TMI Blog2008 (7) TMI 771X X X X Extracts X X X X X X X X Extracts X X X X ..... anufactured products in terms of Section 2(f)(iii) of the Central Excise Act (CEA) owing to repacking in retail packs. The products cleared by the job workers attracted MRP-based assessment under Section 4A of the Central Excise Act as hair oil. In all the four orders impugned, the period of dispute is from 1-3-2005 to 28-2-2007. The job workers of Marico are alleged of having evaded duty due on the excisable goods cleared by them during the material period by suppressing relevant facts from the department. There is penalty on Marico in all the impugned orders for having abetted evasion by the job worker. Order-in-Original in respect of M/s. Aiswarya Industries confirms a demand of duty of Rs. 26,92,25,605/- along with interest, Education Cess of Rs. 53,84,512/- and penalty of Rs. 27,46,10,118/- on M/s. Aiswarya Industries and Rs. 25,00,000/- on M/s. Marico. Similar demands and penalties are involved in the other three orders. 2. The facts of the case are that with effect from 28-2-2005, by Central Excise Tariff (Amendment) Act, 2004, the Central Excise Tariff Act, 1985 was modified by substituting the tariff in the First Schedule with the entries in the HSN. This exercise also i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solutions of essential oils) suitable for use as goods of these headings and put up in packings of a kind sold by retail for such use. Note 2 of Section VI reads after the amendment as under : Subject to Note 1 above, goods classifiable in Heading 3004, 3005, 3006, 3212, 3303, 3304, 3305, 3306, 3212, 3307, 3506, 3507, 3808 by reason of being put up in measured doses or for retail sale are to be classified in those headings and in no other headings of this Schedule. The relevant extract of the Explanatory Notes to HSN reads as follows before and after 28-2-2005 : Preparations (e.g., varnish, and unmixed products (e.g. unperfumed powdered talc, fuller s earth, acetone, alum) which are suitable for other uses in addition to those described above are classified in these headings only when they are : (a) In packings of a kind sold to the consumer and put up with labels, literature or other indications that they are for use as perfumery, cosmetic or toilet preparations, or as room deodorizers; or (b) Put up in a form clearly specialised to such use (e.g., nail varnish put up in small bottles furnished with the brush required for applying the varnish) . The above Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... coconut oil was packed in small bottles, sachets, container etc., by itself would not constitute a form clearly specialised for such use. In the instant case, Commissioner relied on the fact of the product being sold in small size packing to find that coconut oil was sold in retail for use as hair oil. This finding was without proper basis. In the Kothari Products Ltd. v. Commissioner of Central Excise, Kanpur reported in 2002 (139) E.L.T. 633 the Tribunal had held that the mere small size of a pack shall not be determinative of the fact that the product was hair oil. A similar view was held in the case of Shrikant Sachets Pvt. Ltd. v. CCE [2005 (180) E.L.T. 401] by the Tribunal. 5. It is also argued that for a product to be classified under Chapter Heading 3305, it has to be a preparation for use on hair. The subject goods was coconut oil per se and did not undergo any process to make it suitable for use on hair. Therefore, it was not a preparation for use on hair. To become a preparation, the product had to satisfy Note 3 to Chapter 33. The Note 2 to Section VI was relevant only when the goods were classifiable under Chapter 33. As the subject goods did not bear a label, liter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat they were manufacturers of HDPE bottles for captive consumption and that vegetable oil i.e., coconut oil, was its final product. The process of manufacture as well as dispatch of products to Marico s depots had also been intimated. As the appellants had disclosed all the relevant information, the ground of suppression could not be validly invoked on an allegation that it had not disclosed the brand name under which goods were being sold or that they were being sold at MRP. The demand was time-barred. The demand for interest and imposition of penalty were also challenged as the impugned demand itself failed. 6.1 Heard both sides. 7. We have carefully considered the case records and the submissions by all concerned. The issue involved is the correct classification of coconut oil packed and sold in plastic containers of capacity 50 ml to 500 ml manufactured by the job workers and marketed as pure edible oil. The raw material, coconut oil in bulk is received from the principal Marico. The competing entries are CSH 33051990 and CSH 151311 of the CET. The period of dispute is 1-3-2005 to 28-2-2007. The Tribunal had considered classification of refined coconut oil packed in contai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3305. Just for the reason that the item has become exigible by the operation of a Chapter Note deeming a process to be manufacture, an item otherwise classified under a different heading cannot be classified under one of the headings mentioned in Section Note 2 of Section VI unless it qualified to find a place under that heading independent of this Section Note. In the instant case, coconut oil before repacking should be classifiable in Chapter Heading 3305 to classify the same on packing in sachets, bottles and cans under Chapter Heading 3305. In the instant case, the item goes out of the purview of Chapter 33 owing to the operation of Note 3 to Chapter 33 and the HSN Explanatory Notes to the above Chapter. Therefore, Section Note does not help in bringing the impugned goods under CSH 33051990. Yet another ground found by the Commissioner to deny classification under Chapter Heading 15.13 to the coconut oil cleared by the job workers in retail packages is that the containers were not suitable for packing edible oil. The Commissioner found that containers which comprised a component of more than 15% reground plastic was not suitable for packing food grade oil. No basis was disclos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roducts (e.g. unperfumed powdered talc, fuller's earth, acetone, alum) which are suitable for other uses in addition to those described above are classified in these headings only when they are : (a) in packing of a kind sold to the consumer and put up with labels, literature, or other indications that they are for use as perfumery, cosmetic or toilet preparations, or as room deodorizers; or (b) put up in a form clearly specialized to such use (e.g. nail varnish put up in small bottles furnished with the brush required for applying the varnish) . The impugned product does not satisfy these notes and therefore does not fall for classification under CSH 3305. 10. Vide Circular No. 145/65/95-CX dated 1-8-1995 the CBEC had clarified that coconut oil whether pure or refined or whether packed in small or large containers merited classification under Chapter Sub-Heading No. 1503 if it satisfied the criteria of fixed vegetable oil laid down in Chapter Note 3 of Chapter 15. It was also clarified that if the containers bore labels, literature etc. indicating that it was meant for the application on hair as specified under Note 2 of Chapter 33 and/or if the coconut oil had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pter 33 was not applicable for classifying the goods in that case under Chapter 33. 14. HSN Explanatory Notes to Chapter 33 were same before and after 28-2-05. Moreover entries under Chapter 15 relating to coconut oil in the HSN and Central Excise Tariff after 28-2-2005 are also identical. Therefore, the decision of the Tribunal in the above case interpreting the scope of Chapter 15.13 and 33.05 of Central Excise Tariff applies to the corresponding entries even after 28-2-2005. The above ratio of the decision of the Tribunal therefore squarely applies to the present case also. We find that the impugned order is not consistent with the Tribunal s reading of the Tariff entries and HSN Notes relating to the relevant entries of Chapters 15 and 33 of the first schedule to the CETA, 1985. 15. In the result, we set aside the impugned order and allow the appeal filed by M/s. Madhan Agro Industries (P) Ltd. On a study of all the relevant material, we are of the considered opinion that the impugned orders are not sustainable as regards as the classification and the consequential duty liability fastened on the job workers. As the duty liability of the job workers is found to be not sus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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