Customs, Excise and Gold Tribunal - Delhi
Hindustan Lever Ltd. vs Collector Of Central Excise on 21 August, 1984
Equivalent citations: 1985(19)ELT562(TRI-DEL)
ORDER G. Sankaran, Member (T)
1. The captioned appeal was originally filed as a revision application before the Central Government which, under the provisions of Section 35-P of the Central Excises and Salt Act, 1944, has come as transferred proceedings to this Tribunal for disposal as if it were an appeal filed before it.
2. The issue arising for determination in the present appeal is the correct classification under the Central Excise Tariff Schedule (CET) of a product named "Sunsilk Hair Conditioner" manufactured by the appellants (hereafter referred to as Lever).
3. On 5-6-1974, Lever wrote to the Superintendent of Central Excise, Range I, Division II, Bombay that they would be manufacturing and clearing in the near future a product called "Sunsilk Hair Conditioner". According to Lever, the product was not excisable and they submitted a classification list (C.L.) for approval. There was some correspondence between the Superintendent and Lever. On 29-8-1974, the Assistant Collector rejected the request for clearance of the product on 'nil' duty gate pass and directed Lever to clear the product on payment of duty at 30% ad. vol. plus 50% of the basic duty as auxiliary duty pending receipt of test report from the Deputy Chief Chemist. It appears that the Chemical Examiner took a long time to conduct tests on the product. By his letter dated 6-5-1976, the Assistant Collector informed Lever that the test results revealed that Sunsilk Hair Conditioner was a preparation for the care of hair, classifiable under Item No. 14F(ii), CET without, however, specifying the sub-item-'a', 'b' or 'c'-of 14F(ii) under which the product fell. Lever pursued the matter in appeal. The main contention was that the product was not a hair lotion, pomade or cream within the meaning of sub-item (a) nor did it fall under sub-item (b) or (c). By his order dated 14-9-1976, the Appellate Collector set aside the Assistant Collector's order and directed a de novo adjudication observing that the non-mention of the sub-item of the Tariff showed non-application of mind and that a copy of the test report should have been made available to Lever. It may be mentioned that by this time, the residuary Item No. 68 of the CET had come into existence (in 1975) and Lever's contention was that the product fell under Item 68. On re-adjudication, the Assistant Collector, by his order dated 31-7-1977, held the product to be classifiable under Item 14F(ii) (a). The matter was again pursued in appeal. Certain affidavits were submitted in support of the contention that hair conditioner was distinct and different from hair shampoo, hair cream, hair pomade or hair lotion-two of these affidavits were from the technical employees of Lever (the Section Head in the Toilet Preparations Division and the Technical Manager in the same Division) two from consumers of the product, one from the beautician in the Hotel President Beauty Parlour and one from a dealer in cosmetics and toilet preparations. In his order dated 15-12-1978, the Appellate Collector held that the scope of Item 14F(ii) was not limited to the goods specified in (a), (b) and (c) specified thereunder but would take in any product conforming to the broad tariff description. The Appellate Collector also said that hair conditioner could be considered as lotion or even as shampoo. The appeal was rejected. It is against this order that the present appeal has been filed.
4. We have heard Shri C.S. Lodha, Counsel for Lever and Smt. Vijay Zutshi, S.D.R., for the Respondent. After the hearing'was over, both sides filed written submissions.
5. Before we go into the rival submissions, it will be useful to reproduce the nomenclature of Item No. 14F(ii) "14F. Cosmetics and toilet preparations not containing alcohol or opium, Indian hemp, or other narcotic drugs or narcotics, namely :-
(i) * * * * *
(ii) Preparation for the care of the hair-
(a) Hair lotions, creams and pomades,
(b) Perfumed hair oils,
(c) Shampoos whether or not containing soap or detergent.
