2004 (3) TMI 479 - AT - Central Excise

Summary

Issues Involved:
1. Classification of the product "Jem Fresh".
2. Demand for differential duty.
3. Imposition of penalty for alleged duty evasion.

Issue-wise Detailed Analysis:

1. Classification of the product "Jem Fresh":

The appellants manufactured and cleared a product named "Jem Fresh" during August 1997 to March 1998, claiming it under sub-heading 3808.10 of the CETA Schedule, paying duty at 8% ad valorem. The department contested this classification, proposing sub-heading 3307.49, attracting an 18% duty. The adjudicating authority confirmed the product as an Air Purifier under SH 3307.49, leading to a confirmed duty demand of Rs. 4,81,904/- and a penalty of Rs. 45,000/-. The Commissioner (Appeals) upheld this decision, prompting the present appeal.

The appellants argued the product, composed of 99% para-dichlorobenzene (PDCB) and 1% perfume, was an insecticide under SH 3808.10, citing HSN Notes on Heading 38.08 and Classification Decision No. 193 of the Harmonized System Committee. The department, referencing the Tribunal's decision in Shri Satya Sai Industries, contended the product was an air purifier, thus classifiable under SH 3307.49. The product label described "Jem Fresh" as an air purifier, indicating its primary use in rooms, toilets, bathrooms, wardrobes, and shoeracks, supporting the department's classification.

The Tribunal noted that the product's label description and continuous use, unlike short-duration insecticides, aligned with the characteristics of room fresheners or deodorizers. The Chemical Examiner's test report, stating PDCB's general insecticide use, did not advance the appellants' case, as it did not account for the perfume's effect. The Tribunal found the decision in Shri Satya Sai Industries applicable, unaffected by the test report.

2. Demand for differential duty:

The Tribunal confirmed the classification under SH 3307.49, leading to a higher duty rate of 18% ad valorem. Consequently, the demand for differential duty of Rs. 4,81,904/- was upheld. The appellants' reliance on Classification Decision No. 193 was dismissed, as they failed to prove PDCB had an unpleasant odor, a key factor in the decision. The HSN Notes on Heading 38.08 did not support the appellants' claim, as the product was not exclusively intended for pest-repellent purposes but was primarily an air purifier.

3. Imposition of penalty for alleged duty evasion:

The Tribunal found no reason to interfere with the imposed penalty of Rs. 45,000/-. The product's classification as an air purifier under SH 3307.49 justified the penalty for duty evasion. The appellants' arguments, including the product's common parlance recognition as an insecticide, were rejected, as they marketed it as an air purifier. The Tribunal's decision in Peshawar Soaps & Chemical Works did not alter this conclusion.

Conclusion:

The Tribunal upheld the classification of "Jem Fresh" under SH 3307.49, confirming the differential duty demand and the penalty. The appeal was dismissed, affirming the lower authorities' decisions.