Madras High Court
Parry Confectinery Ltd., Madras vs Government Of India And Ors. on 1 January, 1800
Equivalent citations: 1980(6)ELT468(MAD)
ORDER
1. The petittioner are, among other things, manufacturers of confecttionery items, in their facttory situated at Nellikuppam, Sout ArcotDt. Tamil Nadu. They held a Central excise Licence for the manufacture of general confectionery ittems dutied under ittem 1-A of the First Schedule to the Central excise and Tariff ACt, 1944 ( hereinafter referred to as tthe Act). In their application for central excisee licence made under rule 173(b) of the Centtral Excise Rules, they have mentioned `Lozengeds', as one of tthe items manufacttured by the petitioner. These `Lozenges' prepared by tthe petitioners were being asseessed to the central excise duty as if they fall under item 1-A of the Schedule to the ACt. The pettitiioners sttte thatt tthey have wrongly included in their application and were also paying mistakenly duty on Lozenges as if these Lozenges are also covered under item 1-A(1) of the SSchedules. When the mistake was dettected, they filed a petition on 20-10-1973 to the Assistant Collector o Centtral Excise,m Pondicherry to delete lozenges from the list of excisable items mentioned in their appliication filed under rule 173(b) of the Central Excise Rules, and also prayeed that they may be permitted not to pay cebntal excise duty thereafter. They have further prayed that tthe duty collected in the past may also be refunded to them . In thiis petiton, theu have detailed tthe items that mightt come under item 1-A(1) and contended that Lozernges do not fall withi the ttariff description of anyu one of those various speciified itemjs mentiond in that entry. In support of their contention, the petittioners furn;iished the views expressed by certain standard books on confectionery and also the dexcripttion and the specificattion gien for some of the items by the Indian Standards Institution. By a one line ordr dated 8-1-1974, the Assisttant Collector held that `Lozenges' manufactured by the petitioners wil fall under the catregory of `candy' which is to be assessed as confectionery under ttariff item 1-A(1). This was confirmed by the appellatte and revisional authorites. Itt may also be mentioned that both the appellate and revisional authorities also didi ot give any reasona for coming to this conclusion except to state that `lozenges' is included in the word `candy' and is assessable to excise dutty. It is against tthese orders, the petitioners have filed the present writ petitions praying for a writ of certiorari to quash the orders of tthe assessing authorities holding that `Lozenges' are excisable under item 1- A(1) and for a mandamus directing the respondents to dispose of the refund application afresh on the basis the `lozenges' are not eexcisable goods.
2. It may be mentioned at this stage that with effect from 1-3- 1975, as statted by the leared counsel for the petitioners, aresiduary entry in 68 was iintroduced so that even if `Lozenges' do not come under tthe description mentioned in ittem 1-A(1), it will be now excisable under entry 68 with effect from 1-3-1975. There apeears to have been a further amendmentt sometime in 1978, by which aittem 1-A(1) itself wass deleted but these do not condern us and ttherefore ,we need not state enyting morethan to note the amendments.
3. The learned counsel for the petitioners contended that though the heading of excisable products in ittem 1-A of tthe Scheudle is `confectionery' the description gien in item 1-A(1) shows that the products itemnised in that item area exhaustive and that, atherefore, in rder to attract excise duty, the productt will have to fall under anyone or other of the categories mentioned in item 1-A(1). It was then contended by the learned counself for the petitioner thatt tthe products mentioned in item 1-A(1) show that they acould all be brought undr one category of confectionery items producted by the process of heating and cooking. In other words, heating and cooking are common elements in tthe proceess of manufacturing ofeveryone of these itrems. Therefore , in order to bring any partticular comodity wihtin these items, the heatting and cooking elecnents also shoudl be available. TThus, the products in ittem 1-A(1) should be understtook and interpreted in the context in whiich the groups of artticles having some important common process of manufacture are brought together. So understood, Lozenges will nott come under any one of the items much less under th item `cnady' whiich is the only item in whiich it is tated to be incuded accordiing to the ordeers of the assessing autthorites. On theother hand, the learned counsel for the respondents contended that emphasis should nott be made on the ingredientts used in the manufacute or the process of manufacture but the words will have to be understood in tthe popular or common man's understanding and so understood, there could be no dubt thhat lznges could be ttreated as either sweeetts or candies. In this connection, the learned counsel for therespondentts als relied on the label affixed by the petitionnners in mjarkettting the product `Lozenges' wherein it is stated extra strong mint Lozenges below the words `Parry sweets".
