Custom, Excise & Service Tax Tribunal
Yes vs Represented By : Shri C.S. Lodha & Shri ... on 25 August, 2010
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Zonal Bench, Ahmedabad Appeal No. : E/391 & 392 of 2008 and E/3725 of 2004 Arising out of : OIO No.02/MP/Daman/2008 dated 22.1.2008 and OIA No. RKS/261/Daman/2004 dated 14.10.2004. Passed by : Commissioner & Commissioner (Appeals) of Central Excise, Daman VAPI (respectively) For approval and signature : Hon'ble Mrs. Archana Wadhwa, Member (Judicial) Honble Mr. B.S.V. Murthy, Member (Technical) 1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? Yes 3 Whether their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes Appellant (s) : M/s. Nirmala Dyechem Shri Naresh B. Naik Commissioner of Central Excise, Daman Represented by : Shri C.S. Lodha & Shri V.S. Sejpal, Advocates Shri Avinash Thete, SDR Respondent (s) : Commissioner of Central Excise
M/s. Nirmala Dyechem Represented by : Shri Avinash Thete, SDR Shri C.S. Lodha & Shri V.S. Sejpal, Advocates CORAM :
Hon'ble Mrs. Archana Wadhwa, Member (Judicial) Honble Mr. B.S.V. Murthy, Member (Technical) Date of Hearing : 25.08.2010 Date of Decision : _________ ORDER No. _____________ /WZB/AHD/2011 Per : Mr. B.S.V. Murthy;
In the present appeals issue involved is determination of question of classification of following products manufactured and cleared by the appellants as disinfectant preparations Domex disinfectant cleaner, Domex power cleaner, Domex all purpose disinfectant cleaner and Domex all round home cleaner. The period involved is from October 2002 to Jan 2003. Two appeals i.e. E/391 and 392 of 2008 have been filed by M/s. Nirmala Dyechem (referred to as Appellant) and by Shri Naresh B Naik, Partner of M/s. Nirmala Dychem, the appellant. These appeals are against the order in original passed by Commissioner on 22.1.2008. Revenue is in appeal against the order passed by Commissioner (Appeals) in respect of various show cause notices issued for the period Nov 2000 to Jan 2003, wherein he allowed the appeal filed by the appellants against order in original confirming the demands and this appeal is numbered as E/3725/2004. All the appeals involve the same issue namely classification of the above products and consequent demand against the appellants.
2. All the four products mentioned above are different variants of the same product and there is a marginal variation in the level of main ingredient Sodium Hypochlorite. The classification claimed by the appellant is under sub heading 3808.90 of schedule of Central Excise Tariff Act, whereas the department proposed to classify the same under sub-heading 3402.90 of schedule of Central Excise Tariff Act (referred to as CETH).
3. This is the second round of litigation. In the first round, the matter had reached the Tribunal and the Tribunal by its order No. A/604 & 605/WZB/04-CI dated 22.3.2004, had upheld the classification under CETH 3808.90, as claimed by the appellants.
4. On an appeal filed before the Hon'ble Supreme Court by the Revenue, the Hon'ble Supreme Court remanded the matter to the original adjudicating authority with following observations :-
We may also place on record the submission of Mr. Ravindra Narayan, that it is sold in undiluted form also and, therefore, may be put in an appropriate heading for the purpose of classification as it is manufactured on the said basis, and hence it should be classified as such and not on the condition in which it is used, which may be in diluted form. On the other hand, we may also mention the submissions of Dr. R.G. Paida, learned senior counsel for the Revenue that the word disinfectant in heading 38.08 has to be interpreted noscitur a sociis, which means that it has to take colour from the preceding words like insecticides, rodenticides, fungicides, herbicides etc. Dr. Padias submissions is that the expression cide means to kill, and hence the things mentioned in heading 38.08 are all things meant for killing (germs, animals etc.) and they do not relate to products which are basically meant for cleaning. He further submitted that some cleaning materials may have some antiseptic or disinfectant qualities, but that would not by itself bring the product under heading 38.08, instead it has to be classified under heading 34.02. We regret that the matter has not been examined from this angle.
