CESTAT confirms Excise Exemption for Henna Paste Containing Oils [Read Order]

The New Delhi bench of Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that henna paste mixed with oil continues to qualify for excise duty exemption, as the addition of oil is for better application and retention, does not alter its essential character or remove it from the scope of the exemption notification.

The assessee-appellant, Prem Henna Pvt. Ltd., is engaged in the manufacture and clearance of mehandi paste and mehandi powder.

The case began when the Department alleged that the respondent manufactured and cleared henna paste packed in pouches and cones containing oil as a medium. Therefore, the goods did not fall under the category of “henna powder” or “henna paste in unit containers,” which were eligible for exemption under Notification No. 12/2012-CE dated 17.03.2012. It was alleged that the addition of oil transformed the product into a “preparation for use on hair, which attracted the central excise duty.

A Show Cause Notice (SCN) was issued proposing the denial of the exemption and recovery of duty, interest, and penalty.

The adjudicating authority, however, held that the exemption was admissible since the product was henna paste, even if oil was added for better application and longer retention, and dropped the proceedings.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

Revenue challenged this order before the Commissioner, who upheld the adjudication and found that the essential character of henna was not lost by mixing it with oil. The Department filed an appeal before the Tribunal, reiterating that once oil was used as a medium, the product ceased to be “henna paste” and fell under the tariff heading of hair preparations.

The Tribunal, after considering the rival submissions, noted that the chemical examiner’s report had confirmed the goods to be henna paste, and that the addition of oil did not change its essential character.

The bench emphasized that the exemption notification specifically covered henna powder and paste in unit containers, and the respondent’s product squarely fell within the scope of the entry.

Relying on precedent decisions where exemption had been allowed for henna paste mixed with oil, the Bench comprising Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) concluded that the Revenue’s contention was without merit.

Accordingly, the Tribunal dismissed the Department’s appeal and confirmed the excise exemption for henna paste containing oils.

The assessee was represented by Rupesh Kumar along with Jitin Singhal, while Bhagwat Dayal represented the revenue.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates