Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise, ... vs Venkateshwara Essences And Chemicals ... on 28 May, 2014
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Final Order Nos. 21737-21738 / 2014 Appeal(s) Involved: E/Cross Objection No. 369/2002-DB E/890/2002-DB, E/891/2002-DB [Arising out of Order-in-Appeal No. 228/2002 dated 09/04/2002 passed by the Commissioner of Central Excise and Customs, Bangalore] Commissioner of Central Excise, Customs and Service Tax Bangalore-I Post Box No. 5400, CR Buildings, Bangalore 560 001 Appellant(s) Versus Venkateshwara Essences And Chemicals Pvt. Ltd. 145/2, Benniganahalli, Old Madras Road, Bangalore - 560 016 Karnataka Respondent(s)
Appearance:
Mr. R. Gurunathan, AR For the Appellant Mr. K. Parameswaran, Advocate Flat No. 101, Suraj Sadan, No. 23, II Cross, (Ramachandra Road) Gandhinagar, Bangalore 560 009 For the Respondent CORAM:
HON'BLE SHRI B.S.V. MURTHY, TECHNICAL MEMBER HON'BLE SHRI S.K. MOHANTY, JUDICIAL MEMBER Date of Hearing: 28/05/2014 Date of Decision: 28/05/2014 Order Per: S.K. MOHANTY The present appeal filed by the Revenue is directed against the Order-in-Appeal No. 228/2002 dated 09.04.2002, passed by the Commissioner of Central Excise & Customs (Appeals), Bangalore, setting aside the Order-in-Original No. 134/2000 dated 16.10.2000 and No. 154/2000 dated 11.12.2000 of the Assistant Commissioner, Central Excise, IV Division, Bangalore-I Commissionerate.
2. The dispute in this case involves classification of various essences used in the Food or Beverages Industry under the Central Excise Tariff Act, 1985 (for short, the CETA). The contention of the Revenue, the appellant herein, were that the products merit classification under the heading 2107.99 (up to 15.03.1995) and under 2108.10 (from 16.03.1995 onwards), since the essences are meant for use in the aerated water industry. Whereas, the contention of the respondent is that the items were classifiable under heading 3302.10 of the CETA.
3. The brief facts of the case, leading to the present appeals, are stated hereunder:-
3.1 The respondent is engaged in manufacture of essences such as, Rush ABCD, Thrill AB, Sprint ABCD, MAC G9, VEC Cola AB, VEC Orange ABC, VEC Ice Cream Soda ABC, VEC Masala Soda ABC, VEC Pineapple ABC, Mango Concentrates, Pineapple, Mixed fruits, Strawberry, Cariba Cola AB, Liquid Preservatives Lime Lemon Clear (DLI), Orange flavor (COI), Mango (MOI), Orange Booster (00B2), Mango Booster, Pineapple Booster, Lime Lemon Booster, Orange Emulsion, Vanilla Bakers, Ice Cream Soda, Orange Bakers, Pineapple Bakers, Butter Bakers, Lime Lemon FL Clear (CLI), Lime Lemon Flavour Additive (CL2), Cariba Cola AB, Pineapple Emulsion Orange Flavour DOGC, Rose Flavour GC, Vanilla Powder (SPL.), Orange Flavour, Fruit Mist, Ginger Emulsion, Thril A&B. All these above products are used in manufacture of pharmaceutical products, aerated waters, confectionery, bakery products, fruit juices, liquors etc. The respondent filed classification list under Rule 173B of the erstwhile Central Excise Rules, 1944 in respect of the period January 1995 to July 1997, claiming classification of the products under heading 3302.10 of the CETA.
3.2 The Assistant Commissioner, Central Excise Bangalore IV Division adjudicated the classification issue, vide his two orders-in-original dated 16.10.2000 and 11.12.2000, holding that the products are classifiable under heading 2107.99 up to 15.03.1995 and from 16.03.1995 under heading 2108.10 of the CETA.
