Commisssioner Of Customs, Central Excise And Service Tax Vs Ashwani Homeo Pharmacy (Supreme Court of India)
Supreme Court held that Aswini Homeo Arnica Hair Oil being manufactured and marked as Homeopathy medicine is classifiable under Chapter 30 of the First Schedule to the Central Excise Tariff Act and cannot be branded as a cosmetic.
Facts- The Adjudicating Authority held that the product in question, known as “Aswini Homeo Arnica Hair Oil”4 could not be classified as ‘medicament under Tariff Item 3003 90 14 or under any item stated in Chapter 30 of the First Schedule to the Central Excise Tariff Act, 19855-6; and that the product in question, being “Hair oil”, was required to be classified as ‘cosmetic’ under Tariff Item 3305 90 19. Accordingly, the Adjudicating Authority confirmed the demand to the tune of Rs.2,72,14,266/- on the respondent for the differential duty payable in terms of Section 11-A (10) of the Central Excise Act, 19447; ordered payment of interest on the said differential duty in terms of Section 11-AA of the Act of 1944; and imposed penalty in the sum of Rs.54,00,000/- under Rule 25 of the Central Excise Rules, 2002.
However, the appeal preferred by the respondent was allowed by the Tribunal by its impugned order dated 31.01.2018 and the aforesaid order dated 16.10.2015 passed by the Adjudicating Authority was set aside. The Tribunal held that the product in question, AHAHO, fell in the category of ‘medicament’ and hence was rightly classified under Chapter 30 of the First Schedule to the Act of 1985.
Conclusion- In common parlance, the product in question would be approached essentially for its claimed medicinal qualities and not as another hair oil. This aspect, in our view, is itself sufficient to reject the contentions of the appellant and the observations of the Adjudicating Authority. The Tribunal has rightly dealt with the matter in accordance with the law applicable to the facts of the present case.
The Adjudicating Authority has also observed that drug licenses issued by respective authorities per se did not make AHAHO a preparation of Homeopathic medicine. However, the Adjudicating Authority has failed to consider that such drug license issued under Schedule K to the Rules of 1945 had not been a factor to be ignored altogether. Both in relation to common parlance test as also the ingredients test, this factor carries its own relevance even if not finally decisive of the matter. The submission about want of condition of sale by authorised medical distributor or retailer under prescription has its own shortcomings for it has not been shown if such a preparation falling under Schedule K to the Rules of 1945 was also requiring such a mention in terms of Rule 97. In any case, any such requirements for adherence to the Act of 1940 and the Rules of 1945 could only be a matter for consideration of the authorities dealing with licensing and regulating the manufacture and sale of drugs. The only relevant aspect for the present purpose is that the product in question being manufactured as a Homeopathy medicine, and being marketed and used as a Homeopathic medicine for its pharmaceutical value, would fall in Chapter 30 and cannot be branded as cosmetic, so as to fall under Chapter 33 of the First Schedule to the Act of 1985.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
Preliminary and brief outline
1. This appeal is directed against the common judgment and order dated 31.01.2018, as passed by the Customs, Excise and Service Tax Appellate Tribunal1, insofar as relating to Appeal No. E/30050/20162, whereby the Tribunal has disapproved and reversed the order dated 16.10.2015, as passed by the Commissioner of Customs and Central Excise, Hyderabad3 in HYD-EXCUS-004-COM-042-1 5-16.
1.1 By the aforesaid order dated 16.10.2015 in relation to the period from December 2013 to November 2014, the Adjudicating Authority held that the product in question, known as “Aswini Homeo Arnica Hair Oil”4 could not be classified as ‘medicament under Tariff Item 3003 90 14 or under any item stated in Chapter 30 of the First Schedule to the Central Excise Tariff Act, 19855-6; and that the product in question, being “Hair oil”, was required to be classified as ‘cosmetic’ under Tariff Item 3305 90 19. Accordingly, the Adjudicating Authority confirmed the demand to the tune of Rs.2,72,14,266/- on the respondent for the differential duty payable in terms of Section 11-A (10) of the Central Excise Act, 19447; ordered payment of interest on the said differential duty in terms of Section 11-AA of the Act of 1944; and imposed penalty in the sum of Rs.54,00,000/- under Rule 25 of the Central Excise Rules, 2002.
