Supreme Court of India
Commissioner Of Central Excise … vs M/S Global Health Care Products … on 28 July, 2015Bench: A.K. Sikri, Rohinton Fali Nariman




CIVIL APPEAL NOS. 5902-5909 OF 2005




The respondent No.1 (hereinafter referred to as the
‘assessee’) is engaged in the manufacture of different brands of toothpaste
and these are manufactured exclusively for M/s. Hindustan Lever Limited,
Mumbai (for short, ‘HLL’) since 1998. Major brands of HLL manufactured by
the assessee are Close-Up Red, Close-Up Blue, Close-Up Green and Pepsodent
falling under Chapter 33 of the Excise Tariff. The assessee is registered
with the appellant/Revenue and has been paying the excise duty on the
aforesaid products under Chapter sub-heading 3306.10 of the tariff. There
is no dispute about these products.

From July 01, 2001, a new product known as ‘Close-Up Whitening’ was
introduced by the assessee. The assessee classified this product under
Chapter sub-heading 3306.90. The Revenue treated the aforesaid
classification as erroneous as according to it Close-Up Whitening also
falls under Chapter sub-heading 3306.10 and not 3306.90. It also suspected
that this product was deliberately misclassified in the said heading to
evade payment of proper central excise duties by resorting to assessment of
the product under Section 4 of the Central Excise Act, 1944 (hereinafter
referred to as the ‘Act’) instead of assessment under Section 4A thereof.
Investigation into the matter was initiated resulting into searching of the
premises of the assessee. Some documents, which the Revenue claims to be
incriminating in nature, were seized under Section 12 of the Act, including
a Box File with Heading ‘Production Manual’, namely, the literature
containing pages 1 to 235 issued by the Dental Information Centre of HLL.

On the scrutiny of these documents, the Revenue noticed that the difference
in raw materials used for the product in question, namely, Close-Up
Whitening, and the other products, i.e. Close-Up Red/Blue/Green is the
additional presence of 2.8% and 0.2% w/s Silicon Agglomerate and Bluer
Agglomerates respectively in Close-Up Whitening and absence of 0.1% w/w
2,4,4 Tri Chloro 2 hydroxy Diphenyl Ehter in this product in comparison
with the other three products. It was also found that as far as Close-Up
Whitening is concerned, there was presence of ‘uniformity dispersed blue
speckles’. Statements of certain persons were also recorded. On the basis
of the aforesaid material, the Revenue took the position that the aforesaid
differences did not change the essential character of the product in
question which still remained ‘toothpaste’ and, therefore, it was
classifiable under Chapter sub-heading 3306.10.

Show-cause notice dated March 21, 2002 was issued proposing confiscation of
the goods and since these goods had already been provisionally released on
payment of full excise duty as leviable on the goods under Chapter sub-
heading 3306.10, show-cause notice stated as to why the amount of
differential duty amounting to ?22,64,176 be not confirmed under the
provisions of Section 11A(1) of the Act and why redemption fine in lieu of
confiscation as well as penalty be not imposed. The assessee filed its
reply thereto contending that it was not a toothpaste and, therefore,
rightly classified by it under sub-heading 3306.90. The aforementioned
contention of the assessee was brushed aside by the Commissioner in his
Order-in-Original dated December 10, 2003, thereby confirming the excise
duty demand as mentioned in the show-cause notice. He, inter alia,
recorded the following findings in his order:
“(i) Close Up Whitening was known in the market or to the trade and public
as tooth paste for cleaning the teeth as such it was nothing but tooth-
paste used for cleaning the teeth.

(ii) M/s. Global Health Care Products in collusion with M/s. Hindustan
Lever Ltd. by willfully suppressing the fact that Close-up Whitening was a
variant of Close Up tooth paste classifiable under Tariff Heading 3306.10
failed to show particulars of classification, assessable value and duty
leviable with an intention to evade payment of applicable central excise

(iii) The contention of M/s. Global Health Care products that the product
Close Up Whitening was classified under chapter sub heading No. 3306.90 was
not accepted.

(iv) The said product was correctly classified under sub heading 3306.10
of the Tariff attracting the provisions of Section 4A of the Act.”

