Case: The State Of Goa  Vs. M/S.Colfax Laboratories (I) Ltd.

2. M/s Colfax Laboratories (India) Ltd. (for short Colfax) was granted a licence to manufacture various types of cosmetics including after shave lotion under the trade mark Old Spice on 15.4.1968 under the Drugs and Cosmetics Act. A licence under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 (for short the Act) in form L-1 for manufacture of Old Spice after shave lotion and cologne for men as toilet preparations was granted on 1.4.1969. Till the end of the year 1984 excise duty on Old Spice after shave lotion (hereinafter called as ASL) was paid on the basis that it was a toilet preparation. On 14.1.1985 Colfax moved an application before the Commissioner of Excise, Government of Goa for reclassification of Old Spice ASL as a medicinal preparation falling under Tariff Item No.1(i)(b) of the Schedule to the Act for the purpose of levy of excise duty. The Excise Commissioner vide his order dated 23.3.1985 classified the same as medicinal preparation. Subsequently, by the order dated 12.6.1985 Old Spice ASL was classified as falling within the ambit of Item No. 1(i) (b) of the Schedule. Colfax thereafter made application for refund of excess amount of excise duty paid after 23.3.1985 which was allowed by the Commissioner of Excise and orders for refund of the excess amount of the excise duty were passed.M/s. PJM Pharmaceuticals Pvt. Ltd. moved an application before the Drugs Controller, Government of Goa on 14.1.1989 for manufacture of some cosmetic products including Blue Stratos ASL under the loan licence with M/s Colfax Laboratories (India) Ltd. which was approved and a licence was issued on 13.2.1989. The Excise Commissioner vide order dated 12.10.1989 approved the price inclusive of duty, the duty component thereon as well as the maximum price for the products. M/s. PJM Pharmaceuticals Pvt. Ltd. started paying duty on Blue Stratos ASL at the rate applicable to medicinal preparations.3. On 15.5.1991, the Commissioner of Excise, Goa issued a notice under Rule 12 of the Medicinal and Toilet Preparations (Excise Duties) Rules, 1956 to Colfax to pay balance of excise duty amounting to Rs. 17,77,16,361.20 (Rupees seventeen crore, seventy-seven lakh, sixteen thousand, three hundred sixty one and paise twenty only) within 30 days from the date of receipt of notice on the ground that w.e.f. 1.4.1985 the company had paid excise duty on Old Spice range of ASLs as medicinal preparation though it should have paid duty as toilet preparation. On 13.3.1991, a notice was issued to M/s. PJM Pharmaceuticals Pvt. Ltd. to pay balance of excise duty amounting to Rs.92,43,684.08 (Rupees ninety two lakh, forty three thousand, six hundred eighty four and paise eight only) within 30 days from the date of receipt of notice on the ground that it had paid excise duty on Blue Stratos ASL as a medicinal preparation though it should have paid duty as toilet preparation.4. Colfax then filed Writ Petition Nos. 109 of 1991 and 351 of 1991 challenging the aforesaid notices before the Bombay High Court (Goa Bench) which were disposed of with a direction to the Excise Commissioner to treat the demand notices as show cause notices and thereafter to pass a final order after giving the Company an opportunity of hearing. It was left open for the Excise Commissioner to supplement the said notice by additional grounds or materials, if he so desired. Thereafter, supplementary memorandum were issued by the Excise Commissioner on 6.9.1991 and 30.9.1991 to which Colfax gave a reply. The Excise Commissioner after hearing the parties gave his decision on 7.11.1991 which was challenged in appeal by the State Government and Colfax prepared Writ Petition No. 84 of 1992 before the High Court. The High Court by its order dated 21.12.1994 directed the Excise Commissioner to decide all the issues afresh after giving an opportunity of hearing to the company. The Excise Commissioner, after hearing the parties passed a detailed order on 12.8.1998 holding that after shave lotions were toilet preparations and the company was liable to pay excise duty as mentioned in the demand notices dated 13.3.1991 and 15.5.1991, which was challenged by Colfax by filing Writ Petition No. 337 of 1998. The High Court in its impugned order dated 1.4.1999 has held that after shave lotions are toilet preparations and the Revenue was entitled to recover short paid duty on account of erroneous classification of the aforesaid goods. The notices issued will have to be construed in exercise of power