Customs, Excise and Gold Tribunal - Delhi
Collector Of Central Excise vs Frozen Foods (P) Ltd. on 26 June, 1986
Equivalent citations: 1986(10)ECC285, 1987(10)ECR133(TRI.-DELHI), 1987(27)ELT195(TRI-DEL)
ORDER P.C. Jain, Member (J)
1. Question involved in this appeal filed by the Collector of Central Excise, Pune against the impugned order passed by the Collector of Central Excise (Appeals) Bombay is whether the product named 'Spert' manufactured by the respondent herein is covered by entry 14 in the schedule to notification 17/70 dated 1-3-1970 which gives a list of dutiable goods falling under item IB of CET broadly described as 'prepared or preserved Foods'. Entry 14 reads as follows :
"Preparations with a basis of flour, of starch, of malt extract, or of malted barley, and milk foods, which by simply mixing with, or boiling in milk or water, can be used for making beverages invalid foods and gruels, whether or not containing cocoa, but excluding baby foods, that is to say, foods specially prepared for feeding of infants."
2. Composition of 'spert' is given below :
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S.No. Ingredients Quantity
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1. Liquid Glucose 41.30 gms.
2. Skimmed Milk Powder 24.30 gms.
3. Calcium Casienate 18.00 gms.
4. Malt Extracts 5.30 gms.
5. Sugar 10.00 gms.
6. Vitamin cand 1.10 gms.
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3. Controversy centres around the reading of entry 14. The appellant and his learned SDR wants to read the entry in the following manner, as has been read by the Asst. Collector in his order in original : _ "preparations with a basis -
of flour, of starch, of malt extract, or of malted barley, and of milk foods ..."
Appellant's further contention is that the product under consideration, has a basis of malt extract (5.30 gms.) and skimmed milk powder (24.30 gms) since these two together constitute the principal ingredient of the product, apart from liquid glucose which has been added for making the product palatable.
4. In arriving at the above stand, the appellant pleads that "skimmed milk, powder" is a milk food by implication of entries 12 and 13 of the schedule to the said notification which speak of "skimmed milk powder but excluding such powder specially prepared for feeding infants and condensed milk or condensed skimmed milk in both cases whether sweetened or not."
5. Respondents (hereinafter referred to as the assessee) on the other hand, contend that entry 14 requires to be read as :
"(1) Preparations with a basis of flour, of starch, of malt extract, or of melted barley, and (2) milk foods"..."
Assessee's learned advocate further submits that 'milk foods' are nowhere defined in the Central Excise Tariff; there is no standard prescribed for milk foods by I.S.I, although there is one for Malted Milk Foods (I.S. 1806-1975). It is for the department to prove that the product under consideration is covered by entry 14 of notification 17/70 dated 1-3-1970 since this is a claim of the department; the assessee cannot discharge a negative burden that 'Spert' is not covered by entry 14 of the said notification. There is no such term as 'Milk food' except 'infant milk food'; there are, however, 'Milk products' such as malai, cream, curd, cheese, ice-cream, skimmed milk powder, butter, desi-butter etc. as defined in Prevention of Food Adulteration Rules, 1955. It is a well-settled principle of law that terms noted in the Central Excise Law are in the sense in which these are understood by the community which deals with that law i.e. the trade and industry. The assessee has produced a host of certificates from food technological institutions, dieticians, doctors that there is no term as 'milk food' and assuming 'milk food' as the same as 'milk product', 'Spert' cannot be treated a milk product as commonly understood since it contains 'Calcium Catenate' as a major constituent a non-dairy product. Learned Advocate for the assessee finally submitted that the assessee has submitted as much evidence on its own to prove that 'Spert' is not a 'Milk product', yet the department has not furnished any positive evidence either by way of any standard authority or by way of an affidavit to prove that 'Spert' is a 'milk food' or is covered by entry 14 of Schedule to the notification. Learned Advocate has also relied upon various case law in the course of his arguments. We shall refer to them as and when the need arises hereinafter in the course of discussion and findings.
