Customs, Excise and Gold Tribunal - Mumbai
Hindustan Lever Ltd. vs Collector Of Central Excise on 12 June, 2000
Equivalent citations: 2000(121)ELT451(TRI-MUMBAI)
ORDER G.N. Srinivasan, Member (J)
1. These appeals have been filed against the Order-in-Appeal No. SDK (1005 to 1015) 714 to 724/98 dated 31-7-1998 confirming the Orders-in-Original No. 78 to 80/97/AC.FII dated 5-9-1997 confirming the total duty amount of Rs. 65,35,034/-.
2. The appellants are engaged inter alia in the manufacture and marketing of soaps, detergents, personal products, speciality chemicals, exports and other institutional activities. They are manufacturing bathing bar commonly known as 'soap' in their factory at Haji Bunder, Sewri, Mumbai and marketing and selling the same under the trade mark 'Dove'. The appellants commenced commercial production of manufacturing of DOVE BATHING BAR in their Haji Bunder factory after filing classification list under chapter heading 3401.10 some time in December, 1993. It was provisionally approved and was cleared on payment of duty at 20%, during the period January, 1994 to June, 1994. On 20-6-1994 the appellants filed another classification list in respect of the same product seeking to classify it under Heading 3401.20 attracting basic excise duty at 30% ad valorem. The appellants reclassi-fied DOVE BATHING BAR after ascertaining the inputs used in the manufacture of the product and on their own without being called upon by the department and also paid the differential duty at 10% in respect of the earlier clearances made from January, 1994 to June, 1994.
3. A show cause notice dated 9th September, 1994 was issued by the Assistant Commissioner to the appellants requiring them to reply as to why the bathing bar under the trade name Dove not be reclassified under chapter heading 3304 attracting basic excise duty at 70% ad valorem from 15-12-1993 and attracting excise duty ad valorem w.e.f. 1-3-1994. By their letter dated 30-1-1995 a reply was filed and written submission was filed by their letter dated 19-11-1996. Several show cause notices were issued by the Superintendent demanding differential duty. The charge against the appellants was that there was report of the Deputy Chief Chemist therefore on the basis of the same the classification was sought to be changed from 3401 to 3304. A copy of the test report was not given. It was sought to be replied that the Deputy Chief Chemist nowhere suggested that the DOVE BATHING BAR was not a bathing bar but only opined that DOVE BATHING BAR is not a soap. It was never the case of the appellants that DOVE BATHING BAR is a soap attracting duty under heading 3401.10. It was stated in the reply that under the Drugs and Cosmetics Act and the Rules framed thereunder read with the standards of Toilet Soaps as well as Bathing Bar laid down by Bureau of Indian Standards, Toilet Soaps are so technically known where total fatty matter is in excess of 60%. BATHING BARS are products in which TFM content is less than 60% since these are performance based standards and not input based standards. Further it is stated, for technical reasons, Dove bathing bar, even though commonly perceived, understood, known and bought as a toilet soap but is described as a bathing bar. It was further submitted in the reply to show cause notice that the technicalities cannot replace the well settled and understood principle of classification i.e. the classification is to be based on common man's trade perception of the goods. On the basis of the reply the Assistant Commissioner confirmed the show cause notices. In doing so he held that it was agreed that DOVE contains more than l/4th moisturising cream comprised of 23%, 5% moisture and pH 6 to 7 i.e. very mild acidic or neutral and 1.5% perfume. The product DOVE is cosmetic preparation as beauty bar and used for care of the skin and does not dry skin like soap. Therefore the said product comes under chapter sub-heading 3304. Against these orders several appeals were filed before the Collector of Central Excise, Mumbai who by the impugned orders confirmed the same holding that it was not the case of the appellants that the subject product was covered under technical acceptance of BATHING BAR as contained in Indian Standards Bathing Bar Specification prescribed in Bureau of Indian Standards but their claim is based predominantly on the consideration that the surface active agent is more than 50% and, therefore, under the rules of interpretation, the criteria of pre-dominance should be applied in determination of classification. Hence these appeals.