(iii) * * * *
Explanation.-
* * * *"
6. Both sides agreed before us that while the subject product is a preparation for the care of the hair, all products for the care of the hair are not covered by the above tariff entry. Only such products as fall into one or the other of the classes specified in sub-item (ii) would be covered by the entry. A plain reading of the tariff entry can, in our view, yield only this result. Unless a preparation for the care of the hair is either (a) a lotion, cream or pomade, or (b) a perfumed hair oil or (c) a shampoo, it will not fall under Item 14F(ii). The reasoning adopted by the lower authorities in the face of the clear language employed in the entry to conclude that any preparation for the care of the hair would fall under Item 14F(ii) is specious, untenable and must be rejected. Both sides are also agreed that the product under consideration is not a shampoo. Evidently again-and both sides agree-the subject product is not a perfumed hair oil. We are, therefore, really left with only Item l4F(ii)(a). If the subject preparation is a hair lotion, a cream or a pomade, it will fall under the said entry, otherwise not. While the Assistant Collector did not spell out whether it was a lotion, cream or pomade, the Appellate Collector said it can be called a lotion (or a shampoo-which, admittedly, it is not). On the other hand. Lever contends that the preparation is neither a hair lotion, nor cream nor pomade, and that, therefore, it falls under Item 68, CET, the residuary heading in the CET.
7. The submissions of Shri C.S. Lodha, the learned counsel for the appellants may be summarised thus-
(a) Sunsilk hair conditioner is not a "leave-on" product unlike a hair lotion, cream or pomade but a "rinse-off product" to be applied to hair after shampooing. Having regard to its compositional and functional characteristics, this subject product is neither a hair lotion, nor a hair cream nor a hair pomade. In this connection, reliance was placed on two affidavits-one of Dr. K.S. Narayanan, Section Head in the Toilet Preparation Division of Lever and the other of Dr. S. Siva Raja Iyer, Professor of Physical Chemistry and Head of Chemistry Section at the Bombay University Department of Chemical Technology, Matunga, Bombay. Both these experts have deposed in their affidavit that a hair conditioner is not a hair lotion or a hair cream or a hair pomade.
(b) In April, 1972, the Department approved the classification of "Elida" hair conditioner as non-excisable, not falling under Item 14F. On the introduction of Item 68, the product must, therefore, get classified under Item 68. There was only a change in trade-mark from "Elida" to "Sunsilk", the composition remaining essentially unchanged.
(c) Though the onus of proving the classification was on the Department for which a number of authorities were cited in support, it had not discharged the burden. On the other hand, Lever had, by production of affidavits from two experts, two users, a beautician and a dealer, shown that Sunsilk Hair Conditioner was not known as a hair lotion, cream or pomade. These affidavits remain uncontroverted. Any technical submission now made, not supported by any affidavit, which had not been filed at an earlier stage, cannot be taken into consideration at this stage. The Department had also not led any evidence on the commercial understanding of the product. The orders of the lower authorities cannot be butressed by additional reasons at this stage ; they have to be supported on the basis of the reasons contained therein.
(d) The Appellate Collector, in the same breath has put the product under Item 14F(ii)(a) as well as 14F(ii)(c). Such an approach is untenable and illegal.
(e) The Appellate Collector had, while accepting the correctness of the affidavits, sought to dismiss them by saying that a person who had not used hair lotion and hair conditioner or used only lotion, would not be able to distinguish the fine line of distinction drawn between hair lotion and hair conditioner. In other words, the Appellate Collector quite illegally and untenably chose to rely upon the evidence of persons who had not used the products rather than on that of persons who had used the products. Affidavits were a normal mode of proof and could not be arbitrarily rejected without testing their veracity.
(f) Having classified the goods in 1972 as non-excisable which position held good till 1975 when the product fell under the newly created residuary Item No. 68, CET, the Department cannot abruptly change the classification without a review and without cogent reasons. A few authorities were cited in this context.
(g) The Collector (Appeals), by his later Order No. 1652/BI/283/81 dated 17-12-1981 (copy furnished) classified the product under Item No. 68. This order has not been reviewed by the Central Government and has become final and binding on the appellants and the Department.
8. The submissions of the learned Departmental Representative may be summarised thus-
(a) Sunsilk hair conditioner is a grooming aid and is a hair lotion. It is not as if all lotions have to be retained whether on the scalp or the skin as for e.g. cleansing lotion for the skin. The common feature of all lotions is that they are in the form of emulsion. They may be free-flowing or with varying degrees of viscosity but they should be pourable which the subject product is. Samples of Nivea Liquid (Skin oil), Johnson's baby lotion, Loma Hair Oil, Revlon Hair Rinse, Tiara Hair Conditioner and a few other products were produced in support of the argument that lotions are often known by different nomenclatures such as skin-oil, cleansing milk, hair oil, etc. Also, it was submitted that some of these products were being assessed as hair lotion by the Central Excise authorities. [We would like to mention straightaway that this argument based on (allegedly similar) products other than the one presently under consideration before us cannot be the basis of arriving at-its proper classification which will have to be determined on the basis of its own merits].