6. I have carefully considered the pleas advanced on both sides. I observe that although notification 17/70 dated 1-3-1970 is an exemption notification and in order to claim an exemption with certain conditions onus is generally on the assessee who claims the exemption to prove that he fulfils the conditions of exemption notification, yet notification 17/70, is of a peculiar nature. By this notification every commodity covered by item IB of CET is exempted unconditionally except the commodities listed in the schedule to the notification. In other words, notification lists out the dutiable items which are generally mentioned in the Central Excise Tariff; Notification 17/70 substitutes here the role of the tariff. Accordingly, the onus is on the department to prove that the product under consideration is covered by entry 14 of notification 17/70 dated 1-3-1970. No positive evidence has been admittedly furnished by the department to that effect.
7. This aspect, however, is not decisive of the issue under consideration because the department is relying on proper construction of entry 14 read with inferences from entries 12 and 13 of the said notification.
8. The assessee has attempted to prove by producing a large number of authorities that there is no such term as 'milk foods' except infant milk food. Some affidavits, while accepting the factual position of non-existence of any understanding of the expression 'milk foods' in trade and industry, go on to explain as to what this expression should mean. Such affidavits, therefore, do not have any evidentiary value regarding commercial understanding of the expression 'milk foods'. Yet the notification uses this term. In order to make the notification workable or in other words to effectuate the intention of the authority issuing the notification, this term has to be given some meaning. Most appropriate meaning to this term will be given by the expression 'milk products' (taken as foods) which is a generally understood term in trade and industry or a food product containing milk or milk product as a major constituent. 'Skimmed Milk Powder' is undoubtedly a 'milk product' as given in the evidence relied upon by the assessee itself such as 'Encyclopaedia' Britannica (Vol. 25) and 'Prevention of Food Adulteration Rules'. 'Skimmed Milk Powder' is a major constituent of 'Spert' apart from glucose. Therefore, 'Soert' itself becomes a 'milk food' because addition of other things namely glucose, calcium casienate malt extract, sugar, vitamins and flavours does not change the character of the milk products just as addition of sugar, vitamins and flavours to condensed milk, or addition of vitamins, iron salts and minerals to milk powder/skimmed milk powder will not change the milk powder/skimmed milk powder. The aforesaid additives merely make the product 'Spert' more enriched in proteins, vitamins etc. and just add to the nutrient value of the product. Its essential characteristic as 'milk food' is not lost.
It is also to be noted, as rightly contended by the appellant, expression 'milk foods' occurring in entry 14 of the notification, must have a wider connotation than 'infant milk food' like Amulspray, lactogen, etc. which have been specifically exmepted under entry number 12 of the notification.
Another contention of the assessee, based on some affidavits, that if at all something is to be treated as a 'milk food', bulk of it must have as its constituent a milk product is not acceptable because of the vagueness of the word 'bulk'. Where to draw the line ? A sure test is to look at comparative percentages of various constituents which give to the product its essential character as food. There are two contending constituents here - skimmed milk powder and calcium casienate. Between the two, skimmed milk powder has been used in greater quantity. By virtue of this test, 'Spert' is a 'milk food'. Argument that 'clacium caasienate provides larger percentage of 'proteins' in 'Spert' confuses the issue and in my view not relevant for determining whether it is covered by entry 14 in the schedule to the notification 17/70. A 'protein rich supplementary food', as the assessee likes to call 'Spert' does not take it away from the category of 'milk food' on the basis of the above test; that name or advertisement to that effect merely emphasises a quality of the product and does not indicate as to how it is known in the market.
Therefore, if entry 14 is read in the way assessee wants us to read, 'spert' will be covered by the term 'milk foods'.
9. In view of the finding given above, I allow the appeal that 'Spert' is dutiable under entry 14 of the notification 17/70 dated 1-3-1970.
G. Sankaran, Vice President I have carefully perused the order proposed by brother Jain. For the reasons set out below, 1 regret, I have to differ from his conclusions.
11. Having regard to the phraseology, the punctuation and the use of the conjunction 'and' used in entry No. 14 in the Schedule to Notification No. 17/70 dated 1-3-1970, I am of the opinion that the respondent's reading is the appropriate one. In other words, entry 14 should be read as : -
"(1) preparations with a basis -
of flour, of starch of malt extract, or of malted barley, and (2) milk foods, which may simply mixing with..."
In this view of the matter, there does not seem to be any warrant for aggregating the proportions in which malt extract and skimmed milk Powder are present in the product SPERT in order to arrive at a conclusion on the question whether the product conforms or not to entry No. 14.
