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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 5902-5909 OF 2005

COMMISSIONER OF CENTRAL EXCISE, VAPI .....APPELLANT(S)

VERSUS

M/S. GLOBAL HEALTH CARE PRODUCTS PARTNERSHIP FIRM & ORS. .....RESPONDENT(S)

W I T H

CIVIL APPEAL NO. 3569 OF 2006

J U D G M E N T

A.K. SIKRI, J.

The  respondent  No.1  (hereinafter  referred  to  as  the

'assessee') is engaged in the manufacture of different brands of

toothpaste  and  these  are  manufactured  exclusively  for  M/s.

Hindustan Lever Limited, Mumbai (for  short,  'HLL')  since 1998.

Major brands of HLL manufactured by the assessee are Close-Up

Red,  Close-Up  Blue,  Close-Up  Green  and  Pepsodent  falling

under Chapter 33 of the Excise Tariff.  The assessee is registered

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with the appellant/Revenue and has been paying the excise duty

on the aforesaid products under Chapter sub-heading 3306.10 of

the tariff.  There is no dispute about these products.

2) From  July  01,  2001,  a  new  product  known  as  'Close-Up

Whitening'  was  introduced  by  the  assessee.   The  assessee

classified this product under Chapter sub-heading 3306.90.  The

Revenue  treated  the  aforesaid  classification  as  erroneous  as

according  to  it  Close-Up  Whitening  also  falls  under  Chapter

sub-heading 3306.10 and not 3306.90.  It also suspected that this

product  was  deliberately  misclassified  in  the  said  heading  to

evade payment  of  proper  central  excise  duties  by  resorting  to

assessment of the product under Section 4 of the Central Excise

Act,  1944  (hereinafter  referred  to  as  the  'Act')  instead  of

assessment  under  Section  4A  thereof.   Investigation  into  the

matter was initiated resulting into searching of the premises of the

assessee.  Some documents, which the Revenue claims to be

incriminating in nature, were seized under Section 12 of the Act,

including a Box File with Heading  'Production Manual',  namely,

the  literature  containing  pages  1  to  235  issued  by  the  Dental

Information Centre of HLL.

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3) On the scrutiny of these documents, the Revenue noticed that the

difference  in  raw  materials  used  for  the  product  in  question,

namely,  Close-Up  Whitening,  and  the  other  products,  i.e.

Close-Up Red/Blue/Green is the additional presence of 2.8% and

0.2%  w/s  Silicon  Agglomerate  and  Bluer  Agglomerates

respectively  in  Close-Up  Whitening  and  absence  of  0.1% w/w

2,4,4  Tri  Chloro  2  hydroxy  Diphenyl  Ehter  in  this  product  in

comparison with the other three products.  It was also found that

as far as Close-Up Whitening is concerned, there was presence

of  'uniformity  dispersed  blue  speckles'.   Statements  of  certain

persons  were  also  recorded.   On  the  basis  of  the  aforesaid

material,  the  Revenue  took  the  position  that  the  aforesaid

differences did not change the essential character of the product

in question which still remained 'toothpaste' and, therefore, it was

classifiable under Chapter sub-heading 3306.10.

4) Show-cause notice dated March 21, 2002 was issued proposing

confiscation  of  the  goods  and  since  these  goods  had  already

been  provisionally  released  on  payment  of  full  excise  duty  as

leviable  on  the  goods  under  Chapter  sub-heading  3306.10,

show-cause notice stated as to why the amount of differential duty

amounting to  ₹22,64,176 be not confirmed under the provisions

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of Section 11A(1) of the Act and why redemption fine in lieu of

confiscation as well as penalty be not imposed.  The assessee

filed its reply thereto contending that it was not a toothpaste and,

therefore, rightly classified by it under sub-heading 3306.90.  The

aforementioned contention of the assessee was brushed aside by

the Commissioner  in  his  Order-in-Original  dated December 10,

2003, thereby confirming the excise duty demand as mentioned in

the  show-cause  notice.   He,  inter  alia,  recorded  the  following

findings in his order:

“(i)  Close Up Whitening was known in the market or  to  the  trade  and  public  as  tooth  paste  for cleaning  the  teeth  as  such  it  was  nothing  but tooth-paste used for cleaning the teeth.

