S.S. Sekhon, (T)

1. Revenue is in appeal. Respondents are well known manufacturers trader of cosmetics. At a godown in Thane. Maharashtra called Raymond Duty Paid Godown they receive various Cosmetics / Toilet preparation etc. returned from the market / suppliers / manufacturers. Fresh bottles, Hair Dye Developers, packaging material are received without payment of duty or and reversal of Modvat Credit availed on such packaging materials like caps, bottles etc from factory of M/s. J.K. Helen Curtis, the assessee appellant herein. At this Raymond Duty Paid Godown, they conducted activities termed "Redressing" the packages received from the market. The activities are-

a) Shampoos: In case of damaged bottles received from outside, new bottles were used by filling the shampoo from new labels showing the brand name for example Tiara quality of the shampoo, EGG, CREAM SHAMPOO (which was called front label). They are affixed a label which contained the information regarding brand name, quality of the shampoo, instruction to use the same, date of manufacture, content, batch called back side label. They put month and year against column Mfd by stamping with rubber stamp, the date of repacking of the shampoo bottle as R.D . R.D means redressing which included complete repacking and re-labelling of the product. In case the bottles were in good condition and the labels were spoiled, then they changed the labels cue mentioned above and also change outers shippers (cardboard boxes), in case the same were damaged. In case of cosmetics brought back on account of saleable but old stock, they change the date of manufacturing ana put new manufacturing date at the time of sending the cosmetics outside. Against batch no., they put stamp of "R" before the original batch number. They also put the price on the label which is prevailing in the month.

b) Hair Dye : In case of material saleable in the market the hollies containing developer were thrown away and new bottles containing developer were replaced in the carton. The new bottles containing developer were received from their factory on internal Gate passes. The cartons were also changed and date of manufacture was also affixed. Outer shippers were also changed.

c) Talcum powder:- In case of material saleable in the market they put stickers at the bottom of the Tin changing the dale of manufacture and against the batch No. as usual put the rubber stamp "R.D". In case of minor defective Tins the talcum powder was treated as seconds and was sent to Retail shop. Slickers indicating price M.R.P. prevailing in the Month of repacking of the Tins were affixed on the original price shown on the Tins. He further stated that the packing material viz. bottles cartons shippers and labels were received from Indigo stores of the factory. Indigo stores means raw and packing material stores of the factory.

A notice was issued proposing recovery of duty on such activities as undertaken at Raymond Duty Paid Godown by considering them to be amounting to manufacture without licence, therefore confiscation and penal liability were also proposed. Commissioner vide the impugned order, after getting the Range Superintendents re-verification report and considering the scope of note to Chapter 33 of the Central Excise Tariff Act, 1985, Board circular No. 342/58/97-Cxat 81097 held-

(i) The assessee has also raised the question of limitation on the ground that there was no wilful suppression on their part to evade Central Excise duty. I find that the assessee had not declared activities like repacking, relabelling, refilling, in the name of redressing carried out in their duty paid godown, therefore extended period of limitation is invokable in this case. The proviso to Section 11A of the Central Excise Act, 1944 has been rightly invoked in the subject case because the charge of suppression of material facts stand proved in view of the assessee not taking Centra! Excise licence as required Under Section 6 of the Central Excise Act, 1944 and also by not filling the C.L. & P.L. as required under Rule 173B and 173C respectively of Central Excise Rules, 1944. Hence the duty amounting to Rs. 8,45,132.42 is correctly demanded on the goods on which manufacturing activities were carried out in terms of Note 4 of Chapter 33.

ii) In view of the above discussions, the amount of duty demanded to the tune of Rs. 11,52,237.56 on the product Tru Tone Hair Dye stick 9.5 gm. the amount of duty demanded to tune of Rs. 2,54,444.96 on the goods transferred on payment duty to duty paid godown and the duty demanded to the tune of Rs. 1,44,206.06 on the products Premium Cream and Premium Beauty Talc packed in tin duly retimed from trade not requiring any duty demanded of Rs. 23,96,021 -. Accordingly, the revised demand comes to Rs. 8,45,13 2.00.

iii) As regards the goods valued at Rs. 2,50,077.20, found in their duty paid godown, duly seized on 18.1.90, I find that on the said goods manufacturing activities in terms of Note 4 to Chapter 33 had not been carried out as these goods were in fully manufactured and marketable condition and were not accounted for in statutory records and therefore, are liable to confiscation.

And imposed a penalty of 1 Lakh on Respondents and gave an option of redemption fine of Rs. 50,000/- on good seized.

