CHAPTER - X
Classification of Excisable Goods

The rates of duty leviable on excisable goods are prescribed under various headings in the Central Excise Tariff. Some illustrative cases of incorrect classification of goods resulting in short levy of duty are given in the following paragraphs:

10.1    Fertilisers

Harmonized Commodity Description and Coding System specifies that, heading 31.01 excludes mixtures of natural fertilisers with chemical fertilisers. Mixtures of animal or vegetable fertilisers with chemical or mineral fertilisers are, thus appropriately covered under heading 31.05.

M/s. Krishi Rasayan Export Private Limited, Baddi, in Chandigarh I Commissionerate of Central Excise, manufactured ‘Kri Kelp (Cytozyme/sea weed) and classified it as vegetable bio-fertiliser under heading 31.01 carrying nil rate of duty. Scrutiny of the manufacturing process revealed that cytozyme was a micro-nutrient i.e. mixture of soluble salts which assist in growth of plants and was thus correctly classifiable under heading 31.05. Incorrect classification of the product, resulted in non-levy of duty amounting to Rs.1.72 crore from April 1996 to March 2001.

On this being pointed out (March 2001), the Ministry of Finance (the Ministry) while admitting the objection stated (November 2003) that the matter was in their knowledge and was under investigation since July 2000.

Reply of the Ministry is not tenable as action to safeguard revenue was taken only after it was pointed out in audit (March 2001). Two show cause notices for Rs.20.06 lakh and Rs.133.27 lakh were issued in May and December 2001.

10.2    Dabur lal tail

Note 5 of chapter 33, clarifies that heading 33.04 applies to skin foods, skin tonics, cuticle removers and other preparations for use in manicure or chiropody and barrier creams to give protection against skin irritants. The Supreme Court in the case of M/s. Shree Baidyanath Ayurved Bhawan Limited {1996 (83) ELT 492 (SC)} had held that medicine is ordinarily prescribed by a medical practitioner and it is used for limited time and not every day unless it is so prescribed to deal with a specific disease like diabetes. The Tribunal in the case of M/s. Sunny Industries (P) Limited {1995 (75) ELT 677 (T)} held that ‘Ad - vitamin massage oil fortex’ being a massage oil intended for care of skin is classifiable under heading 33.04.

M/s. Burman Laboratories (P) Limited, Maksi, in Indore Commissionerate of Central Excise, manufactured ‘Dabur lal tail’ - baby massage oil for the care of skin and classified the product under sub-heading 3003.39 as other medicament. As per the product literature, it was a baby massage oil for the care of skin, intended for strengthening muscles and nourishing baby’s tender skin to keep it soft and supple. It was, therefore, correctly classifiable under heading 33.04 as per note 5 of chapter 33 and judgements ibid. Incorrect classification of the product, resulted in short levy of duty of Rs.1.42 crore from June 2001 to January 2002.

On this being pointed out (March 2002), the Ministry admitted the objection (October 2003).

10.3    Other cases

In 19 other cases of classification, the Ministry/the Department accepted objections involving duty of Rs.1.07 crore and reported recovery of Rs.20 lakh till February 2004.