ORDER
P.K. Kapoor, Member (T)
1. The above captioned appeals involving common issue were heard together. Therefore, they are being disposed of by this common order.
2. Briefly stated the facts in these cases are as under :-
E/1538/88-C
2.1 The respondents M/s. Kesvardhini Products, Madras manufactured the product called Keshvardhini Concentrate which is diluted with other vegetable oils before use on the hairs. The Assistant Collector, Central Excise vide his order before use on the hairs. The Assistant Collector, Central Excise vide his order dated 13-8-1985 classified the product namely Kesvardhini Concentrate under Tariff Item 68 of the erstwhile Central Excise Tariff modifying the classification list approved on 7-5-1976 by his predecessor. The respondents preferred a refund claim based on the order dated 13-8-1985 passed by the Assistant Collector for an amount of Rs. 12,56,447-61 for the period 14-6-1976 to 26-8-1985 claiming that they had paid duty under protest. A show cause notice dated 26-9-1986 was issued by the Assistant Collector proposing to classify the product namely/ Kesvardhini Concentrate under Tariff Item 14F(II) during the period 17-3-1985 to 27-2-1986 and under sub-heading 3305.90 from 28-2-1986 onwards. He also proposed in the said show cause notice to demand differential duty based on the rate of duty at 105% ad valorem and thus finalised the classification list filed after 17-3-1985. Another show cause notice dated 20-2-1986 was also issued by the Assistant Collector wherein he proposed rejection of the refund claim filed by the party for Rs. 12,56,447.61 on their product i.e. Kesvardhini Concentrate on the grounds that it was classifiable under Tariff Item 14F(II) and tinder Tariff Item 68. Thereafter, the Assistant Collector passed an order dated 2-9-1987 upholding the said product as clas-sifible under Tariff Item 14F(II) w.e.f. 17-3-1985 till 27-2-1986 and demanded duty on 52.5% ad valorem (50% of 105% as applicable to the SSI unit). He also classified the product under sub-heading 3305.90 after 28-2-1986 and demanded duty at 105% ad valorem. The Assistant Collector thus demanded an amount of Rs. 20,98,960.13 as differential duty for the period from 17-3-1985 to 31-3-1987. While sanctioning the refund of Rs. 12,07,864.61 for the period 14-6-1976 to 16-3-1985 he adjusted the said amount towards the amount of duty of Rs. 20,98,960.13 and demanded the remaining amount of Rs. 8,91,105.52.
2.2 Aggrieved by the order dated 2-9-1987 passed by the Assistant Collector the assessee preferred an appeal to the Collector (Appeals) who vide his order-in-appeal dated 15-2-1988 held that the demand of duty made by the Assistant Collector for the period prior to 1-3-1986 was time barred and for the period after 1-3-1986 the classification of the product was to be under sub-Heading 3305.10 and not under 3305.90. The department has filed the present appeal contending that in this case the classification of the goods was approved provisionally and the assessment was also done provisionally, and therefore, the demand of duty made for the period 17-3-1985 to 27-2-1986 was not hit by limitation and the order-in-appeal on this appeal was incorrect. Thus the prayer of the department is that the product Kesvardhini Concentrate should be held as classifiable under Tariff Item 14F(II) during the period 17-3-1985 to 27-2-1986.
E/1932/88-C
2.3 This appeal has been filed by M/s. Kesvardhini Product (Madras), Madras who are engaged in the manufacture of Kesvardhini Concentrate which is used in the hair after diluting with other vegetable oils. The respondents vide their letter dated 3-9-1985 addressed to the Assistant Collector, Madras claiming the classification of the said product under Tariff Item 68 drawing his attention to the classification of the similar product manufactured by M/s. Kesvardhini Products under Tariff Item 68. By his letter dated 23-9-1985 the Assistant Collector informed the respondents that the classification of a similar product under Tariff Item 68 in another case would not be applicable to their product. Thereafter, on the request made by the respondents the clearance of the goods was allowed provisionally under Rule 9B in terms of a bond executed on 9-10-1985. A show cause notice dated 23-9-1986 was issued by the Assistant Collector proposing to (a) classified the product under Tariff Item 14F(II) during the period 17-3-1985 to 28-2-1986 and under Heading 3305.90 from 28-2-1986 onwards (b) demand the differential duty on the clearances effected during the said period at 52.5% ad valorem (c) finalised the classification list filed after 17-3-1985. Thereafter the Assistant Collector passed the order dated 2-9-1987 holding the product Kesvardhini Concentrate as classifiable under Tariff Item 14F(II) during the period 17-3-1985 to 27-2-1986 and under sub-heading 3305.90 from 28-2-1986 onwards. He also demanded duty on 52.5% ad valorem w.e.f. 17-3-1985. Being aggrieved by this order the respondents filed an appeal before the Collector (Appeals), Madras who adopted the same order passed in order-in-appeal No. 36/88(M), dated 15-2-1988. Against this order-in-appeal the present appeal has been filed by the department praying for restoration of the demand of duty for the period 17-3-1985 to 27-2-1986.
