2001(07)LCX0178

IN THE CEGAT, COURT NO. III, NEW DELHI

S/Shri Lajja Ram, Member (T) and S.S. Kang, Member (J)

PESHAWAR SOAP & CHEM. WORKS

Versus

COMMR. OF C. EX., CHANDIGARH

Final Order No. 112/2001-C, dated 30-7-2001 in Appeal No. E/110/2001-C

CASES CITED

Colgate Palmolive (I) Ltd. v. U.O.I. — 1980(01)LCX0012 Eq 1980 (006) ELT 0268 (Bom.) — Relied on........ [Paras 12, 20]

Collector v. K.W.H. Heli Plastics Ltd. — 1998(01)LCX0120 Eq 1998 (097) ELT 0385 (S.C.) — Referred.............. [Para 17]

Collector v. Wood Crafts Products Ltd. — 1995(03)LCX0070 Eq 1995 (077) ELT 0023 (S.C.) — Referred............ [Para 12]

Commissioner of Agricultural Income-tax. v. Plantation Corporation of Kerala Ltd. — 2000 (164) CTR (S.C.) 502 — Referred   [Para 17]

Commissioner v. Bakelite Hylam Ltd. — 1997(03)LCX0041 Eq 1997 (091) ELT 0013 (S.C.) — Referred............... [Para 12]

Commissioner v. Jaya Satya Marine Exports (Pvt.) Ltd. — 2001(05)LCX0139 Eq 2001 (131) ELT 0003 (S.C.) — Referred [Para 16]

Commissioner v. Wood Polymers Ltd. — 1997(12)LCX0034 Eq 1998 (097) ELT 0193 (S.C.) — Referred............ [Para 17]

ESPI Industries & Chemicals Pvt. Ltd. v. Commissioner — 1995(03)LCX0020 Eq 1996 (082) ELT 0444 (S.C.) — Relied on              [Para 19]

ESPI Industries & Chemicals v. Commissioner — 1999(10)LCX0128 Eq 2000 (115) ELT 0081 (Tribunal) — Relied on [Paras 11, 19]

Hindustan Lever Ltd. v. Commissioner — 2000(06)LCX0240 Eq 2000 (121) ELT 0451 (Tribunal) — Relied on [Para 11]

Leukoplast (I) Ltd. v. U.O.I. — 1984(08)LCX0012 Eq 1985 (020) ELT 0070 (Bom.) — Referred..................... [Paras 18, 19]

Oswal Agro Mills Ltd. v. Collector — 1993(04)LCX0046 Eq 1993 (066) ELT 0037 (S.C.) — Relied on................... [Para 11]

Ram Tirth Yogashram v. State of Maharashtra — 1968 (22) S.T.C. 76 — Referred............ [Para 18]

Shree Baidyanath Ayurved Bhawan Ltd. v. Commissioner — 1995(03)LCX0046 Eq 1996 (083) ELT 0492 (S.C.) — Distinguished                [Paras 2, 21]

State of Gujarat v. Prakash Trading Co. — 1972 (30) STC 348 (S.C.) — Relied on............. [Para12]

Subhash Chandra Nishat v. U.O.I. — 1979 (004) ELT J212 (Bom.) — Referred................. [Para 18]

Toshiba Anand v. Collector — 1986(10)LCX0010 Eq 1987 (027) ELT 0187 (Tribunal) — Referred....................... [Para 19]

U.O.I. v. TSR & Company — 1985(03)LCX0063 Eq 1985 (022) ELT 0701 (Mad.) — Referred.............................. [Para 18]

Wipro Ltd. v. Commissioner — 2000(06)LCX0060 Eq 2001 (136) ELT 0885 (Tribunal) — Relied on.................. [Para 11]

Advocated By :   S/Shri V. Lakshmi Kumaran, Advocate, and R. Swaminathan, Consultant, for the Appellant.

Shri K. Swami, Sr. Advocate, for the Respondent.

[Order per : Lajja Ram, Member (T)]. - In this appeal filed by M/s. Peshawar Soap and Chemical Works (hereinafter referred to as ‘M/s. Peshawar’), the matter relates to the classification of the product referred to in the show cause notice, dated 16-12-1999 as Kesh Nikhar branded cake/bar (refer para 1 of the show cause notice). M/s. Peshawar were classifying their product Kesh Nikhar branded cake/bar under sub-heading No. 3401.12 of the Central Excise Tariff as soap in the form of cake/bar. In the said show cause notice, it was proposed that the correct classification of this product was under Heading No. 33.05 of the Tariff, as preparations for use on the hair. The Commissioner of Central Excise (Adjudication), Delhi under her Order-in-Original, dated 18-12-2000 held that the product Kesh Nikhar in the form of a soap merited classification under Heading No. 33.05 (refer para 45.2 of the order). She found justification for invoking the extended period of limitation. The provisions of Section 11AB and Section 11AC of the Central Excise Act, 1944 (hereinafter referred to as the ‘Act’) were found applicable. The following order was passed :-

“ORDER

(I) Duty amounting to Rs. 8,42,17,562/- for the period 1-12-1994 to 30-11-1999 is hereby confirmed under Rule 9 (2) of Rules read with proviso to Section 11A(1) of the Act;

(II) They are also liable under Section 11AC read with Rule 173Q to pay penalty equal to the aforesaid amount of duty evaded by them, which is hereby imposed on them;

(III) They are also liable to pay interest @ 20% under Section 11AB on the aforesaid duty amount demanded till 11-5-2000 and thereafter @ 24% until the date on which it is paid. The amount of interest would be quantified in terms of the aforesaid provision by the jurisdictional Asstt. Commissioner/Deputy Commissioner;

(IV) The noticees are also liable to penal action under Rule 9(2), 52A, and 226 of the Rules. Accordingly, I impose a penalty of Rs. 2,000/- (Rupees two thousand only) under Rule 9(2), Rs. 2,00,00,000/- (Rupees two crore only) under Rule 52A(8) and Rs. 2,000/- (Rupees two thousand only) under Rule 226 of the Rules;

(V) Although plant, machinery used in the manufacture of the offended goods is liable to confiscation, I do not confiscate the same, as the ends of justice will be met by the aforesaid penal action.”