under Rule 11 of the Rules. Thus, the Revenue would be entitled to recover short paid duty on the goods cleared for which the duty was short paid within a period of six months immediately preceding the date of issue of each of the notices. It has been further held that the phrase ad valorem appearing in the column rate of duty in the Schedule appended to the Act refers to the value of excisable goods and, therefore, it will have to be worked out by applying the formula as laid down in Section 4(4)(d) of the Central Excise Act, 1944 and consequently, the excise duty will have to be deducted from the wholesale price and the figure arrived at would be the value of the excisable goods.5. M/s. Colfax has preferred Civil Appeal No. 415 of 2000 challenging the finding of the High Court that Old Spice and Blue Stratos ASLs are toilet preparations and not medicinal preparations. The State of Goa has preferred Civil Appeal No. 414 of 2000 challenging the remaining part of the order of the High Court, wherein the notices have been directed to be treated to be under Rule 11 of the Rules and their right to recover the short paid duty has been restricted to a period of six months immediately preceding the date of issue of notices and also the direction regarding manner of calculation of excise duty out of the wholesale price at which the goods in question were sold.

Court's reasoning:
The process of shaving does not cause any kind of impairment of the normal state of a person. it does not in any manner interrupt or modify the performance of any vital functions of the human body. Many people have been shaving regularly every day for 40-50 years but no one has ever suffered any kind of a disease. If the process of shaving would have resulted in some kind of a disease, the best preventive measure to be adopted was not a shave. The number of persons who shave every day and have been shaving for years would run into crores even in our own country and except for a very insignificant percentage thereof, who belong to affluent class, no one uses any after shave lotion. But they have not suffered any disease. Therefore, on a plain interpretation of the statutory provisions an after shave lotion cannot come within the the ambit of a medicinal preparation as defined in Section 2(g) of the Act.The Excise Commissioner, Goa, after a detailed consideration of scientific and technical material, has recorded a finding that ASLs manufactured by Colfax are toilet preparations within the meaning of Section 2(k) of the Act. The High Court has also examined the matter threadbare and has arrived at the same finding. We find absolutely no reason to disagree with the view taken by the Excise Commissioner, who is an expert in the field. Therefore, the contention raised by learned counsel for Colfax that Old Spice and Blue Stratos ASLs are medicinal preparations and not toilet preparations, has no substance and has to beview of the fact that the order dated 23.3.1985 of the Commissioner of Excise was an order passed wholly without jurisdiction and consequently was a nullity, the Government is entitled to recover the deficiency in duty w.e.f. the said date. Theview taken by the Excise Commissioner on this point in his order dated 12.8.1998 is, therefore, perfectly correct. The High Court clearly erred in setting aside the order of the Excise Commissioner and in directing that the notices be treated to have been issued under Rule 11 of the Rules. The order passed by the High Court in this regard is, therefore, liable to be setbeing no provision for a prior classification of product under the Medicinal and Toilet Preparations (Excise Duties) Act and the Rules made thereunder the entire proceedings commenced on the basis of the application given by Colfax and culminating with the order of the Commissioner of Excise are wholly without jurisdiction. The order passed by the Commissioner of Excise on 23.3.1985 being without jurisdiction is a nullity in the eyes of law and is liable to beHigh Court has placed reliance upon a decision of this Court in Govt. of India vs. Madras Rubber Factory, 1975 (77) ELT 433 for computation of assessable value in a cum-duty price. It has held that the phrase ad valorem appearing in the column rate of duty in the Schedule appended to the Act refers to the value of the excisable goods and, therefore, it will have to be worked out by applying the formula as laid down in Section 4(4)(d) of Central Excise Act. We are of the opinion that the view taken by the High Court is perfectly correct and calls for no