REPORTABLE   

IN THE SUPREME COURT OF INDIA CIVIL APPELALTE JURISDICTION

CIVIL APPEAL NO. 4048/2001

Commissioner of Central Excise, Nagpur        ..           Appellant

Vs.           Shree Baidyanath Ayurved Bhawan Ltd.         ..       Respondent

WITH

Civil Appeal Nos.2396-2397/2003

M/s.Shree Baidyanath Ayurved Bhawan Ltd.   .. Appellant

Vs.

Commissioner of Central Excise, Patna                ..Respondent

WITH

Civil Appeal Nos.9739-9746/2003

M/s. Shree Baidyanath Ayurved Bhawan,Ltd.             .. Appellant

Vs.   Commissioner of Central Excise, Patna                 ..Respondent

WITH

CIVIL APPEAL NO.6691/2004

M/s. Shree Baidyanath Ayurved Bhawan Ltd.

Sathariya, District – Jaunpur                     .. Appellant

Vs. Commissioner of Central Excise, Allahabad          ..Respondent

AND

Civil Appeal No .1521/2009(D.No.20489/06)

Commissioner of Central Excise, Nagpur          ..Appellant

Vs.

M/s. Baidyanath Ayurvedic Bhawan Ltd.                ..Respondent

J U D G E M E N T

R.M. LODHA, J.  

The  only  issue  in  this  batch  of   thirteen   civil

appeals  is  in  respect  of   classification  of  “Dant  Manjan  Lal”

(DML)  manufactured  by  M/s.  Baidyanath   Ayurved  Bhawan

Limited (‘Baidyanath’, for short).  While Baidyanath  contends

that  the  product  DML is  a  medicament  under  Chapter  Sub-

heading  3003.31  of  the  Central  Excise  Tariff  Act,  1985,  the

stand  of  the  Department  is  that  the  said  product   is  a

cosmetic/toiletry  preparation/tooth  powder  classifiable   under

Chapter Heading 33.06.

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2.         The  true classification of the product  DML

has been subject of fluctuating  opinion among the

benches  of   the   Customs,  Excise  and  Gold

(Control)  Appellate  Tribunal  (for  short,  ‘Tribunal’).

West  Regional Bench of  the Tribunal decided the

classification in favour of Baidyanath  and  held that

DML  is   classifiable  under  Chapter  Sub-heading

3003.31.  The similar view has been taken by East

Regional  Bench  of  the  Tribunal.   However,  the

larger bench of the Tribunal to which the issue of

classification  of  DML was  referred,  has  held  that

DML   is  classifiable  under  Chapter  Sub-heading

3306.10.  It is for this reason that the Department

as  well  as   Baidyanath  have preferred   separate

appeals.

3. The litigative journey with regard to classification of

this  product  has  reached  this  Court   earlier   in  Shree

Baidyanath  Ayurved  Bhawan  Ltd.  Vs.  Collector  of  Central

Excise, Nagpur1.  We shall refer to that decision a little later.

1  (1996) 9 SCC 402

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First  we shall  advert  to the sequence of  facts  leading to the

present controversy.

4. Baidyanath  is  engaged  in  the  activity  of

manufacturing  medicines   adopting   Indian  systems.   They

have  their   works  situate  at  Calcutta  (now  Kolkata),  Naini,

Patna,  Nagpur  and  Jhansi.   One  of  the  products  being

manufactured by Baidyanath is DML.  The product is  a powder

compounded with Geru, Peepall, Sonth, Kali Mirch, Tambakuh,

Clove Oil, Camphor, Pepperment, Babul Chhal, Tumber Beej.

Baidyanath  claims  that  DML is  manufactured  in  accordance

with  the  formulae  given  in  Ayurved  Sar  Sangraha  (an

authoritative text on the Ayurved system of medicine) by using

the  ingredients mentioned therein.  Ayurved Sar Sangraha  is

notified under the First  Schedule of the Drugs and  Cosmetics

Act,  1940 ( for  short  ‘Act,  1940’).   It  is also the case of  the

Baidyanath  that DML is sold in  the name which is specified

in Ayurved Sar Sangraha.

5. Prior to 1975, the product DML was considered to

be  classifiable  under Tariff Item  14E of the  First Schedule  of

the Central Excise and Salt Act,1944 ( for short ‘Act,   1944’)

which  item  covered  medicines.   Accordingly,  DML  was  not

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subject to  levy of excise duty and exempted  therefrom.  On

March 1, 1975, Residuary Item  68 was incorporated  in the

Act,  1944 wherein all items  not elsewhere  specified  in the

tariff  were  liable  to  be  classified.   Baidyanath   filed  a  fresh

classification list and  commenced paying excise duty  as was

leviable  under Residuary Item  68 of the Act, 1944.

6. On March 1, 1978,  the Central Government issued

an  Exemption  Notification  bearing  No.  62/78-CE  whereby

exemption  was  extended  to   “…..all  drugs,  medicines,

pharmaceuticals  and  drug   intermediates  not  elsewhere

specified.”  Baidyanath claimed the  benefit   extended by the

Central  Government under the said Notification and  stopped

paying duty on the product DML while filing  fresh classification

list.

7. In  the  month  of  March  1980,  the  Department

expressed doubts about the  classification of DML and  issued

notices to Baidyanath requiring them  to show cause as to why

DML be not subjected  to  tariff rate  without treating  it as an

Ayurvedic Medicine  and without extending the benefit available

under the Notification No.62/78-CE.

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8. Baidyanath resisted various  show cause notices on

diverse grounds,  namely;  that DML is  an Ayurvedic Medicine,

that it manufactures  the same   under a drug licence;  that all

the ingredients of DML are mentioned  in the authoritative book

of  Ayurved  System of  Medicine;  and  that  the  product  is  an

Ayurvedic Medicine in the trade  and   common parlance.    The

Baidyanath,  thus,  claimed that  it  was  eligible  for  the  benefit

extended under the Notification No.62/78-CE.

