AUTHORITY FOR ADVANCE RULINGS
(CENTRAL EXCISE, CUSTOMS &
SERVICE TAX)
NEW DELHI
PRESENT
Hon'ble Mr.Justice Syed Shah
Mohammad Quadri (Chairman)
Mr.Somnath Pal (Member)
Dr.B.A.Agrawal (Member)
Ruling No. AAR/29(CE)/2006
in
Application No.AAR/04(CE)/2005
Applicant
M/s Technical Concepts International Limited
The Nuetralle Centre
Pin Green Business Park
Eastman Way,
Stevenage SG1 4UH England
Commissioner
concerned
Commissioner, Central Excise & Customs, Aurangabad
Present
for the Applicant Mr. Tarun
Gulati, Advocate
Mr. Tushar Jaswal, Advocate
Present for the
Commissioner Shri A.K. Roy, Joint CDR
concerned
CESTAT, New Delhi
R U L I N G
( By Mr. Somnath Pal, Member )
The question that
has been posed by the applicant seeking advance ruling thereon under Section 23C
of the Central Excise Act, 1944 is as follows :
Whether the "Auto Janitor" and
"Auto Sanitizer" merit classification :
" 1 Under Chapter 34 of
the Central Excise Tariff Act, 1985 and liable to Central Excise duty; or
(ii)
Under
Chapter 38 of the Central Excise Tariff Act, 1985 and liable to Central Excise
duty."
2. In the statement of
the relevant facts having a bearing on the question(s) on which the advance
ruling is required, the applicant has stated that they propose to undertake the
manufacture and marketing of the goods "Auto Janitor" and "Auto Sanitizer"
(hereinafter referred to individually as "the item") under brand names which are
the proprietary brand names of the applicant. Both the items consist of a
dispenser and filler. The filler is filled with "odoriferous substances", which
is installed inside the dispenser. The dispenser is attached with the water
pipe which is connected to toilet bowl. The items dispense a continuous dose of
the powerful concentrated chemical formulation into water, which is released to
the toilet bowl, thus cleaning the ceramic surfaces exposed to flushing. This
ensures that the washroom is clean and smells pleasant at all times. The filler
is required to be replaced from time to time when the dispensable quantity of
the liquid is exhausted.
3. The applicant has
supplied the following functional details in their application:-
a. Auto Sanitizer -
Automatic Hygiene System
The Auto Sanitizer provides an
automatic and continuous touch-free hygiene maintenance programme for toilets
and urinals, 24-hours a day. It is automatic system for maintaining clean
washrooms. The features of this item are :
·
Automatic constant
and continuous cleaning of all ceramic surfaces exposed to flushing.
·
Actively attacks
hard water and mineral deposits in drains and septic tanks.
·
Reduces and
prevents scale and stains from forming.
·
Germ kill
properties stops germs breeding.
·
Touch-free
operation reduces the risk of cross infection.
·
Eliminates odours
at source and helps to maintain an odour-free environment.
b. Auto Janitor -
Automatic Hygiene and Odour Control System.
The Auto Janitor is
a '3-in-2' system that provides automatic cleaning and deodorizing with
outstanding germ kill for toilets and urinals. The features of this item are :
·
Automatic constant
and continuous cleaning of all ceramic surfaces exposed to flushing.
·
Kills germs,
maintains hygiene standards, and meets public demand for higher standards of
hygiene.
·
Reduces
maintenance through automatic dispensing and refill indicators.
·
Powerful organic
fragrances continuously neutralize odours in the air and at source.
4. The applicant has
also attached with the application the write up/brochure for these two items,
which gives the pictures and the highlights of their performance and operational
parameters, including examples of their standard installations.
5. As per the applicant,
the issue of classification emanates on account of the fact that the item is
having both the characteristics of a cleaning preparation and a disinfectant
which are classifiable under Chapter 34 & Chapter 38 respectively of the Central
Excise Tariff Act, 1985 (hereinafter referred to as the 'Act'). In addition to
the above, a small quantity of ethyl alcohol is required as an input in the
manufacture of the item. According to the applicant, there is a perception
within the State Excise Authorities, who levy and collect excise duty under the
Medicinal and Toilet Preparation (Excise Duties) Act, 1955 (In short, MTP Act),
that any product for the manufacture of which Alcohol is used is liable to
excise duty under the MTP Act. Citing the relevant portions of Chapter 34 &
Chapter 38 of the Act and of the MTP Act, the applicant has submitted that
(i)
classification under Chapter 38 is ruled out in view of the Chapter Note 7
thereunder which clearly excludes products containing, inter alia, alcohol from
the purview of this Chapter. For the purpose of this Note, 'alcohol' has the
meaning assigned to it in Section 2 of the MTP Act.
(ii)
Levy is
also not sustainable under the provision of the MTP Act in view of its Objects
Clause, definition of the term 'toilet preparation' given in the MTP Act and the
earlier Ruling of this Authority in the applicant's case itself on the question
of classification of Room freshener. For the detailed reasons given therein,
it has been held by the Authority that something which is not covered under the
medicinal or toilet preparation will not be covered by the provision of MTP Act,
even if it contains alcohol (Re: Ruling No. AAR/10(CE)/2005). The items under
consideration in the present application are not medicinal or toilet preparation
as defined in the MTP Act and hence will not fall within its purview
notwithstanding the fact that they contain alcohol.
(iii)
The items
in question are primarily used for cleaning of toilet and urinal surface.
