1993(02)LCX0014
BEFORE THE CEGAT, SPECIAL BENCH ‘C’, NEW DELHI
S/Shri K.S. Venkataramani, Member (T) and G.P. Agarwal, Member (J)
HENNA EXPORT CORPORATION
Versus
COLLECTOR OF CENTRAL EXCISE
Final Order No. 27/93-C, dated 11-2-1993 in Appeal No. E/1666/92-C
Cases Quoted
Rohit Pulp and Paper Mills Ltd. v. Collector - 1990(04)LCX0074 Eq 1990 (047) ELT 0491 (S.C.) ................... [Paras 2, 7]
Collector v. Frozen Foods - 1991(12)LCX0011 Eq 1992 (059) ELT 0279 (Tribunal)............................................ [Paras 2, 7]
Collector v. Mahavir Minerals Store Supply Co. - 1988(09)LCX0006 Eq 1988 (038) ELT 0171 (Tribunal) ............. [Para 2]
Collector v. Maize Products Ltd. - 1990(05)LCX0039 Eq 1990 (049) ELT 0544 (Tribunal)..................................... [Para 2]
S.A.I.L. v. Collector - 1991(02)LCX0011 Eq 1991 (054) ELT 0414 (Tribunal)........................................................... [Para 2]
Chowgule & Co. Pvt. Ltd. v. U.O.I. - 1980(11)LCX0021 Eq 1993 (067) ELT 0034 (S.C.) ......................................... [Para 3]
Badri Prasad Prabhu Shankar v. Commissioner - STC (14) 1963 (All.) .............................. [Para 3]
Commissioner v. Har Prasad Ayodhya Prasad - STC 1977 (39) 420 (All.) ........................ [Para 3]
Sialkot Trading Co. v. Assistant Commissioner - 1980 (45) STC (Del.) .............................. [Para 3]
Empire Industries Ltd. v. U.O.I. - 1985(05)LCX0002 Eq 1985 (020) ELT 0179 (S.C.)............................................. [Para 5]
Mcnicol v. Pinch - (1906) 2 K.B. 352....................................................................................... [Para 5]
Advocated By: Shri V. Lakshmi Kumaran, Advocate, for the Appellants.
Smt. Vijay Zutshi, C.D.R., for the Respondents.
[Order per: K.S. Venkataramani, Member (T)]. - This is an appeal filed against the order dated 15-1-1992 passed by the Collector of Central Excise (Appeals), New Delhi. The facts briefly are that the appellants herein filed a classification list w.e.f. 10-12-1990 for various items which included the two items namely, Henna Powder and Herbal Shikakai Powder. Both these items were approved for classification under Heading 1401.00 CETA, 1985 which covered “Vegetable plaiting materials; vegetable products, not elsewhere specified or included”. The appellants were subsequently issued a show cause notice on 6-6-1991 in respect of these two products since it appeared to the Department that the assessee had not given correct description of their product and had also not declared that the same were cleared under the brand name of Red Rose Henna Powder/Henna Powder and Rose Herbal Shikakai Powder. The Department found that on the basis of the material available that the goods were correctly classifiable under sub-heading 3305.90 CETA, 1985 which covers “preparation for use on the hair”, at a higher rate of duty. Demand of differential duty of Rs. 72,126.65 was also raised besides proposal for imposing penalty on the appellants herein. By the order dated 10-10-1991, the Assistant Collector of Central Excise, Division-1 Faridabad confirmed the demand and imposed a penalty of Rs. 2,500 on the appellants. The Assistant Collector found that it was only after the literature of the product were examined by the Department which was not submitted at the time of approval of classification list that the Department has proposed to change the classification of the product to Heading 3305.90. The Assistant Collector for the purposes of the change in the classification relied upon the Chapter Note 2 and Chapter Note 4 to Chapter 33 CETA and he came to the conclusion that it is clear from these chapter notes that any preparation which is suitable for use on the hair when put up in packings with labels or literature to show that they are meant for use as cosmetics or toilet preparations would be classifiable under heading 3305.90 and also further that in relation to Heading 3305 any labelling or relabelling or repacking or any other terms to making products marketable is to be treated as manufactured. He rejected the appellants’ contention that they are only mixing various ingredients and packing them and that, therefore, they are not manufacturing any new goods, by holding that the very fact that they are purchasing the inputs grinding and mixing them in fixed ratio and then packing them in unit containers as well as in gunny bags for ease of transportation or sale, in itself clearly established that they are manufacturing goods classifiable under sub-heading 3305.90. He also noted that there was clear indication in the literature obtained from the party that in the case of Rose Herbal Shikakai powder it is indicated as being very useful for making the hair silky, black, smooth and shining. In the case of Henna powder, he noted that the pamphlets of the product indicate clearly that they can be used as a hair dye and is good hair conditioner. He also dismissed their alternative claim for classification of the product as Ayurvedic medicaments as an after thought and for want of evidence. The Assistant Collector also imposed the penalty of Rs. 2,500 on the appellants. The Collector of Central Excise (Appeals) by impugned order upheld the Assistant Collector’s classification of the products. He further found no case for sustaining the penalty and, therefore, set aside the penalty.
