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2008 (7) TMI 12 - SC - Central ExciseLiquid hair dyes classification - there was no specific entry relating to hair dyes under CET however, hair lotion is specified under Tariff Item 14F - Demand under Tariff Item 14F of the First Schedule to the Central Excise and Salt Act, 1944 said product could not be treated as a lotion to be used as a scalp or hair nourisher or for medicinal purposes - appellant s preparation was poisonous and had to be used with great care demand according to Tariff Item 14F was erroneous
Issues Involved:
1. Classification of "liquid hair dye" under the Central Excise Tariff. 2. Applicability of Tariff Item 14F versus Tariff Item 68. 3. Interpretation of the term "hair lotion" in relation to "hair dye". 4. Application of the common parlance test for product classification. 5. Validity of demand notices issued by the Excise Department. Issue-wise Detailed Analysis: 1. Classification of "liquid hair dye" under the Central Excise Tariff: The appellant, a public limited company, has been manufacturing "liquid hair dyes" since May 1974. Initially, there was no specific entry for "hair dyes" under the Central Excise Tariff, and the Excise Department did not demand any duty under Tariff Item 14F, which covered "hair lotion". From 1st March 1975, Tariff Item 68 was introduced as a residuary entry for goods not elsewhere specified, under which the appellant began paying duty for "liquid hair dyes". 2. Applicability of Tariff Item 14F versus Tariff Item 68: The respondent issued a show-cause notice on 13th July 1982, proposing to classify "liquid hair dye" under Tariff Item 14F instead of Tariff Item 68. The appellant contested this classification, citing a judgment in Subhash Chandarnishat vs. Union of India, where "Vasmol Emulsified Hair Oil" and "Vasmol Pomade" were held not to fall under Tariff Item 14F. Despite this, the Excise Department issued demand notices for the period from January 1982 to December 1982, which were upheld by the Assistant Collector and later by the High Court. 3. Interpretation of the term "hair lotion" in relation to "hair dye": The appellant argued that "hair dye" and "hair lotion" are distinct products. The product in question, "Godrej - Permanent Hair Dye", was introduced in May 1974 and was not initially taxed under Tariff Item 14F. The Finance Act of 1975 introduced Tariff Item 68, under which the product became taxable at 8%. The Deputy Chief Chemist's analysis in 1975 confirmed that the product did not fall under Tariff Item 14F, implying it was not a "hair lotion" or "pomade". 4. Application of the common parlance test for product classification: The appellant relied on the common parlance test, as applied in previous cases, to argue that "hair dye" should not be classified as "hair lotion". The High Court's decision in Subhash Chandarnishat's case emphasized the common understanding of products in trade and commerce. The affidavits from dealers and consumers supported the view that "hair dye" and "hair lotion" are understood as different products in the market. 5. Validity of demand notices issued by the Excise Department: The High Court dismissed the appellant's writ petition, upholding the demand notices and the classification under Tariff Item 14F. The appellant contended that this classification was erroneous and that the product should be taxed under Tariff Item 68. The Supreme Court, after considering the submissions and evidence, concluded that the product is a hair darkener and not a hair lotion. The Court found that the High Court's decision was erroneous and set aside the demand notices, holding that the product should be classified under Tariff Item 68. Conclusion: The Supreme Court allowed the appeal, set aside the High Court's order, and quashed the demand notices for the period from January 1982 to December 1982. The Court held that the appellant's "liquid hair dye" should be classified under Tariff Item 68, not Tariff Item 14F, and thus, the demand for excise duty at the higher rate was incorrect. The parties were directed to bear their own costs.
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