TMI Blog2002 (9) TMI 128X X X X Extracts X X X X X X X X Extracts X X X X ..... to excise duty under Tariff Item 14F. This item, as it stood prior to 1st April, 1985, had a particular wording and the said wording has been changed subsequent to 1st April, 1985. There is no dispute that hair dyes have been subsequently covered under this amended Tariff Item 14F specifically with effect from 1st April, 1985. The case of the petitioner-company is that the tariff item as it stood prior to 1st April, 1985 did not include hair dyes amongst the categories which were included under cosmetics and toilet preparations. As against that, the case of the Central Excise Department has been that hair dyes were covered under the category of "hair lotions" occurring in Tariff Item 14F as it stood even prior to 1st April, 1985. The petitioner does not dispute that hair dyes are a category of cosmetics, but it is the case of the petitioner that for attracting duty of Central Excise, the concerned product has to be specifically covered under the particular entry. The hair dyes not being so included in cosmetics and toilet preparations prior to 1st April, 1985 were not excisable and it could also not be said to have been covered under the category of "hair lotions". The controversy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 68 on a provisional basis and that the petitioner should execute a necessary bond for provisional assessment under the relevant Rule 98. The petitioner filed a reply to this notice and also filed their written submissions. The petitioner was also issued with four specific demand notices which were dated 2nd August, 1982, 11th October, 1982, 27th December, 1982 and 17th February, 1983. One out of these four notices, the one dated 11th October, 1982 has, subsequently, been dropped. The other three notices covered the period from January to December, 1982. 6.The first notice dated 2nd August, 1982 stated in the reasons annexed thereto that the investigation revealed that the product Liquid Hair Dye appears to answer the definition of cosmetics and was, therefore, classifiable under Tariff Item 14F. The reasons enclosed with the second notice dated 27th December, 1982 stated amongst others: that "from the point of view of composition and the ingredients of the product, it would not be possible to say that the hair dye should not be regarded as hair lotion. The enclosure to the third notice dated 17th February, 1983 repeated the same reasons as annexed with the second notice. 7.As s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d notice. 9.At the time this petition was filed, the writ petitions covering this subject-matter, used to be allotted to Single Judges under the relevant Rules of this High Court. Accordingly, this writ petition came up for consideration before a Single Judge on 1st July, 1983 when he passed the following order :- 'Rule. Interim relief in terms of prayer (c) excluding the words "demanding or", and (c)(iii).' The result of this order has been that from the date of this order, the following interim order has been running in favour of the petitioner, viz. :- that, pending the hearing and final"(c) disposal of the present petition, the impugned order passed by respondent No. 1 be stayed and the respondents, their agents, subordinates and servants be restrained by order and injunction of this Hon'ble Court from :- ……………. …….. recovering from the petitioner any excise duty on the said hair dyes in excess of the excise duty payable thereon under T.I. 66; and taking any action directly or indirectly in pursuance of or to give effect to the impugned order (Ex. L hereto) and/or the impugned Notice (Ex. M hereto) or to recover the said amount of Rs. 1,16,10,001.08." Needless t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, and (iii) shaving creams. Mr. Shroff submitted that again in the category of preparations for the care of hair, there are three specific sub-categories and respondent No. 1 has held the hair dyes as being hair lotions under sub-category (ii)(a) of Tariff Item 14F. Mr. Shroff submitted that hair dyes are not hair lotions and that was the view taken by the learned Single Judge in the case of Subhash Chandarnishat (supra), (hereinafter referred to as "the Vasmol case" for convenience since that was the name of the company involved in that case). In Para 5 of the judgment, the learned Single Judge has rejected the submission on behalf of the Excise Department that the expression "namely" was merely illustrative. The learned Judge has clearly held that the expression "namely" was not used in an illustrative sense but in a restrictive sense. Amongst others, the learned Judge has held that 'the very fact that these goods had to be specifically included in the said item by way of amendments shows that the word "namely" was used in the said item not in an illustrative sense but in a restrictive sense'. 