Customs, Excise and Gold Tribunal - Mumbai
Baccorose Perfumes And Beauty Products ... vs Commissioner Of Central Excise on 30 May, 2005
ORDER S.S. Sekhon, Member (T)
1.1 Appellants have a unit registered in Kandla Free Trade Zone (KAFTZ) where they procure imported and indigenous raw material and subject them to the following process -
a) PROCESS A:
i) The unfilled bottles/godets/tubes/containers etc. are imported. The perfumes/deodorant /eau de toilette/Cream/make up mass etc to be filled in is separately imported in bulk quantity. Besides, various packing materials like pumps, actuators, collars, caps, individual cartons, liners, labels, etc, are all separately imported. Inner cartons, outer cartons, gum tape rolls strapping materials etc. are procured from Intra zone units and BOPP films and some labels are procured from indigenous suppliers.
ii) All the imported materials are tested and checked with the master samples maintained at the factory and their conformation to strict quality requirements is ensured.
iii) The bottles/godets/tubes/containers etc are filled in the factory and in case of bottles the fitment of pumps, actuators and collars, is carried out.
iv) Individual cartons and liners are folded and kept ready for packing of the required products.
v) The bottles are spray tested on the conveyor and then inserted in individual cartons which are subsequently labeled.
vi) After the various products are put in their respective individual cartons and the individual cartons are labeled, the activity of cellophaning of individual cartons is carried out. The BOPP films used for cellophaning are cut to specific sizes and cellophaning is carried out either manually or with the cellophaning machine.
vii) The cellophaning cartons are assembled and assorted as per the customers requirements and then placed in inner cartons which are then labeled.
viii) The inner cartons are segregated and assorted as per customers requirements and subsequently placed in outer cartons, gum taped, strapped and labeled as per shipment specifications.
b) PROCESS B:
i) in this case, the consignments are imported in bulk quantity in the form of - filled bottles/godets/tubes/containers etc and the various packing materials like caps, individual cartons, liners, labels, etc. are separately imported. Other packing materials like inner cartons, outer cartons, gum tape rolls, strapping materials etc. are procured from intra-zone units and BOPP films & some labels are procured from indigenous suppliers.
ii) The imported materials are tested and checked with the matter samples maintained at the factory and their conformation to strict quality requirements is ensured.
iii) Individual cartons and liners are folded and kept ready for packing of the required products.
iv) The bottles are spray tested on the conveyor and defective items are rejected.
v) The products are then inserted in individual cartons which are subsequently labeled.
vi) After the various products are put in their respective individual cartons and the individual cartons are labeled, the activity of cellophaning of individual cartons is carried out. The BOPP films used for cellophaning are cut to specific sizes and cellophaning is carried out either manually or with the cellophaning machine.
vii) The cellophaning cartons are assembled and assorted as per the customers requirements and then placed in inner cartons which are then labeled.
viii) The inner cartons are segregated and assorted as per the customers requirements and subsequently placed in the outer cartons, gum taped, strapped and labeled as per shipment specifications.
c) PROCESS C:
i) the imported consignments are in the form of filled bottles/godets/tubes/ containers etc. which have been placed in the individual cartons. However packing materials such as labels are imported separately. Other packing materials such as inner cartons, outer cartons, gum tape rolls, strapping materials, etc are procured from intra-zone units and BOPP films and some labels are procured from indigenous suppliers.
ii) The products are removed from their individual cartons and tested for their conformity with the master samples maintained at the factory. In case of bottles, the activity of spray testing on conveyors is carried out after dismantling the filled bottles. Detective products are rejected.
iii) The products are then inserted in their respective individual cartons which are subsequently labeled.
iv) After the various products are put in their individual cartons and the individual cartons are labeled, the activity of cellophaning of individual cartons is carried out. The BOPP films used for cellophaning are cut to specific sizes and cellophaning is carried out either manually or with the cellophaning machine.
v) The cellophaned cartons are assembled and assorted as per the customers requirements and then placed in inner cartons which are then labeled.
vi) The inner cartons are segregated and assorted as per the customers requirements and subsequently placed in outer cartons, gum taped, strapped and labeled as per shipment specifications.