(b) The affidavits of the users of the product are similarly worded; therefore, they alone cannot be the basis for any conclusion. No submissions were made on Dr. Iyer's affidavit except that this affidavit was not before the Appellate Collector. No submissions were made on the dealer's affidavit. Dr. Narayanan's affidavit was sought to be controverted by saying that hair conditioner may or may not have setting properties like a lotion, that the subject product imparts in fact a gloss to hair, that it is an alcohol based product just as lotion is and that it is not material whether hair lotion is a "leave-on" product or "rinse-off" product. On the affidavit of the users and the beautician the submission is that it is mystifying that they are more or less similarly worded and along with the dealer's affidavit were sworn on the same day.
(c) Item 14F classified the goods falling under it under different subitems not on the basis of their chemical composition. The products must be considered as they are and not with reference to their composition, etc. A few authorities were cited in this connection.
(d) A few technical authorities were cited showing that in some books, hair conditioning product is described as a cream or lotion. A hair conditioner could be either a 'leave-on" or "rinse-off" product- prepared either as a cream or lotion. There are many types of hair lotions such as those for growth of the hair, for controlling dandrulT, for setting of the hair, for permanent waving of the hair and so on. Hair conditioner is one such lotion. The fact that it is not left on the hair would not alter this position.
(e) Interpretation of terms used in a fiscal statute should not be based on static concepts but should consider latest developments in technology. A few authorities were cited in this context. Since technical books have described hair conditioning products as lotions, they should be considered as lotions.
9. We have carefully considered the submissions of both sides. As seen from the records of this case, the legend on the carton-container of Sunsilk Hair Conditioner reads as follows :-
"Sunsilk hair conditioner is specially formulated to take care of hair that is unmanageable after washing. It smooths out hair problems beautifully, prevents knots and tangles and makes combing so much easier. It gives hair extra body, texture and gloss. Smooth it into your hair after washing. You will find sunsilk hair conditioner teaches every hair its place-gently".
The product contains cetrimide, cetyl alcohol and perfume and is applied to hair for removing knots and tangles caused during hair washing with the help of soap or shampoo.
10. The very product was the subject of another appeal by Lever before the Appellate Collector, Bombay who, after considering technical authorities placed before him, came to the conclusion that the product fell under Item No. 68 and not Item 14F of the CET. We think we should have a close look at this order dated 17-12-1981 of the Appellate Collector to understand why he came to a conclusion different from that of his predecessor which is the subject of the appeal before us. The Appellate Collector had also before him the affidavit of Dr. Siva Raja Iyer of the University Department of Chemical Technology, Bombay, as also those of Dr. Narayanan and two dealers to show that hair conditioner was different from hair lotion, cream or pomade. The reasons which led the Appellate Collector to his conclusion were, in brief-
(a) Unlike hair lotions, creams or pomades, hair conditioner is not retained on the hair and is required to be washed off immediately after application.
(b) Hair lotions, creams and pomades are used as hair grooming preparation to keep the hair in order and to enhance its lustre. For this, he relied on "Formulations and Functions of Cosmetics" by Jollinck and "Cosmetics Science and Technology" by Sagarin. The Appellate Collector was aware that some hair conditioners which also function as lotions etc. were being marketed and so he added that in case any hair conditioner simultaneously performs the functions of hair cream, pomade, lotion or shampoo, it would fall under Item 14F.
11. In the present case, it is a fact, as Shri Lodha has urged before us, that the Department did not adduce before the lower authorities any evidence by way of affidavits or technical authorities to controvert the evidence produced by the appellants. While the orders of the lower authorities cannot be sought to be supported now by the Respondent on the basis of fresh factual material which was not made available to the assessee at the earlier stages, we do not think it would be correct to say that the respondent cannot rely on relevant technical literature in support of his arguments before us. Just as in the case of submissions on points of law, we do not think it is not open to either party to adduce evidence before us in the shape of published standard works of reference.
