Customs, Excise and Gold Tribunal - Mumbai
Commissioner Of Central Excise vs Pioma Industries on 2 May, 2006
ORDER
Jyoti Balasundaram, Vice President
1. The respondents herein who are manufacturers of Soft Drink Concentrate (hereinafter referred to as SDC) falling under CETA Sub-heading 2108.99 filed declaration effective from 2.6.1998 under Rule 173-B of the Central Excise Rules, 1944 claiming benefit of Notification No. 5/98-CE dt. 2.6.1998 at Serial No. 7 of the Table thereto which provides concessional rate of duty at the rate of 8% to preparations in the nature of instant food mix falling under Chapter Heading 2108, for the product. It appeared to the Excise authorities that the product was not a food mix and therefore the benefit of Notification would not be admissible and that the product would attract Central Excise duty at the Tariff rate of 18%. For the period from June 1998 to February 1999, the respondents had cleared SDC on payment of duty at the concessional rate of 8% and therefore they had short levied and short paid differential duty at the rate of 10%. Hence show cause notices dt. 21.12.98 and 22.4.99 were issued proposing modification of the declaration by denying the benefit of the notification, and proposing recovery of differential duty of Rs. 27,79,540/- and Rs. 99,73,245/- respectively and proposing recovery of interest and imposition of penalty. The Assistant Commissioner confirmed the demands and imposed penalty of Rs. 20 lakhs (Rupees twenty lakhs only) on the assessees on the ground that SDC was neither an instant food mix nor preparation in the nature of instant food mix as specified in the notification. The Commissioner(Appeals) set aside the demands and penalty and allowed the assessees' appeal, relying upon HSN Explanatory Notes to budgetary changes in the year 1998-99, and upon several decisions of the Tribunal and the Hon'ble Supreme Court; hence this appeal by the Revenue.
2. We have heard both sides.
3. The entry at sr.No. 7 of the Table to Notification No. 5/98 covers preparations in the nature of Instant Food Mixes for consumption after processing such as cooking, dissolving or boiling in water, milk etc. Thus what is to be determined is whether Rasna Soft Drink Concentrate could be considered as preparations in the nature of 'Instant Food Mixes'. What is required to be considered is the ingredients of the product which has been described as mix of the following:
Powder containing Malic, Fumeric and Citric Acids, Dextrose, Lactose permitted stabi:osers, Emulsifiers, Class 1,11 Preservatives, Colours and Liquid containing Aroma Chemicals and Oils with Stabilisers, Emulsifiers, Vanaspati, Food Acids, Preservatives and Colours.
4. As seen from the above, the ingredients are natural essential oils and oleoresins extracted from fruits/plant materials and of vegetable origin such as orange oil, lemon oil, lime oil etc. Citric acid, derivatives of fruits, plants etc. dextrose, lactose, permitted stabilizers, emulsifiers, preservatives and colours etc. are the other ingredients. Lactose is usually milk sugar as clarified by Encyclopedia of Food Science by Martin S. Peterson and Arnolds. Lactose is recognized as making positive nutritional contributions. The uses of lactose in other foods have also been specified in the Encyclopedia and it is specified that it has the characteristics of carbohydrate of milk. The literature of US Port Export Council available on its website also specifies the applications of lactose for dairy, bakery, snack, confectionery and other foods and nutritional products. As regards dextrose, the same is known in common parlance as glucose. The food additives handbook sets out that dextrose is the synonym of glucose and its use in food as nutritive sweetener. The Indian Pharmacopoeia 1996, puts dextrose as a nutrient. The other ingredients of Rasna Soft Drink Concentrates had been derived/extracted from various food items and have nutritive value. Further, in the letter dated 31.10.1986 addressed to the assessee/respondent by the Basic Chemicals, Pharmaceuticals and Cosmetics export promotion Council (CHEMEXCIL) set up by Ministry of Commerce, the assessee was informed that Soft Drink Concentrate would come under the purview of Processed Foods Export Promotion Council. We also note that certificate of registration was given by Agricultural and Processed Food Products Export Development Authority of Ministry of Commerce for manufacture of Rasna Soft Drink Concentrates. The authorities under the Prevention of Food Adulteration Act have also issued a licence for the product in question, which was referred to and relied upon by the assessee. The Ministry of Food Processing Industries, Government of India have also written to the assessee on 18.7.1996 that Rasna Soft Drink Concentrates, by virtue of its ingredients, is an agro product covered under Fruit Products order, 1955 as determined by Central Food Products Advisory Committee.
5. Common parlance also recognizes, in view of the affidavits of Mrs. Malti Jagasia, housewife, Mr. Ashok Patel, partner of Alka Stores (Trader) and Mr. Dilip Jain, partner of Mahavir Trading that the product in question is a preparation in the nature of instant food mix similar to other food mixes like Rasam mix, Vada mix, idli mix etc. It is also noted that under the provisions of Gujarat Sales Act, 1969, the product is classified as article of good and tax being paid accordingly.
