TMI Blog2009 (3) TMI 868X X X X Extracts X X X X X X X X Extracts X X X X ..... re, a team of Central Excise Officers of Central Excise, Division-I, Kanpur (here in after referred to as the officers) visited the office and the factory premises of the appellants under the authority of search warrant. During the course of visit, the officers gathered that the appellants are manufacturing the goods under Drug License no. 1/97 dated 13-1-97 issued by the Drug Controller, Lucknow. A statement of Sri Subhash Kheria, G.M. was recorded on the spot wherein he stated that the appellants are in production since 1997 and mainly supply the goods manufactured by them to Govt. Hospitals, Hospitals of Defence and Railways and other defence establishments as per their orders and conditions. He further stated that absorbent cotton was the main product being manufactured by them which is classifiable under chapter 56 and the said product was exempted from payment of Central Excise duty vide notification no. 30/2004 as per his knowledge. He also stated that the appellants were manufacturing the goods for themselves without bearing any brand name. 3. During further enquiry, Shri Kheria in his statement dated 26-2-2007 disclosed that the appellants had started manufacturing activ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05 and demanding duty of Rs. 19,83,744.00 (BED), Ed. Cess of Rs. 39,675.00 and H.S. Ed. Cess of Rs. 19,837.00 totaling to Rs. 20,43,256.00 on the clearance value of Rs. 1,23,98,397.02 during the financial year 2007-08 (excluding the value of Trading goods, goods cleared for export against form H SSI exemption limit of Rs. 1.5 crores). 6. The appellants in response to the said demand-cum-show-cause notice submitted a detailed reply contesting therein that their final products did not merit classification under Chapter Sub-Heading No. 3005 as proposed by the adjudicating authority rather as per nomenclature and the constituents, the same were liable to be classified under Chapter Sub-Heading 5601, 5203 or 58 as the case may be because, the same were specifically mentioned therein. The same facts were also reiterated by them at the time of personal hearing before the adjudicating authority. In support of their contentions, the appellants also relied upon various cases laws of higher judicial forums and the definitions given in The Standards of Weight and Measures (Packaged Commodities) Rules, 1977 issued under the Standards of Weight and Measures Act, 1976 and the Drugs Cosmet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ason of mischief of word put up in the form of packing for retail sale for medical, surgical etc. purposes . The Adjudicating Authority was further requested to decide that whether specific entry can be overridden by the residuary entry in defiance of the law laid down in interpretation rules and by Hon ble Supreme Court in various cases. The Learned Adjudicating Authority was also requested to decide as to when no pharmaceuticals substance is added to absorbent cotton wool, how the same can be classified as cotton wool medicated and that can only be done after finalizing the tariff classification with 8 digit sub heading. The Learned Adjudicating Authority was further requested to decide with regard to re-quantification of duty liability in terms of the submissions made in subsequent paras. The Appellants further requested the Adjudicating Authority to decide as to how penal provisions under Section 11AC of the Central Excise Act, 1944 are invokable in the case of determining the classification of the goods and further the impugned Show Cause Notice having been issued within the prescribed period of limitation, none of the ingredients of proviso clause to Section 11A(1) have invo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30 - Textile flock and dust and mill neps kg 8% 5602 Felt, whether or not impregnated, coated covered or laminated. Further Section Note 1(e) of Section XI of Central Excise Tariff Act, 1985 details as follows : - 1. This Section does not cover :- (e) Articles of Chapter 3005 or 3006; yarn used to clean between the teeth (dental floss), in individual retail packages, of heading No. 33.06 . 3. Because the Learned Respondent Ought to have appreciated the fact that Chapter 3005 90 10 w.e.f. 1-4-2005 specified Cotton Wool, Medicated, and after Cotton Wool the use of the word medicated with comma (,) behoves that Cotton Wool which was impregnated or coated with the pharmaceutical substance exclusively fall within the description of the goods as classified under Chapter 3005 90 10. The Learned Respondent also should have appreciated the fact that broad Chapter heading was also stressed upon the classification of Wadding Gauze Bandages, similar article impregnated or coated with pharmaceutical substance. It was not in dispute that the Absorbent Cotton Wool manufactured and cleared by the Appellants did not contain any medicam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is required. In B.P.C. (British Pharmacopoeia) Absorbent Cotton Wool is prescribed in chapter heading of carded products and even as per the Central Excise Tariff, the word carding is applicable in textile, wool, silk etc. The Learned Respondent should have appreciated that printing of word I.P. does not mean that it is only drug/medicine and can only be used for medicinal purposes. The Appellant say that if it was so, then Absorbent Cotton Wool would not have been taken in Schedule K under heading household remedies of Drug Act under Rule 123 according to which it can be sold at shop even without holding the Drug License. The Appellant say that Absorbent Cotton Wool is not only used for medical and surgical purposes but is used by Barber Shop, Beauty parlors, Weight Reducing Centers, Hygienic Cleaning of Child, use of