12.Mr. Shroff has placed reliance on this judgment also for the reason that in Parag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this judgment in Paragraph 8 and explained as to why the Division Bench has decided the matter the way it was decided and as to why he was taking a different approach. Mr. Shroff submitted that in the circumstances, the 1st respondent had to follow the approach adopted by the learned Single Judge. Mr. Shroff also laid emphasis on the proposition from the judgment of Lord Reid in Anisminic Ltd. v. The Foreign Compensation Commission reported in (1969) All E.R. 208 which laid down that if a Tribunal having jurisdiction refused to take into account something which it was required to take into account or based its decision on some matters which it had no right to take into account, the court would be entitled to interfere with the decision of the Tribunal. This proposition has been accepted by the Apex Court in Union of India v. Tarachand Ltd. reported in 1983 (13) E.L.T. 1456 (S.C.) = AIR 1971 S.C. 1558. Both these cases are referred in the Vasmol judgment. Mr. Shroff submitted that in the present case when 45 affidavits were presented to respondent No. 1 pointing out the commercial use of the particular product, he could not have ignored them. 14.Again, in the facts of the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wants to tax particular goods known as such, then the onus is on the Revenue. He submitted that in the present case, the respondent No. 1 has not discharged the burden and either in the commercial sense or in the technical sense, hair dye would not be classifiable as hair lotion. Similar is a subsequent judgment of the Apex Court in Hindustan Ferodo Ltd. v. Collector of Central Excise, Bombay reported in 1997 (89) E.L.T. 16 (S.C.) which is also to the same effect. 17.With respect to the controversy as to whether the commercial meaning of the term has to be accepted, he drew our attention to four different judgments of the Apex Court. The first amongst these is the one in the case of Shree Baidyanath Ayurved Bhavan Ltd. v. Collector of Central Excise, Nagpur reported in 1996 (83) E.L.T. 492 (S.C.) wherein the Apex Court held that "Lal Dant Manjan" (Tooth Powder) is not a medicine (Ayurved). The court held that the goods are to be classified according to the popular meaning attached to them by those using the product. Thereafter in the case of Chemical and Fibres of India Ltd. v. Union of India reported in 1997 (89) E.L.T. 633 (S.C.), the Apex Court held that the tariff entry usin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s pointed out above, the petitioner was not expected to charge at a higher rate to cover their position as per the Tariff Item 14F and it would lead to unjust enrichment. Thereupon Mr. Shroff pointed out that to this show cause notice dated 13th July, 1982, a reply was sent by the petitioner on 8th September, 1982 (Exhibit-F to the petition) prior to filing of the petition pointing out that the petitioner intended to and 105% excise duty ad valorem to arrive at assessable value and that on the assessable value so arrive at they will be paying excise duty at 8%. This was with a view to cover or protect or insure themselves and at the end of that letter they have specifically asked respondent No. 1 to confirm that what was proposed was in order. In this behalf Mr. Shroff made three statements : viz. (1) the petitioner recovered in the process excise duty much less from the customers, (2) whatever duty was recovered was paid to the Government, and (3) may be, at the highest the method of calculation adopted by the petitioner to arrive at the assessable value was an erroneous one. He submitted that as per this calculation, at the highest the unpaid excise duty for the year 1982 would c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l under specific items mentioned in the Entry, it would still fall under cosmetics and toilet preparations in view of the use of the phrase "namely". He also drew our attention to the fact that the Drugs and Cosmetics Act, 1940 specifically includes hair dyes as an item of cosmetics. 21.The second submission of Mr. Sethna was that the Vasmol case, which was decided by a learned Single Judge, was concerning the categories "creams and pomades" and not hair lotions. He referred to various passages from the said judgment to emphasise this aspect and submitted that as far as hair lotions are concerned, the relevant judgment concerning them would be the one of the Division Bench in the case of Chimanlal Mehta (supra). Thus on page 215 of the report of Excise Law Times, the learned Single Judge recorded as follows in the Vasmol case : "The Collector rejected the contention of the petitioner that Vasmol was hair dye meant solely for the purpose of darkening hair and was not covered by Item 14F of the First Schedule to the said Act. He further rejected the contention of the petitioner that Vasmol Emulsified Hair Oil and Vasmol Pomade were used only by such persons who wanted to change t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t would fall under entry 14F. Mr. Sethna contested the submission relying upon a judgment of the Gujarat High Court in Stadfast Mills v. D.R. Kohli, 1983 (12) E.L.T. 744 (Gujarat), wherein the Court held that the evidentiary value of the report of Chemist, lies only insofar as it studies the data obtained by him through chemical analysis. The court had observed — "It is none of the functions of the chemists to give an opinion as to whether the goods in question would be covered by a particular item of the Tariff Schedule". 