Metropol India Pvt. Ltd. vs Commissioner of Central Excise, Delhi>2002(12)LCX0017

2002(12)LCX0017

IN THE CEGAT, COURT NO. III, NEW DELHI

S/Shri S.S. Kang, Member (J) and V.K. Agrawal, Member (T)

METROPOL INDIA PVT. LTD.

Versus

COMMISSIONER OF CENTRAL EXCISE, DELHI

Final Order Nos. 244-245/2002-C, dated 3-12-2002 in Appeal Nos. E/2466-2467/2001-C

Cases Quoted

Asian Paints Ltd. v. Collector — 1987(03)LCX0021 Eq 1988 (035) ELT 0003 (S.C.) — Referred............... [Para 4]

Collector v. Business Forms Ltd. — 2002(01)LCX0193 Eq 2002 (142) ELT 0018 (S.C.) — Referred... [Para 4]

Collector v. K. Mohan & Co. Exports — 1989(09)LCX0088 Eq 1989 (043) ELT 0811 (S.C.) — Referred............... [Para 4]

Kothari Products Ltd. v. Commissioner — 2001(10)LCX0145 Eq 2002 (139) ELT 0633 (Tribunal) — Referred... [Para 3]

Peshawar Soap & Chemical Works v. Commissioner — 2001(07)LCX0178 Eq 2001 (138) ELT 0855 (Tribunal) — Referred [Para 3]

Shree Vaidyanath Ayurved Bhawan Ltd. v. Collector — 1995(03)LCX0046 Eq 1996 (083) ELT 0492 (S.C.) — Referred... [Para 4]

Advocated By : Shri B.L. Narasimhan, Advocate, for the Appellant.

Shri R.D. Negi, SDR, for the Respondent.

[Order per : V.K. Agrawal, Member (T)]. - In these appeals, filed by M/s. Metropol India Private Ltd., the issue involved is whether the products namely “Cleanzo” and “Cleano” are classifiable under sub-heading 3401.12 of the Schedule to the Central Excise Tariff Act as Soap as claimed by the Appellants or under sub-heading 3402.90 as cleaning preparation as confirmed by the Commissioner (Appeals) in the impugned order.

2. Shri B.L. Narasimhan, learned Advocate, submitted that the products have been classified by them under sub-heading 3401.12 as Liquid Soap Solution; that these products are manufactured out of vegetable oil such as castor oil, acid oil, rosin and pine oil; that the pine oil is added for antiseptic and medicinal purposes; that these oils are used in the manufacturing process of soap as fatty acid is required and it is reacted with Alkali; that various vegetable oils are blended in a vessel and thereafter reacted with caustic soda; that after heating of the blend, hydrolysis of oil takes place and as a result of the said reaction the soap is obtained. He, further, submitted that as per Explanatory Note of HSN below Heading 34.01 soap is an Alkaline Salt (inorganic or organic) formed from a fatty acid or mixture of fatty acids containing at least 8 carbon atoms. In practice, part of the fatty acid may be replaced by Rosin acids. According to HSN Explanatory Notes the Heading covers only soap soluble in water that is to say true soap. The learned Advocate also mentioned that as per Note 2 to Chapter 34 of the Central Excise Tariff for the purpose of Heading 34.01 soap applies only to soap soluble in water; that there are 3 categories of soap as per Explanatory Notes, namely Hard Soap, Soft Soap, and Liquid Soap; that liquid soaps are solution of soap in water, in some cases with small quantity (generally not exceeding 5%) of alcohol or glycerol added, but not containing synthetic organic surface active products; that the appellants are manufacturing only liquid soap; that it has not been disputed by the Revenue; that both the impugned products are soluble in water and that they have been made out of vegetable oils and as such Note 2 to Chapter 34 is satisfied and accordingly the product is classifiable under Heading 3401.12.

3. He, further, submitted that Heading 34.02 of the HSN covers organic Surface Active Agent (other than soap); Surface-active preparations, washing preparations (including auxiliary washing preparations) and cleaning preparations, whether or not containing soap, other than those of Heading No. 34.01. He thus contended that Heading 34.02 will be attracted only if the product does not fall under Heading 34.01; that what is being manufactured by the appellants is nothing but soap as pine oil is added along with fatty acids and as such pine oil is added while manufacturing soap; that pine oil is a raw material for manufacturing liquid soap. In support of his contention he relied upon the New Encyclopaedia Britannica Vol. IX wherein it is mentioned that pine oil is also used in Odorant, Insecticides, Detergents, Liquid Soaps, etc. He also referred to “The Wealth of India” - Dictionary of Indian Raw Materials and Industrial products, according to which pine oil finds a wide range of industrial applications as it is used in paints, varnishes, laqured, distempers, soap and detergents and in perfumery and Pharmaceuticals. The learned Advocate contended that it is, thus, apparent from these two technical books that pine oil is used in the manufacture of soap. The learned Advocate also referred to the Explanatory Notes of HSN to Heading 34.02 according to which washing preparations and cleaning preparations generally contain essential constituents and one or more subsidiary constituents and presence of latter constituent distinguishes in particular these preparations from surface active preparations; that according to Explanatory Notes subsidiary constituents are builders, boosters, and fillers and ancillaries; that for a product for being classified under Heading 34.02 as cleaning preparations it has to have a basis of soap to which subsidiary constituents are added; that in the present matter as per their process of manufacture, pine oil is not added after the soap base has been obtained but it is added while making the soap itself and therefore, it does not satisfy the criteria of addition of subsidiary constituents as provided in Explanatory Notes of HSN. He also mentioned that the Adjudicating Authority has classified the impugned product under Heading 34.02 on the ground that HSN clearly mentions that generally subsidiary constituents are used in washing preparations and cleaning preparations and essential constituents are surface active agent and soap or mixture thereof and that cleaning preparation may or may not contain subsidiary ingredients; that the Adjudicating Authority has classified the impugned products under 34.02 observing that soap has no doubt being used as a basis. Finally he submitted that the Commissioner (Appeals) has heavily relied upon the labels and catalogues of the products used by them for marketing the products; that it is well settled law that reliance cannot be placed on labels, etc. as these are used only for marketing purposes. He relied upon the decision in the case of Peshawar Soap & Chemical Works v. CCE, Chandigarh, 2001(07)LCX0178 Eq 2001 (138) ELT 0855 (T) = 2001 (046) RLT 0400 (CEGAT) and Kothari Products Ltd. v. CCE, Kanpur, 2001(10)LCX0145 Eq 2002 (139) ELT 0633 (T) = 2001 (047) RLT 0173 (CEGAT).

