Customs, Excise and Gold Tribunal - Delhi
Amrit Protein Ltd. vs Collector Of Central Excise on 13 January, 1993
Equivalent citations: 1995(80)ELT856(TRI-DEL)
ORDER S.L. Peeran, Member (J)
1. The appellants are aggrieved with the Order-in-Original No. 05-Collector/1991-92, dated 24-8-1991. By this order the learned Collector has passed the following order :-
(i) order the seized goods viz. 3893 Cartons of Soya products are liable to be confiscated under Rule 173Q(1)(d) of the Central Exercise Rules, 1944 but as the goods were released provisionally to the owner before adjudication and the same are not available for confiscation and hence the amount of Rs. 50,000/- (Rupees Fifty thousand only) has been imposed as fine in lieu of confiscation in terms of the bond.
(ii) imposed penalty of Rs. 10,000/- under Rule 173Q(1)(d) of the Central Excise Rules, 1944.
The facts of the case are :
"that the appellants are manufacturers of Soya Milk and Soya Beverages under the brand name of Golden Glow and Big Soya and Vigo Elaichi under sub-heading 2202.90 of the Central Excise Tariff Act, 1985. The investigating team visited their factory premises on 14-9-1990 and found them manufacturing their product without obtaining Central Excise licence and claiming the same under Notification No. 20/89-C.E., dated 1-3-1989 at nil rate of duty without obtaining C.E. licence. It appeared to the Divisional Preventive Officers on the basis of 'Daily Standardisation Report' and the manufacturing process of the product that the products Golden Glow, Big Sipp and Vigo Elaichi were Soya Beverages containing flavours and added with the fruit pulp and, therefore, were not exempted under Notification No. 20/89-C.E., dated 1-3-1989 as amended and thus such goods were liable for confiscation. Hence 3893 cartons of Soya Beverages containing flavours and fruit pulp valued @ Rs. 2,84,189/- approx. were seized under mahazar and Panchnama dated 14-9-1990. The statement of Shri M.M. Chitale, General Manager (Technical) under Section 14 of the Central Excises and Salt Act, 1944 was recorded and several records were checked and details scrutinised. As a result of these investigations, they were issued with Show Cause Notice dated 26-9-1990 alleging contravention of provision of Rules 9(1), 52A, 173B, 173C, 173F and 173G of the Central Excise Rules, 1944.
3. The assessee in reply to the Show Cause Notice denied the charges, inter alia, it was contended that when the factory was set up during 1989 they had filed Classification List No. 1/89 effective from 11th April, 1989. They have urged that the products manufactured by them is Soya Milk base to which sugar, permitted chemicals and colours were added and homogeneously mixed and chilled. The mix is ultra high temperature treated; natural or artificial flavour added and then filled in pouches. They filed Classification List No. 1/89 effective from 11-4-1989 classifying Soya Milk under sub-heading 2202.90 of 'Central Excise Tariff Act, 1985' in the category of non-alcoholic Beverages specifically claiming exemption under Notification No. 20/89-C.E., dated 1-3-1989 for the product viz. Golden Glow, Big Sipp, Mango, Big Sipp Rose, Big Sipp Pinakool and Big Sipp Banana. The Superintendent, Central Excise, Range IV Ghaziabad had returned this classification list vide his letter dated 1-5-1989 indicating therein that there is no need to file classification list as no licence was obtained and that the products are exempted under Notification 20/89-C.E., dated 1-3-1989 and only an annual declaration to the Asstt. Collector, Central Excise Div-III, Ghaziabad is necessary. In response to this, they addressed a letter dated 16-5-1989 to Asstt. Collector, wherein they contended that there was no necessity of filing declaration as their products were fully exempt from Licencing Control under Rule 174A of the Central Excise Rules, 1944. They pleaded that the department was aware of their manufacturing activity. They had pleaded that their products were exempted under the Notification No. 20/89-G.E., dated 1-3-1989 and in support of their contentions raised several pleas and had referred to Technical literature also. They changed the quantum of demand and urged that the invoice price could be treated as Commodity prices only and not the assessable value. They urged that no penalty was leviable as the department was aware of their manufacturing activity.