3.3 The respondent herein, had challenged the above orders-in-original of the Assistant Commissioner, by filing appeal before the Commissioner (Appeals), Central Excise, Bangalore, contending interalia, as follows :-
(a) That as per the explanatory note to HSN, heading 33.02 of CETA covers mixtures consisting of essential oils, resinoids, synthetic aromatics and two or more odoriferous substances and mixtures whether or not containing alcohol, of products of other chapter with one or more of the substances.
(b) That a mixture of any two or more odoriferous substances with essential oil, resinoids and synthetic aromatics whether or not containing alcohol and such addition form basis of the mixture, will merit classification in the heading 33.02 of CETA. The products of the respondent are absolutely mixtures of essential oils and odoriferous substances dissolved in alcohol, squarely meant classification in the heading 33.02 of the CETA.
(c) That as per chapter note and explanatory note of the HSN page 161 to chapter 21.07/21.08, all the preparations require a base of syrup, being sugar solution, for the purpose of classification under the aforesaid headings. That no syrup/sugar solution, is being used in the products manufactured by the respondents. As such, in the absence of the above base ingredients, these products fall outside the ambit of heading 21.07/21.08 of CETA.
(d) The respondent also referred to the chemical examiners report, and contended that the same is parallel to the description of the tariff heading 33.02 and satisfies the explanation to the HSN notes.
(e) The demand raised under the show-cause notice and confirmed by the Assistant Commissioner vide his order-in-original, included a demand of Rs. 2,35,000/- representing excise duty on the products exported under bond. It was the contention of the respondent that the above demand is not sustainable, irrespective of the classification.
3.4 Upon examination of the facts of the case and the submissions of the respondent, including the chemical examiners certificate, the HSN note and the technical write-up, the Commissioner (Appeals) came to the conclusion that all the products manufactured by the respondent are correctly classifiable under chapter heading 33.02 of the CETA. In support of his findings, he relied upon the decision of the Tribunal in the case of M/s. BRITCO Foods Co. Ltd. Vs. CCE, Pune, reported in 2011 (127) E.L.T 73 (Tri.-Mum).
3.5 Appeals filed by the respondent were allowed by the Commissioner (Appeals) with consequential relief, by setting aside the orders-in-original passed by the Assistant Commissioner. Being aggrieved with the said order (for short, referred to as the 'impugned order'), the Revenue - appellant has filed the present appeal before this Tribunal.
4.1 The Revenue - appellant has challenged the impugned order on the ground that the products in question are not manufactured by the respondent by mere mixing of odoriferous substances but a process of compounding various essential oils, edible oils, vegetable extracts, preserving and foaming agents and that after blending all their ingredients especially after their homogenization, their substances, lost those odoriferous substance, are used in manufacture of aerated water. The preparations, in the instant case are made out of concentrates and are used for human consumption and, therefore, correctly classifiable under chapter 21 of CETA as Beverage and Food Stuff. Reliance has been placed on the HSN note on heading 2106 (corresponding to 2108 of the CETA). The goods in question are mixed with sugar syrup and carbon dioxide for manufacture of soft drinks, commercially known as aerated water. When there is a specific heading exactly describing the subject products with respect to usage as preparation intended for use in manufacture of aerated water the products would merit classification under heading 21.07/21.08 only.
4.2 It is contended that chapter sub-heading 2108.10 speaks only about preparation for lemonade or other beverages intended for use in manufacture of aerated water and the heading does not distinguish about the physical form of preparation as powder or liquid or any other form. Therefore, preparation in any form except alcoholic intended for use in the manufacture of aerated water is rightly classifiable under chapter sub heading 21.08.10 (21.07.91 up to March 1995) of CETA.
4.3 Chapter 33.02 of CETA covers preparation based on odoriferous substances, of a kind used for the manufacture of beverages; whereas, chapter 21.08 specifically covers preparation for use in the manufacture of aerated water. All beverages need not be aerated water. Therefore, when there is a specific heading aerated water, all preparation for aerated water is covered under chapter 21.08.10. In this connection reliance has been placed on the Board Circular No. 439/5/99-CX dated 08.02.1999.
