ORDER
D.M. Vasavada, Member (J)
1. We heard this appeal on 3-8-1989 and passed the following order:
“Order-in-Appeal set aside with consequential relief to the appellants. This order will have no bearing in relation to the Central Excise Tariff Act, 1985. Announced in the Open Court.” Hereunder, we set out our reasons for the same:
Facts stated briefly are:
The appellants manufacture Ayurvedic Maka Oil, Ayurvedic Amla Oil and Ayurvedic Brahmi Oil, hereinafter referred to as oils, since 1964 by using herbal ingredients. After the oil is manufactured, as per the process stated in Appeal Memo, a small quantity of 0.3% of sandal wood oil is added in order to preserve aroma and to prevent the oil from becoming rancid. In the year, 1971, perfumed hair oil was included in T.I.14F and that product was brought under excise net, but as the appellants were not manufacturing perfumed hair oil, even though they were made to obtain the manufacturing licence, they were paying duty under protest. But, subsequently, relying upon evidence and reports of the experts, produced by the appellants, the excise authority cancelled the licence and refunded the amount paid by way of duty.
2. Then, Superintendent of Central Excise, issued a show cause notice dated 18-11-1985 demanding amount of Rs. 486848/46 for the period from May, 1985 to October, 1985 and issued another notice dated 13-3-1986 demanding duty of Rs. 87,747.80 for the period from 1-11-1985 to 14-12-1985 mentioning in both these notices that what is being manufactured by the appellants is hair oil which is excisable under T.I.14F (ii) of C.E.T. Matter was adjudicated by the Assistant Collector who confirmed the demands and the appeal preferred by the appellants was rejected by the Collector of Central Excise (Appeals), Bombay which has given rise to the present appeal.
3. We had heard L.A., Shri H.S. Joshi for the appellants and Shri M.S. Arora, Ld. J.D.R. for the respondent.
4. The process of manufacture of three different types of hair oils, manufactured by the appellants, is not in dispute and accordingly, they are prepared out of herbal ingredients of forest origin. The appellants are manufacturing these products since more than 25 years and they were subject to control of Food and Drugs Administration of Maharashtra State under Drugs and Cosmetics Act, 1940. As the said Administration classified the products as ‘cosmetics’ and as Central Excise duty on cosmetics and toilet preparations and perfumed hair oil was imposed by Finance Bill of 1971, by covering them under Tariff Item 14F (ii) (b), the appellants were compelled to take out central excise licence by the Central Excise authorities and were made to pay duty on the same. In the year 1976, the Commissioner, Food & Drugs Administration, agreed to classify the said products as Ayurvedic medicines and issued the licence dated 3-7-1976 to that effect. The appellants brought this fact to the notice of Central Excise authorities and started paying duty under protest. The appellants also prayed for exemption from paying C.E. duty and contended that what they were producing was not ‘perfumed’ hair oils. After investigating the matter, by his order dated 1-2-1977, Assistant Collector, provisionally, approved the classification list of the appellants, classifying the products under heading ‘Ayurvedic’ medicines and pending further enquiries held them to be nonexcisable. Copy of this classification list is produced at Sl. No. 6 of the paper book. Copy of licence issued by the Food & Drug Administration is produced at Sl. No. 13. Thereafter, the products were examined by the Dy. Chief Chemist of Central Excise Deptt. and by a letter dated 26-8-1977, which was in reply to the query raised by the Assistant Collector (C.E.), opined that the product, in question, might be considered as ayurvedic preparations. Copy of this letter is produced at Sl. No. 18. Similar query was addressed to the Director (Ayurved), Maharashtra State by the Assistant Collector (C.E.) and the said Director, by his letter dated 27-7-1977, addressed to the Assistant Collector, opined that the drugs, in question, were ‘Ayurvedic’. Copy of this letter is produced at Sl. No. 16. Relying upon these letters, the Assistant Collector (C.E.) accorded final approval to the classification list treating these products as exempt from payment of Central Excise duty, copy of this letter is produced at Sl. No. 19. Consequently, the Assistant Collector sanctioned refund of the amount of C.E. duty paid, copy of which is at Sl. No. 20.
5. Thereafter, the appellants received two show cause notices, copies of which are produced at Sl. Nos. 2 and 4. Now, as rightly pointed out by L.A., Joshi, it is nowhere alleged in these show cause notices that what is being produced by the appellants is ‘perfumed’ hair oils. In the Order-in-Original (copy at Sl. No. 9), the Assistant Collector also has not given any finding that what is being produced is perfumed hair oils.
6. On perusal of the Order-in-Appeal (copy at Sl. No. 10), we find that the Ld. Collector (Appeals) has noted in his order (at internal page 7), as under:
“The next question is whether the hair oil is ‘pefumed’ or not. There is no clear finding on this aspect, even though it is admitted that 0.3% sandal wood oil is added during the manufacture in order to stablise and preserve odour as there is a tendency in the cocount oil to become rancid. The Deputy Chief Chemist’s letter No. S.1/8/77 dated 26th August, 1977 has been cited to prove that, on the basis of various ingredients such as Maka leaves, brahmi leaves, amla oil, and other ingredients like Nagarmotha, gobla, kachora, Jatamanri, valavhakhand, sandal wood, rose budgs, babbi, etc. commonly used in Ayurvedic preparations, Maka hair oil should be considered an Ayurvedic preparation. Here again, it has not been denied that the Maka Hair oil does not possess fragrance that could have been imparted by some of these very ingredients.”