4. The learned Collector after granting the personal hearing passed the impugned order. He has held that there is no evidence on record to show that the noticee have ever submitted any declaration of the manufacturing process of their product which is generally submitted at the time of filing AL-4 application. He has observed that "had they done so, then the department would have been able to detect that the product being manufactured by M/s. Amrit Protein Foods Ltd., are in fact Soya Beverages and not "Soya Milk". By not doing so the noticee has definitely contravened the provisions of Rule 174A read with Section 6 of the Central Excises and Salt Act, 1944.
There is dispute on the fact that the product manufactured by the Unit is "Soya Milk". Noticee in the reply the Show Cause Notice has stated that sugar, permitted chemical and colours are added milk soya milk base and mixed homogeneously. The mixed is ultra high temperature treated and natural or artificial flavour as the case may be is added and then filled in pouches. Evidently with this detailed process of manufacture which the soya milk undergoes, the soya milk looses its identity as Soya Milk and become the Soya Milk product or Soya , Beverages, as has been named in the Show Cause Notice. Therefore, the products namely Golden Glow, Big Sipp, Mango, Rose, Pinakool and Banana are held to be Soya Milk product and not Soya Milk that is covered within the ambit of exemption Notification No. 20/89-C.E., dated 1-3-1989. The Soya Milk would be chargeable to duty at the appropriate rate...."
5. As regards the extension of larger period the learned Collector by his criptic finding has held thus :-
"Based on the discussions as aforesaid it is also evident concluded that by resorting to misdeclaration or suppression of certain facts made in the Classification List the noticee had the intent to evade Central Excise duty. The past clearance therefore would be chargeable to duty, the demand for which can be raised under Rule 9(2) of Central Excise Rules, 1944 read with Section 11A* (Proviso) of the Central Excises & Salt Act, 1944.
6. The appellants have seriously challenged the findings of the learned Collector and has raised several grounds in this appeal.
7. We have heard Shri N.R. Khaitan, learned Senior Advocate for the appellant and Smt. J.M.S. Sundaram, learned SDR for the Revenue. At the outset, it was brought to our notice that on merits the Tribunal has already taken a view in a similar case in favour of Revenue in the case Noble Soya House Ltd. v. CCE as reported in 1992 (20) ETR 20. Shri N.R. Khaitan, Senior Advocate submitted that he would like to point out certain information in the reported order and seeks its reconsideration. However, on the aspect of extending the extended period under the proviso of Section 11A of the Act, he contended that there is no case for the revenue and there is deliberate suppression or misdeclaration or fraud with an intent to evade duty by the appellants.
8. He submitted that the appellant were under bonafide belief that their product was exempted under the Notification No. 20/89, dated 1-3-1989. They had addressed two letters on 11-4-1989 bringing to the notice of the department about their entering into production and the date of commencement of manufacture is May, 1989. They also filed Classification List alongwith a covering letter dated 11-4-1989. In the Classification List, they clearly indicated out their products and there was a clear indication favouring therefrom that the product is not a plain Soya Milk but were manufactured by adding flavours of mango, banana. It is the appellants contention that despite adding all these ingredients the Soya Milk remains Soya Milk and the resultant product is not a preparation of Soya Milk. The department was fully aware that the product was manufactured with or without flavours. The wrappers also clearly indicated the ingredients used. The Department by their letter dated 1-5-1989 had informed them with reference to the Classification List No. 1/89 with effect from 11-4-1989 as Central Excise Licence is not obtained by them there is no need to file Classification List and that they were required to file an annual declaration to the Asstt. Collector, Central Excise, Div-III, Ghaziabad under Rule 174A of Central Excise Rules, 1944 as their product is fully exempted under Notification No. 20/89, dated 1-3-1989. They sent another detailed letter dated 16-5-1989 by which they contended that they were also not required to file declaration as suggested by them. The learned advocate pointed out from these materials that the department were duty bound to have made enquiries on the Classification List 1/89 filed by them. When the Superintendent by his letter 1-5-1989 informed them that they were exempted under Notification No. 20/89, it clearly followed that the department had made all such enquiries as are required before granting the exemption. The appellant had acted fairly and under bonafide belief. There was no suppression or misdeclaration and hence larger period cannot be extended in the present case. The Learned Advocate also referred to the statement of Shri Chitale to show that they had intentional bonafide belief of exemption available to their product. He contended that after filing of Classification List, if the department had called for information and the same had been withheld then it could have been said that there is suppression of material facts; which is not so in the present case. He relied on the following rulings:
(i) Thermo Electrics Madras Manufacturers v. Collector - 1991 (54) E.L.T. 82
(ii) Collector v. Chemphar Drugs & Liniments -1989 (40) E.L.T. 276 para 8
(iii) Padmini Products v. Collector - 1989 (43) E.L.T. 195 para 8
(iv) Collector v. Muzzaffarnagar Steels -1989 (44) E.L.T. 552
(v) CCE, Calcutta v. Dewarance Macneill & Co. Ltd. - 1991 (56) E.L.T. 645
9. The learned Counsel argued that there is no case for imposing penalty or even redemption fine and in the context relied on the valuing rendered by the Hon'ble Supreme Court in the case of Hindustan Steels Ltd. v. State of Orissa as reported in AIR 1970 SC page 253 para 7.