4. Shri C.S. Lodha, Advocate, argued for the appellants and Shri Deepak Kumar, DR, argued for the department.
5. Shri Lodha argued that the appellants claim the product as an item coming under chapter heading 3401.20 whereas the department claims it under 3304. He invited our attention to chapter note 33 as available from 1994-95 period which states at note l(a) that the chapter does not cover soap or other products of heading 3401. He stated that soap is one of the species out of generic term cosmetics. He also referred to HSN notes for soap as well as organic surface active products pages 18 and 519. He took us through the ISI definition which states that (IS: 7597 to 1974 UDC 661.185.12:001.4 1975 where soap has been defined at paragraph 4.1.4 as follows: a product specifically formulated and manufactured for use as a detergent wherein the surface active agent is predominantly the salts of mixtures of fatty acid contained at least 8 carbon atoms. The surface active agent has been defined as a chemical compound which, when dissolved or dispersed in liquid, is preferentially absorbed by an interface, giving rise to a number of physico-chemical or chemical properties of practical interest. Molecule of the compound includes at least one group with an affinity for markedly polar surface, ensuring in most cases solubilization in water, and a group which has little affinity for water. He also stated that chapter 34 covers soap and other products namely organic surface active agents, washing preparations, lubricating preparations, artificial waxes, prepared waxes, polishing or scouring preparations, candles and similar articles, modelling pastes, dental waxes and dental preparations with a basis of plaster. He stated that once the product in question comes within the chapter 34 in view of chapter note l(a) or as the case may be. l(b) which reads soaps as other products in 3401 would not be covered by chapter 33. Entry 3401 covers, soap; organic surface-active products and preparations for use as soap, in the form of detergent cakes, moulded pieces or shapes, whether or not containing soap; paper, wadding, felt and non-wovens, impregnated coated or covered with soap or detergent and in 3401.20 which reads "organic surface-active products and preparations for use as soap in the form of bars, cakes, moulded pieces or shapes". He states that unlike the soap which goes inside the skin is beauty bar that does not dry the skin like a soap because it is made of neutral cleansing ingredients and 1/4th moisturising cream. He states that it is a beauty bar as mentioned in the cover page 189. The product is only an OSAA preparation as indicated in HSN and put up in the form of a cake. He further emphasizes that it is intended for use as soap which was disputed by the department. He stated that it is an OSAA which contains soap in some proportion. He mentioned the various ingredients of his clients product. He also mentioned about the composition of moisturising cream. He stated that examples of products which are so based and have moisturising cream. He mentioned that oil of an olay moisturing bar (25% moisturising base); rich moisturising soap and special care moisturising soap. He also mentioned examples of the products which are similar to Dove internationally:
(1) Oil of Olay - Proctor & Gamble (2) Caress - Unilever (3) Ivory Bar - Proctor & Gamble (4) Johnson's pH 5.5 - Johnson & Johnson.
He mentioned composition of Lux International which contents :
Soap - 85%, Moisture - 13%, Perfume - 1%, Sodium Chlo - 0.7%, ride Preservatives - 0.3%.
He also read what is emollients. He vehemently charged that the appellate authority had erred in mentioning at page 170 where the appellate authority held as follows: "It is also not their case that the subject product is covered under technical acceptance of bathing bar, as contained in Indian Standard Bathing Bar specification...." He stated that in reply to the show cause notice at page 32 the appellants have stated that the product is described as bathing bar under the Drugs and Cosmetics Act. The soaps are classified in two types namely bathing bar and toilet soap. Bathing bars are soaps while toilet soaps are based on fatty matter ingredients. Bureau of Indian Standards which are mandatory policy lays down a specification of bathing bar and toilet soaps separately. At page 36 also in the written submission it was stated that essentials between toilet soaps and bathing bar are while toilet soap is ingredient based and bathing bar is perfume based product. Keeping the above view the submission continues, even under the Drugs and Cosmetics Act bathing bar, though cosmetics within the meaning of the Act, was not required to have any manufacturing licence while toilet soap is required to have a manufacturing licence. It was further emphasized in the submissions that Dove bathing bar is a specific bar as laid down by BIS. DOVE BATHING BAR is not a toilet soap but organic active agent classifiable under 3401.20. He invited our attention to Rule 150A of the Drugs and Cosmetics Rules. He also invited our attention to letter dated 20-6-1996 written by the Superintendent contained at page 107 of the report which contained Chief Chemist's report. He attacked the Chief Chemist's report. This report, no doubt, was mentioned in the Superintendent's letter and but no cross examination was allowed. He states that the approach of the Chief Chemist is wrong. He read from John v. Simmons, Second Edition of The Science of Cosmetics about what is stearic acid, what is moisturing and states that the entire exercises of the lower authorities are wrong in law and facts. He states that the products come only within sub-heading 3401.20 and not chapter 33 at all. He also gave analysis of the sub-heading 3401 which states that not only a soap can come within the sub-heading 3401 but also OSAA preparations are products which are used as soap. He states that soap has four forms i.e. soap other than for toilet use (3401.11), soap manufactured without form (3401.12), laundry soap produced by KVIC and other approved agency (3401.13) and other soaps (3401.19). The entire analysis of 34 lead one to conclude that it consists of number of organic surface active agents and preparation for use of soap in the form of bars, cakes, moulded pieces or shapes. Lastly paper, wadding, felt and non-wovens, impregnated coated or covered with soap or detergent etc. which are 3401.30. He further stated that in terms of the Bathing Bar Specifications ISI 13498:1997 where it defines BATHING BARS as appearing bar product containing soap or fatty acids and synthetic surface active agents as active ingredients and which should be used for bathing purpose in soft and hard water. He also invited our attention to the ingredients which are contained in bathing bars at paragraph 42.1. He also invited our attention to Annexure 'X' to the said Bathing Bar Specifications which contained in page 7 thereof.
