Custom, Excise & Service Tax Tribunal
Yes vs Represented By : Shri Uday Joshi, ... on 29 April, 2011
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Zonal Bench, Ahmedabad Appeal No. : E/683 to 686 of 2010 Arising out of : OIA No. 11 to 14/2010(Ahd-III)KCG/CE/Commr(A) Dated 25.01.2010 Passed by : Commr. (Appeals) C.Excise. & Cus Ahmedabad For approval and signature : Hon'ble Mrs. Archana Wadhwa, Member (Judicial) Honble Dr. P. Babu, Member (Technical) 1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? Yes 3 Whether their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes Appellant (s) : M/s. Waves Foods Pvt. Limited M/s. Sabar Foods Shri Santosh V. Patel Shri Piruz Khambhata Represented by : Shri Uday Joshi, Advocate Respondent (s) : Commissioner of Central Excise, Ahmedabad
Represented by : Shri R.S. Sangia, SDR CORAM :
Hon'ble Mrs. Archana Wadhwa, Member (Judicial) Honble Dr. P. Babu, Member (Technical) Date of Hearing : 29.04.2011 Date of Decision : 16.05.2011 ORDER No. _____________ /WZB/AHD/2011 Per : Mrs. Archana Wadhwa;
All the appeals are being disposed off by a common order as they arise out of the same impugned order passed by the lower authorities. The dispute in the present appeals relates to the correct classification of Rasana Rozana Amrit manufactured by the appellant in three different flavours Nimbu Paani, Mango and Orange. As per facts on record, the declarations made on plastic pouches of the said products reads as manufactured at M/s. Waves Foods Pvt. Limited by M/s. Sabar Foods, Village : Salal, Distt : Sabarkantha. The said goods were being cleared from the factory without payment of any duty of excise, under the belief that the same were properly classifiable under Chapter headings 2001.10 to the first schedule of Central Excise Tariff Act, 1985 and was exempted from payment of duty.
2. As a result of visit of the officers in the appellants factory made on 22.11.2002, it was noticed that there was a contract dated 28.09.2002 between M/s. Waves Foods Pvt. Limited and M/s. Sabar Foods, wherein all the machineries as also the raw materials were to be supplied by M/s. Waves Foods Pvt. Limited to M/s. Sabar Foods for the manufacture of the product in question. The raw material supplied by M/s. Waves Foods Pvt. Limited was mother mix, malic acid, citric acid, sugar, glucose, vitamin C and vitamin pre-mix. On being questioned, M/s. Waves Foods Pvt. Limited did not disclose the manufacturing process of mother mix, the same being a trade secret. Representative samples were drawn for determination of composition of the said product. The said samples were sent to the chemical examiner, who vide his report dated 20.05.2003 reported that though the said product contain a quantity of fruit powder, the same was not predominant. He further opined that according to Prevention of Food and Adulteration Act, the definition of fruit drinks prescribes the minimum percentage of fruit juice in the final product should not be less than 5% and he observed in his report that after analysis of drink mix, the percentage of mother mix came to 3.9%. Accordingly, he expressed his opinion that the product Rasana Rozana Amrit drink mix is appropriately classifiable under the Chapter No. 2808.99.
3. On the above basis, proceedings were initiated against the appellants by way of issuance of show cause notice dated 30.04.2003 alleging that the product being manufactured by them correctly falls under residuary heading 2808.99 and as such, clearances effected by them during the period 2002-03 without payment of duty by classifying the product under heading 2001.10 were required to discharge duty. Accordingly, notice proposed confirmation of demand of duty of Rs. 30,13,622/-. The said notice was adjudicated by the original adjudicating authority confirming demand along with interest and imposing identical penalty, in terms of Section 11AC on M/s. Waves Foods Pvt. Limited. In addition, penalty of Rs. 3 Lakhs was imposed on M/s. Sabar Foods under Rule 25 of Central Excise Rules and penalty of Rs. One lakh and Rs. 3 lakh was imposed on Shri Santosh V. Patel, proprietor of M/s. Sabar Foods and Shri Piruz Khambhat, Director of M/s. Waves Foods Pvt. Limited, respectively under the provisions of Rule 26 of Central Excise Rules, 2002. The said order of original adjudicating authority stands approved by Commissioner (Appeals). Hence the present appeals.
