Customs, Excise and Gold Tribunal - Delhi
M/S. Jalani Enterprises vs Cce Jaipur on 17 April, 2000
Equivalent citations: 2001(132)ELT422(TRI-DEL)
ORDER
P.S. Bajaj
1. This order will dispose of two appeals filed by the appellants, one bearing bearing No.E/2521/2000-V, which has been preferred against the impugned order dated 27.4.2000 of the Commissioner(Appeals), vide which he had upheld the order in original of the Veputy Commissioner dated 27.9.99 classifying the product in question jaljira of the appellants under Chapter 21 of the CETA and the other bearing No.E/2541/2000-V directed against the impugned order in original of the Commissioner dated 12.5.2000 confirming demand of Rs.22,78,788/- and imposing penalty of Rs.19.34,246/- under Section 11-AC and of Rs.5 lakhs under Rule 173-2 of the Central Excise Rules alongwith the interest, on the appellants.
2. The appellants were engaged in the manufacture of branded as well as unbranded jaljira classifiable under Chapter 21 of the CETA. They filed classification declaration under Rule 173-B of the Rules effective from 6.7.98 clasifying this product under Chapter 9 (sub-heading 0903.10(branded) and under 0903.10(unbranded) of the CETA. They also mentioned in their classification declaration that they would be paying duty at the rate of 18% for the branded product and nil rate for unbranded and would be also availing exemption Notification No.8/98-CE dated 2.6.98, under protest. But it revealed that their branded product(jaljira) was appropriately classifiable under Chapter 21(sub-heading 2108.99) of the CETA attracting 18% and valorem rate of duty, while unbranded was classifiable under sub-heading 2108.91 of the CETA chargeable to nil rate of duty. It also appeared that the clearances of branded goods were to be taken into account, while computing the aggregate value of the clearances for the purposes of deciding the exemption Notification No.8/98-CE dated 2.6.98 right from 1.4.98 as the goods were dutiable at the rate of 18% even prior to 2/6/98 in the financial year 1998-99. The statement of Shri Shushil Jalani, proprietor was also recorded 25.6.98 wherein he gave the detail of clearances of the goods made during the years 1995-96 to 1997-98 and from his statement it revealed that the appellants had exceeded the SSI exemption limit. He, however, pleaded that the product jaljira was a spice and hence not dutiable being classifiable under Chapter 9 of the CETA.
3. Accordingly one show cause notice dated 8/9.3.99 was issued to the appellants proposing classification of their product under Chapter 21(sub-heading 2108.99 and 2108.91) of the CETA and and other show cause notice dated 9.11.99 was issued vide which only demand of amount of Rs.2278788/- for the period 1995-96 to 1997-98 was raised from them. The appellants contested the correctness of both those show cause notices and claimed classification of their product jaljira only under Chapter 9 of the CETA as masala/spice and also avered that the duty demand was time barred. The Deputy Commissioner through under in original dated 27.9.99, who adjudicated the show cause notice dated 8/9.3.99 held the classification under Chapter 21(sub-heading 2108.99(branded jaljira) and sub-heading 2108.91(unbranded) of the CETA. This order of the Veputy Commissioner was upheld by the Commissioner vide dated 27.4.2000 which is under challenge before us in Appeal No.E/2521/2000-V. Similarly, the Commissioner who adjudicated the second show cause notice dated 9.11.99 regarding the duty demand, confirmed the duty demand and also imposed penalty on the appellants, as detailed above through impugned order dated 12.5.2000.
4. The appellants have filed these two appeals against the abovesaid, two impugned orders.
5. We take up the issue of classification of the product in question(jaljira) involved in appeal No.E/2521/2000-V.
6. In order to decide as to whether the product jaljira is classifiable under Chapter 9 or 21 of the CETA it would be beneficial to refer to the relevant Chapter Headings and the Chapter Notes of both these Chapter.