7. Ld. Collector referred to the Deputy Chief Chemist’s letter (at Sl. No. 18) and in that letter it has been clearly stated as under:
“This is then filtered and mixed with small quantity of 0.3% of sandal wood oil to stablise and preserve the odour, as there is tendency in respect of coconut oil to become rancid.”
8. So, as per the opinion of the Deputy Chief Chemist, the sandal wood oil is added not for the purpose of ‘perfume’, but for the purpose of preventing the oils, in question, from becoming rancid. Moreover, as pointed out by L.A., Shri Joshi, the Director of Ayurved of Maharashtra State, in his letter dated 27-7-1977 (Sl. No. 16), has specifically, stated as under:
“(1) That the oils have fragrance of the Ayurvedic ingredients used in the manufacturing and not of the perfume.
(2) That the Ayurvedic ingredients used in the products in question are known for their medicinal properties and not for their perfuming character in Ayurved.
(3) That the perfume does not appear to have been deliberately impregnated in the oils, but used for prevention of the base oil from deterioration and stinking smell.
I feel that the above products are Ayurvedic since formula of the products contain Ayurvedic ingredients and they have been processed more or less as per Ayurvedic manufacturing vidhi known as “Snehapak Vidhi.”
9. So, only because sandal wood oil is added to the products, it cannot be argued that the same has been added for the purpose of making them ‘perfumed’ products or that the products have become ‘perfumed’ hair oils.
10. The appellants have, at Sl. No. 31 of the paper book, produced a copy of the judgment in the case of Union of India and Others v. T.S.R. & Co. -1985 (22) E.L.T. 701 (Mad.) wherein the Hon’ble High Court has explained Connotation of the expression ‘perfumed oil’ as under :
“The expression ‘perfumed oil’ must connote an oil to which perfume has been imparted by way of positive and deliberate act and not as meaning an article which just happens to have perfume”.
11. In the light of above discussion, we are of the view that the products, in question, do not answer to the description of ‘perfumed hair oil’. So, the impugned order, which is based upon this finding cannot be sustained.
12. We have perused Tariff Item 14F(ii), as it stood prior to 28-2-1985 and as it stood after the amendment brought about by the Finance Bill of 1985. After 1985 amendment, the relevant entry stood as under :
“14F. Cosmetics and toilet preparations not containing alcohol or opium, Indian hemp or other narcotic drugs or narcotics, namely –
(i) X X X X X X
(ii) Preparations for the care of the hair, such as: brilliantines, perfumed hair oils, hair lotions, pomades and creams, hair dyes, shampoos whether or not containing soap or organic surface active agents.”
13. We have noted that the definition has been enlarged and we have also noted that the words “such as” would suggest inclusive definition but then names of the products enumerated thereafter would suggest that any product which has to be brought within compass of this definition has either to be one of these products or equivalent to or analogous thereof. As can be seen from the impugned order the department has made effort to bring it within definition of ‘perfumed hair oils’ and as stated above, we are not convinced about this finding. No argument has been advanced before us that the product, in question, will be covered by this Tariff Entry as they answered to the description of the products in this entry or that they could be so covered. It will be appropriate to note that even though the definition is inclusive one, a product for not to be included therein, has to be either one of the products mentioned therein or at least equivalent thereof. Wording of the description suggests that what are sought to be included are toilet and/or cosmetic preparations and the department is not able to prove that the products are such preparations. Assuming that the products are hair oils, but then, by itself, would not bring these products into ambit of this definition because all hair oils were not included therein unless the same could be defined as toilet and/or cosmetic preparations. Explanation-II to this entry makes this position very clear. So, the impugned order is required to be set aside.
14. Ld. Advocate, Shri Joshi has also contended that the authorities could not have straightaway raised and confirmed the demand without first revising the classification list which was already approved earlier and he has cited Foods, Fats and Fertilizers Ltd. v. Collector of Central Excise, Guntur – 1987 (30) E.L.T. 538 (Tribunal) in support of his contention. In this order it has been laid down as under:
“It is true that the proper officer is competent to modify an approved classification list if he thinks that classification list was wrongly approved, he can make such modification with prospective effect only.”
15. But as we are of the view that appeal is required to be allowed on merits, we are not discussing this aspect of the appeal.
16. After coming into force of the CET Act 1985, entire basis of the classification has changed. The appellants have produced a copy of the opinion given by the Director General of Health Services (Drug Section) from a letter of the Central Board of Customs & Excise dated 18-3-1988 addressed to the Collector of Central Excise, Bombay-II and it transpires from this that the opinion of the Board was sought whether ‘Ramtirtha Brahmi Oil’ should be classified as ‘Ayurvedic’ medicine or as cosmetic under new Central Excise Tariff classification and for the reasons stated in the opinion of the Director General of Health Services, the Board has advised the Collector concerned that the same should be classified as ayurvedic medicine. The Directorate has based its opinion on the basis of opinion expressed by the Adviser (Ayurveda & Sidha) in the Ministry of Health and Welfare (Government of India). According to L.A., Shri Joshi, products of the appellants are also similar to the product Ramtirtha Brahmi Oil and these products also fulfill all the five conditions which are stated in this opinon. So, according to L.A., Shri Joshi, the appellants have prayed, by the misc. application No. 361/89-C, that then-product be also classified as ‘ayurvedic’ medicine under C.E.T. 1985 and that the Tribunal may pass order to that effect. But the classification list is still pending for approval before the Assistant Collector and admittedly he has not taken any decision on the same. So, it will be premature for us to express any opinion on this issue and unless the matter is finalised by the lower authorities, we are afraid it is legally not permissible for us to express any opinion on correct classification under the C.E.T. 1985. For the reasons, stated above, we have passed the order as stated above.