Aggrieved by the aforesaid order, the respondents herein filed appeals
before the Custom Excise & Service Tax Appellate Tribunal, Mumbai (for
short, the ‘Tribunal’). These appeals have been allowed by the Tribunal
vide impugned order dated March 11, 2005. In these appeals, validity and
correctness of the aforesaid order of the Tribunal is questioned by the

Before proceeding further, it would be necessary to take note of the exact
language of the relevant entries. As mentioned above, it is the entry
Heading 3306 of Central Excise Tariff Act, 1985, which is attracted in the
present case. The only question is as to whether the product in question
is to be classified under sub-heading 3306.90 or 3306.10. Chapter Heading
3306 of the Tariff Act, with the aforesaid sub-headings, is reproduced
below:|33.06 |Preparations for oral or dental hygiene, |
| |including dentifrices (for example, |
| |toothpaste and tooth powder and denture |
| |fixative pastes and powders) |
|3306.10 |Tooth powders and toothpaste |
|3306.90 |Other. |

The Chapter Heading makes it clear that it covers various preparations for
oral and dental hygiene. These preparations specifically include
dentifrices. Examples of such oral and dental hygiene are also given, like
toothpaste, tooth powder, denture fixative pastes and powders. Out of
these, two products which are covered by sub-heading 3306.10 are toothpaste
and tooth powder. Other oral and dental hygiene preparations fall under
the reminder sub-heading, i.e. 3306.90, nomenclature of which is ‘Other’.
Further, as pointed out above, the Revenue treats Close-Up Whitening as
‘toothpaste’. The plea of the assessee, on the other hand, is that it is
not toothpaste but a ‘dental cleaner’, which is different from toothpaste
and, therefore, has to necessarily be covered by the residual sub-heading,
i.e. 3306.90. Therefore, the moot question is as to whether Close-Up
Whitening is toothpaste or not. If it is found to be toothpaste then the
stand of the Revenue would be justified. On the other hand, if the product
does not qualify to be a toothpaste, then the assessee stands vindicated.

Having noticed the controversy involved, we would like to point out the
main ingredients of the product at this stage:
There is no dispute that most of the ingredients of the product
Close-Up Whitening are the same which are used in the manufacture of the
other products, namely, Close-Up Red/Blue/ Green, which are treated as
toothpaste by the assessee itself. There are, however, additional
ingredients used in the manufacture of the product in question, which are
accepted by the Revenue also and noticed above. Apart from additional
presence of Silicon Agglomerate and Bluer Agglomerate of specified
percentage and absence of Tri Chloro 2 hydroxy Diphenyl Ether, there is a
presence of uniformity dispersed blue speckles in Close-Up Whitening.
There is also additional step of ‘addition of silica agglomerates’. In
fact, it is this ingredient which felicitates at getting uniformity
dispersed speckles. It is on the basis of these additional factors, one
has to determine as to whether Close-Up Whitening loses the character of
toothpaste and assumes the characteristics of another product, namely,
dental cleaner.

A reading of the order of the Commissioner, to which our attention was
drawn by Mr. K. Radhakrishnan, learned senior counsel appearing for the
appellant, with much emphasis, would disclose that the Commissioner relied
upon HSN Notes, i.e. Harmonized Commodity Description and Coding System,
wherein the preparation of oral and dental hygiene is mentioned in the
following form:
| | |
|3306.10 |Dentifrices |
| | |
|3306.20 |Yarn used to clean between the teeth (dental |
| |floss) |
| | |
|3306.90 |Other |

This heading covers preparations for oral or dental hygiene such as:

(I) Dentifrices of all types:

(1) Tooth pastes and other preparations for teeth. These are substances
or preparations used with a toothbrush, whether for cleaning or polishing
the accessible surfaces of teeth or for other purposes such as anticaries
prophylactic treatment.

Toothpastes and other preparations for teeth remain classified
in this heading, whether or not they contain abrasives and whether or not
they are used by dentists.

(2) Denture cleaners, i.e., preparations for cleaning or polishing
dentures, whether or not they contain agents with abrasive properties.

(II) Mouth washes and oral perfumes.

(III) Denture fixative pastes, powders and tablets.

The heading also covers yarn used to clean between the teeth,
in individual retail packages (dental floss).”

