Customs, Excise and Gold Tribunal - Delhi
Veto Co. vs Collector Of Central Excise on 28 July, 1992
Equivalent citations: 1993ECR100(TRI.-DELHI), 1992(62)ELT584(TRI-DEL)
ORDER P.K. Kapoor, Member (T)
1. This is an appeal against the Order passed by the Collector of Central Excise (Appeals), Madras. Briefly stated the facts of the case are that prior to 27-2-1986 the appellants product 'Rita' was being assessed as 'Perfumed hair oil' under Item 14(ii)(b) of the erstwhile Central Excise Tariff on the basis of the approved classification list. On 6-3-1985 the appellants filed a revised classification list claiming the product 'Rita' as classifiable under Tariff Item 68 on the grounds that by itself 'Rita' was only a concentrate which could be used as hair oil only after mixing it with certain oils like Coconut oil or Gingly Oil. On the same grounds the appellants also preferred a refund claim on 30-3-1985 in respect of the differential duty paid during the period 23-7-1982 to 22-3-1985. They contended that unmixed products which were not directly used like that of the appellants became exigible only with effect from 17-3-1985 when Explanation III was added to Item 14F of the Tariff. However, on the grounds that the product in question was being marketed by the appellants as a 'hair oil' and was also known to their dealers and consumers as a hair oil the Assistant Collector held that it was correctly classifiable under Tariff Item 14F. For these reasons and also on the ground that a part of the claim for refund of duty pertained to the period beyond the period of six months, the Assistant Collector rejected the refund claim filed by the appellants. Being aggrieved by the Order passed by the Assistant Collector the appellants preferred an appeal before the Collector (Appeals) who while rejecting the appeal by the impugned order dated 25-8-1.987 did not go into question whether the appellants claim was time barred. The Collector (Appeals) observed that the appellants product being hair oil in concentrated form was covered by Tariff Item 14(ii)(b) even prior to the insertion of 'Explanation III' in Tariff Item 14F with effect from 17-3-1985.
2. On behalf of the appellants the learned Consultants S/Shri P.C. Srinivasan and Vijay Raghavan appeared before us. Shri Srinivasan stated that the finding of the lower authorities that the appellants product marketed under the trade name 'Rita' was a perfumed hair oil was erroneous since it was neither an oil for the care of hair nor was it perfumed. He added that the product in question being a concentrate was not covered by Tariff Item 14F since it could not be used without mixing with other oils such as coconut oil/Castor oil. He further contended that the product in question was not covered by Tariff Item 14F(ii)(b) also for the reason that it had a perfume because of the presence of certain volatile oils such as lemon grass oil and citronella oil and not on account of any perfume having been imparted to it in any positive or deliberate way. In this regard he placed reliance on the decision of the Bombay High Court in the case of Ramthirth Yogashram v. State of Maharashtra reported in 1968 (22) STC 76 . He stated that on the cartons in which this disputed product was sold and also on the literature supplied along with the goods the manufacturers had not claimed that the product was a perfumed hair oil instead it was simply described as 'Rita' compound. He contended that the marketing of the product in very small packings of only 20 ML was indicative of the fact it was only a concentrate and could not be categorised as a 'hair oil' which is normally marketed in much larger packings. He stated that even in the Indian Standard Specification for Hair Oil (First Reprint May 1980), hair oil concentrates have been treated as different products. He argued that the appellants product which was a concentrate could be deemed to have become exigible only after the enlargement of the scope of Tariff Item 14F so as to include in its fold even unmixed products by virtue of the 'Explanation' which was added to this item with effect from 17-3-1985. On these grounds he pleaded that upto 16-3-1985 the product in question was classifiable under Tariff Item 68 and the collection of duty under Tariff Item 14F being without sanction of law was refundable.