10. The learned Counsel further argued that the impugned order proceeded on the footing that in the manufacturing process first Soya Milk is obtained and then it is subjected to further processing and the product is obtained. He pointed out from the evidence on record that this is not the correct position. He contended that in common parlance, the product is referred as Soya Milk itself and that the ratio of noble Soya. Hence case does not consider the doctrine of common parlance. There is no change in essential characteristics of Soya Milk on adition or on addition of 10-13% of fruit pulp. In any Soya Milk plain, which is also marketed by them should also get the exemption.
11. The learned SDR submitted that on merits the appellants are not entitled to the benefit of the notification in question in view of the Order of this Bench itself as rendered in the Noble Soya House's case. The party is not marketing Soya Milk plain but Soya Milk beverages and both are distinct and different commodity. The 'Golden Glow', which the appellant are terming as plain 'Soya Milk' is also not correct. It is a beverage as Sweetners and other ingredients are added to give added Shelf life and hence it is not entitled for exemption.
12. The learned SDR further argued that the demand has been raised for previous six months also and that the same is valid. However, the Collector has refrained from confirming the part demand amounting to Rs. 16,15,831.09 which is for period 27-3-1990 to 13-9-1990 keeping open the option to issue fresh Show Cause Notice for the past clearances also. As the goods had been seized the imposition of redemption and penalty is justified. The learned Collector by bifurcating the Show Cause Notice has not committed any irregularity and in this context the decision rendered in the case of Collector of Customs v. Jugilal Kamlapat U.L. as reported in 1987 (30) E.L.T. 734 para 11 is relied. Even if duty is not confirmed in Show Cause Notice, the position pertaining to seizure, redemption fine and penalty is maintainable. For imposing penalty, there is no need to proof suppression and the clause of Rule 173Q also does not indicate the presence of mens rea. Even in absence of mens rea, penalty is imposable. Rule 173Q provides for both the presence and absence of mens rea. Merely because the learned Collector has quoted Rule 173Q(1)(d), it does not mean that he cannot impose penalty under other clauses of Rule, 173Q. As the party has violated rules in not obtaining licence and has cleared goods without maintaining accounts. There is no need to look into the mens rea and the imposition of penalty is valid and proper. In this context, she relied on the ruling rendered in the case of C.C.E., Madras v. Ultra Marine and Pigments Ltd. as reported in 1985 (22) E.L.T. 413.
13. The party did not disclose the manufacturing flow chart and hence from the Classification List filed, it could not follow as to what ingredients had been added and therefore, there is withholding of correct information. The party cannot put on us on the department for not making sufficient enquiries and in this context referred to the ruling rendered in the case of Piya Pharmaceutical Works v. Collector, Meerut as reported in 1985 (19) E.L.T. 272 para 25. They were required to have taken licence and not merely filed Classification List. The Classification List also does not give details. The party has not substantiated about holding bonafide belief also. The department by returning the Classification List had not given any impression that the product is exempt from duty. In this context the ruling rendered in the case of Jaishri Engineering Co. (P) Ltd. v. Collector of Central Excise as reported in 1989 (40) E.L.T. 214 (S.C.) is also relied.