12. The most important piece of evidence produced by Lever is the affidavit of Dr. Siva Raja Iyer since this affidavit was before the Collector (Appeals) who passed the order dated 17-12-1981 classifying the product under item No. 68-CET (though not before the Appellate Collector who passed the impugned order in this case). It was available to the respondent for quite some time having been produced by Shri Lodha as early as on 5-3-1984. The respondents had ample time to file a counter affidavit if so desired. However, this was not done). From his credentials as furnished therein Dr. Iyer is indisputably an eminent scientist. He says that a hair conditioner which contains a cationic agent in alcoholic solution emulsion belongs to a series of rinse products used immediately after a hair shampooing treatment and its specific formulation makes the hair smooth, more easy to comb and hence improves its manageability. Dr. Iyer has described at length the mechanism of the action of a hair conditioner. To quote his words :-
"Hair is a protein (keratin) fibre consisting of amino acids joined together in long intertwining molecules The surfaces of this macro-molecular fibrous system have equivalent quantities of both positively charged amino (NH3+) and negatively charged carboxyl (COO-) groups. At pH values above the iscelectric point the fibre swellability and reactivity increases. This is the range of pH present in the polymer metric of normal hair fibres and when treated with a shampoo which mainly consists of anionic detergents, the positively charged centresh in the fibres macro-molecules attract the negatively charged anionic detergent molecules which then get bound to the hair surface by strong dispersion forces and to some extent hydrophobic bonding and are, therefore, retained in hair as an absorbed solute species. This process leads to a reduction in the concentration of positively charged centres on the hair surface and hence, the negatively charged centres predominate to a large extent and the hair fibres as a whole become negatively charged. Consequently, electrostatic repulsion between the hairs renders the hair very difficult to manage. However, if a solution or emulsion containing a cationic agent is used for rinsing the hair after washing with the shampoo since the cationic molecules are attracted to the negatively charged centres on the hair surface, the electrostatic repulsion effect is considerably reduced and the hair now becomes more easily manageable and smooth for combing. The neutralisation of these negative charges is the main function of the hair conditions which is used in the post shampoo rinsing treatment and leads to restoration of electrical neutrality in the hair polymer matrix and hence makes the hair smooth and more manageable."
He has also discussed at length why, in his view, a hair conditioner is not a hair lotion. Hair lotion is a grooming aid consisting of an alcohol based product composed of soluble viscous oil or polymeric resins and additional ingredients which, for example, can prevent dandruff. On the other hand, a hair conditioner differs in composition consisting of a cationic agent. A hair lotion works on the principle that a dilute solution of the oil or resin material causes good wetting of the hair fibre surface and subsequent evaporation of the volatile solvent alcohol leaves behind a thin film of the oily material which causes adherence of hair by cohesion of these thin films. A hair conditioner, on the other hand, improves the manageability and smoothness of hair by reducing electrostatic repulsion effects. A hair lotion is a "leave-on" product whereas a hair conditioner is a "rinsing agent".
Likewise, Dr. Iyer distinguishes hair conditioner from hair cream. The latter consists mainly of mineral oil of light or medium viscosity, waxes, lanolin, preservatives, colour and perfume and emulsifying agents. Functionally, a hair cream is a "leave-on" grooming aid. It imparts setting properties to the hair fibres by virtue of the oil phase.
A hair pomade is a semi-solid jelly like material composed of waxes incorporated in a tinted perfumed petroleum jelly. It is also a "leave-on" grooming agent achieving its result by acting as a physical adhesive in keeping the hair in place.
Thus, on a consideration of composition, function and mode of action, Dr. Iyer concludes that hair conditioner is neither a hair lotion, nor a cream, nor a hair pomade.