During this process, it cleans the stains, kills the germs and bacteria present
in the bowl and also releases continuous fragrance in the air. Though the item
contains some disinfectant properties, the main usage is as a cleaning
preparation. The brochures released by the applicant also specify that the item
is mainly used for cleaning. They would therefore appropriately fall under the
category of 'cleaning preparation' and hence classifiable under Tariff Heading
3402 of the Act. That 'cleaning preparation' would fall under this Tariff
Heading is supported by the decision of the Hon'ble Tribunal in the case of
Metropol India Pvt. Ltd. vs. CCE, Delhi - 2003 (151) E.L.T. 460 (Tri-Del.)
which has been upheld by the Hon'ble Supreme Court in its judgement reported in
2003 (157) E.L.T. A135 (S.C).
6. The Commissioner in
his written comments referred to the Note 1(b) to the Chapter 34 and Notes
1(a)(2) and 7 to the Chapter 38 of the Act and has contended that the items
would appropriately fall under the MTP Act since they contain Ethyl Alcohol.
Reliance has been placed in this context on the judgement of the Hon'ble Supreme
Court in the case of Dabur India (1990) 4 SCC 113 as well as in the case of M/s
Baidyanath Ayurved Bhawan (P) Ltd. vs. Excise Commissioner, U.P. and Others
reported in AIR 1971 SC 378 wherein it has been held that mere presence of
Alcohol in a medicine is sufficient to make the medicine dutiable under the MTP
Act.
7. In the hearing before
us, the Ld. Representative of the applicant has made it clear that the applicant
is seeking a ruling on the classification of the liquid (chemical
formulation) which is contained in the "filler" of Auto Janitor & Auto
Sanitizer [for the sake of convenience, the said liquids would hereinafter be
referred to individually as the product]. He reiterated the submissions in
support of classification of the two products under Tariff Item 3402 of the
Act. As regards the reference made by the Commissioner to the Note 1(b) to the
Chapter 34 of the Act, it was submitted by the applicant that the products in
question were not "separate chemically defined compounds" and therefore they
could not be excluded from the purview of Chapter 34. Referring to the basic
description of the two items as given in the application, it was explained that
the difference between them was only in their make up in as much as the
concentration of the liquid in the two items was different. He further
clarified that where the use of the toilet was more then the Auto Sanitizer
would be the right item; otherwise, it was the Auto Janitor which would be
normally used. Referring to the technical write up of the two items attached to
the application it was pointed out that they were marketed also as a cleaning
preparation. Since soap is not the basis of these two products, the appropriate
classification would be under Tariff sub-heading 3402 90 42.
The Ld. Jt. CDR
speaking on behalf of the Commissioner asserted that the products would
appropriately fall under the MTP Act and not under the Central Excise Tariff
Act.
The Authority
directed the applicant to submit the details of the constituents of the two
products so that the exact nature and identity of the chemical formulation of
the liquid could be clearly ascertained and understood for deciding their proper
classification.
8. The applicant, in
compliance with the above direction, submitted the details of the ingredients
for three products instead of two as earlier mentioned. These are (i) Auto
Janitor Refill (ii) Auto Janitor "Bio" (Refill) and (iii) Auto Sanitizer. In
the covering letter they reiterated that the products were used as "cleaning
preparation" and that they did not have any soap but had other surfactants which
were used for the purpose of cleaning. They have further clarified that even
though the Auto Janitor and the Auto Sanitizer have disinfectants, the content
of the disinfectant in the entire refill is relatively less compared to the
surfactant components. Though the percentage of an ingredient does not have any
bearing in determining the essential character and nature of the product, even
on the basis of the percentage composition of various ingredients in the two
products, they would merit classification as cleaning preparation under the
tariff sub-heading 3402 90 42. It has been further submitted that the term
"cleaning preparations" is very broad and extensive and includes within its
ambit preparations which have uses other than cleaning also. Reliance has been
placed in this context on the Explanatory Notes of the HSN on Chapter 34. The
term "disinfectant" has a restrictive and specific meaning and includes within
its scope products of only one specific property i.e. disinfectant property.
Therefore, according to the applicant, while "cleaning preparations" can have
other properties, the word, "disinfectant" is specific and would not include
preparations having other functions also. It has accordingly been submitted
that the products would therefore appropriately merit classification as
"cleaning preparations" and not as a "disinfectant".
9. Before considering
the submission of the applicant that the products would appropriately fall under
Tariff Heading 3402 of the Act it would be useful to first examine the
Commissioner's contention on the coverage of the products under the MTP Act. We
would also examine the alternative classification of the products under Chapter
38 of the Act in response to the second part of the question raised by the
applicant.
10. The Commissioner's
stand, we observe, is apparently based on a sweeping generalization that as
and when there is alcohol content in any product, it must fall under the MTP
Act. The decisions of the Hon'ble Supreme Court in case of Dabur India and
Baidyanath Ayurved Bhawan have been relied upon by the Commissioner in support
of this contention. We have already dealt with this aspect in great detail in
our Ruling* given in this applicant's case, though for a different product.
After carefully examining the provisions of the MTP Act including the scope of
the definition of 'Toilet preparation' given therein and the Notes 1(d), 3&4
of Chapter 33 of the Act, we came to the conclusion in that case that the
products were not 'Toilet preparation' as defined in the MTP Act. We had
expressed our view in clear terms that the effect of Note 1(d) would be that
if a preparation in the nature of perfumery, cosmetics and toilet preparation
falls within the meaning of the MTP Act and contains alcohol or opium
or Indian hemp and other narcotics, it would get excluded from the purview of
Chapter 33. We further went on to explain that it, however, does not follow
that a preparation of the description of perfumery, cosmetics and toilet
preparation containing alcohol etc. but not covered by the MTP Act
would also get excluded from Chapter 33 for the sole reason that it
contains alcohol. We had also gone through the same two decisions of the
Hon'ble Supreme Court now being again cited by the Commissioner and found that
neither of them supported him. In Baidyanath's case the preparations which
were the subject matter of dispute, were undoubtedly medicinal
preparations. It was held that in order to attract
* Ruling No. AAR/10(CE)/2005
dated 06.10.2005
duty under the MTP Act, all that
was required, was that a medicinal preparation should contain alcohol.
