Custom, Excise & Service Tax Tribunal
4. Whether Order Is To Be Circulated To ... vs Unknown on 13 October, 2010
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT AHMEDABAD
COURT-II
Appeal No.E/1139 & 1140/06 & E/2121/06
Arising out of OIA No.KU/42/VAPI/2006, dt.30.01.06
Passed by: Commissioner of Central Excise & Customs (Appeals), Vapi
For approval and signature:
Honble Mrs. Archana Wadhwa, Member (Judicial)
Honble Mr. B.S.V. Murthy, Member (Technical)
1. Whether Press Reporters may be allowed to see the No
Order for publication as per Rule 27 of the CESTAT
(Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the Yes
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy of Seen
the order?
4. Whether order is to be circulated to the Departmental Yes
authorities?
Appellant/s M/s. Alfa Packaging
Shri M. W. Pereira
M/s. Hindustan Lever Ltd.
Represented by Shri V.S. Sejpal, Adv
Ms. H. Aparna, Adv
Vs.
Respondent/s CCE Vapi
Represented by Shri Avinash Thete, SDR CORAM:
MRS. ARCHANA WADHWA, MEMBER (JUDICIAL) MR. B.S.V. MURTHY, MEMBER (TECHNICAL) Date of Hearing :13.10.10 Date of Decision:13.10.10 ORDER No. /WZB/AHD/2010 Per: Mrs. Archana Wadhwa:
The dispute in the present appeal relates to the correct classification of the following three products being manufactured by the appellant for M/s. Hindustan Lever Ltd.
a) Lux Body Wash
b) Lux Skin Care Moisturizing Body Wash &
c) Lux Skin Care Deep Cleaning Body Wash Whereas the appellants have claimed the classification of the same as falling under heading 3402.90, Revenues claim of classification is under heading 3307.39. Accordingly demand of duty of Rs.28,20,347/- stands confirmed against the appellant along with imposition of penalty of identical amount in respect of clearances affected by them during the period October 2000 to February 2002, by way of issuance of a show cause notice dated 28.03.03. The appellants have assailed the impugned orders on merits as also on limitation.
2. After hearing both the sides duly represented by Shri V.S. Sejpal and Ms. H. Aparna, learned advocates appearing for the appellants and Shri Avinash Thete, learned DR appearing for the Revenue, we find that the description and method of use shown on the bottles/outer packaging of the above said products is as under:
1. Lux Skin Care Moisturizing Body Wash NEW INTERNATIONAL LUX SKINCARE Moisturising BODY WASH Discover a luxurious, moisturizing bathing experience.
International Lux Moisturizing Body Wash with Double Moisturizing Action, goes deep down into your skins pores and helps keep essential moisture in, leaving it moisturized and silky. Use regularly for best results.
All you have to do is pour a little international lux moisturizing body wash on to your wet Lux . Lufa TM.
Apply gently all over your wet body for rich, fragrant lather. Enjoy a whole new, moisturizing bathing experience.
2. LUX SKIN CARE DEEP CLEANING BODY WASH.
NEW INTERNATIONAL LUX SKINCARE Deep Cleansing Body Wash Discover a luxurious, refreshing bathing experience.
International lux Deep Cleansing Body-wash with Active cleansers & Glycerin, penetrates the skin to clean it of excess oils, dirt, and grime and keeps it clear and beautiful. Uses regularly for best results.
To Use All you have to do is pour a little international Lux Deep Cleansing Body Wash on to your wet Lux. Lufa TM.
Apply gently all over your wet body for rich, fragrant lather. Enjoy a whole new, refreshing bathing experience.
3. Lux Sensational Care Body Wash LUX Body Wash Sensational Care For beautiful skin Pour just a little LULX body wash on your wet loofah. Apply gently on your wet body for a rich fragrant lather. Rinse thoroughly and discover soft beautiful skin.