And export the resultant bottle of Perfumes deodorants eau-de-edene etc. 1.2 Imports made were claimed and cleared on BEs filed by claiming the benefit of notification 133/94 cus., 9 such BEs were cleared during the period September 1999 to December 1999 However vide letter dtd 7/12/99, the Appraising Office directed them not to use the good till the finalization and on 17/1/99, a show cause notice was issued for the 9 BEs demanding duty by denial of the exemption on the grounds -
i) the consignment imported were finished products in assorted size and ready for sale requiring no further manufacturing/processing. The permission dtd 18/12/84 of Ministry of Commerce & 12/10/99 of Development Commissioner permit imports of Cosmetics & Toiletteries in bulk and require the appellants to re-assessable, retest & repack in assorted size subject to no objection from KAFTZ. Customs & no such no objection was obtained, therefore benefit of not 133/94 cus claimed without indicating the serial number was not available.
ii) In respect of BE No 1771 dtd 30/12/99, it was alleged that deodorants cans 6912 pieces, were in retail packing & being finished products were not covered under notification 133/94-cus.
iii) since the nine consignments were, import of finished goods, in retail pack/consumer pack & not in bulk as permitted; no further processing /manufacture was required the goods were of a kind ready to be sold in retail, they did not figure in the list of items eligible for exemption under notification 133/94
iv) imports were in violation of the permission granted by the Ministry & the Development Commissioner & were liable to confiscation under Section 111(d) of the Customs Act 1962.
v) There was an attempt towards evasion of Customs duty to the tune of Rs 52,89,409/- by violating the conditions imposed by the permission letter dtd 18/12/84 and 12/10/99 by Ministry of Commerce & Development Commissioner, the goods were liable to confiscation under Section 111(o) of the Customs Act 1962 & appellant liable to a penalty under Section 112(a) 1.3 Appellants replied by letter dtd 15/2/2000 contending -
i) Imported material was subjected to the Processes as mentioned herein above & only after such process the goods were marketable in retail & find a consumer, Development Commissioner had permitted the import vide letter dtd 2/11/98 for process as at B above & 12.10.99 for process as at C above, the benefit could not be denied,
ii) Relied upon circular no 314/30197 of CBEC to grant broader meaning to the word 'manufacture'
iii) Activity of segregating repacking & labeling of imported item would fall under the definition of manufacture as per para 3(31) of the Exim Policy 1997-2002.
iv) Activity was also covered under Section 2(f) of the Central Excise Act 1944 when read with note to chapter 34 & the activities undertaken only would render goods, marketable to ultimate consumer.
v) Imported material conformed to notification 133/94 & the Exim Policy & were thus permitted.
vi) The authority were informed about the activity.
Therefore the notice was required to be dropped & imports not to be inter dieted.
1.4 Subsequent to this reply from the noticee, a corrigendum dtd 22/1/00 was issued by enhancing the demand by demanding duty at rates in Medicinal & Toilet Preparation (Excise duty) Act 1955 (hereinafter referred to as MTP Act) the new facts alleged in this corrigendum which came to notice were -
i) Subject consignments contain Alcohol & were not classified under chapter 33 of the Central Excise Tariff Act 1985 & were to be assessed vide MTP Act in view of chapter no 1(d) of chapter 33
ii) Out of the 9 BEs, 5 imports, were through Kandla Port which was not a specified Port of Entry as per Rule 43(a) & therefore the imports were in violation of Drugs & Cosmetics Rule 1945 read with Customs Act 1962.
1.5 The corrigendum was replied on 25/8/2000 interalia contenting -
i) no new facts as alleged were brought out same imports in same manner were being made for last 3 years & full description was given,
ii) benefit of 133/94 was still available & enhanced demand was not called for.
iii) The coverage under MTP Act was not called for
iv) Proposed confiscation under Section 11l(a) was not called for since Kandla Port was notified & approve Port vide entry no 5(9) to notification 62/94-cus NT dtd 21/11/94.
1.6 In another reply dtd 4/7/2000, by the appellants it was brought on record & submitted
i) by two letters dtd 9/6/2000, the raw material used & the process employed was accepted to be manufactured by KAFTZ authorities,
ii) violation of circular no 21/95 dtd March 10, 95 of Board has taken place in as much is no objection of Development Commissioner Kandla has been obtained before the initiating the proceedings.
1.7 The Commissioner however found -
i) the noticee have established a unit in Kandla Free Trade Zone (now known as Kandla Special Economic Zone) for manufacture and export of cosmetics and toilet preparations. The noticee were initially approved for carrying out the manufacturing operations by importing the cosmetics and perfumes in bulk and not in finished form in consumer packs and subsequently carrying out various operations including the filling of consumer packs in measured doses for retail sale.
ii) Examination of the instant goods covered under the nine consignments reveal that the goods imported are not in bulk packing, but these are already filled in retail packs/consumer packs. All the items are already printed and marked with all the necessary description and details of the product. Thus, it is found that the goods imported by the noticee are already put in packing of a kind sold by retail for such use.
iii) The notification no 133/94-cus dtd 22/6/1994 stipulates the exemption from payment of whole of the duty of customs on the goods imported for the following purposes.