4.4 Regarding the Tribunals decision in the case of M/s. BRITCO Food Co. Ltd. Vs. CCE, Pune, reported in 2001 (127) ELT 73 (TRI.-MUM), relied upon by the Commissioner (Appeals), it is contended by the Revenue-appellant that the said decision has not reached finality, as the same is sub-judice before the Honble Supreme Court.
5. In response to the appeal filed by the Revenue, the respondents have filed cross-objection No. 369 of 2002, contending, inter alia, that the items manufactured and cleared by the respondent were only used as raw material in perfumery, food or drink industry and further the said products are only mixtures of essential oil, or odoriferous substances, dissolved in alcohol, classifiable under heading 33.02 of CETA, and conforms to the HSN Explanatory Note. Any product in order to be classified under heading 21.07/21.08, requires base of syrup particularly sugar solution, being present at the stage of clearance of the product. In the case of the respondent, no syrup is either added or present in any of the products manufactured by it. The respondent, referring to the HSN Explanatory note pertaining to chapter heading 21.06 (corresponding earlier by 21.07 or subsequent heading 21.08), which is relied upon by the Revenue, states that the preparations covered therein are intended to be consumed as beverages after simple dilution with water or after further treatment and also that certain preparations of this kind are intended to adding to other food preparations. It is contended that in the present case, the manufactured products are not consumed as beverages or after simple dilution with water or after further treatment. It is also admitted by the appellant in their appeal memorandum that the products are mixed with sugar syrup and carbon dioxide for manufacture of soft drinks, which are commercially knows as aerated water, which would establish that the subject goods are not cleared in the form of preparations which are intended to be consumed as beverages, after simple dilution with water or after further treatment.
5.1 The respondent reiterates the findings of the Commissioner (Appeals), categorically holding that the products are only mixtures of essential oils and odoriferous.
6. Heard both sides and perused the records. In the present dispute, the issue for determination is whether the range of products manufactured by respondents are classifiable under heading No. 21.08 as contended by the appellant, or under heading 3302.10 of the CETA, as claimed by the respondent.
7. The case of the respondent is that the disputed goods were meant for use only as raw materials in food or drink industry and that the said goods are mixtures of essential oils or odoriferous substances, dissolved in alcohol. Further, as per the HSN Explanatory Notes, for any product to be considered as a preparation falling under heading 21.07 or 21.08, it would require a base syrup, particularly sugar solution being present at the stage of clearance of the product, which is not the situation in case of the present respondent. It is an admitted fact on record that no such syrup is either added or present in any of the products manufactured by the respondent. It is also an admitted fact that the various essences cleared from the factory of the respondent are not used as such for human consumption after simple dilution with water or after further treatment, but they are used for preparation of various beverages which involves addition of sugar syrup, carbon dioxide etc., in case of use of the same items for manufacture of aerated waters. Therefore, we are of the considered view that the disputed goods would fall under sub heading 10 of heading 33.02, as against the classification claimed by the Revenue-appellant under heading 21.07 or 21.08 of the CETA.
8. In the appeals filed by the Revenue-appellant, reliance has been placed on a circular bearing No. 439/5/99-CX dated 08.02.1999 issued by CBEC. The circular cannot have retrospective application to the fact and in the circumstances of the present case, since the period involved is from 1995 to 1997. Hence, there is no necessity to discuss or record any findings as to how the said circular is relevant to the case in hand.
9. The issue regarding classification of the disputed goods under heading 33.02 is no more res-integra in view of the decision of Tribunal in the case of Britco Foods Co. Ltd. (supra). The relevant paragraphs in the said decision are extracted herein below :-
7. The Explanatory Notes exclude from classification heading 21.08 preparations of a kind used for the manufacture of beverages based on one or more odoriferous substances. Note 12 below heading 21.08 on which the Departmental Representative relies heavily, refers to preparations for the manufacture of lemonades or other beverages consisting, for example, of flavoured or coloured syrups with natural or artificial substances, of certain fruits or plants, of syrup flavoured with fruit juices which have been modified by the addition of constituents, concentrated fruit juices with the addition of citric acid. It indicates that such preparations are intended to be consumed as beverages after simple dilution with water.