Chapter 9 "Chapter Heading 0903 reads-'Spices' Chapter Note 3 of Chapter 9 reads as under:
Heading No.09.03 covers spices-a group of vegetable products(including seds, etc.) rich in essential oils and aromatic principles, and which, because of their faste, are mainly used as condiments. These products may be whole or in crushed or powdered form. The addition of other substances to spices shall not affect their inclusion in this heading provided the resulting mixtures retain the essential character of spices included in this heading. The heading also includes products commonly known as 'Masalas.
Chapter 21: Chapter heading 2108 reads-'Edible preparations not elsewhere specified or included.' Chapter Note Note 9(b) of Chapter 21 reads-Preparations for use either directly or after processing (such as cooking, dissolving or boiling in water, milk or other liquids), for human consumption".
The bare perusal of Chapter Note 3 of Chapter 9 reproduced above shows that it envisages classification thereunder only if the products satisfied the three conditions, namely, (a) Are mainly used as condiments, (b) Additions of other substances to spices shall not effect their inclusion under Chapter 9 provided the resulting mixture retains the essential character of spices; and (c) Are commonly known as masalas. The product jaljira of the appellants does not satisfy these conditions, as it is not used mainly as condiments, rather is used only cold drink after addiion of water. By merely printing the words 'masala' on the packing of the jaljira by the appellants, did not make it a masala, in fact. The product jaljira is also not known in the market as masala but as a drink which could be taken by mixing in the water. Even on the packing, the appellants had shown a glass of water containing jaljira.
7. The appellants have, no doubt, alleged that the product 'jaljira' was prepared by them from salt(40%), kalanamak(1%), Nimbu Ka Satlcitric (sic), Sonth (10%), Kalim;irch(10%), Pudhina(10%), Hing(1%), Jira(1%) and Lalmirch(2%) but that itself is not enough to hold that jaljira is a masala/spice especially when it is not even commoly known as such but rather it is known as drink. It is well settled that the goods have to be classified accordingly to the popular meaning attached to them by those using the product, as observed by the Apex Court in Shree Baidyanath Ayurved Bhavan Ltd.Vs.CCE,Nagpur 1996(83) ELT 492(SC). Similarly in Novopan India Ltd. vs.1994(73) ELT 796(SC) the Apex Court has observed that commercial/trade understanding is the true test for the classification of the goods and not what scientific books like Encyclopaedia Britannica, may say. This very view has been again reiterated by the Apex Court in Purewal Associates Ltd. Vs. CCE 1996(87) ELT 321(SC).
8. Viewed in this context, the product, 'jaljira' although prepared by adding some spices, cannot be logically said to be 'masala' as it is never understood or taken/accepted/used or called as spice or condiment both in trade parlance as well as common parlance.. It is always understood, as drink by the traders and consumers as it is mainly used (sic) as drink and not as spice/condiment.
9. The Board's Circular No.197/31/96-CX. dated 15.4.96 referred by the counsel before us does not in any manner advance the case of the appellants for classifying the product 'jaljira' under Chapter 9 of the CETA. That circular pertains to the classification of Dhana Dal/Dhania Ki Dal/Coriander Seeds sold in pouches. The Board only (sic) through that circular that even if these (sic) as spices i.e. as condiments, the product retained their identity as spices since the general Chapter Note of Chapter 9 defines spices as those which are mainly used as condiments. But in the instant case, the product jaljira is never used mainly as condiments. It is rather used as a drink. Even the appellants themselves had showed it as a drink in the picture drawn by them on the packings.
10. The applicability of the Board's circular No.205/39/96-CX dated 30.4.96 relied upon the appellants, had been also rightly ruled out by the Commissioner in the impugned order, to the product jaljira of the appellants. That circular only laid down guidelines for classification of various traditional convenience food mixes, masalas, spices and condiments such as pulliyogare powder, sambar power, instant bisibelebath rasan powder bisibelebath masala, mix spiced chutney powder, cury powder, pickle masala, garam masala etc. under Chapter 9 and 21 of the CETA. But the product in question jaljira does not at all fall under Chapter 9 of the CETA being not commonly known as masala, but a drink, as observed above.
