JUDGMENT K.N. Sinha, J.
1. Heard Sri V.P. Srivastava, learned Senior Counsel for the applicant and Sri Ajai Singh learned Counsel for the Central Government representing the opposite party No. 1 and learned A.G.A.
2. The brief fact, as stated in the affidavit, is that the applicant is Director in M/S Surya Herbal Limited situated at Noida. It is further stated that the company manufactures two products namely 'Roop Amruta' and 'Daant Pari'. On information received by the opposite party No. 1 regarding the evasion of the excise duty, the factory premise was searched on 28.3.2006 and stock of the products was detained. No F.I.R. was lodged for the said offence, but the authorities of opposite party No. 1 registered this case on own giving crime No. 2 of 2006 under Section 4/9A/9AA/9 of the Central Excise Act, 1944 (hereinafter referred to as an 'Act') and Section 420/467/468/471 Indian Penal Code. The applicant was also arrested and copy of arrest memo was served, which is Annexure No.1 to the affidavit. The applicant moved application for bail before the Sessions Judge, Meerut which was rejected on 15.5.2006.
3. The present bail application has been moved on the ground that applicant runs a factory for preparing the ayurvedic medicines. A licence has been issued in favour of T.V.C. Sky Shop Limited for manufacturing of Ayurvedic medicines through Surya Herbal Limited by the Director of Ayurvedic and Unani Services, U.P. Lucknow. Accordingly these herbal medicines were being manufactured for T.V.C. Sky Shop Ltd. As per the licence certain items have been approved by the Ayurvedic and Unani Director to be manufactured by the applicant including the above two. The photo copy of the licence is Annexure No. 3. The T.V.C. Sky Shop Limited works on television net work and it entered into agreement with applicant's factory to manufacture the above two medicines for which the applicant concerned has acted as 'Loan Licencee' and made available its manufacturing facility for manufacturing the ayurvedic medicines. The photo copy of the agreement is Annexure No. 4. The wrapper provided to these medicines clearly indicate the same. According to the applicant, the problem arose that as per Central Excise Rules, above two items are covered under chapter 33 of the Central Excise Tariff Act, 1985 and assessment of excise duty is to be made on the basis of M.R.P. under Notification No. 13/2002-CE(NT) dated 1.3.2002 issued under Section 4A of the Act. This chapter deals with cosmetic and toilet preparations. The medicines are not covered under chapter 33 and M.R.P. based valuation under Section 4A of the Act is not applicable. The Excise duty on Ayurvedic medicines is payable under Section 4 of the Act and the same are classified under chapter 30 of the Central Excise Tariff Act, 1985 (hereinafter referred to as Tariff act') and not under chapter 33 of the Tariff Act, Section 4 of the Act deals with the central excise duty as per transaction value and Section 4A of the Act deals with the valuation of excisable goods with reference to M.R.P. It has been further said by stating an example that if the maximum retail price of the product is printed as Rs. 100.00, 40% abatement is permitted for the purposes of fixing central excise duty and it will be valued at Rs. 60/- and the central excise duty shall require to be paid at the rate of 16% plus 2% as Education Cess on excise duty on the value of Rs. 60/-. Thus, according to the applicant, this is the ratio of calculation. Section 9 of the Act deals with the offence and penalty which refers that any evasion done it has got the penal consequences. Section 9A speaks that the offences to be non cognizable. Section 9AA of the Act deals with the offence of the companies. If the notification dated 1.3.2002 is taken into consideration then at serial No. 34 tooth paste is mentioned. In the entire notification nowhere tooth powder is mentioned. Accordingly the excise duty on tooth powder is required to be paid under Section 4 of the Act and not under Section 4A of the Act. The department of opposite party No. 1 claims that 'Roop Amruta' is a beauty or make up preparation and 'Daant Pari' is toiletries and disputes both of them to be Ayurvedic medicines. The Notification dated 1.3.2002 shows difference between paste and powder. A photo copy of the provisions of Chapter 33 of Tariff Act is Annexure No. 8. The indications mentioned on the wrapper of both the preparations are very clear as detailed in para 18 and 19. In this connection reliance was also placed on the judgment of Hon'ble The Apex Court in Puma Ayurvedic Herbal (P) Ltd. v. Commissioner of Central Excise Naqpur. The notification dated 1.3.2002 has been amended by Notification dated 1.3.2006 but in that too there is no mention of tooth powder. The amended notification is Annexure No. 11.
4. The next ground taken was that the applicant had a heart-attack in the year 2005 and his coronary angioplasty was done. The prescription of Escorts Hospital is Annexure No. 12. On these grounds the petitioner has claimed his bail.