The question, in our opinion, would therefore, require deeper consideration at the hands of the Commissioner. The matter has also to be considered from the angle whether the product is having active agents, having surface active function or that is only subsidiary to its main function as a cleaning preparation.
We may also notice that the Tribunal as also the Commissioner have not considered the rules of the interpretation of the schedule as also the explanatory notes, harmonized commodity description and coating system which may possibly provide aids for determination of the dispute. We are, however, not expressing any definite view on the matter, as we are remitting it to the Commissioner. We, however, make it clear that in the facts and circumstances of this case, the extended period of limitation as provided for in Section 11AC of the Central Excise Act, 1944, shall not apply.
The impugned order has been passed by the Commissioner is as per the directions of the Hon'ble Supreme Court in the order referred to above.
5. In the meanwhile, when the litigation relating to the re-classification and demand for the period from Oct 1997 to Oct 2000 was going on, the demands issued by the Revenue for the subsequent period from Nov 2002 to Jan 2003, were decided by the Commissioner (Appeals) in favour of the appellants, following the decision of the Tribunal upholding the classification of the products under CETH 3808.90. Appeal E/3725/2004 filed by the Revenue against this order is also required to be considered along with the appeal filed by the appellant against the order of the Commissioner dated 22.01.2008.
6. Heard both the sides and have gone through the records.
7. On behalf of the appellants it was submitted that in the appeal before the Hon'ble Supreme Court, the department had raised two contentions. The first contention was that the product was required to be diluted at the time of application and therefore, the nature of product at that stage should be examined and this has been rejected. The second contention was that since Disinfectant was placed in the company of Insecticides, Rodenticides, Fungicides, Herbicides etc. and the expression Cide means to Kill, , only such products should be considered as disinfectants which had the capacity to kill. The Hon'ble Supreme Court directed the original adjudicating authority to examine the second issue and hence remanded the matter.
8. It was submitted that during the course of remand proceedings, the appellant had furnished following literature/ documentary evidence/ other details:-
? Copy of FDA License showing Sodium Hypochlorite as the active ingredient and other ingredients and other ingredients as expedients.
? Technical literature showing nature and efficacy of Sodium Hypochlorite, a halogen compound.
? Reports of five independent laboratories who tested the samples and confirmed that it killed 100% germs and bacteria. These were :
? HLRC ? Microbiological Consultant ? Ramnarain Ruia College ? Govt. Laboratory, Foods and Drugs Laboratory ? Jai Research Foundation Society ? National Chemical ? Choksey Lanoratories Limited.
? Technical Affidavit of Mr. Prataya Chakrabarti, Scientist HLRC detailing the role of each of the ingredients used in Domex.
? Trade & Consumer affidavits ? Definitions of following items in Condensed Chemical Dictionary by Hawley.
? Antiseptic ? Sanitizer ? Disinfectant ? Lauric Acid ? Lauryldimethylamine Oxide ? Sodium Hydroxide ? Sodium Hypochlorite ? Sodium Periodate ? Sodium Sillicate.
