2011 (1) TMI 731 - AT - Central Excise

Tribunal affirms Domex products as cleaning agents under CETH 3402.90. Penalties overturned in classification dispute.

NIRMALA DYECHEM Versus COMMISSIONER OF C. EX., DAMAN

The Tribunal upheld the classification of Domex products under CETH 3402.90, considering them as cleaning agents with germ-killing function as subsidiary. ... Classification - products manufactured and cleared by the appellants as disinfectant preparations - Domex disinfectant cleaner, Domex power cleaner, Domex all purpose disinfectant cleaner and Domex all round home cleaner. - Held that: - Since the product has two functions namely, cleaning and killing germs and arguments to be considered is that product can be called as a composite product made up of different components. Further, HSN notes also provides that if the product has multiple use and therefore, prima facie classifiable in more than one headings, for classification, the General Interpretation Rules have to be applied. In this case, in our opinion, in terms of tariff headings and HSN Notes, the product is classifiable under Chapter 34 and therefore, General Interpretative Rules need not be applied.Regarding extended period of limitation and penalty - Held that:- extended period cannot be invoked in this case - penalty is not imposable since the commission has not explained what was the omission in the declaration filed under Rule 173(B) of Central Excise Rules, warranting imposition of penalty. Issues Involved:1. Classification of Domex products.2. Demand and penalty implications.Issue-Wise Detailed Analysis:1. Classification of Domex Products:- Background: The appellants manufactured and cleared four variants of Domex products. The period involved is from October 2000 to January 2003. The classification claimed by the appellant was under sub-heading 3808.90 of the Central Excise Tariff Act (CETH), while the department proposed to classify them under sub-heading 3402.90.- Previous Litigation: Initially, the Tribunal upheld the classification under CETH 3808.90. However, the Supreme Court remanded the matter for deeper consideration, particularly focusing on whether the products should be classified based on their active agents and main functions.- Appellants' Submissions: The appellants provided extensive literature and reports from independent laboratories confirming that the products killed 100% germs and bacteria. They argued that since the products had the capacity to kill germs, they should be classified as disinfectants under CETH 3808.90.- Department's Argument: The department contended that the main purpose of the product was cleaning, with the germ-killing function being subsidiary. They relied on the decision of the Authority for Advance Rulings and other judicial precedents to support their argument that the primary function of the product determines its classification.- Tribunal's Analysis: The Tribunal examined the manufacturing process, ingredients, and end-use of the products. It noted that the products contained organic surface-active agents and other ingredients typically found in cleaning preparations. The Tribunal referred to the Harmonized System of Nomenclature (HSN) notes, which indicated that cleaning preparations could contain bactericides as subsidiary constituents.- Conclusion: The Tribunal concluded that the essential character of the products was that of cleaning agents, with the germ-killing function being subsidiary. Therefore, the products were correctly classified under CETH 3402.90.2. Demand and Penalty Implications:- Extended Period of Limitation: The Supreme Court had already observed that the extended period of limitation could not be invoked in this case.- Penalty on Appellants: The Commissioner imposed penalties on the appellants for contravening various rules. However, the Tribunal found no justification for the penalties, noting that the dispute was about classification and there was no misdeclaration or suppression of facts.- Revenue's Appeal: The Revenue sought restoration of the order-in-original and setting aside of the order-in-appeal. The Tribunal found that the original adjudicating authority had imposed penalties without proper justification. The Tribunal partially allowed the Revenue's appeal, confirming the classification under CETH 3402.90 but setting aside the penalties.Final Disposition:- The appeals were disposed of with the classification of the products under CETH 3402.90 being upheld.- The penalties imposed on the appellants were set aside.- The Revenue's appeal was partially allowed, confirming the classification and demand within the normal limitation period.