5. Counter affidavit has been filed on behalf of the opposite party No. 1, stating that applicant's company is producing cosmetic goods and toilet preparations in the garb of ayurvedic medicines. The searching of the factory premises and preparation of panchayatnama is admitted. According to the opposite party No. 1 the excise duty on cosmetic and toiletries falling under chapter 33 of the Tariff Act is payable on M.R.P./R.S.P. basis after allowing permitted abatement under Section 4A of the Act. These goods are notified by the notification annexed as Annexure 2 to the counter affidavit. The slogan printed on 'Roop Amruta' undoubtedly shows that this is a cosmetic preparation. The opposite party No. 2 has also relied upon the same judgment of Hon'ble The Supreme Court. It is further mentioned that the medicines claiming to cure ailment or human disease need an extensive research, but in the present case no such work or clinical trial was ever made, which is apparent from the statement of Senior Manager Dr. Poonam Ashish and others. The helping of maintaining a fair complexion etc. is not a disease or ailment of human body but it keeps a person to look beautiful hence it is a cosmetic item and not medicine. Some questions were put to the company people as to whether it can cure any ailment but they were unable to answer. It was further mentioned that as investigation was going on the grant of bail would not be proper at this stage. The allegation of bail application is not admitted in the form they stand. Arrest was made for the offence punishable under Section 9 and 9AA of the Act read with offences covered under the Indian Penal Code. The arrest was affected under Section 13 of the Act. 'Roop Amruta' is manufactured in the cosmetic section. Thus, it is a cosmetic item. These items are manufactured in the applicant company, hence applicant is liable to pay the correct excise duty. There is evasion of excise duty to the tune of 1.70 Crores. The products were manufactured for T.V.C. Sky Shop Ltd. In the factory of the applicant, hence the applicant company is liable. The same thing has been repeated that 'Roop Amruta' is a beautification product and in the test of common parlance, as laid down by the Apex Court, this product 'Roop Amruta' is a cosmetic one. The applicant is solely responsible for this evasion. The same thing has been repeated several times that though the produce looks like a medicine and words 'an ayurvedic proprietary medicine' are printed on their package but it is not for any assistance or ailment of human body but is for beautification and improvement of look and attractiveness of a person. 'Daant Pari' is also an item of common use for being used life long. This fact has been admitted by Dr. Punam Ashish, Senior Manager and Miss Archana Prasad, Deputy Manager.
6. The first point raised by the learned Counsel for the opposite party is that the bail application is not maintainable. In my opinion, this argument is misconceived. Section 13 of the Act gives power to arrest any person whom he has reason to believe to be liable to punishment under this Act. Such arrested person is kept in judicial custody and who so ever be in judicial custody has a right to approach for bail.
7. The power of arrest under Section 13 of the Act is confined to the offences in the Central Excise Act and not in other section. The offence under Sections 420, 467, 468 and 471 IPC have also been added for which the Central Excise officers have no power to arrest. Admittedly, no FIR was lodged in this connection. The Affidavit and counter affidavit filed by both the parties and submissions made show that there are two points under dispute:
Firstly, the production was made on behalf of T.V.C. Sky Shop Limited.
and applicant is not liable for payment of excise duty.
The wrapper (Annexure No. 5) shows as follows:
Manufactured and marketed by TVC Skyshop Ltd.
Thereafter the address of T.V.C. Skyshop has been given. This is in case of 'Roop Amruta' and 'Daant Pari' both. The learned Counsel for the applicant has taken me through various papers in this regard. The papers are Annexure No. 3 from page No. 24 to 27. The licencing authority of the Uttar Pradesh has granted the licnece to M/s T.V.C. Skyshop. Page 25 of Annexure No. 3 shows 'Roop Amruta' and 'Daant Pari' are included therein. The ingredients of both items have been given in page No. 26 and 27. There is also an agreement between the applicant and TVC Skyshop which is Annexure No. 4. In this Annexure, Clause 6 (Excise Duty) has been given regarding payment of excise duty which lays as follows:
The products shall be released from the factory premises of SURYA on payment of excise duty which shall be paid from the Cenvat available on the inputs supplied by TVC. In case the amount of Cenvat proves to be inadequate in paying of excise duty, TVC shall make a payment by advance Demand Draft to ensure payment through Personal Ledger Account. Any disputes arising on account of excise duty shall be dealt by and shall be the responsibility of TVC.
The last line of this agreement shows that any dispute arising on account of payment of excise duty shall be dealt by and shall be the responsibility of TVC. The officers of opposite party No. 1 should have made enquiry under Section 14, after summoning the person concerned and would have asked to produce the evidence on certain points. Without any notice and without summoning, the power under Section 13 was exercised arbitrarily for the arrest of the applicant.