2. The matter was heard on 3-7-2001 when Shri V. Lakshmi Kumaran, Advocate with Shri R. Swaminathan, Consultant appeared for M/s. Peshawar. Shri K. Swami, Sr. Advocate, represented the Revenue.

Shri V. Lakshmi Kumaran, Advocate, submitted that the appellants were producing the same product for a number of years since 1935 and at no stage, there had been any dispute about the identity of the product as a soap. At no stage, no one has treated this product as shampoo. In the Central Excise Tariff, soap and shampoo were classifiable differently and there could be no confusion what was a soap and what was a shampoo. Dealing with the scheme of the Tariff, he stated that all varieties of soaps, which were soluble in water were covered by Heading No. 34.01. Soaps were specifically excluded from the description under Heading No. 33.05. He referred to the process of manufacture on record and relied upon the report of the Chemical Examiner to plead that the Kesh Nikhar soap could not be treated as a shampoo. The way the product was advertised could not be the sole basis for classification. There were no justification for invoking the extended period of limitation.

In reply, Shri K. Swami, Sr. Advocate, submitted that the product was exclusively for use on the hair. It was a bath preparation containing soap exclusively meant for use on the hair. As the product was exclusively meant for use on the hair, the form whether it was in the form of a cake or liquid was not relevant. He referred to the process of manufacture of a soap as discussed in the show cause notice and submitted that the process adopted in the manufacture of Kesh Nikhar was different than the process of manufacture for the soap. As the product was used as a shampoo, its classification under Heading No. 33.05 was appropriate. For the product the description under Heading No. 33.05 was more specific. The ld. Sr. Advocate referred to the statements of users, traders and experts and submitted that they were of no relevance in the light of a clear finding that the product in question was a shampoo though in the form of soap. He relied upon the Supreme Court’s decision in the case of Shree Baidyanath Ayurved Bhawan Ltd. v. Commissioner of Central Excise, Nagpur - 1995(03)LCX0046 Eq 1996 (083) ELT 0492 (S.C.).

Both the sides referred to the case law in support of their respective arguments.

3. We have carefully considered the matter.

The issue for our consideration is the classification of the product Kesh Nikhar branded cake/bar manufactured by M/s. Peshawar. M/s. Peshawar were classifying their product under sub-heading No. 3401.12 of the Central Excise Tariff. Heading No. 34.01 covered the following :-

Sub-heading No. 3401.12 covered the soap in or in relation to the manufacture of which, no process has been carried on with the aid of power or of steam. The Commissioner of Central Excise (Adjudication), Delhi who adjudicated this matter had concluded that the product in question merited classification under Heading No. 33.05 of the Central Excise Tariff. Under Heading No. 33.05 of the Central Excise Tariff, “preparations for use on the hair” were classifiable.

4. The product Kesh Nikhar was in the form of cake/bar, and there is no dispute on this account. In para 1 of the show cause notice, the product has been mentioned as Kesh Nikhar branded cake/bar. In other paras of the show cause notice, the goods have been described as (i) a bath preparation containing soap exclusively meant for use on the hair (refer para 3.0), (ii) a poor man’s shampoo - (refer para 3.3.4), and (iii) preparation for hair application - (para 6).

The appellants have described their product as a soap manufactured without the use of power. They had taken a stand that their product was for cleaning of both the body and the hair (refer para F.6 of Reply, dated 21-4-2000 to the show cause notice). In para B-2 of their reply, they had stated that the Kesh Nikhar toilet soap manufactured by them without using power did not contain any ingredient which would make it as a special product for the treatment of hair. It did not contain any hair colouring substance, hair dye, or any hair conditioning material. It did not contain any additives like shikakai, amla, henna, etc. Their product was based on soap and it did not contain any detergent or surfactant or chelating agent or preservatives or emollients or thickening agents. It has no undissolvable material. It was soluble in water. When it is dissolved in water, no sedimentation was formed. (refer para B.2 of the reply).

5. The goods in question were packed and labelled as Kesh Nikhar soap. Kesh Nikhar was a registered trade mark of M/s. Peshawar. M/s. Peshawar were registered with the Central Excise Department as manufacturer of soap (refer page 1 of the paper book). In the classification list, the product was declared as a toilet soap. (refer pages 2, 6 and 8 of the paper book). According to the District Industries Centre, Patiala, it was a soap. (refer page 3 of the paper book). According to the Test Memo, dated 1-7-1999 of the Chemical Examiner, Central Revenue Control Laboratory, sample of one cake of 100 gms. drawn on 16-6-1999 drawn for the purpose of ascertaining the ingredients was analysed with the following results :-

“The sample is in unit container.

The sample is a Octahedral cake of greyish blue colour. It is composed of soap, with colouring matter and perfumery compound. It conforms to the requirements for toilet soap as per I.S. 2888 - 1983. TFM 75.1%.”

6. In the various statements annexed with the show cause notice, the product has been identified as a soap which could be used both on the body and on the hair. It has been explained that for marketing the product, its use on the hair was highlighted. It is seen from the statement, dated 10-6-1991 of Shri Bharat Bhushan, Authorised Signatory that M/s. Peshawar were regularly filing their declaration claiming exemption from the payment of Central Excise duty as the goods were produced without the aid of power. Shri Om Prakash Sethi, a trader has stated that common people know about Kesh Nikhar soap as a bathing soap and it could be used as a shikakai soap. Shri Om Prakash Khandelwal, trader had stated that poor customers, who could not afford shampoo were using the soap like Kesh Nikhar soap. Nowhere the product has been referred to as a shampoo. For marketing the product, its hair washing qualities were highlighted although the witnesses had clarified that it was a bathing soap. For common consumers it was a soap for cleaning the body which had special application on the hair.