3. Statement of Shri K.K. Parkhi, factory manager was recorded on 17.05.02 clarifying about the ingredients and raw materials of the product. For better appreciation, the relevant part of his statement is reproduced below:
On being asked regarding the ingredients/raw materials of Lux Body Wash, he stated that the raw material for Deep Cleansing variant are Treated Water, Metasol, Codex 661, SSLES 28%, Glycerin, Natrasol, Lauric Acid, Myristic Acid, KOH, Formalin, Frescolat MGA, Patent Blue, Quinolin Yellow, Ham Extract and Essential Perfumes. The raw material for moisturizing variant are treated water, Sles 28%, Carbopol 940, CAPB, BHT, Caustic Soda, Jauguar C 35, Genapol EGL, GLYCERIN, Formalin, SILICON 1785 Emulsion, Sunflower Seed Oil. Perfume Bellalux, PVD Salt and Caustic Soda. On being asked whether any of the said raw materials/ingredients are soap, he stated then none of the raw materials are soap. On being asked regarding the manufacturing process, he stated that various ingredients are physically mixed/blended at various stages as per the proportion given by M/s. Hindustan Lever Ltd. He stated that no chemical reaction takes place during the process. On being asked regarding the use of the said variants of Lux Body Wash, he stated that the said products are used for Bath for human beings. The moisturizing body wash has double moisturizing action, goes deeply into the skin pores and helps keep essential moisture in leaving it moisturized and silky. The Deep Cleansing body wash have active cleansers and Glycerin, penetrates the skin to clean it of excess oils, dirt and grime and keeps it clear and beautiful.
4. As is seen from above, it stands clarified that the products in question do not contain any soap but are organic surface active agents. In fact, this fact does not stand disputed by the Revenue.
5. At this stage we may reproduce the two contending entries for better appreciation.
34.02 - Organic surface-active agents (other than soap);
surface-active preparations, washing preparations (including auxiliary washing preparations) and cleaning preparations, whether or not containing soap.
3402.10 - - - - - - - - - - -- - - - - - - - - - - - - -
3402.90 - Other 16% 33.07 - Pre-shave, shaving or after-shave preparations (not containing substances specified in Note 1(d) to this Chapter), personal deodorants, bath preparations, depilatories and other perfumery, cosmetics or toilet preparations, not elsewhere specified or included; prepared room deodorizers, whether or not perfumed or having disinfectant properties.
6. The difference between the two entries is that whereas Chapter 34 covers cleaning preparations Chapter 33 includes bath preparations.
7. The appellants while contesting their case on merits before Commissioner (Appeals) have advanced the following arguments:
(a) That the products viz. Lux Body Wash (150 ml.) are preparations of Organic Surface Active Agents in the form of Liquid used for bathing and washing of human skins, Lux Skin Care Moisturising Body Wash (250 ml.) and Lux Skin Care Deep Cleansing Body Wash (250 ml.);
(a) That they classified these products under Chapter sub-heading No.3402.90 and they filed 173B declarations alongwith details of raw materials and process of manufacture thereof;
(b) That they complied with all the provisions of self removal clearances as visualized under Rule 52A, Rule 53, Rule 54, Rule 173B, 173C, Rule 173G and Rule 173F of erstwhile Central Excise Rules, 1944;
(c) That they Preparations based on Organic Surface Active Agents in the form liquid used for washing of skins as per the specific formulations of their customers namely M/s. Hindustan Lever Ltd. under their brand name of Lux Body Wash, Lux Skin Care Moisturising Body Wash, Lux Skin Care Deep Cleaning Body Wash in pack size of 150 ml. The said formulations have been duly registered with the FDA Authorities and it is predominantly a preparation of Organic Surface Active Agent;
(d) That on perusal of the said FDA Formulations it would be observed that all the products are Preparations based on Organic Surface Active Agents;
(e) That all the three products are specially formulated as Preparations of Organic Surface Active Agent in the form of Liquid used for bathing and washing of skin and they meet with all the requirements and conditions of the Heading 34.02 of CETA, 1985;
(f) That Heading 34.02 covers:
(a) Organic Surface Active Agents (other than soaps); and
(b) Surface Active Preparation, Washing Preparations and Cleaning Preparations whether or not containing soaps
(g) That if a product is an preparation based on Surface Active Agent and if it is used for washing purposes then it would be specifically covered under Heading No.34.02. Accordingly all the three products which are specially formulated of Organic Surface Active Agents with the specific end use of Washing of skin and human body would be covered under the said Heading 34.02 of CETA, 1985.
