TMI Blog2003 (10) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... 1984 excise duty on 'Old Spice' after shave lotion (hereinafter called as 'ASL') was paid on the basis that it was a toilet preparation. On 14-1-1985 Colfax moved an application before the Commissioner of Excise, Government of Goa for reclassification of Old Spice ASL as a 'medicinal preparation' falling under Tariff Item No. 1(i)(b) of the Schedule to the Act for the purpose of levy of excise duty. The Excise Commissioner vide his order dated 23-3-1985 classified the same as 'medicinal preparation'. Subsequently, by the order dated 12-6-1985 Old Spice ASL was classified as falling within the ambit of Item No. 1(i)(b) of the Schedule. Colfax thereafter made application for refund of excess amount of the excise duty paid after 23-3-1985 which was allowed by the Commissioner of Excise and orders for refund of the excess amount of the excise duty were passed. M/s. PJM Pharmaceuticals Pvt. Ltd. moved an application before the Drugs Controller, Government of Goa on 14-1-1989 for manufacture of some cosmetic products including 'Blue Stratos' ASL under the loan licence with M/s. Colfax Laboratories (India) Ltd. which was approved and a licence was issued on 13-2-1989. The Excise Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liable to pay excise duty as mentioned in the demand notices dated 13-3-1991 and 15-5-1991, which was challenged by Colfax by filing Writ Petition No. 337 of 1998. The High Court in its impugned order dated 1-4-1999 has held that after shave lotions are toilet preparations and the Revenue was entitled to recover short paid duty on account of erroneous classification of the aforesaid goods. The notices issued will have to be construed in exercise of power under Rule 11 of the Rules. Thus, the Revenue would be entitled to recover short paid duty on the goods cleared for which the duty was short paid within a period of six months immediately preceding the date of issue of each of the notices. It has been further held that the phrase 'ad valorem' appearing in the column 'rate of duty' in the Schedule appended to the Act refers to the value of excisable goods and, therefore, it will have to be worked out by applying the formula as laid down in Section 4(4)(d) of the Central Excise Act, 1944 and consequently, the excise duty will have to be deducted from the wholesale price and the figure arrived at would be the value of the excisable goods. 5.M/s. Colfax has preferred Civil Appeal No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies. In this connection Shri Desai has referred to British Pharmacopoeia Codex and Remington Pharmaceutical Science to show that if strength of alcohol increases beyond 60% to 90% and beyond 90%, it has no microbiolisation. Reference has also been made to Martindale Pharmacopoeia to show that benzyl alcohol has also bactericidal properties. Propylene glycol is a humectant and it promotes retention of moisture. It has been urged that after shaving skin may get fungus and, therefore, propylene glycol is used as moisturizer. Ethyle alcohol in a concentration of 62% to 65% has bactericidal effects. It is astringent to prevent penetration of bacterias and, therefore, it has antiseptic properties. Propylene glycol is a humectant as well as inhibitant to fungus. Benzyl alcohol is a mild anaesthetic and has antiseptic properties. Therefore, composition of these products in the above mentioned proportion, it is contended, makes Old Spice and Blue Stratos ASLs made by the company as medicinal products. 7.Shri M. Usgaonkar, learned Advocate General for the State of Goa, has submitted that Colfax had a licence to manufacture cosmetics and even the licence applied in the year 1989 for manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies of excise at the rates specified in the Schedule on all dutiable goods manufactured in India. Sub-section (3) of Section 3 lays down that subject to other provisions contained in the Act, the duties aforesaid shall be collected in such manner as may be prescribed. Item 1(i)(b) of the Schedule provides that the rate of duty on 'allopathic medicinal preparations' (other than patent or proprietory medicines) would be Rs. 10/- per litre of pure alcohol content. Item No. 4 of the Schedule deals with toilet preparations and at the relevant time rate of duty for toilet preparations containing alcohol was 100% ad valorem. Section 6 of the Act lays down that no person shall engage in the production or manufacture of any dutiable goods or of any specified components, parts or ingredients of such goods except under the authority and in accordance with the terms and conditions of a licence granted under the Act. Section 18(c) of the Drugs and Cosmetics Act, 1940 lays down that no person shall himself or by any other person on his behalf manufacture for sale or for distribution or sale or stock or exhibit or offer for sale or distribute any drug or cosmetic except under and in accordance wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of a "medicinal preparation" as defined in Section 2(g) of the Act. 9.Section 3(aaa) of the Drugs and Cosmetics Act defines a 'cosmetic' and it means any article intended to be rubbed, poured, sprinkled or sprayed on, or introduced into, or otherwise applied to, the human body or any part thereof for cleansing, beautifying, promoting attractiveness, or altering the appearance, and includes any article intended for use as a component of cosmetic. Section 3(b) of the same Act gives a very exhaustive definition of 'drug'. Sub-clause (i) thereof lays down that drug may include all medicines for internal or external use of human beings or animals and all substances intended to be used for or in the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings or animals, including preparations applied on human body for the purpose of repelling insects like mosquitoes. Sub-clause (ii) thereof lays down that drug will include such substances (other than food) intended to affect the structure or any function of human body or intended to be used for the purpose of destruction of vermin or insects which cause disease in human beings or animals as may be specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest. In the details and particulars submitted as per the Companies (Acceptance of Deposits) Rule, 1975, it was stated that the Company is engaged in the manufacture of cosmetics such as Old Spice ASL, Cologne, etc. Therefore, till as late as December, 1990, the Company itself was giving out that it is engaged in manufacture of cosmetics and not of any medicinal preparation. 