6. In reply Shri Deepak Kumar states that even though the appellants contention that it is a bathing bar and undisputedly it is used as soap and he states that it is not used as a soap, it is used as only SKIN CARE. He invited our attention to the composition of the products which states stearic acid and coconut acid, fatty acid 22% and perfume is 1.5% and moisture is 5%, sodium salt 12%. Therefore, the fatty matter is only 34% and not 40% as required under Bathing Bar Specifications as mentioned in the ISI. Hence he states that it cannot be treated as a bathing bar. Moreover OSAA shows organic surface active agent is 53% namely sodium cocyl isethionate and sodium dodecyl benzene is 2%. It is argued that therefore it can never be a bathing bar and he also emphasized that it is not used as soap. He invited our attention to the same observation of the order-in-appeal at page 5 to the same extract which the counsel showed. He states that in the appeal memorandum at page 18 what is stated therein which reads as: "Without prejudice to the above, even if one was to presume for a moment, that "Dove" does not merit classifcation under CSH 3401.20, it does not, by default, qualify under CSH 3304.00. 3304.00 is not a residual head, as the Dept. has almost made it out to be. Chapter heading 3304.00 under which the product is sought to be reclassified is more appropriately applicable to beauty or make-up preparations, ...which are designed primarily to cleanse the skin. Dove bathing bar does not stand on the same footing...." The DR argued that it cleanses and moisturises. The product contains also perfume as the ingredients of the product shows that. Therefore it is a cosmetic falling under chapter subheading 33.
7. In reply to the arguments made by Shri Deepak Kumar, Shri Lodha stated that the total fatty matter in DOVE consists of several ingredients of which sodium cocyl isethionate is 50%. It is an OSAA that comes to equivalent of TFM 29.6%, stearic acid 23%, soap is 10%. Total comes to 62.6%. Therefore it completely conforms to ISI standards.
8. We have considered the rival submissions. Even though there are 11 show cause notices, we will take up the show cause notice dated 9-9-1994. The first paragraph thereof reads as under :
"M/s. Hindustan Lever Ltd., Sewree, Bombay-15 (hereinafter referred to as "the Company") had filed Classification List bearing No. CL/Soaps/93/5 dated 15-12-93 and CL/Soap/94/3 dated 20-6-94 (Range Sr. No. 56/93-94 & 06/94-95) for their product "Dove 100 Gms" classifying the said product first under Chapter S.H. 3401.10 chargeable to B.E.D. @ 20% Adv. and subsequently under S.H. 3401.20 @ 30%. The party described the product on their primary packing in which the said product is sold, enclosed herewith the classification list as "Dove Beauty Bar", "Doesn't dry skin like Soap", "Dove is a beauty bar that does not dry the skin like soap can because it is made of neutral cleansing ingredients and 1 /4 moisturising cream", "Bathing Bar". On the basis of the Company's declaration, the Classification List was approved provisionally, pending test result from Dy. Chief Chemist by the Asstt. Collector, C. Excise, Division F-IL Bombay-1, on 28-2-94 & 27-7-94. The sample of the product was drawn by the Superintendent, C. Excise, Range VI, F-II Dn. for Dy. Chief Chemist test. It is found from the Dy. Chief Chemist's report that "the sample is in the form of ellipsoidal shaped dull white piece having fragrance. It is sticky in feel and is not alkaline. It is composed mainly of combined fatty matter, free fatty matter, OSAA & emollient materials such as Lecithin etc. The percentage of OSAA is much more than 5%. The sample does not satisfy the statutory definition of Soap as given in the HSN as much as it is not an alkaline Salt of a fatty acid or a mixture of fatty acids coupled with the advertisements, it is unlike soap, but it is a beauty bar". The Dy. Chief Chemist's report is contradictory to the declaration given by the Company."
In reply to the show cause notice the appellants by their letter dated 30-1-1995 at page 3, paragraph iv stated as follows :
"The Dove bathing bar is described as bathing bar because under the Drugs and Cosmetics Act, the soaps are classified in two types, viz. Bathing Bars and Toilet Soaps. Bathing Bars are performance based soaps while toilet soaps are based on a fatty matter or ingredient based soap. The Bureau of Indian Standards which are mandatory also lays down the specifications of Bathing bar and Toilet Soaps separately. We crave leave to refer to and rely upon the same at the time of personal hearing."
