By TIOL News Service

NEW DELHI, MAR 09, 2017: THE appellant-assessee are engaged in the manufacture of Ayurvedic medicaments/ Cosmetic preparations. The dispute is about the classification of the goods. The demands were confirmed by the original authorities by classifying the goods under CETH 33.04. Both assessee and revenue are in appeal before the CESTAT. It is the contention of the revenue that the valuation should be under Sec 4A, but not under Sec 4.

After hearing both sides, the Tribunal held:

+ A plain reading of the description of the product as given by appellant- assessee in their catalogue reveals that the products are more in the nature of items used for enhancing one's appearance and beauty. The appellant-assessee strongly pleaded that "Roop Amrit" is for curing acne and pimples. It contains the approved ingredients of ayurvedic text and hence should be considered as medical preparation. Similarly, for "complete solution" also it was submitted that the disorder of small breast in women is being cured by this product.

+ The Hon'ble Supreme Court in case of Shree Baidyanath Ayurved Bhavan Ltd. vs. CCE- 2002-TIOL-204-SC-CX upheld the view of the Tribunal to the effect that ordinarily a medicine is prescribed by a medical practitioner and it is used for a limited time and not everyday, unless it is so prescribed to deal with specific decease like diabetes. It was also held that normal scientific and technical meaning of the terms and expression should not be automatically adopted but preference should be given to the popular meaning that is to say, the meaning attached to them by those using the product. As such, the certificates issued by Drug Control Authorities or affidavit given by Vaidyas cannot be the basis to decide the classification of these products. In Puma Ayurvedic Herbal P. Ltd. vs. CCE - 2006-TIOL-18-SC-CX the Supreme Court held that cosmetic products are meant to improve the appearance of a person, whereas a medical product or a medicament is meant to treat some medical condition. The Hon'ble Supreme Court held that 'Puma Herbal Massage Oil' (which is similar to complete solution) is not a medicament.

+ Since the products are to be classified as cosmetic or toilet preparations, the valuation has to be done under Section 4A of Central Excise Act, 1944 read with Notification No. 13/2002-CE (NT) dated 01.03.2002.

+ There is no justification for interference with the finding of the lower authorities on the issue of penalties. However, regarding the penalties imposed on partners, since penalty of equal to duty amount has been imposed on the firm, there is no justification to impose penalty on the partners of the firm. As such, the penalties on partners are liable to be set-aside in view of the facts and circumstances of the case.

(See 2017-TIOL-750-CESTAT-DEL)