4. After hearing both the sides, the issues required to be decided in the present appeals are as under :-
(i) Whether the product Rasana Rozana Amrit drink mix is properly classifiable under heading 2001.10, as contended by the manufacturers or the same is classifiable under heading 2108.99, as held by the Revenue authorities.
(ii) As to whether M/s. Waves Foods Pvt. Limited who have supplied the raw materials as also machineries to M/s. Sabar Foods in terms of the contract dated 28.09.2002, have to be held as manufacturer or M/s. Sabar Foods are to be considered to be the manufacturer of the product in question.
(iii) Whether the appellants factory situated in rural area is to be granted the benefit of Notification 08/2002.
(iv) Whether the demand in question having been raised beyond the normal period of limitation is barred by limitation or not.
(v) Whether the penalties on the appellants are required to be imposed or not.
5. Taking up the first issue for decision, we find that two contending entries i.e. one claimed by the appellants and other by the Revenue are as under :-
Heading No. Sub-Heading No. Description of goods Rate of duty (1) (2) (3) (4) 20.01 Preparation of vegetables, fruit, nuts or other parts of plants including jams, fruit jellies, marmalades, fruit or nut puree and fruit or nut pastes, fruit juices and vegetable juices, whether or not containing added sugar or other sweetening matter 2001.10 Put up in unit containers and bearing a brand name 16% Heading No. Sub-Heading No. Description of goods Rate of duty 21.08 Edible preparations, not elsewhere specified or included 2108.10 Preparations for Lemonades or other Beverages intended for use in the manufacture of Aerated Water 16% 2108.20 Sharbat 16% 2108.30 Prasad or Prasadam Nil 2108.40 Sterilised or Pasteurised Miltone Nil Other:
2108.91 Not bearing a brand name Nil 2108.99 Other 16% As is seen from the above heading 20.01 covers the preparation of vegetables, fruits, nuts or other parts plants, fruit juices and vegetable juices, whether or not containing added sugar or sweetening matters. The major ingredients of the product is mother mix. The said mother mix contains fruit powder, vegetable extracts and fruit extracts, emulsifying and stabilizing agents, calcium salts, sodium citrate. In fact, it would be relevant to list the ingredients of the product as detailed in the impugned order of Commissioner (Appeals) for ready reference :- The said product contains following items:-
(i) Mother-mix (containing fruit powder, vegetable extracts, emulsifying and stabilizing agents, calcium salts, sodium citrate)
(ii) Sugar
(iii) Destrose
(iv) Malic Acid
(v) Citric Acid
(vi) Vitamin C
(vii) Vitamin Pre-mix
(viii) Synthetic food colours
(ix) Added flavours.
6. The fact that the product contains fruit powder, fruit extracts and vegetable extracts along with other ingredients, is in fact not being disputed by the Revenue. Para 56.2 of the order in original records that - I find that the product is a combination of fruit powder, fruit extract and vegetable extracts as principal ingredients and also contains sugar, malic acid, dextrose, minerals and vitamins The only reason for not placing the product under the chapter 20 is that the percentage of the mother-mix in the product is to the tune of 3.9%. As such, by referring to the definition of fruit juice, fruit squash and fruit drinks, as appearing in the Prevention of Food Adulteration Rules, 1955, the lower authorities have held that the product cannot be considered to be a preparation fruit juice.