7. The adjudicating authority had not disputed that the Kesh Nikhar was in the form of soap (refer para 38 of the order), but put up the case of the Department as this being a product shampoo in cake form (para 34 of the order). In para 45 of the order, the ld. Commissioner had concluded that the product in question was a shampoo though in the form of a soap (refer para 45 of the order).

8. Under the scheme of the Central Excise Tariff, soap in any form was classifiable under Heading No. 34.01. Soap could be in the form of bars, cakes, moulded pieces, or shapes, or the soap could be in liquid form. In Heading No. 34.01, the soap is described independently as against organic surface active products and preparations for use as soap, which were classifiable under Heading No. 34.01, when they were in the form of bars, cakes, moulded pieces or shapes.

9. According to the Harmonised Commodity Description and Coding System (also referred to as Harmonised System of Nomenclature) (HSN), Explanatory Notes at page 482, there are three categories of soaps :-

Hard Soaps, which are usually made with Sodium Hydroxide or Sodium Carbonate and comprise the bulk of the ordinary soaps. They may be white, coloured or mottled.

Soft soaps, which are made with Potassium Hydroxide or Potassium Carbonate. They are viscous and generally green, brown or pale yellow in colour. They may contain small quantities (generally not exceeding 5%) of synthetic organic surface-active products.

Liquid soaps, which are solutions of soap in water, in some cases with a small quantity (generally not exceeding 5%) of alcohol or glycerol added, but not containing synthetic organic surface-active products.

It is explained at page 483 that the soap of this Heading are generally in the form of bars, cakes, moulded pieces, or shapes, flakes, powder, paste or aqueous solution.

10. It is an admitted position and there is no dispute in this regard that the product Kesh Nikhar that is before us for consideration was in the form of cake/bar. The issue for consideration is whether such a product could be classified under Heading No. 33.05 that covered preparations for use on the hair. Under Heading No. 33.05, two products - perfumed hair oil (sub-heading No. 3305.10), and hair fixer (sub-heading No. 3305.91) have been specifically described. Further, under Chapter Note 6 under Chapter 33, other products like brilliantines, hair lotions, pomades and creams, hair dyes (in whatever form), shampoos, whether or not containing soap or organic surface-active agents, were covered under Heading No. 33.05. None of the products specifically covered under sub-heading No. 3305.10 and sub-heading No. 3305.91 and the products mentioned in Chapter Note 6 under Chapter 33 appears to be akin to the product Kesh Nikhar in the form of cake/bar.

Under Note 1(C) under Chapter 34, shampoos, dentifrices, shaving creams and foams, or bath preparations, containing soap or other organic surface-active agents, have been specifically excluded from the coverage under Chapter 34. Such products were classifiable under Chapter 33.

When we come to Chapter 33, we find that the very first Chapter Note I under Clause (b) provides for the exclusion of soap or other products of Heading No. 34.01 from the coverage under Chapter 33. In other words, if the products are covered by the description under Heading No. 34.01 then their classification under Chapter 33 was excluded. In the Scheme of the Tariff, thus, so far as soap or other products of Heading No. 34.01 were concerned, this Heading No. 34.01 will have a precedence over any heading under Chapter 33 of the Tariff. Thus, Kesh Nikhar, which has been admitted by the adjudicating authority as in the form of soap (refer para 38 of the order) could not be brought for classification under Chapter 33 of the Tariff.

11. In the HSN Explanatory Notes, at page 476, the scope of Heading No. 33.05 - preparations for use on the hair, has been explained as to cover (i) shampoos, (ii) preparations for permanent waving or straightening, (iii) hair lacquers and (iv) other. The scope of ‘other’ has been explained as under :-

“Other hair preparations such as brilliantines; hair oils, creams (“pomades”) and dressing; hair dyes and bleaches used on the hair; cream-rinses.”

The product Kesh Nikhar in the form of soap/cake/bar could not be compared with any of the products named for classification under Heading No. 33.05.

At this stage, we may refer to the two decisions of this Tribunal in the case of (i) Hindustan Lever Ltd. v. CCE, Mumbai - 2000(06)LCX0240 Eq 2000 (121) ELT 0451 (Tribunal) and (ii) Wipro Ltd. and Panchajanya Enterprises v. CCE, Bangalore - 2000(06)LCX0060 Eq 2001 (136) ELT 0885 (Tribunal) = 2000 (092) ECR 0410 (Tribunal).

In the case of Hindustan Lever Ltd., the matter related to the classification of the product - Dove 100 gms. In para 10, the Tribunal observed that the moment any product comes within Chapter 34.01, it goes out of Chapter 33 in view of Chapter Note 1(b) under Chapter 33.

In the case of Wipro Ltd., the matter related to the classification of the product - Santoor toilet soap and the question for consideration was whether they were bathing bar classifiable under sub-heading No. 3307.39, or were classifiable as soap under Heading No. 34.01 - sub-heading No. 3401.19. The Tribunal in para 36 observed that the Total Fatty Material (TFM) content was not the basis for classification, and the reference was made in para 37 to the Supreme Court’s decision in the case of Oswal Agro Mills Ltd. v. CCE - 1993(04)LCX0046 Eq 1993 (066) ELT 0037 (S.C.), wherein the Apex Court had observed that the individual preference, choice or taste for a particular soap for bathing purposes was not relevant. The Tribunal concluded that the soap whether it was a toilet soap or a non-toilet soap both continued to fall under Chapter 34.

