CA Ashish Kumar Bansal

CA ASHISH KUMAR BANSAL

The provisions of Central Excise Act 1944 with respect to medicines under Ayurvedic, Unani, Siddha, Homeopathic or Biochemic (AYUSH) System has been discussed as under:-

A) Levy Of Excise Duty on Ayurvedic , Unani ,Siddha ,Homeopathic or Biochemic Medicaments under Central Excise Act 1944

Medicaments Under Ayurvedic , Unani , Siddha  homeopathic or Biochemic systems can be bifurcated into following categories

a) Medicaments containing alcohol  (Ethyl Alcohol)

b) Medicaments not containing alcohol

c) Medicaments under Biochemic Systems

We shall discuss applicability of Central Excise Act 1944 separately for each of the above categories .

a) Medicaments containing Alcohol (Ethyl Alcohol )

The pharmaceutical Goods are covered under chapter 30 of Central Excise Act 1944 . The chapter note 5  of Chapter 30 is  reproduced below  :-

“This Chapter does not cover pharmaceutical products and medicaments containing alcohol, opium, Indian hemp or other narcotic drugs. For the purposes of this Note, “alcohol”, “opium”, “Indian hemp”, “narcotic drugs” and “narcotics” have the meanings assigned to them in section 2 of the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 (16 of 1955).”

Sec 2(a) of The Medicinal and Toilet Prepration (excise Duties Act defines alcohol as

“Alcohol means ethyl alcohol of any strength and purity having the chemical composition C2 H5 OH “

A plain reading of above provisions imply that pharmaceutical products and medicaments containing alcohol ( as discussed above ) are outside the purview of Central Excise Act 1944 and are taxable only under Medicinal and Toilet Preparations Act 1955 . This is true not only to AYUSH medicines but medicaments under any system  containing alcohol or other narcotics . This has also been held by the honourable Supreme Court in Dabur India Ltd vs State Of Uttar Pradesh Writ Petition (civil )426 of 1989

It may also be noted pharma products which are “care “ (toilet preparation ) like soaps, tooth paste  and not “cure” (medicaments ) are classifiable under chapter 33 of Central Excise Act 1944 . however chapter note 1(d) of chapter excludes toilet preparations containing alcohol , opium , Indian hemp or other narcotic drugs as defined in Medicinal and Toilet Preparation act 1955 . Hence toilet preparation containing alcohol and other narcotics are dutiable  only under Medicinal and toilet preparation act 1955

b) Medicaments Not Containing Alcohol

Position before 17/03/2012

Notification no 03/2005 C.E. dated 24/02/2005 exempted vide entry no 28 of the said notifications

“Medicaments (including those used in Ayurvedic, Unani, Siddha, Homeopathic or Bio-chemic systems), manufactured exclusively in accordance with the formulae described in the authoritative books specified in the First Schedule to the Drugs and Cosmetics Act, 1940 (23 of 1940) or Homeopathic Pharmacopoeia of India or the United States of America or the United Kingdom or the German Homeopathic Pharmacopoeia, as the case may be, and sold under the name as specified in such books or pharmacopoeia “

Position after 17/03/2012

The  said notification however has been superseded by notification no 12/2012 C.E. dt 17/03/2012 w.e.f 17/03/2012 . It may be noted that since there is no entry in notification no 12/2012 .C.E corresponding to entry no 28 of notification non 03/2005 (as discussed above ) . the said exemption stands withdrawn w.e.f 17/032012 . Hence Medicaments under Ayurvedic, Unani . siddha or homeo patjic system, not containing alcohol or other narcotics are dutiable under Central Excise Act 1944 w.e.f 17/03/2012.

c) Medicaments under Biochemic System

Entry 29 of the notification no 03/2005 C.E.exempted non branded medicaments under biochemic system . The same exemption is carried forward after 17/03/2012 vide identical entry no 122 of notification no 12/2012 C..E reproduced below :

“Medicaments (including veterinary medicaments) used in bio-chemic systems and not bearing a brand name”

Hence medicaments under biochemic system not bearing a brand name are exempted from duty under central excise duty Act 1944

Meaning of Brand name

Explanation to notification no 03/2005 specifically defines brand name as

‘brand name’ means a brand name, whether registered or not, that is to say, a name or a mark, such as a symbol, monogram, label, signature or invented words or any writing which is used in relation to a product, for the purpose of indicating, or so as to indicate, a connection in the course of trade between the product and some person using such name or mark with or without any indication of the identity of that person.

The same definition has also been provided vide explanation 2 of notification no 12/2012 dt 17/03/2012 .

It may be noted that In the Pharmaceutical business a distinction is made between a house mark and a product mark. The former is used on all the products of the manufacturer. It is usually device in the form of an emblem, word or both. For each product a separate mark known as a product mark or a brand name is used which is invariably a word or a combination of a word and letter or numeral by which the product is identified and asked for. In respect of all products both the product mark and house mark will appear side by side on all the labels, cartons etc. Goods are ordered only by the product mark or brand name. The house mark serves as an emblem of the manufacturer projecting the image of the manufacturer generally.”

Hence it may be inferred that mere mentioning of housemark will not render a “medicament bearing a brand name “  and hence taxable .

The same has been held by honourable supreme court of india in the case of Astra pharmaceutical (P) Ltd vs Collector of Central Excise Chandigarh (civil appeal no 3403(NM) of 1987 where in dutibility of medicines depended on the fact whether the medicines is sold under a brand name . the definition of brand name was identical to as provided by notification no 12/2012 . in the said case manufacture was puting housmark on all medicines sold by it.