Absorbent Cotton Wool as a Sanitary Pads by ladies and the Appellant further say the Respondents insistence for Drug License denying classification of Absorbent Cotton Wool under Chapter 5601 does not hold good for the reason that Drug License is also required for manufacture of Phenyl and Toilet Cleaner under Rule 126 and as per standards given in Schedule O of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... include retails, wholesalers, private and Govt. hospitals, and hospitals of railway, defence as well as depots and provincial health services. The goods manufactured by the party are sold to the person or Government establishments which deal with the health services. The Appellant say that as stated earlier in the grounds of Appeal that Absorbent Cotton Wool being classified under specific chapter heading cannot be dragged to exclusion clause of Chapter 56, which is not applicable in this case. The Learned Respondent ought to have appreciated the fact even the HSN with reference to Chapter 56 quoted by the Respondent that among the article of wadding the articles impregnated or coated with pharmaceutical substances. It is an admitted fact by the Respondent that Absorbent Cotton Wool manufactured by the Appellants does not have any addition of pharmaceutical substance as such the Absorbent Cotton Wool of the Appellants cannot be dragged out of the specific classification as given in Chapter 56 of Central Excise Tariff Act, 1985. Further the Respondent has insisted on packing for Retail sale for medical, surgical, dental or veterinary purposes. The Appellant say that Standards of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties) Rules, 1977 - Package which was sold by assessee could not be termed as retail package nor the sale thereof be termed as a retail sale and as such there was no requirement of mentioning the retail sale price on that package - Even if assessee displays on the pack the MRP, that would be of no use if otherwise there is no requirement under Standards of Weights and Measures Act, 1976 or the rules made thereunder to declare such a price - Package sold by assessee to hotel was, apart from being for exclusive use of hotel was, also for the purpose of servicing that industry - Hence Rules ibid not applicable - Section 4A of Central Excise Act, 1944 not applicable to ice-cream sold by the assessee. The Decision of Hon ble Supreme Court read with Rule ibid goes to prove that the Absorbent Cotton Wool manufactured by the Appellants does not fall within the definition of packing for Retail Sale. The Appellant submit that in fact the definition as given in HSN Chapter 56 lends assistance to the Appellants submission on classification of Absorbent Cotton Wool, which as per HSN itself says that among the article of wadding under Chapter 56 does not include the Articles impregn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent Cotton Wool is not attracted in as much as the Appellants product is Absorbent Cotton Wool and not Cotton Wool, Medicated, and finally the Appellants goods being classified under specific Chapter Heading 5601 21 10 of Central Excise Tariff Act. 1985 cannot be overridden by any residuary entry. 11. Because the Appellant further say that the Central Excise Tariff Act had provided that the title of Sections, Chapters and Sub Chapters are provided for ease of reference only. For legal purposes, Classification shall be determined according to the term of the headings or any relative section or Chapter Notes. 12. Because the Learned Respondent holding a post of Joint Commissioner was well aware about the Rules of Interpretation of the Schedule to the Central Excise Tariff Act, 1985, wherein it was classified as follows :- 3. When, goods are classifiable under two or more headings, - (a) Most specific description: The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be placed before the Adjudicating authority and after taking note of all the elaborate submissions in his Adjudication Order the Learned Adjudicating Authority blatantly failed to discuss any of the submissions made and/or to make any observations in this regard showing proper application of mind. The issues which were placed before the Adjudicating Authority did go to the very root of maintainability of the proceedings before the Adjudicating Authority and the Appellants crave leave and beg to elaborate the reasons in accordance with law, in support of Appellants submissions as to why absorbent cotton wool and carded cotton manufactured by the Appellants would not merit classification under Chapter 3005 of CETA, 1985 but would appropriately classified under Chapter 56 and Chapter 5203 00 00 of CETA, 1985. 15 (1) The Appellants makes elaborate submissions as to: - WHY ABSORBENT COTTON WOOL MANUFACTURED WITH STANDARD SET OUT IN INDIA PHARMACOPOEIA WOULD NOT MERIT CLASSIFICATION UNDER CHAPTER 3005 OF CETA, 1985 (i) It is an undisputed fact that absorbent cotton wool manufactured in accordance with the standard set-out in Indian Pharmacopoeia does not contain any medicine or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the definition attached to wadding i.e. wrap around has been further defined in oxford dictionary as follows: - Wrap Around: (i) Curving or stretching round at the sides : Wrap around sunglasses (ii) (Of a piece of clothing) having one part that is pulled over to cover another part at the front and then loosely fastened : Wrap around Skirt In R.K. Jain s Words Phrases of Central Excise at internal page 3358 Wadding has been defined as follows :- Wadding : Soft, pliable material usually of cotton or wool used to line or stuff garments, quilts etc., or to pack fragile articles in; cotton wool; material from which gun-wads are made.