(h) That all the products under reference also meet with the technical requirements of Note-3 to Chapter 34 of CETA, 1985;
(i) That in view of the Chapter 3 to Chapter 34 all the three products are Preparations Based on Organic Surface Active Agents in liquid form for use for washing of skin under Heading No.34.02, the Department ought to have carried out the specified tests through the Deputy Chief Chemist for substantiating the applicability of said Chapter Note-3 and to confirm whether appellants claim was correct or not;
(j) That the basic use and properties of all the three products under reference are for washing and cleaning of skin and human body which is achieved by combination of Organic Surface Active and Additives which are present for rendering the product stable and for easy handling;
(k) That all the three body washes are not only formulated, manufactured and registered by the FDA Authority as preparations of OSAA for washing of skin but they are also packed and presented in the market accordingly;
(l) That perusal of packing labels it would be amply clear that the said products has been formulated with the key ingredients which are OSAA and they have been marketed as Liquid Soap for bathing and washing of skin;
(m) That they compositions/formulations, the end use, the application, and the manner in which the said products are understood, traded and consumed in the market support their claim that they are Organic Surface Active Agents Based Preparation used for bathing and washing skin, body etc. and they ought to be classified under Chapter sub-heading No.3402.90;
(n) That all the three products fulfils the common trade parlance test they are bought, sold and marketed in the trade as Body Wash to be used for cleaning and washing of skin and human body. They are used like any other Toilet Soap, which are commonly sold and available in market. They deliver the same function as that of the Toilet Soap with added consumer value in the form of convenience;
(o) That it is a well settled law that the goods are to be classified, as they are commercially understood in the trade and common parlance;
(p) That as per explanatory notes of Harmonized Commodity Description and Coding System (H.S.N) 2nd Edition updated upto January, 2000 and on perusal of Page 521 to H.S.N. it would be observed that the scope of Surface Active Preparations, Washing Preparations, and Cleaning Preparations whether or not containing soap other than those of Heading 34.01 has been explained at Part-II Heading 34.02. Various types of Surface Active Preparations are explained at Clause (A) to Part.II to Heading No.34.02 under the categories of Surface Active Preparations. After listing different types of Surface Active Preparations it further enumerated as under:
This group also includes preparations, consisting wholly or partly of organic surface active agents, in the form of liquid or cream, whether or not put up for retail sale for washing the skin.
On perusal of the above it would be observed that Heading 34.02 covers Preparations which are wholly or partly made of Organic Surface Active Agents in the form of Liquid of cream and which are put up for retail sale for washing of the skin.
(q) That on perusal of Chapter-33 it would be observed that the products referred in the exclusion clause i.e. in Chapter Note 1(c) to Chapter 34 are specifically covered under sub-heading 33.07 and the scope of the said sub-heading 33.07 excludes preparations consisting wholly or partly of organic surface active agents in the form of Liquid or cream and put up for retail sale for use in washing of skin;
(r) That on further referring to the scope of sub-heading 33.07 enumerated at Page No.512 of Harmonised Commodity and Coding System and provisions of clause (III) are reproduced below:
(iii) Bath preparations, such as perfumed bath salts and preparations for foam baths, whether or not containing soap or other organic surface active agents.
Preparations consisting wholly or partly of organic surface active agents, in the form of liquid or cream, whether or not put up for retail sale for use in washing the skin, are classified in heading 34.02.