9. The  view  of  adjudicating  authorities  who  issued

show cause notices was not uniform.   Their  opinion has been

varied.  While some of the  adjudicating  authorities held that

DML was an  Ayurvedic Medicine; the others  took the view that

it was not so.   All these matters ultimately found their way to

the  Tribunal.   On  July  14,  1985,  the  Tribunal   delivered  its

judgment  in  the  matter  and  held  that   in  common  trade

parlance,   DML  is  neither  treated  nor  understood  as  an

Ayurvedic Medicine and hence could not be classified as such.

The Tribunal, thus, held that the product DML was not eligible

for the  benefit extended under Notification  No.62/78-CE  as  it

was not    covered by the  category of  goods mentioned  at

Sr.No.19 of the schedule  to the said notification.  Pertinently,

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the  goods mentioned  in the said category  included ‘drugs,

medicines,  pharmaceuticals  and  drug   intermediates’  not

elsewhere  defined.     

10. The aforesaid   order  of  the  Tribunal  came to  be

challenged at the instance of Baidyanath before this Court in

various  appeals.   The  appeals   were  admitted   and   finally

disposed  of  on  March  30,  1995  (referred  to  hereinafter  as

Baidyanath I1) .  This Court held  that the product  DML would

have  to  be   classified   on  the  basis  of  the  common  trade

parlance  test and applying  that test, the Tribunal was correct

in   its  finding   that  DML  was  not  known as  an  Ayurvedic

Medicine.    The finding of the Tribunal  that DML  was toilet

requisite   was  upheld.   Be  it  noticed   here  that  during  the

pendency  of  the  appeals  before  this  Court,   Central  Excise

Tariff Act, 1985 (for short, ‘New Tariff Act’ ) was enacted  which

replaced the Schedule to the Act,  1944.  Chapter  30 of the

New tariff  Act  deals  with  pharmaceutical  products.   Chapter

Sub-heading 3003.30 provided for no excise duty  leviable on

medicaments,  including  those   used  in   Ayurvedic,  Unani,

Siddha, Homeopathic  or Bio-chemic System.  On August 28,

1987, the First Schedule to the  Drugs and Cosmetic Act, 1940

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was  amended  and  the  book  ‘Ayurved  Sar  Sangraha’  was

included therein.

11. On  September  25,  1991,  the  Central  Board  of

Excise  and Customs (for short,  ‘the Board’) issued a circular

in  respect  of  DML  and  advised   its  classification  as   an

Ayurvedic Medicine.  It is Baidyanath’s case that  in pursuance

of  the  circular  dated  September  25,1991,  the  concerned

Commissioner of Central Excise  issued  trade notices directing

the field formations to classify DML as  an Ayurvedic Medicine.

The  assessee  filed   classification  list  in  its  various  units

declaring  DML  as an Ayurvedic   Medicine and claimed the

exemption  benefit  extending  thereto.   Baidyanath,  thus,

stopped paying excise duty on DML.

12. During  1996-97, Chapter 30 of the New Tariff came

to be amended.  Under Chapter Heading 30.03, Sub-heading

3003.31  was inserted   which provided    levy of   nil  duty  in

respect  of    the  medicaments  manufactured  exclusively   in

accordance  with  the formulae described   in  the authoritative

books in the First Schedule to the Drugs and Cosmetics Act,

1940.     

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13. On  October  31,  1996,  the   Board   withdrew the

circular   dated  September  25,  1991  and  advised  its  field

formations to classify the product DML  in accordance with  the

order passed by this  Court  in Baidyanath  I1.   The assessee

approached the Board by way of  representation  putting  forth

the plea that after the  introduction of  New Tariff Act and the

amendments  made  in  1996,  there  is  a  specific  definition  of

Ayurvedic Medicine and hence classification of its product DML

should be done on the basis of that definition alone and not the

common trade parlance  test.  The Board thereafter on May 27,

1997,  sent   communication  to  the  Commissioner  of  Central

Excise, Nagpur, concerning the  classification of DML to decide

the classification of the product in the light of  opinion of  Drug

Controller  of  India  as  well   as  instructions  contained  in  the

circulars dated March 29, 1994 and April 3, 1996.

14. On  September 10, 1997, the Board  withdrew its

circular  dated May 27, 1997   and directed  classification of

DML in terms of judgment of this Court in Baidyanath  I1 with

regard to this very product.

15. In pursuance of the circular issued by the Board on

October  31,  1996,  several  notices  came  to  be  issued  to

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Baidyanath by various  Excise Authorities at  Patna; Allahabad

(Naini); Jhansi and Nagpur asking them  to show cause as to

why DML should not be  classified  as a toiletry   under Chapter

33 of the New Tariff Act and duty  be  demanded  accordingly.

The show  cause   notices  were resisted   and contested by

Baidyanath  and the matter reached the Tribunal.  As  stated

above,  West   Regional Bench  and East Regional Bench   of

the Tribunal decided the classification in favour of  Baidyanath.

Thereafter,  the  classifiability  issue   of  DML  came   up  for

consideration before the Principal Bench of the Tribunal at New

Delhi and the Bench doubted the correctness of the decisions

of West Regional Bench and East Regional Bench and referred

the  issue  to  the  Larger  Bench.    The  Larger  Bench  of  the

Tribunal  decided the reference and held that the product DML

was  classifiable  under  Chapter  Heading  33.06   of  the  New

Tariff  Act.

16. The  factual  position  that  the  product  DML  is

manufactured  by Baidyanath in accordance with the  formulae

mentioned in the book ‘Ayurved Sar Sangraha’ which is notified

in the First Schedule appended to  Drugs and Cosmetics Act,

1940 and that the product is sold in the name which is specified

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in  that  book  has  not  been  seriously  put  in  issue  by  the

Department before us.   

17. We heard Mr. C.A.Sundram, learned senior counsel

for   Baidyanath  and Mr.   K.  Radhakrishnan,  learned senior

counsel  for the  Department at quite  some length.