1.2. However, the appeal preferred by the respondent was allowed by the Tribunal by its impugned order dated 31.01.2018 and the aforesaid order dated 16.10.2015 passed by the Adjudicating Authority was set aside. The Tribunal held that the product in question, AHAHO, fell in the category of ‘medicament’ and hencewas rightly classified under Chapter 30 of the First Schedule to the Act of 1985.
1.3. An ancillary but intertwined aspect of the matter had been that the product in question was being classified as ‘medicament’ under the said Chapter 30 since the year 1994. According to the respondent, this classification was regularly accepted by the Department in the past with at least two successive orders of the Commissioner (Appeals) and hence, there was no justification in re-examining the issue. The Adjudicating Authority expressed the view that because of material amendment of the tariff entries in Chapters 30 and 33 in the year 2012, classification of the product in question required re-examination. The Tribunal, however, did not approve of this proposition of the Adjudicating Authority.
1.4. The appellant is aggrieved of the order so passed by the Tribunal and hence, has preferred this appeal while asserting that the product in question had rightly been classified by the Adjudicating Authority as ‘cosmetic’ in terms of Chapter 33 and hence, the demand in question deserves to be maintained. On the other hand, the respondent supports the order impugned while asserting that the product in question has rightly been classified as medicament’ in terms of Chapter 30.
2. In view of the above, the primary question in this appeal is as to whether the product in question, AHAHO, would be classified as ‘medicament’ under Chapter 30 or as ‘cosmetic’ under Chapter 33 of the First Schedule to the Act of 1985. The other question is as to whether because of amendment of the entries in the said Chapters 30 and 33 in the year 2012, classification of the product in question required re-examination, even though the same was classified as ‘medicament’ under the said Chapter 30 since the year 1994.
2.1. With reference to the aforementioned questions, we may take note of the relevant background aspects and stand of the respective parties with reference to the show-cause notice to the respondent and its reply.
The Background: Show-Cause Notice and Reply
3. The respondent, having registration number ADHPB1884HEM003 under the central excise, is engaged in the manufacture of the product in question, AHAHO, in its units at Moosapet (since the year 1994), Maheshwaram and Bala Nagar. Further, the respondent had classified the product under Tariff Item 3003 90 14 as ‘medicament’ and paid the excise duty at concessional rate accordingly. This classification of the product in question was examined as many as four times during the period 1994-2004 and, according to the respondent, was duly accepted by the Department.
4. It appears that even when classification of the product in question as ‘medicament’ had been accepted during the period 1994-2004, this classification remained in doubt and, particularly after changes in the Act of 1985 in the year 2012, the respondent was served with different show-cause notices pertaining to different periods of consideration, essentially to the effect that the product in question was classifiable as ‘cosmetic or toilet preparations under Chapter 33, Tariff Item 3305 09 19. In the show-cause notice dated 26.12.2014, which forms the subject-matter of this appeal, the Adjudicating Authority, inter alia, stated as under: –
“02. The assessees are engaged in the manufacture of ‘Aswini Homeo Arnica Hair Oil’ which was classified by them under Tariff Item No. 3003 9014 of the First Schedule to the Central Excise Tariff Act, 1985. However, as per Chapter 33 of the Central Excise Tariff Act, 1985, preparations for use on the hair are rightly classifiable under Chapter Sub Heading No. 33050919 and shall be liable for assessment under Section 4A of the Central Excise Act, 1944 @12% adv. creating them as ‘Cosmetic or Toilet preparations’. Accordingly, show cause notices as under were issued to the assessees.
