HINDUSTAN RIMMER Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) THE appellant is a manufacturer of cosmetics and hair care products. The hair care products are three Gels. They are (1) Harmony Styling Gel (2) Jolen Country Born Styling Gel and (3) Jolen Country Born Styling Gel Hair Fixer. The first two varities are mostly for export and the third is for sale in the domestic market. Hair care products manufactured in India are liable to Central Excise duty under Chapter 33 which is for cosmetics, toilet preparations etc. More specifically, the classification is under Heading 33,05. That heading reads as under : -

(2.) THE appellant classified 'Jolen Country Born Styling Gel Hair Fixer' under heading 3305.91 as 'hair fixer'. Classification lists were being filed from time to time and the Central Excise authorities raised no objection. However, on 18 -7 -2002, a show cause notice was issued alleging that, for the period March 1988 to February 2002, the appellant had evaded Central Excise duty by misclassifying the product under 3305.91 as 'hair fixer', while the correct classification should have been under sub -heading 3305.99 as 'other'. The appellant resisted the charge; but to no avail. Under the order impugned in this appeal, learned Commissioner of Central Excise Delhi -I upheld the changed classification proposed in the show cause notice and demanded differential duty of over Rs. 23 lakhs for the aforesaid period and imposed equal amount of penalty on the appellant. Demand for interest was also made. The present appeal challenges that order.

(3.) THE ground for revising the classification is that Jolen Country Born Styling Gel Hair Fixer too is a hair styling gel like Jolen Country Born Styling Gel, and when the appellant sold Jolen Country Born Styling Gel in the domestic market, it paid duty on it after classifying the product under heading 3305.99, while when the same product is cleared under a more expanded name of "Jolen Country Born Styling Gel Hair Fixer", the appellant is incorrectly paying duty on it as hair fixer. It is also a ground that the composition of both products is the same and therefore the distinction made between Styling Gel and Styling Gel Hair Fixer is a baseless distinction made only to evade payment of Central Excise duty. As against this, the appellant has contended that the product is a hair fixer and is known in the market as such and is bought, sold and used as such and therefore, it is required to be assessed under the specific sub -heading for "hair fixer" and not under the residual heading for "other" preparations for use on the hair. The appellants have referred to much evidence produced by them in support of their contention that hair fixers are used mostly by Sikh gentlemen and that, the fact of bulk of the sale being in Punjab itself is proof that the product is commercially transacted and used as hair fixer by persons dealing in it and using it. About the composition, the appellant has shown that one particular item used is PVP (Poly Vinyl Pyrolidone) which is a hair fixer according to Kirk Othmer's Encyclopedia of Chemical Technology and other technical literature. The appellants have submitted that occasion for sale of Jolen Country Born Styling Gel in the domestic market arose because of cancellation of an export order. It is being pointed out that, that consignment was actually manufactured as Gel for export and since the export did not take place, it had to be disposed of in India as Gel. It was cleared after payment of duty as such under heading 3305.99. The appellants' contend that such a sale is no ground to challenge the correctness of the clearance of Jolen Country Born Styling Gel Hair Fixer as "hair fixer" under 3305.91. During the hearing of the case, learned Counsel for the appellant pointed out that similar goods may be sold differently in different markets. Each is required to be classified under the tariff heading appropriate to it. The learned Counsel also pointed out that the heading "hair fixer" is unique to our tariff, inasmuch as the HSN, which is the basis for our tariff, does not contain such a subheading. It is the learned Counsel's submission that since the tariff has a specific heading for ''hair fixer", that too without a statutory definition, the appropriate course would be to classify the products known in trade and commerce as hair fixers under that heading. He submitted that the method adopted in the impugned order would render the sub -heading for hair fixers redundant and such a course should not be adopted. In this context, he relied on the decision of the Apex Court in the case of Indian Metals & Ferro Alloys Ltd. v. Collector of Central Excise, 1991 (51) E.L.T. 165 (S.C.) wherein the Apex Court observed as under : -