18. Mr.  C.A.Sundram  would  contend:  (i)   that  the

product DML falls under Chapter Sub-heading 3003.31  as it is

a  medicament  because  it   comprises   of  two  or    more

constituents which have been mixed together for  therapeutic

and  prophylactic   uses.   It   is  manufactured   exclusively  in

accordance  with  the   formulae  described  in  ‘Ayurved  Sar

Sangraha’  which  is  an authoritative  text on the Ayurvedic

System of treatment and is notified in the First Schedule to the

Drugs and Cosmetics   Act,  1940.   Moreover,  in  accordance

with the provisions of the Drugs and Cosmetics Act, 1940, the

said  product  is  manufactured  by  Baidyanath  under   a  drug

licence issued by the concerned competent authority.  Further,

the product is sold  under the name of ‘Dant Manjan Lal’ which

is  the  name specified  for  the  said  product  in   ‘Ayurved Sar

Sangraha’, (ii)  that the Government accepts that the product

DML  is a classical or pharma-copoeial   Ayurvedic Medicine.

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During the parliamentary debates,  the Finance Minister clearly

stated  that  if the two conditions are met  namely, the product

is  manufactured  exclusively in  accordance  with  the  formulae

described in the  authoritative text on the Ayurvedic System of

treatment and is notified in the  First Schedule to the Drugs and

Cosmetics  Act,  1940  and  the  product  is  sold  in  the   name

which  is  the  name  specified  for  the  said  product  in  the

authoritative text, there  is no duty on the product; (iii) that the

New Tariff Act contains definition of Ayurvedic Medicines  post-

1996   and  now  there  is  clear  distinction  drawn  between

classical  or   pharmacopoeial    Ayurvedic  Medicines  and

patent and proprietary  medicines.  Once there is  a definition

provided in the  Tariff  Act,  that  definition alone shall  prevail

and  common  trade  parlance  test  is  not   applicable.  The

common  trade  parlance  test  is  to  be  applied  only  in  the

absence  of  definition;  (iv)  that  therapeutic  and  prophylactic

uses  of  DML as  pharmacopoeial  Ayurvedic  Medicine  clearly

stand established  as the  formulae has been in existence for

the  past  several  100 years  which  is  contained in  the   book

‘Ayurved Sar Sangraha’  and the said book is notified  in the

First Schedule of the Drugs  and Cosmetics Act, 1940 and the

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product is accepted  as a medicine under the Drugs Act;  (v)

that entry in Chapter Sub-heading 3003.31 being more specific

entry,  it  must  be  preferred  over  general  residuary  entry  of

3306.10.   By  applying  general  rules  of  interpretation  to  the

Schedule and the New Tariff Act, a specific entry  must  prevail

over  a general entry; (vi) that Note 1(d) of Chapter 30 does not

cover  -“preparations  of  Chapter  33  even  if   they  have

therapeutic  or prophylactic properties”  and for a product to be

excluded by this Note 1(d),  it must be  a product covered in

Chapter 33 while DML  is an Ayurvedic Medicine specifically

covered under Chapter 30; and (vii) that the product DML does

not qualify   Note 2 of Chapter 33 as this Court in the case of

BPL Pharmaceutical  Limited vs.  Collector of Central Excise,

Vadodra2, has held that  for a product to fall under this Entry, it

must:  (i)  be suitable   for  use  as goods of Chapter  Heading

33.06,  (ii)   the  packaging,  with  labels,  literature  and  other

indications  must indicate  that it  is for  cosmetic or toilet  use,

and (iii)   irrespective of  whether  they are  held  out   to  have

subsidiary curative  or prophylactic properties.

2  1995 (77) ELT  500 (SC)

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19. The  learned  senior  counsel  for  Baidyanath  relied

upon the judgment of this  Court  in the case of  Collector of

Central Excise vs.  Andhra Sugar Limited3 wherein the  rule of

‘contemporaneous  exposito’  has been explained  namely that

for  construction  of  a   statute   the  Legislative  intent  and

Executive  instructions may be taken into  account to determine

the  scope   and  intent  of  the  entry   or  statue   under

consideration.   He also relied upon decisions of this Court in

(1)  Oswal   Agro Mills  Ltd. vs.  Collector  of  Central  Excise  &

Ors.4 (2)  Amrutanjan Ltd. vs.  Collector of Central Excise5; (3)

Commissioner  of  Central  Excise,  Calcutta vs.  Sharma

Chemcial Works6; (4) Commissioner of Central Excise, Nagpur

vs.  Vicco Laboratories7 and  (5)  Meghdoot Gramodyog Sewa

Sansthan vs. Commissioner of Central Excise, Lucknow8.

20. Mr.  K.  Radhakrishnan,  learned senior  counsel  for

the Department contending  contra,   by referring  to Notes 1

(d) and 2 of Chapter 30 and Note 2 to Chapter 33 and Chapter

Heading 30.03 and 33.06,  submitted that Chapter 30 excludes

3   1989  Supp. (1) SCC 144 4   1993 (6) ELT  37 SC 5  1995 (77) ELT 500 SC 6   2003 (154) ELT 328 7   2005 (17) ELT 17 SC 8   2004 (174) ELT 14 SC

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preparations  of  Chapter  33 even if  they have therapeutic  or

prophylactic  properties.  He  would submit that the word   used

in Note 1(d) of Chapter 30 is ‘properties’ while the word used in

Note 2 of Chapter  30 is ‘uses’.  These two words, ‘properties’

and  ‘uses’  import  different  concepts.   Mr.  K.  Radhakrishnan

would  submit   that  the   restrictive  definition  of  the  word

‘medicaments’  in Note 2 of  Chapter 30 is for the purposes of

Heading  30.03.  Chapter  Heading  30.03  deals  with

medicaments  including  veterinary  medicaments  and

medicaments  for  therapeutic  and  prophylactic  use.