7. The appellants have held that reference to such definitions in the PFA Rules by the lower authorities was not justified inasmuch as the product in question is admittedly neither the fruit juice nor fruit quash or fruit energy or fruit drink. To deal with the said submission of learned advocate, we reproduce below the relevant definitions from the above PFA Rules :-
Heading A.1601 of the PFA Rules defines the term fruit Juice as follows;
:A.16.01 fruit Juice means the unfermented and un-concentrated liquid expressed from sound, ripe fresh fruit and with or without .. Reference of Heading A.16.04 has also been made which defines the term fruit squash as follows:
A.16.04 fruit squash means the expressed juice of the sound rip fruit with pulp containing sugar, dextrose, invert sugar or liquid sugar either singly or in combination and with or without. Reference of the term fruit drink has also been made which has been defined in Heading A.16.05, which reads as follow: A. 16.05 fruit beverage or fruit drink means any beverage or drink which is purported to be prepared from fruit juice and water, or carbonated water, and containing sugar, dextrose, invert sugar or liquid glucose either singly or in combination and with or without
(a) water, peel oil, fruit essences and flavours;
(b) citric acid, ascorbic acid;
(c) permitted preservative and colours The total soluble solids w/w in the final product shall be not less than 10 per cent. The minimum percentage of fruit juice in the final product shall not less than 5.0 per cent w/w.
8. As is seen from the above Para A.61.01 defines the fruit juice which going by the dictionary meaning and the common parlance test conveyed that the same is liquid extract from fruit juice. The appellants have not claimed their product as fruit juice. In fact, fruit juice is supposed to be in liquid form whereas, appellants product is in powder form.
Further Para A.16.04 defines fruit squash, which means expressed juice of the sound ripe fruits. The appellants are not claiming their product as fruit squash.
Para A.1605 defines the terms fruit drink, which has to be prepared from the fruit juice and water. The minimum percentage of fruit in the fruit drinks should not be less than 5%. The product in question cannot again called as fruit drink inasmuch as the same refers to a drink prepared from fruit juice and water. As such, we fully agree with the appellants that the above definitions relied upon by the lower authorities do not advance the Revenues case.
9. The lower authorities have also referred to definition for fruit syrup as given in Para 11(1) of the Food Product Order, 1955. According to this definition, fruit syrup is any beverage which does not contain at least twenty five percentum of fruit juice in its composition, shall not be describing as fruit syrup, fruit juice, fruit squash or fruit cordial or crush and shall be described as a synthetic syrup. It is again a liquid and syrup and not in a powder form.
10. Having held that the definition in the Prevention of Food Adulteration Act, which stands relied upon by the lower authorities, not covering the product in question, we proceeds to decide the issue in the light of the chapter notes and the precedent decisions of the Tribunal in respect of identical products.
11. We note that the samples of the product was drawn from the factory premises on 22.11.2002 and the test reports stands conveyed to the appellants by the Assistant Commissioner, vide his letter dated 28.05.2003 as under:-
The drink mix, orange and mango: the sample give positive test for sugar having natural flavour of mango, nimbu and orange respectively.
(1) That, the exact contents of the fruit powder cannot be determined in absence of standard dry fruit powder whose traceability of being standard should be known rather than the declaration made by the firm arbitrarily. The standard samples are essentially required to determine the percentage of fruit powder, however, the percentage of quality of fruit powder is not much important in such products. The appellants had contended before the Assistant Commissioner that it stands established from the above report that the chemical examiner had not determined the exact contents of the fruit powder. They further contended that the opinion of the chemical examiner that the product is classifiable under Chapter heading 21.08, cannot be relied upon as it is not the function of the chemical examiner to opine about the classification of the product and relied upon the various decisions of the Tribunal. We agree with the above aspect of the issue that it was not within the purview of his function to opine about the classification of the product and as such no reliance can be placed upon his opinion about classification of the product, which has to be arrived at based upon the composition, Chapter notes, description and various precedent decisions.
12. In addition, the appellants placed on record the following evidences, during the course of adjudication, before the Commissioner :-
(a) A certificate dated 29.03.2003 from the ministry of Agriculture, Government of India, was placed on record wherein it has been categorically stated that the dry fruit content is equivalent to that found in a fruit squash. The product in diluted form conformed to all specifications of fruit squash, which was fit for human consumption.