(COD) --of textile materials is made by super- imposing several layers of carded or air-laid textile fibres one on the other, and then compressing them in order to increase the cohesion of the fibres. Wadding is sometimes lightly punched to increase the cohesion of the fibres and, in some cases, to fix the layer of wadding on a support of woven or other textile fibres . It is generally made of cotton fibres (absorbent or other cotton waddings) or of artificial staple fibre. Wadding is largely used for padding (e.g. shoulder pads, inter-linin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 425 (E) dated 17-7-2006 w.e.f. 12-1-2007. The product Absorbent Cotton Wool manufactured as per I.P. Standards and Carded Cotton do not come either within the definition of retail package or retail sale because of the admitted fact in the Show Cause Notice that the sale is to Government and Private Hospitals etc. which as per the law of land do not come within the definition of ultimate consumers. The Noticee submits that in the Show Cause Notice provisions of Rule 6 of the Packaged Commodities Rules have been invoked which is very specific with regard to the requirement of marking of Retail Sale Price on the package, emphasis in the Show Cause Notice is laid down upon Rule 6 (i) (f) of Packaged Commodities Rules, 1977 because of details printed on packets as per investigation from various purchasers. Rule prescribes the information required to be printed on retail packets but does not stop that any extra information cannot be printed. In Jayanti Food case Apex court has decided this fact of RSP printed on the product. This Hon ble Chair will appreciate the fact that Noticee are effecting their sale to Government and private hospitals and also to wholesalers, who in turn are making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hy the absorbent cotton wool and carded cotton would be still taken up for the retail sale. This Hon ble Chair would appreciate the fact that only if this Hon ble Chair may hold with speaking order that the definition of Chapter Heading 3005 of CETA, 1985 fully applies to the Noticee s goods only then this Hon ble Chair can proceed to classify the goods under sub heading of 3005 for the reasons supported with the decision cited supra and further submit that the Hon ble Tribunal in the case of Wyeth Ltd. v. CCE, Mumbai reported in 2008 (231) E.L.T. 53 (Trib. Delhi) has made observations with regard to the element of sale as given in Standards of Weights and Measures Act, 1976 following the principles laid down by Hon ble Supreme in M/s. Jayanti Food Processing Pvt. Ltd., ibid. The Appellants submit that in the above decision the Hon ble Tribunal has held that unless there is an element of retail sale to the ultimate consumer the product in question would not fall within the restricted arena of Section 4A of Central Excise Act, 1944 which determines the provisions with regard to Retail Sale Price and/or provisions of packing for retail sale . The Appellants say that it being an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quid Oral forms, Unit dose (including applicaps). 6. Pack sizes of dosage forms meant for retail sale to Hospitals, Registered medical Practitioners, Nursing Homes. 7. Physician s Samples. 8. Pack sizes of large Volume intravenous Fluids. Rule 105A. Packing of drugs specified in Schedule X. - The drugs specified in Schedule X shall be marketed in packings not exceeding- (i) 100 unit doses in the case of tablets/capsules; (ii) 300 ml in the case of oral liquid preparation; (iii) and 5 ml in the case of injections: Provided that nothing in this rule shall apply to packing meant for use of a hospital or a dispensary subject to the conditions that (i) such supplies are made by the manufacturers or distributors direct to the hospital/dispensaries; and (ii) hospital packs shall not be supplied to a retail dealer or to a Registered Medical Practioners. A careful reading of the above provisions of Drugs Cosmetics Rules, 1945, copy enclosed, goes to prove two things firstly, the use of letter I.P. in absorbent cotton wood only means that it is manufactured in accordance with the Standards set out with the Indian Pharmacopoeia or any such pharmacopoeia so no confusio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sified under Chapter 5601 21 10 under a specific entry after introduction of 8 digit tariff w.e.f. 2005 and the same cannot be overridden by the residuary entry. This Hon ble chair is well aware that prior to 2005 Absorbent Cotton wool was being classified under Chapter 3004 90 through various trade notices, wherein with regard wadding there was no definition attached to the packing for retail sale. Prior to 2005 it was only written as follows: - Wadding, gauze, bandages and similar articles (for example, dressings, adhesive plasters, poultices) impregnated or coated with pharmaceutical substances or put up in forms or packings for medical, surgical, dental or veterinary purposes. Whereas with the introduction of 8 digit Tariff Classification w.e.f. 2005. Absorbent Cotton Wool was specifically classified under Chapter 5601 21 10 and on the other hand while clarifying the classification of Absorbent Cotton Wool the definition of put up in the form of packing for retail sale for medical, surgical etc. purposes was attached to Chapter 3005. As you are aware that classification of Absorbent Cotton Wool from 3004 to 5601 under specific entry and which was not in existence for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... covers items like brooms, brushes etc. that cotton swabs cannot be called brooms or brushes. He submitted that they are similar to M/s. Johnson Johnson ear buds and therefore, are classifiable under Chapter Sub-Heading 5601.00. In support of his contention he cited and relied upon the decision of this Tribunal in the case of Johnson Johnson . In terms