3. On behalf of the appellants Shri A.K. Madan, learned SDR submitted that the disputed product namely, Kesvardhini Concentrate was to be treated as Hair Oil even though it is marketed in concentrated form and requires dilution with other vegetable oil before being applied to the hairs. He submitted that the classification of the said product stands settled by the Tribunal’s decision in the case of Veto Products, reported in 1992 (62) E.L.T. 584 wherein it had been held that Perfumed Hair Oil Concentrate would fall under Tariff Item 14F(II)(b) prior to 1986. He also reiterated the findings in the impugned order.
4. Appearing on behalf of the respondents M/s. Kesvardhini Products, Madras in Appeal No. E/1538/88-C Shri V. Lakshmikumaran, learned advocate submitted that the respondents’ product namely, Kesvardhini Concentrate would not fall under Tariff Heading 14F(II) since under the said item only preparation for the care of Hair like Hair Lotions, Creams, and Pomades, Perfumed Hair Oils, and Shampoos whether or not containing soap or detergent are classifiable. He contended that to fall under Tariff Item 14F(II) the product is to be appropriation like Hair Lotion, Cream, Perfumed Hair Oil etc. He submitted that the appellants’ product was not capable of being used directly on the hairs or for the care of the hairs since it requires to be diluted with other vegetable oils to become usable. He contended that under these circumstances the Tribunal in the case of Veto Products v. Collector (supra) wherein it has been held that Perfumed Hair Oil Concentrate would fall under Tariff Item 14F(II)(b) prior to 1986 would not be applicable to the respondents’ product which was in concentrate and not usable directly as Hair Oil. He submitted, that even if the Tribunal is inclined to hold that the classification of the respondents’ product would be covered by the decision in the case of Veto Company the duty to be demanded would have to be worked out only at 10% ad valorem (i.e. 50% of 20% ad valorem applicable to SSI units) and not 52.5% as claimed by the appellants. He added that the contention of the appellants that the assessment were provisional, and therefore, the order-in-appeal of the Collector (Appeals) reversing the order of the Assistant Collector that the demand was time barred is erroneous since after the classification issue was decided by the Assistant Collector vide his order dated 13-8-1985 classifying the goods under Tariff Item 68, classification list No. 62/4/85 was filed on 29-8-1985 was approved by the department. He stated that there was no endor sement on the said classification list that the assessment were to be provisional and the respondent had also sent letters dated 28-8-1985 and 5-9-1985 informing their intention to avail the exemption under Tariff Item 68 for the product manufactured by them and even then there was indication by the department that the assessment were to be provisional and hence the respondents availed complete exemption from payment of duty under Tariff Item 68. He reiterated his stand that there was no provisional assessment during the period 17-3-1985 to 28-2-1986.
5. In regard to the case of Kesvardhini Products (Madras), Madras in Appeal No. E/1932/88-C the learned counsel submitted that here also the respondents reiterated that Kesvardhini Product manufactured by them is classifiable only under Tariff Item 68 and not under Item 14F(II) in view of the various submissions made in the case of Kesvardhini Products, Madras. He added that even if the Tribunal is inclined to apply the decision of Veto Company classifying the Hair Oil Concentrate in question under Item 14F(II) duty would be demandable only on 10% ad valorem and not 52.5% ad valorem. He added that duty had been paid by the respondents only at 10% ad valorem during the period March, 1985 and July to September, 1985 and exemption had been availed by them during the period April, 1985 to June, 1985 and accordingly even if duty is to be paid by them at 10% ad valorem it would be demandable only for the period April, 1985 to June, 1985 and October, 1985 to February, 1986.