12.Shri Ashok Desai has placed great reliance in support of his submission on BPL Pharmaceuticals Ltd. v. Collector of Central Excise [1995 Supp. (3) SCC 1] wherein the decision of CEGAT holding 'Selsun' Shampoo as a cosmetic product was reversed by this Court and it was held to be a drug or medicine. The judgment shows that the Court went into the chemical components of the article, the nature of use and the contents of the label on the bottle. The main factors which weighed with the Court were : (i) the article was used for treatment of a disease known as dandruff; (ii) it was manufactured under a drug licence; (iii) the Food and Drugs Administration had certified it as a 'drug'; (iv) it was sold only on a doctor's prescription and was used as a medicine; (v) it was marketed as a patent or proprietory med ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reparation and the company started paying excise duty on its basis and the view to the contrary taken by the High Court is not correct. Shri Ashok Desai, learned Senior Counsel for the company has, on the other hand, submitted that the case is covered by Rule 11 of the Rules and Rule 12, which is a residuary provision, can have no application and, therefore, the order passed by the High Court in that regard is perfectly correct and calls for no interference. 16.Before examining the rival contentions, it will be useful to take note of the scheme of the Medicinal and Toilet Preparations (Excise Duties) Rules, 1955 (for short 'Rules'). Sub-rule (1) of Rule 9 provides that no dutiable goods shall be removed from any place where they are manufactured or any premises appurtenant thereto which may be specified by the Excise Commissioner in this behalf, whether for consumption, export or manufacture of any other commodity in or outside such place until the excise duty leviable thereon has been paid at such place and in such manner as is prescribed in these Rules or as the Excise Commissioner may require. Rule 81 lays down that when the licensee desires to remove goods on payment of duty, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion has to be filled in by the owner of the bonded manufactory or his authorised agent. The second part is Assessment Memorandum, wherein the total number of containers, quantity of goods, rate of duty and total duty payable has to be mentioned and has to be signed by the officer-in-charge of the bonded manufactory/warehouse. The third part relates to the receipt of amount of excise duty in the treasury which has to be signed by the concerned officer of the treasury/bank. The combined effect of Rules, 9, 40 and 81 is that every time when a manufacturer or licensee desires to remove goods, he has to make an application in form A.R.-2 in triplicate to the officer-in-charge. The officer has to then assess the amount of duty leviable on the goods which has to be deposited in the treasury. The goods can be cleared only after payment or deposit of the assessed duty. If a manufacturer or licensee is aggrieved by an order of the Excise Officer, he has got a right of appeal to the Excise Commissioner or to the State Government, as the case may be, under Rule 127 of the Rules and there is a further right of revision under Rule 128. The scheme of the Medicinal and Toilet Preparations (Excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ler granted a cosmetics licence for manufacture of Old Spice ASL on 15-4-1968. The licence was renewed from time to time as a toilet preparation. Colfax continued to pay excise duty on ASL as a toilet preparation till the end of 1984. It was for the first time on 14-1-1985 that Colfax moved an application before the Commissioner of State Excise, Government of Goa stating that their product ASL is essentially a medicinal preparation and should be classified under Tariff Item No. 1(i)(b) of the Schedule appended to the Act and a prayer was made to reclassify the product. The Commissioner of Excise after noticing the contention of Colfax sent a reply on 24-1-1985 requiring Colfax to show cause as to why its request should not be rejected in toto. Colfax gave a reply and thereafter the Commissioner of Excise passed an order on 23-3-1985 holding that After shave lotion is to be classified as a 'Medicinal' preparation and not as a 'Toilet Preparation' under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 and the order shall be effective from the date of issue of the same. M/s. PJM Pharmaceuticals Pvt. Ltd. had moved an application before the Drugs Controller, Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the order of the Commissioner of Excise are wholly without jurisdiction. The order passed by the Commissioner of Excise on 23-3-1985 being without jurisdiction is a nullity in the eyes of law and is liable to be ignored. 18.Rule 11 of the Rules will apply when duties or charge have been short levied through inadvertence, error, collusion or misconstruction on the part of an excise officer or through misstatement as to the quantity or description of such goods on the part of the owner. After the order dated 23-3-1985 had been passed by the Commissioner of Excise, Goa, the concerned Excise Officer who made the relevant entries in Form A.R.-2 submitted by Colfax could not have taken a different view and had to proceed on the footing that ASL was a medicinal preparation. Being a subordinate officer he was fully bound by the order of the highest Excise authority of the State. Thereafter, till 1991 when notices were issued and the matter was finally decided by the Excise Commissioner, he had to proceed treating the ASL as medicinal preparation. In the fact situation, the concerned Excise Officer who made entries in Form A.R.-12 will be the Excise Officer for the purposes of Rules ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The High Court clearly erred in setting aside the order of the Excise Commissioner and in directing that the notices be treated to have been issued under Rule 11 of the Rules. The order passed by the High Court in this regard is, therefore, liable to be set aside. 19.The third point relates to the quantification of duties done by the Excise Commissioner. The learned Senior Counsel for Colfax has submitted that in case of a product which has a cum-duty price, the assessment is required to be done on the basis of wholesale price less excise duty payable, as provided under Section 4(4)(d)(ii) of the Central Excise Act, 1944. Learned Additional Solicitor and learned Advocate General for the State of Goa have urged that the chart annexed to the show cause notices takes into account the prices indicated by the manufacturer after excluding the duty and its on this price that the excise duty has to be worked out. The High Court has placed reliance upon a decision of this Court in Govt. of India v. Madras Rubber Factory, 1995 (77) E.L.T. 433 for computation of assessable value in a cum-duty price. It has held that the phrase 'ad valorem' appearing in the column 'rate of duty' in the Sc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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