9. Learned DR submitted that the Commissioner has obeyed the directions of the remand order of the apex Court and passed a very detailed order. He submitted that according to the description of the goods in the classification list filed by the appellant and on the label of the product and also literature would show clearly that the product cleans the surface and also kills the germs. He drew our attention to the word also used in the labels and in the manufacturing process and product description filed with the department and submitted that this would show clearly that the main purpose of the product is to clean the surfaces and it also serve the subsidiary purpose of killing germs. He further submitted that the reliance of the Commissioner on the decision of the Authority for Advance Rulings in the case of Technical Concepts International Limited 2006 (204) ELT 251 (A.A.R.) is appropriate and in this decision also the AAR, had taken a view that what is to be seen is the main purpose of the product and the fact that product is capable of killing the germs or it contains disinfectant cannot be the only criterion to be adopted for the purpose of classification. He also relied upon the decision of the apex Court in the case of Sujanil Chemo Industries vs. CCE, Pune 2005 (181) ELT 206 (S.C.) to support his contention that the main purpose for which the product is used is required to be considered and not the fact that product kills the germs. He also relied upon the decision of the Honble High Court of Kerala in the case of Reckitt Benckiser (India) Limited vs. Commissioner 2010 (250) ELT 523 (Kerala). In this case the Honble High Court had taken a view that Lizol and Harpic are items essentially used as stain remover and deodorants though they kill germs as well. The Honble High Court referred to the HSN and observed that HSN Code NO. 3808 covers essentially disinfectant and not cleaning agent which serves as a disinfectant as well. The Honble High Court also observed that HSN Code No. 3808 covers mostly direct chemicals which are essentially disinfectants and not cleaning agents which serve as a disinfectant. The dominant object of the product was taken into account by the Honble High Court to hold that Lizol and Harpic were to be treated as cleaning agents and he submitted that the products in question are similar to these two products and therefore, deserve to be classified under CETH 3402.90 as proposed by the department. He also took us through the relevant extracts of HSN Notes to show that the HSN also supports the view taken by the department.
10. Admittedly, according to declaration filed by the appellant for claiming modvat under Central Excise Rules, 1944, raw materials required for manufacture of 1000 Leters of Domex Power Cleaner/ Domex All Around Home cleaner are:-
(a) Caustic Soda Lye - 28.30 Kgs (b) Liquid Chlorine - 13- 15 Kgs (c) Amine Oxide/ Lauryl Amine Oxide - 45- 50 Kgs (d) Lauric Acid - 15- 20 Kgs (e) Sodium Silicate - 1- 1.5 Kgs (f) Sodium Meta Periodate - 0.02- 0.03 Kgs (g) Perfume - 1.0- 1.5 Kgs.
11. The manufacturing process declared by the appellant and end-use of the product declared as per the provisions of Rule 173-B of Central Excise Rules, 1944, is as under :-
Manufacturing Process To charge caustic soda lye along with cooling by Ice. Start chlorination to maintain temperature 28 degree Centigrade to 30 degree centigrade in the reaction mixure which is to be mixed in mixute and add DM water and sufficient Thickener.
Process of Thickener making Take DM water in SS Vessel, heat upto 70 degree centigrade and add Lauric acid, caustic soda lye then solution is clear and add Lauryl Amine oxide, sodium silicates and perfumes and stirred for 15 minutes and then stop stirring.
Then the product is packed in the retail containers of plastic.
In the 173-B declaration dated 17.2.97, end use of the Domex All purpose Disinfectant Cleaner hs been mentioned as a surface cleaner like floors, kitchen slabs, tiles, bathrooms etc.
12. It is the claim of the appellants that the four variants of the Domex contains Sodium Hypochlorite from 1.5% to 3% and they have relied upon the certificate issued by the Commissioner Food and Drugs Control administration.
13. Sodium Hypochlorite is, according to the Hawleys Condensed Chemical Dictionary which defines Sodium Hypochlorite as below :-
Sodium Hypochlorite (NaOCI 5HOH) Properties: Unstable in air unless mixed with sodium hydroxide. Strong oxidizing agents, usually stored and used in solution, disagreeable, sweetish odor and pale greenish colour, soluble in cold water, decomposed by hot water, mp 18C.
Hazard Five risk in contact with organic materials, Toxic by ingestion, strong irritant to tissues.
Uses: Bleaching paper pulp, textiles etc., intermediate, organic chemicals, water purification, medicine, fungicides, swimming pool disinfectant, laundering, reagent, germicides.
14. Sodium Hypochlorite is a chemical compound with chemical formula Naocl and as defined in the dictionary it is used as a disinfectant as well as bleaching agent. It is highly unstable and transparent chemical and it is to be stored in Sodium hydroxide and this is the reason why Sodium Hydroxide is also one of the ingredients of Domex.
