Customs, Excise and Gold Tribunal - Delhi
M/S. Nestle India Ltd. vs Commissioner Of Central Excise, New ... on 16 March, 2001
Equivalent citations: 2001(132)ELT134(TRI-DEL)
ORDER
K. Sreedharan:
1. M/s. Nestle India Ltd. are engaged in the manufacture of various types of Dessert Mixes. They filed classification list seeking to classify them under Chapter Heading 04.04. The period during which the classification was proposed was from 1-5-96 to 18-9-96. The Dessert Mixes sought to be classified under sub-heading 04.04. were:
(1) Nestle Milkmaid Kesar Kulfi Mix (2) Nestle Milkmaid Shahi Rabri Mix and (3) Nestle Milkmaid Kalakand Mix On the ground that the saleable packs of these products show they are mixtures which are not ready to use, but can be used only after processing, show cause notice dated 26-9-96 was issued demanding differential duty to the tune of Rs.35,55,871.00 alleging that the products manufactured fall under Chapter sub-heading 2108.90 of the Schedule to the Central Excise Tariff Act.
2. The appellant disputed the proposed classification under Tariff Heading 21.08 and contended that the three products mentioned above were classifiable under Chapter Heading 04.04 and not elsewhere. Adjudicating authority by its order-in-original No.179/96 dated 4-12-96 confirmed by the levy of duty mentioned in the show cause notice by classifying the products under Chapter sub-heading 2108.90. Appellant took up the matter before the Commissioner (Appeals). Appellate authority interfered with the order-in-original by passing order-in-appeal No.73-CE/DLH/97 dated 15-5-97. The Commissioner came to the conclusion that the products do not appear to be classifiable under Chapter 21 as held by the Assistant Commissioner. It was also observed that it is not possible to uphold the manufacturer's classification under Heading 04.04. Consequently, the Assistant Commissioner was directed to examine the matter afresh and decide the issue denovo, in the light of the observations made by that authority in the appellate order. Apprehending that the observations made by the Appellate Commissioner in the order will go against the interest of the manufacturer, they approached this Tribunal by filing appeal No.E/1384/97-D. By final order No. 684/97-D dated 7-8-97, this Tribunal disposed of the appeal making it clear that the Assistant Commissioner should deal with the matter afresh on all the claims made by the appellants and should pass an appropriate order in accordance with law after providing an opportunity to the appellants. In compliance the said direction, the Assistant Commissioner again went into the issue and passed adjudication order No. 166/97 dated 28-11-97 upholding the classification under Chapter sub-heading 2108.90 of the Schedule to the Act. The duty demanded in the show cause notice was also confirmed.
3. The above mentioned adjudication order was challenged in appeal before the appellate authority. That authority disposed of the appeal by order-in-appeal No. 386-CE/DLH/98 dated 12-8-98. Classification proposed in the show cause notice was not agreed to by the appellate authority. It again classified the products under Chapter Heading 19.01, thereby the adjudicating authority was directed to requantify the differential duty in respect of clearances effected during the period 1-5-96 to 18-9-96. Correctness of this order passed by the appellate authority is under challenge.
4.Learned counsel representing the appellant raised two points for our consideration. According to him, differential duty was claimed in the show cause notice on the ground that subject goods are classifiable under Chapter Heading 21.08. When the appellate authority found that classification under that Chapter Heading is not tenable, the demand made in the show cause notice should fail. In such a situation, the appellate authority could not have directed the adjudicating authority to requantify the differential duty on the ground that the goods are classifiable under Chapter Heading 19.01. The second argument was that the three products dealt with by the authorities below are squarely falling within Chapter Heading 04.04 and so the appellate authority was not correct in arriving at the conclusion that the goods are classifiable under Chapter Heading 19.01. We shall proceed to deal with these points hereinbelow.