This was cited by the Hon'ble Court in its later decision in Dabur's case where
also the product namely Homeodent was found to be a medicinal and toilet
preparation.
In our view, the legal position
is quite clear and we had explained it in no uncertain terms in our earlier
Ruling.
11. On the question of
classification of the two products under Chapter 38 of the Act, we have
carefully perused the Chapter Notes of Chapter 38 which covers "miscellaneous
chemical products". As per Chapter Note 7, Chapter 38 "does not cover products
containing alcohol, opium, Indian hemp or other narcotic drugs". It has been
further clarified in this Note that "for the purpose of this Note, "alcohol",
"opium", "Indian hemp", narcotic drugs" and "narcotic" have the meanings
assigned to them in section 2 of the Medicinal & Toilet Preparations (Excise
Duties) Act, 1955 (16 of 1955)". The term "alcohol" has been defined in the MTP
Act as meaning "ethyl alcohol of any strength and purity having the chemical
composition C2H5OH".
The information supplied to us by the applicant indicates that the two products
under consideration do contain ethanol/ethyl alcohol. (Ethanol is a synonym of
ethyl alcohol). Therefore, by virtue of the exclusion clause incorporated in
Note 7 of Chapter 38 of the Act, they are in any case not classifiable under
this Chapter.
12. Before going into
further details, we would examine the contention of the Commissioner that the
products in question are "separate chemically defined compounds" and hence
excluded from the coverage of Chapter 34 by virtue of Chapter Note 1(b).
Apparently, the Commissioner's submission is that the products being organic
chemicals would fall under Chapter 29 which, inter alia, applies, to "separate
chemically defined organic compounds, whether or not containing impurities". As
per the Explanatory Note to Chapter 29 of HSN, "a separate chemically defined
compound is a substance which consists of one molecular species (e.g., covalent
or ionic) whose composition is defined by a constant ratio of elements and can
be represented by a definitive structural diagram. In crystal lattice, the
molecular species corresponds to the repeating unit cell". It has been further
clarified that "separate chemically defined compounds containing other
substances deliberately added during or after their manufacture (including
purification) are excluded from this Chapter". Having regard to the above
explanation, the type of compounds covered in Chapter 29 and the details of the
chemical formulations of the two products which are apparently a combination of
surfactants, disinfectant, solvents, deodorizing chemicals, dilutant (water)
etc. cannot be justifiably treated as falling under the category "separate
chemically defined compound". That being so, Chapter Note 1(b) has no
application to the products in question. Incidentally, as per the Chapter Note
9 of Chapter 29, products containing alcohol, opium, Indian hemp or other
narcotic drugs (as defined in MTP Act) are excluded from this Chapter. The
products under consideration do contain ethyl alcohol as disclosed by the
applicant and hence they would in any case be outside the purview of Chapter
29. So, we are unable to agree with this contention of the Commissioner.
13. The moot points for
consideration for the purpose of classification are -
(i)
Are the two
products 'cleaning preparations'?
(ii)
If they are
'cleaning preparations', are they having basis of soap or other organic
surface-active agents or are they not having a basis of soap or
other organic surface active agents?
(iii)
If they are
not 'cleaning preparations', then, can they be treated as
'disinfectants'?
(iv)
If they are
'disinfectants', where will they fall for the purpose of Tariff classification
since they contain ethyl alcohol?
14. The point (i) arises
since the products are evidently having three functions as has been submitted by
the applicant itself in the application supported by the pictorial write up
attached therewith. The three functions are (a) cleaning (b) killing germs and
(c) deodorization. The products in question are therefore clearly composite
goods made up of different components.
As per the Rule 2(b) of the
General Rules for the Interpretation of the First Schedule to the Central Excise
Tariff Act, "Any reference in a heading to a material or substance shall be
taken to include a reference to mixtures or combinations of that material or
substance with other materials or substances. Any reference to goods of a given
material or substance shall be taken to include a reference to goods consisting
wholly or partly of such material or substance. The classification of goods
consisting of more than one material or substance shall be according to the
principles of rule 3."
Rules 3(a) and 3(b) read as
under -
"3. When by application
of Rule 2(b) or for any other reason, goods are, prima facie,
classifiable under two or more headings, classification shall be effected as
follows :
(a)
the heading
which provides the most specific description shall be preferred to headings
providing a more general description. However, when two or more headings each
refer to part only of the materials or substances, contained in mixed or
composite goods or to part only of the items in a set put up for retail sale,
those headings are to be regarded as equally specific in relation to those
goods, even if one of them gives a more complete or precise description of the
goods.
(b)
mixtures,
composite goods consisting of different materials or made up of different
components, and goods put up in sets for retail sale, which cannot be classified
by reference to (a), shall be classified as if they consisted of the material or
component which gives them their essential character, in so far as this
criterion is applicable".
The point for consideration
therefore gets focused as to which of the three components gives the product its
essential character. Simply stated, this would mean whether the products can be
taken to have the essential character of a 'cleaning preparation' or
'disinfectant' or 'deodoriser'. Though the term "cleaning preparation" has been
used in Chapter 34 of the Act, it has not been defined therein. The HSN
Explanatory Notes also do not define it but mention that "cleaning preparations
serve for cleaning floors, windows or other surfaces. They may also contain
some odoriferous substances." We would therefore like to examine the aspect of
essential constituent/character primarily on the basis of (a) information
supplied by the applicant on the ingredients and their respective function
including their percentage content in the products and (b) the expression
"cleaning preparations" being words of everyday use and not technical
expression, its meaning as understood in common parlance or in the commercial
world or trade circles.
