2004 (6) TMI 339 - AT - Central Excise

Summary

Issues Involved:
1. Classification of goods under the Central Excise Tariff Act.
2. Applicability of Note 2 to Chapter 33 of the Tariff.
3. Application of Rule 2(a) of the Rules for the Interpretation of Schedule.
4. Extended period of limitation and revenue neutrality.

Detailed Analysis:

1. Classification of Goods under the Central Excise Tariff Act:
The primary issue in this appeal was whether the goods manufactured by M/s. Three N. Products Pvt. Ltd. are classifiable under Heading No. 33.02 as mixtures of odoriferous substances used in industry or under Headings Nos. 33.04 & 33.05 as preparations for the care of skin and hair. The appellants argued that their products, which include various compounds used as raw materials for Ayur brand shampoo and cream, are not suitable for direct use as shampoos or creams due to their high concentration and the need for additional raw materials. The Tribunal noted that the Revenue did not provide any evidence that the products could be used as shampoos or creams as they are.

2. Applicability of Note 2 to Chapter 33 of the Tariff:
The appellants contended that Note 2 to Chapter 33 requires products to be suitable for use as cosmetics or toilet preparations and to be put up in packings with labels and literature indicating such use. The Tribunal agreed with the appellants, noting that the impugned goods did not meet these criteria as they were not suitable for use as shampoos or creams, were packed in large containers not meant for retail sale, and were not accompanied by labels or literature indicating their use as cosmetics or toilet preparations.

3. Application of Rule 2(a) of the Rules for the Interpretation of Schedule:
The Commissioner had applied Interpretative Rule 2(a) to classify the compounds under Heading 33.04/33.05, arguing that the products had the essential character of shampoos and cosmetics. However, the Tribunal found this application incorrect, citing the Explanatory Notes which state that Rule 2(a) does not normally apply to goods of Sections I & VI, which includes Chapter 33. The Tribunal emphasized that the impugned goods did not have the essential character of finished goods and were not put up in a form specialized for use as cosmetics or toilet preparations.

4. Extended Period of Limitation and Revenue Neutrality:
The appellants argued that the extended period of limitation should not apply as they had filed classification declarations, cleared the goods on payment of duty, and filed RT-12 returns. The Tribunal agreed, noting that the show cause notice was based on the scrutiny of RT-12 returns and that the entire issue was revenue neutral since the goods were cleared to their other units, which would be eligible for Modvat credit. The Tribunal cited previous decisions supporting the view that when statutory documents filed by the assessee are relied upon, suppression of facts cannot be alleged, and the extended period of limitation cannot be invoked.

Conclusion:
The Tribunal concluded that the impugned products are classifiable under Heading No. 33.02 of the Central Excise Tariff as mixtures with a basis of one or more odoriferous substances. The appeal was allowed, and the Tribunal held that the products did not meet the criteria for classification under Headings 33.04 or 33.05.