Custom, Excise & Service Tax Tribunal
M/S. S. Narendrakumar & Co vs Commissioner Of Central Excise, Mumbai ... on 17 March, 2011
IN THE CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
Application No. E/S/96/10 in Appeal No. E/152/10
(Arising out Order-in-Original No. 05-07/ANS/09-10 dated 29.10.2009 passed by the Commissioner of Central Excise, Mumbai III)
For approval and signature:
Honble Mr. Ashok Jindal, Member (Judicial)
Honble Mr. P.R. Chandrasekharan, Member (Technical)
1. Whether Press Reporters may be allowed to see
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy
of the Order?
4. Whether Order is to be circulated to the Departmental
authorities?
M/s. S. Narendrakumar & Co.
Appellant
Vs.
Commissioner of Central Excise, Mumbai III
Respondent
Appearance:
Shri Prakash Shah, Advocate for the appellant Shri V.K. Singh, SDR for the respondent CORAM:
Honble Mr. Ashok Jindal, Member (Judicial) Honble Mr. P.R. Chandrasekharan, Member (Technical) Date of hearing : 28.01.2011 Date of decision : 17.03.2011 O R D E R No:..
Per: Mr. Ashok Jindal, Member (Judicial) The appellants are in appeal against the impugned order wherein their product Kesari masala milk was held as classifiable under tariff item no. 2106 9060 of the eight digit Central Excise Tariff which is not eligible for benefit of exemption at sr. no. 30A of notification no. 3/2006-CE dated 1.3.2006 as amended by notification no. 3/2007 dated 1.3.2007 and for the benefit of exemption at sr. no. 22 of the notification no. 3/2006 dated 1.3.2006. Therefore, the appellants are liable to pay central excise duty on their product along with interest and penalties.
2. The facts of the case are that the appellants are engaged in the manufacture of product predominantly consisting of mixing dry fruit. The product is marketed in the brand name of Everest Milk Masala. The ingredients of the product are specified as under:-
Nuts Percentage Other Spices Percentage Almonds 42.36% Cardamom 9.00% Cashewnuts 24.05% Mace 6.36% Pista 16.95% Saffron 0.064% Nut Meg 0.064%
3. The appellants classified the said product under chapter heading 21.06 as food mixing and sought exemption for payment of duty under sr.no. 30A of notification 3/07 CE dated 1.3.2007. A show cause notice was issued. In response to the show cause notice, the appellant contended that the product is a mixture of dry fruit and classifiable under chapter heading 2008 1900 and is fully exempt under sr.no. 22 of the notification 3/2006-CE. After hearing the contention of the appellant the adjudicating authority classified the product under heading 2106 9060 as food flavouring material relying on the opinion of Prof. Lele. Therefore by the said classification the appellants are in appeal before us.
4. Therefore, the matter involves the following issue :-
1. Whether the product consisting of more than 83 per cent of mixed dry fruits with other items like Cardamom, Mace, Saffron and Nutmeg are classifiable under Heading 2008 1990 of the Central Excise Tariff Act, 1985, as Mixture of Dry Fruits as claimed by the Appellants or as Food Flavoring Material under Heading 2106 9060 as claimed by the Revenue? or alternatively
2. In the event it being held that the product is classifiable under Chapter Heading 21.06 and exempt under Serial No. 30A of Notification No. 3/2006 dated 1st March, 2006 as amended by Notification No. 3/2007-CE dated 1st March, 2007?
5. Shri Prakash Shah, ld. Advocate for the appellant appeared before this Tribunal and submitted as under:-
A. In view of the composition, the product in question is rightly classifiable under Chapter Heading 2008 1990 of the Central Excise Tariff Act, 1985. B. Explanatory Notes to Chapter Heading 20.08.1990 reads as follows:
This heading covers fruits, nuts and other edible parts of plant, whether whole, in pieces or crushed, including mixtures thereof, prepared or preserved otherwise than by any of the processes specified in other Chapters or in the preceding headings of this Chapter.
It includes, inter alia:
(1) Almonds, ground-nuts, area (or betel) nuts and other nuts, dry-roasted, oil-roasted or fat-roasted, whether or not containing or coated with vegetable oil, salt, flavours, spices or other additives. C. The reliance placed by the Revenue on the following exclusion note to Heading 20.08 does not apply to the above product.
The heading further excludes mixture of plants, parts of plants, seeds or fruits (whole, cut, crushed, ground or powdered) of species falling under different heading (e.g. 7,9,11,12) not consumed as such, but of kind used directly for flavouring beverages or preparing extracts for manufacture of beverages (chapter 9 or heading 21.06) D. Firstly, the exclusion note does not cover mixture of nuts. Secondly, it applies to the mixtures of plants, parts of plants, seeds or fruits not consumed as such. The impugned order accepts the claim of the Appellants that the subject product is capable of being consumed as it is. In view thereof, the exclusion note does not exclude the above product from Chapter 20.08.