3. On behalf of the Revenue, the learned JDR Shri L.N. Murthy stated that prior to 17-3-1985 over a long period the appellants had been claiming that their product was a perfumed hair oil and the assessments during the period for which refund had been claimed was done on the basis of the approved price lists. He added that the label on the product and the I.S.I. specification cannot be the basis for classification of a product and it was well settled that in these matters what is relevant is how any item is known and treated in the trade. He stated that in the permanent S.S.I. Registration Certificate issued to the appellant in 1977 the Director of Industries and Commerce, Madras the appellants were registered only for the manufacture of 'Hair Oil' and according to the Trade Mark Registration Certificate issued by the Registrar of Trade Marks as well the product in question has been described as a hair oil. He pointed out that in the Certificate of Renewal of the Licence for the manufacture of cosmetics also the appellants, the concerned authority had described their product as 'Rita Hair Oil'. He also referred to the copies of the documents at pages 6 to 9 of the Paper Book filed by the Department and stated out that the appellants product was known only as a hair oil in the trade since in the orders placed by different dealers it had been described as 'hair oil'. He contended that from these documents it was evident that on appellants own declarations and according to the thinking of the trade the product in question was a hair oil. He pleaded that on this basis the product in question was classifiable under Tariff Item 14F even prior to 17-3-1985. On these grounds and also for the reason that during the relevant period the goods were assessed on the basis of an approved price list he pleaded that the appellants did not have any case. In support of his contentions he cited the following case law:
Collector of Customs v. Bhor Industries Ltd. -1988 (35) ELT 346 (SC) Union of India v, T.S.R. & Co. -1985 (22) ELT 702 (Mad.) Indian Aluminium Cable Co. Ltd. v. Union of India - 1985 (21) ELT 3 (SC)
4. We have examined the records of the case and considered the submissions made on behalf of both sides. It is seen that the main point that arises for consideration in this case is whether prior to 17-3-1985 the appellants product sold under the Brand name 'Rita' could be deemed as a perfumed hair oil classifiable under Tariff Item 14F(ii)(b) or it had to be treated only as a compound or concentrate falling under Tariff Item 68. In order to appreciate the rival contentions, we consider it desirable to reproduce below the Tariff Item 14F(ii)(b) and Explanation III which was added to this item with effect from 17-3-1985 :
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Item No. Tariff Description 1 2
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14F Cosmetics and toilet preparations not containing alcohol or opium,
Indian hemp or other narcotic drugs or narcotics, namely:
(i) ...
(ii) Preparations for the case of the hair -
(a)...
(b) Perfumed hair oils
(c)...
Explanation III. - This item includes unmixed products only when they are in packing of a kind sold to consumer and put up with labels literature or the other indications that are for use as cosmetics or toilet preparations or put up on a form clearly specialised to such use.
5. We find from the records of the case that the lower authorities did not have before them the results of any test indicating the Chemical Composition of the disputed product. It is also seen from the records of the case that the manufacturers had neither indicated the details of the ingredients of the disputed product on the cartons nor in the literature meant for the guidance of the consumers. In any case as held by the Madras High Court in the case of Union of India v. T.S.R. & Co., reported in 1985 (22) E.L.T. 702 the label on a product and advertisement which is suggestive of use for attracting customers cannot be the determining factor for the classification of a product. The appellants have contended that even in terms of the Indian Standard Specification for Hair Oil (No. SS 7123-1973) which places hair oil and hair oil concentrates in distinct categories their product has to be deemed as a hair oil concentrate and not a perfumed hair oil since it was usable only by mixing with 10 or 20 times the quantity of other oils such as coconut oil or mustard oil. In this regard we find that in the case of Indian Aluminium Cables Ltd. v. Union of India, reported in 1985 (21) E.L.T. 3 it has been held by the Hon'ble Supreme Court that specifications issued by Indian Standard Institution being meant for ensuring quality control are not relevant for determining the class to which the goods belong in a Tariff Schedule. Hence the I.S.I. specification which has been referred to by appellant cannot be of any assistance to them.
6. It is well settled that goods have to be classified under the tariff schedule according to their popular meaning or as they are understood in their commercial sense and not as per their scientific or technical meaning. In this regard we consider it relevant to refer to the observations of the Hon'ble Supreme Court in Para 13 of the judgment in the case of Plasmac Machine Mfg. Co. Pvt. Ltd. v. Collector of Central Excise -1991 (51) ELT 161 , which is reproduced below :
"13. The submission that 'nuts' in Entry 52 are to be understood in the commercial sense is not disputed by the department. It is an accepted principle of classification that the goods should be classified according to their popular meaning or as they are understood in their commercial sense and not as per the scientific or technical meaning, Indo International Industries v. Commissioner of Sales Tax, U.P. - 1981 (3) SCR 294 and Dunlop India Ltd. v. U.O.I. (1976) 2 SCC 241 have settled this proposition. How is the product identified by the class or section of people dealing with or using the product is also a test when the statute itself does not contain any definition and commercial parlance would assume importance when the goods are marketable as was held in Attul Glass Industries (Pvt.) Ltd. v. Collr. of C. Ex. - (1986) 3 SCC 480 and Indian Aluminium Cables Ltd. v. U.O.I. - (1985) 3 SCC 284 . In Asian Paints India Ltd. v. Collr. of C. Ex. - (1988) 2 SCC 470 , which was a case of Emulsion paint, at para 8 it was said :
"It is well settled that the commercial meaning has to be given to the expression in tariff items. Where definition of a word has not been given, if must be construed in its popular sense. Popular sense means that sense which people conversant with the subject matter with which the statute is dealing, would attribute to it'.