(b) An expert opinion dated 31.05.2003 of Prof. J.S. Pai from UDCT, Mumbai was placed on record, wherein it was opined that the product contains dry fruit powder and vegetable extract. The product is an instant squashy and drink can be prepared by adding water as in fruit squash drink. The only difference is that squash is in liquid form and Rasna Rozana Amrit is in powder form.
(c) A test report dated 02.6.2003 issued by Public Health Laboratory, Ahmedabad Municipal Corporation, Ahmedabad was also placed on record, which opined that Rasna Rozana Amrit conformed to PFA specification with respect to the tests undertaken.
(d) Labels of squash manufactured by them as well as various other companies were also placed on record.
(e) In the test report dated 12.06.2003 issued by Foods and Drugs Laboratory, Vadodara as regards samples of Rasna Rozana Amrit, it was opined that the final products match with the standard of food beverage in respect of total soluble solids and that the sample confirmed to the standards and provisions laid down under prevention of Food Adulteration Rules, 1955.
As such, the appellants contended that the above evidences clearly establish the fact that the product in question is preparation of fruit juice and is not fruit flavour preparation. They also relied upon the Tribunals decision in the case of Northland Industries vs. CCE 1988 (37) ELT 229, Godrej Foods Limited vs. CCE 2006 (202) ELT 473 and Hindustan Lever Limited vs. CCE 2007 (212) ELT 141, wherein while dealing with the classification of identical products, Tribunal held that the same are appropriately classifiably under Chapter heading 2001.10.
13. While dealing with the above submission, the adjudicating authority has observed that out of the various items used in the manufacture of product in question, only one item is fruit powder and all the rest of the items are man-made/synthetic chemicals. Going by the statement of one of the authorised representative, he has observed that the weight of the mother mix in the product is to the tune of around 3.9%, which is less than 4% of the total weight. On diluting the product with water, the weight of mother mix could be less than 1% of the total drink mix. As such, the fruit powder is not a pre-dominant component of drink mix and at such a low percentage, the presence of fruit powder in the drink mix could at best be seen as a flavouring agent.
He has also gone to the relevant explanatory notes of HSN and by referring to the notes of heading 2109, he has observed that in the light of the said notes, the product cannot be held to be fruit juice. However, we find that HSN heading 2109 relates to fruit juices and not preparations of fruit juices. As such, any reference to the said heading in the HSN and the relevant notes there, would not be of any help.
14. While deciding the classification it has to be kept in mind that Chapter 21 deals with the edible preparations, not elsewhere specified or included. As such, if the product is otherwise covered by the description 20.01, the same would not fall under the heading 21.08, inasmuch as the same is a residuary entry. Chapter heading 20.01 covers the preparation of various products including preparation of fruit juices. As such, any preparation of fruit juice would fall under the said heading. The Assistant Commissioner has observed in Para 56.2 of his order and in fact, there is no dispute that the product is a combination of fruit powder, fruit extracts and vegetable extracts as principle ingredient and contains sugar, malic acid, dextrose, minerals and vitamins. The same has to be further dissolved in the water before it can be consumed. The product is also a preparation, which after dissolving in water is ready to be used. There is no percentage of fruit or fruit juice or vegetables required to be contained in the said product in terms of either the notes of Chapter 20 or any requisite requirement of heading 20.01. As such, according to us, the said heading appropriately covers the product in question.
15. The appellants have also submitted the evidences in the shape of certificates and expert opinion, which are to the effect that the product is an instant squash and drinks can be prepared by adding water as in fruit squash drinks. The only difference is that the squash is in liquid form and Rasana Rozana Amrit is in powder form. The said certificate stand rejected by the adjudicating authority on the ground that no data/ statistical parameters resulting from any chemical analysis had found part of the said certificate or opinion. As such, he has observed that such opinion has to be ignored.
