CESTAT Chennai: Herbal Shikakai Powder Classified as 'Cosmetic'

The Appellate Tribunal CESTAT, Chennai, classified "Herbal Shikakai Powder" as a 'cosmetic' under SH 3305.99, upholding a retrospective duty demand based on the revised classification. The department's appeals against the Commissioner (Appeals) Trichy's order were allowed, citing the validity of demanding duty retrospectively under Section 11A of the Central Excise Act. The Tribunal referred to a Supreme Court judgment supporting duty payment for 6 months prior to the date of the Show Cause Notice (SCN), settling the dispute in favor of the department. The impugned order was set aside, and the appeals were allowed on 12-7-2006.

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Issues: Classification of "Herbal Shikakai Powder" under Central Excise Tariff Act, retrospective demand of duty, applicability of Section 11A of the Central Excise Act, interpretation of Board's circulars.

In this judgment by the Appellate Tribunal CESTAT, Chennai, the issues revolve around the classification of "Herbal Shikakai Powder" under the Central Excise Tariff Act, the retrospective demand of duty, the applicability of Section 11A of the Central Excise Act, and the interpretation of Board's circulars. The department's appeals were against a common order passed by the Commissioner (Appeals) Trichy, upholding the classification of the product as 'cosmetic' under SH 3305.99 and demanding duty. The first appellate authority restricted the duty demand to the period from 10-9-97 based on a Board's Circular. The department contended that duty could be demanded for a period of 6 months prior to 10-9-97 as per Section 11A, supported by a Supreme Court judgment.

The Senior Advocate referred to a letter issued by CBEC classifying a similar product under SH 3003.30 till 9-9-97, arguing that duty demand prior to this date was not valid based on a Supreme Court judgment. The dispute for the period from 10-9-97 had been settled under the Kar Vivad Samadhan Scheme between the department and the manufacturer. The Tribunal considered these submissions, noting that the Board's direction in the letter was non est in law due to Section 37B's proviso, which prohibits requiring a specific assessment. The product was classified as 'cosmetic' under SH 3305.99, and the duty demand was upheld retrospectively based on the revised classification.

The Tribunal referred to the Supreme Court's judgment in ITW Signode India Ltd., upholding the validity of demanding duty retrospectively under Section 11A. The SCNs issued to the respondents were within the validated category of actions under Section 11A, requiring duty payment for 6 months prior to the date of the SCN. As the revised classification date was 10-9-1997, duty was to be paid for 6 months prior to this date. The impugned order was set aside, and the appeals were allowed, with a clarification regarding settlements under the KVS Scheme. The operative part of the order was pronounced on 12-7-2006.

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