In a major ruling the Supreme Court of India classified Aswini Homeo Arnica Hair Oil as ‘medicament’ under Central Excise Tariff Act, 1985 (CETA) and ruled that the classification of a product under the Central Excise Tariff Act, 1985, cannot be changed merely on the ground of change of tax structure or tariff entries, without showing a change in the nature and character of a product or a change in the use of the product.
The respondent in the present matter is Aswini Homeo Pharmacy.
The Adjudicating Authority noted that the product Aswini Homeo Arnica Hair Oil 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 crores and ordered payment of interest and imposed penalty in the sum of Rs.54 lakhs under Rule 25 of the Central Excise Rules (CER), 2002. On appeal, the Commissioner of Customs and Central Excise (CESTAT), Hyderabad set aside the order of the Adjudicating authority and the appeal has been preferred by the Revenue Department.
A Two Judge Bench of Justice Dinesh Maheshwari and Justice Vikram Nath observed that Aswini Homeo Arnica Hair Oil “, 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”.
The Bench concluded that the department was not justified in seeking to re-open the settled position in relation to the product in question, merely on the ground of the amendment made to the Central Excise Tariff in the year 201 2, which had made certain changes in Chapter 30 and Chapter 33 and the said changes had essentially broadened their ambit and scope and provided modified marginal notes and tariff entries with detailed specifications.
The Court also remarked that anything which is prepared for being used on the hair and carries the name “Hair Oil”, would not lose its character as medicament if otherwise it has been prepared for therapeutic or prophylactic uses.
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