1995 (3) TMI 107 - SC - Central Excise

Supreme Court overturns Tribunal decision, grants exemption on barrier cream classification.

The Supreme Court allowed the appeal, overturning the Tribunal's decision, and held that the appellant was entitled to the benefit of the exemption under ... Whether appellant was entitled to the benefit of the Notification dated 22-8-1986? Held that:- We are satisfied beyond any manner of doubt that the product in question is a barrier cream and since it is being manufactured under and in accordance with a licence issued by the Department concerned under the Drugs and Cosmetics Act, [it attracted] the notification. We are, therefore, of the opinion that the appellant was entitled to the benefit of the Notification dated 22-8-1986. In favour of assessee. Issues:Classification of product as a barrier cream under Central Excise Rules and Central Excise Tariff Act.Entitlement to exemption under Notification dated 22-8-1986.Validity of Department's contention regarding the nature of the product.Analysis:The case involved a dispute regarding the classification of a product, specifically a cream containing Oil of Olay, under the Central Excise Rules and Central Excise Tariff Act. The appellant claimed that the cream was a barrier cream and thus eligible for exemption under a specific notification issued by the Central Government. The Department, however, contested this claim based on a market inquiry suggesting that Oil of Olay was a beauty fluid and not a barrier cream for skin treatment. The advertisement for the cream highlighted its properties of caring for the skin in a special way, replacing essential fluids, and promoting soft, smooth, and younger-looking skin. The Extra Pharmacopoeia definition of barrier creams supported the appellant's claim, emphasizing their role in preventing skin damage by mechanical, chemical, or bacteriological action.The Tribunal noted that the appellant's product had been classified under Heading 3304, which includes barrier creams, and the appellant had applied for a license under the Drugs and Cosmetics Act specifically for a product described as a barrier cream. The appellant's license and classification list both referred to the product as 'Oil of Olay (Barrier Cream).' Despite the product also being described as a beauty cream, the Tribunal found that it met the criteria of a barrier cream as per the Extra Pharmacopoeia definition. The Tribunal concluded that the product in question was indeed a barrier cream and manufactured in accordance with a license under the Drugs and Cosmetics Act, making it eligible for the exemption under the notification.Ultimately, the Supreme Court allowed the appeal, overturning the Tribunal's decision, and held that the appellant was entitled to the benefit of the exemption under the Notification dated 22-8-1986. The Court set aside the orders imposing penalties and granted consequential relief to the appellant, including the cost of the appeal. The judgment emphasized the importance of the product's classification as a barrier cream and its compliance with licensing requirements under the Drugs and Cosmetics Act in determining its eligibility for the exemption.