4. Countering the arguments Shri R.D. Negi, learned SDR, submitted that the label of the product clearly mentions that the product is a marvelous cleaner which does not stain and leaves the cleaned surfaces shining and leaves a sweet aroma; that the label further provides that the product is to be used to clean fine tile work, rubber, linoleum floor covering, mosaic floor, door & window panes, toilet fittings and oil painted articles; that it is evident from the label of the product itself that it is nothing but cleaning preparation; that the directions for use given on the label that one tea cup full of cleanzo mixed in half of medium size bucket of water is adequate for regular cleaning of toilets flooring etc. Learned SDR, further, submitted that a product is to be classified as per the description given in the tariff and on the basis of the definition of the product given in the Tariff; that in absence of any definition given in the Tariff, the classification of the product is to be determined on the basis of common parlance test and the scientific or technical meaning should not override the commercial uses for the trade understanding. He relied upon the decision in the case of C.C. v. K. Mohan & Co. Exports, 1989(09)LCX0088 Eq 1989 (043) ELT 0811 (S.C.). The learned SDR contended that the learned Advocate for the Appellants has gone only by Technical/Scientific Dictionary while submitting the use of pine oil; that Encyclopaedia and Wealth of Nation books are not using the word soap in general terms and not as soap mentioned in Heading 34.01 cleaning preparation in 34.02. Reliance has also been placed in the case of Asian Paints India Ltd. v. CCE, 1987(03)LCX0021 Eq 1988 (035) ELT 0003 (S.C.) wherein it was held that “interpreting items in statute like the Excise Act or Sales Tax Act whose primary object was to raise revenue and for which purpose to classify diverse products, articles and substances resort should be had not to the scientific and technical meaning of the terms or expressions used but to their popular meaning, that is to say meaning attached to them by those dealing in them.” Reliance has also been placed on the decision in the case of Shree Vaidyanath Ayurved Bhawan Ltd. v. CCE, 1995(03)LCX0046 Eq 1996 (083) ELT 0492 (S.C.) Finally, he submitted that as per Explanatory Note of HSN cleaning preparations serve for cleaning floors, windows and other surfaces and contended that the impugned products are used only for cleaning floors and windows and as such even as per HSN Explanatory Notes these are to be classified under Heading 34.02. He relies upon the decision of the Supreme Court in the case of C.C., Bombay v. Business Forms Ltd., 2002(01)LCX0193 Eq 2002 (142) ELT 0018 (S.C.) wherein the Supreme Court has held that the Explanatory Notes to HSN are not only of persuasive value but they “are entitled to far greater consideration” in classifying the goods under Central Excise Tariff. In reply learned Advocate emphasized that the Adjudicating Authority has proceeded only on the ground that it is not must that subsidiary constituents must be added in any product for being classified under Heading 34.02.

5. We have considered the submissions of both the sides. Heading 34.01 applies inter alia to soap and Heading 34.02 covers various products including cleaning preparations. According to HSN cleaning preparations generally contain essential constituents and one or more subsidiary constituents. The essential constituents are synthetic organic surface active agents or soap or mixtures thereto. The subsidiary constituents are as under : -

(1) Builders,

(2) Boosters,

(3) Fillers,

(4) Ancillaries (e.g. chemical or optical bleaches, and anti-redeposition agents, corrosion inhibitors, anti-electrostatic agents, colouring matters, perfumes, bactericides, enzymes).

The soap according to HSN Explanatory Note is an Alkaline salt formed from a fatty acid or a mixture of fatty acid containing at least 8 carbon atoms. None of the sides have disputed the manufacturing process as given in the records. It is not the case of the Appellants that pine oil is a fatty acid which is required for manufacturing of soap. Pine oil, according to the Appellants themselves, is added for antiseptic and medicinal purposes. Thus it is clearly evident that it is a subsidiary constituent as described in HSN Explanatory Note. Further, it has not been controverted by the Appellants that both the products in question are used for cleaning floors, windows or other surfaces. In view of this we agree with the Revenue that both the products are nothing but cleaning preparations classifiable under Heading 34.02 of the Central Excise Tariff. We do not find any substance in the contentions of the learned Advocate that they are not adding subsidiary ingredient as the pine oil is added at the time of blending of tatty acids. Merely because the pine oil is added at the time when fatty acids are blended will not take away its character of subsidiary constituents. Accordingly we also find substance in the submissions of the learned SDR that the reliance cannot be placed for the purpose of determining the classification on the basis of uses of pine oil given in Encyclopaedia Britannica and Wealth of Nations as these are in general terms and not in the way or manner in which Central Excise Tariff has been enacted. We, therefore, reject both the appeals filed by the Appellants.

Equivalent 2003 (151) ELT 460 (Tri. - Del.)