Customs, Excise and Gold Tribunal - Tamil Nadu
Naga Limited vs Cce on 5 March, 2002
Equivalent citations: 2002(81)ECC713, 2002(148)ELT251(TRI-CHENNAI)
ORDER S.L. Peeran, Member (J)
1. Both these appeals have been filed by the same assessee against a common issue against two different orders of the Commissioner (Appeals).
2. Appeal E/646/99 arises from Order-in-Appeal No. 25/99 (MDU) dated 6.1.99 by which the Commissioner (Trichy) has allowed the departmental appeal by setting aside the Order-in-Original No. 84/96 dated 24.5.96 passed by the Asst. Commissioner of Central Excise, Dindigul by which he has approved the classification of VIM Dish wash bar under sub-heading 3405.40 of CET Act as "scouring preparation" while the department took the plea that the item is not "scouring preparation" and it could not be categorized under description "scouring paste and powders" and that the same is classifiable under SH 3401.20. The grounds urged by the Revenue before the Commissioner (Appeals) have been noted by Commissioner (Appeals) in para-2 of his order and for the purpose of convenience, same are reproduced below:
2. As the said order passed by the Assistant Commissioner of Central Excise, Dindigul was not proper and legal, Commissioner of Central Excise, Madurai has issued directions under Section 35E for filing an appeal against the said order on the following grounds:
(1) The product "Vim dish wash bar" is a mixture of surface active agent, abrasive materials and other chemical ingredients. It is claimed to be a scouring bar for cleaning utensils and other dishes. As per the claim of the manufacturer, the surface active agent acts on the surface of the dishes by reducing surface tension and converts the soil, grease and oily matters into a state of solution or dispersion which is later washed away and the abrasive materials helps to polish or brighten the dish by friction. Thus it is evident that the actual cleaning is by the surface active agent and that the abrasive materials help only to shine the dish/utensils.
(2) By virtue of Note.-2 to Chapter 34, soap and organic surface active products of heading 34.01 may contain added substances like abrasive powder, fillers etc. and that such products in the form of bars, cakes or moulded pieces or shapes would fall only under heading 34.01 and not under 34.05.
(3) It appears that the term "for use as a soap" mentioned in Heading 34.01 has been misinterpreted and a claim has been made that as the product is not used as soap (either as toilet soap or washing soap) it cannot be classified under heading 34.01 as soap or organic surface active product for use as a soap. However, a careful reading of the HSN notes at pages 483 and 485 would show that organic surface active products and preparations containing abrasive material would fall under heading 34.01 only if they are in the from of Bars, cakes etc. For easy reference, the relevant portion of HSN notes is reproduced below:
Page 483 of HSN Notes:
(II) ORGANIC SURFACE ACTIVE PRODUCTS AND PREPARATIONS FOR USE AS SOAP, IN THE FORM OF BARS, CAKES OR MOULDED PIECES OR SHAPES, WHETHER OR NOT CONTAINING SOAP.
This part includes toilet or washing products and preparations, in which the active component consists wholly or partly of synthetic surface-active agents, (which may contain soap in any proportion), provided they are put up in the form of bars, cakes or moulded pieces or shapes, that is to say, the ordinary forms of soaps intended for the same uses.
This part also included such products and preparations which have been rendered abrasive by adding sand, silica, pumice powder etc. provided they are put up in the forms described above.
Page 485 of HSN Notes:
Washing preparations based on surface-active agents are also known as DETERGENTS. This type of preparation is used for washing clothes and also dishes or kitchen utensils.
They may be liquids, powders or pastes and are used for household or industrial purposes. Toilets and washing products in the form of bars, cakes, moulded pieces or shapes fall in heading 34.01.
(4) Thus, it is clear from the above that organic surface active products and preparations which may contain abrasive material like felspar on calcite and manufactured in the form of bars, cakes etc. would be more appropriately classified under heading 34.01 and not under 34.05 alongwith scouring powder and other similar preparations. As has been held by Supreme Court in the case of Collector of Central Excise, Shillong v. Woodcrafts Products Ltd. , for resolving any dispute relating to tariff classification, the HSN notes can be a safe guide. This has also been reiterated by SC in the case of Collector of Central Excise v. Bakelite Hylam Ltd. . Hence going by the HSN notes referred to above, the product Vim Dish Wash Bar is correctly classifiable under heading 34.01 only.
(5) The argument that 'Vim' powder is being classified under heading 34.05 and hence "Vim Dish Wash Bar" should also be classified under the same heading is no argument in view of the more specific Note: 2 of Chapter 34.
(6) The argument that chemical Examiner has given an opinion that the classification of the product would be under heading 34.05 is also not relevant as the Chemical Examiner is not expected to classify the products but only to give test results of the products sent for testing. Even the test report given by the said Chemical Examiner clearly shows that the product 'Vim Dish Wash Baar' is in the form of Bar and is composed of water soluble inorganic compounds and synthetic organic surface active agent plus water insoluble inorganic compounds.
(7) The product "Vim Dish Wash Bar" though described as a "scouring bar" is meant for cleaning of the dishes/utensils and hence the surface agent function would be very relevant if not the predominant function in addition to the abrasive function because of the presence of ingredients like feldspar or calcite in the preparation. Accordingly the product is more appropriately classifiable under heading 34.01 and not under 34.05 3.