Though this dispute can be settled only by proper forum as to who is responsible for payment of the excise duty and this Court abstains from recording any finding thereon. Section 9A makes the offence under Section 9 to be non-cognizable. The mater is also compoundable as per see 9 (2) g (sic). Thus, in my opinion, this was in no way any ground to arrest the applicant under Section 13 of the Act.
8. Secondly, the next issue, which was hotly contested before this Court is about the fact as to whether it was ayurvedic medicine or whether it was toiletries. The learned Counsel for the applicant has submitted that according to the Central Excise Department, these two items mentioned above, are covered under Chapter 33 of the Tariff Act and assessment of excise duty is to be made on the basis of M.R.P. under notification No. 13/2002-CE(NT) dated 1.3.2002 issued under Section 4A of the Central Excise Act, 1944, where as according to the applicant it is Ayurvedic medicine and cannot be valued under Section 4A of the Act. According to the applicant's case the duty on Ayurvedic medicine is payable under Section 4 of the Act and same are classified under Chapter 30.
Sri Ajay Singh, learned Counsel for the Central Excise Department has made submissions otherwise. According to him the two preparations are cosmetic preparation primarily meant for beautification and improvement of look and attractiveness of a person. Further, according to him, a medicine is not an item of common use and a user will use it only for treatment of a particular ailment and will stop use after the ailment is cured.
9. In this connection, my attention was again drawn to Annexure No. 5, the wrapper of 'Dant Pari' and 'Roop Amruta'. On both these wrappers, where the name of manufacturer is mentioned, it is also mentioned in bold letter that it is 'an ayurvedic proprietary medicine'.
10. Thus, apparently it is being sold as an ayurvedic medicine. While deciding the bail application, it is again emphasized that this is not a forum where it could be judged as to whether it is a medicine or toiletry product but it would be prima facie seen on the basis of manner of use. It should be without deceiving the customer.
11. The learned Counsel for the applicant has also submitted that in the notification dated 1.3.2002 tooth paste is mentioned at serial No. 34 and not the tooth powder, whereas 'Daant Pari' is a tooth powder. The wrapper of 'Daant Pari' lays as follows:
Whitens teeth, removes plague and tartar naturally, useful in bleeding, spongy and inflamed gums.
12. All the adjectives given to Daant Pari except the whiteness is in the nature of disease. A normal healthy teeth is neither bleeding, nor spongy nor Inflamed, nor they could be plague or tartar. Normally, the people resort to the tooth power or brush of their choice but in case of these abnormalities, they use a particular tooth power or tooth paste. So is the case with 'Roop Amruta' in which the following indications have been mentioned:
It is an unique combination of active part of herbs which helps to maintain a fairer complexion, minimize scars, blemishes & pigmentation, naturally after regular application.
13. The common character of face is smooth and normal face without any scar, blemishes and pigmentation. It can be used only when such things appear on the face. Both the learned Counsel for the parties have relied upon the judgment of Hon'ble The Supreme Court in the case of Puma Ayurvedic Herbal (supra). In this case an illustration has been given about a particular shampoo, and a medicine for the baldness. It has been held that whenever there is growth of hair, the use of medicine for baldness shall come to an end. It would not be out of place to say that finding about present (sic) cannot be recorded conclusively at this stage. It can be adjudicated upon by the competent forum after the parties have adduced evidence in favour of their respective claims.
14. To sum up, Section 9A of the Act makes the offences non-cognizable and Section 9A(2) of the Act, as amended by Finance Act 23 of 2004, made the offences of this Act compoundable either before or after the institution of prosecution. The provision of enquiry by summoning the person is also there under Section 14 of the Act. In spite of existence of such provision, without ascertaining the facts, the officers of opposite party No. 1 resorted to Section 13 of the Act and arrested the applicant. The officers of opposite party No. 1 also exceeded by taking steps under the provisions of Indian Penal Code as well.
15. In the present case the offence is non-cognizable and compoundable. There can be no chance of tampering of evidence or threat to complainant. There is also no chance of absconding also. So far as the liability of payment of tax is concerned, who so ever is liable cannot escape the same.
16. Considering this, I find it a fit case for bail. Let applicant Inder Setia be released on bail in Case Crime No. 2 of 2006 under Sections 4/9A/9AA/9 of the Central Excise Act, 1944 and Sections 420/467/468/471 IPC Commissionerate Central Excise Noida under police station Sector 20 Noida, on his furnishing a personal bond and two sureties, each in the like amount to the satisfaction of the concerned court.