Medicaments cover the entire Heading 30.03 including every

Sub-heading.  Thus,  for  a  product  to  qualify  under

‘medicament’,  ‘use’ and ‘not properties’ of the  product must be

therapeutic  or  prophylactic.   The common parlance  test,  the

learned senior counsel  would  submit, is inbuilt in the definition

of ‘medicament’ in Note 2 of Chapter 30 as the emphasis is on

the  word  ‘uses’.   In  the  submission  of  the  learned   senior

counsel   for the Department,   common parlance test is  well

recognized  as one of the twin tests which should be applied to

classify a product as medicament or cosmetic even post 1996.

Without satisfying the common parlance test, the classification

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cannot be applied.  Mr. K. adhakrishnan submitted  that as to

whether  the  product  described  against  the  Sub-heading

3003.31 is a medicament or not can be ascertained only  after

resorting  to  Note  2 of Chapter 30  and the common parlance

test inbuilt in it.   Rule 1 of the Rules for the interpretation of the

Schedule to the New Tariff  Act  mandates that  classification

shall  be determined  according to  the terms of the Heading

and any relative Section or Chapter Notes, hence Chapter Note

2  dealing with medicaments  cannot be  by-passed.

21. The  learned  senior  counsel  for  the  Department

would urge that the classification cannot be finalized by looking

at the  description of the goods provided against  Sub-heading

3003.31;  the  description  of  goods  provided  against  Sub-

heading 3003.31, is not a definition of  medicament.  According

to  him,  Sub-heading  3003.31  provides  the  process  of

manufacture of certain medicaments including  those used in

Ayurvedic  and   sale   of  the  same.   He  would  submit  that

procedure for manufacture of a product is not a relevant  test

legally recognized for classification of the product.

22. Mr.  K.  Radhakrishnan,  learned  senior  counsel

would also  submit  that  the  definition   under  Section  3(a)  of

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Drugs and Cosmetics Act,  1940 does not relate to Ayurvedic

Medicines alone and it is materially distinct from Sub-heading

3003.31 of Chapter 30  as  collocation  of   words “sold under

the name  as specified  in such book or pharmacopoeia”  is

conspicuously absent  in Section 3(a).

23. The  learned   senior  counsel  for  the  Department

heavily relied  upon a three Judge Bench decision of this Court

in  Baidyanath I1 wherein this Court held that the product DML

is not an Ayurvedic Medicine.  This Court  approved common

parlance test applied by the Tribunal.  He  would submit  that

the product  is the very same product for which  Baidyanath is

agitating  to get a classification under the heading medicament.

The  product  has  not  undergone  any  change   in  their

composition,  character  and  use;   merely  because  there  is

some difference in  the  tariff entries, the character and use of

the  product  will  not  change.  According   to  Mr.  K.

Radhakrishnan,  by  inclusion  of  the  book   ‘Ayurved  Sar

Sangraha’ in the first schedule of  the Drugs  and Cosmetics

Act,  1940,  the  product  DML  could  not  be  classified   as

‘medicament’.  The  senior  counsel  also  submitted   that   the

earlier  decision  of  this  Court  relating  to  very  same  product

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operates  as  res  judicata  which  is  based  on  three  legal

maxims:  (1)  Nemo debet bis vexari pro una et eadem causa

(2)  Interest republicae ut sit finis litium   and (3)  Res judicata

pro veritate occipitur.  He, thus, submitted that the product DML

is  classifiable  under Heading  33.06  being a tooth powder.   

24. We deem it  appropriate  at  this  stage   to  set  out

relevant  portions in the Tariff  Items, Chapter  Notes  and the

Rules  for  the  interpretation   of  the   Schedule   which  have

bearing for consideration before us.

25.   Rules for interpretation of the Schedule as stated

in New Tariff Act are as follows:

“1.   The  titles  of   Sections  and  Chapter  are  provided  for ease of   reference only; for legal purposes,  classification shall be determined  according to the terms  of the  headings and  any  relative  Section  or  Chapter  Notes  and,  provided such headings or Notes  do not otherwise require, according to the provisions  hereinafter contained.

2. (a) ………………………………………………..

(b)  ……………………………  The  classification  of goods consisting of more than  one material  or substance shall be according to the principles contained in  rule 3.

3. When an application of sub-rule(b)  of  rule 2 or for any  other  reason,   goods  are,   prima  facie,   classifiable under  two  or  more      headings,   classification  shall  be effected as follows:

(a) The  heading  which  provides   the  most   specific description shall  be  preferred to  headings providing a more general description.  However,  when two or more

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headings  each  refer  to  part  only  of  the  materials  or substances contained in mixed or composite goods or  to part only of the items  in a set,  those headings are to be regarded as equally specific  in relation to those goods, even if one of them  gives a more complete or precise description of the goods.  

(b)   Mixture,  composite  goods  consisting  of  different materials  or made up of different components, and  goods put up in   sets, which cannot be classified  by reference to (a), shall  be  classified as if they consisted of the material or component which   gives them  their  essential  character, insofar as this criterion is applicable.   

(c)  When  goods  cannot  be  classified  by  reference  to (a) or (b), they shall be classified under the heading which occurs  last  in   the  numerical  order  among  those  which equally merit consideration.    

4. Goods which cannot be classified  in accordance with the  above  rules  shall  be  classified  under  the  heading appropriate to the goods to which they  are most akin.

5. For legal purposes, the classification of  goods in the sub-headings  of a heading shall be determined  according to the terms of those sub-headings and any related Chapter Notes  and,  mutatis  mutandis,  to  the  above  rules,  on  the understanding that only sub-headings at the same level are comparable.     For  the  purposes  of  this  rule,  the relative Section  Notes  also  apply,  unless  the  context  otherwise requires.

GENERAL EXPLANATORY NOTES

1. Where in column (3) of this Schedule, the description of an article or group of articles under a heading  preceded by  “-“  the said article or group of articles  shall be taken to be a  sub-classification of  the article  or  group of  articles covered  by  the  said   heading.     Where,  however,  the description of  an article or group of  articles is preceded   by “- -“,  the said article  or group of articles shall be taken to be a  sub-classification  of  the  immediately   preceding description of  article  or group of articles which has “—“.

2. ………………………………………………....... ………..