3. The cross-objections filed by the assessee as recorded in para-3 of the impugned order of the Commissioner (Appeals) are extracted herein below:--
3. In the Memorandum of Cross-Objection the respondent submitted that the final decision on the classification had been taken at the level of Commissioner deciding the classification under Tariff Heading 3405 and hence what is now before the Commissioner (Appeals) is not a decision of the Assistant Commissioner but that of Commissioner himself. Obviously the Commissioner cannot seek to revise his own order under Section 35E, that power vests in the Board. Hence, the present appeal is not maintainable as lacking in jurisdiction both on the part of the Commissioner and Commissioner (Appeals). This is clear from letter C. No. IV/16/19/96-Vol. VIII dated 31.1.97 from Superintendent (Appeals) to the Assistant Commissioner, returning the case files and conveying a decision of the Commissioner that the order has been accepted by the Commissioner. This would indicate that Order No. 84/96 dated 31.5.96 passed by the Assistant Commissioner has been considered and found to be in order. Thus, the power of review under Section 35E of the Act has been exercised some time prior to 31.7.97 and the question of Commissioner purporting to exercise power under Section 35E thereof, is not maintainable as lacking in jurisdiction for want of proper sanction;
(ii) VIM dish wash bar is a product for cleaning of dishes, i.e., cooking utensils and similar items of domestic use. The abrasive element in the product is of the order of 54% as against the detergent element of 13.5%. Adopting the common manner of naming such composite products, one could call it a detergent abrasive. Item 3401 covers soaps as well as surfact (sic) active agent and preparation for use as soap. Hence, for inclusion under this Heading, the product should be designed for use as soap. It should be used for all purposes for which the soap is used. VIM dish wash bar is not a soap per se. Soap is invariably used for the washing of human body and washing of clothes. The abrasive detergent cannot be so used for either purposes because of the presence of a large percentage of abrasives used. Thus, the product, an. abrasive detergent is not usable as soap and, therefore, it would not fall under sub-heading 3401 as it is neither a soap nor useable as soap.
(iii) Heading 3204 dealing with organic surface active agent does not cover abrasive preparations containing surface active against (scouring pastes and powders). They are indicated as falling under 3405 vide note (d) on page 486 of HSN under Heading 3402. This clearly enunciates that an abrasive preparation, despite its containing surfact active agents is classifiable under 3405. As per Rule 3(b) of Rules for Interpretations of the schedule, the detergent abrasive is a composite article, containing an abrasive component, a detergent component, fillers and additives. It is, therefore, to be classified by the component which gives its essential character. The abrasive which is by far the largest single component is a deliberate introduction into the product to enable its use as a scouring preparation.
4. In paras 4 & 5, the Commissioner has given his order which is reproduced herein below:
4. I have gone through carefully the facts of the case, the grounds of appeal and the submissions made by the respondent. The question to be decided in this appeal is as to what is the correct classification of VIM Dish Wash Bar as to whether it is classifiable under Heading 34.01 as contented by the appellant or under Heading 34.05 as contended by the respondent? Note 2 of Chapter 34 reads as under:
For the purpose of Heading 34.01, 'Soap' applies only to Soap soluble in water. Soap and the other products of heading No. 34.01 may contain added substances (for e.g., disinfectants, abrasive powders, fillers or medicaments). Products containing abrasive powders remain classified in heading No. 34.01 only if in the form of bars, cakes or moulded pieces or shapes. In other forms, they are to be classified in heading No. 34.05 as scouring powders and similar preparations.
In view of the above provisions since Vim dish wash bar is in the form of a bar, the same is correctly classifiable under Heading 34.01 even though it may be containing abrasive powders, fillers etc. Heading 34.01 covers Soap, organic surface active products and preparation for use as soap, in the form of bars, cakes, moulded pieces or shapes. Since the VIM dish wash bar is in the form of a bar and the same is used as Soap the same is specifically classifiable under Heading 34.01 read with Note 2 of Chapter 34 supra. Therefore, the contention of the respondent that Vim dish wash bar is not a soap because the soap is invariably used for washing of the human body and washing of the clothes and the abrasive detergent under discussion cannot be used for either purposes, is not tenable in view of the provisions contained in Note 2 of Chapter 34. Whether the Vim dish wash bar is containing abrasives or fillers is not material and the product has to be classified under Heading 34.01 only and, therefore, the question of its classification under Heading 34.05 does not arise because that Heading covers only scouring pastes and powders and similar preparations. Since, the Vim Dish wash bar is not in the paste form or powder form but in the bar form, the same has to be classified under heading 34.01 and not under Heading 34.05 as contended by the respondent. Their contention that as per Rule 3(b) of Rules for interpretation, their products has to be classified by the material which gives its essential character and the abrasive which is the largest single component is a deliberate introduction into the product, the same has to be classified as a scouring preparation, is also not valid in view of the fact that Rules for interpretation applies only if the product could not be classified by applying Rules 1 and 2 of the Rules for Interpretation. Rule 1 lays down that the titles of Sections and Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the provisions hereinafter contained. Note 2 of Chapter 34 specifically provides for the classification of such composite products. Interpretative Rule 3(b) is therefore, not applicable in the instant case.