E. It is settled position in law that once the goods covered by a specific entry, they are to be classified under that entry. In the present case, the product is specifically covered under Chapter Heading 20.08 by description and is correctly classifiable under Chapter Heading 20.08.
F. In any event, the above product is not classifiable under Chapter 21.06. The explanatory note to HSN specifically provides that the goods which are not covered by any other heading of the nomenclature are covered under heading 21.06. Heading 21.06 is residuary heading.
G. It is settled position in law that the specific entry takes precedence over the residuary entry.
H. Reliance on the Supplementary Note 5(b) to Chapter 21 of the Central Excise Tariff has no application in the facts of the present case. Notwithstanding similar note in the explanatory notes in Heading 21.06, the mixture of dry fruits whether or not containing or coated with vegetable oil, salt, flavours, spices or other additives are covered under Chapter Heading 20.08.
I. It is submitted that the effect of note 5(b) is the same as given in the explanatory notes. It is now well settled that explanatory notes to HSN is to be applied in interpreting the Central Excise Tariff.
J. On and from 2005, the Central Excise Tariff including Chapters 1 to 21 is now fully aligned with the Explanatory Notes upto four digits.
K. Further, the products are not covered by Heading 21.06. It covers only food preparations not elsewhere specified. If, the products are not covered by the Chapter Heading, they are not covered by chapter sub-heading.
L. It is held by this Honble Appellate Tribunal in the case of Commissioner of Central Excise, Noida V/s. D.S. Foods Ltd., reported in 2009 (239) ELT 54, that the preparations falling under Chapters 20 and 21 are both edible in nature. Going by the common products mentioned in Chapter 21, we rightly considered as preparation of fruits, nuts or other part of plants. When the product is covered under the description of Chapter 20, the need to go to the Chapter 21 which is residuary in nature does not arise.
M. The earlier order of this Honble Appellate Tribunal in respect of the subject product relied upon by the Revenue did not examine classification under Chapter 20. In the absence of sub-headings in Chapter 20 at the relevant time, this Honble Appellate Tribunal did not examine the classification of the product under Chapter heading 20.08.
N. In any event, this Honble Appellate Tribunal determined the classification based on the trade parlance or commercial understanding.
O. It is submitted that, having regard to the facts that the product is specifically covered under chapter sub-heading 20.08 by description viz. mixture of dry fruits, the trade parlance or commercial understanding is not relevant. In support of this contention, the Appellants rely upon the following decisions:
(i) Kulkarni Black & Decker Ltd. V/s. Union of India reported in 1992 (57) ELT 401 wherein in paragraph 5 the Honble Bombay High Court, inter alia, held that It is now well settled by catena of decisions of the Supreme Court and this Court that it is not permissible to take into consideration the trade meaning or commercial nomenclature when the definition provided in the statute is extremely clear and does not suffer from any ambiguity. In case where the application of commercial meaning or trade nomenclature runs counter to the statutory context in which the word is used in the Tariff Item, then the trade meaning or commercial nomenclature should be ignored
(ii) Collector of C.Ex. Madras V/s. Sundaram Fastners Ltd., Madras reported in 1985 (22) ELT 923, the Honble Appellate Tribunal inter alia, held that common parlance test principles means that the goods for classification should be covered by, and not that they should be known in, the wordings of tariff description.
P. Assuming without admitting that the product is covered by Chapter Heading 21.06, it is submitted that the product is to be treated as food mix. The Heading covers Food Preparation. It is admitted in the impugned order that the product can be consumed as such. What can be consumed as such is to be regarded as food. In view thereof, the product is exempt under Serial No. 30A of Notification No. 3/2006 dated 1st March, 2006 as amended by Notification No. 3/2007-CE dated 1st March, 2007.
Q. The claim of the revenue that the product is food flavouring material is completely without any basis. No such claim was set up in the earlier proceedings.
R. The case of the revenue that the product is food flavouring material is based on the opinion of Prof. Lele. Prof. Lele was not permitted to be cross-examined despite specific request and the said request is not even considered in the impugned order. In the case of TULSYAN NEC LTD. V/s. Commissioner of Customs, Chennai, reported in 2003 (157) ELT 627, the Honble Madras High Court has held that the opinion of the expert cannot be relied unless the expert is allowed to be cross-examined.
S. Further, the opinion of Prof. Lele, is based on the alleged market survey. The alleged market survey is based on the website of the Appellants and Messrs Pravin Masala.
