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TMI Blog1990 (12) TMI 214X X X X Extracts X X X X X X X X Extracts X X X X ..... /90, dated 22-2-1990. 2. The brief allegation in the show cause notice, dated 19-2-1988 is that on 5-1-1988 the Assistant Collector of Central Excise (Anti-Evasion) headquarter office, Hyderabad and his staff (hereinafter referred to as the officers ) visited the appellants factory. The assessee are said to be manufacturing OIL OF OLAY falling under Chapter No. 33 of CET. They had filed classification list for Oil of Olay (Barrier cream) and clearing the same at 20% ad valorem in terms of Notification No. 393/86-C.E., dated 22-8-1986 under Chapter 3304.00. The classification list was approved in C. No. IV/10SRP/17/87, dated 18-8-1987 of Asstt. Collector Hyderabad-II division. 3. At the time of filing the classification list the assessee had submitted certain label showing write up of the product. The label read as follows :- Discover the secret of Oil of Olay....... the mysterious beauty fluid that closely resembles your skin s own vital fluids. It s light, non-greasy, and readily absorbed. To smooth away dryness and soften the traces of age, gentle on a few drops of oil of olay every morning and night..... under make-up or otherwise. You will find your skin looking and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd only such creams will be entitled for concessional rate of duty in terms of Notification No. 393/86-C.E., dated 22-8-1986 and subject to conditions mentioned in the said Notification. The Department has alleged that the goods manufactured by the assessee does not conform to the description of barrier cream mentioned under Chapter Note No. 5, and they are not to be identified as so, for the purpose of classifying the goods as Barrier Cream . 7. The assessee has taken up several contentions and have asserted that the product Oil of Olay is barrier cream and it satisfied all the conditions of Notification No. 393/86. 8. The various contentions taken by the appellants which will be noted by and by have all been rejected by the Collector in his impugned order. The learned Collector has examined the entire technical literature placed before him and also the pamphlet issued by the appellants as well as the advertisements of the product appearing in magazines. He has come to the conclusion that on the application of the product on the skin it penetrates thin outer layer of the skin. It is quickly absorbed and it acts to augment oil glands and moisture secretions and helps to mainta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r proviso to Section 11A of the Act. 8A. The appellants have contended in the appeal that the condition laid down under Notification No. 393/86 is applicable for Barrier Cream which are manufactured in accordance with the licence issued for such purpose under the Drugs and Cosmetics Act, 1940. They have contended that in their case the licence has been issued under the Drugs and Cosmetics Act, 1940 by the Drug Controller, Govt. of Andhra Pradesh for manufacture of Oil of Olay as Barrier Cream. Hence, it fulfils the condition under the said Notification and therefore, it is not open to the Asstt. Collector to deny the exemption as would be transgressing in the realm of the powers exercised by the Drugs Controller under the Drugs and Cosmetics Act, 1940 and for which the Asstt. Collector had no competence and jurisdiction. In this connection, they have relied on the following rulings :- (i) Bombay Chemicals Pvt. Ltd. v. Union of India -1982 (10) E.L.T. 171 (Bom.). (ii) M.G. Abrol v. Shantilal Chotalal Company -1966 AIR 197 (SC). 9. The appellants have stated that Notification No. 393/86 does not define Barrier Cream. It is their contention that if Chapter Note defines a Bar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Barrier creams should not remove the natural grease, weaken the horny skin layer, or have a drying oxiding or reducing action. The pH should be from 5.5 to 6.5. The choice of a suitable preparation depends on the specific type of contamination against which protection is desired. Contaminants may be divided into 2 main groups, water-miscible and water-immiscible substances, the first group including acid and neutral irritants, alkalis and soaps, explosives and photographs chemicals, and the second including such substances ad paraffin oils, paints, dusts and tars. Numerous proprietary barrier creams are marketed and many of these are issued with precise details of the contaminants against which they are effective. A short review of barrier creams, with typical formul - P. Alexander, Mfg. Chem., 1968, 39 (Nov.) 33. For other formulas for barrier creams, see under Silicones. p.1069. Proprietary Preparations HEB Waterproof (Waterhouse. UK). A barrier cream containing celostearyl alcohol emulsifying wax, liquid paraffin, soft paraffin, wood fat, preservative and water. Kerodex (Sterling Industrial. UK). A range of water-resistant and water-soluble barrier creams for protect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rotective action against mechanical stress. Basing on this literature, the appellants have sought to show that their product Oil of Olay meets the requirements of Barrier Cream. 12. Shri V.L. Lakshmi Kumaran, learned Advocate appearing for the appellants vehemently aruged his case and has taken up many legal points and contended that the proceedings itself is bad in law and inasmuch as that the Assistant Collector has no powers under proviso to Section 11A to issue show cause notice. He has submitted that the Excise authorities will not get any jurisdiction to challenge the licence granted by the Drug Controller under the Drugs and Cosmetics Act in view of the fact that the Notification in question stipulates that the licence issued under the said Act certifying the product as Barrier Cream will be sufficient for grant of exemption. In this connection, he has relied upon the ruling of this Bench referred to in Order No. 685/89-C, dated 21-11-1989 in the case of Collector of Central Excise, Bombay v. Bakul Aromatics Chemicals Ltd. Although in that case, the Notification pertains to Customs Notification No. 386/86 but he submits that the condition of the Notification and the ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ector will not vitiate the order and that there is no informity in the entire procedure, followed by the department and the impugned order is maintainable. 