8. The beverages which are ultimately made from these products now under consideration by us are different. They are in the main sweetened, and generally (though not always) carbonated. The particular characteristic flavours which give them their brand identity distinguishes them from other beverages of the similar kind is in fact a particular odoriferous substances or mixtures of such substances that is contained in the beverage. Apart from this, heading 21.08 is residuary heading being for food, edible preparations not elsewhere specified or included. It is not possible for us to agree that the condition in the heading 21.08 that the goods must not be elsewhere specified or included, refer obviously to the entire tariff. A plain reading of the heading shows the contrary that they must not be specified or elsewhere in the tariff. If it were the intention to limit the specification or inclusion in the chapter, the chapter heading would have said so, as it does for example in headings 84.85, 84.75, 84.85. All these three headings speak of goods not specified or included elsewhere in this chapter. In the absence of these words, it is not permissible to read them into the words of heading 21.08.
9. The Explanatory Notes, to which we have already referred earlier, to heading 21.06 clearly excludes preparations for the food or drink industry based on odoriferous substances from that heading and put them under heading 33.02. The corresponding headings in the tariff are 21.08 and 33.02. It is not possible for us to agree that the condition in heading 21.08, that the goods must not be elsewhere specified or included and applies to the chapter and not the tariff. We must therefore approve the finding of the Assistant Commissioner that by description of the tariff heading these goods are classifiable under heading 33.02. Even if we were to agree that this is not the case, and there is in fact a dispute between the two headings, the fact that heading 21.08 is a residuary heading, would require classification of the goods under heading 33.02. This is only, for some reason, they could not be classifiable under this heading or any other heading in the tariff that classification under heading 21.08 would be required to be considered.
10. The Commissioner (Appeals) says that since the product is in the nature of uniquely compounded formulation or preparations and not merely mixture with basis of one or more odoriferous substances as envisaged in chapter heading 3302., the classification claimed by the appellant cannot be accepted. He finds the goods to be compound preparations, which characterise the branded aerated beverage which is made out of it. We are not able to see how the fact that these are formulations, which have been made up or compounded so to speak, to a particular requirement or a specific end-use takes them out of the scope of chapter heading 3302.10. It is clear to him that this heading does not cover such a unique compounded formulation or preparations. We are however not able to find anything in the words of that sub-heading which would justify this view. As we have noted, sub-heading 10 of heading 3302 is for the goods described in the tariff heading of a kind used in the food and beverage industry. There is nothing in these words to suggest or to justify an inference that it is only goods which can be put to more than one use which could be classifiable under this heading. The Commissioner, in his order, does not give any reasons for his conclusion nor was the Departmental Representative, who echoed that reasons, were able to give any reasoning. The two decisions of the Tribunal in Pepsi Foods Ltd v. CCE and the unreported decision cited by the appellant indicate that the department itself had claimed classification of Mirinda, Lehar 7Up both of which are beverages similar to the beverages made, out of the products now under consideration, and in fact referred to in the notice to show cause as products classifiable under heading 3302. We agree with the Departmental Representative that these were not the issues specifically for consideration in this matter. However, these decisions certainly show the departments view that these are to be classifiable under heading 3302.10 and adds reinforcement to the submissions made by the appellant.
10. The present dispute stands fully covered by the above decision of the Tribunal, which has so far not been stayed or set aside by the Higher Court. Therefore, considering the position of law and the principles decided therein, we do not find any merit in the appeals filed by the Revenue-appellant, and accordingly, the same are dismissed. The cross objection filed by the respondent is disposed of.
(Operative portion of the order has been pronounced in open court on 28.05.2014) (S.K. MOHANTY) JUDICIAL MEMBER (B.S.V. MURTHY) TECHNICAL MEMBER iss