We may also refer to the Tribunal’s decision in the case of ESPI Industries and Chemicals v. Commissioner of Central Excise, Hyderabad - 1999(10)LCX0128 Eq 2000 (115) ELT 0081 (T) = 2000 (036) RLT 0411 (Tribunal). The Tribunal in para 11 observed that Chapter 33 does not cover soap, as Chapter Note 1(b) of Chapter 33 specifically excludes soap or other products of Heading No. 34.01.

12. The adjudicating authority had concluded that the product in question was a shampoo though in the form of a soap (refer para 45 of the order). In common parlance, shampoo is a viscous, liquid with agreeable fragrance. It lathers well and had cleansing property. It cleans, disinfects hair and controls dandruff. The term ‘shampooing’ refers to the viscous, liquid character of the shampoo. According to the Oxford Dictionary, ‘Shampoo’ is a cleansing preparation for the hair usually in liquid or cream form to be rubbed into the scalp or worked into the hair. According to the Kirk-Othmer Concise Encyclopedia of Chemical Technology - Page 326, soap shampoos are primarily aqueous solutions of soft soap, combined with preservatives, sequestrants, colour and perfume. Soapless shampoos are primarily aqueous solutions of sulfonated oils. According to IS 7669 - 1990, Shampoo shall be in liquid form, should be clear and free from sediment.

In the Kirk-Othmer Encyclopedia of Chemical Technology - 3rd Edition at Pages 163-165, different types of shampoos are described as under :-

“Hair Preparations

Shampoos. Present day shampoos usually contain a primary detergent which can be a fatty alcohol sulfate, ether sulfate, sarcosinate, or one of many other anionics (see Hair preparations; Surfactants). The primary detergent can also be amphoteric or non-ionic. The secondary, or auxiliary, detergent is usually an alkanolamide, which controls the viscosity of the product and increases the quality and volume of the foam (33-39).

Soap Shampoo. Soap shampoos do not cleanse well in hard water areas. They are primarily aqueous solutions of soft soap combined with preservatives, sequestrants, color, and perfume.

Soapless Shampoo. Soapless shampoos are primarily based on aqueous solutions of sulfonated oils such as sulfonated castor oil and sulfonated olive oil combined with preservatives, color, and perfume.

Low pH Shampoos. Unlike many of the properties ascribed to shampoos, such as foaming, cleansing, luster, and manageability, pH is an intangible in that it cannot be observed or demonstrated during product usage, and the effects of low pH are not obvious to the user. It has been reported that mild aqueous acids cause anti-swelling action on the cuticle scales of the hair. As the cuticle tightens, the hair gains luster because light is more efficiently reflected from the surface of the hair shaft. In the absence of external charges hair shows its highest strength and resiliency at pH 4.0-6.0. Some surfactants do not perform well in an acid medium. Fatty alcohol sulfates hydrolyze rapidly and decompose below pH 4.0. Alkanolamides generally react in a similar manner. However, combinations of triethanolamine, and sodium and ammonium lauryl sulfates with amine oxides can be adjusted to low pH with good stability. Examples of clear, stable shampoo formulations adjusted to pH 4.0 are: 54.0 wt % water; 40.0 wt % ammonium lauryl sulfate (30% solution); 6.0 wt % cocamidopropylamine oxide (30% solution); and qs (as needed) preservative, color, perfume, acid, etc.

Amphoteric Shampoos. Amphoteric surfactants are generally assumed to be less irritating to the eyes than other detergent or soap preparations. They are usually low foam materials, and it is customary to combine them with anionic surfactants. Amphoteric shampoos are based on the use of imidazoline, betaine, and sulfobetaine surfactants. Amphoteric-base shampoos are difficult to thicken and difficult to opacify. Amphoterics can be blended with equal parts of either high foaming anionic lauryl sulfates or the sulfo-succinate half esters. Amine oxides can also be used instead of the more irritating alkanolamides. The keratin substantivity of the betaine amphoterics is greatest at pH 5.5-6.5. The following shampoo formula, which has been adjusted to a pH of 5.8, illustrates the use of amphoterics: 17.0 wt % ammonium lauryl sulfate; 6.0 wt % Monomate CPA-40 (sulfo-succinate half ester); 2.0 wt % Monateric ISA-35 (isostearic imidazoline); and qs perfume, preservative, color, and water.

Dandruff Shampoos. Dandruff is the product of hyperkeratinization. The rate of keratinization has increased to the point that the scales become more visible. There are no known differences in the incidence of dandruff in men and women or among races. Dandruff shampoos contain ingredients that effectively control dandruff by allowing a normal turnover rate of epidermal cells. Ingredients used in some anti-dandruff shampoos are coal tar, quaternary ammonium compounds, resorcinol, salicylic acid, selenium sulfide, sulfur, undecylenic acid and derivatives and zinc pyrithione (zinc 2-mercaptopyridine 1-oxide: zinc omadine). Selenium sulfide and zinc pyrithione are cytostatic (reduce epidermal cell turnover rate). Zinc pyrithione is strongly adsorbed by the hair, with adsorption related to concentration, pH, temperature, product formulation, and time of exposure. Since these are medicated shampoos, formulations should be non-irritating and non-sensitizing.

A typical lotion cream shampoo is: 47.0 wt % distilled or deionized water; 42.1 wt % sodium lauryl sulfate, 28 % active; 4.0 wt % ethylene glycol monostearate; 3.0 wt % coconut fatty acid diethanolamide; 3.0 wt % propylene glycol; 0.5 wt % perfume; and 0.4 wt % preservative.

A typical clear liquid shampoo is: 50.0 wt % triethanolamine lauryl sulfate, 65% active; 27.6 wt % distilled or deionized water: 10.0 wt % propylene glycol; 5.0 wt % lauric acid diethanolamide; 4.0 wt % myristic acid; 2.0 wt % oleyl alcohol; 0.8 wt % perfume; 0.4 wt % preservative; 0.1 wt % citric acid; and 0.1 wt % sequesterant Na₂.

