M/S Dabur India Limited vs Cce, Jammu

Excise Appeal No. 2456, 2458, 2490-2491 of 2011 and 56678 of 2013

[Arising out of the Order-in-Original No. JNK/CEX/000/COM/16/ 2011 dated 13/07/2011 passed by The Commissioner Central Excise, Jammu.]

For Approval and signature :

Honble Shri Ashok Jindal, Member (Judicial)

Honble Shri B. Ravichandran, Member (Technical)

1. Whether Press Reporters may be allowed to see :

the Order for publication as per Rule 27 of the

CESTAT (Procedure) Rules, 1982?

2. Whether it would be released under Rule 27 of :

the CESTAT (Procedure) Rules, 1982 for

publication in any authoritative report or not?

3. Whether their Lordships wish to see the fair :

copy of the order?

4. Whether order is to be circulated to the :

Department Authorities?

M/s Dabur India Limited Appellant

Versus

CCE, Jammu Respondent

Appearance

Shri B.L. Narasimhan, Advocate  for the appellant.

Shri Pramod Kumar, Authorized Representative (Jt. CDR)  for the Respondent.

CORAM: Honble Shri Ashok Jindal, Member (Judicial)

Honble Shri B. Ravichandran, Member (Technical)

Final Order No. 52387-52391/2015 Dated : 28/07/2015

Per. B. Ravichandran :-

The appellant are manufacturers of hair oils, shampoo, toilet water and Ayurvedic medicaments subject to Central Excise Duty. They have manufacturing units in different parts of the country. The present case is in respect of their unit in the State of Jammu and Kashmir in respect of which they are availing the exemption under Notification No. 56/2002-CE. There are 5 appeals by the appellant. As the issue involved in all these appeals are same, they are taken up together for decision. The period covered is from 01/04/2004 to 31/07/2011. The dispute relates to three products namely Gulabari, Keora Water and Shilajit Capsules. The appellants were paying duty on these products either by utilizing Cenvat credit or by cash and claimed the same as refund of the amount paid through PLA. The Departments view is that Gulabari and Keora Water were correctly classifiable under heading 3301 of Central Excise Tariff as aqueous solutions of essential oils and the process undertaken by the appellant does not amount to manufacture and as such no duty is chargeable accordingly there is no question of granting exemption of paying refund as per Notification No. 56/2002-CE. Further Shilajit Capsules manufactured by the appellant is to be classified under heading 30.03 as Ayurvedic Medicine as the same is made in accordance with formula prescribed in the Authoritative Ayurvedic text which is specified in the 1st Schedule to the Drugs and Cosmetic Act, 1940. As such they are fully exempt in terms of Notification No. 3/2005-CE and accordingly the benefit of Notification No. 56/2002-CE is not available to the same.

2. Show cause cum demand notices were issued to the appellants and they were decided by the Adjudicating Authority by 5 orders covering the period from April 2004 to July 2011. The refund sanctioned in terms of Notification No. 56/2002-CE and the credit taken as per Cenvat Credit Rules on inputs are denied and demand confirmed in these proceedings alongwith penalty under Rule 25 of Central Excise Rules 2002 and Rule 15 of Cenvat Credit Rules, 2004. Aggrieved by these orders, the appellant is before us. The appellants contended that both Rose Water and Keora Water are specifically mentioned in the Tariff under heading 33030020 and 33030030 respectively under the main heading Perfumes and Toilet waters. The Departments case that these are different and classified as aqueous solutions of essential oils is neither supported by facts nor the Tariff entries. The action of the Department is apparently motivated only to deny the concession extended by the Government under Notification No. 56/2002-CE as is evident from the fact that the appellants own unit in Sahibabad is manufacturing same items (Rose Water, Koera Water, the Shilajit Capsules). There is no dispute regarding classification or duty payment. A different view is taken only in respect of their Jammu unit. The appellant also contended that the proceedings initiated against them in the show cause notice dated 03/4/2009 are not sustainable as the refund sanctioned already by the proper authority is not to be recovered by a demand invoking extended period as per proviso to Section 11A of the Central Excise Act. The learned Counsel for the appellants argued at length explaining the process of manufacture in respect of Gulabari, Keora Water and Shilajit Capsules. The process undertaken by the appellant in respect of Gulabari is as below :-

Step 1 : Warm propylene glycol in a SS container upto 60 degree Cent. And dissolve MP and PP by stirring.

Step 2 : Cool the resultant solution to room temperature, mix Rooh gulab with stirring.

Step 3 : Take D.M. Water in manufacturing Tank fitted with mechanical stirrer. Add bronopol.

Step 4 : Add the solution of step 2 slowly with stirring and mix for another 5 minutes after complete addition of solution.

Step 5 : The product thus prepared in Step 4 is filtered through sparker filter.

Step 6 : Submit the sample to QC lab for analysis, undertake packaging operation soon after getting satisfactory report from DC Department.

3. Similarly, in respect of Keora Water, the process undertaken by the appellant is as below :-

Step 1 : Disperse required quantity of Pandanol in Propylene Glycol in a S.S. container with continuous stirring until Pandanol is completely mixed.