14. We have heard both sides and considered the submissions made by them and perused the records. The questions that arise for consideration in this appeal are :- (i) Whether the show cause notice, dated 9-2-1988 is valid in law; and (ii) Whether the impugned product Oil of Olay is entitled for exemption as Barrier Cream in terms of Notification No. 393/86-C.E., dated 22-8-1986. 15. The contention of the appellants has been that the proviso the Section 11A has been invoked and as the show cause notice has been signed by the Assistant Collector, it is invalid in law and therefore the Order is vitiated. A careful reading of the show cause notice dated 9-2-1988 shows that the ingredient of proviso to Section 11A has not been invoked at all. The period for which the show cause notice is within 6 months from the date of show cause notice from 13-10-1987 and 12-1-1988. The whole trust of the show cause notice is that there has been mis-declaration of classification list and contravention of Rule 9(2) read with Rules 173B and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... served that the learned Collector in his order has not relied or referred to this piece of evidence. The learned Collector has based his findings on the admitted facts and has applied the trade parlance and commercial understanding of the product as advertised and claimed by the appellant s themselves. This is the correct position and the settled law is that the trade parlance and commercial understanding of the goods is the factor to be considered in the classification of the goods in the Central Excises and Salt Act, 1944. 17. The contention of the appellants has been that the condition of the Notification would be satisfied if the Barrier Cream is manufactured under and in accordance with a licence issued for such purpose under Drugs and Cosmetics Act and that the Department cannot seek to extend the meaning of the definition of Barrier Cream to the one available in Note 5 of Chapter 33. At a first blush the argument sounds very reasonable but on a close scrutiny of the Notification No. 393/86, the fallacy in the contention becomes obvious. 18. The Notification No. 393/86, dated 22-8-1986 is reproduced below :- Effective rate for barrier creams. - In exercise of the power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has examined the technical literature, the manner in which the appellants are producing the product and relying on the assessees own admissions in advertisements as Beauty Cream for fairer sex and taking into consideration the Trade Parlance as advertised by them, has come to conclusion that the product is not a Barrier Cream. There may be several types of Barrier oils but the Notification grants exemption only such Barrier Creams which is considered as a drug or cosmetics and manufactured under a licence and control of the authorities under the Drugs and Cosmetics Act. Both the criteria have to be satisfied and they are complimentary to each other. The requirements of the Excise Act having overriding precedence over the other statutes. Therefore, the conclusions arrived at by the Department are not erroneous. 21. Shri V. Lakshmi Kumaran, learned Advocate has relied OB Order No. 327/89-C of this Bench referred to in the case of Vimpex Dye Chem v. Collector of Customs, New Delhi as well as in Order No. 685/89-C referred to by this Bench in the case of Collector of Central Excise, Bombay v. Bakul Aromatics Chemicals Ltd. to contend that once the assessee obtained a licence u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial and seek their opinion in the matter, as well. 22. The assessee has relied upon the ruling of Bombay Chemicals (P) Ltd. v. Union of India as reported in 1982 (10) E.L.T. 171 and that M.G. Abrol v. Shanthi Lal and Chotelal Co. reported in AIR 1966 S.C. page 197 and contended that once the competent authority mentioned in the Notification issued the necessary licence, the exemption under the Notification should not be denied by the Assistant Collector of Central Excise. 23. In the case of Bombay Chemicals Pvt. Ltd. (supra) the Court has held that it was within the exclusive jurisdiction of the Customs authorities to decide whether the goods attract a particular tariff item and levy duty accordingly, it was open for them to go back and claim that the goods imported were classifiable under a different tariff item. This ruling will have no reliance to the facts of the present case as the Rule 9(2) read with Rules 173B and 173F of the Central Excise Rules are attracted. In the case of M.G. Abrol v. Shantilal and Chotelal reported in AIR 1966 S.C. 197, the case pertains to grant of licence by Iron and Steel Controller to export the quantity of steelscull scrap under Sea Customs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y [1984 ECR 2164 (CEGAT)], that in such a situation, the demand for additional duty by reference to T.I. 68 is enforceable only with effect from the date of issue of show cause notice. That was also a case of a long standing practice having been allowed to continue by the Department by means of orders issued and approvals recorded both from the period prior to introduction of T.I. 68 as well as subsequent dates, till the issuance of show cause notice in 1980. We feel inclined to adopt a similar view on the peculiar facts of this case, and hold that the demand for additional duty in this case under T.I. 68 can be held enforceable only with effect from the date of issue of the first show cause notice i.e. 28-4-1980. 