[Classification Under Central Excise] Aswini Homeo Arnica Hair Oil Is Not Cosmetic & Rather Medicament: Clarifies SC
While considering the classification of ‘Aswini Homeo Arnica Hair Oil’ (AHAHO) under Central Excise Rules, 2002, the Supreme Court observed that when the product in question is intended to control hair fall as also to prevent dandruff and to induce good sleep, which all carry their own therapeutic and prophylactic connotations, the picture of a lady with long black flowing hair, by itself, cannot make the product in question a cosmetic.
A Two Judge Bench of Justice Dinesh Maheshwari and Justice Vikram Nath observed that "AHAHO, merits classification as 'medicament' under Chapter 30 and not as 'cosmetic or toilet preparations' under Chapter 33 of the First Schedule to the Central Excise Tariff Act, 1985, and the change in tariff structure by way of amendment brought about in the year 2012 did not justify any re-look at the classification of the product in question".
ASG Vikramjit Banerjee & AOR Mukesh Kumar Maroria appeared for the Appellant whereas, Senior Advocate V.V.S. Rao & AOR Gopal Jha appeared for the Respondent.
In a nutshell, in relation to the period from December 2013 to November 2014, the Adjudicating Authority held that the product known as "Aswini Homeo Arnica Hair Oil" [AHAHO] could not be classified as 'medicament' under Tariff Item 3003 90 14 and that the product in question, being "Hair oil", was required to be classified as 'cosmetic' under Tariff Item 3305 90 19. The Adjudicating Authority also confirmed the differential duty demand of Rs.2,72,14,266/- and ordered payment of interest and imposed penalty in the sum of Rs.54,00,000/- under Rule 25 of the CER, 2002. On appeal, the Tribunal set aside the order of the Adjudicating authority. Hence, present appeal by Revenue Department.
After considering the evidences, the Apex Court found that the product in question, i.e., AHAHO, was classified as 'medicament' under Chapter 30 on at least four different occasions by the Department, including two orders passed by the successive Commissioner (Appeals) during 1994-2004 and the said orders had attained finality.
As regards the question as to whether the product in question, AHAHO, merits classification as 'medicament' under Chapter 30 or as 'cosmetic or toilet preparations' under Chapter 33, the Apex Court opined that an inquiry shall be directed towards a couple of tests taken together, being the common/commercial parlance test i.e., how the product is understood commonly, including by the persons dealing in the same and by the end-users; and the ingredients test i.e., whether the ingredients used in the product are found mentioned in authoritative textbooks.
Further, as regards the question as to whether a particular product is classifiable under Chapter 30 as 'medicament' or under Chapter 33 as 'cosmetic', the Bench of this Court highlighted that one of the essential features would be as to whether the preparation is essentially for cure or prevention of disease (medicament) or for care (cosmetic); and the preparation having only subsidiary curative or prophylactic value would fall under Chapter 33.
The Bench admitted that the product has been manufactured as a drug after being duly licensed by the competent authorities and carries the combination of as many as four Homeopathic medicines, Arnica Montana, Cantharis, Pilocarpine, and Cinchona in its preparation, apart from the fact that these Homeopathic medicines are duly found mentioned in Homeopathic Pharmacopoeia of India as also in the Dictionary of Practical Materia Medica.
“In the over-anxiety to somehow hold the product in question as cosmetic, the Adjudicating Authority even attempted to suggest his reservations as regards the utility of Pilocarpine as a Homeopathic drug contrary to the authoritative texts. The perversity and unreasonableness of approach of the Adjudicating Authority is also noticed from the observations that, if the intention was to identify the product as medicament, there was no need to label it as "Hair Oil". While the expression "Hair Oil" does appear on the label, the other integral expressions "Homeo" and "Arnica" preceding the expression "Hair Oil" could not have been ignored and could not have been left aside. The Adjudicating Authority had gone to the extent of observing that hair growth was at best a cosmetic necessity rather than a disease requiring immediate attention or treatment! The Tribunal has rightly observed that when hair fall or baldness is recognized as a medical condition, the Adjudicating Authority could not have taken a different view, which was not recognized by any branch of medicine”, added the Bench.
The Apex Court also clarified that by way of the amendment of 2012, even if the relevant entries pertaining to preparation for use on the hair have been provided with micro classifications in comparison to the entries standing earlier, it could never be taken to mean that anything which is prepared for being used on the hair and carries the name "Hair Oil", would lose its character as medicament, if otherwise, it has been prepared for therapeutic or prophylactic uses.
Accordingly, the Apex Court dismissed the appeal.
CauseTitle- COMMISSIONER OF CUSTOMS, CENTRAL EXCISE AND SERVICE TAX, HYDERABAD v. ASHWANI HOMEO PHARMACY