of Rule 3(b) of the Rules for interpretation of the Schedule to the said Tariff AO, since the said product consists of Buds, which are made of articles of wadding of textile materials, which gives the said product its essential character and the PP Stick the other component of the said product is only a carrier and of no functional use for the purpose for which the said product is intended to, the product is classifiable under Chapter Heading No. 5601.00 . (b) Absorbent Cotton Wool I.P. does not have any therapeutic and curative properties. The Noticee submits that it is an undisputed fact that absorbent cotton wool I.P. does not have any therapeutic and curative properties and as per settled position of law the same would be classified under Chapter 5601 and not under Chapter 3005 as done by the Revenue. (c) That the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e principle was adhered to by the Supreme Court in Western India Theatres Ltd. v. Municipal Corporation of the City of Poona - AIR 1959 (S.C.) 586 and State of U.P. v. Malik Zarid Khalid - AIR 1988 (SC) 132. In this context one may took at the dictionary meaning of absorbent cotton : absorbent cotton as cotton for surgical dressing, cosmetic purpose, etc., made by removing the natural wax . absorbent cotton means cotton made absorbent by chemically freeing it from its fatty matter. According to British Pharmaceutical Codes 1959 absorbent......... ........ the seeds are removed mechanically and the trichomes freed from fatty matter by treatment with alkali, are bleached, washed and mechanically separated to form a fleecy mass of soft white filaments which consist almost entirely of cellulose. In that shape substance continues to be cotton; albeit in its manufactured state, different from raw cotton. ................in the Bombay High Court in Commissioner of Sales Tax, Maharashtra State, Bombay v. Fairdeal Corporation Ltd. [1962] 13 STC 750, the question arose for consideration of their Lordships was whether absorbent cotton wool or surgical cotton is not raw cotto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts further relies upon the decision of Hon ble Allahabad High Court in the case of Indian Surgical Works and another v. ADJ, Hapur in CMWP of 18577 of 1999, wherein internal page 24 the Hon ble High Court has held as follows: - While preparing the absorbent cotton the essential fiber ingredients of cotton do not loose their identity. There is no warrant for the submissions that the process of chemicalization of cotton involved a manufacturing activity or that it results in the creation of a substance, which is entirely different and distinct in nature from the cotton. In my view, for the reasons stated above, there is hardly any difference in a raw cotton - ginned or unginned on the one hand as well as absorbent cotton, except that there uses are different. One cannot, therefore, escape from the conclusion that the absorbent cotton is covered by the definition of agricultural produce. 1. The Appellants in respect of classification of carded cotton (non absorbent cotton wool) under Chapter 5203 00 00 submit as under : - The Appellants rely upon the internal page 17 18 of the reply and Para D (i, j, k l) and for the sake of brevity and to avoid repetition the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equipments by Ministry of Defence and lab testing etc. and does not have use in any case for medical and surgical purposes and as such the action of the Revenue in classifying Non Absorbent Cotton Wool (Carded Cotton) under the head of Chapter 30 is not only illegal but also infructuous and void ab initio. The Noticee say that even the statement dated 26-2-2007 of Shri Subhash Chandra Kheria, wherein in question No 14 the officers had questioned the Noticee and had resumed sample of Non-absorbent Cotton Wool (Carded Cotton), the Learned Respondent has failed to make any observation on the correct classification of Non-Absorbent Cotton Wool (Carded Cotton) and has not even challenged the submission of Noticee with regard to Non-Absorbent Cotton Wool (Carded Cotton) the respondent has taken a hybrid stand and issues the show cause due to oversight. It is on record that the Noticee has always received supply orders separately for Non-Absorbent Cotton Wool (Carded Cotton) having no therapeutic or medicinal substance therein. Hence the impugned order for this product is incorrect and hence not liable to be maintained. 19. Because with regard to carded cotton the appellants had also p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... try of Chapter 52.03 (copy of HSN is enclosed) wherein it had been held that this heading covers cotton which had been carded or combed whether or not prepared for spinning. The Noticee submits that Central Excise Tariff and Customs Tariff are based on harmonized system of nomenclature and the Hon ble Supreme in CCE v. Wood Craft Products Ltd. reported in 1995 (77) E.L.T. 23 (S.C.) has held that - In case of doubt the HSN may be taken in to account and the doubts be resolved with reference to the nomenclature indicated by the HSN unless there be an express different intention indicated by the Central Excise Tariff Act, 1985 itself and the said judgment of Apex Court has been confirmed in 2002 (152) E.L.T. 18 (S.C.) and 2005 (180) E.L.T. 300 (S.C.) in Okay Play India v. CCE. It is submitted that Hon ble Tribunal in the case of CCE v. Telco Ltd. reported in 2002 (143) E.L.T. 548, has held that - Opinion given by World Customs Organization in regard to classification of goods having great persuasive value, considering the purpose of its setting up and expertise it represents, cannot be brushed aside. The Appellant Crave indulgence of this Hon ble Chair to examine the use of carded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tton sold in length of 18-20 meters like cloth by no stretch of imagination merits classification as pharmaceutical product under Chapter 30 and the said product will merit classification under Chapter 5209.21 and 5803.00 respectively of CETA, 1985 and both are exempt from payment of CENVAT/Duty under Notification No. 30/2004 with regard to classification the onus is heavily cast upon the Revenue to prove as to how the referred products would be allegedly classified under Chapter 3005 as pharmaceutical products and how Cenvat duty on said product would be leviable. 