11. Moreover, even the Board itself through its latest circular No.9/1/99-CX.I dated 21.12.2000 on the classification of jaljira masala, had clarified that this product was classifiable appropriately under Heading 21.08 of the CETA as essentially it is used as a drink in admixutre with water, in view of Chapter Note 9(b) under Chapter 21 of the CETA. This circular was issued by the Board after examining the representations received from Jaljira Masala Manufacturers' Association of Rajasthan where the appellants are also carrying on their business. That Association requested the classification of the 'jaljira masala' under Chapter 9 of the CETA as masala/spice but the Board through its abovesaid circular clarified that it was not classifiable under Chapter 9, but under Chapter 21 (sic) (Heading 21.08) of the CETA.
12. Heading 21.08 reproduced above, covers edible preparations not elsewhere specified or included and chapter Note 9(b) appended to this chapter further clearifies that preparations for use either directly or after processing such as cooking, dissolving or boiling in water or other liquids for human consumption are included therein. The product 'jaljira' of the appellants, squarely falls within the four corners of this Chapter 21 read with its chapter Note 9(b) of the CETA. The Board's circular dated 21.12.2000, referred to above also makes the position quite clear about the classification of the jaljira manufactured by the appellants under Chapter 21 and not Chapter 9 of the CETA.
13. In the light of the discussion made above, the impugned order of the Commissioner(Appeals) upholding the order in original of the Deputy Commissioner classifying the product jaljira under Chapter 21 (sub-heading 2108.99(branded) and 2108.91(unbranded) of the CETA is prefectly valid and does not suffer from any legal infirmity. That being so, there is no merit in appeal No.E/2521/2000-D of the appellants.
14. This takes us to the second appeal No.E/2541/2000-D.
15. The duty period relates to the years 1995-96 to 1997-98 while the show cause notice was issued for recovery of the duty amount for these years only on 9.11.99. On the face of it, the recovery is time barred. The extended period of limitation under proviso to Section 11-A of the Act had been invoked against the appellants by the adjudicating authority so as to make the demand within time. The duty liability in this appeal has been contested mainly on the ground of limitation.
16. The learned counsel for the appellants has contended that proviso to Section 11-A(1) of the Act could not be invoked for want of any material to show that there was any fraud, collusion or any wilful misstatement or suppression of fact by the appellants about the production of the product 'jaljira' by them. He has referred to the letter dated 3.3.94 vide which the appellants had informed the Excise Department about their production jaljira, alongwith the production of other goods.
17. The learned SDR, on the other hand, has argued that since there was suppression of material facts about the production of the product 'jaljira' by the appellants, the extended period of limitation in view of the proviso appended to Section 11-A of the Act, had been rightly invoked against them.
18. It is well settled that in other to make the demand for duty sustainable beyond a period of six months and upto a period of 5 years, in view of the proviso to sub-section (1) of Section 11-A of the Central Excise and Salt(sic) Act, 1944 against the assessee, it has to be established that the duty of excise has not been levied or paid or short levied or short-paid, or erroneously refunded, by reasons of either fraud or collusion or wilful mis-statement or suppression of facts or contravention of any provisions of the Act or the Rules made thereunder, with intent to evade payment of duty. Something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information when the manufacturer knew otherwise, is required before he can be saddled with any liability, beyond the period or six months, Whether in a particular set of facts and circumstances, there was any fraud or collusion or wilful misstatement or suppression of facts or contravention of any provision of the Act or the rules, is a question of fact depending upon the facts and circumstances of a particular case. In this contex reference may be made to CCE Vs. Chemphar Drugs & Laminates 1989(21) ECC 66=1989(40) ELT 276(SC) wherein it has been so observed by the Apex Court.