5. The respondents have also pleaded that the Order-in-Original No. 84/86 dated 31.5.96 has already been reviewed by the Commissioner as is clear from letter C. NO. IV/16/19/96-Vol. VIII Appeals dated 31.1'.97 and second review under Section 35E is not maintainable. This view is also not correct as the file mentioned in the letter dated 31.1.97 is different and it does not mention about F. No. V/34/3/119/94-VC in which the said order-in-original was passed and issued. Moreover, the directions under Section 35E have been issued by the Commissioner within the period stipulated under Section 35E and hence it cannot be pleaded that the Commissioner had already exercised his powers under Section 35E as per letter dated 31.1.97.
5. The assessee is aggrieved with this order and has filed this appeal.
6. E/1088/2001 arises from Order-in-Appeal No. 72/2001(GVN)(MDU) dated 30.7.2001 by which the Commissioner (Appeals) Trichy rejected the assessee's claim for classification of the same product Vim Dish wash bar under sub-heading 3405.40 of the Schedule of the CET Act and upheld the classification adopted by the AC under sub-heading 3401.20 of the Schedule to the CET Act.
7. The reasons given by the Commissioner in the said order are noted in para-3 which are extracted herein below:
3. I have given my careful consideration to the facts and circumstances of the case and submissions made in the grounds of appeal and during the personal hearing. Shri C. Saravanan, Advocate appeared for personal hearing. He reiterated the submissions made in the grounds of appeal. The point to be decided in this case is whether the product Vim Dish wash Bar is classifiable under 3405.40 as requested by the appellant or under 3401.20 as contended by the Department. It was alleged that the said Vim Dish wash Bar manufactured by the appellant was different from scouring preparations and it could not be categorized under scouring pastes and powders and the same was classifiable under sub-heading 3401.20. Note 2 of Chapter 34 reads as under:--
For the purpose of Heading 34.01, "Soap" applies only to Soap soluble in water. Soap and the other products of heading No. 34.01 may contain added substances (for e.g., disinfectants, abrasive powders, fillers or medicaments). Products containing abrasive powders remain classified in heading No. 34.01 only if in the form of bars, cakes or moulded pieces or shapes. In other forms, they are to be classified in Heading No. 34.05' as scouring powders and similar preparations.
In view of the above provisions since Vim dish wash bar is in the form of a bar, the same is correctly classifiable under Heading 34.01 even though it may be containing abrasive powders fillers etc. Heading 34.01 covers Soap, organic surface active products and preparations for use as soap, in the form of bars, cakes, moulded pieces or shapes. Since the Vim dish wash bar is in the form of a bar and the same is used as soap the same is specifically classifiable under heading 34.01 read with Note 2 of Chapter 34 supra. Therefore, the contention of the appellant that Vim dish wash bar is not a soap because the soap is invariably used for washing of the human body and washing of the clothes and the abrasive detergent under discussion cannot be used for either purposes, is not tenable in view of the provisions contained in Note 2 of Chapter 34. Whether the Vim dish wash bar is containing abrasives or fillers is not material and the product has to be classified under Heading 34.01 only and therefore, the question of its classification under Heading 34.05 does not arise because that Heading covers only scouring pastes and powders and similar preparations. Since the Vim dish wash bar is not in the paste form or powder form but in the bar form, same has to be classified under heading 34.01 and not under heading 34.05 as contended by the appellant. Their contention that as per Rule 3(b) of Rules for interpretation, their products has to be classified by the material which gives its essential character and the abrasive which is the largest single component is a deliberate introduction into the product, the same has to be classified as a scouring preparation, is also not valid in view of the fact that Rules for interpretation applies only if the product could not be classified by applying Rules 1 and 2 of the Rules for Interpretation. Rule 1 lays down that the titles of Sections and Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative section or Chapter Notes and provided such headings or Notes do not otherwise require, according to the provisions hereinafter contained. Note 2 of Chapter 34 specifically provides for the classification of such composite products. Interpretative Rule 3(b) is therefore, not applicable in the instant case.