15. Taking up (a) first,
we find that the details have been furnished in respect of three products,
namely, (i) Auto Janitor, 600 ml (582 g) Refill (ii) Auto-Janitor "Bio" 600 ml
(594 g) Refill and (iii) Auto Sanitizer - Purinel 300 ml (300 g) Refill. For
the first product, the following broad break-up of the ingredients usage-wise
can be summarized, (1) Fragrance Oil (2) Solvents and Defatters (3) Alcohols for
solubolizing the oil (4) Dilutant (water) (5) Disinfectant (6) Surfactant
cleaner (7) Chelating agent (8) Acid to balance the pH (9) Chemical to stabilize
the pH. From the information provided by the applicant it becomes apparent
that this particular product has larger percentage of surfactant cleaner
component than the disinfectant component. While the water having the function
of dilutant has the lion share, the ethanol/ethyl alcohol and the propan-2-ol
whose usage/function is claimed to be to solubolize the oil have the next major
share followed by solvent and defatter components. As per the Hawley's
Condensed Chemical Dictionary, 14th Edition, ethanol/ethyl alcohol
has use as a solvent "for resins, fats, fatty acids, oils, hydrocarbons; it has
got also use in the manufacture of other organic chemicals/compounds as well as
detergents, cleaning preparations, antisepsis etc". As per Kirk-Othmer's
Concise Encyclopedia of Chemical Technology, Fourth Edition, Ethanol or Ethyl
alcohol, "is one of the most versatile oxygen - containing organic chemicals
because of its unique combination of properties as a solvent, a germicide, a
beverage, an antifreeze, a fuel, a depressant, and especially as a chemical
intermediate for other organic chemicals". It has been further stated that "the
main uses for ethanol are as an intermediate in the production of other
chemicals and as a solvent. As a solvent, ethanol is second only to water". As
regards the Propanol-2-ol which is another name for Isopropyl alcohol, it has
been indicated in the said Encyclopedia that "it is the lowest member of the
class of secondary alcohols and is known as the first petrochemical". It
further goes on to say that "uses of isopropyl alcohol are chemical, solvent,
and medical......... Because of its balance between alcohol, water, and hydrocarbon
like characteristics, isopropyl alcohol is an excellent, low cost solvent.......
Isopropyl alcohol is also used as an antiseptic and disinfectant for home,
hospital and industry".
From the above, it appears that
though ethyl alcohol and Isopropyl alcohol do have
germicidal/disinfectant/antiseptic uses, their main usage is inter alia as a
solvent for oil, resins, fat etc.
As regards the other two
ingredients which are claimed to be 'solvent and defatter', one of them has been
indicated by the applicant as a trade mark name. On checking up this trade mark
name in Hawley's Condensed Chemical Dictionary, Fourteenth Edition, it is found
that its uses are indicated as "Solvents, intermediates for plasticizers,
bactericidal agents, and fixatives for soap and perfumes". The other ingredient
is also found to have use inter alia as "solvent for fats, oils, waxes,
resins". Thus, for these two ingredients as well, the main use as a solvent is
apparent, though one of the two is indicated as 'bactericidal agent' also.
This, therefore, brings us to
the two components which are described as "surfactant cleaner" and
"disinfectant" respectively. The word 'surfactant' is a contraction of
"surface active agent". The expression 'organic surface active agent' appears
in chapter 34 of the Act. As per Chapter Note 3 thereunder, "for the purpose of
heading 3402, "organic surface-active agents" are products which when mixed with
water at a concentration of 0.5% at 20°C and left to stand for one hour at the
same temperature :
(a)
give a
transparent or translucent liquid or stable emulsion without separation of
insoluble matter; and
(b)
reduce the
surface tension of water 4.5X10ˉ²N/m (45 dyne/Cm) or less."
It has been further
explained in the HSN Explanatory Note to Heading 34.02 that "organic
surface-active agents are capable of adsorption at an interface; in this state
they display a number of physico-chemical properties, particularly surface
activity (e.g., reduction of surface tension, foaming, emulsifying, wetting),
which is why they are usually known as "surfactants". In any liquid an
attractive force is exerted by the molecules below the surface upon those at the
surface-air interface, resulting from the high molecular concentration of a
liquid compared to the low molecular concentration of a gas. An inward pull, or
internal pressure, is thus created which tends to restrain the liquid from
flowing. [Ref:-Hawley's Condensed Chemical Dictionary, 14th Edn.].
This pull or pressure is called surface tension. Liquid like water has higher
surface tension compared to say, benzene and hence, the latter flows more
readily than water. By reducing the surface tension of cleaning solution a
surfactant thus helps it to have easier flowing property. Surfactants also
provide emulsification and wetting action. The function of a surfactant is to
clean a surface of dirt or what is more broadly known as 'soil'. As per the
information collected by us from the Internet in the article d "The
Chemistry of Cleaning - soil removal", (Ref:-www.essind.com/cleaners/gc-chemistry
- the website of Essential Industries, Inc.) - "understanding the basic elements
of a cleaner's effectiveness against different types of soil is essential to the
'Chemistry of Cleaning." For the sake of convenience, we would like to quote
certain relevant portions of this article -
"Soil
Types
Soil can be broken
down into three broad categories : organic, inorganic and combination.
Organic soils
encompass a broad range and include food soils such as fat, grease, protein, and
carbohydrate, living matter such as mold, yeast and bacteria and petroleum soils
such as motor oil, axle grease and cutting oils.........
Inorganic soils include rust,
scale, hard water deposits and minerals such as sand, silt and clay.....
Combination soils
often present the toughest challenge for a cleaner since the soil contains both
organic and inorganic components. Proper identification is critical. Most
combination soils are removed with a very concentrated, highly built cleaner
that also contains solvent."
