PEARLS OF BEAUTY Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) SHRI L.P. Asthana, ld Advocate, mentioned that in this appeal filed by M/s. Pearls of Beauty, the issue pressed by them is only time limit. The ld. Advocate submitted that show cause notice was issued on 4 -5 -1999 for demanding the Central Excise duty for the period from April 94 to 22 -7 -1996 in respect of Henna Powder removed by them in unit containers; that the Appellants manufactured Henna Powder which is removed by them in unit containers of 50 gms, 100 gms, 140 gms and 250 gms; that they had classified Henna Powder under sub -heading 3203.00 of the Schedule to the Central Excise Tariff Act in their classification list filed by them on 6 -4 -1994; that they had claimed the Nil rate of duty under Notification No. 27/90, dated 20 -3 -1990; that as per Sl. No. 11 of the table attached to the Notification, Henna Powder falling under sub -heading 3203.00 or 3212.90, was chargeable to Nil rate of duty; that similarly Notification No. 14/93, dated 28 -2 -1993 provided Nil rate of duty in respect of Henna Powder, falling under sub -heading 3203.00 or 3212.90. The issue regarding classification of Henna Powder came up for decision before the Appellate Tribunal in the case of Heena Export Corporation v. C.C.E., New Delhi - 1993 (67) E.L.T. 907. The Tribunal held, in that case, that Henna Powder in bulk is classificable under Heading 14.01 and Henna Powder in unit packings under Heading 33.05 of the Tariff; that the appeal filed against the order of the Tribunal was rejected by the Supreme Court; that though the decision was pronounced by the Tribunal on 11 -6 -1993, the Department continued to classify Henna Powder under Chapter 32 of the Central Excise Tariff which is evident from the various Notifications mentioned earlier; that only after the decision of the Tribunal was upheld by the Supreme Court, the Central Board of Excise and Customs issued a Circular No. 256/90/96 -CX, dated 20 -10 -1996 in which it was mentioned that after rescinding of Notification No. 13/95 vide Notification No. 19/96, dated 23 -7 -1996, Henna Powder if classifiable under Chapter 32, has become liable to duty at 20% and representations have been received from the trade contending the classification under Chapter 14; that the classification of Henna Powder should be decided in the light of Tribunal's decision in the case of Heena Export Corporation, supra. He further, mentioned that Central Excise Collectorate, New Delhi, also issued a Trade Notice No. 48/CE/96, dated 6 -11 -1996 to this effect; that under Notification No. 32/96 Henna Powder, not mixed with any other ingredients, falling under Chapter 33, was chargeable to Nil rate of duty; that this Notification establishes clearly that the previous exemption to Henna Powder without any condition meant that Henna Powder preparations were covered by the exemptions; that the Supdt. Central Excise under letter dated 28 -11 -1996 directed them to file the revised declaration under Rule 173B of Central Excise Rules in respect of Henna Powder under sub -heading 3305.99 w.e.f. 23 -7 -1996; that the Supdt had sent them another letter dated 9 -12 -1996 enclosing therewith the copy of the Trade Notice No. 48/96 and Board's Circular dated 30 -10 -1996 and directed them to file the declaration in respect of Henna Powder under Heading 33.05; that, show -cause -notices dated 3 -2 -1997 and 4 -5 -1999 were issued for demanding the duty in respect of Henna Powder; that the Commissioner under the impugned Order has confirmed the demand by invoking the extended period of limitation holding that no details of the product with regard to its use was given in the classification lists and that it was incumbent on them to have given full description of the goods in the classification lists/classification declaration.