8. Assessee is seeking for restoration of the Order-in-Original No. 84/96 dated 31.5.96 passed by the AC which is based on the technical literature and the Dy. Chemist's report clearly overruling the department's contention in the SCN that the item is soap and not falling under description of "other preparation of scouring powder and paste". The original authority has upheld that the item is a Vim dish wash bar and it is to be classified as "scouring bar" in view of substantial composition of the item being abrasive in nature which does not dissolve in water; while the definition of "soap" in terms of Chapter Note 2 of Chapter 34 and in terms of definition available in various technical sources means 'the alkaline salts of fatty acids, chiefly, palmilic, stearic or oleic acids (Source: Chamber Dictionery of Science and Technology); and that soap should be manufactured as a result of saponification of fatty acids such as palmilic acid or oleic acid found in vegetable oils and their product is not a saponified matter as 'soap' and that it is not soluble in water. Therefore, it does not qualify to conform technically to "soap". He also found that the item does not fall under the category of Organic surface active products and similar preparations. Neither in common parlance the item is understood as laundary soaps, toilet soaps, disinfect soaps or medicated soaps. Such soaps available in the market are intended for use by rubbing with body or clothes for washing purpose. While the item Vim Dish Wash Bar is used for cleaning kitchen utensils and it belongs to the family of scouring preparations such as vim cleaning powders and liquid and vim dish wash bar which contains higher percentage of abrasives and which cannot be used on human body or clothes. The item is rubbed on the surface of the utensils with a scrubber, which is vetted, the bar is touched and a little amount of the content of the bar is taken and thereafter with an abrasive action, the utensils in question is cleaned. Hence the function of dish wash bar is akin to scouring powder sold as "Vim cleaning powder" except that vim dish wash bar is in the solid form of mass. It was noticed that the ingredients which is in major composition are all abrasive material like china clay, feldspar, calcite which is more than 78% and the assessee is adding only 12 to 14% of acid slurry which acts as surface active agent. But these abrasive ingredients does not dissolve in water and it is these ingredients which have the essential character of the product to scour and to clean the utensils. The product consists of mixtures of more quantity of abrasive material viz. calcite 12 to 14%, China clay 22 to 26% and feldspar 28% to 32% besides confirming filter materials act as abrasive agents. The Dy. Chemist also in his report clearly opined that the item is in the form of bar composed of material of insoluble inorganic compound of water inorganic compound and synthetic organic surface agent. He has clearly opined that the item cannot be classified as soap and gave a finding in favour of the assessee as a "scouring preparation".
9. In view of detailed finding given by the AC in the Order-in-Original No. 84/96 dated 31.5.96 which is based on the HSN explanatory notes and the Dy. Chemist's report, the appellant seeks for confirmation of the said order by setting aside both the orders-in-appeal which are impugned herein.
10. We have heard Ld. Senior Advocate Shri L.S. Lodha accompanied by Shri N. Vankatraman, Advocate for the appellants and Shri G. Sreekumar Menon, Ld. SDR.
11. After going through the entire records and documents produced we proceed to record our findings and deal with the arguments in the course of the findings itself in order to avoid repetition as well as not to make the order unduly lengthy.
12. We have already extracted the findings recorded by the Commissioner (Appeals) in both the cases and the findings given by the ACCE, Dindigul in his Order-in-Original No. 84/96 dated 31.5.96 in favour of the assessee on the basis of the Dy. Chemist's report and on due examination of the entire technical literature and evidence and also in the light of explanatory notes to HSN and on our careful consideration, we find that this Order-in-Original No. 84/96 dated 31.5.96 is a well considered order and it satisfies all the requirements of law for being upheld in view of the fact that the order is consistent with the explanatory notes to HSN and as to what the item is about. Therefore, the conclusion that the product is required to be classified under sub-heading 3405.40 as "Scouring pastes and powders and scouring preparations" is required to be upheld as against the claim of the Revenue for classification under SH 3401.20 which refers to "Organic surface-active products and preparations for use as soap in the form of bars, cakes, moulded pieces or shapes.
13. Appellants have produced before us, the details of ingredients of its percentage was also relied before the authorities. The same is extracted herein below:
INGREDIENTS OF VIM DISH WASH BAR Sr.No. Ingredient Percentage Soluble/Insoluble Level of Hardness (MOH)
1. Acid Slurry 12.00% to Soluble -
15.00%
2. Soda Ash 4.50% to 6.00% Soluble -
3. Sodium Tri Poly Phosphate 1.50% to 3.00% Soluble -
4. Sodium Silicate 8.00% to 10.30% Soluble -5. China Clay 22.00% to 26.00% Insoluble 1
6. Feldspar 28.00% to 32.00% Insoluble 6-6.5 7. Calcite 12.00% to 14.00% Insoluble 3
8. Hyd. Lime 1.00 to 2.00% Insoluble -
9. Yellow Colour 0.03% to 0.05% -
10. Green Colour 0.05% to 0.10% -
11. Magnesium Sulphate 2.00% to 4.00% Soluble -
Insoluble- 63% to 74%
14. From the above ingredients, we can clearly see that the items china clay, feldspar, calcite and Hyd. Lime are all insoluble ingredients. Note (2) to Chapter 34 reads as below:
2 For the purposes of heading No. 34.01, 'soap' applies only to soap soluble in water, soap and other products of heading No. 34.01 may contain added substances (for example, disinfectants, abrasive powders, fillers or medicaments). Products containing abrasive powders remain classified in heading No. 34.01 only if in the from of bars, cakes or moulded pieces or shapes. In other forms, they are to be classified in heading No. 34.05 as "scouring powders and similar preparations.
15. From a reading of the above note (2), it clearly reads that "soap" applies only to products which are soluble in water. The Dy. Chief Chemist's report clearly indicates as follows:
The sample is in the form of a bar, composed mainly of water,insoluble inorganic compounds,less amount water soluble inorganic compounds and synthetic organic surface active agent. .(Emphasis supplied by us).