23.Mr. Sethna relied upon a judgment of the Apex Court in the case of Collector of Customs, Madras v. K. Ganga Shetty, which is a judgment of the Constitution Bench of Apex Court reported in 1999 (110) E.L.T. 221 (S.C.) = AIR 1963 SC 1319. In that matter, the question was with respect to the decision of the Customs Authorities classifying "feed oats" as grain. In Para 7 of that judgment, the Supreme Court referred with approval to an earlier judgment in the case of Venkateswaran v. R.S. Wadhwani reported in 1983 (13) E.L.T. 1327 (S.C.) = AIR 1961 SC 1506, and then commented as follows : "It is primarily for the Import Control Authorities to determine the hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the court had no jurisdiction to interfere merely because the other interpretation favourable to the subject appealed to the court as a better one to adopt. These judgments are :- (1) Venkateswaran v. Wadhwani - 1983 (13) E.L.T. 1327 (S.C.) = AIR 1961 SC 1506 (2) Collector of Customs, Madras v. Ganga Shetty - 1999 (110) E.L.T. 221 (S.C.) = AIR 1963 SC 1319 (3) Girdharlal Bansidhar v. Union of India - AIR 1964 SC 1519 (4) V.V. Iyer v. Jasjit Singh, Collector of Customs - 1999 (110) E.L.T. 414 (S.C.) = (1973) 1 SCC 148 In fact in the last judgment, the Apex Court observed as follows :- "In our opinion, there is nothing in the decision of the Collector which can warrant its condemnation as perverse or unreasonable. Even if it be assumed that because of the language used in the two items viz. : Item 74 (vi) and 74(x) of the I.T.C. Schedule, there is some room for confusion, it would not be competent for the High Court to interfere in a writ petition with the conclusion of finding of the Collector of Customs regarding the scope and ambit of those items." Similar has been the view of a Division Bench of this Court in the case of Kulkarni Black ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us items periodically. We are dealing with a taxing statute and the citizens must know specifically as to whether a particular product is covered thereunder or not. In the present entry, the expression "namely" will have to be held as restrictive of the genera words "cosmetics and toilet preparations" and not merely illustrative. Thus, if hair dyes were not specifically mentioned at the relevant time, they had to fall under particular categories of hair lotions, creams and pomades, if at all they were to be charged to excise duty. The submission of Mr. Shroff in this behalf will have to be accepted. 29.Then we come to the second aspect of the controversy as to which of the two judgments hold the field, namely the Vasmol judgment or the one in the case of Chimanlal Mehta, and whether the respondent No. 1 was bound to follow either of the two. Now, in this connection, what we have to note is that three show cause notices, with which we are concerned in this matter, called upon the petitioners to explain as to why their product "liquid hair dye" should not be reclassified under Tariff Item No. 14F. The reasons in support of these notices enclosed with the second and the third notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horities the commercial sense in which the person dealing with the subject understood the term "hair lotions". After considering the technical data, the court did come to the conclusion that the concerned hair dyes will have to be considered as hair lotions but wait it observed in Para 10 thereafter is relevant. Secondly, even if the question is"10. approached from the aspect from which Mr. Joshi wants us to approach, it seems to us rather difficult to accept this contention. It is true that the petitioners product 'Ensola Cone' contained, apart from 90% water and perfumery material, ingredients like Lead Acetate and Sodium Thiosulphate, the ingredients which have the properties of giving colour to the hair. It is also true that the petitioners have not advertised their product as any hair lotion or pomade or cream or anything of the kind but the same has been advertised as Hair Darkener. In other words, the product is intended to be used solely for darkening hair or blackening grey hair. But the question is whether even such a product is commercially known as hair lotion or not, for it is in that sense that the relevant item under the tariff will have to be understood and in thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perverse one, one is not expected to interfere therewith. In the present case, the Division Bench has made observations at two different places on the commercial interchangeability of the terms. When the Division Bench could form and express such an opinion, though the data before it was a technical one, it will be difficult to find fault with the respondent No. 1 if he chooses to adopt that approach. It is undoubtedly true that he could have followed the approach taken in the Vasmol case, but that would have been at the risk of ignoring the observations of the Division Bench. No doubt. It is true that the learned Single Judge had explained the observations of the Single Judge to find out a way in the matter before him. In our view, the judgment of the learned Single Judge will have to be restricted to the facts of that case which were before him as applicable to creams and pomades. Faced with the two judgments, the respondent No. 1 had preferred to follow the one given by Division Bench on hair lotions. In our view, for the reasons stated above, it is not possible to categorise the approach of the respondents No. 1 as a perverse one. The submissions canvassed by Mr. Shroff is und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. 