In further statements at page 2 of the appellants letter dated 19-11-1996 it is mentioned as follows :
"Further, under the Bureau of Indian Standards there are two different standards prescribed for Toilet Soaps as well as for Bathing Bars. Copies of standards of Toilet Soaps as well as Bathing Bars are enclosed and marked as Annexure 'A'. You would notice that the essential difference between Toilet Soaps and Bathing Bars is while Toilet Soap is ingredient based, Bathing Bar is performance based product. Keeping the above view even under the Drugs and Cosmetics Act Bathing Bar though cosmetic within the meaning of the Act is not required to have any manufacturing licence while Toilet Soap is required to have a manufacturing licence. Dove Bathing Bar meets the specifications of Bathing Bar as laid down by the Bureau of Indian Standards. Dove Bathing Bar is not a Toilet Soap but Organic Surface Active Product classifiable under Chapter 3401.20."
Before the adjudication order by letter dated 20-6-1996 Chief Chemist's report was given which reads as under :
"The sample is packed in printed paper cartoon description given on the packing is as follows.
1/4 moisturing cream Net wt. 100 g, Dove Beauty Bar Does not dry skin like soap.
Dove is a beauty Bar that does not dry the skin like soap can because it is made of neutral cleansing ingredients and 1 /4 moisturising cream.
The sample was subjected to test and it is observed that sample is elliptical shape white bar having pleasant odour. It is composed of 52.66% non-ionic surfactant and 21.85% TFM (total fatty matter). Sample also contains salt of stearic acid and polyglycode. It is acidic in nature.
According to the literature on cosmetics, moisturising cream purporated to main the moisture content of skin and prevent dry skin condition by absorption of moisture and this consists of stearic acid salt - glycol and emulsifying agent.
According to HSN explanatory Notes page 482 soap and alkaline salt (inorganic or organic) formed from a fatty acid or a mixture of fatty acids containing at least eight carbon atoms.
Since the sample is not alkaline salt of fatty acid or a mixture of fatty acids, it does not conform to the requirements of toilet soap. It is moisturising preparation for care of skin, akin to moisturising cream.
Sealed remnant sample is being returned separately."
In the Order-in-Original in the finding portion it was found by the AC as follows:
"I have gone through the case records while deciding the correct classification of the product 'Dove Soap'. I have discussed the issue in length vide Order-in-Original No. 95/96 dated 20-12-1996 passed by me under F. No. CLVL/FII/VI/HLL/94. It is agreed that 'Dove' contains more than 1/4 moisturising cream comprised to 23% fatty acids, 5% moisture and pH 6 to 7 i.e. very mild acidic or neutral and 1.5% perfume. The product 'Dove' is cosmetic preparation as beauty bar and used for care of the skin to moisturising cream and does not dry skin like soap. Therefore, the said product merit classification under CH. S.H. 3004.00 attracting duty @ 40% for March 1995, @ 40% for January 1997 to February 1997 and @ 30% to March 1997 to May 1997. Therefore, I find that SCNs issued by the Range Superintendent are sustainable and are required to be confirmed. Accordingly, I pass the following order."
In the Order-in-Appeal when the appeal was filed in paragraph 13 of the said order the Commissioner (Appeals) has held as follows :
"Appellants have also not claimed the classification for the subject product "Dove" as a soap under Chapter Sub-heading 3401.10, but has sought its classification as organic surface active product and preparation for use as soap in the form of bars, cakes, moulded pieces referred in Chapter subheading 3401.20 of the schedule. It is also not their case that the subject product is covered under technical acceptance of bathing bar, as contained in Indian Standard Bathing Bar specification prescribed by Bureau of Indian Standard, but their claim is based predominantly on the consideration that the surface active agent contained therein is more than 50% and, therefore, under the rules of interpretation, the criteria of pre-dominance should be applied in determination of classification. Appellants are also not contesting the findings of the Assistant Commissioner that the statutory requirements of indicating the contains of bathing bar, provided under the said specific standard, are not contained in the label placed on this product. This product is marketed as "beauty bar", that "does not dry the skin like soap" because it is made of neutral cleansing ingredients and 1/4 moisturising cream. The price shown for 100 gms. packing is Rs. 30/-. The findings of the Assistant Commissioner on its acidic nature is contested, but no evidence has been cited for this, while the report of the Chief Chemist indicates otherwise, that the sample is slightly acidic."
____________________________________________________________ Heading Sub-Heading Description of goods Rate of No. No. duty ____________________________________________________________ 33.04 3304.00 Beauty or make-up 50% preparations and preparations for the care of the skin (other than medicaments), including sunscreen and suntan preparations; manicure or pedicure preparations.