He has also given his opinion based on the HSN explanatory notes. However, we are not looking into the same as the Dy. Chief Chemist should himself confine to give his technical report alone and about his test finding. Therefore, we have extracted only the test finding as above which clearly clinches the issue that the sample is an insoluble inorganic compound. Therefore, in terms of Note (2) of Chapter 34 of CET, the item gets clearly excluded from the heading 34.01. Further more, the products containing abrasive powders remain classified under heading No. 34.01 only if it is in the form of bars, cakes or moulded pieces or shapes. In other forms, they are to be classified in heading No. 34.05 as "scouring powders and similar preparations". The case of the appellant is that although the item is in the form of cake but the item being "scouring powder" gets excluded from 34.01 and falls under sub-heading 3405.40. This aspect of the matter is now required to be considered in the present case. It is well settled that classification has to be adopted on the basis of section notes, chapter notes and only when classification cannot be proceeded in terms of section notes and chapter notes in terms of Interpretative Rule (1), only then the other Rules of Interpretation should be applied for the purpose of classification.
16. The explanatory notes to HSN are having persuasive value and they are required to be adopted for the purpose of classification. Keeping these two points under consideration, we have to proceed to see as to whether the item can be classified under sub-heading 3405.40 of CET as claimed by the appellants and as upheld by the Asst. Commissioner in Order-in-Original No. 84/96 dated 31.5.96. The explanation given to the item "soap" as appearing at page 518 of HSN under heading 34.01 is noted herein below:
(1) SOAP 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 rosin 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. Thy 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.
This part covers in particular:
(1) Toilet soaps frequently coloured and perfumed, which include: floating soaps and deodorant soaps, as well as glycerin soaps, shaving soaps, medicated soaps and certain disinfectant or abrasive soaps, as described below:
(a) Floating soaps and deodorant soaps.
(b) Glycerin soaps, which are translucent and are made by treating white soap with alcohol, glycerol or sugar,
(c) Shaving soaps (shaving creams fall in heading 33.07).
(d) Medicated soaps containing boric acid, salicylic acid, sulphur, sulphonamides or other medicinal substances.
(e) Disinfectant soaps, containing small quantities of phenol, cresol, naphthol, formaldehyde or other bactericidal, bacterioustatic, etc., substances. These soaps should not be confused with disinfecting preparations of heading 38.08 containing the same constituents, the difference lying in the proportions of the constituents (soap, on the one hand, and phenol, cresol, etc., on the other). The disinfecting preparations of heading 38.08 contain a substantial proportion of phenol, cresol, etc., and are liquid whereas disinfectant soaps are usually solid.
(f) Abrasive soaps, consisting of soap to which sand, silica, pumice powder, slate powder, sawdust or any similar product has been added. The heading covers abrasive soaps only in the form of bars, cakes or moulded pieces or shapes. Abrasive scouring pastes and powders, whether or not containing soap, fall in heading 34.05.
(2) Household soaps, which may be coloured or perfumed, abrasive or disinfectant.
(3) Rosin, tall oil or naphthenate soaps, containing not only alkaline salts of fatty acides, but also alkaline resinates of heading 38.06 or alkaline naphthenates of heading 34.02.
(4) Industrial soaps, prepared for special purposes, such as those used for wire-drawing, for polymerising synthetic rubber, or in laundries.
Subject to the exception in paragraph 1(f) above, the soaps of this heading are generally in the following forms: bars, cakes, moulded pieces or shapes, flakes, powder, paste or aqueous solution.
17. As can be seen from the above explanation, the 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 and it will be soluble in waiter that is to say true soap. The categorisation of soap has been given therein. The Chapter Note (2) to Chapter 34 clearly indicates that heading No. 34.01 covers abrasive powders only if in the form of bars, cakes or moulded pieces or shapes. It also states that abrasive pastes and powders whether or not containing soap fall under 34.05. Therefore, we have to examine as to whether the item is an abrasive paste and powder to come within the category of sub-heading 3405.40.
18. We have seen the explanatory note at page 520 which gives the items which are not covered under heading 34.01. Heading 34.02 deals with Organic surface active agents, (other than soap) to which the revenue is inclined to classify the item. At page 522 of the explanatory notes items which are not covered under heading 34.02 are noted under Clause (d) which reads "abrasive preparations containing surface-active agents (scouring pastes and powders)(heading 34.05)" (Emphasis supplied by us). Appellants are now relying on this exclusion Clause (d) page 522 of explanatory notes to plead that the item is an abrasive preparations containing surface-active agents (scouring pastes and powders) (Heading 34.05) which is excluded from Chapter 34.02. It is argued by the Ld. Senior Counsel that material produced by them which is technical in nature, which was also before the appellate authority has not been gone into but they have proceeded solely on the basis of Rule 3(b) of Interpretation and gone by the predominant nature of the item to classify the item within heading 34.02. But they have not examined Clause (d) of Exclusion Clause under 34.02 of the Explanatory Notes to HSN. The argument of the Ld. Sr. Counsel is supported by his reading of the Explanatory Notes the goods falling under 34.05 which reads as follows:
34.05--POLISHES AND CREAMS, FOR FOOTWEAR, FURNITURE, FLOORS, COACHWORK, GLASS OR METAL, SCOURING PASTES AND POWDERS AND SIMILAR PREPARATIONS (WHETHER OR NOT IN THE FORM OF PAPER, WADDING, FELT, NON-WOVENS, CELLULAR PLASTICS OR CELLULAR RUBBER, IMPREGNATED, COATED OR COVERED WITH SUCH PREPARATIONS), EXCLUDING WAXES OF HEADING No. 3.04.