22. It is further submitted that First Aid Dressing Sterile and Unsterile is a product classified under chapter 5601 of CETA, 1985 in view of decisions and principles laid down on Johnson and Johnson and Modi Surgichem case and as submitted for Absorbent Cotton Wool/ Carded Cotton, the entire sale of First Aid Dressing is made to Ministry of Defence/Arms Forces on their placement of order and not sold in the market, which is a verifiable fact and as such the bar of put up in retail pack as given in Chapter 3005 of the Act does not apply in the case and this fact of clearance of First Aid Dressing to Ministry of Defence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ium to use medicament having no therapeutic use or any curing capacity individually and as such the Absorbent Cotton Wool manufactured in the Appellants case, is no way be taken as Cotton Wool, medicated, as allegedly done by the Learned Respondent, which is nothing but an arbitrary action without authority of law. 25. Because the Appellant further say that with regard to classification of the goods the onus is heavily cast on Revenue to prove the same. The Learned Respondent has misdirected himself in law and has erroneously classified Absorbent Cotton Wool under the head of Cotton Wool, Medicated. Reliance is placed on 2005 (179) E.L.T. 17 (S.C.) (3 Judges Decision) in CCE, Nagpur v. Vicco Laboratories, wherein it has been held that the burden of proof that the product is classifiable under the particular heading of Tariff is on the Revenue and must be discharged by providing that it is so understood by the consumers of product in common parlance. 26. Because the Learned Respondent has misinterpreted and misconstrued the Harmonized Commodity, Description and Coding System in respect of Carded Cotton (Non-Absorbent Cotton Wool). The Appellant submit that under the HSN, referre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility by wrong classification of Carded Cotton is liable to struck down only on this ground alone, with consequential relief, as admissible in the accordance with law. 28. Because the Learned Respondent has wrongly classified the following products under Chapter 30 without challenging the nomenclature of the product (a) Handloom Gauze Cloth (b) Handloom Bandage Cloth The Appellant say that the name and descriptive nomenclature of Handloom Gauze Cloth and Handloom Bandage Cloth itself shows, that it is Woven Product made through handloom, coming out of handloom machine and marketed by weavers directly and also by cooperative society and the product itself proves that both the products are textile articles of handloom and dragging of its classification under chapter 30 is most arbitrary, most unjustified and only shows the abuse of process of law. The Learned Respondent even as on today through the officers of lower formation is forcing for classification of Absorbent Cotton Wool and Non Absorbent Cotton Wool (Carded Cotton), Handloom Gauze Cloth and Handloom Bandage Cloth under Chapter 3005 which is an erroneous action and needs intervention of this Hon ble Tribunal. 29. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cturing the goods under Drug License no. 1/97 dt. 13-1-97 issued by the Drug Controller Lucknow. A statement of Sri Subhash Kheria, G.M. was recorded on the spot wherein he stated that the appellants are in production since 1997 and mainly supply the manufactured goods to Govt. Hospitals, Hospitals of Defence and Railways and other defence establishments as per their orders and conditions. He further stated that absorbent cotton was the main product being manufactured by them which is classifiable under chapter 56 and the said product was exempted from payment of excise duty vide notification no. 30/2004 as per his knowledge. He also stated that the appellants were manufacturing the goods for themselves without bearing any brand name 12. During enquiry Shri Kheria in his statement dated 26-2-2007, further disclosed that the appellants had started manufacturing activities by manufacturing Absorbent Cotton Wool IP., Non Absorbent Cotton Wool (Carded Cotton), Gauge Bandage cloth, bleached and cut bandages. Gradually they started manufacturing Sanitary Napkins Dressing first aid (un-medicated). In addition to it, they were manufacturing Disposable syringe (Dispo) in their another ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... H SSI exemption limit of Rs. 1.5 crores). 15. The appellants in response to the said demand-cum-show-cause notice submitted a detailed reply contesting therein that their final products did not merit classification under Chapter Sub-Heading No. 3005 as proposed by the adjudicating authority rather as per nomenclature and the constituents, the same were liable to be classified under Chapter Sub-Heading 5601, 5203 or 58 as the case may be because, the same were specifically mentioned in the said Chapter Sub-Headings. The same facts were also reiterated by them at the time of personal hearing before the adjudicating authority. In support of their contentions, the appellants also relied upon various case laws of higher judicial forums and the definitions given in The Standards of Weight and Measures (Packaged Commodities) Rules, 1977 issued under the Standards of Weight and Measures Act, 1976 and the Drugs Cosmetics Act. 16. The department however rejected the submissions of the appellants and passed impugned order vide which demand of duty under Section 11A amounting to Rs. 16,81,711/- (after re-calculation) alongwith interest under Section 11AB was confirmed and an equivalen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of various judicial forums. 