14. Countering the arguments of the learned SDR, the Senior Advocate contended that the details pertaining to the addition of ingredients to Soya Milk had been furnished indicated in the Classification List and hence it cannot be argued that there has been withholding of information. Soya Milk is itself a beverage, which falls under sub-heading 22.02 of Central Excise Tariff, 1985 and the Notification mention Soya Milk and hence the benefit of the Notification in question is available to the party.
15. We have carefully considered the submissions made by both sides and have perused the records and the impugned order. The question that arises for our consideration is as to the correct classification of various varieties of Soya Milk manufactured and marketed by appellants in this case and as to whether the duty is demandable for extended period and as to whether there is justification for imposition of redemption fine on seized goods and penalty under the relevant rules.
16. The appellants were manufacturing four varieties of Soya Milk products viz.
(1) Unflavoured Soya Milk sold under the brand name "Golden Glow".
(2) Flavoured Soya Milk sold under the brand name 'Vigo'.
(3) Flavoured Soya Milk sold under the brand name "Big Sipp 'Rose'" and 'Big Sipp Tinakool' (4) Flavoured Soya Milk to which fruit pulp (for natural flavour) upto a maximum of 10% of the total content was added, sold under the brand name "Big Sipp Mango and Big Sipp Banana".
17. The appellants contention is that despite their adding to the Soya Milk base cum sugar, permitted additives colours, Milk, natural or artificial flavours and addition of fruit pulp or synthetic flavours could not make the product into a different one but continue to be Soya Milk. It is their contention that the product classifiable as Soya Milk under Heading 2202.90 as "Non-alcoholic Beverages". On this point the learned SDR brought to our notice our own order of this Bench rendered by us in the 'Noble Soya House Ltd.'s case (supra) and has contended that the facts are totally similar and the Bench has clearly held that the product is not entitled to the exemption under Notification No. 286/86-C.E. as amended by Notification No. 20/89-C.E. We have carefully considered the submissions of the appellants and also have perused the ruling rendered in this case. On a careful perusal of the citation referred, we are of the considered opinion that the facts of the case being identical, the ratio of the citation on the question of availability of the benefit of Notification No. 286/86, dated 5-6-1986 and 20/89, dated 1-3-1989 as amended is fully applicable to the facts of the present case. It has been held that Plain Soya Milk, both in the liquid form and as spray dry powder, can serve as valuable ingredients to the process of food industries in the manufacture of bakery products, Confections sweetmeats and instant desert mixes proven applications in the pharmaceutical industry include high protein therapeutic foods, dietetic foods, weaning foods and infant foods. Therefore, it has been held that Soya Milk, as such, as used in Pharmaceutical industry and food processing industries. It has also further held that the product manufactured by the assessee by adding several ingredients as a Soya Milk beverages or soft drinks and that there are two types of products. After the detailed discussions, the Bench has concluded that the product manufactured with several additives sugar, fruit pulp is a non-alcoholic beverage and not entitled to the benefit of the said notification, which applies solely to Soya Milk only. In view of the ruling given in the Noble Soya House Ltd.'s case we have to upheld the findings of the learned Collector on this aspect of the matter only and we hold that the appellants are not entitled to the benefit of the Notification in question.