3405.10--Polishes, creams and similar preparations for footwear or leather 3405.20--Polishes, creams and similar preparations for the maintenance of wooden furniture, floors or other woodwork 3405.30--Polishes and similar preparations for coachwork, other than metal polishes 3405.40--Scouring pastes and powders and other scouring preparations 3405.90--Other This heading covers polishes and creams for footwear, furniture, floors, coachwork, glass or metal (silverware, copper, etc.) and prepared pastes or powders for scouring cooking utensils, sinks, tiles, stoves, etc., and similar preparations such as polishes and creams for leather. The heading also includes polishing preparations with preservative properties.
These preparations may have a basis of wax, abrasives or other substances. Examples of such preparations are:
(1) Waxes and polishes consisting of waxes impregnated with spirits of turpentine or emulsified in an aqueous medium and frequently containing added colouring matter.
(2) Metal polishes and polishes for glass consisting of very soft polishing materials such as chalk or kieselguhr in suspension in an emulsion of white spirit and liquid soap.
(3) Metal, etc., polishing, finishing or fine-grinding products containing diamond powder or dust.
(4) Scouring powders consisting of mixtures of very finely ground sand with sodium carbonate and soap. Scouring pastes are obtained by binding these powders with, for example, a solution of waxes in a lubricating mineral oil.
These preparations, which are often put up for retail sale and are usually in the form of liquids, pastes, powders tablets, sticks, etc., may be used for household or industrial purposes.
The heading also covers paper, wadding, felt, nonwovens, cellular plastics or cellular rubber, impregnated, coated or covered with such preparations, but textile dusters and metal pot scourers similarly impregnated, coated or covered are excluded (Sections XI and XV respectively).
The heading also excludes:
(a) Abrasive powders, when not mixed (generally Chapter 25 or 28).
(b) Whitenings for footwear, in tablets, and prepared liquid dyes for chamois-leather footwear (heading 32.10).
(c) Degras and artificial degras (heading 15.22): other oils and greases for leather dressing (Chapter 15, headings 27.10, 34.03, 38.24, etc.)
(d) Dry-cleaning fluids and stain removers, for cleaning clothing, which are classified according to their composition (usually as petroleum spirit, heading 27.10, or as products of heading 38.14 or 38.24).
19. The above note explains that the heading covers powders for scouring cooking utensils etc. It also states that these preparations which are often put up for retail sale and are usually in the form of liquids, pastes, powders, tablets, sticks etc. may be used for household or industrial purposes. It is the contention of the Senior Advocate that the word "usually" is only explanatory and not exhaustive and the form in which the item it is stated therein are also explanatory and not exhaustive as the word "etc." given therein, which includes cakes also. It is also stated that when powder which is in the form of abrasive scouring material, if made into cakes, it continues to remain in this heading. This powder form is continuing to be classified under SH 3405.40. The argument of the Senior Counsel is supported by the literature, which is relied and requires acceptance for further reasons herein below.
20. Before coming to the literature and technical aspect of the matter, it is necessary also to see the ground on which the revenue has proceeded to classify the item as 'detergent' under sub-heading 3401.20. In the Show Cause Notice dated 3.4.96 annexed to Appeal No. E/646/99, the department has clearly admitted the ingredients used in the manufacturing process. They also admit that the item is described as Vim Dish wash bar but have brought out the fact that the claim for classification under 3405.40 as 'scouring paste & powder and similar preparations' is not appropriate for the reason that the ingredients are water mixed and that the preparation are mixed together in a SIGMA MIXTURE. Soda Ash neutralises acid slurry and chemically reacts with it to give a surface active agent. The SCN also referred to the write up of the party wherein they have described the items China Clay and Feldspar as fillers which contribute to the body of dish wash bar as a natural abrasive product. Although, there is mixture of surface active agent and other ingredients, the appellant claim that the item in question cannot be used for washing the clothes or for use on human body, as it will have a serious effect both on human skin surface as well as on the clothes in view of the abrasive element contained in it, which irritates the human skin or tears out the clothes. It has to be used as scouring bars for scouring function which abrades or scours to cleanse or brighten by friction. The cleaning or brightening property of the scouring preparation is attributed to the abrasive function of the abrasive agent present in that preparation. The department in the SCN has gone through the principle functions of the surface active agent to rule out the classification of the product under SH 3405.40 as claimed by the appellants by applying Interpretative Rule 3(b) Rules of Interpretation to the CETA, which rule lays down that when mixtures consisting of different material cannot be classified by reference to most specific description then they shall be classifiable as if they consist of the material or component which gives them their essential character in so far as this criterion is applicable. Therefore, the department proceeded to allege that the preparation in question would be classifiable as a surface active preparation. In view of the surface active preparation predominating or as a scouring preparation, if the abrasive function predominates.