4. Section 3 of tthe Act imposed a duty on all excisable goodsset forthe in tthe First Schedule tto the Act. There are a number of major heading under which a maha number of sub-items are also month in the Firstt Schedule. The furst heading is `food'. Under thatt, we find number of itens viz. items 1, 1-A, 1-B, 1-C, 1-D, 1-E and 1-F. Each of the items give a description of the goods and the rate of duty leviable in respect of the same. Item 1-A of the First Schedule reads as follows -
"1-A. Confectionery, conoa poweder and chocolates in or in relatio to thejmanufacture of which any process is ordinarily- carried on with the aid of power, namely -
(1) Boiled sweetts, toffees, caramels, ten per cent candies, nuts ( including sweeteing ad valorem almonds) and fruit kernels coated with sweeteningagent and chewing gums.
(2) Cocoa powder ten per cent ad valorem (3) Drinking chocolattes, chocolotes in the ten per cent form of granules or powder ad valorem (4) Chocolates in the form of blocks, slabs, ten per cent tabletts, bars, pastillers or conquettes ad valorem or in any other form not otherwise specified, whether or not containing nuts, fruit, kernels or fruits".
It can bee seen from this item that whatver confectionery items excisable under this entry are those mentioned in items 1-A(1), Cocoa powder comes under 1-A(2) and Chocolate under 1-A(3) and (4). If we split up tthe items, we may read `confectttionery', namely -
"Boiled sweets, toffees, caramels, candies, nuts (including almonds) and fruit kermels coated with sweetening agent and chewing gums are dutiable at 10 percent ad valorem".
5. The learned counsel for the petitioner is well founded in his contenttions thatt by use of the word `namely' itt is intended to be an exhaustiive definition of coafectionery and therefore, there is no use in looking into the meaning of the word `confecttionery' in the general sense but one will have to understand whether a partticulr commodity manufactured will come under any one of the items mentioned in 1-A(1). Unless itt can be brought under any one ofthese categories, it iwll not be dutiable under that entry. As already stated, the assessing authority and theappellate and revisional authorities have held thatt Lozenges ae included in the item Candies. It is therefore ,necessary for me only to see whether the view expressed by these authoritties is correct and iit is not necessary to find out whetther it will come under ay otther category mentioned in item 1-A or under general heading `confectionery' a tthat was not the contenttion of tthe respondentts either.
6. When the matter was pending before the appellate authority, the authorised representative of the petitioer company applied to the Indian Standard Instittute for a ttechnical opinion as to the meaning of tthe word `candy' and `lozenges'. The Indian Standard Institute in ttheir lettter dated 11-10-1974, replied as follows -
"(i) Candy is a liight, bright and glossy confection made by pulling sugar syrup boiled to a thick consisteency. In other words, candy is crystallised sugar made by repeated boilingand low evaporation. A lozenge on the other hand is enttirely different,. Its process of manufacture involves a cold process without any boiling abeig done, unlike confectionery or candy. The lozenge is made out of finally pulverised sugar or icing sugar with certain binding materials, suitable flavours and colour added, worked up to dough consistency without the aid of heat, rolled flat and then stamped into separate lozenges by cutting.
(ii) Usually candy is defined as light and brilliant confection made by pulling sugar syrup, boiled to a thick consistency. Lozenges are made of sugar, flavoured with essence and coloured to taste. Usually for the preparation of lozenges finely pulverised sugar, glucose syrup and a binder, such as gum tragacanth or liquid calatime is worked up to a dough consistency without the aid of heat, which is rolled flat and them stamped into separate lozenges by cutting. The only difference we see between candy and lozenges is application of heat. Also probably in the case of candy, the ratio of sucrose to glucose may be higher than in lozenges.
(iii) In India, candy is understood to be the cystallised sugar made by repeated boiling and slow operation. The trade name for such a product is `mishri', which is marketed in the form of `slabs and bowls'.