2. Shri Lakshmikumaran, the learned Counsel, arguing for the appellants submitted that there was no process of manufacture involved in preparation of the Henna powder. What is done by the appellants is to collect natural Henna leaves in dried form which is powdered by them by grinding through pulverisers or grinders. The powder so made is mixed thoroughly by manual process. Therefore, it was their plea that there was no new product coming into existence. The leaves are only cleaned and separated from sand, stones dust, etc. and other foreign matters before being made into powder form. In the case of Red Rose Shikakai Powder which is other product in dispute, it was their case that no manufacturing process is involved. It is prepared by mixing manually mehandi leaves, Amla, Retha, Shikakai, Henna, Sandal, Turmeric, Rose, Coffee, Katha, etc. obtained in powder form in fixed ratio then packed in unit containers. It was pleaded that all the ingredients in this case are taken in powder form and mixed together manually, therefore, no process of manufacture was involved. The product is a pure Herbal compound. It was also submitted that the duty demanded includes Henna Powder in gunny bags other than in unit packings under Heading 33.05 without giving justification therefor. Regarding classification of Henna powder under Heading 3305, the learned Counsel submitted that as per Note 6 of Chapter 33, the Heading 33.05 applied inter alia to the products namely; Brilliantines, perfumed hair oils, hair lotions, Pomades and creams, hair dyes (in whatever form), shampoos, whether or not containing soap or organic surface active agents. The learned Counsel argued that the products mentioned therein are all exclusively prepared for use on the hair. In this context he referred to The New Lexicon Webster’s Dictionary of the English Language, Volume 2 Edition: 1988 which gave the meaning Brilliantine as a cosmetic hair dressing used mainly by men. Similarly, Pomades means scented ointment for the hair and Shampoo is to mean liquid or powder preparation for washing the hair. Therefore, it was contended by the learned Counsel that only those preparations which are exclusively used on the hair will fall under Heading 33.05. The product like Henna powder which is used predominently to adorn the hands and feet with a pleasing colour and its marginal use in some cases for the hair will not bring it under Heading 33.05, having regard to the Chapter Note 6 to Chapter 33. The learned Counsel further argued that this Chapter note uses the term “inter alia” while spelling out the coverage of the heading mentioning some of the products covered thereunder and it was his submission that there is no ground for importing into this grouping any product which is alien to it. It can be dearly stated according to the appellants that Henna powder is not in the category as brilliantine perfumed hair oils, Pomades or shampoos. The conclusion would follow even by applying the principle of Nosciture a Sociis following the principles laid down in this behalf by the Supreme Court in the case of Rohit Pulp and Paper Mills Ltd., reported in 1990(04)LCX0074 Eq 1990 (047) ELT 0491 (S.C). This principle as laid down, was followed in interpretating another instance where the term “inter alia” was used in statutory provisions by the Tribunal in the case law reported in 1992 (059) ELT 279, in the case of Collector of Central Excise v. Frozen Foods. Henna Powder is used predominantly on the body and its use as hair dye is not its dominant use. Therefore, it would fall outside Heading 33.05 CETA according to the appellants. It was further contended that thus when the goods did not at all fall for classification under Chapter 33, the question of applying the Chapter Note 2 or Chapter Note 4 to the product will not arise. The learned Counsel further argued the classification of the goods under Heading 14.04 is also supported by the Explanatory Note to HSN. It was pointed out that the Heading 33.05 of the CETA is completely aligned to the Heading 33.05 of HSN, wherein it is clear indication that preparations applied to hair on parts of the human body other than the scalp are excluded from that heading. On the other hand, under the HSN Explanatory Note for Heading 14.04 which covers vegetable products not elsewhere specified or included, Henna is specifically mentioned as one such material of raw-vegetable material covered by the heading. On the reasoning adopted by the Collector (Appeals) to hold that there was a process of manufacture involved in the preparation of Henna powder, the learned Counsel relied upon the following case law :
1. 1988(09)LCX0006 Eq 1988 (038) ELT 0171 (Tribunal) Collector of Central Excise v. Mahavir Minerals Store Supply Co.