18. The second question for our consideration is pertaining to the extension of the proviso of Section 11A of the Act. It has been alleged against the appellant that they have suppressed material facts and have not furnished all the material details and thus the extended period under the provisio of Section 11A of the Act can be inforced on them. The learned Counsel has vehemently argued on this point and attempted to show that there has been no suppression, or withhelding of information or misdeclaration or fraud so as to enable the department to proceed for recovery for extended period. Here, he also argued that the appellants have not attempted to evade Central Excise duty and that they were holding a bonafide belief that their product is exempted for duty. Their belief has been arisen from the technical details and information they were having and also on the basis of definition of Soya Milk as is available in Glossory of Soya Milk terms. The Learned Counsel has also argued that in Trade and Commercial Parlance, Soya Milk could include also the non-alcoholic beverage manufactured and marketed in the manner the appellants have done. The appellants are very strongly relying on the Classification List No. 1 of 3/89 and letters addressed by them to the Department about the commencement of their production and on this basis have vehemently contended that, the department cannot plead ignorance of the manufacturing process and hence there is no suppression, as the department had been made fully aware of the manufacturing activity. The department has taken a view that the appellants have not disclosed about the manufacturing process or of use of additives, sugar and fruit pulp in the Soya Milk manufactured by them and hence there is misdeclaration. The whole case is to be viewed from the context of this rival contention by the authorities. The material before us is the Classification List No. 1/89 filed by the appellants and the correspondence to the appellants and the department in this context. The declaration made by in the Classification List in column No. 2 is as reproduced herein :-
"Natural or artificial mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured; other non alcoholic beverages, not including fruit or vegetable juices of Heading No. 20.01 Others : 1 Soya Milk - 'Golden Glow', 'Big Sipp' - Mango, Rose Pinakool and Banana"
19. On receipt of this covering letter and Classification List, the Suptd. has returned the same alongwith covering letter. In this the Suptd. has informed them that their product is fully exempted under Notification 20/89, dated 1-3-1989 and as they have also not taken Central Excise Licence, the Classification List filed by them is returned. The Suptd. also informed them to file annual declaration to Asstt. Collector. The appellants filed a reply to this letter and protested about their filing annual returns as they were exempted under the said Notification. The question that arises for our consideration is as to whether there is suppression in the details given by the party in the Classification List filed by them. As has been extracted above, the Classification List clearly indicates the product 'Golden Glow' and 'Big Sipp the Big Sipp and they have also clearly indicated 'Mango, Rose, Pinakool and Banana'. These four items indicate use of fruit and flower essence. This should have given very clear indication to the department about the addition of fruit pulp in the Soya Milk. They have also clearly indicated that they are going to sold these in pouches, in cans of .plastic and metal. Therefore, when they were to market in cartons with a brand name, any reasonable person would certainly come to the conclusion that what the party is marketing is not plain Soya Milk for which exemption is granted in the said notification but it is a separate product manufactured by using Soya Milk as a base. Therefore, the department before returning the Classification List to the party was duty bound to have made further inquiries and satisfy itself about the exemption. In case if the Party had not given the details or had suppressed any material information on being asked by the department then a reasonable conclusion can be drawn that the appellant had withheld material facts and hence it had been done with mala fide intention to evade duty. The Department has not shown any material by which such a conclusion can be drawn. The Department alone is to blame itself for not making sufficient inquiries before returning the Classification List and informing them that their product is exempted under Notification No. 20/89. Therefore, taking into consideration the several citations cited by the learned Counsel, we are unable to agree with the Department's contention that the party has attempted to suppress and evade duty and the larger period is available to the department to recover the duty. The learned SDR has placed reliance on the ruling of the Supreme Court rendered in the case of Jayshree Industries Co. Pvt. Ltd.'s case and has argued that the rulings would apply and that the department's charge of suppression should be upheld. In this particular case there was a clear findings that the information given in the Classification List was not sufficient and there had been a clear indication that the up-holding of the information resulted in granting of the benefit. In the case in hand the Party has clearly given the indication that they are not clearing Soya Milk alone but they were clearing it by adding fruit pulp like Mango, Rose, Pinakool and Banana. In such a circumstance it was for the department to have further investigated by making inquiries and satisfy itself as to whether they were entitled to the benefit or not. There is a failure on the department's part in carrying out the necesary enquiries and for such a failure, the party cannot be held responsible. In this context, the ruling rendered in the case of Muzzaffarnagar Steels (Supra) is applicable and we rely on the same. The Collector however, has not confirmed the duty but has only held that he is refraining from confirming part-demand as the department could raise further demands for past period. The Collector has also not confirmed duty for six months in the present case.
20. As regards the imposition of redemption fine on the seized goods viz. 3893 Cartons of Soya Product, it has been argued by the learned Advocate that the imposition of fine is not justified as there is no mens rea on their part to evade the duty. In this context the learned SDR has stated that there is no need to place proof of mensrea as the product was dutiable in the seizure and imposition of redemption fine is justified in the peculiar facts of the present case. We find that this imposition of redemption fine is not justified as the party were clearing the goods after only having filed the Classification List and they have not done any act with a view to evade payment of duty intentionally. We are not inclined to confirm the imposition of penalty of Rs. 10,000/- and we are strengthen in our view by the observations made by the Supreme Court in the case of Hindustan Steels Ltd. (Supra). In the result, the appeal is allowed in the above terms.