"Surfactants
A surfactant is the
most important part of any cleaning agent. The word surfactant is short for
"Surface Active Agent". In general they are chemicals that, when dissolved in
water or another solvent, orient themselves at the interface (boundary) between
the liquid and a solid (the dirt we are removing), and modify the properties of
the interface.
How does a
surfactant work? All have a common molecular similarity. One end of the
molecule has a long nonpolar chain that is attracted to oil, grease, and dirt
(the hydrophobe). Another part of the molecule is attracted to water (the
hydrophile). .... The hydrophobic end of the molecule gets away from the water
and the hydrophilic end stays next to the water. When dirt or grease is present
(hydrophobic in nature) the surfactants surround it until it is dislodged from
the boundary......"
"Chelating
Agents
Soil removal is a
complex process that is much more involved than just adding soap or surfactant
to water. One of the major concerns we have in dealing with cleaning compounds
is water hardness. Water is made "hard" by the presence of calcium, magnesium,
iron and manganese metal ions. These metal ions interfere with the cleaning
ability of detergents. The metal ions act like dirt and "use up" the
surfactants, making them unavailable to act on the surface we want to clean.
A chelating agent
(pronounced keelating from the Greek word claw) combines itself with these
disruptive metal ions in the water. The metal ions are surrounded by the
claw-like chelating agent which alters the electronic charge of the metal ion
from the positive to negative. This makes it possible for the metal ions to be
precipitated with the surfactants. Thus, chelated metal ions remain tied up in
solution in a harmless state where they will not use up the surfactants.
Some common
chelating agents used in industrial cleaning compounds include phosphates, EDTA
(ethylene diamine tetra acetate), sodium citrate, and zeolite compounds......"
"Builders
Detergents, ........
consist of surfactants and chelating agents..... surfactants remove dirt from a
soiled surface and chelating agents are used to surround unwanted metal ions
found in cleaning solutions......
Builders are added
to a cleaning compound to upgrade and protect the cleaning efficiency of the
surfactants(s). Builders have a number of functions including softening,
buffering, and emulsifying.
Builders soften
water by deactivating hardness minerals (metal ions like calcium and
magnesium)......
Builders, in
addition to softening, provide a desirable level of alkalinity (increase pH),
which aids in cleaning. They also act as buffers to maintain proper alkalinity
in wash water.
Finally, builders
help emulsify oily and greasy soil by breaking it up into tiny globules. Many
builders will actually peptize or suspend loosened dirt and keep it from
settling back on the cleaned surface."
"Solvents
Detergents,.......
consist of surfactants, chelating agents and builders....... surfactants are
designed to remove dirt from a soiled surface. Chelating agents and builders
are added to the formula to keep water hardness from interfering with the
cleaning process.
Water makes up a
large percentage of most liquid cleaner formulas. It is not uncommon for
water-based detergents to contain 50% water or more..........
Water can be
considered an active ingredient that actually adds to the detergency of
cleaners. It performs several very important functions in liquid cleaners.
Most importantly, it adds to the "detergency" of a cleaner. Water acts as a
solvent that breaks up soil particles after the surfactants reduce the surface
tension and allow the water to penetrate soil..........
Water also aids in
the suspension and anti-redeposition of soils. Once the soil has been dissolved
and emulsified away from the surface, we want to prevent it from being
redeposited. Water keeps the soil suspended away from the clean surface so that
it can be carried away easily during the rinsing process.....
In addition to
water, other chemical solvents are often added to cleaners to boost
performance. Compounds such as 2-Butoxyethanol (butyl), isopropyl alcohol
(rubbing alcohol) and d-Limonene are all considered solvents. Their main
function is to liquefy grease and oils or dissolve solid soil into very small
particles so surfactants can more readily perform their function."
"Preservatives
A preservative is
nothing more than a substance that protects soaps and detergents against the
natural effects of aging such as decay, discoloration, oxidation and bacterial
degradation......
In detergents,
preservatives are used to prevent bacteria from spoiling the solution."
16. We have deliberately
gone a little deeper into the chemistry of cleaning to assess the roles of
'surfactants', chelating agents', 'builders', 'solvents' and 'preservatives' -
in the 'cleaning' process. It is clear that surfactants aided by chelating
agents, builder and solvent perform the function of cleaning soils from a
surface. The ingredients of the 'Auto Janitor Refill' as disclosed by the
applicant, include surfactant, chelating agent, solvents and dilutant (including
water) whose primary role is to 'clean' the surface. The applicant has declared
that the product does not have 'soap' as its basis, which appears to be
supported by the details of components for this product, furnished by them. But
evidently, the cleaning function is having a basis of organic surface active
agent (surfactant).
17. Lets now turn to the
'disinfectant' component, the percentage of which, according to the information
supplied to us by the applicant for this particular product, is quite low
compared to that of other ingredients whose function is to clean the surface.
From the Trade Mark name of the 'Disinfectant' indicated by the applicant, the
ingredients are found to be mainly quaternary ammonium compounds. We have also
to keep in mind that the ethanol/ethyl alcohol and isopropyl alcohol - the two
ingredients of the product in question - are also, per se, having
antiseptic/disinfectant action, though they are apparently to be used by the
applicant mainly as solvents for oils, fats, fatty acids etc. We have already
seen that these two groups of alcohol do have primary function as a solvent used
"to liquefy grease and oils or dissolve solid soil into very small particles so
surfactants can more easily perform their function". The short question is -
can the product under consideration which is evidently a combination product of
a cleaner and disinfectant, be treated as having the primary function of a
'disinfectant' with the cleaning function being subsidiary to it or is the
reverse position true? It is necessary to state at this juncture that the
Tariff classification of any goods would depend on first establishing its exact
and correct identity and then looking for the proper Tariff Heading/Item etc.
aided by, wherever called for, the Section/Chapter/Explanatory Notes, the
General Rules for Interpretation of the Tariff Schedule, the
technical/scientific information and the like. Therefore, the fact that a
'disinfectant' containing ethyl alcohol would go out of Chapter 38 of the Act,
cannot and should not preclude us from ascertaining whether the product in
question is a 'disinfectant' or not. If it indeed turns out to be so, then one
has to consider the issue of classification for such types of disinfectant which
contain ethyl alcohol.
