2006 (11) TMI 3 - SC - Central Excise

Central Excise Alma Lio Addition of perfume in Alma Lio (hair oil) product at the end of manufacturing process comes under manufacturing process Classifiable under heading 3305.10 of CETA 1985 as perfumed hair oil and not under heading 3305.99

Summary

Issues involved:
1. Classification of the product under the Central Excise Tariff Act, 1985.
2. Assessment of excise duty rate on the product.
3. Penal action under the Central Excise Rules, 1944.
4. Classification of the product as perfumed hair oil or cosmetic product.

Detailed Analysis:

1. Classification of the product under the Central Excise Tariff Act, 1985:
The Respondent manufactured hair oil under the brand name "Alma Lio" and initially classified it under SH No.3003.39 of the Schedule appended to the Central Excise Tariff Act, 1985. However, a show cause notice was issued proposing to classify the product under SH No.3305.99 as a cosmetic product attracting a higher excise duty rate. The Deputy Commissioner opined that the product should be classified under SH 3305.99, leading to a short payment of central excise duty. The Commissioner (Appeals) later classified the product under Chapter Heading No.3305.99 as a hair tonic, distinct from hair oil. The Tribunal, on appeal, classified the product as 'perfumed hair oil' under SH3305.10, remanding the matter for recomputing the excise duty payable.

2. Assessment of excise duty rate on the product:
The dispute revolved around the excise duty rate applicable to the product. The Respondent contended that their product, "Alma Lio," contained ingredients with curative or prophylactic value, justifying a lower excise duty rate. The assessing authority considered the manufacturing process and ingredients used, concluding that the product could be classified under Chapter Sub Heading No. 3305.10 as perfumed hair oil, attracting a different excise duty rate.

3. Penal action under the Central Excise Rules, 1944:
Penal action was proposed against the Respondent under rule 173Q of the Central Excise Rules, 1944, for the alleged short payment of central excise duty. The Tribunal, however, set aside the penalty imposed on the Appellants, considering the issue of classification of the product and the declaration filed by the Appellants.

4. Classification of the product as perfumed hair oil or cosmetic product:
The Tribunal's decision to classify the product as 'perfumed hair oil' under SH3305.10 was based on the addition of fragrance in the manufacturing process. The Tribunal held that the product was classifiable under SH3305.10 and remanded the matter for reevaluation of the excise duty payable. The Supreme Court, without delving into the therapeutic value of the product, upheld the Tribunal's judgment, dismissing the appeal on the grounds that perfume was added to the product, making it a 'perfumed hair oil.'

In conclusion, the Supreme Court upheld the classification of the product as 'perfumed hair oil' under SH3305.10, based on the addition of perfume in the manufacturing process, and dismissed the appeal without imposing any costs.