A typical viscous liquid shampoo is: 60.0 wt % triethanolamine lauryl sulfate, 38% active; 21.1 wt % distilled or deionized water; 3.0 wt% myristic acid; 2.0 wt % oleyl alcohol; 2.0 wt% propylene glycol; 1.0 wt % perfume; 0.5 wt % poly(vinylpyrrolidinone) K-30; and 0.4 wt % preservative.

A typical anti-dandruff shampoo is: 65.3 wt % water; 25.5 wt % sodium lauryl sulfate; 5.0 wt % stearic acid; 2.1 wt % lauramine oxide: 1.0 wt % zinc pyrithione powder; 0.7 wt % sodium hydroxide pellets; 0.4 wt % sodium chloride; plus preservative, color, and perfume.”

In the case of Colgate Palmolive (I) Ltd. v. Union of India & Ors. - 1980(01)LCX0012 Eq 1980 (006) ELT 0268 (Bombay), the petitioners contention before the appellate authority was that the shampoo was not known commercially as soap. The High Court rejected the argument of the Revenue that shampoo was also a kind of soap. The High Court observed in para 15 - “If a person were asked for soap from a shopkeeper and instead was given shaving cream or shampoo, it would require no great degree of intelligence and common sense on the part of the person making the purchase to reject outright what the shopkeeper offered him in the place of soap.” Paras 17 and 18 from that decision are extracted below :-

“17. Thus, Mr. Setalvad is correct when he says that the petitioner’s shaving cream and shampoo not known commercially as “soap” and not having been established by the Department to be known commercially as “soap”, do not attract duty under Item 15. To the extent that Mr. Dalal says that the basic component of the petitioner’s shampoo is soap, Mr. Dalal is correct because for the preparation of its shampoo the petitioner added water, perfume and colour to the liquid soap purchased by it. Surely that does not make shampoo to be known commercially as “soap”. If it is not so known and has not been established by the Department to be so known, that is the end of the matter and Item 15 cannot be attracted.

18. Mr. Dalal, however, relied on the decision of the Supreme Court in State of Gujarat v. Prakash Trading Co., (1972) 30 Sales Tax Cases 348, where it was held that shampoo is a kind of liquid soap and has all the essential ingredients of a soap. That decision can be of no assistance to the respondents before me. In that case the question was whether shampoo fell within Entry 28 of Schedule C to the Sales Tax Act. That entry pertains to soaps. On a construction of that entry, the Supreme Court held that shampoo being a kind of liquid soap and having all the essential ingredients of a soap fell within that particular entry. However, the distinction in that matter and in the matter before me is that while Entry 28 in the Sales Tax Act merely referred to soap, Entry 15 before me goes a step further and defines soap as meaning “all varieties of the product known commercially as soap”. Thus the question of the product being commercially known as “soap” was not before the Supreme Court while construing Entry 28 of the Sales Tax Act.”

In the case of State of Gujarat v. Prakash Trading Company - 1972 (30) STC 348 (S.C.), the respondents in that case had urged before the Dy. Commissioner Sales Tax that their product Palmolive Shampoo was a kind of liquid soap for the purposes of Bombay Sales Tax Act, 1959 as amended by the Gujarat Act No. 25 of 1962. The Hon’ble Supreme Court agreed with the Gujarat High Court that shampoo was a kind of liquid soap. They, however, distinguished the shampoo from the soap in the form of a cake. According to this decision, while shampoo for the purposes of Bombay Sales Tax Act, 1959 was a kind of liquid soap in terms of the entries in Schedules C and E of that Act of 1959, it was different from the soap in the form of a cake. Soap in the form of a cake was not the same as shampoo, which for the above purposes was a kind of a liquid soap.

In the Central Excise Tariff, soap including liquid soap on the one hand, and the shampoo on the other hand, had been separately described and classified. Thus, while shampoo may be a kind of a liquid soap, but as a separate classification has been made for soap including liquid soap, for the purposes of classification under the Central Excise Tariff, shampoo could not be classified as a soap, and the soap could not be classified similarly as shampoo. In no case, a soap in the form of cake/bar could be considered as a shampoo as shampoo in common parlance is not a product in the form of cake/bar.

The scope of Tariff entries has to be determined with reference to Chapter Notes, Section Notes and the Rules of Interpretation. In the case of Commissioner of Central Excise, Hyderabad v. Bakelite Hylam Ltd. - 1997(03)LCX0041 Eq 1997 (091) ELT 0013 (S.C.) = 1997 (069) ECR 0193 (S.C.), the Hon’ble Supreme Court had held in para 17 that for the interpretation of the present CET, Harmonised System of Nomenclature and its explanatory notes were relevant. After making a reference to the Commissioner of Central Excise, Shillong v. Wood Crafts Products Ltd. - 1995(03)LCX0070 Eq 1995 (077) ELT 0023 (S.C.) = 1995 (3) SCC 452, it was added by the Apex Court that for resolving any dispute relating to Tariff classification the internationally accepted nomenclature emerging from the HSN is a safe guide, this being the expressly acknowledged basis of the structure of the present Central Excise Tariff, and the Tariff classification made therein, and that in case of any doubt, the HSN is a safe guide for ascertaining the true meaning of any expression used in the Act. In para 18, it was provided as under :-

“18. In addition the New Tariff Act has specifically laid down Rules of Interpretation which govern the interpretation of various entries in it. Each chapter in the New Tariff Act further contains its own notes which are relevant for the interpretation of entries forming part of that chapter.”

13. In view of the above discussion the product - Kesh Nikhar soap in the form of a cake/bar could not be considered as shampoo for the purposes of Central Excise Tariff.