15. The product also contains Amine Oxide and long chain alkyl amine oxides are used as non-ionic surfactant and foam stabilizers. Another ingredient Lauric Acid is a saturated fatty acid and is used in many soaps and shampoos. One of the main uses of Lauric Acid is as a cleaning agent because of its surfactant character which lowers the surface tension of water, allowing it to penetrate and wet a variety of materials.
16. The test report dated 29.9.2002 of the Chemical Examiner also states that the samples are mainly composed of surface active agent, Fatty matter, Sodium salt of Chlorine and Silicate.
17. After taking note of manufacturing process and various ingredients, the Commissioner has come to the conclusion that organic surface active agent as a group has a major share as compared to Sodium Hypochlorite in the product under dispute. According to him, Laurel Amine oxide, Lauric Acid are having properties of organic surface activity and the presence of Sodium Hydroxide gives soap like property to the mixture.
18. Keeping in view the manufacturing process, end-use as declared and various ingredients in the product, we have to consider the classification of the product. CETH 34.02, during the relevant time read as under:-
34.02 Oraganic Surface Active Agent (other than soap);
Surface Active Preparations, Washing preparations (including auxiliary washing preparations) and Cleaning Preparations, whether or not containing soap.
3402.10 - Sulphonated castor oil, fish oil or sperm oil 3402.11 - other
19. Commissioner has examined the relevant notes in the HSN and after considering came to the conclusion and the same are reproduced:-
7.19 In the HSN the heading 34.02 comprises of two parts/ groups covering (I) Organic Surface Active Agents (other than soap); and (II) Surface Active Preparations, Washing preparations and Cleaning Preparations, whether or not containing soap, other than those of Heading 34.01.
7.20 The said second group (II) comprises of (3) categories of preparations namely (A) Surface Active Preparations; (B) Washing Preparations and Cleaning Preparations, having a basis of soap or other Organic Surface Active Agents; and (C) Cleaning or Degreasing Preparations not having a basis of soap or other Organic Surface Active Agents.
7.21 The second category of preparations i.e. Washing and Cleaning preparations as appearing at page No. 630 of the HSN is as under;
(B) Washing preparations (including auxiliary washing preparations) and cleaning preparations, having a basis of soap or other organic surface active agents.
This category covers washing preparations, auxiliary washing preparations and certain cleaning preparations. These various preparations generally contain essential constituents and one or more subsidiary constituents. The presence of these latter constituents distinguishes, in particular, these preparations from those described in Part (A) above.
7.22 The essential constituents are synthetic organic surface-active agents or soaps or mixtures thereof.
The subsidiary constituents are;
(1) Builders (e.g. sodium polyphosphates, carbonates, silicate or borate, salts of Nitrilotriacetic acid (NTA) (2) Boosters (e.g. alkanolamides, fatty acid amides, fatty amine oxides) (3) Fillers (e.g. sodium sulphate or chloride) (4) Ancillaries (e.g. Chemical or optical bleaches, anti-redeposition agents, corrosion inhibitors, anti-electrostatic agents, colouring matter, perfumes, bactericides, enzymes) These preparations act on surfaces by bringing the soil on the surface into a state of solution or dispersion.
Washing preparations based on surface active agents are also known as detergents. This type of preparation is used for washing clothes and also dishes or kitchen utensils.
They may be liquids, powders or pastes and are used for household or industrial purposes. Toilet and washing products in the form of bars, cakes, moulded pieces or shapes fall in 34.01.
Auxiliary washing preparations are used for soaking (pre-washing), rinsing or bleaching clothes, household lines, etc. Cleaning preparations serve for cleaning floors, windows or other surfaces. They may also contain small quantities of odoriferous substances.
20. From the above what emerges is that a cleaning preparation contains essential constituents and one or more subsidiary constituents. The subsidiary constituents are builders, boosters, fillers and ancillaries. It is to be noted that HSN takes note of bactericides as one of subsidiary constituents in a cleaning agent. Sodium Hypochlorite is a strong bleaching agent and is also a bactericide when its content is more than 1.5%.
21. HSN also excludes the preparations containing surface active agents where the surface active function is either not required or is only subsidiary to the main function of the preparation from Chapter 38.