a) for the production or manufacture of articles for export out of India, or
b) for being used in connection with the production, manufacture or packaging of articles for export out of India, or for export of services out of India, or
c) for carrying out processing of, or operations (including repairs, reconditioning and reengineering in relation to, the articles intended for export out of India or
d) for promotion of such export.
iv) Chapter note 4 of chapter 33 stipulates labeling, relabelling of containers, repacking, and adoption of other treatments to make the products marketable amount to manufacture. Examination of the processes employed by the noticee reveal that they are only putting a sticker which cannot be termed as labeling or relabelling. The goods imported in filled bottles of measured doses are sold as such. Therefore, it cannot be construed as repacking from bulk packing to retail pack. Further, the noticee is not undertaking any treatment to make the products marketable nor the physical aspect of the product is changed or modified by the use of processes employed by the noticee. Therefore, the processes employed by the noticee in respect of the instant consignments does not amount to manufacture Under Section 2(f) of the Central Excise Act 1944.
v) The contention of the noticee that para 3.31 of the Exim Policy envisages even processes such as refrigeration, repacking, polishing, labeling and segregation, as amounting to manufacture is relevant only for the purposes of export. For clearances to DTA market, notification no 133/94 cus specifically makes provisions under para 3 and stipulate charging of duty in the case where processes carried out does not amount to manufacture under Section 2(f) of the Central Excise Act, 1944.
vi) The noticee has contented that Circular no 32/97-cus dtd 1/9/97 issued by the CBEC lays down the scope and ambit of exercise of powers of the Customs authorities and emphasizes that the Assistant Commissioner/Dy. Commissioner posed in the Zone is on deputation to the Zone and should work under the overall supervision of the Development Commissioner. The above contention of the noticee is not based on correct appreciation of the circular 32/97-cus dtd 1/9/97. On perusal of the circular, I find that it stipulate that the Commissioner of Customs would exercise powers in respect of certain areas including adjudication proceedings. The issue of show cause notice and subsequent proceedings from part of the adjudication proceedings and hence the contention of the noticee is not accepted.
vii) The addendum to the show cause notice issued on 22/2/00 is part of the show cause notice. The noticee has not challenged that this addendum is illegal and had been issued beyond the competency. Since the addendum has been issued within the stipulated time limit and as per law, it forms part of the SCN and the contention of the noticee in this regard cannot be accepted.
viii) The noticee has also drawn attention towards chapter l(d) of chapter 33 of Central Excise Tariff and submitted that "Alcohol" is to be considered and construed in the context of other words like Narcotics. Careful examination of chapter 33 of Central Excise Tariff reveal that the term 'Alcohol' is not prefixed or suffixed by any particular variety of Alcohol. Further, the alcohol is not linked with other Narcotics mentioned in this chapter note. Therefore conclusion drawn by the noticee that alcohol which is consumable by human being is only relevant for this chapter note is far from the truth,
ix) It is an undiputed fact that the products of the noticee have alcohol as an ingredient. Therefore, in view of chapter note 1(d) of chapter 33 of the Central Excise Tariff, CVD has to be charged as per Medicinal & Toilet Preparations (Excise Duties) Act, 1955 and excise duty leviable is 50% adv.
x) Rule 133 of the Drugs & Cosmetics Rules, 1945 stipulate that no cosmetic shall be imported in to India except through the points of entry specified in Rule 43(a) and as per Rule 43(a), such items are allowed to be imported through Madras, Calcutta, Bombay and Cochin Sea Ports, Madras, Calcutta, Bombay, Delhi & Ahmedabad Air Ports. Therefore, it becomes obvious that Kandla Port is not covered under this Rule for importing the drugs and cosmetics containing alcohol. Hence, four consignments covered under Bs/E no 1135 dtd 30/9/99, 1624 dtd 10/2/99, 1770 dtd 30/12/99 of a total assessment value of Rs 40,58,720/- are ordered for confiscation in terms of Rule 133 of the Drugs & Cosmetics Rules, 1945 read with Section 111(d) and 111(o) of the Customs Act 1962.