CIT v. Taj Mahal Hotel -1972 (1) SCR 168 : (1971) 3 SCC 550 was applied."
7. We find from the case records that prior to 17-3-1985 for a number of years the disputed product was being assessed as a 'perfumed hair oil' on the basis of approved classification lists in which the appellants had themselves been declaring the item as 'perfumed hair oil'. The permanent S.S.I. Certificate of registration issued by the Department of Industries and Commerce, Madras also shows that from 1977 onwards the appellants have been registered for the manufacture of only hair oil. In the Certificate issued by the Registrar of Trade Marks under the Trade and Merchandise Marks Act, 1958 as well the product in question was described as hair oil. It is also seen that in the certificate of renewal of licence for the manufacture of Cosmetics issued to the appellants the concerned authority had described their product as 'Hair Oil'. The copies of the documents at pages 6 to 9 of the Paper Book filed by the respondents disclose that the dealers in different parts of the country while placing orders on the appellants for the supply of the disputed product had also been describing the product as 'Rita Hair Oil'. It is therefore evident that even prior to 17-3-1985 when Explanation III was added to Item 14F of the Tariff in common and trade parlance the disputed product was known as a hair oil. Under these circumstances we are of the view that the appellants contention that prior to 17-3-1985 their product had to be treated as a concentrate or compound classifiable under Item 68 of the Central Excise Tariff has no force at all.
8. We find that in the literature which was being supplied along with the product, the manufacturers had claimed that it was pleasantly perfumed. Relying upon the decision of the Bombay High Court in the case of Ramthirth Yogashram v. State of Maharashtra (supra) the appellants have contended that their product could not be treated as a perfumed hair oil also for the reason that its perfume was on account of the presence of certain volatile ingredients such as 'lemon grass' oil and 'Citronella oil' and not on account of any perfume having been deliberately imported to it. In this regard we find from the following extracts from the Chapter on Essential Oils in 'Kirk-Othmer' Encyclopedia of Chemical Technology that oils such as lemon grass oil and Citronella Oil are used for importing flavours or fragrance.
"Essential oils are isolated from various plant parts, such as leaves (patchouli) fruit (mandarin), bark (cinnamon), root (ginger) grass (citronella), wood (amyris), heartwood (cedar), gum [myrrh oil (8016-37-3)], balsam [Tolu balsam oil (8024-03-1)], berries (pimenta), seed (caraway), flowers (rose), twigs (clove stems) and buds (cloves). These plant parts are processed to yield their quintessences or essential oils which are mostly devoid of cellulose glycerides, starches, sugars, tannins salts and minerals which also occur in these botanicals"
"Essential oils are used as such for flavours and fragrances, but products derived from, or based on essential oils have large volume usage for specific applications. Essential oils are concentrated rectified, extracted or chemically treated to further isolate vital components, purify adjust properties or increase the concentration of significant flavour or fragrance components."
It is evident that the essential oils such as Citronella Oil and Lemon grass oil were deliberately added to the appellants product to impart perfume. For this reason and also in view of the fact that the appellants had themselves claimed in the literature which they were supplying along with the product that it was perfumed, their contention that the goods in question could not be deemed as 'perfumed' hair oil has to be rejected.
8A. In view of the above discussion we hold that even prior to 17-3-1985 when Explanation III was added to Item 14F of the Central Excise Tariff, the disputed product for the purposes of classification had to be treated as 'perfumed hair oil' and was therefore classifiable under Tariff Item 14F(ii)(b).
9. Since we have held that the disputed product was a 'perfumed hair oil' classifiable under Tariff Item 14F(ii)(b) even prior to 17-3-1989 it is not necessary for us to examine the question whether the refund claim filed by the appellant was filed within the statutory time limit.
10. In view of the foregoing the appeal is rejected.