Per Jyoti Balasundaram :

The appellants herein are inter-alia engaged in the manufacture of nail polish, nail strengthener, nail polish remover, cuticle softener, etc. falling under CET Sub-heading 3304.00, and thinner under CET Sub-heading 3814.00, as per classification list submitted by them w.e.f. 1.3.92 and 1.10.92. All these items are manufactured under the trade mark "Gala of London". In the classification list effective from 1.10.92, the assessees claimed the benefit of Nil rate of duty under Notification 230/86 as amended by Notification 89/87. Since the Department was of the view that the thinner was used for dilution of nail polish and removal of nail polish, it was used for cosmetic purposes only and the thinner was a `preparation for use in manicure and pedicure' classifiable under CET Sub-heading 3304.00 and chargeable to duty @ 105% BED + 15% SED, a show cause notice dated 15.12.92 was, therefore, issued proposing classification of thinner under CET Sub-heading 3304.00 proposing recovery of duty during the period April to November 92 (since the appellants had cleared thinner at nil rate of duty during the period in dispute in terms of the above mentioned Notifications), and proposing imposition of penalty. The Assistant Collector accepted the assessees' plea of classification under CET Sub-heading 3814.00, holding that there is no evidence of any practice or usage that the thinner is used for removal of nail polish and as such, the condition of Note 5 to Chapter 33 is not satisfied. He held that the product was not a preparation for use in manicure or pedicure, but an organic solvent, and hence dropped the demand and penalty. The lower appellate authority before whom the Revenue filed an appeal, reversed the Assistant Collector's order for the reasons, inter-alia, that the appellants were registered for manufacture of cosmetics and toilet preparations under a franchise agreement and were registered under the Cosmetics and Toilet Preparations Act and that the appellants had not substantiated their submission that the thinner was a general purpose thinner, having different applications and uses. Hence this appeal.

2. We have heard Shri R.C. Gupta, learned Advocate and Shri T.A. Arunachalam, learned DR.

3. We find that the product was being cleared in packing of 60 ml similar to the packing of nail polish remover. The retail price of Rs. 12.50 also indicates that he product is a cosmetic preparation. The label on the product shows that it is a "scientifically formulated solvent to correct dried and thickened nitro cellulose lacquer". The contention of the assessee that the thinner in dispute is different from nail polish remover is unsubstantiated. Even assuming that there is a difference from thinner and nail polish remover, the thinner is still admittedly used for dilution of dry and thick nail polish. Hence Note 5 to Chapter 33 which states that Heading 3304 covers inter-alia `preparations for use in manicure or pedicure' is applicable. The appellants have not substantiated with reference to any technical literature that the thinner manufactured by them is capable of being used elsewhere than as nail polish remover/diluter. Having regard to the fact that the thinner is used for dilution of nail lacquer/nail polish, it has been rightly held to be classifiable under CET Sub-heading 3304.00, having regard to "Note 2 to Chapter 33 which clearly states that "Heading Nos. 3303 to 3307 apply inter-alia to products whether or not mixed (other than.......) suitable for use as goods of these Headings and put up in packing with labels, literature or other indications that they are for use as cosmetics or toilet preparations or put up in a form clearly specialised to such use". In the result we see no reason to interfere with the impugned order and accordingly reject the appeal.