22. Chapter heading 38.08 reads as under :-
38.08 INSECTICIDES, RODENTICIDES, FUNGICIDES, HERBICIDES, ANTISPROUTING PRODUCTS AND PLANT-GROWTH REGULATORS, DISINFECTANTS AND SIMILAR PRODUCTS, PUT UP IN FORMS OR PACKING FOR RETAILS SALE OR AS PREPARATIONS OR ARTICLES (FOR EXAMPLE, SULPHUR-TREATED BANDS, WICKS AND CANDLES AND FLY-PAPERS) 3808.10 Insecticides, fungicides, herbicides, weedicides and pesticides 3808.20 Plant Growth Regulators.
3808.90 - Others.
23. Corresponding notes provided in HSN in respect of this Chapter are as under :-
This heading covers a range of products (other than those having the character of medicaments, including veterinary medicaments-heading 30.03 or 30.04) intended to destroy pathogenic germs, insects (mosquitoes, moths, colorado beetles, cockroaches etc.), mosses and moulds, weeds, rodents, wild birds, etc. Products intended to repel pests or used for disinfecting seeds are also classified here.
These insecticides, disinfectants, herbicides, fungicides, etc., are applied by spraying, dusting, sprinkling, coating, impregnating, etc., or may necessitate combustion. They achieve their results by nerve-poisoning, by stomach-poisoning, by asphyxiation or by odour, etc. The scope of the said sub-heading 3808.40 is further enumerated at Page 681, 682 & 683 of HSN which reads as under :
At pg. 681 of HSN, the scope of the products under the said Heading 3808 is referred as; These products are classified here in the following cases only (3) When they are put up in packing (such as metal containers or paperboard cartons) for retail sale as disinfectants, insecticides, etc. or in such forms (i.e. in balls, strings of balls, tablets or plates) that there can be no doubt that they will normally be sold by retail.
Products put up in these ways may or may not be mixtures. The unmixed products are mainly chemically defined products which would otherwise fall in Chapter 29, i.e. naphthalene, or 1.4 dichlorobenzene.
The heading also includes the following products, provided they are put up for retail sale as disinfectants, fungicides, etc.
(c) Organic Surface-active products and preparations, with active action (i.e. quaternary ammonium salts), having antiseptic, disinfectant, bactericidal or germicidal properties.
(d) Poly (vinyl pyrrolidone) iodine, being a reaction product of iodine and poly (vinyl pyrrolidone).
(4) When they have the character of preparations, whatever the presentation (i.e. as liquids, washes, powders). These preparations consists of suspensions or dispersions of the active product in water or in other liquids (i.e. dispersion of DDT (1.1.1 trichloro- 2.2 bis-(p-chlorophenylethane) in water), or of other mixtures. Solutions of active products in solvents other than water are also included here (i.e. solutions of pyrethrum extract (other than standardized pyrethrum extract), or copper naphthenate in a mineral oil). ---------- 7.29 At Pg. 681 & 682 of HSN, it is enumerated tat the products of Heading 38.08 can be divided in to following groups (I) Insecticides, (II) Fungicides, (III) Herbicides, Anti-sprouting Products, Plant Growth Regulators & (IV) Disinfectants; and others.
7.30. Further at Clause (IV) Disinfectants have been specified/ clarified to include, (IV) Disinfectants.
Disinfectants are agents which destroy or irreversible inactivate undesirable Bacteria, viruses or other micro organisms, generally on inanimate objects.
Disinfectants are used, for i.e. : in hospitals for cleaning walls, etc., or sterilizing instruments. They are also used in agriculture for disinfecting seeds and in the manufacture of animal feeds to control undesirable microorganisms.
This group includes sanitizers, bacteriostats and sterilizers.
24. The products in this case are not sold as disinfectant but are sold as cleaning agent which can also kill germs. HSN also provides that products having multiple uses and are therefore prima-facie classifiable in more than one headings are usually classified by application of general Interpretative Rule-3.