(2.) THE ld. Advocate, further, submitted that according to Government's own understanding, Henna Powder was classifiable under Heading 32.03 irrespective of whether other ingredients were present in the powder or not and even if the composition of Henna Powder was given by them it would still be classifiable under Heading 32.03; that had there been any doubt about it for classifying Henna Powder mixed with other ingredients differently then Henna Powder, the Department would have asked the composition of Henna Powder; that it is common knowledge that Henna Powder is used for the care of Hair; that according to "The World Book of Encyclopedia, "Henna is used today mainly as a hair dye;" that it cannot be alleged that there was any deliberate suppression on the part of the Appellants so as to invoke extended period of limitation; that no mentioning of composition of goods in classification lists does not amount to suppression or mis -statement of facts. Reliance was placed on the decision in the case of C.C.E. v. Dewarance Macneills Co. Ltd., 1991 (56) E.L.T. 645 (T) wherein it was held that "the fact that the Respondents did not furnish the composition of their productions in the classification lists will not affect this Position..The proper officer could very well ask the Respondents to furnish the composition of the goods before he approved the said lists. It is nobody's case that the Respondents did not furnish the composition in spite of being asked to do so. This being the position they cannot be held guilty of suppression or mis -statements of facts." Regarding imposition of penalty equivalent to the amount of duty under Rule 173Q read with Section 11 AC by the Commissioner under the impugned Order, the ld. Counsel submitted that as the entire period of demand of duty falls prior to the date of introduction of Section 11 AC in the Central Excise Act the penalty under Section 11 AC is not imposable; that the Tribunal in the case of Lauls Ltd. v. C.C.E., New Delhi, Final Order No. A/411/99 -F, dated 27 -5 -1999, has held that when a consolidated penalty is imposed under Rule 173Q read with Section 11AC apportionment cannot be done in appeal.

(3.) COUNTERING the arguments, Shri Prabhat Kumar, ld. SDR, submitted that Heading 3203.00 of the Tariff covers colouring matter of Vegetable or animal origin and preparations based on colouring matter of vegetable or animal origin where as Heading 3305 applies to preparation for use on the Hair; that if the Henna Powder is useable as preparations for use on the Hair and it is so indicated in the classification lists, there could not have been any doubt about its classification under Heading 33.05; that Heading 3203 covers Colouring matter or preparations based on Colouring matter of Vegetable or animal origin; that had the appellants given the full description of the goods in their classification lists/declaration, the department would have done the correct classification; that when the classification of the product is dependent on its use, which is apparent from the headings, it is the duty of the manufacturer to indicate the uses of the product in classification list/declaration; that incorrect description in the classification lists or declaration amounts to suppression of important and vital facts. The ld. SDR, further, submitted that there was no mistake in the Notifications issued by the Government from time to time classifying Henna Powder under Heading 32.03 as the same was not a preparations for use on the Hair; that it is also evident from the World Book of Encyclopedia that Henna is an orange -red dye that varies in colour with the article on which it is used..women in Asia use Henna to colour their nails, fingertips and parts of their feet. It has also been used to dye men's beards as well as the manes and hoofs of horses. People have also coloured wool, silk and animal skins". Henna Powder falling under Heading 32.03 is different from Henna Powder which is a preparation for use on the Hair; that as per Explanatory Notes of HSN the products falling under Heading 32.03 are generally extracted from materials of vegetable origin or of animal origin by steeping them in water or week acid or Amonia solution, that certainly such Henna Powder cannot be a preparation for use on the hair and it will fall under 32.03 as the process of manufacture involves using of week acid. The ld. SDR emphasised that that Appellants had concealed the full description of the goods as appearing in invoices in their classification lists/declaration. In support of his contention, he relied upon the decision in the case of Jai Shri Engineering Company Private Ltd. v. C.C.E. -1989 (40) E.L.T. 214 (S.C.), ICE and Diesel Engineer Works v. C.C.E. -1991 (53) E.L.T. 70; Hindustan Playing Cards v. C.C.E. - 1993 (68) E.L.T. 906 (T); Limenaph Chemicals v. U.O.I. -1993 (68) E.L.T. 77 and Indrol Lubricants and Speciality Ltd. v. C.C.E. -1994 (69) E.L.T. 325 (T). In Indrol Lubricants case it was held that extended period of limitation is invokable as the chemical composition of the products, its character and use were not declared by the assessee while claiming low rate of duty.