5. Show cause notice dated 26-9-96 was issued demanding differential duty amounting to Rs.35,55,871.00 on the specific ground that the goods manufactured and cleared are to be classified under Chapter sub-heading 2108.90 which would attract Central Excise duty of 20% advalorem. The adjudicating authority found the goods to be classified under Chapter sub-heading 2108.90. Consequently, differential duty claimed in the show cause notice was confirmed. The appellate authority in unmistakable terms came to the conclusion that Chapter 21 does not come into the picture for classifying the subject goods. It is settled law that recovery of duty under Tariff Heading different from that which was proposed in the show cause notice is not permissible vide decision of CEGAT in Collector of Central Excise vs. Bright Brothers Ltd., 1991 (52) ELT 385. This order of the Tribunal has been upheld by the Supreme Court as seen from 2000 (116) ELT A67. In view of this legal position, the differential duty claimed from the appellant cannot be now recovered from them. When the appellate authority found that the subject goods do not fall under Chapter Heading 21.08, there was no justification for directing the adjudicating authority to requantify the duty recoverable from the manufacturer. In other words, when the appellate authority disagreed with the proposed classification made in the show cause notice, differential duty claimed in the show cause notice was irrecoverable. Differential duty can be claimed only on the goods being classified under Chapter Heading 19.01 for which separate show cause notice should issue. Without such show cause notice being issued, adjudicating authority cannot be directed to recompute the duty liability. In this view of the matter, we make it clear that pursuant to the order passed by the appellate authority, no amount of duty is leviable from the appellant.
6. Coming to the second issue raised by the learned counsel representing the appellant, we have to examine the Tariff sub-heading under which the subject goods can be classified. The ingredients of the subject goods are the following:-
(A) Nestle Milkmaid Kalakand Mix
(i) Dairy Powder 68.8%
(ii) Sugar 30.9%
(iii) Tartaric Acid 0.2%
(iv) Green Cardamom Powder 0.1%
(v) Citric Acid 0.01% (B) Nestle Milkmaid Rabri Mix
(i) Dairy Powder 57.5%
(ii) Dried Corn Starch 3.7%
(iii) Sugar 36.7%
(iv) Almond Bits 1.8%
(v) Pistachio Bits 0.4%
(vi) Green Cardamom Bits 0.4%
(vii) Saffron Bits 0.02%
(viii) Citric Acid 0.2% (C) Nestle Milkmaid Kulfi Mix
(i) Dairy Powder 57.5%
(ii) Dried Corn Starch 3.7%
(iii) Sugar 36.7%
(iv) Almond Bits 1.8%
(v) Pistachio Bits 0.4%
(vi) Green Cardamom Bits 0.4%
(vii) Saffron Bits 0.02% Composition of the above three products is not in dispute. So, the only question is whether the above products are to be classified under Chapter Heading 04.04 or under Chapter Heading 19.01.
7. Central Excise Tariff is based on internationally accepted nomenclature found in the HSN. Any dispute relating to Tariff classification must, according to the Apex Court, be resolved with reference to the nomenclature indicated by the HSN unless there be an express different intention indicated by the Central Excise Tariff Act, 1985 itself vide Collector of Central Excise, Shillong vs. Wood Craft Products Ltd., 1995 (77) ELT 23. In this case, there Lordships observed:
"Since the Central Excise Tariff Act, 1985 is enacted on the basis and pattern of the HSN, the same expression used in the Act must, as far as practicable, be construed to have the meaning which is expressly given to it in the HSN when there is no indication in the Indian Tariff of a different intention."
In Collector of Central Excise, Hyderabad vs. Bakelite Hylam Ltd., 1997 (91) ELT 13, the Apex Court opined:
"In case of any doubt, the HSN is a safe guide for ascertaining the meaning of any expression used in the Act (Excise Tariff Act)."
In view of this settled legal position, we have to examine the relevant items of goods mentioned in the Tariff sub-headings.