The Commissioner, thus, noted that in the HSN Notes, sub-heading 3306.10
deals with dentifrices. The Commissioner noted that the meaning of
dentifrices as per the Concise Oxford Dictionary is ‘a paste or powder for
cleaning of teeth’. On that basis, he concluded that the product in
question was paste, namely, the toothpaste for cleaning the teeth and,
therefore, would fall under sub-heading 3306.10. En passe, the
Commissioner also observed that there is no major difference in these
products, namely, Close-Up Whitening and Close-Up Red/ Blue/Green, except
one ingredient used in the manufacture of Close-Up Whitening and the
addition of that ingredient does not change the purpose, nature as well as
definition of the product in a common market parlance. He observed that in
the market the product was known as toothpaste. He also observed that it
is treated as toothpaste as per the product manual issued by the Dental
Invocation Centre, Mumbai. Discussion is summed up in para 32 of the order
passed by the Commissioner, which reads as under:
“32. As narrated in the SCN that the tooth paste, being dentifrice has
been correctly classified under the HSN and the Central Excise Tariff has
been based on HSN. Accordingly it is essential to follow the correct
classification of the product in question as described and classified under
the relevant chapter of HSN. In this connection it may be mentioned that
the Hon’ble Supreme Court in the case of CCE, Shillong vs. Wood Craft
Product Ltd. Reported in 1995 (77) ELT 23 (SC) in para 18 has held that the
structure of Central Excise Tariff is based on the internationally accepted
nomenclature found in the HSN and therefore any dispute relating to tariff
classification must, as far as possible be resolved with reference to the
nomenclature indicated by the HSN unless there be an express different
intention indicated in the Central Excise Tariff Act, 1985 itself.

Further it may be mentioned that the Hon’ble Bombay High Court
in the case of Jagdish D. Devgekar Vs. Collector of Central Excise, Poona
reported in 1978 (2) ELT (J581) in para 6 has held that the correct test in
interpreting any item mentioned in the first schedule to the Central Excise
Act is to see the commercial sense in which the item is understood or the
sense in which traders or persons dealing in that terms understand it and
not the technical or scientific sense.

Even it may be mentioned that the Hon’ble Tribunal in case Veto
Co. Vs. CCE reported in 1992 (62) ELT 584 (T) in para 6 has held that the
goods have to be classified under the tariff schedule according to their
popular meaning or as they are understood in their commercial sense and not
as per their scientific or technical meaning. While holding so the Hon’ble
Tribunal has referred to the observations of the Hon’ble Supreme Court’s
judgment in case of Plasmac Machine Mfg. Co. Pvt. Ltd. Vs. CCE reported in
1991 (51) ELT 161 (SC) (Para 13).”

The aforesaid approach adopted by the Commissioner has been found fault
with by the Tribunal. The Tribunal pointed out that there was material
difference in the sub-heading 3306.10 in the Indian statute when contrasted
with Harmonized Commodity Description and Coding System. Whereas, as per
the tariff entry 3306.10 in the Excise Act, it is ‘tooth powder’ and
‘toothpaste’, under the Harmonized Commodity Description and Coding System,
what is mentioned is ‘dentifrices’. It is further noticed by the Tribunal
that dentifrices was more generic in nature as it recognized all three
types of products, namely, (i) toothpaste, (ii) other preparations for
teeth and (iii) denture cleaners, than tooth powders and toothpaste. Thus,
when under Indian statutory regime there is a restricted sub-heading under
3306.10, namely, tooth powder and toothpaste only, the approach of the
Commissioner in taking aid of HSN Notes was erroneous. Discussion on this
aspect runs as follows:
“A perusal of the HSN notes would indicate that all three types of
‘Dentifrices’ are recognized as (i) ‘Toothpaste’, (ii) Other preparations
for teeth, and (iii) ‘Denture cleaners’. The Note further explains that
“Dentifrices” to include ‘toothpaste’ and “other preparations for teeth”
whether for cleaning or polishing the assessable surface of teeth or for
other purposes such an Anticaries prophylactic treatment. The Note also
enumerates that ‘toothpaste’ and ‘other preparations for teeth’ remains
classified under Heading 3306 whether or not they contain abrasives and
whether or not they are used by dentist. The correct scope of the heading
as per the submission of the appellants is that when one refers to HSN item
3306 and the bifurcations as also under CETA 1985 there is a variance seen.
In other words, this bifurcation under Heading 3306 for HSN and is not
pari materia and under CETA 1985 and therefore the sub heading structure of
HSN would not apply to CETA. The CETA proves preparation for oral or
dental hygiene including Dentifrices and Denture Fixative paste and powders
under Heading 3306 and at the four digit level it is para material HSN.
The scope of sub heading 3306.10 of CETA 1985 restricts it to only ‘tooth
powder and paste’ and any entity which is not a ‘toothpowder or toothpaste’
would be covered under heading 3306.90. This submission has to be upheld.”