2. Revenue is aggrieved by their order/finding of the Commissioner on the following grounds-

a) the assessee has not produced any specific documents to indicate that the product was received and cleared from the godown in the same packing in which those were received from M/s. Jas Raney and Co., New Delhi, in as much as

aa) The description of goods appearing on the invoices issued by M/s. Jas Raney Co., New Delhi is different from those appearing on invoices issued by assessee in respect of "Hair Dye Stick". The representative invoices of supplier of the goods have the following description. "Hair Dye Stick". The invoices issued by M/s. J.K. Helene Curtis Ltd. has described the product as "Tru Tone Hair Dye Stick 9.5 Gm" e.g. invoices Nos. 2544 dt. 10.4.86, 2566 dt. 5.9.87, 2568 dt. 30.9.87 of M/s. Jas Raney & Company Ltd., for receipt of the goods show the description of gods as "Hair Dye Stick" only. Against these, the description of goods appearing on the invoice Nos. MDB/29 86-87 dated 18.1.86, PMC 625 86 87 dated 4.8.87, DEC 184 87-88 dated 5.6.87 of M/s. J.K. Helene Curtis Ltd. has been shown as "Tru Tone Hair Dye Stick 9.5 gm". If the goods were cleared in the same packing in which those were received then there would have no scope for including the brand name "Tru Tone" on the product.

bb) Likewise, the specific size weight of the product is also not mentioned on the invoices issued by M/s. Jas Raney & Co., New Delhi. The invoices issued by Ms. J.K. Helene Curtis Ltd., indicate the package weight size as 9.5 gm per stick.

cc) There is a vast difference in the price at which the "Hair Dye Stick" is purchased and the price at which those are sold by M/s. J. K. Helene Curtis Ltd., from the godown. E.g. invoice Nos. 2562/18.6.87, 2566/5.9.87. 2568/30.9.87, of M/s. Jas Raney & Co., New Delhi indicate the price of "Hair Dye Stick" as Rs. 20.40 while those referred to in invoice Nos. BOM302/87-88 dated 2.7.87, BOM 408/87-88 dated 29.7.87. BOM 452/87-88 dated 8.8.87 of M/s. J.K. Helene Curtis Ltd., indicates the price of "Tru Tone Hair Dye Stick 9.5 gm" as Rs. 45.55. if the goods were received and cleared from the godown in the same packing then there was no reason for the sale price of goods being more than double of the purchase price unless some manufacturing activities as mentioned in show cause notice is carried out.

It is thus clear that the goods were not being cleared from the godown premises in the same packing in which those were received. The above discrepancies in the description and the absence of the particulars of the weight size of the stick gives credence to the allegation that manufacturing activities as mentioned in note 4 to chapter 13 of the tariff was being carried out by the assessee from their godown premise. Therefore in view of the foregoing it could he appreciated that there was sufficient evidence on record to sustain the allegation made in the Show Cause Notice that the activities of note 4 of chapter 33 of the schedule to Central Excise Tariff Act. The commissioner (Adj), Mumbai has failed to appreciate the above points and has thus erred in arriving at decision that the demand is not tenable.

ii) In paragraph 42 of the order, the Commissioner (Adj), Mumbai had erred in arriving at a conclusion that the demand for duty to the extent of Rs. 2,54,444.95 being the duty in respect of goods which were transferred from factory on payment of Central Excise duty to Raymond godown is not justified as he has failed to appreciate the fact that:-

a) The submission made by the assessee were found to be different from those reported by the Range Superintendent in his verification report. If the assessees submission, the Range Superintendents report, and the discussion in paragraph 43 to 49 of the order are considered, the following position emerges.

DUTY INVOLVED



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Relief given in the Relief not Total

Order given

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Product other than Premium Cream

Premium cream and premium

And Premium Talc Talc

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1 (a) 1(b) 2 3

1,33,038.70 1,21,406.25 50,874.12 3,05,319.07

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1 (a) + 1 (b) = Rs. 2,54,444.95