(ii)  M/s. Global Health Care Products in collusion with  M/s.  Hindustan  Lever  Ltd.  by  willfully suppressing the fact that Close-up Whitening was a variant of Close Up tooth paste classifiable under Tariff Heading 3306.10 failed to show particulars of classification,  assessable  value  and duty  leviable with an intention to evade payment  of  applicable central excise duties.

(iii)   The  contention  of  M/s.  Global  Health  Care products that the product Close Up Whitening was classified under chapter sub heading No. 3306.90 was not accepted.

(iv)  The said product was correctly classified under sub  heading  3306.10  of  the  Tariff  attracting  the provisions of Section 4A of the Act.”

5) Aggrieved by  the aforesaid  order, the respondents  herein  filed

appeals  before  the  Custom  Excise  &  Service  Tax  Appellate

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Tribunal, Mumbai (for short, the 'Tribunal').  These appeals have

been allowed by the Tribunal vide impugned order dated March

11,  2005.   In  these  appeals,  validity  and  correctness  of  the

aforesaid order of the Tribunal is questioned by the Revenue.

6) Before proceeding further, it would be necessary to take note of

the exact language of the relevant entries.  As mentioned above,

it  is the entry Heading 3306 of Central Excise Tariff  Act,  1985,

which is attracted in the present case.  The only question is as to

whether  the  product  in  question  is  to  be  classified  under

sub-heading 3306.90 or 3306.10.  Chapter Heading 3306 of the

Tariff Act, with the aforesaid sub-headings, is reproduced below:

33.06 Preparations for oral or dental hygiene, including dentifrices  (for  example,  toothpaste  and  tooth powder and denture fixative pastes and powders)

3306.10 Tooth powders and toothpaste 3306.90 Other.

7) The  Chapter  Heading  makes  it  clear  that  it  covers  various

preparations  for  oral  and  dental  hygiene.   These  preparations

specifically include dentifrices.  Examples of such oral and dental

hygiene  are  also  given,  like  toothpaste,  tooth  powder, denture

fixative pastes and powders.  Out of these, two products which

are covered by sub-heading 3306.10 are  toothpaste  and tooth

powder.  Other oral and dental hygiene preparations fall under the

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reminder  sub-heading,  i.e.  3306.90,  nomenclature  of  which  is

'Other'.   Further,  as  pointed  out  above,  the  Revenue  treats

Close-Up Whitening as 'toothpaste'.  The plea of the assessee, on

the other hand, is that it is not toothpaste but a  'dental cleaner',

which  is  different  from  toothpaste  and,  therefore,  has  to

necessarily be covered by the residual sub-heading, i.e. 3306.90.

Therefore,  the  moot  question  is  as  to  whether  Close-Up

Whitening is toothpaste or not.  If it is found to be toothpaste then

the stand of the Revenue would be justified.  On the other hand, if

the product does not qualify to be a toothpaste, then the assessee

stands vindicated.   

8) Having noticed the controversy involved, we would like to point

out the main ingredients of the product at this stage:

There is no dispute that most of the ingredients of the product

Close-Up  Whitening  are  the  same  which  are  used  in  the

manufacture of the other products, namely, Close-Up Red/Blue/

Green, which are treated as toothpaste by the assessee itself.

There  are,  however,  additional  ingredients  used  in  the

manufacture of the product in question, which are accepted by the

Revenue also and noticed above.  Apart from additional presence

of  Silicon  Agglomerate  and  Bluer  Agglomerate  of  specified

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percentage and absence of Tri Chloro 2 hydroxy Diphenyl Ether,

there  is  a  presence  of  uniformity  dispersed  blue  speckles  in

Close-Up Whitening.  There is also additional step of 'addition of

silica agglomerates'.  In fact, it is this ingredient which felicitates

at  getting uniformity  dispersed speckles.   It  is  on the basis  of

these  additional  factors,  one  has  to  determine  as  to  whether

Close-Up  Whitening  loses  the  character  of  toothpaste  and

assumes the characteristics of  another  product,  namely, dental

cleaner.

