Excel for
Chartered Accountants
Supreme Court in its latest judgment has held that “Close-Up Whitening” is not a toothpaste but a dental cleaner and hence is subject to payment of excise duty at a rate different from toothpaste.
Case Details:
Case No. :
Civil Appeal Nos. 5902-5909 of 2005 with Civil Appeal No. 3569 of 2006
Parties:
Commissioner of Central Excise, Vapi (Appellant) vs M/s Global Health Care Products Partnership Firm & Ors (Respondent)
Judgment Date:
28-07-2015
Coram:
Justice A. K. Sikri and Justice Rohinton Fali Nariman
Case Laws referred:
Camlin Limited v. Commissioner of Central Excise, Mumbai (2008) 9 SCC 82
Facts of the Case:
The assessee was engaged in the manufacture of different brands of toothpaste exclusively for M/s. Hindustan Lever Limited, Mumbai (HLL) since 1998. Major brands manufactured were Close-Up Red, Close-Up Blue, Close-Up Green and Pepsodent falling under Chapter 33 of the Excise Tariff. The assessee was registered with the exise department and had been paying the excise duty on the aforesaid products under Chapter sub-heading 3306.10 of the tariff act.
From July 01, 2001, a new product 'Close-Up Whitening' was introduced which was classified under sub-heading 3306.90. The Revenue treated the aforesaid classification as erroneous as according to it Close-Up Whitening also fell under Chapter sub-heading 3306.10 and not 3306.90. It also alleged that it was deliberately misclassified to evade payment of proper central excise duties. The assessee contended that Closeup Whitening was not a toothpaste and, therefore it rightly classified it under different sub-heading.
As per Chapter Heading 3306 of the Tariff Act the following classification is as under;
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 Others
On appeal, CESTA (Tribunal) also upheld the assessees contentions.
Excerpts from the Judgment of Supreme Court:
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.
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 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 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.
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.
Download Full Judgment Click Here >>
Supreme Court-Close-Up Whitening is not Toothpaste but a Dental Cleaner Hence is subject to Excise Duty at a Rate Different from Toothpaste | 28-07-2015 |
