Customs, Excise and Gold Tribunal - Mumbai
Godrej Foods Ltd. vs Commissioner Of C. Ex. And Cus. on 1 October, 1999
Equivalent citations: 2000(115)ELT403(TRI-MUMBAI)
ORDER Gowri Shankar, Member (T)
1. Delay in filing of these appeals, which was necessitated by there being so many number of notices to show cause, is condoned.
2. These applications are for waiver of deposit of duty totalling to Rs. 8.59 crores. The duty had been demanded on the ground that the beverages manufactured and cleared by the applicant between March, 1993 to February, 1997 were liable to duty and not entitled to duty free clearance. The Commissioner has found that the beverages were classifiable not under Heading 20.01 of the Tariff as claimed by the assessee but under Heading 22.09. He has also held that the benefit of exemption Notification 103/90, and its successor 2/94 would not be available to the pulp based drinks cleared by the applicant.
3. We are unable to accept the contentions raised by the Advocate for the applicant that the classification under Heading 20.01 is correct. We have noted the extensive submissions made by him with regard to the classification of the goods under the Fruit Products Order (FPO), 1955. However, we do not think it necessary to go into this aspect of the matter for the moment for the following reasons. Fruit juice which are classifiable under Heading 20.01 of the tariff, figure in Pleading 20.09 of the Explanatory Notes to the Harmonised System of Nomenclature (HSN). The notes under this heading indicate, at page 162 of the 1996 edition, that addition of water to a normal fruit or vegetable juice results in diluted products, which have the character of beverages of Heading 22.02. The proportion of water in each of the products is considerable, about 70%. Therefore the goods, by adopting this reasoning, prima facie, will be classifiable under Heading 22.02. It is this reasoning that the Commissioner has adopted in his order.
4. The contention raised by the Advocate for the applicant, that there has been incorrect calculation by applying to the goods incorrect rate of 15% instead of actually applicable rate of 10% under Heading 22.02 was not disputed by the departmental representative. The departmental representative also did not dispute that Modvat credit of the duty paid on the goods used in the manufacture of non pulp based drinks would be available towards payment of duty towards these drinks. His contention that the Commissioner has already taken into account in arriving duty payable was not substantiated by him; on the other hand the notice which was issued for demanding duty did not show that this deduction was made. The mere fact that by dropping proceedings which were commenced simultaneously with this proceedings against the applicant on the ground that it wrongly took Modvat credit does not have the effect of the saying that the credit has been taken into account for payment of duty on the finished product. The credit was not taken because of no duty was paid on the finished products. If duty is bound to be payable the credit taken would be available for paying duty, and it has to be therefore taken into account in determining the duty effectively payable on these accounts is Rs. 47.57 lakhs and Rs. 1.06 crores. It is also not disputed bank guarantees have already been encashed for Rs. 66.93 lakhs. This reduces the total of duty prima facie payable to Rs. 2.21 crores.
5. It was further contended that pulp based drinks were totally exempted from duty by Notification 103/90 and later by Notification 2/94. The notification exempted from duty pulp based drinks. The Commissioner, before whom this point was urged has not effectively dealt with these by saying that the benefit of notification was not claimed when the price list was approved. This view is prima facie, unacceptable. The price list, which was originally filed was for duty free clearance and the question of claiming the benefit of notification would have not arisen. Applicant had not at any stage given up any such claim; on the contrary it has been specifically raised in the reply to the notice. The Commissioner has not given clear finding on the availability of the notification. The notification had not defined what pulp based drinks are.
6. The matter was adjourned on the last date as Shri Ravindran, Advocate for the appellant was not available on the date of dictation of the order and clarification was necessary as to which were the fruits from which the pulp based drinks were made. Advocate for the appellant today produces before us the form-D register prescribed under the Fruits Products order in which, for the mango and guava drinks, the fruit pulp is the raw material whereas in the case of the other drinks it is the juice concentrated or otherwise which is the raw material. That this register was made available to the Commissioner is clear from the written submissions filed after the personal hearing before him on 28-3-1995. It is therefore prima facie, reasonable to hold these product to be pulp based drinks. The benefit of Notification 103/90; and later 2/94 would, prima facie, be available.
7. The departmental representative produce before us a letter dated 9-7-1999 of the Commissioner in response to our clarification regarding pulp based drinks. The contention therein that the question of availability of Notification 103/90 and 2/94 was not before the Commissioner was not correct. The notice may not have referred to it, but the applicant in its reply did claim it, and the Commissioner was bound to consider. It is settled law that a benefit of notification can be claimed and has to be granted at any stage during the proceedings. It is also not possible to agree that because while adjudicating in 10 out of 19 show cause notices issued for this purpose the Assistant Commissioner has denied the credit, the Tribunal cannot take the Modvat aspect into account. In considering an application under Section 35F the Tribunal is required to take into account the probability of all issues which are raised before it. It is prima facie, difficult to hold on the basis of settled law that the benefit of Modvat credit of the duty paid on the inputs would not be available.
8. The amounts claimed as deduction on account of freight and octroi amount to Rs. 19.4 lakhs approximately. We note here that while the deductions may be available in principle, details relating to these has not been furnished.
9. Some deduction is also claimed on account of deducting of the duty from the cum duty price. While the departmental representative contends that where no duty is paid, abetment of the duty is not permissible; the deduction is prima facie supported by Tribunal decision in Srichakra Tyres v. C.C.E. 1999 (32) RLT 1 (Tribunal) in which it has been held that, even when the sale price did not include element of duty that element has to be deducted in arriving at the assessable value. The deduction on account of this stated to be of Rs. 19.97 lakhs. It cannot be denied that freight would form some element of supplier's price. The price is for delivery at the destination in accordance with normal commercial practice.
10. Taking into account all these aspects the duty payable works out Rs. 93.07 lakhs. Out of this amount a sum of Rs. 66.92 lakhs has already been paid by encashing the bank guarantee leaving a balance of Rs. 26.11 lakhs. Accordingly we direct deposit of Rs. 15 lakhs.
11. Penalty of Rs. 20 crores has been imposed under rule 173Q read with Section 11AC. Commissioner's order finalises the provisional assessment; hence there can be no question of any suppression of facts justifying the invocation of Section 11AC. The reason given by the Commissioner for imposition of penalty, that the assessee choose to not to pay duty despite being aware that classification contrary to that claimed by it was indicated by the department is, prima facie not supported by law. Correspondence indicates that on the assessee filing the classification, provisional assessment was ordered by Assistant Commissioner, by letter dated 9-12-1993. It is this assessment which has been finalised by the importer. Apart from this there is no allegation of any suppression or mis-declaration or wilful intention to evade duty. Considering these aspect as also the total duty prima facie becomes payable, we waive deposit of the penalty imposed and stay its recovery.
12. The amount in question to be paid within two months of receipt of this order. Compliance on 3rd November, 1999.