2. 1990(05)LCX0039 Eq 1990 (049) ELT 0544 (Tribunal) Collector of Central Excise v. Maize Products Limited
3. 1991(02)LCX0011 Eq 1991 (054) ELT 0414 (Tribunal) S.A.I.L. v. Collector of Central Excise
and it was argued that in preparing the Henna powder from henna leaves by grinding them after removal of foreign material from the leaves, the essential character of the powder remains the same as that of the leaves which is the starting material. In such circumstances, in the absence of any change in the essential character of the materials and also since the use is also the same, no manufacturing process can be said to have taken place making the goods liable to duty. Similarly, in the case of the other products, namely, Shikakai powder, it was urged, mere mixing of the various powders manually does not result in the .emergence a new product and, therefore, there is no process of manufacturing involved. The Ld. Counsel also submitted that the alternate classification of the products has Ayurvedic medicaments under Heading 33.03 has also to be considered by the Department with regard to their submissions on this behalf.
3. Smt. Vijay Zutshi, the Ld. Chief Departmental Representative, appearing for the Revenue, contended that the question whether there was a process of manufacture involved has to be looked into from the point of view of the definition of the term in Section 2(f) of the Central Excises and Salt Act, 1944 even prior to its amendment in 1985. A comparison of the definition alongwith provision to Chapter Notes 2 and 4 of Chapter 33 would show that the wording of the definition and the Chapter Notes are identical. What is incorporated is a deeming provision in which case it is not necessary that a process of manufacture as such should take place. The learned Chief Departmental Representative further argued in respect of the product Henna powder Chapter 14 is inapplicable because it is a residuary item of covering vegetable products not elsewhere specified. When Henna powder as a preparation for use on the hair is specifically covered, it will be inappropriate to consign its classification to the residuary item. Further, the Heading 14.04 as is indicated in the HSN Explanatory Note indicates use of the material therein primarily in dyeing or tanning which cannot be applied to a product which has cosmetic use. In the case of Henna powder, the label on the container gives the indication of its use as a cosmetics. Even in respect of Chapter Note 6 to Chapter 33 and the arguments of the learned Counsel, in this regard it was pointed out by the learned Chief Departmental Representative that as per HSN Explanatory Note under Heading 33.05 the heading would cover other hair preparations and bleaches used on the hair. Therefore, the grouping cannot be said to be only exclusively of those preparations which are for use on the hair on the scalp. The literature of Red Rose Henna powder shows its use as cosmetic and on the hair as hair dye and hair conditioner. The learned Chief Departmental Representative further argued that the principles of Nosciture a Sociis is to be resorted to only in case of doubt and it is not a rule of universal application and it need not be invoked when the entry itself is clear. The learned Chief Departmental Representative also produced as an example a product marketed under the brand name AYUR which is an instant bleach manufactured under Cosmetic Act Licence as being similar to Henna, which product is also said to bleach the hair and also makes the skin fair. This would show that the coverage of Heading 33.05 can extend to such products. The learned Chief Departmental Representative also urged that the process adopted by the appellants to manufacture Henna powder from Henna leaves is a process of manufacture because only at the end of those processes it is possible to make Henna marketable to the consumer. The Henna can also not be considered as an Ayurvedic medicaments as it is not made under an Ayurvedic licence nor is commercially known as such. In this context, the learned Chief Departmental Representative cited the case law reported in STC (47) 1981 = 1980(11)LCX0021 Eq 1993 (067) ELT 0034 (S.C.) - Chowgule & Co. Pvt. Ltd. and Another v. Union of India and Others to say that any process of commodity as preparation for making it marketable would amount to manufacturing processes. The learned Chief Departmental Representative also relied upon the case reported in STC (14) 1963 Allahabad - Badri Prasad Prabha Shanker and Another v. Sales Tax Commissioner, U.P., Lucknow holding that the tobacco crushed and sieved is different from tobacco leaves. The learned Chief Departmental Representative also referred to Allahabad High Court decision STC 1977 (39) 420 - Commissioner of Sales Tax v. Har Prasad Ayodhya Prasad to say that Mehndi, being an item for beautification, is cosmetic article. The learned Chief Departmental Representative also cited the case law reported in 1980 (45) STC (Delhi) - Sialkot Trading Company v. The Assistant Commissioner of Sales Tax, 2 Battery Lane, Delhi-7, and Another wherein it was held that medicated hair oil is a toiletry item.