The assessee, in his submission dated 6.1.98, had actually claimed relief to the extent of Rs. 3,05,319/- on the ground that the goods in question were received from the warehouse to the Raymond Godown on payment of duty. Against this amount, it was reported by the Range Superintendent that the assessee had produced original gate passes etc. for the goods listed in paragraph 42 of the order covering duty amounting to Rs. 2,54,444.95 only. Therefore, considering these aspect, the Commissioner (Adj), Mumbai had observed in paragraph 43 of the order that the amount of Rs. 2,54,444.95 also included an amount of Rs. 1,21,406.25 pertaining to "Premium Cream" and "Premium Beauty Talc", which were sold as "Seconds" which clearly mean thai the item was not sold as such i.e. in the packing in which it was originally received from the factoty and hence it is obvious that before such sale the package in which the goods were received is required to be opened, examined and tested by chemist etc. before arriving at conclusion that the goods could be sold as "Second". Shri. R.Y. Kamble, Warehouse Assistant had mentioned in his statement that the saleability of the goods was required to be ascertained before the goods are either desrroyea or "the various procedure are followed to make the goods marketable. This aspect has been mentioned in paragraph 44 of the order and in terms of note 4 to chapter 33 of the Central Excise Tariff, Act, 1985, the processes of re-packing carried out by the assessee for making the goods marketable amount to manufacture. It is thus clear that manufacturing activities were being carried out by the assessee on these products. Besides it has been brought out by the assessee in their letter dated 06.01.1998 that only the goods involving duty amounting to Rs. 1,07,614.57 (and not Rs. 1,21,406.25) were the goods which were cleared from bonded store room of the factory to the godown. Hence, the Commissioner has erred and has ignored factual discrepancy. Also, far the three amount related to product i.e. Rs. 1,33,038.70, Rs. 1,21,406.25, Rs. 50,874.12 the Commissioner (Adj), Mumbai has taken three different stands. For the amount of Rs. 50,874.12 the Commissioner (Adj), Mumbai has not given any relief to the assessee on the ground that the processes carried out by the assessee amounted to manufacture. In contract, for the amount of Rs. 1,21,406.25 the Commissioner (Adj), Mumbai has observed that the product premium cream and premium Beauty Talc related to the amount, was being sold as "Seconds", but the same does not amount to manufacture and no duty is recoverable as the goods were received from the warehouse on payment of duty. The demand for duty amounting to Rs. 1,33,038.70 was not considered as tenable as duty was paid on the goods received from warehouse. Thus although the products is the same, conflicting stands were taken by the Commissioner (Adj), Mumbai while passing the orders. The Commissioner (Adj), Mumbai has therefore erred in arriving at a conclusion that demand to the extent of Rs. 2,54,444.95 is not tenable.

iii) In paragraph 43 of the order, the Commissioner (Adj), Mumbai has observed that in view of the details appearing on the sample shown to him and also in view of the Range Supreintendents report, demand to the extent of Rs. 1,44,206.06 is not justified as no re-labelling is required on the container While making such an observation, the Commissioner (Adj) Mumbai had jailed to appreciate the fact that it has been specifically brought out in the statemtn of R.Y. Kamble as referred in the show cause notice that in respect of Talcum powder when the material is saleable, a sticker is affixed at the bottom of the tin changing the date of manufacture against the Batch No. by putting the rubber stamp R.D.. Thus, this activity clearly indicates labelling re-labelling or the adoption of trestment to render the products marketable to the consumers as-specified in Note 4 to chapter 33. Hence, the duty is due on this item. Besides for the product premium cream and premium Beauty Talc also the Commissioner (Adj), Mumbai had taken different stands on the total amount of duty involved for the product. The assessee has in their submission dated 6.1.98 had claimed relief for duty amounting to Rs. 1,57,997.74. Against the said amount the Commissioner (Adj), Mumbai has granted relief for the amount of Rs. 1,44,206.06 on the ground that process of re-labelling is not required to be carried out on the goods. Thus same products demand was confirmed to the extent of Rs. 13,791.68, but dropped for the extent of Rs. 1,44,206.06 although the process of repacking was being carried out on the goods and the activity amounted to manufacture. The commissioner (Adj), Mumbai had therefore, erred in arriving at a conclusion that the demand to the extent of Rs. 1,44,206.06 is not tenable on the premium cream and premium Beauty Talc cleared from the godown of the assessee.

3. Respondent in the Cross objection has taken the parts -

i) The issue of demand being barred by limitation

ii) Market Note 4 to chapter 33 would not render the activities of "Redressing" as amount to manufacture, being varied and different, for each item/package and circular of Board 342/58/99 - CX dated 8/10/97 was not applied correctly, as no new product emerged.

4. After hearing both sides considering the issue it is found-

a) demand of duty amounting to Rs. 3,06,319 and Rs. 1,55,206/- as made out in goods is to be set aside and the matter is to be remanded back to re-determine the exact process undertaken which is being considered and would amount to manufacture. This should be done after hearing the Respondents.

b) The appeal as Regards demand is TRU TONE Hair Dye Stick amounting to Rs. 11,52,237/- is dismissed after finding that the same is arrived at on presumptions.

c) Since the matter is being remanded back for re-adjudication on other items, the questions raised in the Cross objections as regards manufacture and interpretation of Boards circulars and quantum of penalty left open to be re-determined.

5. Appeal and Cross objection disposed off accordingly.

(Pronounced in Court)