18. The word
'disinfectant' is defined in Mcgraw-Hill Dictionary of Scientific and Technical
Terms, Fifth Edition, as 'A chemical agent that destroys micro-organisms but not
bacterial spores". Hawley's Condensed Chemical Dictionary, 14th
Edition, gives the following note on 'disinfectant' - "A substance used on
inanimate objects that destroy harmful microorganisms or inhibit their
activity. Disinfectants are either complete or incomplete. Complete
disinfectants destroy spores as well as vegetative forms of microorganisms;
incomplete disinfectants destroy vegetative forms of the organism, but do not
injure spores. Some representative disinfectants are (1) mercury compounds
(mercuric chloride, phenylmercuric borate); (2) halogens and halogen compounds
(chlorine, iodine, fluorine, bromine, calcium and sodium hpochlorite); (3)
pheols, including cresol from coal tar, o-phenylphenol; (4) synthetic detergents
(anionic such as sodium alkylbenzene sulfonates, and cationic, such as
quaternary ammonium compounds); (5) alcohols of low molecular weight, except
methanol; (6) natural products (pine oil); (7) gases (sulfur dioxide,
formaldehyde, ethylene oxide)". It is clear from the above that 'quaternary
ammonium compounds' are 'disinfectants'.
In the case before
us, the applicant has submitted that "the product under consideration is meant
for cleaning the toilet and urinal surface and provides an odour free clean
washroom. The primary character or the primary use of the product is cleaning.
While performing the cleaning activity, the product kills the germs and
bacteria which is incidental to the primary activity". The applicant has
further submitted that "in addition to the above, the brochures released by the
Company also specify that the product is mainly used for cleaning". It is
therefore to be taken that the applicant is not going to put up the products
under consideration for retail sale as disinfectants. A perusal of the
brochure on 'Auto Janitor' reveals the words 'CLEANER & DEODORISER' printed on
the label of the bottle with brand name 'NEUTRALLE', which is supposed to
contain the chemical formulation as refill. It would therefore be reasonable to
infer that the applicant's product is not to be marketed or sold as primarily or
solely a disinfectant. It can more appropriately be treated as what is commonly
known as 'disinfectant-cleaner'. In the article "Cleaning and Disinfecting the
Indoor Environment : Chlorine Bleach, Quats and Phenolics" by Roger McFadden,
Technical Director, Coastwide Laboratories (Ref - www.coastwidelabs.com/
Technical%20Articles/quatbleach), it has been explained in simple terms that
"Disinfectants require the removal of soils from a surface before they are
effective. Disinfectant cleaners combine the cleaner and disinfectant into a
"one-step" process. A disinfectant-cleaner is diluted and then used to remove
soils and kill germs all in one application. One step disinfectant-cleaners
save labour time and money. Simply stated, disinfectants 'disinfect' and
disinfectant-cleaners 'disinfect and clean'". The relevant point to note is
the relative role and function of the cleaning process vis-à-vis the
disinfecting processes. Cleaning the surface is a prerequisite for disinfectant
action to be effective. So, in the one-step disinfectant-cleaner, the cleaning
action has an important role to play in removing the visible dirt so the
disinfectant can get to work.
19. The thrust put by the
applicant on the primary function of cleaning gets support from the brochure for
the product Auto Janitor, when it says "The unique 'three in one' Auto Janitor
offers improved automatic cleaning and deodorizing for toilets and urinals with
simple programming and flexible dispensing options". This is the perception
which they would like any intending customer of the product to have about its
use and function. The perception is primarily that of a 'cleaner' which would,
in the process of cleaning, perform two other functions as well, - disinfectant
and deodorizer. It would be relevant in this context to see how generally such
combined products are sold and marketed in the course of normal trade and
business by those dealing with them. The information downloaded by us from the
Internet in respect of various brands taken at random, shows that products which
are meant for 'cleaning' of toilet bowls without having any 'disinfectant'
function as well as those which are having components for both 'cleaning' and
'disinfectant' are all commonly advertised and marketed under the same
name 'Toilet Bowl Cleaner'. For example, 'Lysol' brand 'Toilet Bowl Cleaner'
performs the following functions:- ". Disinfects the toilet bowl as it cleans
. Dissolves tough rust stains and mineral deposits on contact . Kills germs
such as Salmonella and Escherichia coli . Will not harm plumbing or septic
systems." Another product of the same brand, 'Lysol CLING Toilet Bowl Cleaner'
does not have any specific 'disinfectant' component. Its functions are:- ".
Cleans and deodorizes even under the rim . Thick liquid formula coats the bowl
for better cleaning . Leaves a fresh, clean scent . Available in Country Scent,
Spring Waterfall and Citrus fragrances . Will not harm plumbing or septic
tanks". Both the products are named 'Toilet Bowl Cleaner'.
This indicates that the emphasis
is on 'cleaning' which is normally accepted in the concerned trade as a broad
expression covering pure cleaning preparations as well as those preparations
which also 'disinfect' the toilet bowls as they 'clean'. The very fact that
both the categories are treated as 'cleaners' presupposes that cleaning
preparations having 'disinfectant' component as subsidiary to the 'cleaning'
component, are generally taken as 'cleaning preparation' only. When a product
has primarily or solely the 'disinfectant' function, it is to be labeled and
marketed as such, complying with all the relevant regulatory requirements as may
be applicable. We may cite the example of the brand 'Phenyle' or ' Dettol'
which are labeled and marketed as 'Disinfectant' or 'Antiseptic' respectively.