____________________________________________________________ The party claims it under 3401 which reads as under :
____________________________________________________________ Head- Sub- Description of goods Rate of ing Heading duty No. No. ____________________________________________________________
34.01 Soap; organic surface-active products and preparations for use as soap, in the form of bars, cakes, moulded pieces or shapes, whether or not containing soap, paper, wadding, felt and non-wovens, impregnated coated or covered with soap or detergent 3401.10 Soap in any form 20% 3401.20 Organic surface-active products 30% and preparations for use as soap in the form of bars, cakes, moulded pieces or shapes 3401.30 ...
____________________________________________________________ The composition of Dove is as follows :
____________________________________________________________ Item % incorpn Nature Function ____________________________________________________________ Sodium Cocyl 51 % Organic Surface Active Agent Cleaning Isethionate & Foam Sodium Dodecyl 2 % Organic Surface Active "
Agent "
Benzene Sul-phonate Stearic Acid 22 % Fatty Acid Binder and Coconut Acid Sodium Salt of 12 % Soap Cleaning Vegetable Oil, Sodium Cocoate and Sodium Palm Kernelate Sodium Chlo- 5.6% Electrolyte Bar ride and So- hardening dium Isethionate Perfume 1.5 % Fragrance Tri-Sodium 0.2% Chelating agent Preserva-
EDTA and Tri- tive
Sodium Etidro-
nate
BHT 0.2% Phenolic compound Anti-
oxidant
Titanium Diox- 0.5 % Pigment Impart
ide whiteness
Moisture 5 % Water Moisturiser
____________________________________________________________
Composition of Moisturising Cream is like this :-
____________________________________________________________
Item % incorpn Nature Function
Stearic Acid 22% Fatty Acid Moisturiser
Moisture 50% Water "
Mineral Oil 10% Paraffin "
Glycerine 10% Chemical "
Tween 60 5 % Organic Emulsifier
Surface
Active
agent
Perfume 3% Perfume Fragrance
____________________________________________________________
Composition of Dove in another form is as follows :
OSAA+Soap + Fatty Acid + Water + Perfume + Others
51% 12% 22% 5% 1.5%
28.5%
Ingredients of moisturising cream
The difference in soap and Dove :-
"Soap is a sodium salt of fatty acid which apart from having cleansing properties dries the skin. It dries the skin because it tends to penetrate the pores of the skin since it has a smaller head group. Dove on the other hand has a larger head group which cannot penetrate the skin pores and therefore is soft on the skin.
Oil is triglyceride having structure RCO-OCH2. These are reacted with Caustic Soda (NaOH) to obtain 3RCOONa (Soap) and Glycerine.
There is yet another process where oil is boiled with water under pressure. As a result the fatty portion (Fatty Acid) splits and you obtain 3RCOOH and Glycerine. The fatty acid is then reacted with Caustic Soda (NaOH) to obtain RCOONa (Soap) + water.
While in case of soaps fatty acids are reacted with caustic soda (NaOH) to obtain alkaline salt of fatty acid, in case of DOVE fatty acids are reacted with Sodium Isethionate (OHCH2SO3Na) a chemical available like caustic soda.
Rexona Coconut oil (20%) + rice bran oil (80%) Dove Coconut oil (100%) + OHCH2SO3Na The word soap has been defined in HSN as follows :
"Soap is an alkaline salt (inorganic or organic) formed from a fatty acid or a mixture of fatty acids containing at least eight carbon atoms. In practice, part of the fatty acids may be replaced by resin acids.
The heading covers only soap soluble in water, that is to say true soap. Soaps form a class of anionic surface-active agents, with an alkaline reaction, which lather abundantly in aqueous solutions.
There are three categories of soap:
Hard Soaps, which are usually made with sodium hydroxide or sodium carbonate and comprise the bulk of the ordinary soaps. They may be white, coloured or mottled.
Soft soaps, which are made with potassium hydroxide or potassium carbonate. They are viscous and generally green, brown or pale yellow in colour. They may contain small quantities (generally not exceeding 5%) of synthetic organic surface-active products.
Liquid soaps, which are solutions of soap in water, in some cases with a small quantity (generally not exceeding 5%) of alcohol or glycerol added, but not containing synthetic organic surface-active products."