1.8 Commissioner therefore passed the following order.
i) I hold that the process employed by the notice in the instant consignments do not amount to manufacture in tenure of Section 2(f) of the Central Excise Act 1944"
ii) I confiscate the goods in respect of the four consignments covered under Bs/E no 1135 dtd 30/9/99, l624 dtd 10/12/99, 1770 dtd 30/12/99 and 1171 dtd 30/12/99 o f a total assessement value of Rs 40,58,720/- However 1 impose a penalty of Rs 5,00,000/- (Rupees Five lakhs only) in lieu of confiscation.
iii) I impose a penalty of Rs 10,00,000/- (Rupees ten lakhs only) on the notice under Section 111(a) and 111(o) of the Customs Act 1962.
iv) the goods imposed may be used for the purpose of processing for export out of India 1.9 Hence this appeal 2.1 After hearing both sides & considering the material, the findings it is found-
i) the Commissioners finding arrived for confiscation of the subject goods under Section 111(a) of the Act, ignore the notification issued, whereby Kandla was an "appointed port" for the purpose of Clause (a) of Section 7 of the Customs Act, for the purpose of unloading of imported goods or any class of such goods, vide notification issued under the Customs Act 1962. The provisions of Rule 43A of the Drugs & Cosmetics Rule 1945 being applied to the imports made herein cannot be & derogate the provisions of Section 7(a) of the Customs Act 1962 & the notification allowing 'unloading of any class of imported goods' as per the Customs Act 1962. The confiscation arrived at under Section 111(d)& 111(a) for these four consignments as impugned vide proposal in the corrigendum dtd 17/1/2000 was only to be under 111(a) as recorded in para 10(ii) of the order impugned before us. Therefore confiscation order as arrived cannot be upheld as the order has not only proceeded beyond the notice issued but also ignores the specific notification as regard Kandla Port issued under the Customs Act 1962.
ii) Imports vide BE no 1135, 1624,1770,1171 as arrived in the finding under 111(a) & 111(d) cannot be confiscated, as the order travels beyond the notice issued. Penalty of Rs 5 lakhs in lieu of confiscation cannot be upheld as ordered. Very strangely, the Ld. Commissioner, has not arrived at any order of confiscation by indicating any provision of the Customs Act 1962 in the order portion, nor, offered any redemption fine which was to be offered. We therefore cannot upheld the liability to confiscation or order to confiscate
b) As regards imposition of a penalty of Rs 10 lakhs on the appellants. The order portion imposes the same, under Section 111(a) & 111(o) of the Customs Act 1962. We find no provision for a penalty which could be imposed under the provisions of these sections of the Customs Act 1962 as ordered by the Ld. Commissioner; The same are therefore to be set aside as ordered since they have been arrived without application of mind.
c) We find that the proposal was to deny the benefit of duty under claim of notification 133/94 that has not been ordered. Indeed the Ld. Commissioner has ordered.
i) I hold that the process employed by the notice in the instant consignments do not amount to manufacture in tenure of Section 2(f) of the Central Excise Act 1944
ii) I confiscate the goods in respect of the four consignments covered under Bs/E no 1135 dtd 30/9/99, 1624 dtd 10/12/99, 1770 dtd 30/12/99 and 1171 dtd 30/12/99 of a total assessement value of Rs 40,58,720/-. However I impose a penalty of Rs 5,00,000/- (Rupees Five lakhs only) in lieu of confiscation.
iii) I impose a penalty of Rs 10,00,000/- (Rupees ten lakhs only) on the notice under Section 111(a) and 111(o) of the Customs Act 1962
iv) the goods imposed may be used for the purpose of processing for export out of India While we would agree that the presence of Alcohol in the produced would render the levy in them to be not under the provision of the Central Excise Act 1944; thus the definition under Section 2(f) thereof & its coverage would not be called to be adjudicated; however we can accept the order of permission to process for the purpose of export with the stipulation that the benefit of domestic Tariff Area Clearance as per Excise Policy & or the levy applicable in such cases on to production in KAFTZ shall not be debarred to the appellants.
d) We find that all 'manufacture ' cannot be judged with reference to Section 2(f) of the Central Excise Act 1944. Infact the board vide its orders/circulars has held and ordered the field staff, that a broader view is called for in respect of the interpretation of the provisions of notification 1/95-CE & the exemption may not be restricted only to cases where 'manufacture' under Section 2(f) of Central Excise Act is involved" (see para 5 of circular CBE&C Circular no 314/30/97-C dtd 6/5/97) This view of interpretation has been adopted by the Tribunal in a Catena of decisions (see Super Cassettes Industry 1998(104) EIL 115. The appellants had raised this ground & the permissions specially granted by the Development Commissioner, we cannot ignore the same, as nothing contrary shown. We would therefore find no reason to conclude that the imports were not to be subjected to or are not subjected to manufacture and are thus imports of Complete Consumer Goods, not permissible to be imported. The process (A) &(B) &(C)(supra) would be covered under the concept of manufacture, as there is no finding that the goods were marketable dehor that all or any one of these process; the bland allegations of deodorant cans to be finished goods would not be sufficient to hold so.
e) The present proceedings of duty demands and confiscation are not being upheld, there is no case or cause for any impediments to such imports if a penalty as arrived.
3. In view of the findings, the order is set aside & the appeal allowed.
(Pronounced in Court)