25. We agree with the Commissioner on his observation that on the basis of extracts from HSN and the Tariff Heading, for a product to be classified as disinfectant under Chapter 38, the following conditions have to be satisfied by the product :-
(1) The product should have capacity to destroy or irreversibly inactivate undesirable Bacteria, viruses or other microorganisms, generally on inanimate objects.
(2) The product should be put up in packing for retail sale as disinfectants.
(3) The disinfecting, insecticidal, etc. properties of the product should not be subsidiary to any other function.
(4) The product should not be covered by more specific headings of the Nomenclature elsewhere.
26. As regards ability to destroy or inactivate undesirable bacteria, germs, microorganisms, etc. the Commissioner has agreed with the stand taken by the appellant. This is also supported by technical literature provided by the appellant. Further, the test reports submitted by the appellant in respect of their product also shows that the products contain 1.5% of Sodium Hypochlorite and can kill Bacteria to the extent of 100%.
27. It is the submission of the appellants that having agreed that the product has the capacity to kill the germs, Commissioner ought to have classified it as disinfectant. For this purpose, it was submitted that before the apex court it was the submission of the department that the product was not capable of killing the germs and only the products which had the capacity to kill the germs could be considered as disinfectants. Having taken a stand before the apex court, the decision of the Commissioner holding that even though the product has the capacity to kill germs, it has to be classified under Chapter 34, is against the terms of the remand order. At this stage, consider the submissions made by the learned Senior Counsel for the Revenue as summarized by the Hon'ble Supreme Court with regard to the product. The Hon'ble Supreme Court observed that the expression cide means to kill and hence the things mentioned in heading 38.08 are all things meant for killing (germs, animals, etc.) and they do not relate to products which are basically meant for cleaning (highlight added). Hon'ble Supreme Court also noted that the submission made by the learned Counsel that some cleaning materials may have some antiseptic or disinfectant quality but that would not by itself bring the product under Chapter 38.08. These submissions as summarized by the Hon'ble Supreme Court would clearly show that the submissions of the department before the apex court was that basic function of the product is to be seen and basic function of this product is cleaning and the fact that the products also kill the germs, is not relevant. Hon'ble Supreme Court observed that the matter required an in-depth consideration to see what was the main function and what was the subsidiary function. In our opinion, the submissions that once the Commissioner came to the conclusion that the product had a capacity to kill 100% germs, it should have been classified under Chapter CETH 3808.90, is not correct. Further, we also note that the appellants unlike learned Commissioner picked up only portions of the HSN notes which are in their favour without considering the notes as a whole and the conclusion that emerges from the notes viz-a-viz Chapter headings.
28. As regards the submission of the appellants that the Commissioner had completely ignored the decision in the following cases namely;
(a) Bombay Chemicals case 1995 (77) ELT 3
(b) Bengal Chem. & Pharmaceuticals vs. CCE, Mumbai 2001 (138) ELT 844 (Tr. Mum.)
(c) Balsara Hygiene Products Limited vs. Collector of Central Excise
-- 1999 (106) ELT 41 (Tribunal)
(d) Rosin & Terpentine Factory case - 1997(94) ELT 187 The decision in the case of Bombay Chemicals was rendered with reference to the erstwhile tariff as had it existed prior to 1986. In this case the Tribunal had found that the products under dispute were being referred to and marketed as disinfectants. In this case, the departments case is that the main function of the product is that of cleaning agent and the products are not being sold as disinfectants. Therefore, this decision is not relevant. In the case of Bengal Chemicals & Pharmaceuticals, the Tribunal was considering the classification of Phenol. In this case, the Tribunal observed that the products were disinfectant fluid produced from Phenol compound and high boiling tar acid. Once again the question of subsidiary and the main purpose had not arisen in this case. In the case of Balsara Hygiene Products Limited, the products had contained 85% of Sodium Bisulphate which by itself is a disinfectant. Further, the National Chemical Laboratory also reported that both the products were disinfectants. In that case, Deputy Chief Chemist of the departmental Laboratory has observed that he did not have any facility to conduct the test the samples by Rideal Walker method. The department was not able to produce any evidence contrary to the National Chemical Laboratory report. Therefore, the decision can not be applied. In the case of Rosin & Terpentine Factory two contending entries under consideration were 3810.90 and 3003.20 and hence the decision cannot be applied to the present case.