So when we go through this it is very clear that the product contains fatty acids OSAA which is sodium cocyl isethionate 53%. But if it is an OSAA, does it indicate coming under 3401? What does it say? If we look into the chapter heading it starts with soap, OSAA products organic surface active products and preparation for use as soap in the form of bars. The product here is in the form of bar. It can be the chapter heading which covers soap in any form. What is soap has been already described in HSN. The various categories of soaps are also mentioned. It is not the case of the appellants that they are having soap only. Here the soap is consisted in the form of sodium salt, it contains 11 to 12%, i.e. less than what is contained in OSAA which comes to nearly 53%. The bathing bar has been specified in the ISI in paragraph 311 thereof which has been extracted above which states that product contained which is about 11% and synthetic surface active agents which is also true in this case, namely the product also contains sodium cocyl-isethionate 51%, Sodium Dodecyl Benzene 2%. These are all surface active agents and this has been used for bathing purpose in soft and hard water. The bathing bar ingredients have been described in ISI specification at page 1 which is as follows :
______________________________________________________________________ SI. Characteristics Requirements Method of Test, Ref to No. ______________________________________________________________________ Annex Clause No. of IS 286:1978 ______________________________________________________________________ (1) (2) (3) (4) (5) ______________________________________________________________________
(i) Lather in ml, Min 200 C -
(ii) Mush (loss in mass 15 D -
due to mushing),
g/50 cm2, Max
(iii) Free caustic alkali 0.05 - 6
(as NaOH), percent
by mass, Max
(iv) Free carbonated 1.0 - 28.0
alkali, percent by
Mass, Max
(v) Freedom from grit- To pass E -
tiness the test
(vi) Freedom from " F -
cracking
(vii) Cleaning efficieny " G -
(viii) Total fatty matter 40 H -
percent by Mass, Min
(ix) Synthetic surface 4 H -
active agent, percent
by mass, Min
______________________________________________________________________ From the above it will be clear that the ingredients should contain additional isothionate. We have stearic acid and coconut acid. We also have cocyl isethionate which is 29% TF. The argument of Shri Deepak Kumar is that the total content of fatty matter is only 12% namely soap and fatty matter consist of only 34% that is indicative by Shri Lodha's argument which states as follows :
cocyl isethionate which is equivalent to total fatty matter of 29.6%.
Stearic acid 22%. Soap is either 11 to 12%, i.e. TFM is 10%. The total comes to 62.6%. In the ISI specification we find in table 1 requirements of bathing bar is total fatty matter should be 40% min. and synthetic surface active agent is min. 4%. Shri Lodha during the course of his argument invited our attention to total fatty matter and synthetic surface active agent at page 7 of the ISI specifications which reads as under:
"The test method of analysis for total fatty matter (TFM) given in 15 of IS 286:1978 pertains to the analysis of fatty matter derived from soaps.
In the context of a wider definition of TFM relevant to bathing bar which may contain synthetic actives in addition, it becomes necessary to quantify the fatty chain (s) linked with synthetic surface active agents and include their contribution to the TFM.
Fatty chain anionic surfactants undergo hydrolysis when refluxed with mineral acids to give corresponding fatty matter which can be extracted by petroleum ether along with fatty matter from soap. Non-fatty anionics like LAS and AOS do not undergo hydrolysis and therefore do not interfere in the analysis.
Since several synthetic surfactants are permitted to be used in bathing bar formulations, there is wide variation in the molecular weight range of these surfactants. Estimation of individual surfactants is not necessary from the analytical point.
The analytical strategy involves the estimation of total absolute alcohol soluble matter which will include all surfactants (soaps, non-ionics, anionics and amphoterics). This is the total actives. This absolute alcohol soluble matter is refluxed with 2 N sulphuric acid and extracted with petroleum ether. The residue obtained after evaporation of petroleum ether is the total fatty matter comprising of free fatty acid, fatty matter from soap, as well as fatty matter associated with other surfactants. The difference between percent total actives and percent total fatty matter will be percent synthetic surfactants."
9. Both parties have referred to page 170 of the paper book namely the observation of the Commissioner (Appeals) in paragraph 13. The Commissioner specifically mentioned that it is not the case of the appellants that the subject product is covered under technical acceptance of bathing bar which is wrong. It has been shown in the earlier portion of the judgment that the ingredients contained in the product meet with the specifications contained in ISI namely paragraphs 3.11,4.2 and Annexure H to the said specification. The TFM in Dove meets the requirements of the ISI.