6. The Revenue relies upon the judgment of the Apex Court in CCE v. Parle Exports(P)Ltd. 1988(38)ELT 741(SC) to contend that the product in dispute is not in the nature of food mix. The first thing to be noted is that the product in that case was non alcoholic beverage bases and the question before the Supreme Court was whether non alcoholic beverage is a food product or food preparation covered in terms of Notification No. 55/75-CE dated 1.3.75. The product under consideration was for use in Industry and was for an industrial purpose for manufacturing aerated waters and could not be consumed directly by consumers and only aerated waters manufactured out of beverage base could be consumed. However, as far as the product in the present case is concerned, it is used by consumers directly and is not sold to industry for the purpose of manufacturing goods which in turn is sold to consumers. It is pertinent to note that the product under consideration in the Parle Exports(P)Ltd. supra contained no fruit or ingredients having nutritive value and is mostly made of chemicals, whereas, in the present case, the product in question contains oils extracted from fruits, vegetables, plants as well as lactose, dextrose etc.
7. This apart, the Tariff entries under consideration by the Apex Court were totally different in as much as there was a specific entry for food products (Tariff Item 1C) and aerated waters (Tariff item 1D) and Tariff item 68 was a residuary entry covering all other goods not elsewhere specified. The Notification under consideration viz. Notfn.No. 55/75-CE dated 1.3.75 exempted goods falling under Tariff item 68 mentioned in the Schedule to the Notification viz. all kinds of food and food preparations including those specified therein. In the present case, there is no specific entry for food and food preparations and the relevant Notification No. 5/98 exempted preparations in the nature of instant food mix. The entire judgment of the Apex Court was based upon the entries in the Central Excise Tariff as well as the language of the Notification as it stood during the material period whereas in the present case, both the entries and the language of the Notification are totally different. The Supreme Court further held that the expression in the schedule and the exemption notification should be understood by the language therein, bearing in mind, the context in which the expression occurs. There was also no evidence placed on record before the Court of common understanding or the ordinary persons understanding of the product.
8. During the period covered in the present appeal, the Central Excise Tariff was aligned with HSN whereas this was not the position during the period covered in the Parle Exports(P)Ltd.
9. We also note that during the relevant period, the product in dispute was being classified under ITC (HS) classification under Exim Code 21.06 covering food preparations not elsewhere specified or included. The Exim Code No. 210690 01 specifically covered soft drink concentrates as food preparation not elsewhere specified. It is also brought to our notice that with effect from 2005-06, a specific tariff item covering food preparations not elsewhere specified or included has been incorporated and soft drink concentrates are covered under that heading. In fact, at present, the assessee is clearing the goods classifying the same under CET sub-heading 2106 90 11.
10. For the above reasons, we agree with the respondents herein that Rasna Soft Drink Concentrates can be considered as being in the nature of food preparation and in the nature of instant food mix eligible to the benefit of exemption as per Sr. No. 7 of the Table to Notification No. 5/98-CE.
11. We, therefore, see no reason to interfere with the impugned order and accordingly uphold the same and reject the appeal.
12. I have carefully perused the order recorded above but I am unable to persuade myself that the arguments relied upon are sound enough to deviate from the Honourable Supreme Court's decision in the case of Parle Exports (cited supra) holding that non-alcoholic beverages are not food products or food preparations. Non-alcoholic beverages can be either aerated (such as Limca) or non-aerated. Rasna is nothing but a non-alcoholic beverage and hence cannot be treated as a food product or food preparation following the aforecited decision of the Honourable Supreme Court. Consequently, Rasna soft drink concentrate cannot be treated as instant food mixes. In my view, the ratio of the Honourable Supreme Court's decision does not become inapplicable merely because it dealt with a concentrate which is used industrially and Rasna concentrate can be used in the household. What is important is the end product which is a non-alcoholic beverage and that has been held by the Honourable Supreme Court to be not a food product or a food preparation. Hence, the concentrate cannot be considered to be an instant food mix. Similarly, presence of a small amount of dextrose/lactose as a sweetener does not change the character of the beverage. After all, it is not anything like glucose powder, which is used in the case of depletion of energy due to intense sporting activity/exhaustion. I am also of the view that a few stray favourable affidavits collected and filed by an interested party is not a sure way of meeting the common parlance test and overcoming the ratio of a carefully considered decision of the Honourable Supreme Court, which has held that an average Indian will not treat non-alcoholic beverage bases as food products/preparations. I am also of the view that ratio of such a decision rendered in the context of one exemption is equally applicable in the context of another.
13. I also find that the lower appellate authority has not taken into account the observations of the Honourable Supreme Court in the case of Parle Exports (cited supra) to the effect that expressions in the exemption notifications should be understood by the language employed therein bearing in mind the context in which the expressions occur, that the words used in the provision imposing taxes or granting exemption should be understood in the same way in which these are understood in ordinary parlance, that an exception to the general rule of taxation is to be construed strictly against those who invoke the benefit and that absurd results of construction should be avoided.
14. Applying the ratio of the Honourable Supreme Court's decision in Parle Exports (cited supra), I am of the view that the impugned products do not fail in the exempted category under Notification No. 5/98-CE dated 2.6.1998. Consequently, I set aside the impugned order-in-appeal and restore the order-in-original confirming the duty demand of Rs. 1,27,52,785/-. As regards the penalty, this being a case of disputed classification, I set aside the penalty imposed by the original authority. Interest would be chargeable in accordance with the legal provisions in force.
15. Department's appeal is allowed in the above terms.
The following points of difference are referred to Hon'ble Third Member's opinion:
Whether Rasna Soft Drink Concentrate is instant food mix and hence eligible to the benefit of exemption in terms of Sr.No. 7 of the Table to Notification No. 5/98-CE dated 2.6.1998, as held by the Hon'ble Vice President OR Whether the product cannot be considered as instant food mix and hence not eligible to the benefit of exemption under the above Notification as held by the Hon'ble Member (Technical)