16. We also find that the issue is covered by the earlier decisions of the Tribunal. In the case of Hindustan Lever Limited vs. CCE 2007 (212) ELT 141(Tri. Mumbai), wherein while dealing with an identical product, the Tribunal observed as under :-
9. There are two? products in the last class of products i.e. class 4 Kissan Fruit Kick Orange Fruit Beverages Powder and Kissan Mr. Fruit Orange Juicy Bits, both of which contain sugar, orange juice powder, citric acid, minerals, vitamins, xanthan gum, permitted fruit colours and added flavours. In view of their ingredients they are fruit juices falling for classification under Chapter Heading 20.01 (as claimed by the assessees) which specifically covers Preparations of vegetables, fruits and fruit juices and vegetable juices, whether or not containing added sugar or other sweetening matter, and eligible to exemption in terms of serial no. 9 of the table to notification 6/2002 which covers all goods falling under Heading 2001.10 and set aside the classification adopted by the Department under CET sub-heading 2108.99 as edible preparations not elsewhere specified or included, and consequent demand, as not sustainable.
In the case of Godrej Foods Limited vs. CCE, Indore 2006 (202) ELT 473 (Tri. Del.), an identical product known as Lipton Tree Top, the Tribunal observed that Chapter heading No. 20.01 covers a broad range of mechanicals irrespective of the fact that sugar or other sweetening matter is added or not. In Para 17, 18 and 19 of their judgment, it was observed and held as under:-
17. The construct of Chapter 22.02, in our opinion, is oriented towards such beverages which are other than fruit juice beverages. We are unable to find a distinction between fruit juice and the fruit juice beverages as no such distinction has been spelt out in both these Headings. There is no criterion available in the Tariff to distinguish the products on the basis of their concentration. Thus, a diluted fruit juice never cease to be a fruit juice beverage and would, for all practical purposes, continue to remain as preparation of fruit.
18. While arriving at this conclusion, we gain support from? this Tribunals decision in Northland Indus. v. CCE (supra) in which it was held that squash and cordials which are preparation of fruit juice are correctly classifiable under sub-Heading 2001.10. Further, in this context, we may also refer to the conclusion reached by the Honble Supreme Court in Hamdard (WAKF) Laboratories v. CCE, Meerut (supra) to the effect that only beverages that contained fruit or vegetable juices that fall under Heading 20.01 are excluded from Heading 22.02.
19. We, therefore hold that the product in question manufactured by the appellants are fruit preparations within the meaning of the tariff Heading 20.01 and are classifiable as such. We, therefore, set aside the impugned order of the Commissioner (Appeals) dated 22-6-94. The appeal is, accordingly, allowed.
Similarly, in the case of Northland Industries vs. CCE 1988 (37) ELT 229 (Tribunal), while dealing with an identical issue observed that bare reading of heading 2001 it will be clear that preparations of fruit juices, whether or not containing added sugar or other sweetening matter are covered by it. If squashes and cordials are covered by heading 21.01 (fruit juice) they would not be covered by residuary heading 21.08. (edible preparations not elsewhere specified or included). The Tribunal in Para 14 and 19 has observed as under :-
14. We have carefully considered the submissions of both sides. The competing sub-headings are 2001.10 and 2107.91 (reproduced earlier). From a bare reading of Heading No; 20.01, it will be clear that preparations of fruit juices; whether or not containing added sugar or other sweetening matter are covered by it. But, are squashes and cordials preparations of fruit juices? And, why has the Assistant-Collector classified them under sub-heading 2107.91 ? Prima facie, if squashes and cordials are covered by the Heading 20.01 (fruit juices), they would not be covered by the residuary Heading No. 21.07 (Edible preparations, not elsewhere specified or included). Unfortunately, the composition of the subject quashes and cordials is not on record though there is no dispute that these are squashes and cordials. The Assistant Collector has relied on Statutory Note 5(j) to Chapter 21 in support of his conclusion. (This note has been reproduced earlier). The note has the effect of including within Heading No. 