(iv) The term candy connotes different meanings in different countries. In English speaking countries with the former British background, candy means highly purified from of sugar made by slow evaporation of sugar syrup and is obtained in the from of large crystals, characteristic to sucrose, a disaccharide. In the new word, i.e. primarily America, candy means virtually and confectionery be it, hard boiled sweets, confectionery goods, toffees, caramels, boiled marshmellows, jujubs, lozenges, chocolate bars and coated chocolate confectionery etc. Therefore the term candy should not be interpreted in the American sense of the term as meet of our rules and regulations as well as terms of common usage are on the British pattern. The term candy, therefore, should connote only candy sugar and not confectionery.
As regards lozenges, this produce unlike all the other classes of sugar confectionery is not cooked at all. Further, this product, except minor quantities of binding material, colour and flavouring is almost exclusively sugar and therefore must be regarded as distinctly different."
7. In Indian Standard Institute's specification relating to IS: 1668-1975, which product relates to lozenges, it is stated -
"0.2 Lozenges (as different from medicated lozenges or others with special claims) are confections mainly made out of pulverised sugar or icing sugar with certain binding materials and lubricants with the addition of suitable flavours and colours. Powdered spices or extracts of spices are also added in the preparation of some varieties of lozenges. These are generally made from cold mixing which means that no preliminary boiling or cooking of ingredients is required. These confections are produced either as cut goods from a sheet of dough and air- dried or they might be held under pressure so as to form a hard cohesive confection. The compressed lozenges are produced by could mixing and wet granulation of slugging procedure."
The petitioners had also obtained the views of the Central Food Technological Research Institute. Mysore, who in their letter dated 6-2-74, have stated.
"Usually candy is defined as light and brilliant confection made by pulling sugar syrup, boiled to a thick consistency, lozenges are made of sugar, flavoured will essence and coloured to taste. Usually for the preparation of lozenges, finely pulverised sugar, glucose syrup and a binder such as gum tragacanth or liquid gelatin is worked up to a dough consistency without the aid of heat which is rolled flat and then stamped into separate lozenges by cutting. The only difference we see between candy and lozenges is application of heat. Also probably in the case of candy the ratio of sucrose to glucose may be higher then in lozenges."
As may be seen from the informations, specifications, descriptions and manufacturing process in relation to lozenges, no preliminary boiling or cooking of the ingredients is required in the manufacture of lozenges, whereas candies are made only with aid of heat and cooking is involved in the process. Even though the learned counsel for the respondents is not in a position to deny that there is such a difference in the manufacture of candies and lozenges, he contended that this difference is of no consequence. It is a respect of this argument that the contention of the learned counsel for the petitioners that for making every one of the commodities mentioned ?? cooking and boiling by use of heat are essential elements ?? selection of the commodities among the confectionary items and it under item 1-A (1) is relevant, Toffees are defined in the Indian standard Institute's specifications IS: 1667-1871 as -
"Boiled sugar confectioneries made out of sugar, edible fat, water and other ingredients..."
8. In the book Chocolate Cocoa and Confectionery : Science and technology by Barnard W. Minifie we find the following passage relating to the manufacture of Caramels, toffees, butterscotch :
"These confections owe their character mainly to the presence of milk, butter and certain vegetable fats. Brown sugars are also used to contribute flavour. Milk when heated in the presence of sugar, is subject to partial decomposition known as caramelization and this gives the characteristic flavour associated with caramels and toffee. Caramelisation of a different type also occurs in sugar, glucose and invert sugar when syrups are boiled to temperatures of 149 - 157 (300-315 F) A stronger type of caramolisation with yet another type of flavour is obtained by alkaline treatment, for example by the decomposition of sodium bicarbonate with boiling syrup of about 300 F."
