TaxTMI 
TaxTMI 
2025 (6) TMI 593
X X X X Extracts X X X X
X X X X Extracts X X X X
....the brand name of "Vaseline". Pure Petroleum Jelly manufactured by the Appellants was/is being classified under Tariff Item 2712 10 90 and duty was discharged thereon at the applicable rates. The rate of basic excise duty for the disputed products was changed from time to time during the disputed period; with effect from 07.12.2008, rates of duty for Cosmetics was reduced from 14% to 10% and further reduced from 10% to 8% w.e.f. 25.02.2009. It was enhanced to 10% from 27.02.2010 and further enhanced to 12% from 17.03.2012. The percentage of abatement was changed from time to time, but the rate for Petroleum Jelly under Tariff Item 2712 10 90 remained same at 14%. The Appellants filed Self- Declarations, Monthly ER-1Returns, etc. from time to time. In the year 2009, the Appellants developed two new products, namely "Petroleum Jelly-Baby" and "Petroleum Jelly-Aloe Vera" and classified the same as Cosmetics under Chapter 33 and paid duty applicable thereto. For manufacture of White Petroleum Jelly IP, packing size of 8, 25, 40, 50, 100 & 200 gms, Food and Drugs Administration, Pondicherry (FDA) had issued Food and Drugs Licence No.PP/5499/98 dated 06.11.1998 in Form 25, under Rule 70 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....paid on the inputs used in the manufacture of final products. 5.3 The term "final products" is defined under CENVAT Rules : 2(h)-"final products" means excisable goods manufactured or produced from inputs, or using input services. 5.4 The term "manufacture" is defined under Section 2(f) of the Central Excise Act 1944, which includes any process incidental or ancillary to the completion of the manufactured product and also those processes which are specified under the Tariff schedules/section/chapter notes. 5.5 The term "inputs" is also defined under Rule 2(k) of the CENVAT Rules 2004 to mean all goods (except certain exceptions) used in or in relation to manufacture of final products or all goods (excluding certain goods) used in the factory by the manufacturer of final products. In order to avail CENVAT credit, a manufacture or producer must use the inputs or inputs services for the manufacture of final products. 5.6 Regarding the scope of the term "manufacture" Ld. Special Counsel would submit that the same was the subject matter in the following judicial decisions: i) Union of India vs. Delhi Cloth & General Mills, 1977 E.L.T (J 199)=(1963) ii) Empire Industries Ltd. vs.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....istinct character, name and use and hence, such processes do not amount to manufacture. The Hon'ble Supreme Court in the case of Commissioner of Central Excise Vs. Osnar Chemical (P) Ltd. reported in 2012 (1) TMI 27-Supreme Court held that mere improvement in quality does not amount to manufacture. 5.11 The inputs, i.e. Yellow Petroleum Jelly and Packing Materials used by the appellant in the activity of repacking does not result in a new manufactured final product as defined under Rule 2(h) of the CENVAT Credit Rules, 2004 and therefore, they don't qualify as "inputs" within the meaning assigned to the term under Rule 2(k) of the CENVAT Credit Rules, 2004. Consequently, duty paid on such materials is not eligible for CENVAT Credit in terms of Rule 3 of the CENVAT Credit Rules, 2004 as credit is allowed only in such inputs are used for manufacture of final products. 5.12 The meaning of the expression "Manufacture" in terms of CBEC Circular No.129/40/95 dated 29.05.1995 was to include processing of goods for the purpose of grant of input stage rebate of the duty paid on materials used for processing of excisable goods for export and hence, this cannot be applied to determi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se may be summarized as follows : (i) When a product contains pharmaceutical ingredients with therapeutic/prophylactic or curative properties, the proportion of the ingredients is not decisive. The curative attributes of the ingredients render it a medicament and not a cosmetic. (CIENS Laboratories) (ii) A product can be sold without a prescription from a medical practitioner. Yet it does not lead to the conclusion that the sale of overthe-counter products are cosmetics. Several products are sold over- thecounter and are yet, medicaments. (CIENS Laboratories) (iii) Before adjudicating whether a product is a medicament or not, courts have to consider what the people who use the product understand it to be. If a product's primary function is "care" and not "cure", it is not a medicament. Cosmetic products are used in enhancing or improving a person's appearance or beauty, whereas medicinal products are used to treat or cure some medical condition. A product that is used mainly in curing or treating ailments or diseases and contains curative ingredients even in small quantities, is to be branded as a medicament. (CIENS Laboratories) (iv) Products cannot be classified as cosmet....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n; Bituminous Substances; Mineral Waxes." Entry at 2712 gives the description of goods as "Petroleum jelly, paraffin wax, microcrystalline petroleum wax, ozokerite, etc. obtained by synthesis or by other processes, whether or not coloured". This gives an indication to be covering petroleum jelly per se, in pure form, obtained by synthesis or by other processes, without any additives. Interestingly, Heading 27.12 of HSN at (A) has provided for specific exclusion, as noted earlier, for petroleum jelly suitable for use for the care of skin, which is also indicated to be covered under heading 33.04. 18. Chapter 33 of CETA refers to "Essential Oils and Resinoids, Perfumery, Cosmetic or Toilet Preparations". Entry at 3304 gives the description of goods as "Beauty or make-up preparations and preparations for the care of skin (other than medicaments)....". Further, the Heading 33.04 of HSN at (A) specifically covers "...preparation for the care of the skin "....... Petroleum jelly put up in packings of a kind sold by retail for the care of the skin .....". 19. The relevance, purpose and importance of HSN Explanatory Notes has been held to be paramount by the Apex Court on several occas....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... board. Since the Central Excise Tariff Act, 1985 is enacted on the basis and pattern of the HSN, the same expression used in the Act must, as far as practicable, be construed to have the meaning which is expressly given to it in the HSN when there is no indication in the Indian Tariff of a different intention." Clearly, therefore, the HSN Explanatory Notes are entitled to far greater consideration than the Tribunal has given there. 3. The Tribunal has also said that the Collector (Appeals) had not relied upon the HSN Explanatory Notes. That was clearly an oversight of the Tribunal because its order says, earlier, thus : "The Collector (Appeals) held that the photographic apparatus, as has been imported, for making printing blocks were excluded from Chapter Heading 84.38 vide Explanatory Notes to CCOM at Page 1288." ---" 20.3 In O.K. PLAY (INDIA) LTD. - Vs - COMMISSIONER OF C. EX., DELHI-III, GURGAON -2005 (180) E.L.T. 300 (S.C.), the Court held as under : "--- 6. Before dealing with the issue of classification, certain points are required to be clarified. 7. In the case of A. Nagaraju Brothers v. State of Andhra Pradesh reported in [1994 (72) E.L.T. 801], it has been hel....