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TMI Blog2019 (2) TMI 400X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ared by them in unit pack. 2.2 Two Show Cause Notices dated 3rd April, 2008 23rd September 2008 respectively were issued to them proposing to classify the goods cleared by them under Heading 33049190 and demanding the duty at applicable rate as per Sr No 66 Notification No 4/2006- CE dated 01.03.2006 as amended. First Show Cause Notice demanded Central Excise Duty of ₹ 156846 + Education Cess of ₹ 3138 + secondary and Higher Education Cess of ₹ 1569 = ₹ 161583/- for the period from April 2007 to September 2007. Second Show Cause Notice demanded Central Excise Duty of ₹ 264024.28 + Education Cess of ₹ 5280.49 + secondary and Higher Education Cess of ₹ 2640.24 = ₹ 271945/- for the period from April 2007 to September 2007. Both the show cause notices demanded interest under Section 11AB and also proposed imposition of penalty under Rule 25 read with section 11AC of the Central Excise Act, 1944. 2.3 After considering the submissions made by the appellants, adjudicating authority decided both the show cause notices as per the order referred in para 1, supra. 2.4 Aggrieved appellants filed appeal before Commissioner (Appeal). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reiterating the order of adjudicating authority and Commissioner (Appeal) submitted that- i. Goods in the present case are cleared in unit packs and are used as beauty product for application on the hands. This is quite evident from the packing itself. Hence they merit classification under heading No 33049190 as has been held by the lower authorities. ii. Since the manner in which the Henna Powder is cleared, it is evident that the same is not meant for dyeing or tanning. Since the single dash entry preceding the three dash entry Henna and four dash entry Henna Powder is raw vegetable materials of a kind used primarily in dyeing or tanning , the same could not have been classified under chapter 14. iii. As the product in form manner in which it is cleared, is classifiable under Chapter 33 of Central Excise Tariff, the process of packing/ repacking from bulk to retail packs shall amount to manufacture as per chapter Note 5 to Chapter 33. iv. There is no res-judicata applicable in the matters relating to classification. The classification is to be done as per the terms of heading and relevant chapter and section Notes. The claim of the appellants that for the past peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 . 3304 BE A UT Y O R M A KE - UP P R E PAR AT I O N S AN D PREPARATIONS FOR THE CARE OF THE SKIN (OTHER THAN MEDICAMENTS), INCLUDING SUNSCREEN OR SUNTAN PREPARATIONS; MANICURE OR PEDICURE PREPARATIONS 3304 10 00 - 3304 20 00 - 3304 30 00 - - Other: 3304 91 -- Powders, whether or not compressed: 3304 91 10 --- Face powders 3304 91 20 --- Talcum powders 3304 91 90 --- Other 3304 99 -- Other: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rohit Pulp and Paper Mills Ltd. v. Collector of Central Excise, reported in 1990 (47) E.L.T. 491 (S.C.) can be applied. The products mentioned in Chapter Note 6 are all preparation of a kind used exclusively on the hair. Brilliantine is a cosmetic hair dressing, so also Pomade is a scented ointment for the hair, and the shampoo is usually a liquid or powder preparation for washing the hair. HSN Explanatory Notes under Heading 33.05 also say that preparations applied to hair on parts of the human body other than scalp are excluded, whereas under the HSN Explanatory Note under Heading 14.04 covering vegetable products not elsewhere specified or included, it is stated under a raw vegetable materials of a kind used primarily in dyeing or tanning that such materials may be untreated, dried, ground or powdered and the more important are inter alia given at Serial No. (6) as Stems, Stalks, leaves and flowers: steins, stalks and leaves of woad, sumach, young fustic , holly, myrtle, sunflower, henna, reseda, indigo plant: leaves of lentiscus (mastic); flowers of safflower (bastard saffron) and dyer s greenwood (Genistra tinctoria; woadwaxen). In the Book titled Textiles Fiber to Fabric - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. In the case of Henna Export Corporation referred, supra, the Henna Powder was described to be used for the purpose of colouring hairs and hence classified under the said heading 3305. In the present case when the same is used as beauty or make up preparation the same gets classified under heading 3304. Even in terms of HSN Explanatory Notes for Chapter Heading 3304, the test for treating the products as preparation classifiable under heading 3304 are satisfied. CBEC Circular 256/90/96-CX dated 30.10.1996 also supports the classification of the said product under Chapter 33 only. The said circular reads as follows: The matter has since been examined in the Board. The Board has observed that the CEGAT Special Bench-C, New Delhi in its order No. 27/93-C, dated 11.2.93 in Appeal No. E/ 1666/92-C in case of Henna Export Corporation v. CCE 1993 (67) E.L.T. 907 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est under Section 11AB and penalty equal to 25% of the accepted amount of duty within thirty days of the date of receipt of notice then the proceeding against him would be deemed to be conclusive (without prejudice to the provisions of Sections 9, 9A and 9AA) as provided in the proviso to sub-section 2 of Section 11A. Sub-section 1A and the proviso to sub-section 2 were inserted with effect from July 13, 2006 and, therefore, have no application to the periods relevant to the two appeals. 