8. Chapter 4 of the Central Excise Tariff Act deals with dairy produce; edible products of animal origin, not elsewhere specified or included. This Chapter has two Chapter Notes which are verbatim identical to the Chapter Notes attached to Chapter 4 of HSN which deal with the same goods, among others. Over and above the above mentioned two Chapter Notes, the Central Excise Tariff Act has two more Notes 3 and 4. For our purpose Note 4 is very important. That Note reads:
"Heading No. 04.04 applies, inter alia, to butter-milk, curdled milk, cream, yogurt, whey, curd, and products consisting of natural milk constituents, whether or not containing added sugar or other sweetening matter or flavoured or containing added fruit or cocoa."
This Note brings out that the various types of milk products mentioned therein are to be classified under Heading 04.04 even when they are containing added sugar, sweetening matters, matters which go to flavour them and contain added fruit or cocoa. In other words, products consisting of natural milk constituents fall under Heading 04.04 even when they have added sugar, other sweetening matters or matters which go to change their flavour and added fruit or cocoa.
9. As per HSN, Chapter 4 therein will cover dairy products like milk cream, butter milk, curdled milk and cream, yogurt, kephir and other fermented or acidified milk and cream, whey, products consisting of natural milk constituents, not elsewhere specified or included, butter and other fats and oils derived from milk, cheese and curd. HSN further goes on to state that the dairy products may contain small quantities of stabilising agents, small quantities of anti-oxidants, small quantities of chemicals necessary for their processing or anticaking agents. Heading 04.01 may contain additives. Heading 04.02 may contain small quantities of starch not exceeding 5% by weight. Heading 04.03 can have added sugar or other sweetening matter, flavourings, nuts, fruit or cocoa. Heading 04.04 states that the milk product may also contain added sugar or other sweetening matter.
10. Ingredients of the three products with which we are concerned do not contain any material, which will take the said product out of goods falling under Heading 04.04. The dried corn starch in two products constitutes 3.7% by volume. Starch contents up to 5% will not take out the product from Heading 04.04. In other words, the presence of starch below 5% sugar, almond bits, pistachio bits or saffron bits cannot take the subject goods outside the purview of Heading 04.04.
11. Can citric acid and tartaric acid take these products outside heading 04.04? Flavoured milk produce falling under heading 04.04 should continue to be classified under that heading because of Chapter Note 4 quoted above. So, one has to examine the nature and function of the above mentioned acids. Glossary of terms for Sensory Evaluation of Cocoa Materials produced by the appellant shows that cetric and tartaric acids are basic flavours. The tartaric acid and cetric acid shall fall in the category of principal additives. One of the uses of citric acid as per Hawley's Condensed Chemical Dictionary 11th edition revised by N. Irving Sax and Richard J. Lewis, Sr. is as flavouring extracts. The same book gives the use of tartaric acid as acidulant in foods. Chambers 21st Century dictionary explains it as to make something slightly acid or sour. Thus, these acids are flavouring agents. Their addition to the milk product cannot take that product outside Chapter Heading 04.04.
12. Chapter Heading 19.01, inter alia, takes within its ambit food preparations of milk and cream, not containing cocoa powder or containing cocoa powder in a proportion by weight of less than 10%, not elsewhere specified or included. This entry shows that food preparations of milk and cream will fall under Heading 19.01 only if it is not elsewhere specified or included. HSN also contains identical entry as seen in Heading 19.01. Note III to it relates to:
"Food preparations of goods of Heading 04.04 not containing cocoa powder or containing cocoa powder in a proportion by weight of less than 10%, not elsewhere specified or included."
It goes on to state that preparations falling in this Heading may be distinguished from the products of Heading 04.01 to 04.04 only when they contain, in addition to natural milk constituents, other ingredients not permitted in the products of those earlier headings i.e. 04.01 to 04.04. This Note makes it abundantly clear that the milk product will go to Heading 19.01 only if it contains other ingredients not permitted by the Headings 04.01 to 04.04. When it is seen that the products with which we are concerned do not contain any ingredient not permitted by Chapter Headings 04.01 to 04.04, that product can, under no circumstance, be classified under Heading 19.01.
