S.C. Jain, Member (J)

1. Briefly staled the facts of the case are that Shree Baidyanath Ayurved Bhawan Limited, Nagpur (hereinafter called the appellants) manufacture patent or proprietary medicine falling under item 14E of the CET. They also manufacture other products including (1) Dant Manjan, (2) Surma and (3) Kajal.

Prior to 1975, the appellants classified Dant Manjans, Surmas and Kajals manufactured by them under item 7 of the classification list meant for showing "other goods manufactured". With effect from 1-3-1978 when a residuary item 68 was introduced in the Central Excise Tariff, these three products were classi-Pharmaceuticals and drug intermediates not elsewhere specified were exempted from payment of excise duty. The appellants treated these products, namely, Dant Manjan, Surma and Kajal as Ayurvedic drugs/medicines and did not pay any excise duty with effect from 1-3-1978 by taking benefit of Notification No. 62/78 C.E., dated 1-3-1978.

2. The Superintendent, Central Excise, Range V, Nagpur issued to the appellants a show cause notice dated 3-11-1981. A paragraph of this notice reads as under :

"And whereas it appears that the notice have been wrongly and wilfully taken recourse to Notification No. 62/78, dated 1-3-1978 which on its true and correct interpretation has no application to the said goods in question, as the said goods cannot be treated as Ayurvedic medicines, drugs, pharmaceuticals and drug intermediates because they are patently marketed as tooth powder, Surma, Kajal to the consumers as well as to trade."

3. In reply to the said show cause notice the appellants raised the following contentions :

1. Since Ayurvedic medicines have been specified under Item 14-E of the Central Excise Tariff, even if by way of exclusion, they cannot be included in the residuary Item 68;

2. Dant Manjan is known in the trade parlance as Ayurvedic medicine;

3. The sale of the product as Ayurvedic medicine is evident from the description on the containers and the advertisement regarding it;

4. All the ingredients of Dant Manjan, appear in original books on Ayurved viz., Bhav Prakash, Banoshadha, Sushrut Samhita, Chandrodaya, etc. It is exclusively Ayurvedic medicine for the treatment of mouth and teeth diseases like Pyorrhea, alveerine, toothache, gum-boils, etc. All the ingredients arc medicinal like red earth, long pepper, ginger, black pepper, tobacco, clove, camphor, menthol, neem chhal, Babhul Chhal, etc. and they have got both pharmacological and therapeutic qualities. In colloquial language it is called as 'Manjan';

5. The manufacture and sale of the product Dant Manjan has been authorised by the highest authority in the State viz. Food and Drug Control Administrator as per his sanction order dated 19-3-1977 issued under the Drugs and Cosmetics Act, 1940;

6. The Principal, Ayurvedic College, Bombay and the Principal, Government Ayurvedic College, Bundelkhand (Jhansi) who are experts in the field of Ayurved, have certified that Dant Manjan is an Ayurvedic medicine. The analystical report showing the properties and effect of each ingredient also proves this fact;

7. The product Dant Manjan is a 'Drug' as defined in Section 3(b) of the Drugs and Cosmetic Act, 1940 and is entitled to exemption under Notification No. 62/78, dated 1-3-1978;

8. The show cause notice is not valid as it does not disclose the evidence on which it is based. No material like market enquiry has been supplied. It only makes an arbitrary mention that it is not Ayurvedic medicine. It is based on only opinion, presumption and assumption;

9. The onus of prof for taxing it is on' the Department which has not been discharged;

10. The classification of this product is approved by the Department and unless that decision which is quasi-judicial is annulled under Section 35-A of the Act, no proceedings can be held;

11. The change in view or stand that is being sought to be done now is not permissible in law;

12. Since there was no clandestine or fraudulent