35.Reading of the aforesaid section clearly indicates that the whole-sale price which is charged is deemed to be a value for the purposes of levy of excisable duty, but the element of excise duty, sales tax or other taxes which is included in the whole-sale price is to be excluded in arriving at assessable value. This section has been so construes by the Apex Court in Collector of Central Excise and others v. Bata India Ltd. - 1996 (84) E.L.T. 164 (S.C.) = 1996 (4) SCC 563 and it is thus clear that when cum-duty price is charged, then while arriving at the excisable value of the goods, the element of duty payable is to be excluded. In this case, the price indicated in the wholesale price list was reduced by trade discount post-manufacturing expenses and element of excise duty @ 105% ad valorem to arrive at the assessable value so arrived. In this view of the matter, when we examine the strength of the submission of the petitioner that merely because excise duty @ 105% was deducted from the price to arrive at the assessable value on which 8% excise duty was paid it cannot lead to the conclusion that the difference was recovered from the customer and retained by the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessable value claimed in col. No. 11 is Rs. 232.01 duty @ 105 % shown in the col. No. is Rs. 243.62 37.The above calculation would reveal that on the assessable value of Rs. 232.01 the petitioner paid 8% excise duty, namely, Rs. 232.01 the petitioner paid 8% excise duty @ 105% as against 8%. The petitioner ought to have deducted excise duty component only @ 8% instead of 8% instead of 105%, then using same formula the assessable value would have been Rs. 659/- minus Rs. 218.60/- (Rs. 26.36 + Rs. 157.01 + Rs. 35.23) = Rs. 440.40. On this assessable value the duty at the rate of 8% would have been Rs. 35.23. Had it been so, the wrongly deducted component of the excise duty @ 105% would have been the net profit of the petitioner. But factual position is otherwise. The petitioners herein while calculating assessable value actually claimed deduction @ 105% on account of excise duty component instead of claiming it @ 8%. In other words, the figure of 8% excise duty was substituted with that of 105% and factually and actually the said deduction of 105% was shown and claimed on account of excise duty. The deduction claimed and collection m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner did not disclose this fact in clearest possible terms to this court and, on the thereof almost for more than 13 years and used the said amount in their business. The Revenue is deprived of the advantages of the said amount, it is thus clear that the petitioner deducted higher amount of excise duty presumably on the premise that they may be required to pay @ 105% in the event of dismissal of their petition, but did not pay this amount of duty so collected to the Revenue. The petitioner very well knew that Section 4(4)(d)(ii) permitted deduction only of such amount which is paid excise duty and which was so collected. The fact, therefore, remains that its amount was collected as excise duty and not paid to the Revenue. 39.It is needless to mention that, had it been the amount towards the increase in the price of the product, then, in that event the petitioner would have treated this amount as their profit and would not have claimed deduction in their return filed under Income-tax Act for assessment year 1983-84. It is thus clear that the amount of excise duty at the rate of 105% was collected from the customers. In other words, the liability of the excise duty was trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chaser at one and retain the same without paying it to the State. The power of the court is not meant to be exercised for unjustly enriching a person. If an assessee has passed on the tax to the consumer or a third party and sustained no loss or injury; allowing him to retain the amount will result in windfall to him. Such a person will be unjustly enriched. This will result in the assessee or claimant obtaining a benefit, which is neither legally nor equitably due to him. It is needless to mention that the power under Article 226 has to be exercised to effectuate the rule of law and not for abrogating it. Where a person approaches the High Court but fails, he cannot take advantage of the amount of duty so collected. He is under an obligation to return the said amount to the Revenue. Thus, case in hand is a clear case of undue enrichment and on this count also, the petitioner must fail. 42.In the circumstances, we hold that hair dyes concerned manufactured by the petitioner were covered under Tariff Item No. 14F of the Central Excise Tariff at the relevant time. And even if one were to take the view that they were not so covered under Tariff Item No. 14F but under residuary Entry ..... X X X X Extracts X X X X X X X X Extracts X X X X
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