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2019 (2) TMI 400 - AT - Central ExciseClassification of Henna Powder - under the chapter heading 3304 or 3305 - deemed manufacture - repacking from bulk in unit packs - Penalty - Rule 25 of Central Excise Rules, 2002 read with Section 11AC of The Central Excise Act, 1944 - Held that - From the description of the product as it appears on the packing it is quite evident the product is a beauty or make up preparation for application on the hands. In terms of Section Note 4 to Section VI, such beauty or make up preparations are to be classified only under the heading 3304 of tariff and not anywhere else in the Schedule. In terms of chapter note 3 to Chapter 33, also these goods have to be classified as per the use as indicated on the packing material. It is fact that though the Henna Powder in unit container could be used for colouring the hairs also, but the packing describes the use of the product being cleared as beauty or makeup preparation for decoration of the hands. In view of the specific description and use as is mentioned on the packing the classification under heading 3305 cannot be accepted. Since the product gets classified under Chapter 33, in terms of Chapter Note 5, conversion of powder into tablets, labelling or relabelling of containers intended for consumers or repacking from bulk packs to retail packs or the adoption of any other treatment to render the products marketable to the consumer, shall be construed as manufacture . Thus the processes undertaken by the appellant also amount to manufacture Penalty 25 of Central excise Rules, 2002 read with Section 11AC of Central Excise Act, 1944 - Held that - The demand in the present case is made within the normal period of limitation as provided by Section 11A (1) - Not even a whisper or iota of mention of ingredients mentioned for invoking extended period of limitation as per proviso to section 11A(1) is there in any of the two show cause notices, or adjudication order. Since the ingredients as prescribed for invoking extended period of limitation are identical to those for invoking Section 11AC for imposition of penalty, there is no justification to sustain the penalty imposed. The penalty equivalent to the duty demanded imposed on the appellants under Rule 25 of Central Excise Rules, 2002 read with Section 11AC of The Central Excise Act, 1944 is set aside - The demand of duty under Section 11A along with interest under Section 11AB of Central excise Act, 1944 is upheld - appeal allowed in part.
Issues Involved:
1. Classification of Henna Powder. 2. Applicability of Central Excise Duty. 3. Imposition of Penalty. 4. Demand of Interest. Issue-wise Detailed Analysis: 1. Classification of Henna Powder: The primary issue was whether Henna Powder repacked in unit packages should be classified under Chapter Heading 33049190 or Chapter 1404. The appellants argued that their product should be classified under Chapter 14, as their packaging did not indicate the powder was for use as a hair dye. They cited previous classifications and judicial decisions to support their claim. However, the Tribunal found that the product, based on its packaging and intended use as a beauty or makeup preparation for hands, should be classified under Chapter 33. The Tribunal referred to Section Note 4 to Section VI, Chapter Note 3 to Chapter 33, and HSN Explanatory Notes, concluding that the product merits classification under Heading 33049190. 2. Applicability of Central Excise Duty: The Tribunal upheld the classification under Chapter 33, which meant that the processes of packing/repacking from bulk to retail packs amounted to manufacture as per Chapter Note 5 to Chapter 33. Consequently, the demand for Central Excise Duty under Section 11A of the Central Excise Act, 1944, was upheld. The Tribunal noted that the product, as cleared, was not used for dyeing or tanning, thus ruling out classification under Chapter 1404. 3. Imposition of Penalty: The Tribunal examined the imposition of a penalty equivalent to the duty amount under Rule 25 of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1944. It found that the demand was made within the normal period of limitation, and there was no mention of fraud, collusion, willful misstatement, or suppression of facts in the show cause notices or adjudication order. Citing the Supreme Court's decision in Rajasthan Spinning Mills, the Tribunal concluded that the penalty provisions under Section 11AC require a finding of intentional evasion, which was absent in this case. Therefore, the penalty was set aside. 4. Demand of Interest: Since the classification under Chapter 33 and the corresponding duty demand were upheld, the Tribunal also upheld the demand for interest under Section 11AB of the Central Excise Act, 1944. The interest was applicable due to the confirmed duty liability. Conclusion: The Tribunal allowed the appeal to the extent of setting aside the penalty imposed but upheld the demand for duty and interest. The classification of Henna Powder under Heading 33049190 was confirmed, and the processes undertaken by the appellant were deemed to amount to manufacture, making them liable for Central Excise Duty and interest.
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