29. On the other hand, reliance of the learned Commissioner on Technical Concepts International Limited case is apt in view of the fact that in that case the Advance Ruling Authority was precisely considering the products which were used for cleaning as well as disinfectant. In that case the Advance Ruling Authority was considering the classification of Auto janitor refill, auto janitor bio refill and auto sanitizer refill. According to the submissions made before the authority, the auto sanitizer, had the features of automatic constant and continuous cleaning which ensures clean washrooms and also killing the germs.
30. The second requirement is that the product should be put up in packing for retail sale as disinfectant. At this juncture, we will have to go through the labels of one of the products and label of the product Domex, appearing on the Domex Power Clearner, as submitted by the appellants is as under :-
Domex Power Cleaner Cleans, Kills 100% Germs (when used undiluted) Touch cleaning : use undiluted Light Marks : Use 1 capful in a mug of water For Floor : Use 1 capful in = bucket of water Domex Power Cleaners powerful Hypo formula removes dirt and stains completely and also kills germs. Use it to clean all the surfaces in your kitchen; platform, tiles, stove, fridge, sink, kitchen cabinets and window glass. Domex Power Cleaner makes your kitchen sparklingly clean and a safe place to be in.
Domex Power Cleaner kills 100% germs when used undiluted.
Active ingredient : Sodium Hypochlorite (min. 0.5% w/w) Excipient : Myristic acid, amine oxide, sodium silicate, sodium hydroxide, perfume and water.
Caution : Do not use the product along with other products, i.e.: Acids, Detergents etc. It may release dangerous gases (chlorine). Keep away from children. If swallowed drink one or two glasses of mil or water. Seek medical help. Avoid contact with eyes and skin. In case of accidental contact with eyes, rinse immediately with plenty of water and seek medical advice. Show the container or label to the doctor. In case of contact with skin, wash immediately with plenty of water. Keep only in the original container and store upright in a cool place. The labels and the contents clearly show that product is being sold as a cleaning agent which also kills germs. In fact, the label also says that it contains powerful Hypo formula, which obviously is Sodium Hypochlorite to show that it can remove dirt and stains completely and also kills germs. The words also kills germs indicates that the main purpose of the product is cleaning and subsidiary purpose is killing germs. The Commissioner has rightly ignored the affidavits submitted by the appellants from dealers, end users and the technical experts of the company. Only when there is doubt or label is not clear or the manufacturing process and end use as declared by the manufacturer is different from the label, the obvious conclusion that one has to reach is that the main purpose of the product is of cleaning. In this case, in the classification declaration, modvat declaration and on the labels, the product is being shown as cleaning agent which can also kill germs. In these circumstances, we are not able to accept the submission that the department has not discharged the burden to show that classification of the item is under CETH 3402 and not under 3808. Technical opinion and the consumer affidavits cannot be preferred to the declarations made by the appellants themselves in the statutory documents as well as on the labels on the retail packages, approved by the statutory authorities.
31. Since the product has two functions namely, cleaning and killing germs and arguments to be considered is that product can be called as a composite product made up of different components. Further, HSN notes also provides that if the product has multiple use and therefore, prima-facie classifiable in more than one headings, for classification, the General Interpretation Rules have to be applied. In this case, in our opinion, in terms of tariff headings and HSN Notes, the product is classifiable under Chapter 34 and therefore, General Interpretative Rules need not be applied.