9) A reading of the order of the Commissioner, to which our attention

was  drawn  by  Mr.  K.  Radhakrishnan,  learned  senior  counsel

appearing for the appellant, with much emphasis, would disclose

that the Commissioner relied upon HSN Notes, i.e. Harmonized

Commodity  Description  and  Coding  System,  wherein  the

preparation  of  oral  and  dental  hygiene  is  mentioned  in  the

following form:

33.06 - PREPARATIONS FOR ORAL OR DENTAL HYGIENE, INCLUDING  DENTURE  FIXATIVE  PASTES  AND POWDERS: YARN USED TO CLEAN BETWEEN THE TEETH  (DENTAL FLOSS),  IN  INDIVIDUAL RETAIL PACKAGES.

3306.10 Dentifrices

3306.20 Yarn used to clean between the teeth (dental floss)

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3306.90 Other

This  heading  covers  preparations  for  oral  or dental hygiene such as:

(I)  Dentifrices of all types:

(1)   Tooth pastes and other  preparations for teeth.  These are substances or preparations used with a toothbrush, whether for cleaning or polishing the accessible surfaces of teeth or for  other  purposes  such  as  anticaries prophylactic treatment.

Toothpastes  and  other  preparations for  teeth  remain  classified  in  this  heading, whether  or  not  they  contain  abrasives  and whether or not they are used by dentists.

(2)   Denture  cleaners,  i.e.,  preparations  for cleaning or polishing dentures, whether or not they contain agents with abrasive properties.

(II)  Mouth washes and oral perfumes.

(III)  Denture fixative pastes, powders and tablets.

The heading also covers yarn used to clean between  the  teeth,  in  individual  retail  packages (dental floss).”

10) The  Commissioner,  thus,  noted  that  in  the  HSN  Notes,

sub-heading 3306.10 deals with dentifrices.  The Commissioner

noted that the meaning of dentifrices as per the Concise Oxford

Dictionary is  'a paste or powder for cleaning of teeth'.  On that

basis,  he  concluded  that  the  product  in  question  was  paste,

namely,  the  toothpaste  for  cleaning  the  teeth  and,  therefore,

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would  fall  under  sub-heading  3306.10.   En  passe,  the

Commissioner also observed that there is no major difference in

these products, namely, Close-Up Whitening and Close-Up Red/

Blue/Green,  except  one  ingredient  used  in  the  manufacture  of

Close-Up Whitening and the addition of that ingredient does not

change the purpose, nature as well as definition of the product in

a common market parlance.  He observed that in the market the

product was known as toothpaste.  He also observed that it  is

treated as toothpaste as per the product manual issued by the

Dental Invocation Centre, Mumbai.  Discussion is summed up in

para 32 of the order passed by the Commissioner, which reads as

under:

“32.  As narrated in the SCN that the tooth paste, being dentifrice has been correctly classified under the  HSN and the  Central  Excise  Tariff  has  been based on HSN.  Accordingly it is essential to follow the correct classification of the product in question as  described  and  classified  under  the  relevant chapter  of  HSN.   In  this  connection  it  may  be mentioned that the Hon'ble Supreme Court in the case of CCE, Shillong vs. Wood Craft Product Ltd. Reported in 1995 (77) ELT 23 (SC) in para 18 has held  that  the  structure  of  Central  Excise  Tariff  is based  on  the  internationally  accepted nomenclature found in the HSN and therefore any dispute relating to tariff classification must, as far as  possible  be  resolved  with  reference  to  the nomenclature  indicated by the  HSN unless there be an express  different  intention  indicated  in  the Central Excise Tariff Act, 1985 itself.

Further  it  may  be  mentioned  that  the Hon'ble Bombay High Court in the case of Jagdish

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D. Devgekar Vs. Collector of Central Excise, Poona reported in 1978 (2) ELT (J581) in para 6 has held that  the  correct  test  in  interpreting  any  item mentioned  in  the  first  schedule  to  the  Central Excise Act is to see the commercial sense in which the  item  is  understood  or  the  sense  in  which traders or persons dealing in that terms understand it and not the technical or scientific sense.