19. Similarly, in Padmini Products Vs. CCE 1989(24) ECC 362 = 1989(43) ELT 195(SC) the Apex Court has observed that mere failure or negligence on the part of the producer or manufacturer either to take out a licence or where there was scope for doubt whether goods were dutiable or not, would not attract Section 11-A of Act.
20. To the same effect is the ratio of law laid down in Tamil Nadu Housing Boafd vs. CCE Madras, 1994(74) ELT 9(SC) wherein it has been ruled that when the law requires an intention to evade payment of duty then it is not mere failure to pay duty, it must be something more. That is, the assessee must be aware that the duty was leviable and he must have deliverately avoided paying the same.
21. In the instant case, the appellants vide their letter dated 3.3.94 informed the Superitendent of Central Excise that they were manufacturing the product Jalani jaljira besides seven other products of Ayurvedic medicines. They also categorically mentioned in that letter that the Ayurvedic medicines were chargeable to nil rate duty and so also the spices by virtue of Notification No.1/93-CE dated 28.2.93 and that the clearances of the spices were not to be taken into account for the purpose of computation of aggregate value of the clearances of first Rs.30 lakhs under that notification. This letter was duly received in the office of the superintendent of Central Excise on 3.3.94. From this letter it is quite evident that the appellants never kept the Excise Department in dark about the manufacture of the product Jalani jaljira, rather it can be safely said without any hesitation that the Excise Department came to know/acquired full knowledge onreceipt of that letter that the appellants were manufacturing Jalani jaljira besides some Ayurvedic medicines which were also detailed by them in the letter itself. That being so,, it could not be said that there was any suppression of the material facts about the production of the product Jalani jaljira, by the appellants from the Excise Department.
22. Even in the show cause notice it had been nowhere specifically alleged that the appellants suppressed the manufacture of the product Jalani jaljira branded or unbranded from the Excise Department during the period in question. All that avered in para 9 of the notice was that the appellants suppressed the material fact of clearances beyond exemption limit and never filed declaration under Notification No.13/92-CE(NT) dated 14.5.92. Regarding the production of the product Jalani jaljira it was nowhere asserted in the show cause notice that the appellant kept the Revenue Department in dark. The receipt of the letter dated 3.13.94 referred to and discussed above from the appellants by the Excise Department, had not been denied at all.
23. In CCE Vs. HMM Ltd. 1985(76) ELT 97(SC) it has been observed by the Supreme Court that the showcause notice must contain averment to that effect pointing out specifically as to which various commissions or omisions stated in the proviso to Section 11-A of the Act had been committed by the assessee and the adjudicating authority must specifically deal with the assessee's contention in rebuttal thereof. But, the show cause notice in the instant case did not attribute any suppression about the product Jalani jaljira by the appellants from the Excise Department. The adjudicating authority has even failed to refer to the letter dated 3.3.94 of the appellants vide which they informed the Excise Department about the production of Jalan jaljira by them alongwith some Ayurvedic medicines detained therein, in the adjudication order.
24. In the light of the discussion made above, in our view the provisions of proviso to Section 11-A of the Act could not be invoked against the appellants for bringing the time barred recovery, within time. Therefore, the impugned order of the Commissioner dated 12.5.2000 in appeal No.E/2541/2000-D cannot be legally sustained and deserves to be set aside on the question of limitation. The duty demand for the period in question is time barred.
25. Consequently, appeal No.E/2541/2000-D of the appellants is allowed with consequential relief, if any, under the law and impugned order dated 12.5.2000 of the Commissioner confirming duty demand and imposing penalty, as detailed above, is set aside. However, the impugned order of the Commissioner(Appeals) dated 27.4.2000 classifying the product 'jaljira' of the appellants, under Chapter 21 of the CETA, as discussed above, is upheld and appeal No.E/2521/2000-D of the appellants is dismissed.