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26.    Chapter 30 to the extent, it is relevant for the present

matter, is as follows:

“CHAPTER 30 PHARMACEUTICAL PRODUCTS

NOTES

1. This Chapter does not cover: (a) …………….. (b) …………….. (c) …………….. (d) Preparations of Chapter 33 even if they have

therapeutic  or prophylactic  properties; (e) …………….. (f) …………….. (g) …………….. 2. For the purposes of the heading No.30.03,  

(i) ‘Medicaments’  means   goods  (other  than     foods  or beverages such as  dietetic, diabetic or fortified  foods, tonic beverages) not falling  within heading No.30.02 or 30.04 which are either :

(a) products  comprising two or  more  constituents  which have  been  mixed   or  compounded  together  for therapeutic  or prophylactic uses; or   

(b) unmixed products suitable for such uses. 3. ………….. 4. ………….. 5. ………….. 6. …………..

27.     Relevant portions in Chapter 33 is thus:

CHAPER 33

ESSENTIAL OILS RESINOIDS; PERFUMERY, COSMETIC OR TOILET PREPARATIONS

NOTES 1. …………………………………………………. 2. Heading  Nos.  33.03  to  33.08  apply,  inter  alia, to

products, whether or not mixed (other than aqueous distillates  and aqueous  solutions of  essential   oils),

2 0

suitable for use as goods of these  headings and put up  in  packings  with  labels,  literature   of  other indications  that  they are  for  use  as cosmetics   or toilet  preparations  or  put  up  in  a  form  clearly specialized   to  such  use  and  includes  products whether  or   not  they  contain  subsidiary pharmaceutical   or  antiseptic   constituents,  or  are held out as having  subsidiary curative or prophylactic value.

3. ……………… 4. ………………

--------------------------------------------------------------------------------------------------- Heading Sub- Description of goods Rate No. heading  of   No. duty (1) (2) (3) (4) 33.06         3306.00      Preparations for oral or dental 15%

    Hygiene, including dentifrices      (for   example  toothpaste and      Tooth powder)  and     denture      Fixative pastes and powders”

28. In 1996-97, Chapter 30   to New Tariff Act came  to

be amended.   Chapter  Sub-heading No.3003 now stands as

under:

“MEDICAMENTS (INCLUDING VETERINARY MEDICAMENTS)

3003.10-Patent  or  proprietary   medicaments,    other  than those medicaments which are exclusively  Ayurvedic, Unani, Siddha, Homoeopathic or Bio-chemic

3003.20-  Medicaments  (other  than  patent  or  proprietary  ) other  than  those   medicaments  which  are  exclusively Aurvedic, Unani, Siddha, Homoeopathic or Bio-chemic

-Medicaments,  including  those  used in  Ayurvedic,  Unani, Siddha, Homoeopathic or Bio-chemic systems

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3003.31   -  -    Medicaments (including veterinary Medicaments)  used   in  Ayurvedic,  Unani,  Siddha  or Homoeopathic   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 …………….. and sold under the  name as specified in such book   or  pharma- copoeia;”

29. Baidyanath’s  product DML has not been  treated

as Ayurvedic Medicine to qualify for exemption from payment

of excise duty under Notification No.62/78-CE dated March, 1,

1978  by this Court.   This Court  approved common parlance

test applied by the Tribunal that DML could not be described as

a medicinal  preparation and that it could rightly be described

as a toilet preparation.  In Baidyanath I1,  it was held thus:

“The  ingredients   for  the  product  in  question  are stated  to be Geru (red earth) to the extent of 70% which is sated to have  cooling quality but the Tribunal noticed that it is  largely used as a filler  or  colouring   agent  and is  not described as a medicine  in common parlance.  After going through the various texts, the definition of ‘drug’ under the Drugs  and Cosmetics  Act,  1940 and ayurvedic books as well  as  opinion  of  experts  in  this  behalf,  the  Tribunal ultimately  came  to  the  conclusion  that  the  product  in question could not be described as a medicinal preparation and accordingly rejected the claim of the appellant.

We have heard  the learned counsel  at some length. He also invited our attention to the provisions of the Drugs and Cosmetics Act,  1940, the opinion  of  the experts, the statements of a  few consumers as well as the description given  in  certain  Ayurvedic  books  and  contended  that  the preparation  would  fall  within  the  relevant  entry   in  the exemption notification.   The Tribunal rightly points out that in interpreting statutes  like the Excise Act the primary object of  which  is  to  raise  Department  and  for  which  purpose

2 2

various products are differently classified, resort should not be had to the scientific and technical meaning of the terms and expressions used but to their popular meaning, that is to say  the  meaning   attached  to  them  by  those  using  the product.  It is for this reason that the Tribunal came to the conclusion that scientific and technical meanings would not advance in case of the appellants if the same runs counter to how  the product is understood in popular parlance.  That is why the Tribunal  observed in para 86  of the judgment as under:

“So certificates and affidavits given by the Vaidyas do not advance   the case of Shri Baidyanath Ayurved Bhawan Limited in the absence  of any evidence on record to  show   and prove that  the common man who uses this  Dam Manjan daily to clean his teeth considers this Dant Manjan as a medicine and not a toilet requisite.”

It is this line of reasoning with which we are in agreement. The Tribunal rejected the claim of the appellant holding that ordinarily a medicine is prescribed by  a  medical practitioner and it is used for a  limited time and not every day   unless it is so prescribed to deal with a specific disease like diabetes. We are, therefore, of the opinion that the Tribunal  applied the  correct  principles  in  concluding  that  the   product  in question was not a medicinal preparation (‘Ayurvedic’) and, therefore,  the appellant was not entitled to the benefit of the exemption notification.   Having  heard the learned counsel at length and having perused the line of reasoning adopted by the Tribunal with which we are in general agreement, we see no reason to interfere with the conclusion reached by the  Tribunal and, therefore, we dismiss these appeals, but make no order as to costs.”   