Even it may be mentioned that the Hon'ble Tribunal in case Veto Co. Vs. CCE reported in 1992 (62) ELT 584 (T) in para 6 has held that the goods have  to  be  classified  under  the  tariff  schedule according to their popular meaning or as they are understood in their commercial sense and not as per  their  scientific  or  technical  meaning.   While holding so the Hon'ble Tribunal has referred to the observations  of  the  Hon'ble  Supreme  Court's judgment  in  case  of  Plasmac  Machine  Mfg.  Co. Pvt. Ltd. Vs. CCE reported in 1991 (51) ELT 161 (SC) (Para 13).”

11) The aforesaid approach adopted by the Commissioner has been

found fault  with by the Tribunal.   The Tribunal pointed out that

there was material difference in the sub-heading 3306.10 in the

Indian  statute  when  contrasted  with  Harmonized  Commodity

Description and Coding System.  Whereas, as per the tariff entry

3306.10 in the Excise Act,  it  is  'tooth powder'  and  'toothpaste',

under  the  Harmonized  Commodity  Description  and  Coding

System, what is mentioned is 'dentifrices'.  It is further noticed by

the  Tribunal  that  dentifrices  was  more  generic  in  nature  as  it

recognized all three types of products, namely, (i) toothpaste, (ii)

other preparations for teeth and (iii) denture cleaners, than tooth

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powders  and  toothpaste.   Thus,  when  under  Indian  statutory

regime there is a restricted sub-heading under 3306.10, namely,

tooth  powder  and  toothpaste  only,  the  approach  of  the

Commissioner  in  taking  aid  of  HSN  Notes  was  erroneous.

Discussion on this aspect runs as follows:

“A perusal of the HSN notes would indicate that all three  types  of  'Dentifrices'  are  recognized  as  (i) 'Toothpaste',  (ii)  Other preparations for teeth,  and (iii) 'Denture cleaners'.   The Note further explains that “Dentifrices” to include 'toothpaste' and “other preparations  for  teeth”  whether  for  cleaning  or polishing  the  assessable  surface  of  teeth  or  for other  purposes  such  an  Anticaries  prophylactic treatment.   The  Note  also  enumerates  that 'toothpaste'  and  'other  preparations  for  teeth' remains classified under Heading 3306 whether or not they contain abrasives and whether or not they are  used  by  dentist.   The  correct  scope  of  the heading as per the submission of the appellants is that  when one refers to  HSN item 3306 and the bifurcations as also under  CETA 1985 there is  a variance  seen.   In  other  words,  this  bifurcation under  Heading  3306  for  HSN  and  is  not  pari materia and under CETA 1985 and therefore the sub heading structure of HSN would not apply to CETA.  The CETA proves preparation for  oral  or dental  hygiene  including  Dentifrices  and  Denture Fixative paste and powders under Heading 3306 and at the four digit level it is para material HSN. The scope of sub heading 3306.10 of CETA 1985 restricts it to only 'tooth powder and paste' and any entity  which  is  not  a  'toothpowder  or  toothpaste' would  be  covered under  heading  3306.90.   This submission has to be upheld.”

We find ourselves in agreement with the aforesaid approach of

the Tribunal having regard to the cogent reasons given by it.

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12) This Court in the case of  Camlin Limited  v.  Commissioner of

Central Excise, Mumbai1 held that if the entries under HSN and

the  entries  under  the  Central  Excise  Tariff  are  different,  then

reliance cannot be placed upon HSN Notes for the purposes of

classification  of  goods  under  Central  Excise  Tariff.   This  is  so

stated  in  para  24  of  the  judgment  that  makes  the  following

reading:

“24.  In our considered view, the Tribunal erred in relying upon the HSN for  the purpose of  marker inks  in  classifying  them  under  Chapter Sub-Heading  3215.90  of  the  said  Tariff.   The Tribunal failed to appreciate that the entries under the HSN and the entries under the said Tariff are completely  different.   As  mentioned  above,  it  is settled law that when the entries in the HSN and the said Tariff are not aligned, reliance cannot be placed upon HSN r the purpose of classification of goods under the said Tariff.  One of the factors on which  the  Tribunal  based  its  conclusion  is  the entries  in  the  HSN.   The  said  conclusion  in  the order  of  the  Tribunal  is,  therefore,  vitiated  and, accordingly, set aside.  We agree with the findings recorded by the Commissioner (Appeals).”