4. In reply, the learned Counsel Shri V. Lakshmikumaran contended that the general definition and its extended uses will have to be within the confines of the statutory provisions. In the first instance it should be shown that the product falls under Heading 33.05 in order to invoke provisions of Chapter Note 4 whereas it is the appellants’ case Henna powder is not at all falling under that heading because it is not a preparation for use on the hair. The learned Counsel further urged that in any event Henna powder in bulk packings will not fall under Heading 33.05 and whether there was any process amounting to a process manufacture in making the Henna powder will have to be then determined in accordance with the general principles laid down to determining what constitutes a process of manufacture. The example of a product called Ayur produced by the Chief Departmental Representative according to the learned Counsel is more in the nature of skin bleaches, whereas their product is not the same. The learned Counsel further submitted that the description of the entries considered by the various High Courts in the case law cited by the learned Chief Departmental Representative was different in scope than in the present case of tariff heading under the CETA, 1985.
5. The submissions made by both the parties herein have been carefully considered. The first point to be determined as whether a process of manufacture is involved in the production of Henna powder and Shikakai powder. It is seen from the records that the appellants collected Henna leaves cleaned by way of removal of sand stones, dust etc. and other foreign matter therefrom mechanically and then it is powdered by means of pulverised/grinding by grinding the leaves into powder. The powder is then mixed thoroughly and then it is packed into unit packings for retail sale as well as gunny bags. In respect of Rose Herbal Shikakai powder which is the other product under consideration, this was produced by mixing powdered Mehandi leaves, Amla, Retha, Shikakai, Keshia, Sandal, Turmeric, Rose, Coffee, Katha, etc. in a fixed ratio and then packed in unit containers as well as gunny bags. The appellants say that the process of making Henna powder and Shikakai powder is only manual and in the case of Henna powder that it is not different in essential character from the leaves from which it is made, and that further in the case of Shikakai powder, there is only a mixing of the various powders which makes it a herbal compound and, therefore, here also no manufacturing process is involved. These submissions have been examined in the light of the decision of the Supreme Court in the case of Empire Industries Ltd. & Others v. Union of India & Others reported in 1985(05)LCX0002 Eq 1985 (020) ELT 0179 (S.C.) which is a decision laying down the principles to be adopted to determine what would constitute manufacture for the purposes of Central Excise. In Para 37 of the decision it has been observed that manufacturing is the transformation of a matter into something else and that something else is a question of degree, whether that something else is a different commercial commodity having its distinct character, use and name and commercially known as such from that point of view is a question depending upon the facts and circumstances of the case. In this context, the Supreme Court referred to the observation in the case of Mcnicol and Another v. Pinch (1906) 2 K.B. 352 relating to the manufacture of saccharin, wherein one of the judges observed “Take the manufacture of wool, it is wool when it is on the sheep’s back; it is wool when it has passed through me process of sorting and picking which it has to go through in the mill. Is not that the manufacture of wool? I should have thought it most certain, although the name ”wool" is applied to it both before the process begins and after it has ended". In Para 41 of the judgment the Supreme Court observed “It was not required that the goods would be manufactured in the sense that raw material should be used, to turn out something altogether different. It would still require that these should be produced in the sense that some human activity and energy should be spent on them and these should be subjected to some processes in order that these might be brought to the state in which they might become fit for consumption”. Applying the above guidelines to the processes in respect of Henna powder, it is seen from the material given that the consumer uses the paste and powder of the leaves vide the extract from the book “Beautiful Shrubs” by Pratibha P. Trivedi which is on record. It is further stated in another publication Henna (Laswonia Intermis Linn) Vanaushishi Visheshant Volume 5, Pages 455 to 457 that the leaves are ground into powder and this powder is sold in the open market as Mehandi. Therefore, by the process adopted by the appellants, the leaves are made into powder which is the state in which Henna powder becomes fit for consumption. Therefore, it is held that there is a process of manufacture involved attracting Central Excise duty. Similarly in the case of Shikakai kesh powder resultant powder is a distinct commodity having a different name use and character from the various raw materials like a Henna powder, Amla, Shikakai, Sandal etc. which go into its making and hence is an excisable commodity.
6. In respect of classification, the Department holds that product is classifiable under heading 33.05 which reads as “Preparation for use on the hair”. Chapter Notes 2 and 4 have also been invoked which are as follows :-
Chapter Note 2 - Heading Nos. 33.03 to 33.07 apply, inter alia, to products, whether or not mixed (other than aqueous distillates and aqueous solutions of essential oils), suitable for use as goods of these headings and put up in packings with labels, literature or other indications that they are for use as cosmetics or toilet preparations or put up in a form clearly specialised to such use and includes products whether or not they contain subsidiary pharmaceutical or antiseptic constituents, or are held out as having subsidiary curative or prophylactic value.