We find ourselves in agreement with the aforesaid approach of
the Tribunal having regard to the cogent reasons given by it.

This Court in the case of Camlin Limited v. Commissioner of Central Excise,
Mumbai[1] held that if the entries under HSN and the entries under the
Central Excise Tariff are different, then reliance cannot be placed upon
HSN Notes for the purposes of classification of goods under Central Excise
Tariff. This is so stated in para 24 of the judgment that makes the
following reading:
“24. In our considered view, the Tribunal erred in relying upon the HSN
for the purpose of marker inks in classifying them under Chapter Sub-
Heading 3215.90 of the said Tariff. The Tribunal failed to appreciate that
the entries under the HSN and the entries under the said Tariff are
completely different. As mentioned above, it is settled law that when the
entries in the HSN and the said Tariff are not aligned, reliance cannot be
placed upon HSN r the purpose of classification of goods under the said
Tariff. One of the factors on which the Tribunal based its conclusion is
the entries in the HSN. The said conclusion in the order of the Tribunal
is, therefore, vitiated and, accordingly, set aside. We agree with the
findings recorded by the Commissioner (Appeals).”

The issue, therefore, has to be decided dehors HSN Notes as aid thereof
cannot be taken in the instant case.

Faced with the aforesaid position, Mr. Radhakrishnan argued that the
Commissioner has also come to the conclusion that mere addition of one
ingredient does not change the purpose, nature as well as character of the
product and further the product was known in the market as ‘toothpaste’.
The Tribunal has differed with the aforesaid view.

In the first place, it is pointed out that there is no evidence on record
placed by the Revenue which would reflect that the product in question is
known to the consumers as toothpaste. When this was pointed out to Mr.
Radhakrishnan, he was unable to pinpoint any evidence in support that was
led by the Revenue.

We may record that a finding is arrived at by the Tribunal to the effect
that Close-Up Whitening is not a toothpaste but a dental cleaner. We are
convinced that this finding is perfectly just and proper for the following
(a) The Tribunal has pointed out the differences which are noted above
and accepted by the Department itself. From these differences, it is held
that ingredients and ratio of all the inputs which go into the
manufacturing of a toothpaste and dental cleaner are different and varying.
The dental cleaner, in addition, has two more ingredients, namely, Silicon
Agglomerate and Bluer Agglomerates, which play an active role as abrasive.

(b) Even the manufacturing process of Close-Up toothpaste and Close-up
Whitening is different. While the total stages for manufacturing
toothpaste were nine, the number of stages for manufacture of Close-Up
Whitening were eleven. It takes 120 minutes to manufacture a toothpaste
tube, while it takes 155 minutes to effect the manufacture of Close-Up

(c) Statement of one Mr. N.H. Bijlani, the only expert in this case and
whose statement was recorded on January 09, 2002, was referred to by the
Tribunal. In this statement, Mr. Bijlani has explained the difference
between toothpaste and dental cleaners and has opined that Close-Up
Whitening dental cleaner cannot be equated with toothpaste.

(d) The Tribunal has also found that as per records, classification of
the same product in an earlier avtar/brand was acceptable to the Department
as the same was classified under a different name for all these years when
the rate of duty under Heading 3306.90 were higher than that under Heading
3306.10. It, thus, observed that mere change of duty and brand name cannot
be the reason to alter classification.

(e) Another important aspect, in conjunction with aforesaid features
which has to be kept in mind, is that in the instant case even Food and
Drug Authorities (FDA) from where prior permission is needed for
manufacturing ‘toothpaste’ and sale thereof, had not registered the product
in question as ‘toothpaste’ but as a dental cleaner. It becomes a
supporting factor along with other features of the product, which have been
taken note of and discussed above.

The upshot of the aforesaid discussion would be to hold that Close-Up
Whitening dental cleaner is not a ‘toothpaste’ but other form of dental
hygiene and, therefore will have to be classified under sub-heading 3306.90
as a consequence. These appeals are found bereft of any merits and are,
accordingly, dismissed.
No costs.



JULY 28, 2015.
[1] (2008) 9 SCC 82


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