2007 (5) TMI 31 - AT - Central Excise

Department contended that (i) the oil manufacture by the appellant is classifiable under CH 3305 instead of 3003.20 (ii) duty amount confirmed on the products cleared by the appellant using brand name of some other person and demand were made Held (i) classifiable under SH 3003.20 (ii) demand is time -barred

Issues Involved:
1. Classification of the product under Chapter Heading 3305 vs. 3003.20.
2. Demand for duty for the extended period.
3. Imposition of penalties on the appellant company and its directors.
4. Validity of the show cause notice issued beyond the period of limitation.
5. Consideration of the product as ayurvedic medicine or hair oil.

Detailed Analysis:

1. Classification of the Product:
The primary issue in this case is the classification of the products "Daga Ghritkumari Oil" and "Daga Chandan Oil". The appellants claimed these products as ayurvedic medicines under Chapter Heading 3003.20, while the Revenue classified them as hair oils under Chapter Heading 3305. The appellants argued that the products were manufactured using ayurvedic ingredients and were marketed as ayurvedic medicines, supported by affidavits from ayurvedic doctors. The Tribunal found that the products were indeed manufactured using ayurvedic ingredients and were sold as ayurvedic medicines, thus supporting the appellants' classification under Chapter Heading 3003.20.

2. Demand for Duty for the Extended Period:
The Revenue demanded duty for the period from 1995-96 to 1999-2000, arguing that the appellants had not declared the manufacturing process or filed the cartons with the authorities. The appellants countered that they had been filing declarations as a small-scale industry since 1994. The Tribunal noted that the Revenue had been aware of the products' manufacturing since 1994 and had not acted upon the declarations, thus the demand for the extended period was not justified.

3. Imposition of Penalties:
Penalties were imposed on the appellant company and its directors by the Adjudicating Authority. The Tribunal, however, found that the Revenue had not provided sufficient evidence to prove that the products were hair oils and not ayurvedic medicines. Given the lack of evidence and the appellants' compliance in filing declarations, the penalties were deemed unjustified and were set aside.

4. Validity of the Show Cause Notice:
The appellants argued that the show cause notice issued in 2000 was beyond the period of limitation, as the department was aware of the manufacturing of these products since 1994. The Tribunal agreed, stating that the Revenue's inaction on the declarations filed by the appellants precluded them from invoking the extended period for the demand of duty. Therefore, the show cause notice was considered time-barred.

5. Consideration of the Product as Ayurvedic Medicine or Hair Oil:
The Tribunal examined the affidavits from ayurvedic doctors and the product cartons, which indicated that the products were used for therapeutic purposes such as preventing hair loss and relieving headaches. The Tribunal also referenced Supreme Court judgments, including M/s. Sharma Chemical Works and M/s. Dabur (India) Ltd., which supported the classification of products with ayurvedic ingredients as ayurvedic medicines. The Tribunal concluded that the products were ayurvedic medicines and not hair oils, thus falling under Chapter Heading 3003.20.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeals and granting consequential relief. The products were classified as ayurvedic medicines under Chapter Heading 3003.20, the demand for duty for the extended period was deemed time-barred, and the penalties imposed on the appellant company and its directors were revoked. The Tribunal's decision was based on the evidence provided by the appellants and the relevant Supreme Court judgments.

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