9. In the same book relating to the manufacture of gums, we find that in the process of manufacture sugar and glucoses are dissolved in water and boiled upto 149 0 C. The The first commodity mentioned in item 1-A is boiled sweets. In the process of manufacture of these sweets, therefore, cooking is involved. Coated nuts and fruits kernels and coated candies (vide Encyclopaedia Britannia). Thus in every one of the commodities mentioned under item 1-A (1). boiling and cooking are essential elements in the process of manufacture, Having regard to the context in which candies are used in this entry in order to bring a product within the context in which candies are used in this entry in order to bring a product within the meaning of candies, it should be one in the manufacture of which the process of boiling and cooking are also involved. We have already noticed that in the process of manufacture of lozenges, boiling and cooking are not done. Necessarily therefore, lozenges cannot be included in the item `candy'. The description, specification and the process referred to in the Indian Standard Institute's specifications and the view expressed by the Indian Standard Institute in their letter dated 11-10-74 also clearly show that lozenges cannot be brought under the category of `candies'. It may also be mentioned that in the opinion given by the Indian Standard Institute in their letter dated 11-10-1974, they have also referred to the understanding of the word `candies' in England and America. In this connection, we may refer to a decision of the Supreme Court reported in Union of India Vs Delhi cloth and General Mills Co. Ltd. , wherein the Supreme Court observed that in technical matter like this, the views expressed by the Indian Standard is Institution must by preferred. I see from some of the specifications of the Indian Standard Institution produced of eminent persons in trade, industry and Government as also consumers and other experts. Their views therefore deserve acceptance by court except where there are other strong considerations to the contrary. Having regard to all these facts, I am of the opinion that the view expressed by the respondents that lozenges will be included in the description of 'Candy' cannot by accepted and therefore lozenges are not excisable under entry 1-A (1) of the First Schedule to the Act.
10. The learned counsel for the respondents then contended that even so, no refund could be ordered. First of all, in this petition no refund is asked for and the petitioners have prayed only for a writ of mandamus directing the respondents to consider their application for refund on merits. But, I do not want to leave the matter in doubt relating to the entitlement of the petitioners for refund. So far as the period subsequent to 20-10- 1973 when the petitioners contended that they are not liable to pay any excise duty, and were paying excise duty under protest, is concerned, there could be no doubt that they are entitled to get a refund of the same. So far as the period earlier than 20- 10-1973 is concerned, the learned counsel for the respondents contended that the duty had been collected and it would have been appropriated for the common goods and there is no justifiable reason for directing a refund of the same. Generally, the Supreme Court is maintainable within a period of three years from the date of knowledge of the mistake. In case, there could be no doubt that payment of excise duty was on a mistake. In case, there could be no doubt that the payment of excise duty was on a mistake of law and not on a mistake of fact. The question whether lozenges will be included or not in Candies cannot be taken as so obvious as to make it any payment without protest as a payment under mistake of fact. In fact, so many authorities will have to be looked into and verified before one could come to a conclusion that lozenges are not included in candies. Therefore, if the petitioners had to file a suit, they could have done so and claim refund for a period of three years prior to the date on which they had entertained the doubt and filed application for refund. But they had not filed a suit and if any suit were to be filed today, it would have been barred by limitation. As held by the Supreme Court in M/s. D. Gawasji and Co. v. State of Mysore, , if the relief for refund could be asked for in a suit, it could be asked for in a writ petition also. Since the relief related to a period beyond three years prior to the filing of the writ petition, I could not grant any relief for refund relating to the period, prior to 20-10-1973. What the learned counsel for the petitioner wants to contend is that Rule 11 of the Central Excise Rules enables the petitioners to file an application for refund and such an application will have to be filed only with the Assistant Collector and they need not file any suit. Therefore, to the extent the petitioners could be given relief under Rule 11, the excise authorities should have given them the relief. The rule reads -
"No duties or changes which have been paid or have been adjusted in an account current maintained with the Collector under rule 9, and of which repayment wholly or in part is claimed in consequence of the same having been paid through inadvertence, error or mis-construction, shall be refunded (unless the claimant makes an application for such refund under the signature and lodges it with the proper officer) within three months from the date of such payment or adjustment, as the case may be."
11. It is manifest that the petitioners having filed an application for refund on 20-10-19793, will be entitled to a refund of the excise duty mistakenly paid for a period of three years prior to that date. No question of limitation arises because the application itself is dated 20-10-1973, and the pendency of the application will not bar the relief itself. The petitioners will accordingly be entitled to a refund of the moneys paid for a period of three months prior to 20-10-1973, and also for the period subsequent to 20-10-1973, which they paid under protest.
12. Accordingly, the writ petition is allowed. The rule nisi is made absolute. There will be writ of Mandamus directing the 3rd respondent to take up the refund application on file and dispose of the same in the light of the observations made above. There will be no order as to costs.