19. On the contrary, the appellants have pleaded that the goods in question were rightly classifiable under their respective sub-headings as claimed by them, on the basis of nomenclature. The basic submission of the appellants was that the specific entry cannot be overridden by the residuary entry. In support of their contention they have relied upon various judicial pronouncements of Hon ble Apex Court and Hon ble Tribunal, wherein it has been settled that the specific entry will prevail over the general. The next submission of the appellant was that their sales were not the retail sales as the goods were not sold for retail consumption to ultimate consumers; rather their buyers were the Industrial and Institutional buyers. They have also submitted that their packages were not the retail packages . The appellants in their defence have relied upon the definition of terms retail sale and retail package as defined in The Standards of Weight and Measures (Packaged Commodities) Rules, 1977 (SWMPCR in short) issued under the Standards of Weight and Measures Act, 1976 (SWMA in short). They have also relied upon various other provisions of said rules ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per the nomenclature and the constituent material. In case no specific entry is available the next attempt should be to find the nearest entry where the goods can be classified. In case both the attempts turn to be futile then the attempt should be made to consider the end uses, the inclusion and exclusion clauses provided in the section notes, the chapter notes and the explanatory notes given the HSN. While doing so the interpretation of the said Note will depend upon the context in which the entries have been worded. If an entry is clearly worded and is broad in character, the same would lead to the conclusion. An entry is to be given its ordinary meaning. If any goods fit in within one entry, the same for any purpose would not be held to be included in the other and in particular the residuary. Now coming to the issue, I observe that the goods Absorbent Cotton Wool and Cotton Carded specifically find place in the Chapter Sub-Heading 56012110 and 52030000 respectively. Nothing regarding its uses, its packing, its end use or its being of IP grade has been specified therein so as to exclude it from classification under the said heading. For appreciation of facts and ready ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Wadding of textile materials and articles thereof; textile fibers, not exceeding 5 mm in length (flock) textile dust and mill neps. 5601 10 00 - Sanitary towels and tampons, napkins and napkin liners for babies and similar sanitary articles of wadding kg Nil - Wadding; other articles of wadding: 5601 21 -- Of cotton 5601 21 10 --Absorbent cotton wool kg 8% 5601 21 90 ---other kg 8% 5601 22 00 -- Of man made fibers kg 16% 5601 29 00 --Other kg 8% 5601 30 00 - Textile flock and dust and mill neps kg 8% 5602 Felt, whether or not impregnated, coated, covered or laminated. 24. It is well-settled what is not excluded would be held to be included. In this regard, I would like to quote the provisions of Rule 1 of the Rules for the Interpretation which clearly provides that 1. The titles of Sections and Chapters are provided for ease of reference only; for legal purposes, classification shall be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Interpretation of Central Excise Tariff Act observed that, the goods produced by the appellant specifically fall in Heading No. 90.24. They may also fall in Heading No. 90.26 but that being more general entry preference should have been given to the entry 90.24 as the goods satisfy most specific description of being flow meter. The Tribunal or the appellate authority without adverting to it applied clause (c) and levied duty under 90.26 as it was a latter heading. But clause (c) would apply only if clauses (a) and (b) do not apply. Since the goods manufactured by the appellant satisfied the specific description of Tariff Heading 90.24 being a flow meter, the Tribunal committed an error of law in classifying it under Tariff Heading 90.26 as it was a latter item under the classification list. 26. In the same order, in para 4 the Hon ble bench while comparing various Chapter Headings has further noticed that Flow meters are specifically covered in Tariff Heading 90.24. Specific excludes general, is the well-known principle. Heading 90.29 permits levy on parts or accessories which are used solely in the manufacture of one or more of the articles falling within Heading 90.24. The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y purpose, sterile surgical suture material) were omitted. As the period under dispute in this case is the Financial Year 2007-08, the facts shall have to be appreciated as per the amended Section note which reads as (e) Articles of Chapter 3005 or 3006; yarn used to clean between the teeth (dental floss), in individual retail packages, of heading No. 33.06 . The simple reading of the said amended note makes it clear that only the items of Chapter Heading No. 3005 or 3006, which specifically find entry therein, are not classifiable in Chapters under Section XI. The use of semi colon (;) in the said note further makes it clear that the condition of packing in individual retail packages has also been dispensed with (for the articles of 3005 3004 only), meaning thereby that