(t) That in view of the HSN their products under reference are specifically excluded from the scope of Heading 33.07 and specifically included under the scope of Heading 34.02. Accordingly the scope of the exclusion Clause-1(C) of Chapter 34 would not apply to the products under reference and the HSN supports their claim of classification under Heading 34.02 of CETA, 1985;
(s) That they submitted classification declarations disclosing therein all the details including the product names, manufacturing process, packing, applications etc. There has been no misstatement or suppression of facts of what so nature. It is their bonafide belief and claim even today that the said products are correctly classified under sub-heading 3402.90 and therefore, there are no grounds for invoking large period under Section 11A of the Central Excise Act, 1944.
8. While dealing with the above contention of the appellants, Commissioner (Appeals) observed that the lower authority was wrong in relying upon the chapter notes and the explanatory notes given for the sub heading 34.02 and 33.07, as they existed prior to 1998.
9. As such the appellants have rightly relied upon the amended explanatory notes (amended in February 1998) he accordingly observed as under:
(i) After the amendment as far as sub heading 33.07 is concerned in the explanatory notes the words and preparations for personal hygiene has been deleted and the following sentence added:-
... Preparations consisting wholly or partly of organic surface active agents, in the form of liquid or cream, whether or not put up for retail sale for use in washing the skin, are classified in Heading 34.02.
(ii) As far as the explanatory notes for such heading 34.02 is concerned at page 521 at the end the following is added:
This group also includes preparation, consisting wholly or partly of organic surface-active agents, in the form of liquid or cream, whether or not put up for retail sale for washing the skin. At page 522 in the list of exclusions from 3402 given at the end, the words for personal hygiene has been deleted from the first sentence given at Sr. No.(a).
10. However he observed that in as much as the product in question contains soap and is used for bating purposes, the same has to be held as a bathing preparation and the amendment in the explanatory notes will not make any difference. He observed that the exclusion clause -2, explanatory note 2, heading No.33.07 and inclusion clause -2, explanatory note-2, heading No.34.02 which have been added in February 1998 are applicable for products used for washing of the skin. Probably this would cover items like hand wash, liquids etc. He further observed that between a specific term Bath Preparations and Clean for Washing the Skin bath preparation is more specific term and the later one is a general term. As such he preferred the specific term and held the products as classifiable under Heading No.3307.89.
11. After hearing both the sides we find that the findings of Commissioner (Appeals) are more or less self contradictory. Having taken note of the amendment in the HSN explanatory notes, he has correctly arrived at a finding that the inclusion clause added in February 1998 are applicable for products used for washing of the skin. However he has limited the said use only to the washing of the hands. We really fail to understand that the skin of the hands is skin whereas the skin of the other body parts has not been held to be skin by the appellate authority. There is no justification for limiting the scope of such use only to the washing of the skin of the hands and not the other body parts. The product being an OSSA product and keeping in view the amended provisions of explanatory notes, such products have to be held as classifiable under Heading 34.02.
12. At this stage we also take note of the precedent decision of the Tribunal in the case of Mul Dentpro Pvt. Ltd. Vs. CCE Vapi reported in 2007 (218) ELT 435 (Tri. Ahmd.) in which case Pears Face Wash, produced on the principle of surface active agents was held to be classifiable under Heading No.34.02. Similarly in the case of Hindustan Lever Ltd. Vs. CCE Chennai reported in 2008 (228) ELT 374(Tri. Chennai) face wash being a preparation wholly or partly consisting of organic surface agent and used for applying on skin and washing off was held to be a washing preparation falling under sub-heading 3402.90. In the case of Hindustan Lever Ltd. Vs. CCE Nagpur reported in 2003 (56) RLT 227 (CEGAT Mum.) the Revenues claim of classification of Liril Active Shower Gel as falling under heading 33.04 was rejected.
13. In view of the above, we find no merits in the Revenues claim of classification of the three products in question under heading 3307.39. The impugned orders, confirming demand of duty against M/s. Alfa Packaging and imposing penalties on the other appellants are accordingly set aside and appeal allowed on above grounds.
14. As the appeal has been allowed on merits, we are not going into the limitation aspect, as pleaded by the appellants.
(Pronounced in Court)
(B.S.V. Murthy) (Archana Wadhwa)
Member (Technical) Member (Judicial)
jk
??
??
??
??
9