Chapter Note 4 - In relation to products of Heading Nos. 33.03,33.04 and 33.05, conversion of powder into tablets, labelling or relabelling of containers intended for consumers or repacking from bulk packs to retail packs or the adoption of any other treatment to render the products marketable to the consumer, shall be construed as ‘manufacture’.
The herbal Shikakai powder manufactured by the appellants are sold in unit packings with labels which clearly contained indication that they are for use for the hair and make the hair silky, black, smooth and shining. It is clear that such shikakai powder would fall for classification under Heading 33.05 CETA in view of Chapter Note 2 as also Chapter Note 4 of Chapter 33. In respect of this product the appellants have not seriously contested the classification so much as the question that no process of manufacture was involved in the making of it.
7. In respect of Henna powder the Department seeks to classify it under Heading 33.05 CETA, 1985 on the same basis of the above two Chapter Notes, whereas the appellants herein claim classification of the product under Heading 14.01 which covers vegetable plaiting materials; vegetable products not elsewhere specified or included. The appellants have also relied upon Chapter Note 6 to Chapter 33 to say that Henna powder falls outside the purview of Heading 33.05 by applying the principle of Nosciture a Nociis to the interpretation of the Chapter Note 6 of Chapter 33 which reads as follows :-
Chapter Note 6 - Heading No. 33.05 applies, inter alia, to the following products; brilliantines, perfumed hair oils, hair lotions. Pomades and creams, hair dyes (in whatever form), shampoos, whether or not containing soap or organic surface active agents.
Examining this contention, it is seen that Chapter Note 6 clearly indicates the group of products which is covered thereunder and whether Henna powder has any of the aspect or features common to the items in the group will have to be found out by applying the principles of Nosciture a Sociis. A similar exercise, we note, was done by the Tribunal while interpretating Chapter Note 4 of Chapter 4 of the CETA mats decision in the case of Collector of Central Excise v. Frozen Foods Pvt. Ltd., reported in 1991(12)LCX0011 Eq 1992 (059) ELT 0279 (Tribunal) where also the heading was similarly worded using the term inter alia. The Tribunal found that in interpretating the Chapter Note, the principles of Nosciture a Sociis as laid down by the Supreme Court in the case of Rohit Pulp and Paper Mills Ltd. v. Collector of Central Excise, reported in 1990(04)LCX0074 Eq 1990 (047) ELT 0491 (S.C.) can be applied. The products mentioned in Chapter Note 6 are all preparation of a kind used exclusively on the hair. Brilliantine is a cosmetic hair dressing, so also Pomade is a scented ointment for the hair, and the shampoo is usually a liquid or powder preparation for washing the hair. HSN Explanatory Notes under Heading 33.05 also say that preparations applied to hair on parts of the human body other than scalp are excluded, whereas under the HSN Explanatory Note under Heading 14.04 covering vegetable products not elsewhere specified or included, it is stated under a raw vegetable materials of a kind used primarily in dyeing or tanning that such materials may be untreated, dried, ground or powdered and the more important are inter alia given at Serial No. (6) as Stems, Stalks, leaves and flowers: steins, stalks and leaves of woad, sumach, “young fustic”, holly, myrtle, sunflower, henna, reseda, indigo plant: leaves of lentiscus (mastic); flowers of safflower (bastard saffron) and dyer’s greenwood (Genistra tinctoria; woadwaxen). In the Book titled “Textiles Fiber to Fabric - Sixth Edition to Bernard P. Corbman at Page 202 under heading Natural Dyes, Henna is mentioned as one of the principal vegetable dyes. In these circumstances, there is sufficient material to hold that Henna powder in bulk as produced by the appellants herein will be more appropriately classifiable under 14.01 CETA, 1985. However, in respect of Henna powder in unit packings, a perusal of the literature relating to Instructions for use of Red Rose Henna there is a clear indication for its use as a hair dye as follows :-
RED ROSE HENNA FOR HAIR DYE
Open the packet and take powder according to your requirement. Make paste by mixing water, curd, tea or coffee or egg in a bowl. Make paste one hour before its application. It should be applied gently up to the roots of hair. Wash the hair when Henna is fully dried. It is a good hair conditioner. It gives body and texture to hair and dispel heat and have soothing effect.
From the above, it will be evident that Henna powder in such unit packings will be covered by Chapter Notes 2 and 4 of Chapter 33 and hence such Henna powder will fall for classification under Heading 33.05 Central Excise Tariff Act, 1985. In respect of Rose herbal Shikakai Powder, the goods are classifiable under Heading 33.05 Central Excise Tariff Act, 1985. The appeal is disposed of in the above terms.
Equivalent 1993 (67) ELT 907 (Tribunal)