1990 (12) TMI 214 - AT - Central Excise

Summary

Issues Involved:
1. Validity of the show cause notice dated 9-2-1988.
2. Entitlement of 'Oil of Olay' to exemption as Barrier Cream under Notification No. 393/86-C.E., dated 22-8-1986.

Detailed Analysis:

1. Validity of the Show Cause Notice:
Issue: Whether the show cause notice dated 9-2-1988 is valid in law.

Analysis:
The appellants argued that the show cause notice was invalid as it was signed by the Assistant Collector, and not by the Collector, as required under proviso to Section 11A. The Tribunal examined the show cause notice and found that it did not invoke the proviso to Section 11A. The notice was issued within six months from the date of the alleged contravention, thus falling within the normal period for issuing such notices. The Assistant Collector had the authority to issue the notice under Rule 9(2) of the Central Excise Rules, 1944, which allows for redetermination of classification and demand of duty for six months. Therefore, the show cause notice was deemed valid and not vitiated.

2. Entitlement of 'Oil of Olay' to Exemption:
Issue: Whether the product 'Oil of Olay' is entitled to exemption as Barrier Cream under Notification No. 393/86-C.E., dated 22-8-1986.

Analysis:
The appellants claimed that 'Oil of Olay' was a barrier cream and satisfied the conditions of Notification No. 393/86. They argued that the product was manufactured under a license issued under the Drugs and Cosmetics Act, 1940, and therefore qualified for the exemption. The Department contended that 'Oil of Olay' did not meet the definition of a barrier cream as per Chapter Note 5 of Chapter 33, which describes barrier creams as products that give protection against skin irritants.

The Collector examined the technical literature and advertisements of 'Oil of Olay' and concluded that the product did not form a continuous protective film on the skin, as required for barrier creams. Instead, it was absorbed by the skin and marketed as a beauty fluid for general skin care. The Tribunal upheld this finding, noting that the product's characteristics and commercial understanding aligned with it being a beauty cream rather than a barrier cream. Consequently, 'Oil of Olay' did not qualify for the exemption under Notification No. 393/86.

Additional Considerations:
- The appellants argued that the Department could not challenge the license issued by the Drug Controller, but the Tribunal held that the exemption depended on the product being a barrier cream as defined in the Central Excise Tariff Act, 1985, and not merely on the issuance of a license.
- The Tribunal also addressed the appellants' contention that classification lists could only be revised prospectively, citing relevant case law. However, it found that the facts of this case did not support the appellants' position, as the show cause notice was issued within the permissible period and based on valid grounds.

Conclusion:
The show cause notice dated 9-2-1988 was valid, and 'Oil of Olay' was not entitled to exemption as a barrier cream under Notification No. 393/86-C.E., dated 22-8-1986. The penalty imposed was reduced from Rs. 1 lakh to Rs. 50,000, considering the circumstances of the case. The appeal was otherwise dismissed, upholding the Collector's order.