12. It is an admitted position that the expression "milk foods" has not been defined in the Excise Law, nor has any authoritative definition been placed before us by either side. Indian Standards IS: 1806-1975 which is the specification for malted milk foods, according to the respondent, would not cover SPERT which would, however, be covered by IS: 8220-1976, which is the specification for protein-rich concentrated nutrient supplementary foods. The product SPERT is being advertised and sold as a protein food supplement. The affidavits of a few doctors testify that SPERT is a protein-rich concentrated nutrient supplementary food and that the product is totally different from many malted foods available in the market such as Bournvita. A couple of affidavits from dieticians testify that protein supplementation required by convalescing patients like post - operative patients or patients recovering from chronic and acute illness is normally provided by giving products like Complan, SPERT, Proteinex etc. The affidavits go on to say that milk foods like Lactogen, Glaxo Sunshine and Amul Spray are used to prepare reconstituted milk to feed infants who do not get adequate quantity of mother's milk. Energy foods like Bournvita, Horlicks, Nutramul, etc. are given to patients recovering from chronic illness over a long period of time. The dieticians also state that, to their mind, milk foods are nothing but baby milk foods and they are used for feeding infants.
13. The Assistant Collector has gone on the footing that SPERT is a preparation with a basis of malt extract. The appellant's contention is that SPERT is a preparation with a basis of malt extract (5.30 gms) and skimmed milk powder (24.30 gms) and that, since these two, together, constitute the principal ingredients of the product, apart from liquid glucose which has been added for making the product palatable, it is a preparation with a basis of malt extract and milk foods. As stated earlier, there does not seem to be any warrant, in my opinion, to aggregate malt extract and skimmed milk powder to determine the basis of the preparation. Even assuming, for the sake of argument, that the appellant's contention is tenable, since SPERT is admittedly a protein-rich food, its basis, as Shri D.V. Rege, Professor of Food Technology and Director, Department of Chemical Technology, University of Bombay, has stated in his opinion dated 26th June, 1985 has to be determined taking into account the material from which the protein content of the product is derived. Prof. Rege goes on to say that SPERT contains 23.66% of protein of which 14.4% is derived from the calcium casienate (18.00 gms in 100 gms) present in the product, whereas 8.99% is derived from skimmed milk powder which is present to the extent of 24.30 gms. per 100 gms and 0.21% is derived from malt extract which is present to the extent of 5.30 gms. On this footing, Prof. Rege concludes that calcium caseinate contributes 61% of the total protein content of the product whereas skimmed milk powder, together with malt extract, contributes 39%. Having regard to this position, the conclusion of Prof. Rege is that it is calcium caseinate which contributes the major share of the protein content of SPERT and, therefore, calcium caseinate should be considered as the basis of this product. In his earlier opinion of 12th January, 1985, Prof. Rege has stated that since SPERT is a protein-rich food supplement to be taken under protein deficiency conditions, it should be considered as a protein rich mineral nutrient supplement rather than a milk food.
14. The respondent has also filed an opinion dated 7-6-1985 from Dr. V.H. Potty, Head, Industrial Development and Consultancy Services of the Central Food Technological Research Institute, Mysore. Dr. Potty states that if one is discussing about proteins only, skimmed milk powder is not the major source of protein in SPERT since it contains only about 35% protein and that though in terms of proportion, calcium caseinate is less than skimmed milk powder, its contribution to the final protein content is rather high due to its concentrated form. More than 60% of the protein in the product is contributed by calcium caseinate and more than 50% of the energy is derived from liquid glucose and sugar. It would be difficult, according to Dr. Potty, to agree with the view that skimmed milk powder and malt extract form the basis of SPERT.
15. The above referred-to opinions from eminent experts in the line have not been rebutted by the appellant nor has any material which may point to a different or contrary conclusion been placed before us.