26. The above observation is in the context of changing the classification, as there did not exist any fresh reason for changing the stand, as established by the long standing practice, which was approved by the Department. In this present case the facts are different and this ruling will not have application in view of the fact that Rule 9(2) read with Rules 173B and 173F are invoked. In the case of Kirloskar Electric Co. Pvt. Ltd. (supra) the Bench noted that motoris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause Notice, it has to be observed that a similar contention was raised in the case of Solid Containers Ltd. v. Collector of Central Excise, Bombay as reported in 1990 (46) E.L.T. 406 (Tri.) = 1990 (31) ECR 64. In this case the assessee were clearing Solid Boxes imprinted made as packing containers from solid fibre board and composite board charged at approved duty manufactured in their factory only without printing falling under Item 17(4) and claimed exemption from CED under Notification No. 66/82-C.E., dated 28-2-1982. The Assistant Collector approved the classification list submitted by assessee. On 29-7-1984 a show cause notice was issued to the appellants demanding duty of Rs. 66,328.00 for the period March, 1982 to Dec., 1982 on the ground that the appellants product was not eligible to the exemption from duty under the aforesaid Notification as the said product was printed boxes. The show cause notice were issued demanding duty under Section 11A of the Act. It was alleged that the assessee had mis-represented and suppressed the facts in the classification list and wrongly claimed exemption under the aforesaid Notification as unprinted solid fibre board boxes. Invoking lar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that Sections 11A and 11B of the Central Excises and Salt Act are applicable even if no appeal is filed against the approval of the price list or classification list. It has been held therein that the provisions of appeal under Sections 35A and 35EE do not override the Sections 11A and 11B. Therefore, the lower authorities were competent to demand duty for a period of six months under Section 11A of the Central Excises and Salt Act even though the classification list was approved allowing the exemption notification. In view of this legal position, we reject the contention of the learned Advocate that the demands for duty could not be legally raised even for a period of six months under Section 11A of the Act ibid." 29. A similar situation arose in the case of Piya Pharmaceutical Works v. Collector of Central Excise, Meerut reported in 1985 (19) E.L.T. 272 (Tribunal). Although in this case also there was approved classification, the notice was issued by Assistant Collector and the Collector conducted the proceedings and imposed penalty under Rule 9(2) and Rule 173Q. Even in this case, there was allegation of mis-declaration of Piyamycetine Vet as eligible to concessions under N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and they cannot say there was anything they did not know or did not have to arrive at any conclusion that they might need to arrive. We are not able to accept this. To have all details of clearances, production, etc. etc. is not the same thing as having a sheet or a statement or a declaration for a particular purpose designed to meet that one purpose. If the Central Excise were to know that from 1979-80, M/s. Piya Pharmaceuticals would not be entitled to free first five lakhs, they must be given a declaration for that purpose with relevant totals of clearances of the different goods, whether 14E or 68, so that they can calculate for themselves if the limits are being exceeded or not. And even if we say the Central Excise were at fault when they had all the details, M/s. Piya Pharmaceuticals was at greater fault for failing to do what they surely knew they need to do, or must do in the changed circumstances, to ensure that they were still entitled to the exemption. It is well for all to remember that in taxation there are no permanent benefits to be permanently enjoyed. They can change and the exemption or benefit seeker must keep his title bright if he wants to continue to enjoy th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the imposition of such penalty. The notice is in the nature of a charge against a person proceeded against under that provision. On the similar provisions of Section 124 of Customs Act, 1962 in the case of Tarak Nath Sen v. Union of India, AIR 1957 Cal. 337 at page 339 it was held, that a show cause notice under that section is partly ministerial and really serves the purpose of being an intimation of initiation of a proceeding without involving any judicial determination, but that a show cause notice issued by the officer other than the adjudicating authority must ask the party to show cause direct to the adjudicating officer concerned, and it was held in that case by the High Court that notice by the Assistant Collector of Customs asking petitioner to show cause to the Additional Collector of Customs who had jurisdiction was not invalid. 34. As regards the merits of the case, Notification No. 393/86 exempts barrier creams falling under sub-heading 3304.00 CETA, 1985, confining it to such barrier creams which are manufactured under and in accordance with a licence issued for such purpose under the Drugs and Cosmetics Act, 1940. The criterion for classification as barrier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Oil of Olay is a beauty fluid which on application rapidly penetrates the thin outer layer of the skin and actually augments the oil gland and moisture secretions because it is compatible with skins own fluids. There is further information that the unique penetrating quality makes Oil of Olay an ideal foundation for make up. From these details of their own product given in the pamphlet on Oil of Olay it is evident that it does not satisfy the criterion of a barrier cream which is that barrier cream is one which forms a continuous film on the skin impenetrable by the harmful substance. On the other hand, Oil of Olay which is compatible with skin s own fluids, on application rapidly penetrates the outer layer of the skin and augments the oil glands and moisture secretions and helps to keep the outer skin smoother and more youthful looking. Thereby it also fails to satisfy the criteria given in the literature quoted supra on barrier cream that such preparations should neither evaporate nor be absorbed by the skin and should remain active as a protective film against harmful substances for a reasonable time. Again, since it has been found that there are no universal barrier creams and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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