13. We have briefly referred to the other affidavits. Dr. Narayanan's affidavit is more or less on the same lines as that of Dr. Iyer and Dr. Atul T. Kaji merely supports the deposition of Dr. Narayanan. Two consumers have testified that hair conditioner is different from hair lotion and cannot be used as substitute for the lotion. Likewise, it is different from hair cream and hair pomade. Both say that after shampooing the hair, they use hair conditioner which is "rinsed off" after 2-3 minutes and the hair conditioner makes the hair free of knots and tangles, whereas a hair lotion is allowed to remain on the hair to make it glossy by imparting a thin layer of oil. The beautician of Hotel President testifies on similar lines as regards the use by her of hair conditioner on the hair of her customers. She also says that, in the trade, hair conditioner is regarded as different from hair lotion, cream or pomade. The remaining deposition is that of a dealer in cosmetics and toilet preparations who testifies that, in commercial parlance, a hair conditioner is different from shampoo, cream or pomade and that they are not interchangeable.
14. The cumulative weight of the above evidence is undeniably in support of the appellants' contentions. But before coming to a decision, let us look at the evidence produced by the Department. As we have already'said, the correct classification of the product before us cannot be determined on the basis of the advertisements of products which are said to be similar nor on the basis of their reported classification under the Central Excise Tariff Schedule which may or may not be the subject matter of quasi-judicial or judicial proceedings. We are not, therefore, considering these materials. In the book "Perfumes, Cosmetics and Soaps", Volume II "Modern Cosmetics", 7th edition, by W.A, Poucher, it is stated that hair conditioners are considered to improve the appearance of the hair by giving body lustre and to achieve this effect two types of hair conditioning creams are used. The most popular are those used as rinses and are applied to the hair after shampooing and rinsing, while the hair is still wet. The second category includes hair dressings or creams and brilliantines. These are applied to dry hair either immediately after setting and drying, or at any time when extra gloss or light fixing properties are required. The book goes on to say that hair conditioning preparations for use on wet hair after a shampoo are prepared either as creams or lotions. If the product is in lotion form this can either be poured over the hair followed by combing, or diluted with water and poured repeatedly over the hair while the head is held over a basin. The cream or lotion is left on the hair for a few minutes and then rinsed off with warm water.
15. In the book "A Formulary of Cosmetic Preparations" compiled by Michael and Irene Ash, hair conditioning products are stated to be used to give the hair manageability, gloss and soft texture. They are generally used on hair that has been damaged by too frequent shampooing, bleaching, dyeing, permanents and hair straighteners. Under the head "Hair Conditioner", different formulae are specified, one in respect of cream and another in respect of lotion. In the book "Cosmetics, Toiletries and Health Care Products-Recent Developments"-by George W. Owens, the formulation of lotion hair conditioner (lotion balsam type) has been described.
16. The aforesaid books were cited by the Departmental Representative to show that hair conditioners come in two forms as lotion or cream and that it is not always necessary that a hair conditioner should be rinsed off after application to the hair. In our view, all that these authorities show is that hair conditioner could be in the form of a cream or lotion. That, however, is not the issue before us which is whether Sunsilk hair conditioner is a lotion or not. On this point, the Department has practically led no evidence in rebuttal of that led by Lever. The evidence given by two users, a dealer and a beautician to the effect that hair conditioner is different from hair lotion shows the understanding of the terms in the minds of the consumer and commercial communities. Item 14F is, unlike Item 15A, not an entry riddled with scientific and technical expressions. The expressions used therein are ordinary common place ones. Therefore, the sense of these expressions as ordinarily understood by trade and consumers will have to be given precedence over their technical sense. We cannot approve the Appellate Collector's brushing aside the affidavits (in the absence of any evidence in rebuttal) on the ground that a person who has not used the two things (i.e. hair lotion and hair conditioner) or a person who normally uses (only) lotion would not be able to distinguish the fine line of distinction between the two, after having observed that it may be that the specialist dealer or even user of these goods (the two products) would draw a distinction between hair lotion and hair conditioner. As the appellants have stated, the Appellate Collector has chosen to rely on the (nonexistent) evidence of persons who have not used the products rather than that of persons who have used the products. This, to our mind, is an entirely illogical and irrational approach. Even from the scientific or technical standpoint, Lever has made out a plausible case which, in our opinion, the Department has not effectively met. It is contended by the Department that hair conditioner is a lotion because it satisfies the criteria of being termed as a hair lotion, that it is in the form of an emulsion, that it is capable of being poured and that it is used on the hair. The fact that it has to be rinsed off the hair is not material. No evidence has been placed before us to conclude that based on these tests alone, the product can be classified as hair lotion. Again, the Department has listed some types of lotion such as for growth of hair, for controlling dandruff, for setting of hair, for permanent hair-waving and for controlling over-active sebacious glands of the scalp which lead to oily hair. From the mechanism of action of Sunsilk Hair conditioner as brought out by the evidence adduced by Lever, it cannot be said to fall in any such categories; it is for better hair management by its property of reducing electrostatic repulsion effects. No doubt, the technical authorities cited by the Departmental Representative do refer to hair conditioners as creams or lotions but these do not add up to an effective rebuttal of the evidence produced by Lever as to how the trade, users, dealers and experts in our country understand these terms.