32. Even then we find that Commissioner has examined the issue in detail and we find ourselves in agreement with the conclusion. According to rule 3(b), in the case of composite goods consisting of different materials or made up of different components, classification is to be based on components which give them their essential character. In this case, it is clear from the discussion above that essential character of the product is that of cleaning and incidentally it also performs function of disinfectant. Further, as noted in the HSN, cleaning preparations generally contain essential constituents and also subsidiary constituents. In this case, essentially Sodium Hypochlorite is an active agent and subsidiary constituents are other than OSAA. In fact, even HSN notes mention subsidiary components of cleaning agents in the HSN which cover Sodium Hypochlorite. The most important aspect which supports the case of the Revenue is the label of the product which specifically says that Domex cleans and also kills germs. In view of the labels, manufacturing process declared by the appellants under Rule 173 (B) of Central Excise Rules, 2004, the product is sold to the public declaring as cleaning agent which also kills germs, the classification has to be as a cleaning agent.
33. It was also submitted that the chemical examination report was partial and does not help the case of the department. In fact while making submission, the appellant did not quote the last sentence, on the label it is stated to be used as cleaner, special preparations, 34.02 (ii) (B) of HSN (cleaning preparations). This shows that the chemical examiner while examining report had seen the contents of the products and had also taken note of notes in HSN. If it was disinfectant or if the function was mainly that of disinfectant, chemical examiner could not have ignored. In any case, the dispute is not about the contents/ ingredients of the product but about how the product is marketed and used. Chemical test report is one of the aspects which is required to be considered and there cannot be any dispute that it is in support of the Revenues case.
34. In view of the above discussion we do not find any merit in the appeal filed by the appellants as regards classification of the product.
35. Hon'ble Supreme Court had already observed while remanding the matter that extended period cannot be invoked in this case. However, we find that the Commissioner has imposed penalty under Rule 173(Q) of Central Excise Rules on the appellant and has also imposed a personal penalty of Rs. One lakh on Shri Naresh B. Naik, partner. The Commissioner observed in this regard that M/s. Nirmala Dyechem have contravened the rules 173B, 173F read with Rule 9(I) of Central Excise Rules and clearly violated the provisions of Section 4(A) of Central Excise Act, 1944. Further he has not explained what was the omission in the declaration filed under Rule 173(B) of Central Excise Rules, warranting imposition of penalty. Similarly, he has not explained the omission as regards Rule 173 (F) of Central Excise Rules 1944. The dispute is about the classification and the nature of omission in case of Rule 173B, has not been explained or examined. What led to the conclusion by the learned Commissioner that Section 4(A) has been contravened, has not been explained. In these circumstances, we do not find justification for imposition of penalty on both the appellants and accordingly set-aside the penalties imposed by the learned Commissioner.
36. As regards appeal filed by the Revenue, Revenue is seeking restoration of order in original and setting aside of order in appeal. We find that original adjudicating authority had adjudicated several show cause notices in a single order and had imposed penalty equal to the duty demanded under Rule 173(Q) (1) and under Rule 25 (I) of Central Excise Rules. For coming to this conclusion the original adjudicating authority stated that the appellant failed to file correct declaration under Rule 173(B) of Central Excise Rules, 1944 and mis-classified the same. In the discussion the Commissioner in his order observed that appellant had mis-declared the manufacturing process or description of the goods. The fact is that chemical examiner had also given a report and appellants had never claimed that the products in question are disinfectant exclusively. The appellants claim obviously was that the product can kill 100% germs and is classifiable as disinfectant. They can be faulted with for misunderstanding the provisions of HSN and they can be faulted with attempting classification under Chapter 38 but we are unable to understand where was the mis-declaration in the statutory forms submitted by them. It is not the case of adjudicating authority that there was suppression of facts or mis-declaration in the classification list and appellants have filed classification under a wrong heading. The department had the information and there is no allegation that it was not complete or wrong. Further, the observation of the Hon'ble Supreme Court that extended period could not have been invoked also supports the view that this is a case of interpretation of tariff heading, HSN Notes, manufacturing process, end use etc. Therefore, imposition of penalty by the original adjudicating authority cannot be sustained. The departments appeal is allowed only as regards classification of the disputed items and the demand within the normal limitation period under the law. Thus the departments appeal is partially allowed.
37. All the appeals are disposed of in above terms.
(Pronounced in the Court on __________________)
(Archana Wadhwa) (B.S.V. Murthy)
Member (Judicial) Member (Technical)
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