15. Sub-section 2B of Section 11A provides that in case the person in default makes payment of the escaped amount of duty before the service of notice then the Revenue will not give him the notice under sub-section 1. This, perhaps, is the basis of the common though erroneous view that no penalty would be leviable if the escaped amount of duty is paid before the service of notice. It, however, overlooks the two explanations qualifying the main provision. Explanation 1 makes it clear that the payment would, nevertheless, be subject to imposition of interest under Section 11AB. Explanation 2 makes it further clear that in case the escape of duty is intentional and by reason of deception the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 11A relates to notices issued prior to the date on which the Finance Act, 2000 receives the assent of the President; (1) any amount paid to the credit of the Central Government prior to the date of communication of the order referred to in the first proviso or the fourth proviso shall be adjusted against the total amount due from such person.] 17. The main body of Section 11AC lays down the conditions and circumstances that would attract penalty and the various provisos enumerate the conditions, subject to which and the extent to which the penalty may be reduced. 18. One cannot fail to notice that both the proviso to sub-section 1 of Section 11A and Section 11AC use the same expressions : ....by reasons of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty,... . In other words the conditions that would extend the normal period of one year to five years would also attract the imposition of penalty. It, therefore, follows that if the notice under Section 11A(1) states that the escaped duty was the result of any con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essential ingredient and whether there is a scope for levying penalty below the prescribed minimum. Before the Division Bench, stand of the revenue was that said section should be read as penalty for statutory offence and the authority imposing penalty has no discretion in the matter of imposition of penalty and the adjudicating authority in such cases was duty bound to impose penalty equal to the duties so determined. The assessee on the other hand referred to Section 271(1)(c) of the Income Tax Act, 1961 (in short the IT Act ) taking the stand that Section 11AC of the Act is identically worded and in a given case it was open to the assessing officer not to impose any penalty. The Division Bench made reference to Rule 96ZQ and Rule 96ZO of the Central Excise Rules, 1944 (in short the Rules ) and a decision of this Court in Chairman, SEBI v. Shriram Mutual Fund Anr. [2006 (5) SCC 361] and was of the view that the basic scheme for imposition of penalty under section 271(1)(c) of IT Act, Section 11AC of the Act and Rule 96ZQ(5) of the Rules is common. According to the Division Bench the correct position in law was laid down in Chairman, SEBI s case (supra) and not in Dilip Shroff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f in some statues mens rea is specifically provided for, so is the limit or imposition of penalty, that is the maximum fixed or the quantum has to be between two limits fixed. In the cases at hand, there is no variable and, therefore, no discretion. It is pointed out that prior to insertion of Section 11AC, Rule 173Q was in vogue in which no mens rea was provided for. It only stated which he knows or has reason to believe . The said clause referred to wilful action. According to learned counsel what was inferentially provided in some respects in Rule 173Q, now stands explicitly provided in Section 11AC. Where the outer limit of penalty is fixed and the statute provides that it should not exceed a particular limit, that itself indicates scope for discretion but that is not the case here. 23. The decision in Dharamendra Textile must, therefore, be understood to mean that though the application of Section 11AC would depend upon the existence or otherwise of the conditions expressly stated in the section, once the section is applicable in a case the concerned authority would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determine ..... X X X X Extracts X X X X X X X X Extracts X X X X
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