21.07, preparations for lemonades or other beverages, consisting, for example, of flavoured or coloured syrups, syrup flavoured with an added concentrated extract, syrup flavoured with fruit juices and concentrated fruit juices with added ingredients. The Assistant Collector has observed in his order that it is evident that all beverages are covered herein whether consisting of concentrated fruit juice or syrup flavoured with fruit juices. It seems to us, however, that what is covered are preparations for beverages and not beverages themselves, preparations of fruit juices are, in terms, covered by Heading No. 20.01. The Assistant Collector has construed the heading to mean that only fruit juices have been included herein, not preparations of fruit juices. He has come to this conclusion on the basis that the preparations of fruit included in the heading are only jams, fruit, jellies, marmalades, fruit or nut puree. The word preparations at the commencement of the entry does not qualify the phrase fruit juices. In other words preparations of fruit juices are not included. Since squash is a beverage and can be consumed after simple dilution with water, squashes and cordials are covered more specifically by the term beverages. As noted earlier, we are of the view that, in the light of Note 5(j) to Chapter 21, Heading No. 21.07 covers preparations for beverages and not beverages themselves. On the other hand, preparations of fruit juices are specifically covered by Heading No. 20.01. The appellants contention is that squashes are not syrups flavoured with fruit juices for all fruit squashes must contain, in accordance with law, a minimum of 25% fruit juice which is a substantial quantity and hence squashes cannot be treated as having fruit juices as flavouring agent. Nor are they manufactured out of concentrated fruit juices.
19. The Assistant Collector, in our view, is not right when he says that the word preparations in the entry in Heading No. 20.01 does not qualify the words fruit juices and vegetable juices, whether or not containing added sugar or other sweetening matter. This result flows from the arrangement of the words and punctuations employed. Given this position, and having regard to the fact that Heading No. 21.07 is a residual heading, we are of the opinion that the subject squashes and cordials which are preparations of fruit juices are correctly classifiable under Heading No. 20.01, sub-heading No. 2001.10.
The said order of the Tribunal in the case of Northland Industries stands confirmed by the Hon'ble Supreme Court as reported in 1999 (113) ELT 20 (Honble Supreme Court).
The appellants in their written submissions have given the ingredients of the product manufactured by M/s. Godrej Foods Limited, M/s. Northland Industries and M/s. Hindustan Lever Limited as also the ingredients of their product. On comparison the same are found to be identical. As such, we are of the view that the ratio of all the above judgments squarely covers the dispute in favour of the appellant, inasmuch as the same is in respect of identical product.
17. Further, the Hon'ble Supreme Court in the case of CCE, Meerut vs. Maharishi Ayurveda Medicines Limited 2006 (103) ELT 10 (SC), while dealing with the same two contending entries has held that where the product being mixture of assorted vegetation and dry fruits and seeds, stands specifically covered under Chapter 20, which is a specific entry dealing with vegetable, fruit or nuts again, cannot fall under Chapter 21, which is a residuary entry. As per the provisions of Rule 3(a) of the rules of interpretation of schedule-1, the heading which provides the most specific description shall be preferred to the one providing a more general description. Accordingly, it was held that since Chapter heading 21.08 covers edible preparation not elsewhere specified and as such it is residuary entry, the goods stands correctly classifiable under Chapter 20 being a mixture of different vegetations.
18. We find that the ratio of all the above decisions is squarely applicable and in the light of the same as also in the light of discussions in foregoing paragraphs, we hold that the product is rightly classifiable under Chapter heading 2001.10. We accordingly, uphold the appellants claim of classification.
19. Though, the other grounds raised in the appeal remains only of academic interest, having already held in favour of the appellant on the point of classification, nevertheless, we proceed to deal with the same.