even if the goods classifiable under Section XI are put up in retail packages, the same will not be classified under Chapter Heading 3005 or 3006.The adjudicating authority has observed that the said section note insists upon the end use of the goods to be classified under the chapters covered by the section rather than the generic description of the goods. I do not agree with the observation of the adjudicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the instant case also the Chapter Sub-Headings themselves are determinative as the goods can be classified under the specific headings by virtue of their nomenclature. Moreover, the amended Section note itself has opened the way for classification of the goods in question under the Chapters falling under Section XI. When the Chapter Sub-Heading, the Chapter notes and the Section notes are sufficient for determining the classification, no need remains for consulting the interpretative rules. The view given by Hon ble Tribunal is in concurrence with my view and supports my findings than the findings of the adjudicating authority. Here the question for determination is not the applicability of Interpretative Rules as held by the adjudicating authority rather the question is as to whether the specific entry prevails over the general. The said case law has no direct binding on the case, hence the same is distinguishable. 30. The next is the case of M/s. Aravali Forgings Ltd. v. Collector of Central Excise, Jaipur - 1994 (70) E.L.T. 693 (Tribunal) that has been relied upon by the adjudicating authority for the same reason as discussed in the preceding paragraph. After going through the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tand the method of classification. The Chapter Sub-Headings in the appellant s case are clear and free of any condition therefore, the references of Section, Chapter or Sub-Chapter are not applicable. It is a settled law that the findings of Larger Bench are binding on the lower authorities. When the law is settled, I find that there is no room for any controversy. I notice that the adjudicating authority has not appreciated the facts in right perspective. The revenue has lost sight of the basic rules of classification and has ignored the most appropriate specific entry available in the Tariff. The findings of the adjudicating authority with reference to the case of Rajasthan Transformers and Aravali Forgings Ltd.(supra) are therefore liable to be set-aside. 34. The adjudicating authority has also discussed the applicability of the section note 2 of Section VI of the CETA, 1985 which pertains to Chapter No(s) 28 to 38. After considering the said note, I observe that it should clearly be borne in mind that the applicability of the said section note is restricted only to the commodities that can clearly be classified under the chapters 28 to 38. For applying the conditions of said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt which gives them their essential character. In the present case, the essential character of a decorative laminated sheet is its rigidity or strength and its resistance to heat and moisture. These are essentially characteristics which are imparted by resins. Paper does not possess any of these characteristics. Therefore, applying Rule 3(b) and going by the essential characteristics of such laminated sheets, these goods are more appropriately classifiable under Chapter 39 . The adjudicating authority has considered the findings of the Hon ble Supreme without appreciating the circumstances under which the necessity of consulting the HSN was stipulated. The discussions in the preceding paragraphs have clearly set out that the goods in question in this case were classifiable under their respective specific Chapter Sub-Headings on the basis of their nomenclature hence, the applicability or the discussion on applicability of HSN explanatory notes was not at all warranted. I find that the reference of both the case laws in this case is irrelevant. 36. However for the sake of arguments I would like to discuss the explanations contained in HSN. In respect of Chapter 30 the explanations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts were not fit for use in dressing. The department also has not brought out any thing on record regarding end use of the goods in the hospital although the onus lies upon the department. In absence of any fact on record to show that the wadding and gauze sold by the appellants were for dressing, it cannot be held on the basis of sales to hospitals that the goods merit classification under Chapter Heading 3005. 39. The next in serial is the explanation given in HSN under Chapter 5601 which reads as Among the articles of wadding not classified here are: wadding or articles of wadding, impregnated or coated with pharmaceutical substances, or put up in forms or packings for retail sale for medical, surgical, dental or veterinary purposes, (Heading 30.05) . As is evident this is an exclusion clause and the goods mentioned therein are not to be classified under CSH 5601, if they qualify either of the condition. It is an undisputed fact that the articles being manufactured by the appellants are not medicated therefore this condition no. 1 does not apply in their case. The second condition of retail packing will be taken later with the definition of retail package and retail sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r consumption. 