As we have already seen, the applicant's product in question is proposed to be
labeled and marketed as a 'cleaner & deodorizer'. Though the percentage of the
active ingredients in such products may not always be a true indicator of its
use, function and purpose, it is a matter of record before us that as per the
information supplied by the applicant, the percentage of the 'disinfectant'
component is definitely less compared to that of the 'surfactant' component - a
fact which at least does not contradict the claim of the applicant that the
product is primarily a cleaning preparation.
20. Regarding the second
product, namely, 'Auto Janitor "Bio" Refill', we find from the details furnished
by the applicant, that active ingredients are by and large the same as those of
'Auto Janitor Refill'. There is one component 'Bio F/S' in the "Bio" Refill
whose usage/function is indicated as 'Bacterial slurry, which according to the
applicant is "a liquid mixture that contains good bacteria which attacks the
source of the odour in a urinal by breaking down the uric acid scale deposits in
the urinal. The bacteria used in the slurry is in the nature of a weight
digesting bacteria". So, effectively, the position is virtually the same as
that of 'Auto Janitor Refill' discussed above.
21. In so far as the third
product (i.e., Auto Sanitizer) is concerned, the applicant's brochure states
that 'Neutralle Auto Sanitizer system provides the most effective automatic
hygiene system that maintains clean, sanitized and odour-free toilets and
urinals 24 hours a day ..... The Auto Sanitizer is an automatic cleaning and
hygiene system that keeps toilets and urinals clean and germ-free 24 hours a
day". Generally speaking, an Auto Sanitizer is reported to be "the ideal system
for maintaining well cared for washrooms. Automatic constant and continuous
cleaning of all ceramic surfaces exposed to flushing and attacks hard water and
mineral deposits. It reduces and prevents scale and stains from forming and
kills germs. Touch free operation and eliminates the build up of odours".
[Ref:- www.1sthygienesolutions.co.uk/index. php?section_name=WC AND URINAL
SANITIZING]. As per the details of the ingredients furnished by the applicant,
the 'Purinel Refill' has anionic surfactant and emulsifier as its main active
ingredient with ethanol/ethyl alcohol and propan 2-ol as components to
solubolize the oil, water as dilutant, relatively low percentage of the
'Biocide' compared to the surfactant percentage and a very small percentage of
'Chelating Agent'. The particular type of anionic surfactant, whose trademark
name has been indicated by the applicant, is the one which is used in all types
of liquid wash and cleaning agents, especially suited for highly concentrated
products. So, in effect, this product is also having similar characteristics as
those of an Auto Janitor Refill in as much as it is primarily a cleaner with
subsidiary disinfectant qualities.
The two plastic
bottles each of the Auto Janitor Refill and Auto Sanitizer Refill respectively
submitted by the applicant as representative samples of the items in question
also confirm the position that they are to be labeled and marketed in retail
pack as cleaner and none of them carries a label of 'disinfectant'.
22. From the above
analysis, we are led to the following conclusions :-
(i)
All the
three products in question are in the nature of preparations and having
disinfectant qualities which are subsidiary to their primary qualities as a
cleaner. The deodorising property is evidently secondary to the cleaning
property.
(ii)
By applying
the test of essential character, the three products are to be taken as 'cleaning
preparations'.
(iii)
They are
having as basis the organic surface active agents (surfactants).
(iv)
As is
apparent from the information furnished by the applicant, the 'filler' which
contains the product is to be replaced from time to time when the dispensable
quality of liquid is exhausted. It means the products are to be put up for
retail sale.
23. We would now turn to Chapter 34 of the Act to see
whether the products fall within its purview or not. This Chapter deals with :
"Soap, Organic
Surface-Active Agents, Washing Preparations, Lubricating Preparations,
Artificial Waxes, Prepared Waxes, Polishing or Scouring Preparations, Candles
and similar Articles, Modelling Pastes, "Dental Waxes" and Dental Preparations
with a basis of Plaster".
We observe that the
applicant's submission is that the products are "cleaning preparations" and
would appropriately be classifiable under the Tariff Item 3402 which covers :
"Organic surface
active agents (other than soap), surface-active preparations, washing
preparations (including auxiliary washing preparations) and cleaning
preparations, whether or not containing soap, other than those of heading 3401".
It is apparent from
the above description that all cleaning preparations other than those of Heading
3401 would be classifiable under the Tariff Item 3402 irrespective of whether or
not they contain soap. For the sake of convenience, it is necessary to refer to
the description of goods covered by Tariff Item 3401 which reads as :
"Soap; organic surface-active
products and preparations for use as soap, in the form of bars, cakes, moulded
pieces or shapes, whether or not containing soap; organic surface active
products and preparations for washing the skin, in the form of liquid or cream
and put up for retail sale, whether or not containing soap; paper, wadding, felt
and nonwovens, impregnated, coated or covered with soap or detergent".
The goods covered by
the Tariff Item 3402 are other than those falling under Tariff Item 3401 as
described above.
At this juncture it is also
necessary to refer to the HSN Explanatory Note to Tariff Heading 34.02. It
clarifies that it has got broadly two sub-groups namely (I) organic
surface-active agents (other than soap) and (II) surface-active preparations,
washing preparations (including auxiliary washing preparations) and cleaning
preparations, whether or not containing soap, other than those of Heading
34.01. It has been further clarified that the group (II) comprises three
categories of preparations, namely (A) surface-active preparations (B) washing
preparations (including auxiliary washing preparations) and cleaning
preparations, having a basis of soap or other organic surface-active agents and
(C) cleaning or de-greasing preparations, not having a basis of soap or other
organic surface active agents. For the 'preparations' indicated in (B) above,
the Note goes on to explain that "these various preparations generally contain
essential constituents and one or more subsidiary constituents.