20. M/s. Waves Foods Pvt. Limited have contended before the authorities that they are not the manufacturer of the product in question, inasmuch as they have already entered into an agreement with M/s. Sabar Foods to manufacture the goods. Merely because they have supplied the raw material and machinery to M/s. Sabar Foods, will not make them the manufacturer when the goods are admittedly being manufactured by M/s. Sabar Foods. As such, confirmation of demand of duty against M/s. Waves Foods Pvt. Limited was not justified. While dealing with the above contention of the appellant, Commissioner (Appeals) has held as under :-
11.2. As regards the above I find that the factory for various Foods & Beverage Products and its allied products where the disputed product Drink Mix is manufactured was set up by the Appellant No.1 (M/s. Wave), the raw materials and packing materials were procured by the Appellant No.1, the manufacturing activity was controlled and supervised by the persons of the Appellants No.1, the payment of electricity charges was the responsibility of the Appellants No.1. Further, the registration with the sales tax department was in the name of the Appellant No.1 (M/s. Wave) only. The selling of the entire production was made by the Appellant No.1. Thus, all the activity right from setting up of plant, purchase of raw materials and packing materials, supervise the manufacturing activity and ultimately selling the manufactured goods was done by the Appellant No.1 (M/s. Wave). A mere agreement between the two parties cannot supersede statutory requirements. The Appellants No.1 is the manufacturer in the eyes of the law.
On going through the above reasoning of Commissioner (Appeals), we do not find favour with the same merely because M/s. Waves Foods Pvt. Limited was supplying raw material, was supervising the manufacturing activities, was registered with the sales tax department and was selling the entire production, the said fact will not make them the manufacturer of the goods. The authorities have not disputed the fact there is an agreement between M/s. Waves Foods Pvt. Limited and M/s. Sabar Foods for manufacture of goods for M/s. Waves Foods Pvt. Limited. In fact, it is also does not denied that the printing on the pouches reads as manufactured at M/s. Waves Foods Pvt. Limited by M/s. Sabar Foods, Village : Salal, Distt : Sabarkantha. Thus also show that the goods were being manufactured by M/s. Sabar Foods in the premises of M/s. Waves Foods Pvt. Limited. It is settled legal position that the one who actually manufactures is to be considered as manufacturer and supplier of the raw material cannot be treated as manufacturer. From this angle also, confirmation of demand of duty against M/s. Waves Foods Pvt. Limited was not called for.
21. The demand also stand assailed by the appellants on the invocation of longer period of limitation. The extended period stands invoked by the lower authorities on the ground that appellant has neither filed any declaration with Central Excise department and nor obtained any Central Excise registration, and as such suppressed the facts with malafide intention. On the other hand, it is the appellants contention that their factory was situated in rural area and in the light of various Tribunal decisions, they were always under the bonafide impression that there product is classifiable under Chapter 20 and no duty is required to be paid by them. The dispute being bonafide relating to classification of the product, no malafide can be attributed in the absence of any evidence to that effect. We agree with the appellants on the above count. Non filing of declarations by the appellants was for the reasons that as the aggregate clearances value by M/s. Sabar Foods was below the small scale exemption limits, and as such no declarations was required to be filed. Further in the light of various decisions of Tribunal, referred supra, holding identical products to be falling under Chapter 20, there could be bonafide belief on the part of the appellants that no duty is required to be paid by them. As such, we are of the view that non filing of declaration etc. was on account of bonafide belief and there is no positive evidence reflecting on any malafide intention to evade payment of duty. In the absence of any positive evidence to that effect invocation of longer period was not justified. As such, we also hold that the demand to be barred by limitation.
22. Whether the appellants are entitled to the benefit of notification 08/2002 on account of their factory being located in rural area, as the facts in respect of the above submissions are not clear, we refrain from giving any decision on the above issue, as we have already extended the benefit to the appellants on the merits as also on limitation.
23. In view of the above, the confirmation of demand of duty of Rs. 30,13,622/- stands set-aside against M/s. Waves Foods Pvt. Limited by us. As a consequence the imposition of penalty on the said appellant, as also on the other appellants, is not called for and is accordingly, set-aside. All the appeals are disposed off in above terms.
(Pronounced in the Court on 16.05.2011)
(Dr. P. Babu) (Archana Wadhwa)
Member (Technical) Member (Judicial)
.KL
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