13. Learned Departmental Representative raised a contention that the products with which we are concerned are not edible as such and so it cannot be classified under Chapter Heading 04.04. Since these products can be consumed only after some type of cooking, according to the learned Departmental Representative, they are not edible and so cannot be classified under Heading 04.04. This aspect was considered by the Commissioner and held against the Department. According to the authority:
"The Assistant Commissioner has wrongly interpreted the word "edible" to mean something which can be eaten straightaway. Anything which is fit to be eaten as food with or without further cooking is edible."
In this view, the Commissioner rejected the classification proposed under Chapter 21. We are inclined to accept that approach made by the appellate authority. Revenue has not cared to question the correctness of the above arrived at by the appellate authority. So, the learned Departmental Representative was not justified in advancing an argument to get the subject goods classified under Chapter 21 of the Tariff Act.
14. Learned Departmental Representative very vehemently relied on the observations made by the larger Bench of this Tribunal in Collector of Central Excise vs. Frozen Foods Pvt. Ltd., 1992 (59) ELT 279 to contend that the subject goods cannot be classified under Chapter Heading 04.04. This Tribunal's decision in that case was upheld by the Supreme Court in Frozen Foods Pvt. Ltd. vs. Collector of Central Excise, Pune, 1998(98) ELT 295. We are not in a position to agree with the learned Departmental Representative for the simple reason that the product that was considered by the Tribunal was entirely different in character and composition compared to the one on hand. "Surje" with which the Tribunal was concerned contained mainly proteins, vitamins, small amount of sucrose, peptides, etc. It was an edible preparation for human consumption, etc. Neither the Tribunal nor the Supreme Court was concerned with a milk product, which squarely fell within Chapter Heading 04.04. In paragraph 38 of the final order, this Tribunal gave the reason for taking it out of Chapter 4 on the ground of addition of vitamins. Further, paragraph 42 of the order of this Tribunal clarifies the position that "Surje" was to be classified under Chapter 21 because protein concentrates can only fall within that Chapter. More than that at the relevant time Note 9 to Chapter 21 specifically stated that Heading 21.08 includes protein concentrates and textured protein substances. When "Surje" was a protein concentrate, the same could be classified under only Chapter 21 in view of Note 9 to that Chapter. Therefore, the decision relied on by the learned Departmental Representative has no application to the facts on hand.
15. Learned Departmental Representative then advanced an argument that final order No. 684/97 dated 7-8-97 prevents classification of the subject goods under Heading 04.04. This argument was based on the following statements in the order:-
"It was the apprehension of the party that while deciding the issue on readjudication proceedings, the Assistant Commissioner may be guided by the observations made by the Commissioner (Appeals). Thus, the appellant's contention that the goods are classifiable under heading 04.04 is not tenable."
We feel that this argument is ill-conceived because operative portion of the order makes it clear that the entire issue regarding classification was left at large. The operative portion reads:
"Since the matter has been remanded for de novo consideration, we make it clear that the Assistant Commissioner should deal with the matter afresh on all the claims made by the appellants and to pas an appropriate order in accordance with law after providing an opportunity to the appellants."
When the entire matter regarding classification was left open and the authorities below rightly proceeded to examine whether the classification is to be made under Heading 04.04, the present argument advanced by the learned Departmental Representative is one which requires only to be stated to be rejected. We do so.
16. In view of what has been stated above, we hold that the subject goods with which we are concerned in this case, namely, (1) Nestle Kalakand Mix, (2) Nestle Rabri Mix and (3 Nestle Kesar Kulfi Mix are products classifiable under Heading 04.04. The duty demanded, as they are not classifiable under Chapter Heading 21.08, cannot stand. Appeal is allowed as stated above with consequential reliefs, if any.