10. Further it should be stated at pages 32 and 36 as quoted above clearly brings out what is the case of the assessee namely if it is a toilet soap it is ingredient based and if it is bathing bar it is perform based. Unfortunately in making the observation the Commissioner (Appeals) has separately cited what is contained in reply to the show cause notice as well as to the written submissions made before the adjudicating authority. Therefore the order suffers from it. Moreover in the affidavit of Dr. Vinodkumar R. Dhanuka at page 108 specifically states that the Deputy Chief Chemist's report finding that licithin is found in the product is not correct. The entire affidavit especially at para 9 thereof which is reproduced below which clearly brings out the difference between toilet soap and bathing bar :
"I state that in India, soap manufacturing is governed by the provisions of Drugs & Cosmetics Act and the Rules framed therein. Under the said Act every manufacturer of soap is required to obtain a licence for manufacturing soaps. In addition, the manufacturer is required to make soaps to be termed as "toilet soaps" to conform to the specifications of toilet soaps as prescribed by Bureau of Indian Standards (IS:2888-1983, a copy of which is enclosed). Essentially, toilet soaps are required to contain total fatty matter of not less than 60% (TFM). The soaps which contain TFM of less than 60% cannot be termed as toilet soaps under the said Act and therefore as per the new standard which has been recently introduced is called "bathing bar". The essential distinction between the toilet soaps and the bathing bars is that toilet soap is based on composition and bathing bar is based on performance."
Paragraph 13 makes a very pointed reference to skin preparations and soap :
"I further state that merely because some soap contain emollient material by itself cannot make such product as cosmetics. Essentially, the difference between soap and skin preparations is that while soap is used for cleaning purposes and it is a rinse off product whereas skin preparation are used for beautification of skin and are leave-on products. Further, skin preparations do not contain active agents which are used for cleaning purposes in most types of soaps. In Dove the active agent is as high as 50%. Dove cannot, therefore, be classified as beauty preparations or cosmetic in technical sense of the term."
These two paragraphs clearly clinch the issue for and on behalf of the assessees. Unfortunately the department has not filed any affidavit nor did they bring any evidence to rebut the same. No doubt in page 4 paragraph 14 they say something about care of skin. The moment any product comes within chapter 3401 comes into play and such a product goes out of chapter 33 in view of chapter note l(b) thereof. We are therefore of the view that the appellants have made out their case and we accept the appeal of the appellants setting aside the orders passed by the lower authorities and the products in question come within the chapter sub-heading 3401.20.
11. Appeals stand allowed.
J.H. Joglekar, Member (T)
12. Advertising is a potent weapon in the manufacturer's armoury. In the present days of consumerism, a wit has defined advertising as the craft of selling product (1) which is not worth buying, (2) which the consumer does not want and (3) which he cannot afford to buy. Very often the product is outrageously priced. The advertiser appeals to the Narcissistic instincts of the buyer and plays upon his or her vanity.
13. Sometimes the exercise creates unforeseen complications for the advertiser. Before the Madras High Court [1985 (22) E.L.T. 701] the issue posed was whether certain "Thailams" (oil) were bath oils intended for cooling the body or whether they were perfumed hair oils. The latter commanded a higher rate of duty. The label on the bottle bore a picture of a woman with luxuriant hair. The cover however stipulated the product as "bath oil". The Excise authorities classified the goods as hair oil. The court in accepting the assessee's case observed as under :
"In this case, the cover contains the expression, "bath oil"- The label of a woman in that style (displaying her lavishly grown and flowing hair) cannot be suggestive of the use of the thailams as hair oils and will depict...only the beauty of a woman and the refreshing effect the woman may have with the use of the thailams as bath oils. In any event it has only an advertising effect or value and nothing more. Further, tax on a product cannot be levied merely on the basis of a suggestive aspect of a picture found in the label which is intended to attract the customers to use the thailams. The expression "perfumed hair oil" will normally indicate an oil which is exclusively prepared for the care of the hair and it will not in any sense include a bath oil which is applied to the entire body or portions of the body before bath. It is the specific case of the respondent that in the commercial field the thailams manufactured by it are not treated as hair oils much less perfumed hair oils, as the thailams are intended for use for cooling the body as such. These thailams could never be considered as an item of cosmetic or toilet preparation."
14. In the case of Blue Star Ltd. v. UOI [1980 (6) E.L.T. 280] the Bombay High Court was considering the classification of "walk-in-coolers". There also the advertising material had led the department to classify the product to the detriment of the assessee. In holding for the assessee the High Court held-
"In any event, what the petitioner may advertise by way of attracting customers, can be no criterion for adjudicating upon the issue whether duty is payable under a particular tariff item. In other words, payment of duty under a particular tariff item must depend upon the facts of the case and not on the advertisement gimmick of the advertiser. Thus, it is not on the basis of what the petitioner advertises to attract customers, can its liability to pay duty under a particular tariff item be fastened but on the facts and circumstances actually existing and on a determination whether on the basis of those facts and circumstances as disclosed by the record, the case would fall within the provisions of Tariff Item No. 29A (1) or not".
The present case is another example of how the tall claims made in the sales literature created complications for the manufacturer.