21. The department has, in the SCN, proceeded to consider the surface active agent to predominate and not the Feldspar as a principle agent which contributes to the cleansing function of the preparation. The SCN although states that by applying Interpretative Rule 3(b) and Explanatory Note II (b) of Heading 34.02 of HSN such washing preparation are also known as "detergents" but as the item is used as 'soap' in the form of bar, it has to be classified under 34.01 only in view of understanding of the department of reading of Note (2) to Chapter 34. The SCN also stated that the word "similar preparations" under 34.05 would never bring the product in the form of bars, cakes, or moulded pieces or shapes into its fold and hence they are required to be classified only under 34.01 in spite of the fact that the predominant functional character of the product is abrasive.
(Emphasis supplied)
22. We have considered these grounds and the findings based by the Commissioner (Appeals) solely on this ground without going into other aspects of the matter and confirmed the demands as proposed in the SCN. Ld. SDR also emphasised for upholding the order as the item is a 'soap' for classification under 34.01 although the predominant functional character of the product is abrasive. We have carefully considered these submissions. However, we are not in agreement with the averments in the SCN and the finding of the Commissioner (Appeals) in both the matters for the reason that for classification of the item under 34.01, the item has to be a 'soap' which should be soluble in water. The Dy. Chief Chemist's report also supports appellant's claim. The department has not brought out any rebuttal evidence to prove that it is marketed as such and used as a 'soap' for human needs or washing clothes as a 'detergent'. Therefore, the department itself has taken a contradictory stand inasmuch as contending in the SCN it is averred that although it cannot be considered as 'detergent' but still it has to be considered as a 'soap' for the reason that it has got organic surface agent. Thus, admitting that the predominant functional character of the product is abrasive.
23. We have read Note (2) to Chapter 34 which is also extracted supra which deals with the classification of the product under 34.01 and it applies only to 'soap' soluble in water. Although the abrasive products remain classified in this heading but the note further states that "scouring powders and similar preparations" would fall under 34.05. Now, we are required to see as to whether the item is a "scouring paste and powders and similar preparations" classifiable under heading 3405.40 as claimed by the appellants.
24. In this regard reference to Indian Standard Specifications for Scouring Powders under IS 6047:1970 is relied. The portion pertaining to Foreword in paras 0.1. to 0.3.3 is extracted herein below:
INDIAN STANDARD SPECIFICATION FOR SCOURING POWDERS
0. FOREWORD 0.1 This Indian Standard was adopted by the Indian Standards Institution on 2 November 1970, after the draft finalized by the Soaps and Other Surface Active Agents Sectional Committee had been approved by the Chemical Division Council.
0.2 Scouring powders are formulations containing powdered mildly abrasive material along with a cleansing agent like soap, synthetic detergent, etc. These are used for cleansing of utensils, crockery, floors, wash basins, etc., where cleansing is effected by the combined action of scrubbing and detergency.
0.3 Among the various definitions that are published and accepted at the international level, one is the Brussels Trade Nomenclature. This publication deals with a variety of products which are dealt with under different sections and clearly distinguishes scouring preparations from washing preparations.
0.3.1 By the very nature and definition of the product, scouring powders have to contain an ingredient which scours, that is cleanses by friction; hence they have to contain an abrasive ingredient. As a consequence, the three principal components of scouring powders are: (a) an abrasive ingredient to perform the scouring function; (b) a surface active ingredient to provide slight detergent action; and (c) water-soluble builders and additives whose function is to improve the effectiveness of the product under the conditions of use. The action of additives and builders is largely physico-chemical, producing a series of effects leading to a more economic usage and better cleansing action of the surface active ingredient. Brussels Trade Nomenclature has a Section (VI. 34.05) which is entitled 'Polishes and creams, for footwear, furniture or floors; metal polishes; scouring powders and similar preparations, but excluding prepared waxes falling within the heading No. 34.05.' According to this section, scouring powders are described as preparations 'consisting of mixtures of very finely ground sand with sodium carbonate and soap; scouring pastes are obtained by binding these powders with, for example, a solution of waxes in a lubricating mineral oil.' 0.3.2 Brussels Trade Nomenclature has a separate Section (VI. 34.02) which is entitled 'Organic surface-active agents; surface-active preparations and washing preparations, whether or not containing soap'. All the ingredients listed therein are water-soluble, that is, there is no water-insoluble ingredient in the list which cleanses by friction. There is no abrasive ingredient listed in the Brussels Trade Nomenclature in this Section.
0.3.3 Scouring powders, which form the subject-matter of this standard, come within the purview of Brussels Trade Nomenclature Section VI. 34.05 and not Section VI. 34.02.
0.4 For sieve analysis, the use of IS Sieves (conforming to IS: 460-1962) is prescribed. Where IS Sieves are not available, other equivalent sieves, as judged from aperture size, may be used.
0.5 For the purpose of deciding whether a particular requirement of this standard is complied with, the final value, observed or calculated, expressing the result of a test or analysis, shall be rounded off in accordance with IS: 2-1960. The number of significant places retained in the rounded off value should be the same as that of the specified value in this standard.