30. Merely because there is some difference in the tariff

entries, the product will not change its   character.  Something

more  is  required   for  changing  the  classification  especially

2 3

when the product  remains the same. (BPL Pharmaceuticals

Ltd.)9

31. There cannot  be justification enough for  changing

the classification  without a change in the nature  or a change

in the use of the product.  The exception being where  Tariff Act

itself provides for a statutory definition, obviously, the product

has to be classified as per the  definition.

32. The  question,  therefore,  is:  does  Chapter  Sub-

heading  3003.31  contain  a  definition   of  Ayurvedic  Medicine

and,  if  so,  common  parlance  test  for  classifiability  of  the

product, whether medicament or cosmetic, is inapplicable?

33. Chapter  30  of  the  New  Tariff  Act   deals  with

pharmaceutical products.  Note 2 thereof provides that for the

purpose  of   the  Heading  No.30.03,  ‘medicaments’  means

goods …………not falling within Heading 30.02 or 30.04 which

are products comprising two or more constituents  having been

mixed or compounded together  for therapeutic or prophylactic

uses  or  unmixed  products  suitable  for  such  uses.   Chapter

Heading  30.03 is  in  respect  of  medicaments.   Sub-heading

3003.10  refers to  patent or proprietary  medicaments other

9 . 1995 Supp.(3) SCC 1

2 4

than  those which are exclusively  Ayurvedic, Unani,  Siddha,

Homoeopathic or Bio-chemic.  Sub-heading 3003.20 refers to

medicaments including those used in Ayurvedic, Unani, Sidha,

Homoeopathic or  Bio-chemic system.  Inter alia Sub-heading

3303.31 refers to medicaments used in Ayurvedic  system of

medicine exclusively in accordance with the formulae described

in the authoritative books specified in the First Schedule to the

Drugs and Cosmetics Act, 1940  and sold under the name as

specified.

34. Does  Chapter  Sub-heading  3003.31  contain

specific definition of Ayurvedic Medicine?  We do not think so.

What  is  provided  in  column  3  of  Schedule  is  description  of

goods  against  sub-heading   3003.31.   We  are  afraid

description  of goods cannot be treated as definition.  There is

merit in the contention  of the learned  senior counsel for the

Department   that  Chapter  Sub-heading   3003.31  provides

process  for  manufacture  of  certain   medicaments  including

those used in Ayurvedic system and sale of the same; it is not

a definition clause.   Classification of  a product,  interpretative

Rule 1 of rules for interpretation of the Schedule  says, is to be

determined according to  the terms of  the  heading  and any

2 5

relative Section or Chapter Notes and provided such headings

or  Notes  do  not  otherwise  require.   Chapter  Sub-heading

3003.31 is an entry double dash (--) occurring under the single

dash (-) heading for medicament including those in Ayurvedic

Systems.  As per general explanatory Note 1 appended to rules

for  interpretation,  single dash (-)  indicates the said article  or

group of articles to be a sub-classification of the article or group

of articles covered by the said heading and double dash (--)

indicates,  the  said  article  or  group  of  articles  to  be  a  sub-

classification of the immediately preceding description of article

or group of articles which has single dash (-).  It is, thus, clear

that Chapter Heading 30.03 would cover every Sub-heading as

well.   Therefore,  to  find  out  whether  the  product  described

against  Sub-heading 3003.31 is  a medicament or not,  aid to

Note 2  of  Chapter  30 for  the  purposes  of  Heading  30.03  is

necessarily  called  in.  Note  2  to  Chapter  30  defines

medicaments for the purposes of Heading 30.03 as products

comprising two or more  constituents which have been mixed or

compounded  together for  therapeutic or prophylactic  uses or

unmixed   products  suitable  for  such  uses.     The  use  of

expression “uses” in Note 2 is not without significance and is

2 6

surely distinct from the expression “properties” used in Note 1

(d)  of  Chapter  30.  The  term  “uses”  brings  within  its

comprehension, the act of user and, thus, there is merit in the

submission  of the learned senior counsel for the Department

that   common parlance   test  is  inbuilt  in  Chapter   Heading

30.03.

35.   As a matter of  fact,  this Court   has consistently

applied common parlance test as one of the  well recognized

tests to find out whether the product  falls  under Chapter 30 or

Chapter 33.   In a recent decision in Puma  Ayurvedic Herbal

(P) Ltd. vs. Commissioner, Central Excise, Nagpur 10 this Court

observed that  in  order  to  determine whether   a product  is  a

cosmetic or  medicament, a twin test (common parlance test

being one of them) has found  favour with the courts.  This is

what this Court observed:

”….  In  order  to  determine  whether  a  product  is  a cosmetic or a medicament a  twin test has find favour  with the courts.   The test has approval of this  Court also vide CCE v. Richardson Hindustan {(2004) 9 SCC 156}.  There is no dispute about this as even the Department accepts that the test is determinative for the issue involved.  The tests are:

I. Whether the item  is commonly understood as medicament  which  is  called  the  common parlance test.   For this test  it  will have to be

10   (2006) 3 SCC 266

2 7

seen whether in common parlance  the item is accepted as a medicament.  If a product  falls in the category  of medicament it will not be  an item of  common use.  A user  will use  it only for  treating a particular ailment and will stop its use after the ailment is cured.  The approach of  the  consumer towards the product  is  very material .   One may buy any  of the ordinary soaps available in the market.  But if one has a skin problem, he may have to buy a medicated soap.   Such  a  soap  will  not  be  an  ordinary cosmetic.   It  will  be  medicament  falling  in Chapter 30 of the Tariff Act.

II. Are  the  ingredients  used  in  the  product mentioned in the authoritative  textbooks  on Ayurveda ?”   

36. In  Puma Ayurvedic  Herbal  (P)  Ltd.,  the  question

that arose for consideration before  this Court   was whether

the  products  manufactured   by  the  appellant  therein  were

covered under the   category  of medicaments  or cosmetics.

The  following  products  were  under  consideration:  1.  Puma

neem facial pack (Neemal), 2. Puma anti-pimple herbal powder

(Pimplex), 3. Puma herbal facial pack (Herbaucare),  4. Puma

herbal remedy for facial blemishes,  5.  Puma herbal massage

oil, 6. Puma herbal massage oil  for women, 7. Puma hair tonic

powder (Sukeshi), 8. Puma scalp tonic  powder (Scalpton), 9.