13) The issue, therefore, has to be decided dehors HSN Notes as aid

thereof cannot be taken in the instant case.

14) Faced with the aforesaid position, Mr. Radhakrishnan argued that

the  Commissioner  has  also  come to  the  conclusion  that  mere

addition of one ingredient does not change the purpose, nature as

well  as  character  of  the  product  and  further  the  product  was 1 (2008) 9 SCC 82

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known in the market as  'toothpaste'.   The Tribunal has differed

with the aforesaid view.   

15) In the first place, it  is pointed out that there is no evidence on

record  placed  by  the  Revenue  which  would  reflect  that  the

product  in  question  is  known to  the consumers  as toothpaste.

When this was pointed out to Mr. Radhakrishnan, he was unable

to pinpoint any evidence in support that was led by the Revenue.

16) We may record that a finding is arrived at by the Tribunal to the

effect that Close-Up Whitening is not a toothpaste but a dental

cleaner.  We are convinced that this finding is perfectly just and

proper for the following reasons:

(a) The  Tribunal  has  pointed  out  the  differences  which  are  noted

above  and  accepted  by  the  Department  itself.   From  these

differences, it is held that ingredients and ratio of all  the inputs

which  go  into  the  manufacturing  of  a  toothpaste  and  dental

cleaner are different and varying.  The dental cleaner, in addition,

has two more ingredients, namely, Silicon Agglomerate and Bluer

Agglomerates, which play an active role as abrasive.

(b) Even  the  manufacturing  process  of  Close-Up  toothpaste  and

Close-up  Whitening  is  different.   While  the  total  stages  for

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manufacturing  toothpaste  were  nine,  the  number  of  stages  for

manufacture of Close-Up Whitening were eleven.  It  takes 120

minutes  to  manufacture  a  toothpaste  tube,  while  it  takes  155

minutes to effect the manufacture of Close-Up Whitening.

(c) Statement of one Mr. N.H. Bijlani, the only expert in this case and

whose  statement  was  recorded  on  January  09,  2002,  was

referred  to  by  the  Tribunal.   In  this  statement,  Mr.  Bijlani  has

explained the difference between toothpaste and dental cleaners

and has opined that Close-Up Whitening dental cleaner cannot be

equated with toothpaste.

(d) The Tribunal has also found that as per records, classification of

the same product in an earlier avtar/brand was acceptable to the

Department as the same was classified under a different name for

all these years when the rate of duty under Heading 3306.90 were

higher than that under Heading 3306.10. It, thus, observed that

mere change of duty and brand name cannot be the reason to

alter classification.

(e) Another important aspect, in conjunction with aforesaid features

which has to be kept in mind, is that in the instant case even Food

and  Drug  Authorities  (FDA)  from  where  prior  permission  is

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needed for manufacturing  'toothpaste' and sale thereof, had not

registered the product in question as 'toothpaste' but as a dental

cleaner.  It becomes a supporting factor along with other features

of  the product,  which have been taken note  of  and discussed

above.

17) The  upshot  of  the  aforesaid  discussion  would  be  to  hold  that

Close-Up Whitening dental cleaner is not a 'toothpaste' but other

form of dental hygiene and, therefore will  have to be classified

under  sub-heading 3306.90 as a consequence.  These appeals

are found bereft of any merits and are, accordingly, dismissed.  

No costs.

.............................................J. (A.K. SIKRI)

.............................................J. (ROHINTON FALI NARIMAN)

NEW DELHI; JULY 28, 2015.

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