V.K. Agrawal, Member (T)
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.
4. In reply, Shri L.P. Asthana submitted that even though the Department was aware of the Tribunal’s decision in the case of Heena Exports no action was taken to revise the classification lists; that when the exemption in respect of Henna Powder was given in general terms under the Notification from time to time, no suppression on the part of the Appellants can be alleged; that non indication of use does not amount to suppression. He relied upon the decision of the Supreme Court in the case of Cosmic Dye Chemical v. Collector of Central Excise, Bombay -1995 (75) E.L.T. 721 (S.C.) wherein it was held that there cannot be suppression or mis-statement of fact which is not wilful; that mis-statement or suppression of fact must be wilful. Finally, he submitted that the Circular issued by the Board is binding on the Central Ex- else Authorities as held by the Supreme Court in the case of Ranadey Micronu-trients v. C.C.E., 1996 (87) E.L.T. 19 (S.C.).
5. We have considered the submission of both the sides. The ld. Advocate for the Appellants has not pressed the challenge about the classification of Henna Powder in question. The classification of Henna Powder will therefore, be under Heading 33.05 as decided by the Commissioner under the impugned Order. The ld. Advocate has, however, emphasised that the demand of duty beyond the period of six months is hit by time limit as specified in Section 11A(1) of the Central Excise Act as there was neither any suppression nor any wilful mis-statement by them. According to him the department was classifying Henna Powder without any reservation or qualification under Heading 3203 and it was only after the dismissal of appeal filed by M./S. Heena Export by the Supreme Court, the Board issued a Circular for classifying Henna Powder under heading 3305 if sold in unit packing with indication of its use as a hair dye. The Commissioner has invoked the provisions of proviso to Section 11A of the Act on the ground that the Appellants had not made complete disclosure about the use of Henna Powder sold in unit containers. The Ld. SDR has relied upon the number of decision in support of his contention that non disclosure of use amounts to suppression. We find that in all the Notifications issued from time to time, such as 14/93, 27/90 as-amended by Notification No. 10/94 or 13/95 Henna Powder falling under Heading 32.03 or 3212.90 was exempted from payment of duty. No change was made in the Notification even after Appellate Tribunal had de-lievered the decision in the case of Heena Export, supra. The Appellants have clearly mentioned in their classification lists. “Henna Powder in unit packing.” This classification lists was filed in 1994 and if there was any doubt, the Department should have, asked the Appellants to indicate its use. The Appellants had claimed the benefit of Notification No. 27/90 as amended. Merely because they have not indicated the use of the impugned goods in their classification lists it cannot be alleged, in the facts and circumstances of the present matter that they have wilfully suppressed facts or made wilful mis-statement of facts. This was the view held by the Tribunal in the case of Dewarance Macneill Coy. Ltd., supra. The decision relied upon by the ld SDR are not applicable to the facts of the present matter. For example, in the case of Limenaph Chemicals, extended period of 5 years was held to be invokable by Madras High Court as there was a deliberate mis-statement on the part of petitioner with regard to the classification of the product and the entitlement of the same to exemption under the Notification. In that case the petitioner was claimining his product as Sagol and the Notification 5/97 exempted cement commonly known as Sagol and obtained by heating lime stone and burnt coal in a kiln. On chemical analysis, the product was found to be calcium hydroxide in powder form and not cement based water paint. Such facts are not available in the present matter as it cannot be denied that what was manufactured by the Appellants was not Henna Powder. Similarly in the case of Hindustan Playings Cards, supra, larger period of limitation was held to be applicable as the Appellants therein had not filed the classification lists after issue of notification and the appellants did not furnish the informations sought by the Department under numerous letters. The ld. SDR has relied upon the decision in Jai Shri Company, supra, where again the facts are different. The Appellants therein manufactured nuts which were described by them as end fittings connectors meant for lubricating purposes. Further, it was observed by the Supreme Court that the Appellants themselves were both buying and selling these nuts and as such there was no conceivable reason why these nuts were described as end-fittings in the declaration to the Departments. In view of these facts it was held by the Court that the Appellants had made mis-declaration of their product. There is no such mis-declaration in the present matter as the Appellants have clearly declared, “Henna Powder in unit container”. If the uses of the product is determinative factor, it was required on the part of the Departments to make enquiry from the Appellants about the uses of the product before approving the classification. Taking into consideration the entire facts and circumstances of the present matter, and the various notification issued by the Government from time to time, we are of the view that it cannot be said that by not declaring the uses of their impugned product, the Appellants have suppressed wilfully any material fact or made wilful mis-statement. Accordingly the extended period of limitation for demanding the duty is not invokable in the present matter. Consequently, the demand of duty confirmed and the penalty imposed under the impugned Order are set aside and the Appeal is allowed to this extent.