Customs, Excise and Gold Tribunal - Mumbai
Kraps Chem Pvt. Ltd. And R.P. Gupta vs Commissioner Of Customs And Central ... on 6 October, 2004
Equivalent citations: 2005(179)ELT589(TRI-MUMBAI)
ORDER Moheb Ali M., Member (T)
1. These appeals arose out of the order of the Commissioner of Central Excise, Surat-II.
2. The facts are that M/s. Kraps Chem Pvt. Ltd., the appellant company, manufacture guar dal powder. Shri R.P. Gupta is its managing director, the other appellant.
3. The issue that comes up for determination is whether or not the process carried out by the appellants amounts to manufacture of excisable goods, if so, the appropriate classification of the resultant goods under CETA.
4. The process of manufacture earned out with the aid of power is somewhat as follows:-
Guar, dal powder stored in raw material godown was put into a blender to which additives like saw dust, TKP were added in required quantities. Then the mixture is blended for some time. After mixing/blending the materials thoroughly, the same is packed in 50 kgs. bags. Shri R.P. Gupta, managing director, deposed that the blender was operated with the aid of power. Further, he deposed that they had two blenders and other equipments installed at factory and stacker machine for filling the bags, stitching machine for stitching the bags etc. He also deposed that they had lab equipment such as viscometer, microbalance, stirrer which were used for testing the quality of raw materials received from the supplier as it was an agro products and the quality of raw material depended on many factors. Further, he deposed that their main customers were paper industries, agarbatti industries and explosive industries etc.
5. From Shri Gupta's statement, it is evident that the unit manufactures different types/grades of guar dal powder depending on the use the product is being put to. Say, for use in the paper industry, the product has a different specification from the one used in mosquito coil etc. The appellant has a lab where the viscosity and solubility of the product is tested before selling the goods to their various customers. The department's contention is that such process as carried out by the appellant results in converting guar dal into guar gum of different grades for use in different industries amounts to manufacture.
6. After hearing both sides on this issue, we hold that the process carried out by the appellant amounts to manufacture. 'Guar dal, when it is pulverised along with additives, becomes guar gum and no more remains guar dal. Here we are not merely dealing with a case where a cereal/grain is merely powdered. Guar dal is subjected to certain process so as to make it marketable as guar gum. In the case of Empire Industries v. UOI (1985 [20] ELT 129), the Hon'ble Supreme Court held that whatever may be the operation, it is the effect of the operation on the commodity that is material for the purpose of determining whether an operation earned out on goods constitutes a process of manufacture. Applying this ratio, we find that the process carried out on guar dal in the present case amounts to manufacture. While coming to this conclusion, we also follow the ratio laid down by the Supreme Court in the case of CCE, Bombay v. S.D. Fine Chemicals Pvt. Ltd. (1995 [77] ELT 49 [SC]).
7. The next issue pertains to classification of guar gum. The rival entries are found in Chapter 11 and 13 of CETA. We have heard the rival contentions. The Revenue seeks to classify the goods under Chapter 13 as gum but the appellants argue in favour of Chapter 11 as a product of milling industry.
We set out the rival entries -
Heading 11.01 Products of the milling industry, including flours, groats, meal and grains of cereals, and flour, meal or flakes of vegetables.
Heading 13.01 Lac; gums, resins and other vegetable saps and extracts.
8. These chapters in CETA are not completely aligned with HSN and thus HSN explanatory notes are not much of help in deciding the classification of guar gum. We observe that in the case of Dilip Gum Industries v. CCE, Rajkot (order No. A/772-773/WZB/2004/C-II dated 1.9.2004), the Tribunal held that guar gum is classifiable under heading 13.01. The consideration that weighed with the Tribunal in that case is that CET sub-heading 1301.00 covers lac; gums, resins and other vegetable saps and extracts manufactured with the aid of power. The entry specifically covers gums. As against H.S. heading 13.01 which includes natural gum, GET heading includes all gums without any qualifications. The Tribunal in that case went on to argue that guar gum powder does not fall under chapter sub-heading 1101.00 because the products falling under that chapter are not treated chemically. The Tribunal also distinguished the decision in Hindustan Gum and Chemicals Ltd. v. CCE, Ahmedabad-II (2004 [91] ECC 289) wherein it is held that tamarind kernel powder (a kind of gum only) falls under Chapter 11 as a product of milling industry and not a gum falling under chapter heading 13.01. The ground taken by the Tribunal is that the Board in its circular dated 14.8.1986 clarified that tamarind kernel powder is classifiable under Chapter 11 as a product of milling industry.
9. The learned advocate for the appellants argued that chapter heading 13.01 which reads as lac; gums, resins and other vegetable saps and extracts though speaks of gum, covers only such gums derived from vegetable saps and extracts. After gums, resins the expression used in the heading is and other vegetable saps and extracts' which only means that gum and resins which are derived from saps and extracts are covered here. He argued that the meaning of expression gum, resins should be read with the expression other vegetable saps and extracts'. The legal maxim that the meanings of words used in a statute must be derived from the company of words they keep. He argued that guar gum powder is not a sap or an extract of any vegetable. It is derived from milling guar dal. A product thus manufactured is different from the one derived from vegetable sap or extract by any standards. What are covered in chapter heading 13.01, according to him, are those gums which are derived from vegetable saps and extracts and not those which are products derived from milling cereals. It was further contended that if tamarind kernel powder which is also a kind of gum known to the consumers is classified as a product of milling industry, there is no reason why similar classification should not be accorded to guar dal powder. When the characteristics of both tamarind kernel powder and guar dal powder are same and when both products are derived by pulverising, they cannot be differently classified.
10. The learned SDR, Shri Saxena, on the other hand, argued that the issue is no more res Integra as the Tribunal in the case of Dilip Gum Industries cited supra already held that guar gum powder falls under tariff heading 13.01. He submitted that the Tribunal should follow its own decision.
11. We observed that the decision in Dilip Gum Industries does not become a binding precedent at least for two reasons. That decision proceeded on the understanding that all types of gums are covered under chapter heading 13.01. That assumption looked from the angle of words and phrases used in heading 13.01 as pointed out by the learned advocate, does not appear to be correct. Secondly, the Tribunal in that case agrees that tamarind kernel powder, a gum, falls under Chapter 11 as a product of milling industry. Thus, the Tribunal in the Dilip Gum's case agrees that all gums do not fall under Chapter 13 as otherwise it would have found that tamarind kernel powder also falls under that chapter. We, therefore, respectfully observe that the decision in Dilip Gum Industries does not come as a binding precedent, the ratio of which has to be followed. We hold that guar gum powder falls under Chapter 11 as a product of milling industry attracting 'nil' rate of duty.
12. In fine our decision in the appeals are:-
(a) The process carried out by the appellants amounts to manufacture.
(b) Guar gum falls under chapter heading 11.01 attracting nil rate of duty.
13. In view of this decision, we set aside the demand, confiscation and penalty ordered in the impugned order.
14. The appeals are decided in the above terms.
(Operative part pronounced in court)