Puma anti-dandruff oil (Dandika), 10. Puma shishu rakshan tel,

2 8

11. Puma neem tulsi. This  Court referred to various  decisions

of this Court and held:

“From the above  judgments it follows  that the law is settled  on the  twin test for determination of  classification of a  product.   We have already found that  the twin test   is satisfied  in  the  present  case regarding most  of  the  items under consideration.”   

37. Applying twin test for determination  of classification

of  products  (including  common parlance test), this Court  in

Puma   Ayurvedic   Herbal  (P)  Ltd.  held   that  items

1,2,3,4,7,9,10 & 11 were medicaments while items  5,6  & 8

were liable  to be classified as cosmetics under Chapter sub-

heading 33.04.

38. We  endorse the view  that in order to determine

whether a product is covered  by ‘cosmetics’ or  ‘medicaments’

or in other words whether a product falls under Chapter 30 or

Chapter 33 : twin test noticed in  Puma Ayurvedic Herbal (P)

Ltd., continue  to be relevant.  The primary object of the Excise

Act is to raise revenue for which various products are differently

classified  in  New  Tariff  Act.  Resort  should,  in  the

circumstances, be had to popular meaning and understanding

attached to such products by those using the product and not

2 9

to be had to the scientific and technical meaning of the terms

and expressions used.  The approach of the consumer or user

towards  the  product,  thus,  assumes  significance.   What  is

important to be seen is how the consumer looks at a  product

and what  is  his  perception  in  respect  of  such product.   The

user’s  understanding  is a  strong   factor  in  determination  of

classification of the products.  We find  it difficult to accept the

contention of the learned  senior counsel for Baidyanath that

because DML  is manufactured  exclusively in accordance with

the  formulae  described  in  Ayurveda  Sar  Sangrah  which  is

authoritative  text  on  Ayurvedic  system  of   treatment  and  is

notified in the First Schedule to the Drugs and Cosmetics Act,

1940  and  the  said  product   is  sold  under   the  name ‘Dant

Manjan Lal’ which is the name specified for the said product in

Ayurveda   Sar  Sangrah,  the  common  parlance  test  is  not

applicable.   As a matter  of  fact,  this  contention is  based on

misplaced assumption that   Chapter  Sub-heading 3003.31 by

itself provides the definition of Ayurvedic Medicine and there is

no requirement to look beyond.

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39. West  Regional Bench of the Tribunal  in its order

dated  13.12.2000  which  is  subject  matter  of  Civil  Appeal

4048/2001 observed thus :

“The  Drugs and Cosmetic Act, 1940 provides for a licence to be obtained for manufacture of Ayurvedic, Sidha, Homoeopathic  and  Unani  medicines.   Technical  Advisory Board to advise Central and State Government  on technical matters.   Among the  members of  this  Board  are persons well  versed  in  ayurvedic  medicines,  including  teacher  in Dravya Guna and Kalplana and a practitioner in ayurvedic medicine.  It also provides for a Ayurvedic, Sidha, and Unani Drugs  Consultant  Committee.   The  manufacture  of ayurvedic medicament is subject to supervision and checks by officers appointed  to carry out the provisions under the Drugs and Cosmetic Act, 1940.

Section 3 (a) of the Drugs  and Cosmetics Act, 1940 defines “Ayurvedic, Sidha or Unani Drug” as follows:

Ayurvedic,  Sidha  or  Unani  drug”  includes  all  medicines intended for internal or external use for  or in the diagnosis, treatment,  mitigation  or  prevention  of  disease  or  disorder inhuman beings or animals and manufactured exclusively in accordance    with  the  formulae  described    in  the authoritative  books  of  “Ayurvedic,  Sidha  or  Unani  Tibb system of medicine, specified in the First Schedule.”

A  comparison  of  this  definition  and the   entry  now contained in heading 3003.30 of the Tariff  shows that  the two are virtually identical for the purpose of both the Drugs and Cosmetics Act and the Tariff, after its amendment, the medicament which is made exclusively in accordance with the formulae described  in the First Schedule to the Act is to be  considered as ayurvedic medicament.

The effect of insertion of the new entry  in the tariff is that to bring it on a par with the Drugs and Cosmetics Act, 1940.   The  term  “ayurvedic  medicament”  in  the  tariff  will have the same meaning as the meaning in the Drugs and Cosmetics  Act.    Therefore,  if  the  product   under consideration conforms to the requirements specified in that Act and the tariff, it will be entitled to be so classified.  There would be no requirement  that the Central Excise  authorities

3 1

must independently test  it for its efficacy as medicament  by apply the provisions  of Note (2) to the Chapter.  

It must be emphasized  that  these considerations were  not present before the Supreme Court which passed its  orders  on  the  classification  of  Dant  Manjan  Lal.   The Tribunal, and on appeal the Supreme Court, was concerned with the classification of the goods under  Item 14E   of the earlier  Central  Excise  Tariff.   The  Tribunal  has  therefore rightly  applied  the  test  as  to  whether  the  product   was a medicament, as  is normally understood by persons in the trade, was shown to  possess the therapeutic or prophylactic properties,  was  demonstrated  as  to  be   medicament  by being prescribed for a limited period, for a  specific disease or disorder.  By virtue  of the amendment  made to the  tariff, these considerations cannot be gone into.   The judgment of the Supreme Court therefore cannot be a deciding  factor in determining  its classification under the heading as it  now stands.    This in  fact is the view that has been expressed by  the  Commissioner  (Appeal),  Patna,  whose  order  was cited by the advocate for the appellant.    We therefore hold t hat the product was rightly classifiable under heading 30.03 as claimed by the appellant.”  

We do not agree.  The approach of the  West Regional Bench

is fallacious   in what we have  indicated above as  it overlooks

and ignores  common parlance  test which is one of the well

recognized   tests  to  determine   whether  the  product  is

classifiable  as  medicament  or   cosmetic  and  that  has  been

consistently followed by this Court including with regard to this

very product.   It  also overlooks the well-settled legal position

that without a change in the nature  or a change in the use of

the product and in the absence  of a  statutory definition, the

3 2

product will not change its character. The product DML remains

the  same in  its  composition,  character  and uses.   We have

already held above that Sub-heading 3003.31 does not define

Ayurvedic  Medicine  and,  therefore,  there  cannot  be  any

justification  enough  for  changing  the  classification  of  the

product  DML  which  has  not  been  held  to  be  Ayurvedic

Medicine by this Court.

40. The learned senior counsel  for Baidyanath heavily

relied upon the statement  of  the Finance Minister  during the

parliamentary debate on the question of levy of excise duty  on

Ayurvedic medicines.  In the entire debate there is no reference

to the product DML with which we are concerned.  The part of

statement of Finance Minister reads, ‘………..there is no excise

duty  on Ayurvedic  Medicines  manufactured  according  to  the

Ayurvedic formulae, some medicines appears to be  Ayurvedic

medicines.’  The Finance Minister also stated, ‘……..he must

raise  the dispute on that.  It will be decided by the  Collector.  It

will be decided by the appellate authority.  There is a method to

decide it……….’.  We are afraid   the statement made by the

Finance Minister in the Parliament  does not  advance the case

of  the  assessee  at  all  insofaras  classification  of  DML  is

3 3

concerned as method to decide classification has rightly been

observed to be within domain of the authorities.

41. True  it  is  that  Section  3(a)  of  the  Drugs  and

Cosmetics Act, 1940 defines ‘Ayurvedic, Sidha or Unani Drug’

but that definition is not necessary to be imported in New Tariff

Act.   The  definition  of  one  statute  having  different  object,

purpose  and  scheme  cannot  be  applied  mechanically  to

another statute.  As stated above, the object of Excise Act is to

raise  revenue  for  which  various  products  are  differently

classified in New Tariff Act.

42. There is no doubt that a specific entry must prevail

over a general entry.  This is reflected from Rule 3(a) of the

general Rules of interpretation that states that heading which

provides  the  most  specific  description  shall  be  preferred  to

headings providing a more general description.  DML is a tooth

powder which has not been held to be Ayurvedic Medicine in

common parlance in Baidyanath I1.  We have already observed

that  common  parlance  test  continues  to  be  one  of  the

determinative  tests  for  classification  of  a  product  whether

medicament or cosmetic.  There being no change in the nature,

character  and uses of  DML, it  has to  be held to  be a tooth

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powder – as held in Baidyanath  I1.  DML is used routinely for

dental hygiene.  Since tooth powder is specifically covered by

Chapter Sub-heading 3306, it has to be classified thereunder.

By virtue of Chapter Note 1(d) of Chapter 30 even if the product

DML has some therapeutic or medicinal properties, the product

stands excluded from Chapter 30.

43. The  learned  senior  counsel  for  Baidyanath  relied

upon the judgment of this Court in Vicco Laboratories to show

that in Baidyanath I1, no tests for classification were laid down.

First,  in Baidyanath  I1,  common parlance test  applied by the

Tribunal has been approved.   Second, and more importantly,

with regard to the very product (DML), this Court  held that it

could not be classified as Ayurvedic Medicine and rather the

product is toilet  requisite.   Baidyanath  I1,  no doubt relates to

old Tariff  period i.e.  prior  to enactment of new Tariff  Act  but

since   the  product  in  its  composition,  character  and  uses

continues to  be the same,  even after  insertion of  new sub-

heading  3301.30,  we  have  already  held  that  change  in

classification is not justified as common parlance test continues

to be  relevant  for classification.  Vicco Laboratories is of no

help to the assessee.    

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44. In what we have already discussed above, it is not

necessary  to  refer  to  other  decisions  cited  by  the  learned

Senior Counsel for Baidyanath.  Be it noted here that Mr. C.A.

Sundaram,  learned Senior  Counsel  submitted  before  us  that

matters  should  be  decided  by  this  Court  as  raising  neat

question  of law  about classification  of product DML on the

available  material  and  any  further  inquiry  or  remand  was

unnecessary.

45. Before we part with the case,  we may address to

the plea of  res judicata  raised by the learned Senior Counsel

for the Department.  Mr. K. Radhakrishnan pressed into service

few legal maxims in this regard.  It  is true that maxim  Nemo

debet  bis  vexari  pro  una et  eadem  causa   is  founded  on

principle of  private  justice as  it   states that no man ought to

be twice put to trouble  if  it  appear to the court  that it is for

one and  the same cause.    The maxim  Interest  republicae

sit   finis  litium    concerns  the  State  that  law  suits  be  not

protracted.    This  maxim is  based  on  public  policy.   In  our

opinion, these maxims  cannot be applied as a rule of thumb in

the taxation matters.   In the matters of classification of goods,

the principles that  have been  followed   by the courts - which

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we  endorse  -  are  that  there  may  not  be  justification  for

changing the  classification without  a  change  in the nature or

a change in the use of the product; something more is required

for  changing  the  classification  especially  when  the  product

remains the same.   Earlier decision  on an issue inter parties is

a cogent  factor in the determination  of the same issue.   The

applicability  of  maxim  Res judicata  pro veritate occipitur in

the matters of classification  of  goods  has  to be seen  in that

perspective.  The  interpretation  given  by  this  Court   in

Baidyanath  I1 with  regard   to   this   product  has   been

considered  and  applied  by  us  after  amendment  because

Chapter  Sub-heading 3003.31  does not contain definition of

Ayurvedic Medicine and the product DML in nature, character

and uses remains the same  as it was prior to  amendment.

46. As a result of the foregoing discussion, appeals of

Baidyanath  must  fail  and  are  dismissed.   The  Department’s

appeals are allowed.  The parties shall bear their own costs.

………………………J. (D.K. Jain)

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………………………J. (R.M. Lodha)

New Delhi April 13, 2009

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