Skin-care classification prevails over fragrance heading, and extended limitation fails without suppression of facts.

A skin-care moisturising product was held classifiable under Heading 3304 because its dominant function was beauty or skin care, not fragrance; Heading 3303 was treated as covering toilet waters whose basic purpose is to impart scent. The record also showed that the department had been supplied with classification lists, composition details and labels, so suppression of facts was not established and the extended limitation period was not justified. As a result, the duty demand, penalty, interest and confiscation failed on limitation and the absence of suppression, while the classification determination was sustained.

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Issues: (i) Whether the product was classifiable under Heading 3304 or Heading 3303; (ii) whether the demand, penalty, interest and confiscation could be sustained in view of limitation and the nature of the show cause notices.

Issue (i): Whether the product was classifiable under Heading 3304 or Heading 3303.

Analysis: The product was marketed as a moisturising, skin-care preparation, with ingredients and literature showing emollient and skin-softening properties. Heading 3303 covered toilet waters, whose basic function was only to impart fragrance, whereas Heading 3304 covered beauty or skin-care preparations. On the product description, ingredients, and use, the dominant function was skin care and not fragrance.

Conclusion: The product was correctly classifiable under Heading 3304 and not under Heading 3303.

Issue (ii): Whether the demand, penalty, interest and confiscation could be sustained in view of limitation and the nature of the show cause notices.

Analysis: The department had been supplied with the classification lists, composition details and labels, and had earlier been put on notice regarding the same product. The record did not support suppression of facts with intent to evade duty. The demand sought under Rule 9(2) could not be sustained on the facts, and the invocation of the extended period under Section 11A was not justified. Once the demand failed, the consequential penalty, interest and confiscation also failed.

Conclusion: The demand was barred by limitation and the penalty, interest and confiscation were unsustainable.

Final Conclusion: The classification was upheld against the assessee, but the duty demand and all consequential penal and confiscatory directions were set aside, resulting in partial relief to the assessee.

Ratio Decidendi: Where the department already has the material facts necessary for classification, mere non-acceptance of the assessee's declared classification does not by itself establish suppression so as to justify the extended limitation period; and a product whose dominant function is skin care is not classifiable as a toilet water meant only to impart fragrance.

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