16. Another conclusion in the form of an affidavit is from Dr. A.S. Aiyar Executive Director of the Protein Foods and Nutritional Development Association of India. Para 3 of the affidavit reads as follows :
... "3. On studying the complete technical details about the product, I say that a protein rich concentrated nutrient supplementary food containing 24% skimmed milk powder cannot be labelled as a 'milk food' because of the following reasons :
'Milk Food' has not been defined in any of the Acts or Rules that govern food products, e.g. Customs, Excise, PFA. In the absence of a legal definition, a rational interpretation of the term 'milk food' is that it denotes products that are derived exclusively or almost so (processing additives exempted) from milk by physical, chemical or biological processing. This definition would include products like evaporated milk, condensed milk, skimmed milk,- plain yoghurt, cheese, milk powder and others that are obtained from fluid milk by treatments such as heating, drying, fermentation acidification, etc. without any significant addition of exogenous ingredients.
If one does not accept this view, a product that contains milk, cereals, vegetable protein, vegetable fat and fruit, in whatever proportions, may be variously referred to as 'milk food', 'cereal food', 'vegetable protein food', 'vegetable fat food' or 'fruit food' depending on the whims of the individual.
There are indeed a very large number of food products that contain milk as one of the ingredients the proportion varying from insignificant (as in tea) to predominant (as in some sweetmeats). While these are all 'milk containing food products', the term 'milk food' can be precisely and unambiguously applied only to products that are exclusively (or almost so) derived from milk...."
Based on the above reasoning, Dr. Aiyar concludes that SPERT cannot be classified as milk food.
17. The respondent has also submitted affidavits from a few dealers: druggists, provision storekeepers. These are to the effect that when customers ask for milk foods, they are given products like Lactogen, Amul Spray etc. which are in fact milk foods and when customers ask for malted milk foods, they are given products like Bournvita, Nutramul, Horlicks etc.
18. As against all what the respondent has produced in support of his contention, the department has not produced any material in support of their stand. We note in this connection that the Dy. Chief Chemist, Central Excise, Bombay, in his note of 19-9-1984 states that the form and nature of the ingredients as well as composition of SPERT indicate that it is to be taken as a protein-rich concentrated nutrient supplementary food. He does not call it milk food or malted milk food.
19. It is interesting to note in this connection that in response to the respondent's letter dated 12-1-1985 to the Assistant Collector seeking clarification on what, according to the department, was 'milk food' so as to enable the respondent to reply to the show cause notice, the Assistant Collector in his reply (undated) of January, 1985 has not been able to clarify the query. He has merely stated that the Central Excise Tariff has not defined 'milk food' and that he was, therefore, unable to give any definition excepting that it should carry the meaning as commonly understood. The Assistant Collector added that it was for the respondent to defend his case as the show cause notice was based on the tariff wordings. This shows the lack of any precise or unassailable definition or meaning of the expression "milk food". In this background, I do not see any reason why the opinions expressed by eminent persons in the field of food science and food technology, doctors, dealers and chemists, should not be accepted and acted upon, particularly, when the appellants have not placed any material before us which may throw any other angle of light to the proper understanding of the expression or contradict the opinion given by these persons.
20. Though notification No. 17/70 dated 1-3-1970 is an exemption notification, the general principle that it is for the assessee who claims exemption from duty to show that his goods fall within the four corners of the notification, may not strictly apply in the present case. It is for the reason that, unlike the general run of notifications, which name products and exempt them, the present notification exempts all goods falling under item No. IB of the Central Excise Tariff Schedule from payment of excise duty except those enumerated in the schedule to the Notification. In other words, if a product is covered by any of the entries in the schedule to the notification, it is taxable, otherwise not. In my view, it is, therefore, for the department which is seeking to tax SPERT under entry No. 14 of the schedule to show that it falls within the entry. I am afraid the department has not discharged its burden, whereas the respondent has, on its part, produced sufficient material to point to the conclusion that its product does not fall within the mischief of entry No. 14.
21. In the light of the foregoing discussion, I am of the view that the product SPERT manufactured by the respondent is not covered by entry No. 14 of the Schedule to Notification 17/70 dated 1-3-1970-and hence it is exempted from payment of excise duty. In this view of the matter, the appeal fails and is rejected.
V.T. Raghavachari, Member (J) I have carefully perused the orders prepared by Shri P.C. Jain, (Member) and Shri G. Shankaran, (Vice President). I agree with the reasonings and the conclusions in the order prepared by Shri G. Sankaran and therefore agree with him that the appeal is to be rejected.
In accordance with the decision of the majority this appeal is dismissed.