6. We have examined the record of the case and considered the submissions made on behalf of both sides. It is seen that the disputed product in these cases namely, Kesvardhini Concentrate is meant for being applied to the hairs after dilution with other vegetable oils. The Tribunal in the case of Veto Campany v. C.C.E., reported in 1992 (62) E.L.T. 584 after taking into account the fact that similar product which contains Essential Oils and are used for being applied to the hair after dilution with other vegetable oils are in common and trade parlance known as hair oils. Having regard to these facts the Tribunal had held that similar product marketed under the brand name Rita was classifiable under Item 14F(II)[(b)] of the Central Excise Tariff even prior to 17-3-1985 when explanation (III) was added. Relevant extract from the said decision of the Tribunal is reported below :-
6. It is well settled that goods have to be classified under the tariff schedule according to their popular meaning or as they are understood in their commercial sense and not as per their scientific or technical meaning. In this regard we consider it relevant to refer to the observations of the Hon’ble Supreme Court in Para 13 of the judgment in the case of Plasmac Machine Mfg. Co. Ltd. v. Collector of Central Excise 1991 (51) E.L.T. 161, which is reproduced below:
“13. The submission that ‘nuts’ in Entry 52 are to be understood in the commercial sense is not disputed by the department. It is an accepted principle of classification that the goods should be classified according to their popular meaning or as they are understood in their commercial sense and not as per the scientific or technical meaning, Indo International Industries v. Commissioner of Salex Tax, U.P.1981 (3) SCR 294 and Dunlop India Ltd. v. U.O.I. – (1976) 2 SCC 241 have settled this proposition. How is the product identified by the class or section of people dealing with or using the product is also a test when the statute itself does not contain any definition and commercial parlance would assume importance when the goods are marketable as was held in Atul Glass Industries (Pvt.) Ltd. v. Collr. of C. Ex. (1986) 3 SCC 480 and Indian Aluminium Cables Ltd. v. U.O.I. (1985) 3 SCC 284. In M/s. Asian Paints India Ltd. v. Collr. of C. Ex. (1988) 2 SCC 470, which was a case of Emulsion Paint, at para 8 it was said :
‘It is well settled that the commercial meaning has to be given to the expression in Tariff items. Where definition of a word has not been given, it must be construed in its popular sense. Popular sense means that sense which people conversant wilh the subjecl matter with which the statute is dealing, would attribute lo it’.
CIT v.Taj Mahal Hotel 1972 (1) SCR 168 : (1971) 3 SCC 550 was applied.”
7. We find from the case records that prior to 17-3-1985 for a number of years the disputed product was being assessed as a ‘perfumed hair oil’ on the basis of approved classification lists in which the appellants had themselves been declaring the item as ‘perfumed hair oil’. The permanent S.S.I. Certificate of registration issued by the Department of Industries and Commerce, Madras also shows that from 1977 onwards the appellants have been registered for the manufacture of only hair oil. In the Certificate issued by the Registrar Of Trade Marks under the Trade and Merchandise Marks Act, 1958 as well the product in question was described as hair oil. It is also seen that in the certificate of renewal of licence for the manufacture of Cosmetics issued to the appellants the concerned authority had described their product as ‘Hair Oil’. The copies of the documents al pages 6 to 9 of the Paper Book filed by the respondents disclose that the dealers in different parts of the country while placing orders on the appellants for the supply of the disputed product had also been describing the product as ‘Rita Hair Oil’. It is therefore evident that even prior to 17-3-1985 when Explanation III was added to Item 14F of the Tariff in common and trade parlance the disputed product was known as a hair oil. Under these circumstances we are of the view that the appellants contention that prior to 17-3-1985, their product had to be treated as a concentrate or compound classifiable under Item 68 of the Central Excise Tariff has no force at all.