17. The Appellate Collector, in his order of 19-12-1981, has referred to certain technical authorities :
(i) Formulation and Function of Cosmetics-by Jellinck.
(ii) Cosmetics Science and Technology-by Sagarin,
(iii) Modern Cosmeticology-Ralph C. Harry.
The Appellate Collector gives the following passage from one of the books on hair lotions -
"Hair lotions are alcohol-containing products which have been popular since the turn of the century. By diluting viscous oils with alcohol, it is possible to get good wetting action and after evaporation of the alcohol, deposition of a uniformly thin layor of oils. Furthermore, the temporary stimulation received from the alcohol on the scalp is liked by many people. Castor oil is unique among fixed oils, in being alcohol soluble in all proportions; it is used frequently as the oil in an alcoholic lotion. Another material often used is glycerol. Formulations vary with viscosity and degree of grooming desired."
Going by the above concept of hair lotions, the subject product which is "rinseoff" product cannot be said to be a hair lotion.
18. In the standard work "Encyclopeadia of Chemical Technology"- Kirk Othmer-3rd edition- Volume 12-it is stated that almost every product in the hair-preparation category has some conditioning effect, which is an all encompassing term involving all or any of the desired qualities related to the finished hair, i.e. ease of combing, detangiing, body, shine, texture, split-end mending, prevention of static build-up and manageability. Rinses and conditioners are shown separately from hair-dressings under which category is shown alcohol-based lotions, brilliantines, fixatives, hair sprays, emultion creams, etc. Neutralizing lotions and waving lotions are shown under the category of permanent waving preparations.
Hair dressing is a broad term, according to the said book, for the products applied for final grooming. They may be oil-or water-based preparations which give the hair a natural healthy appearance while holding it in place and improving lustre and condition. They are applied by rubbing a small amount on the palm of the hands, and then massaging it into the hair. This concept accords with what the Appellate Collector (who parsed the order of 17-12-1981) gathered from the authorities cited before him as well as what emerges from the affidavits place on record in the present proceedings on the subject of hair lotions.
19. We cannot also entirely overlook the fact-though this cannot be the final determinant-that the Department considered the subject product to be outside the purview of Item No. 14F, GET since 1972 till the Assistant Collector changed the classification in 1976 bringing it under Item No. 14F(ii). Even in the proceedings that commenced in 1976 and continued till the filing of the present appeal, the Department has not taken a clear and unambiguous stand that the product is a lotion. The Appellate Collector's order of 17-12-1981 classifying the subject product under Item 68, CET, ruling it out of Item 14F(ii) has not been challenged by the Department.
20. In the light of the above discussions, we hold that during the relevant period Sunsilk Hair Conditioner did not fall for classification under Item No. 14F(ii) of the CET but under Item No. 68, CET from the date of insertion of the latter item in the Tariff.
21. While arriving at the above conclusion, we have kept in view the well-settled principle of law that the burden to prove that a product falls under a specified entry in the tariff schedule lies on the revenue. We are not, therefore, referring to the case law cited by Shri Lodha in this connection. Shri Lodha had also cited case law in support of his contention that a change in the Department's stand without cogent reasons is impermissible, that affidavit is a normal mode of proof and a few other propositions. Since we are allowing the appeal, we do not think it necessary to refer to these authorities. The SDR, on her part, had cited certain authorities to support the proposition that interpretation of terms in a fiscal statute should consider latest developments and technology and that it should not be a static concept. There cannot possibly be any quarrel with this and, therefore, we are not referring to these authorities as well.
22. The result is that the appeal succeeds and is allowed.