2001 (7) TMI 1293 - AT - Central Excise

Summary

Issues Involved:
1. Classification of the product Kesh Nikhar branded cake/bar.
2. Applicability of extended period of limitation.
3. Applicability of penalties and interest under Sections 11AB and 11AC of the Central Excise Act, 1944.
4. Relevance of product advertising in classification.

Detailed Analysis:

1. Classification of the Product:
- The primary issue is whether Kesh Nikhar branded cake/bar should be classified under Heading No. 34.01 as soap or under Heading No. 33.05 as preparations for use on the hair.
- M/s. Peshawar classified the product under sub-heading No. 3401.12 as soap in the form of cake/bar, which is not manufactured with the aid of power or steam.
- The Revenue argued that the product should be classified under Heading No. 33.05 as it is a bath preparation containing soap exclusively meant for use on the hair.
- The Tribunal noted that the product was in the form of a cake/bar and was marketed as soap. The product did not contain any special ingredients for hair treatment and was soluble in water, conforming to the requirements for toilet soap.
- The adjudicating authority acknowledged that the product was in the form of soap but classified it as a shampoo in cake form.
- According to the Harmonised System of Nomenclature (HSN), soaps are generally in the form of bars, cakes, moulded pieces, or shapes, and shampoos are typically liquid.
- The Tribunal referred to various case laws and concluded that the product Kesh Nikhar soap could not be classified as a shampoo under Heading No. 33.05. The product is more appropriately classified under Heading No. 34.01 as soap.

2. Applicability of Extended Period of Limitation:
- The Tribunal found that M/s. Peshawar had been producing and marketing the product since 1935, and it was never previously classified as a shampoo.
- The product was consistently treated as soap by the Central Excise Department, and M/s. Peshawar had been filing declarations and classification lists accordingly.
- The Tribunal concluded that there was no justification for invoking the extended period of limitation under Section 11A(1) of the Act.

3. Applicability of Penalties and Interest:
- The Commissioner of Central Excise had imposed penalties and interest under Sections 11AB and 11AC of the Act, along with Rules 9(2), 52A, and 226 of the Central Excise Rules.
- Since the Tribunal held that the product was correctly classified under Heading No. 34.01, the penalties and interest imposed were not justified.
- The Tribunal set aside the impugned order, thereby nullifying the penalties and interest.

4. Relevance of Product Advertising in Classification:
- The Tribunal emphasized that the nature of the product and its description in the relevant Tariff Entry should form the basis of classification, not the way it is advertised.
- Advertisements highlighting the product's use on hair do not change its fundamental classification as soap.
- The Tribunal referred to various judgments which held that advertisements are not decisive in determining the real nature of the product for classification purposes.

Conclusion:
- The product Kesh Nikhar branded cake/bar is correctly classifiable under sub-heading No. 3401.12 of the Central Excise Tariff as soap.
- The classification under Heading No. 33.05 as preparations for use on the hair is not appropriate.
- The appeal is allowed with consequential benefits as per law, and the impugned order is set aside.