8. We find that in the literature which was being supplied along with the product, the manufacturers had claimed that it was pleasantly perfumed. Relying upon the decision of the Bombay High Court in the case Ramthirth Yogashram v. State of Maharashtra (supra) the appellants have contended that their product could not be treated as a perfumed hair oil also for the reason that its perfume was on account of the presence of certain volatile ingredients such as ‘lemon grass’ oil and ‘Citronella oil’ and not on account of any perfume having been deliberately imported to it. In this regard we find from the following extracts from the Chapter on Essential Oils in ‘Kirk-Othmer’ Encyclopedia of Chemical Technology that oils such as lemon grass oil and Citronella Oil are used for importing flavours or fragrance.
“Essential oils are isolated from various plant parts, such as leaves (patchouli), fruit (mandarin), bark (cinnamon), root (ginger), grass (citronella), wood (amyris), heartwood (cedar), gum [myrrh oil (8016-3-73)], balsam [Tolu balsam oil (8024-03-1)], berries (pimenta), seed (caraway), flowers (rose), twigs (clove stems) and buds (cloves). These plant parts are processed to yield their quintessences or essential oils which are mostly devoid of cellulose glycerides, starches, sugars, tannins salts and minerals which also occur in these botanicals”
“Essential oils arc used as such for flavours and fragrances, but products derived from, or based on essential oils have large volume usage for specific applications. Essential oils are concentrated, rectified, extracted or chemically treated to further isolate vital components, purify adjust properties or increase the concentration of significant flavour or fragrance components.”
It is evident that the essential oils such as Citronella Oil and Lemon grass oil were deliberately added to the appellants product to impart perfume. For this reason and also in view of the fact that the appellants had themselves claimed in the literature which they were supplying along with the product that it was perfumed, their contention that the goods in question could not be deemed as ‘perfumed’ hair oil has to be rejected.
8A. In view of the above discussion we hold that even prior to 17-3-1985 when Explanation III was added to Item 14F of the Central Excise Tariff, the disputed product for the purposes of classification had to be treated as ‘perfumed hair oil’ and was therefore classifiable under Tariff Item )14(ii)b.
On the ratio of the Tribunal’s decision extracted above we held that the disputed product namely, Kesvardhini Concentrate was correctly classifiable under Tariff Item 14F(II) prior to 1986.
7. In Appeal No. E/1538/88-C in the case of Kesvardhini Products, Madras it has been contended on behalf of the appellants that even if the product in question is held as classifiable under Item 14F(II) the duty would be demandable only at 10% ad valorem (50% of 20% ad valorem as applicable to SSI unit). It has also been contended that the contention of the department that the assessment was provisional is erroneous since after the classification issue was decided by the Assistant Collector vide his order dated 13-8-1985 holding the goods classifiable under Tariff Item 68 classification list No. 72/4/85 and it was approved by the department. The appellants have contended that there was no endorsement on the said classification list that the assessments were to be provisional and the respondents had also sent letters dated 28-8-1985 and 5-9-1985 informing the department that they would be availing exemption under Tariff Item 68 for the product in question. Hence, there was no provisional assessment during the period 17-3-1985 to 28-2-1986.
8. We find that the claim by the respondents that the demand for duty would be only at 10% even if the goods were classifiable under Tariff Item 14F(II) and there was no provisional assessment during the period 17-3-1985 to 28-2-1986 we find that these points would require examination by the lower authorities with reference to the relevant record and correspondence.
9. Similarly in the case of Kesvardhini Products (Madras), Madras in Appeal No. E/1932/88-C the respondents’ claim that the duty would be demandable only at 10% ad valorem and that the assessments were provisional in the case only during the period 9-10-1985 to 27-2-1986 and not for the entire period prior to 9-10-1985 would have to be examined by the lower authorities with reference to the relevant record.
10. In view of the foregoing we hold that the disputed product namely, Kesvardhini Concentrate was classifiable during the relevant period under Tariff Item 14F(II). However, for giving a finding on the question whether the duty was chargeable at 10 % ad valorem by treating the respondents as Small Scale Manufacturer and whether the assessment in question were provisional or otherwise during the relevant period we remand the matter to the Assistant Collector for giving a finding after re-adjudication of the case in accordance with law and after giving personal hearing to the appellants.
11. In view of the foregoing both the appeals are disposed of in the above terms.