification list claiming classification of their goods under sub-heading 3003.30 read with erstwhile notification No. 32/89-CE dated 1-3-1989-Show cause notice issued by Assistant Collector of Central Excise as to why goods should not be classified as Patent or Proprietary Medicaments under sub-heading 3003.10 of Central Excise Tariff attracting excise duty at the rate of 15 ad valorem -Appellants claim that the goods are Ayurvedic Medicine-Appeal against order of CEGAT rejecting appellant s claim-Whether medicated cough drops and throat drops manufactured by appellants are classifiable as Ayurvedic Medicaments for purpose of levy of central excise duty-(Yes)-Whether products Sloan s Balm and Sloan s Rub are ayurvedic medicines-(Yes).
       Held : At the time of hearing, our attention was drawn to circular No. 25/91 dated 3-10-1991 issued by the Department after the decision in Richardson Hindustan s case (supra) laying down the twin tests, namely (i) that the product should be known as Ayurvedic medicament in the common parlance and (ii) the ingredients should be mentioned in Ayurvedic text books. (Para 28)
       It is seen 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. (Para 29)
       A patent Ayurvedic 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. (Para 37)
       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 are 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. (Para 40)
       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 drugs 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. (Para 42)

JUDGMENT

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 :

2. 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 for the manufacture of "Ayurvedic Drugs" are classifiable as Ayurvedic Medicaments for the purpose of levy of central excise duty.

The issue for determination in Civil Appeal No. 10744 of 1996 is:

3. 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 sub-heading 3003.10 chargeable to duty at 15 ad valorem.

4. The facts briefly stated in Civil Appeal No. 2072 of 1996 leading to the filing of this appeal are as under:-

The appellants - M/s Naturalle Health Products (P) Limited, Hyderabad filed the classification list as required under Rule 173-B of the Central Excise 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 notice was issued by the Assistant Collector of Central Excise calling upon the appellants to show cause why the said goods should not be classified as Patent or Proprietary Medicaments under sub-heading 3003.10 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 show-cause notice were not relevant for determining the classification of the goods. The Assistant Collector, after giving a personal hearing, vide Order dated 14-3-1991 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 upholding the Order dated 14-3-1991 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 12-3-1993 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 of 2:1 dismissed the appeal and 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 order, the appellants preferred the present appeal under Section 35L(B) of the Central Excise and Salt Act, 1944.

Civil Appeal No. 10744 of 1996

The short facts are :

5. 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 by the decisions in the case of Richardson Hindustan Limited v. Collector of Central Excise, 1988 (35) ELT 424 (T) as confirmed by this Court reported in 1989 (42) ELT A100 and the decision in the case of Shri Baidyanath Ayurved Bhawan Private Limited v.

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2003 Supreme(SC) 1130

IMPORTANT POINTMedicated cough drops and throat drops manufactured by the assessee in accordance with and under the licence issued under the Drugs and Cosmetics Act for the manufacture of Ayurvedic Drugs are classifiable as Ayurvedic Medicaments for the purpose of levy of central excise duty.

Cases Referred (4)

IMPORTANT POINT
Medicated cough drops and throat drops manufactured by the assessee in accordance with and under the licence issued under the Drugs and Cosmetics Act for the manufacture of Ayurvedic Drugs are classifiable as Ayurvedic Medicaments for the purpose of levy of central excise duty.