42. For sake of better appreciation of facts, the Chapter Sub-Heading 3005 is reproduced as under :- 3005 Wadding, gauze, bandages and similar articles (for example, dressings, adhesive plasters, poultices), impregnated or coated with pharmaceutical substances or put up in forms or packing for retail sale for medical, surgical, dental or veterinary purposes 43. From the reading of Chapter Sub-Heading 3005 it is clear that the said chapter is divided in two parts by the word or in-between. The first part is Wadding, gauze, bandages and similar articles (for example, dressings, adhesive plasters, poultices), impregnated or coated with pharmaceutical substances and the other part separated by or is put up in forms or packing for retail sale for medical, surgical, dental or veterinary purposes . Since the parts are separated by the word or , the goods mentioned therein shall be classified under this sub-heading if either of the conditions is fulfilled. 44. As it is an undisputed and accepted fact that the entire range of products being manufactured by the appellant was free from any impregnation or coating of pharmaceutical substance, the same can not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Packages of commodity containing quantity of more than 25 Kg or 25 litre excluding cement and fertilizer sold in bags upto 50 Kg; and (b) Packaged commodities meant for industrial consumers or institutional consumers. Explanation - For the purpose of this rule ,-- (a) Institutional consumer, - means those consumer who buy packaged commodities directly from the manufacturers/packers for service industry like transportation [including airways, railways], hotel or any other similar service industry (b) Industrial Consumer, -means those consumers who buy packaged commodity directly from the manufacturers/packers for using the product in their industry for production, etc. 46. From the definition of retail package it is clear that the retail packages are those which are intended for sale to ultimate consumer for purpose of consumption and through the proviso, the the Industrial or Institutional Consumers have been excluded from the definition of Ultimate Consumer . In the same set of rules, the Industrial or Institutional Consumers have been defined separately. Further, the definition of retail sale means that the sales must be made through retail sales agencies o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e CSH no. 30059010. Since the Chapter 30 is silent and the Absorbent Cotton Wool has specifically been placed in Chapter 5601, any attempt to classify the same will be against the law of the land and in total disregard to the higher judicial forums. The discussions in succeeding paragraphs will further clarify as to why the CSH No. 56012110 is the most appropriate for Absorbent Cotton Wool . 49. Chapter Heading 5601, which has already been reproduced above, the main definition is divided in two parts. The first one is Wadding of textile materials and articles thereof and the other one separated by semi-colon (;) is textile fibers, not exceeding 5 mm in length (flock), textile dust and mill neps . The adjudicating authority has not appreciated the definition properly and has ignored this basic point while holding that the Absorbent Cotton Wool as per the test, constituted of average staple length not less than 10mm. On the basis of this very fact, he excluded the product from Chapter 56 and suggested its classification in Chapter 30. The main definition if considered in right spirit makes it clear that the condition of 5 mm was in respect of Textile Fibers alternatively ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the goods in question were any kind of drugs rather it is on record that the products were free from any coating or impregnation of pharmaceutical substances. It is also a matter of fact that the Chapter 30 of CETA, 1985 is meant for classification of Pharmaceutical Substances. Once its is proved that the goods in question are not the drugs or Pharmaceutical Substances, the same cannot be placed under Chapter 30 merely for the reason that the letters IP were mentioned thereon or the same were made in accordance with the Indian Pharmacopoeia. In this regard the appellants have placed reliance on the case of CCE v. Modi-Surgichem Pvt. Ltd. - 1999 (113) E.L.T. 450 (Tri.) and CCE v. Johnson Johnson Ltd. - 2006 (193) E.L.T. 368 (Tri.). I have gone through the said case laws and observe that the appellant s submission is correct. In the case of Johnson Johnson, the findings of Commissioner (Appeals) (reproduced in para 5) have been upheld. The said findings are being reproduced for better understanding of the case- In terms of Rule 3(b) of the Rules for interpretation of the Schedule to the said Tariff AO, since the said product consists of Buds, which are made of articles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal in the cases referred supra, I hold that for this reason also the products viz. Carded Cotton/Non-absorbent Cotton and Absorbent Cotton Wool are not classifiable under Chapter 30 rather they are correctly classifiable under Sub-Heading 52030000 and 56012110. 54. As regards the items Handloom Bandage Cloth- Cotton, Handloom Gauze Cloth-Cotton/gauze, all in running length of 10 meters and more and width of 100 cms and packed in packing of 10 or more pieces, the appellants have claimed that the same do not fall under Chapter 30. The contention is that the said articles are textile materials. They have also produced samples for my perusal. I have seen the samples produced before me by the appellants at the time of personal hearing and find that they are woven fabrics in running length of the description mentioned above. The said products are non-sterilized and also free from any coating or impregnation of any pharmaceutical substance. The appellants have also explained that they pack the small packings in gunny bags before they are dispatched for delivery at destination. After considering the facts, I find that the correct classification of the said items will have to be done on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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