B) Classification under Central Excise Act 1985

The Relevant entries for classification are as under

3003 Medicaments (excluding goods of heading 3002, 3005 or 3006) consisting of two or more constituents which have been mixed together for therapeutic or prophylactic uses, not put up in measured doses or in forms or packings for retail sale

3003 90 Other:

Ayurvedic, Unani, Siddha, Homoeopathic or Bio-chemic systems medicaments:

3003 90 11 Of Ayurvedic system     6%

3003 90 12  Of Unani system            6%

3003 90 13 Of Siddha system           6%

3003 90 14 Of Homoeopathic system  6%

3003 90 15 Of Bio-chemic system    6%

3004 Medicaments (excluding goods of heading 3002, 3005 or 3006) consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses (including those in the form of transdermal administration systems) or in forms or packings for retail sale

3004 90 — Other:

— Ayurvedic, Unani, Siddha, Homoeopathic or Bio-chemic systems medicaments:

3004 90 11 Of Ayurvedic system    6%

3004 90 12  Of Unani system          6%

3004 90 13 Of Siddha system         6%

3004 90 14 Of Homoeopathic system  6%

3004  90 15 Of Bio-chemic system   6%

 C) Rate of Duty

Normal rate of duty (with Cenvat )

The normal rate of duty on medicaments under ayurvedic , unani, siddha , homeopathic or biochemic system as specified under Central excise Tarrif Act 1985 ( classification as discussed above is 6% advolerem

Concessional Rate of duty (without  Cenvat )

Entry no 37 of notification 01/2011 C,E provides for concessional rate of duty of 2% advolerem with a condition that no cenvat credit would be available  to following

Medicaments (including those used in Ayurvedic, Unani, Siddha, Homeopathic or Bio-chemic systems), manufactured exclusively in accordance with the formulae described in the authoritative books specified in the First Schedule to the Drugs and Cosmetics Act, 1940 (23 of 1940) or Homeopathic Pharmacopoeia of India or the United States of America or the United Kingdom or the German Homeopathic Pharmacopoeia, as the case may be, and sold under the name as specified in such books or pharmacopoeia

It may be noted that concessional rate of duty aoption is available only ot medicaments prepared as per formulae described in authoritive books or pharmacopeia as discussed above i.e. medicaments sold under generic name . however medicaments sold under brand name (proprietary medicines ) cannot claim benefit of concessional rate of duty and are taxable at normal rate of duty i.e 6% advolerem with cenvat

D) Valuation

MRP based valuation has been introduced to non branded medicaments  w.ef from 01/03/2011 to the following

Medicaments (including those used in Ayurvedic, Unani, Siddha, Homeopathic or Bio-chemic systems), manufactured exclusively in accordance with the formulae described in the authoritative books specified in the First Schedule to the Drugs and Cosmetics Act, 1940 (23 of 1940) or Homeopathic Pharmacopoeia of India or the United States of America or the United Kingdom or the German Homeopathic Pharmacopoeia, as the case may be, and sold under the name as specified in such books or pharmacopoeia.

MRP based valuation for medicines sold under brand name has been introduced w.e.f 01/03/2013

Medicaments exclusively used in Ayurvedic, Unani, Siddha, Homeopathic or Bio-chemic systems and sold under a brand name

Abatement

An abatement of 35% on MRP value is prescribed to arrive at assessable value

E) SSI EXEMPTION

Medicaments under  used in Ayurvedic, Unani, Siddha, Homeopathic or Bio-chemic systems are covered by notification no -8/2003 C.E. which provides for exemption of central excise duty to first clearance upto 150 lacs in a year provided total turnover of excisable goods in previous financial year does not exceed rs 400 lacs .

It may be noted tha the value for both 150 lacs and 400 lacs limit respectivey would MRP value less abatement i.e.35%

It may also be noted that turnover of non excisable items (medicaments containing alcohol ) will not be included in either of  the limit

Further turnover of exempted goods (non branded biochemics) will only be included in limit of rs 400 lacs and not for limit of Rs 150 lacs

Summary and conclusion

All the above provisions have been summarised in bleow mentioned table .

Medicament Containing alcohol or other narcotic drug Not Containing alcohol or other narcotic drug
Non Branded  Bio chemic

 

Non Branded Ayurvedic ,Homeopathic , Unani, siddha system Branded under ayurvedic , unani, siddha homeopathic or biochemic system
Dutiable under Central Excise Act 1944 NO YES YES YES
Exemption available Not required Yes

(entry no 122 notification no 12/12012)

NO NO
Rate of Duty under Central Excise Act 1944 NIL NIL 6% with option to avail cenvat credit

                 Or

2% without cenvat credit (Entry 37 notification no 01/2011 C.E)

 

 

 

6% with option to avail cenvat credit

 

Valuation N.A. MRP – 35% (entry 125 Notification no 49/2008 C.E. MRP – 35% (entry 125 Notification no 49/2008 C.E. we.f from 01/03/2013
SSI exemption available Not required

 

Yes

 

Yes

 

Yes
Includible in limit of Rs 150 lacs as specified in ssi exemption notification 08/2003 C,E NO NO YES Yes
Includible in limit of Rs 400 lacs as specified in ssi  exemption notification 08/2003 C.E NO YES YES yes
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One response to “Excise duty on medicines under Ayurvedic, Unani, Siddha, Homeopathic or Biochemic Systems”

  1. Vivek says:

    Thanks a lot. Its a very informative article.

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