On a reading of the above material, it is clear that it recognizes scouring powders are formulations containing powdered mildly abrasive material alongwith a cleansing agent like soap, synthetic detergent etc. These are used for cleansing of utensils, crockery, floors, washbasins etc. where cleansing is effected by the combined action of scrubbing and detergency. In para 0.3.1. also the nature and definition of the product, scouring powders and ingredients have also been noted in the extracted portion above. This piece of evidence which clearly discloses that abrasive ingredients alongwith surface active agents are required for making scouring preparations for cleaning utensils, for scouring. The item satisfies the definition of "scouring preparation" in view of majority of the ingredients being abrasive material and composing more than 74%. It does not dissolve in water and which are not used for washing human body or clothes. We have already noticed the HSN explanatory notes at page 518 under heading 34.01. It clearly lays down that heading 34.01 covers only soap soluble in water and categorizes all the three types of soaps are mentioned therein. It also lays down at pages 519 that abrasive scouring pastes and powders, whether or not containing soap fall under heading 34.05. Likewise, heading 34.01 deals with organic surface active agents to bring within its ambit 'detergents'. The HSN note at page 522 excludes in Clause (d) abrasive products containing surface active agents (scouring paste and powders) which should fall under 34.05. Reading of heading 34.05 has already been analysed and shown that heading covers pastes or powders for scouring cooking utensils etc and preparations having put up for retail sale in the form of liquids, pastes, powders, tablets, sticks. The item is claimed to fall under the term 'etc' which is not exhaustive and includes items in the form of cake. Further, we notice from the book "Synthetic Detergents" Seventh Edition by A.S. Davidsohn and B. Milwidsky, which deals with about the Abrasive Cleaners at page 251. Scouring powders for pots and pans was well as cleaners for tiles and bath-tubs are explained under this category. The book brings within its ambit the following materials on account of hardness viz. Talc, Diatomaceous Earth, Dolomite and Calcite, Marble Dust, Volcanic Ash, Felspar, Quartz and Sand. The technical literature clearly states that the hardness of felspar is equivalent of Volcanic ash and hardness of each of the item is already brought out in the extracted portion supra. These items are so hard that it cannot be used for washing clothes or human skin except for scouring dirt on utensil for its removal. The technical book, "The Manufacture of Soaps, Other Detergents and Glycerine" by Edgar Woollatt deals about "Abrasive Powders" and the manner of its manufacture. From para 11.3.2. of the said literature, it shows that in the selection of an abrasive powder for use in scouring products, there needs to be a compromise between scouring performance against difficult soils, such as foodstuffs burnt onto pans, and mildness to surfaces. It also states that the modern trend is towards greater mildness but an abrasive also needs to be selected to meet the marketing requirements of the product in which it is to be used. It gives all the details about the factors and the minerals that are required to be selected. At pages 434 and 435, the reason as to why such hardness for purpose of scouring and scrubbing dirt for dish washing hand is explained and certain amount of calcite and other insoluble salts, organic agents are also required for reaction purpose.
25. Appellants have also produced the write up of each of the minerals like Calcite and other materials from technical book to show about their use as abrasive element for cleaning utensils. Appellants have also produced Indian Standard for Household Laundry Detergent Powders--Specification IS 4955: 1993 which excludes abrasive use for scouring material. This clearly discloses that the items which are used in the manufacturing of household laundry detergent powders are to ensure safety from skin irritation and skin sensitization hazards to consumers using detergents as a requirement for compliance, with corresponding test methods. Appellants have shown that the items are not to be used for the human skin or for clothes as "detergents" as it has detrimental effect.
26. Appellants have also produced extracts of the definition "abrasive" appearing in various dictionaries in Webster's Encyclopedia and also the definition of "scourer". The definition of "soap" as appearing in Merriam Webster's Collegiate Dictionary 10th Edition clearly defines that to be a typical commercial washing soap it should be made by reacting Sodium Hydroxide with Fatty Acid and uses of soaps are also shown for human needs including medicates soaps, detergents etc.
27. In view of these technical material produced, there is no glimmer of doubt that the item cannot be considered for classification under 34.01 as 'soap', as the abrasive elements are used as a scouring preparation. Note (2) itself excludes from heading 34.01 'scouring preparations' and therefore both the appellate authorities have clearly erred in not going into depth of the issue and in not examining the evidence but have merely proceeded to uphold classification under 34.01 on the basis of Rule 3(b) which is totally untenable in terms of Rule (1) of Interpretative rule which clearly lays down that the classification has to be done in terms of headings, and any other relevant section notes, chapter notes. Only if such heading or section notes do not help in classifying a product then alone resort to other rules has to be adopted. As in the present case, there is no doubt about the applicability of section note and chapter note under the heading to the chapters discussed above and that the AC in his exhaustive Order-in-Original No. 84/96 dated 31.5.96 has clearly analysed the facts and has rightly dropped the proceedings for classification of the product under heading 34.01 as claimed by the department. The findings is also based on the Dy. Chief Chemist's report besides examining the manufacturing process, technical literature, and market understanding of the product. Thus, we uphold the Order-in-Original No. 84/96 dated 31.5.96 and set aside the Order-in-Appeal No. 25/99 dated 6.1.99.
28. Likewise the Order-in-Appeal No. 72/2001 dated 30.7.2001 passed by the Commissioner (Appeals) is also set aside and appellant's claim for classification of the item as "scouring paste and powders and other scouring preparations is upheld. In that view of the matter, the appellants succeed and appeals are allowed.