14. The product in question is in the form of a soap and it is too obvious to be disputed. The show cause notice has referred to the product as cake/bar (refer para 1 of the show cause notice). The adjudicating authority has admitted that the product was in the form of soap (para 38 of the order). According to IS 2888 - 1983 read with IS 7597 - 1974, toilet soap shall be thoroughly saponified soap of firm and smooth texture. It shall be white or coloured and perfumed. The essential requirement of toilet soap are good cleaning and lathering properties. The Total Fatty Matter (TFM) in grade 3 soaps was to be 60% by mass, minimum. In the product Kesh Nikhar, the TFM was 65% and above.

According to the appellants, their product Kesh Nikhar soap is manufactured by the process known as cold process saponification. At pages 77-78 of the paper book, the process of manufacture is explained as under :-

“We are engaged in the manufacture of Kesh Nikhar toilet soap without the use of power for the past more than 65 years. Kesh Nikhar soap is manufactured by the process known as cold process saponification. The process of manufacture is carried on without the aid of power. It is the simplest of batch saponification procedures and requires a minimum of equipments. Since neither nigre nor lye are separated, the glycerol and impurities from the fats remain in the soap. The oils are put in a vessel and manual stirring is done and the calculated amount of caustic solution is added with vigorous manual stirring. After emulsification and thickening, colour and perfume are added at the stage and the mass is poured in the frames where saponification is completed during cooling and solidification. The soap blocks are removed from the moulds and the blocks are cut into slabs and slabs are further cut into bars and cakes. The process of manufacture of Kesh Nikhar toilet soap is without using power.”

In the publication, Soap, Detergent and Perfume Industry published by the Small Industry Research Institute, the cold process saponification is described at page 129 of the paper book as under :-

“Coconut oil is the most suitable oil for this process since it saponifies quickly and can take up an appreciable quantity of fillers. In this process a cylindrical or rectangular and flat-bottomed pan is used to carry out the reaction. Crutcher may also be used, but it is more expensive. The mixture of oils is taken in this vessel. The oil mixture taken in the pan may be heated to bring it into a fluid condition (Temperature of the mixture is kept at 40°-45° C). Now alkali solution (36 - 38° Be) is slowly added to the mixture with continuous stirring of mass. The mixture spontaneously heats up. It starts thickening up as the alkali is added at this stage and mixture is uniformly mixed. The hot mass is poured into cooling frames before it becomes too viscous.”

According to the publication, Household Detergents and Industrial Surfactants published by Small Business Publications, soaps whether laundry or toilet soap must wash well; they must produce lather, which is profuse and at the same time fairly stable, they must not wear out too soon and they must keep well i.e. they should not get discoloured, crack, sweat or shrink. The toilet soap should have a firm texture than the laundry soap and should be mild in action i.e. they should not irritate the skin. These properties must not vary considerably use with temperature, quality of water, and manner of scrubbing.

15. The product Kesh Nikhar soap meets these requirements and for the purposes of Central Excise Tariff, is a soap.

16. The adjudicating authority had claimed to decide the classification of the product in question as a shampoo on the basis of common parlance test. In para 52 of her order, the adjudicating authority had stated that the principle of common trade parlance has been applied in this case to classify the product in question as a shampoo. We, however, do not find any facts on record to justify the statement that in common trade parlance, the product in question was known as shampoo. On the other hand, there is a good deal of material to affirm the proposition that those who were dealing in the product in question and were using it, were trading in it or otherwise were concerned with the product, were treating it as a soap, and not as a shampoo. The use of soap on the hair will not make it a shampoo as shampoo has different understanding for the users and the dealers. The goods in question were marketed as soap Kesh Nikhar soap. There is no doubt that the product was in the form of cake/bar.

The evidence placed on record is of the users, traders and experts. Among the users at page 156 of the paper book, one Shri Vipin Kumar, has stated that he had been using Kesh Nikhar soap for bath purposes as also for cleaning hands and face and not only for washing the hair (head). At page 158 of the paper book, one Shri R. Sharma had submitted that he and his members of the family were using Kesh Nikhar soap, which was good not only for washing hair but also for bathing purposes. At page 163 of the paper book, one Shri Narendra Kumar had stated that he had been using Kesh Nikhar soap for bathing and washing hands and face for a long time and that it was not that the soap was being used only for washing the hair.

Among the traders, there are statements at pages 150, 152, 154, 164, 165 and 166 of the paper book where they have testified that the soap was used on the body as well as on the head and was being sold like any other toilet soap.

As regards the experts, there is a report at page 201 of the paper book prepared by Dr. (Mrs.) Sheela Kulkarni, Head of the Department of Cosmetic Technology. According to this Technical Report, the product was toilet soap and not shampoo. According to the report of Dr. (Mrs.) Sheela Kulkarni, shampoo was to be in liquid form. The soap based shampoo also could not lead to formulation of cake. In para 3 of her report, ready reference has been made to different forms of shampoo and it has been stated as under :-

“As per available data Shampoos are available in following forms :-

(a) Clear liquid hair shampoo

(b) Liquid cream or cream lotion shampoo

(c) Cream based shampoo

(d) Egg shampoo

(e) Herbal shampoo

(f) Dry (Powder) shampoo

(g) Colour shampoo, and

(h) Aerosol shampoo

Till date, no literature/information/data is available where shampoo in the cake form is reported.”

She has referred to the different characteristics of the product, specification for shampoo and specification for toilet soap and had offered her remarks after making observations of the product in question.

Dr. D.N. Bhowmick, Professor of Oil Technology, University Department of Chemical Technology (UDCT), Bombay, had also stated that the product was a toilet soap and it meets all the specification for the same as prescribed by the Bureau of Indian Standards. He has concluded at page 199 of the paper book that the product could not be termed as a shampoo.

