The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has observed that excise duty exemption is available on manufacturing henna paste from henna powder.
The bench of Justice Dilip Gupta (President) and P. V. Subba Rao (Technical Member) has observed that predictability and certainty is an important hallmark of judicial jurisprudence developed in this country in last six decades and increase in the frequency of conflicting judgments of the superior judiciary will do incalculable harm to the system inasmuch as the courts at the grass root will not be able to decide as to which of the judgment lay down the correct law and which one should be followed.
The appellant/assessee is in the business of manufacturing and clearance of mehandi paste and mehandi powder. The dispute in the present appeal relates to availment of Notification No. 12/2012-CE dated 17.03.2012, as subsequently amended by Notification No. 12/2013- CE dated 01.03.2013, by the appellant on the manufacture of mehandi paste.
The Exemption Notification exempts the excisable goods of the description Henna powder, not mixed with any other ingredient from so much of the duty of excise specified thereon under the First Schedule to the Excise Tariff Act, as is in excess of the amount calculated by the 6% rate.
The department stated that the appellant would not be entitled to claim exemption on the manufacture of mehandi paste, whereas according to the appellant it would be entitled to claim the benefit of the Exemption Notification dated 17.03.2012, as amended on 01.03.2013, on the manufacture of mehandi paste.
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The Central Board of Excise and Customs, through a letter dated 10.07.2014, clarified that the aforesaid exemption would be available to henna powder mixed with a liquid, so far that liquid is a medium to change the form of henna powder into paste, but excludes products like henna dye and such other products which are cosmetics.
A show cause notice dated 02.08.2019 was issued to the appellant for the period from 01.08.2014 to 30.06.2017 mentioning therein that under the amended Exemption Notification dated 01.03.2013 henna powder cannot be mixed with any other ingredient and should contain pure henna.
The show cause notice states that to ascertain the presence of other ingredients in the henna paste manufactured by the appellant, the Superintendent sent samples drawn on 21.05.2014 to the Central Revenue Control Laboratory, New Delhi, which submitted a test report dated 27.08.2014.
The Superintendent also drew sample on 25.10.2015 and sent it to the Central Revenue Control Laboratory, New Delhi which submitted a test report dated 22.01.2016. Both the test reports were enclosed as relied upon document no. 6 to the show cause notice.
The show cause notice drew a conclusion from the aforesaid two reports that there were some extraneous dyes/material other than henna powder/leaves present in the samples and thus henna paste manufactured and cleared by the appellant did not satisfy the description given for claiming exemption under the Exemption Notification.
The show cause notice also alleges that the appellant is mixing other ingredients like Benzyl Alcohol, Terpineol, Clove Oil, Eucalypts Oil in mehandi powder to manufacture mehandi paste. The appellant was, therefore, required to show cause as to why central excise duty should not be demanded and recovered from the appellant for the period August 2014 to June 2017 with interest and penalty.
The tribunal noted that the test report does not mention or conclude that extraneous dyes/material other than henna powder/leaves were present in the sample. Therefore, the appellant is clearly entitled to avail the benefit of the Exemption Notification dated 17.03.2012, as amended on 01.03.2013, when manufacturing henna paste from henna powder.
Case Details
Case Title: Prem Heena Pvt Ltd Vs Commissioner, Central Excise & Cgst-Jodhpur
Case No.: Excise Appeal No. 50488 of 2021
Date: 03.01.2025
Counsel For Appellant: Senior Advocate Rupesh Kumar
Counsel For Respondent: Bhagwat Dayal