15. The appellants manufactured soaps for toilet use. One brand called 'dove' was classified under heading 3401.10 in terms of the classification approved provisionally on 24-4-1994. On 20-6-1994, the appellants sought reclassification under heading 3401.20. They voluntarily debited the differential duty also. A number of show cause notices were issued seeking reclassification of the product under heading 3304. The sample was subsequently retested in the Chief Chemist New Delhi Laboratory. The communication of the findings of the Chief Chemist was made by the jurisdictional Supdt. in his letter dated 20-6-1996, the text of which is available in the order made by Member (J).
16. After hearing the assessee the Asstt. Commissioner passed the orders drawing strength from his earlier order dated 20-6-1996. He confirmed classification under heading 3304 and confirmed the consequent differential duty. The Commissioner (Appeals) vide the impugned order upheld the lower findings resulting in the present appeal.
17. We have heard Shri Lodha, counsel for the appellant and Shri Deepak Kumar, SDR, for the revenue.
18. At the material time, the contesting chapter headings read as follows:
"Heading 3401 - Soap, organic surface-active products and preparations for use as soap, in the form of bars, cakes, moulded pieces or shapes, whether or not containing soap, paper, wadding, felt and non-wovens, impregnated, coated or covered with soap or detergent"
Heading 3304 - Beauty or make-up preparations and preparations for the care of the skin (other than medicaments), including sunscreen and suntan preparations; manicure or pedicure preparations."
19. Some of the show cause notices as also the report of the Chief Chemist reproduced the various claims printed on the lable. The material read as under:
"Dove is a beauty Bar that does not dry the skin like soap because it is made of natural cleansing ingredients and 1/4 moisturising cream. It is also described as "bathing bar".
20. Shri Deepak Kumar commenting on the claim of the contested product being bathing bar cited the requirement of bathing bar as per the IS 13498:1992. He stated that the requirement of total fatty matter of 40% minimum is not satisfied here. Shri Lodha contested this and stated that some of the ingredients such as cocyl isethionate which is a Organic Surface Active Agent had the function of cleaning and foaming would also classify for TFM as a percentage thereof. Similarly, stearic acid and coconut acid were fatty acids and would count towards the TFM content.
21. During the proceedings, Shri Lodha's attention was drawn to the claim containing of l/4th moisturing cream. A specific question was made whether the cream was first made and then added as an input in making the soap. Shri Lodha very candily explained the reality and that is that the ingredients in the soap were of such kind and of such quantity as would be available in a moisturing cream weighing l/4th of the weight of the soap. In the face of this explanation, I agree with the ld. brother that the contested product contained sufficient TFM to qualify as "soap". Since the bathing bar does not have a separate identity in the Tariff, it is not necessary to labour the issue whether the contested product passes muster as bathing bar or not.
22. The limited issue is whether dove is an OSAA product for use as soap or whether it is a preparation for the care of the skin. Shri Lodha has demonstrated by listing the chemical components and their percentages as well as the process of manufacture that Dove is an OSAA preparation for use as soap. There is an affidavit of one Mrs. Nalini Ajay who is a business executive as well as a house wife affirming that dove is a product to be used as soap. Yet another affidavit is filed by one Shri A. Achala Srivatsa of a Research Organization by citing the findings of a survey that dove was comparable with premium soaps and not with skin preparations such as cosmetics. There are other affidavits of the technical personnel of the company which I would not take into account on the ground that these are affidavits filed by interested persons.
23. The Supreme Court in laying down the law as to classification of goods under the Tariff has consistently held that the commercial nomenclature or trade understanding should the basis of classification except when the statutory content, in the Tariff Entries requires a departure. In paragraph 53 of the judgment in the case of Akbar Badruddin Jiwani v. CC [1990 (47) E.L.T. 161 (S.C.)] the Court held "it is well settled that in Taxing Statute the words used are to be understood in the common parlance or commercial parlance...where the word in the Tariff Entry has not been used in a scientific or technical sense...." In their judgment in the case of Metagraphs Pvt. Ltd. [1996 (88) E.L.T. 630 (S.C.)] the Supreme Court held that trade parlance/common parlance of a particular product was the material factor in arriving at the classification. The same view was held by the Supreme Court in their judgment in the case of Chemical and Fibres of India Ltd v. UOI [1997 (89) E.L.T. 633 (S.C.)].
24. The word "soap" as is commercially understood or is apprecated by an individual means a product which lathers, in the process cleansing the body of a person (or a fabric in the case of laundry cloth) of grime and dirt. This was the appreciation of the people used as samples in the test conducted referred to above. In a departmental store like Apna Bazaar, Dove is found nestling on the same shelf with other soaps.
25. With these findings, I agree with the findings of my ld. Brother (J). Accordingly, the appeals stand allowed.