Although in a different context, the Delhi High Court while dealing with the issue regarding trade mark had referred to the product in their judgment at several places as a soap and as bathing soap. Reference may be made to paras 21, 30, 31, 36 and 39 of the Delhi High Court’s decision at pages 176, 177 and 185 of the paper book. If the goods are assessed as a shampoo, then the decision of the High Court in favour of M/s. Peshawar will be rendered infructuous as the decision in favour of M/s. Peshawar was only for soap. It will have serious repercussions on the business. We may also refer to the Supreme Court’s decision in the case of Commissioner of Customs v. M/s. Jaya Satya Marine Exports (Pvt.) Ltd. - 2001(05)LCX0139 Eq 2001 (131) ELT 0003 (S.C.), wherein Apex Court had ruled that judicial notice of the fact as to how goods are known in the common parlance cannot be taken if there is no evidence before the Court. (Head Note) Para-7 from that decision is extracted below :-

“7. It is not disputed that, let alone sufficient evidence, there was no evidence whatever before the High Court on the basis of which it could come to the conclusion that prawns and shrimps were not “fish” in common parlance. All that has been repeatedly stated in the judgment is exemplified by this sentence : “There can be no gain saying that judicial notice can be taken of a fact that a common man treat fish and prawns as two different articles ...” We are unable to take such judicial notice.”

17. The adjudicating authority in para 33.1 of her order had referred to the Rules for the Interpretation of the Tariff to make a point that the Heading No. 33.05 of the Tariff provided the most specific description to the goods in question and that Heading No. 33.05 was to be preferred to Heading No. 34.01 providing for a more general description. We do not consider that the Heading No. 34.01 provides for more general description vis-a-vis the Heading No. 33.05 in so far as the goods in question are concerned. In fact, ‘soap’ is a more specific description than the description under Heading No. 33.05, which covered the preparations for use on the hair. Rule 3 of the Rules for the Interpretation of the Tariff could be applied only when the goods were prima facie classifiable under two or more headings, (refer Commissioner of Central Excise v. Wood Polymers Ltd. - 1997(12)LCX0034 Eq 1998 (097) ELT 0193 (S.C.). We do not find such a case here.

So long as there is no ambiguity in the statutory language, resort to any interpretative process to unfold the legislative intent becomes impermissible. Need for interpretation arises only when the words in the statute are on their own terms ambivalent and do not manifest the intention of legislature. (refer Commissioner of Agricultural Income-tax v. Plantation Corporation of Kerala Ltd. - 2000 (164) CTR (S.C.) 502.

In the case of Commissioner of Central Excise, Bombay v. K.W.H Heli Plastics Ltd. - 1998(01)LCX0120 Eq 1998 (097) ELT 0385 (S.C.) = 1998 (024) RLT 0453 (S.C.), it was held by the Apex Court in para 7 that the relationship of the goods with particular heading depends upon the description, purpose, and use of the goods. In para 6, it was noted that Rule 4 of the rules of interpretation provided that the goods which cannot be classified in accordance with Rules 1, 2 and 3 of the Rules of Interpretation, should be classified under heading appropriate to the goods to which they are most akin.

In the present case, we find that there is no ambiguity in the statutory language read with the Chapter Notes. These are adequate to precisely determine the coverage of the relevant tariff entries. There is no need to resort to any interpretation process, beyond the language of the entries when read with the relevant Chapter Notes.

18. Classification of a product could not be determined on the basis of certain characteristics of a product highlighted in its advertisement. The nature of the product and its description in the relevant Tariff Entry, have to form the basis of classification. It has been held by the Bombay High Court in Ram Tirth Yogashram v. State of Maharashtra - 1968 (22) STC 76 (Bombay) that the mode in which a person may choose to advertise his commodity cannot be decisive in determining its real nature (refer para 5 of Union of India v. TSR & Company - 1985(03)LCX0063 Eq 1985 (022) ELT 0701 (Madras).

In the case of Subhash Chandra Nishad v. Union of India - 1979 (004) ELT J 212 (Bombay), the Bombay High Court had observed in para 10 of their judgement “it is usual for an advertiser of products to claim all possible virtues for his products, but it would be erroneous to rely on all these claims to determine the trade use of the products.

In the case of Leukoplast (I) Pvt. Ltd. v. Union of India - 1984(08)LCX0012 Eq 1985 (020) ELT 0070 (Bombay), the Bombay High Court had held in para 12 as under :-

“12. .... However, it may be pointed out that for the purposes of classification for levy, the advertisements are of no value or help. Advertisements are published by the manufacturers of a product in order to attract consumers and have nothing to do with the classification of the same product for levying of duty. This Court dealing with such contention has held, inter alia, in the case of Blue Star Ltd. v. Union of India and another - 1980 (006) ELT 280 that payment of duty under a particular Tariff Item must depend upon the facts of the case and not on the advertisement gimmick of the advertiser. The same view was also taken in Subhash Chandra Nishat v. Union of India and another - 1979 (004) ELT (J 212) (Bom.), and by a Division Bench of the Kerala High Court in the case of The Dy. Commissioner of Agricultural Income-tax and Sales Tax (Law) Board of Revenue (Taxes), Ernakulam v. Union Carbide India Ltd., Madras-2, 1976 Sales Tax Cases (Vol. 38), Page 198.”

19. Reference may also be made to the Supreme Court’s decision in the case of ESPI Industries and Chemicals Pvt. Ltd. v. Commissioner of Central Excise, Hyderabad - 1995(03)LCX0020 Eq 1996 (082) ELT 0444 (S.C.). The Hon’ble Supreme Court had observed that the manner in which a product is described for marketing cannot be the sole guide for classification. In para 2 the Apex Court observed, “the mere fact that it (oil of olay) is also described as a beauty cream does not necessarily exclude it from being a barrier cream”.

In the Tribunal’s decision in the case of ESPI Industries and Chemicals v. CCE - 1999(10)LCX0128 Eq 2000 (115) ELT 0081 (T) = 2000 (036) RLT 0411 (CEGAT), in para-10, the Tribunal while dealing with the classification of the product - Clearasil daily soap wash in liquid form gave a finding that the reliance placed on the product literature has to be held impermissible in the light of the decision in the cases of (1) Toshiba Anand v. CCE - 1986(10)LCX0010 Eq 1987 (027) ELT 0187 (Tribunal) and (2) Leukoplast v. Union of India - 1984(08)LCX0012 Eq 1985 (020) ELT 0070 (Bombay).