The presence of these latter constituents distinguishes, in particular, these
preparations from those described in Part(A) above. The essential
constituents are synthetic organic surface-active agents or soaps or mixtures
thereof.
The subsidiary
constituents are :
(1)
Builders...........
(2)
Boosters.........
(3)
Fillers.............
(4)
Ancillaries
(e.g., chemical or optical bleaches, antiredeposition agents, corrosion
inhibitors, antielectrostatic agents, colouring matter, perfumes,
bactericides, enzymes)".
These preparations act on
surfaces by bringing the soil on the surface into a state of solution or
dispersion.
24. Having regard to our
conclusion that the products in question are cleaning preparation having a basis
of organic surface active agent (other than soap), they are squarely covered by
Tariff Item 3402 of the Act. One more aspect which we would like to mention in
support of this view is the example of "Disinfectant soaps". 'Disinfectants'
are covered by Tariff Heading 38.08 whereas 'soaps' fall under Tariff Heading
34.01. As per the HSN Explanatory Notes to Tariff Heading 38.08, one of the
specified group of items which are excluded from the purview of the
Heading 38.08 is -
(a)
------------------------------------------------------------------------------------------
(b)
Preparations covered by more specific headings of the Nomenclature, or having
subsidiary disinfecting, insecticidal etc., properties, for example :
(i)
--------------------------------------------------------------------------------
(ii)
Disinfectant soaps (heading 34.01)
(iii)
--------------------------------------------------------------------------------
(c)
------------------------------------------------------------------------------------------
(d)
------------------------------------------------------------------------------------------
We note from the above that the
words "heading 34.01" appear after "Disinfectant soaps", indicating that they
are to be classified in heading 34.01. Heading No. 34.01 refers to 'soaps', but
it does not refer specifically to 'disinfectant soaps'. In our view, the
products before us which are in effect disinfectant cleaner should be treated
similarly to the example of the disinfectant soap for classification purposes.
Though these products have disinfecting qualities, as does the disinfectant
soap, we are of the view that they should be classified under the Tariff Heading
3402 of the Act on the basis of its primary description and use as a cleaner
(cleaning preparation).
Having said so, we
now proceed to examine the exact sub-heading and tariff item of the Act under
which the three products would fall. Tariff sub-heading 3402 20 covers
'Preparations put up for retail sale' which would appropriately apply to the
products in question as they are to be put up for retail sale. Below this
sub-heading, we find the Tariff Item 3402 20 10 which is interalia, for
'cleaning preparations, having a basis of soap or other organic surface active
agents". As we have found, the applicant's products are cleaning preparations
having a basis of organic surface active agents. They must accordingly fall
under this Tariff Item. We have noticed that the applicant has submitted that
their products in question would be classifiable under the Tariff Item 3402 90
42. For an easy reference and comparison purpose, we reproduce the relevant
portions of the Tariff Heading 3402 as follows :
Tariff Item |
|
Description of goods |
Unit Rate of duty
|
(1) |
|
(2) |
(3)
(4) |
3402 20
3402 20 10
3402 20 20
3402 20 90
3402 90
---
---
---
---
---
---
3402 90 41
3402 90 42
3402 90 49
--- |
-
---
---
---
--
---
----
----
----
---
---
---
----
----
----
--- |
Preparations put up for
retail sale :
Washing preparations
(including auxiliary washing preparations) and cleaning preparations, having
a basis of soap or other organic surface active agents
Cleaning or degreasing
preparations not having a basis of soap or other organic surface active
agents.
Other
Other:
---------------------------------------------------------
---------------------------------------------------------
----------------------------------------------------------
----------------------------------------------------------
---------------------------------------------------------
----------------------------------------------------------
Wetting agents :
Washing preparations
(including auxiliary washing preparations) and cleaning preparations, having
a basis of soap or other organic surface active agents
Cleaning or degreasing
preparations not having a basis of soap or other organic surface active
agents.
Other
-------------------------------------------------------------- |
|
What we notice is
that the Tariff sub-heading 3402 90 covers goods which are other than, inter
alia, the preparations put up for retail sale. This is supported by the fact
that Tariff Heading 3402 20 which is for 'preparations put up for retail sale'
has three Tariff Items under it namely 3402 20 10, 3402 20 20 and 3402 20
90 - the last one being 'other' which means, other than those covered by 3402 20
10 and 3402 20 20. So, all the types of goods covered by 3402 20 are
exhaustively covered by these three Tariff Items. The next sub-heading 3402 90
(-- other), therefore, stands for those which are other than (i) 'organic
surface-active agents, whether or not put up for retail sale' as well as (ii)
'preparations put up for retail sale'. The applicant's products would not fall
under this sub-heading as they are preparations to be put up for retail sale.
The question of their falling under any Tariff Item under 3402 90 would not,
therefore, arise. Classification under the Tariff Item 3402 20 10 is thus the
most appropriate one in the facts and circumstances presented before us.
It goes without
saying that the points (iii) & (iv) in para 13 above do not require any
examination having regard to our findings on points (i) & (ii).
In view of the
foregoing, we rule on the question raised by the applicant that each of the
three products namely 'Auto Janitor Refill', 'Auto Janitor "Bio" Refill' & 'Auto
Sanitizer Refill', would be classifiable under Tariff Item 3402 20 10 of the
First Schedule to the Central Excise Tariff Act, 1985.
Pronounced in the open Court of
the Authority on this 7th day of September, 2006.
Sd/-
Sd/- Sd/-
(B.A.Agrawal)
(Justice S.S.M.Quadri) (Somnath Pal)
Member
Chairman Member
|