Step 2 : Take D.M. Water in the manufacturing tank fitted with mechanical stirrer and add Keora Water to it. Add slowly the solution of step 1 to the bulk with continuous agitation. Make up the final volume with D.M. Water (previously boiled and cooled.) and mix for 20 minutes with constant stirring. Also add Potassium sorbate.

Step 3 : Filter, send sample for analysis.

Step 4 : Pack after QA approval.

Step 5 : The product thus prepared in Step 4 is filtered through sparker filter.

Step 6 : Submit the sample to QC lab for analysis, undertake packaging operation soon after getting satisfactory report from DC Department.

4. In respect of both Gulabari and Keora Water the appellants plea is that the resultant item sold by them are manufactured products entirely different from the raw materials used and they are rightly classifiable under specific heading in their own name under Central Excise Tariff 33030020 and 33030030 respectively. Regarding Shilajit Capsules, the learned Counsel for the appellant stated that the said Ayurvedic medicine is not made as per the specifications mentioned in the Authoritative text and these are PP medicines approved as such by the Drug Controller and hence cannot be categorized as generic Ayurvedic Drug. He also submitted the process of manufacture which indicated addition of certain chemical etc. The drug package also which was produced by the Counsel during hearing, did not contain declaration to the effect that the same is made as per the ingredients declared in Authoritative text of Ayurveda. He reiterated that the Department is taking a different stand in respect of their Jammu unit when compared to the same products manufactured and cleared from their Sahibabad Unit only to deny them the exemption granted under Notification No. 56/2002-CE. Such different approach in respect of same products in different unit is legally untenable.

5. The learned AR reiterated the findings of the learned Commissioner in his various orders and stated that though Rose Water and Keora Water are specifically mentioned under heading 3303, the learned Commissioner held that the product cleared by the appellant are not fitting into that prescription.

6. Heard both the sides and examined appeal records carefully. In respect of Gulabari and Keora Water whether the process involved in making them amounts to manufacture or not and their correct classification is point of dispute. In respect of Shilajit Capsules whether the same are generic Ayurvedic Medicaments or PP medicines is to be decided. A close perusal of the process involved in the production of bottled and labeled Rose Water and Keora Water indicates that a commercially identifiable distinct product emerges as a result of these processes and it is clear that these two products are emerging out of processes amounting to manufacture. It is not a case of certain limited modifications in the input material to arrive at the product by simple refining or purification. The various specific process addition of materials and packing, specific branding result in a new commercially identifiable product and as such we hold these two products are emerging as a result of manufacturing process. Regarding classification it is clear that these products are mentioned by specific name under Tariff heading 33030020 and 33030030. The learned Commissioners observation that the products sold by the appellant are not Rose Water and Keora Water covered by these headings is erroneous.

In the absence of specification or definition as to what constitutes a Rose Water or a Keora Water, commercially accepted parlance has to be considered. It is not in dispute that the products labels clearly carry the name as Rose Water and Keora Water and the lower authorities conclusion for not considering them under the specific heading is not legal and tenable. These products cannot be considered as aqueous solutions of essential oils under heading 3301 as that heading deals with essential oils, products of essential oils and aqueous distillates and solutions of essential oils. Further, as per the Rules of interpretation when there is a specific heading by the very same name of the product these products cannot be put under generic heading of aqueous solution. As such, we find that these products which are emerging as manufactured items are rightly classifiable under heading 33030020 and 33030030. It is also necessary to mention here that the Department cannot take two different views in respect of same product manufactured by the same person in two different units. We are inclined to agree with the appellant that the present view in respect of Jammu unit is intended only to deny the benefit under Notification No. 56/2002-CE without much legal basis.

7. Regarding classification of Shilajit Capsules, the learned Counsel for the appellant submits that they are not manufacturing the product as per the formula specified in any Authoritative text book of Ayurveda. They have their own patented formula for manufacturing this product and they have got drug licence to this effect. As such, they claimed that it is not a Generic Classical Ayurvedic medicine as per Section 3 (a) of the Drug and Cosmetic Act. They have not indicated any Ayurvedic Text book in their product label as per requirement of this Section and as such they are not exempt the Notification No. 3/2005-CE. They have been classifying this product as Patent and Proprietary Ayurvedic Medicine under heading 33049011. This product is manufactured in many units of the appellants and they have been paying Central Excise duty on the same as patented or proprietary ayurvedic medicine. On careful consideration of the observations of the lower authority and the submissions of the appellant, we find that though the Department claimed that Shilajit Capsules are generic Ayurvedic medicine as per the formula/ingredients mentioned in Authoritative Ayurvedic text, no documentary support to the effect that the product cleared by the appellant is as per any such text has been put forth before us. The appellant produced registration of this Shilajit Capsules with the Drug Controller and in absence of any contrary evidence by the Department as mentioned above, it is clear that the Ayurvedic medicine cleared by the appellant is manufactured PP medicine and not of generic nature.

8. Considering the above findings, we allow the appeals with consequential relief, if any.

(Operative part of the order pronounced in the open court.)

(Ashok Jindal)

Member (Judicial)

(B. Ravichandran)

Member (Technical)

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