20. On limitation also, we find that the appellants have a good case. It is seen from the material on record that the product Kesh Nikhar was being produced; marketed and sold by the appellants since 1935 and at no stage, prior to the issue of present show cause notice, dated 16-12-1999, it was held by the Revenue to be a shampoo. Excise duty was levied on shampoo w.e.f. 1-3-1954 under Item No. 15 of the erstwhile Central Excise Tariff. Cosmetics and toilet preparations were added to the Tariff w.e.f. 1-3-1961 under Item No. 14F of the said Tariff. With effect from 1-3-1971 “shampoos whether or not containing soap or detergent” were added as item No. (ii)(c) to Item No. 14(F) under the Heading Cosmetics and Toilet Preparations. Item No. 15, however remained the same as under :-

“Soap means ail varieties of the product known commercially as soap -

I.          Soap in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power or of steam for heating

(i) Soap household and laundry.

(ii) Other sorts.

II.         Soap in or in relation to the manufacture of which no process has been carried on with the aid of power or of steam for heating.

(refer para 12 and para 13 of the Colgate Palmolive (I) Ltd. v. Union of India - 1980(01)LCX0012 Eq 1980 (006) ELT 0268 (Bombay).

In reply to the show cause notice, the appellants had referred to their registration certificate, classification lists, registration from State Industries Department and exchange of correspondence with the Deptt. in the year 1994-95 when for a short duration from 4-3-1994 to 9-5-1994, duty was levied on the product of the appellants. They had explained the process of manufacture when they filed their classification lists. They have also described the various ingredients. Reference could be made to the appellants’ communication, dated 4-5-1994 addressed to the Asstt. Collector of Central Excise, at Page 4 of the paper book and the communication from the Superintendent of Central Excise dated 30-3-1995 at Page 10 of the paper book wherein, it has been intimated by the Deptt. to the appellants that their registration certificate stood cancelled and that their refund claim was being forwarded to the Asstt. Collector’s office after due verification.

All this will indicate that there is no justification for invoking the extended period of limitation.

21. The product with which we are concerned in these proceeding is in the form of cake/bar. It is a soap as popularly understood. There is nothing concerning the product that it is a preparation for use on the hair for the purposes of Heading No. 33.05 of the Tariff. It is not akin to any of the products specifically mentioned in the sub-headings of Heading No. 33.05 or the products illustrated in Note 6 of Chapter 33. We have analysed the structure of the Tariff entries under Heading No. 34.01 vis-a-vis Heading No. 33.05. Reference has been made to the statements of users, dealers and technical experts. The conclusions drawn by us are not exclusively based on the statements on record. Thus, the observations of the Supreme Court in the case of Shree Baidyanath Ayurved Bhavan Ltd. v. CCE, Nagpur - 1995(03)LCX0046 Eq 1996 (083) ELT 0492 (S.C.) a case relied upon by the ld. Sr. Advocate appearing for the Revenue are not applicable in this case. Para 3 of the Supreme Court’s decision is extracted below :-

“3 We have heard the learned Counsel at some length. He also invited our attention to the provisions of the Drugs & Cosmetics Act, 1940, the opinion of the Experts, the statements of a few consumers as well as the description given in certain Ayurvedic Books and contended that the preparation would fall within the relevant entry in the exemption notification. The Tribunal rightly points out that in interpreting statutes like the Excise Act the primary object of which is to raise revenue and for which purpose various products are differently classified, resort should not be had to the scientific and technical meaning of the terms and expressions used but to their popular meaning, that is to say, the meaning attached to them by those using the product. It is for this reason that the Tribunal came to the conclusion that scientific and technical meanings would not advance the case of the appellants if the same runs counter to how the product is understood in popular parlance. That is why the Tribunal observed in Paragraph 86 of the judgment as under :

“So certificates and affidavits given by the Vaidyas do not advance the case of Shri Baidyanath Ayurved Bhawan Limited in the absence of any evidence on record to show and prove that the common man who uses this Dant Manjan daily to clean his teeth considers this Dant Manjan as a medicine and not a toilet requisite.”

It is this line of reasoning with which we were in agreement. The Tribunal rejected the claim of the appellant holding that ordinarily a medicine is prescribed by a Medical Practitioner and it is used for a limited time and not every day unless it is so prescribed to deal with a specific disease like diabetes. We are, therefore, of the opinion that the Tribunal applied the correct principles in concluding that the product in question was not a medicinal preparation (‘Ayurvedic’) and, therefore, the appellant was not entitled to the benefit of the exemption notification. Having heard the learned Counsel at length and having perused the line of reasoning adopted by the Tribunal with which we are in general agreement, we see no reason to interfere with the conclusion reached by the Tribunal and, therefore, we dismiss these appeals, but make no order as to costs.”

The Hon’ble Supreme Court had emphasised the importance of popular meaning in interpreting the statutes and had explained that the popular meaning is the one attached to them by those using the product.

22. In the light of the above discussion, we consider that the product in question is not a shampoo or a preparation for use on the hair in the sense the term has been used in Heading No. 33.05 but is a soap as described in Heading No. 34.01 of the Central Excise Tariff. Accordingly, we hold that the product Kesh Nikhar branded cake/bar is correctly classifiable under sub-heading No. 3401.12 of the Central Excise Tariff. Its classification under Heading No. 33.05 is not correct. As a result, the impugned order is set aside and the appeal is allowed with consequential benefits as per law. Ordered accordingly.

Equivalent 2001 (138) ELT 855 (Tri. - Del.)

Equivalent 2001 (046) RLT 0400