It is admitted by the Department that the said Pravin Masala is not registered with the Department and no duty is paid by the said Pravin Masala and that admittedly in the documents submitted by the said Pravin Masala for the purpose of export the product is declared under heading 0910, 9100 as spices. The so-called market survey conducted by Prof. Lele is clearly insufficient to hold that the product is known in the market as food flavouring material.
6. On the other hand, ld. DR supported the impugned order and submitted that the Commissioner has passed a speaking order and issue has already been classified in favour of the department by the earlier order of the Tribunal in the appellants own case reported in 1992 (57) ELT 966 (T) wherein the product Everest Milk Masala was classified under sub-heading 2107.91. Hence the impugned order is to be sustained. He further submitted that the explanatory notes relied upon by the appellant itself excludes the product and relied on the following exclusion note to the Heading 20.08 of HSN.
The heading further excludes mixture of plants, parts of plants, seeds or fruit (whole, cut, crushed, ground or powdered) of species falling in different Chapters (e.g. Chapters 7, 9, 11, 12) not consumed as such, but of a kind used either directly for flavouring beverages or for preparing extracts for the manufacture of beverages (Chapter 9 or heading 21.06)
7. He further submitted that having regard to supplementary chapter note 5B to Chapter 21, the product is rightly classified under Chapter heading 21.06.
8. He also submitted that the opinion of Prof. Lele was obtained during adjudication and same was relied upon by the adjudicating authority which is an independent opinion, so cross examination of the same is not required. As it has been observed that product is food flavouring material, hence the adjudicating authority has passed the impugned order within the purview of law. Hence same is to be sustained. He further submitted that w.e.f. 28.2.2005, the Central Excise Tariff has been aligned with the 8 digit Customs Tariff. However, the scope of Chapter 21 has not been changed. Due to alignment, goods covered by earlier heading 21.07 of the Central Excise Tariff are now covered under heading 21.06 of the Tariff ibid. The earlier Chapter heading Note 5(b) to Chapter 21 (before alignment) is also existing in the present chapter 21 in the form Sub heading Note 5(b). Therefore, the aforesaid decision of the Honble Tribunal, which was based on Chapter note 5(b) is applicable under post aligned Central Excise Tariff. Further at the time alignment it was clarified by the CBEC vide circular no. 808/5/2005/CX dated 25.5.2005 that exercise is to align the Central Excise Tariff with Customs Tariff and it was not meant for changing the rates of duty, and suitable amendments were made in the notifications where there was change in duty. The only change is at the subheading level. In new Tariff separate tariff heading at 8 digit level (21 06 90 60) has been created for Food Flavouring material. Further scope of Chapter 20 of the Central Excise Tariff Act, 1985, prior to alignment and thereafter are same. After alignment the product falling under this chapter, which were earlier classifiable under two sub-headings have been classifiable under different tariff item numbers. Therefore, product being food flavouring material is classifiable under tariff item 2106 60 90 of the Tariff.
9. Heard both sides in detail. After hearing both sides and going through the records available before us, we have observed as under:-
9.1 The exclusion note relied upon by the department does not cover mixture of nut and applies only to mixture of plant, parts of plant seeds, or plants not consumed as such. In adjudication order, it is held by the adjudicating authority that the product in question is capable of being consumed as such. Therefore, the subject product fits in the products specifically falling under Chapter heading 2008 1990 which is reproduced herein as under :-
2008 Fruit, nuts and other edible parts of plants, otherwise prepared or preserved, whether or not containing added sugar or other sweetening matter or spirit, not elsewhere specified or included
- Nuts, ground-nuts and other seeds, whether or not mixed together:
9.2 Now the question of two residuary heading covering only fruit preparations not elsewhere specified therefore does not arise. The explanatory notes to HSN squarely mandate classification of subject product under heading 2008 1990. The Honble Apex Court has consistently held that explanatory notes to HSN can be applied for interpretation of central excise tariff headings.
9.3 So far as reliance by the department in previous classification in respect of subject product for the earlier period, it is seen that the classification of the product under Chapter 20 was not examined by this Tribunal at all in the absence of sub-heading in chapter 20 at the relevant time and thus reference to trade parlance or commercial understanding was resorted to. However, presently it is seen that Chapter 1 to 21 of the CETA are fully aligned with explanatory notes up to 4 digits and same meaning given in explanatory notes was therefore be given to note 5B. The Tribunal in the case of DS Foods Ltd. (supra) has already decided that the preparations falling under Chapter 20 and 21 are both edible in nature and when the products are actually classifiable under Chapter 20, there is no question of going to the heading in Chapter 21, which is residuary in nature. In the case of Kulkarni Black & Deckers Ltd. (supra) the Honble Bombay High Court has held that it is not permissible to take into consideration the trade meaning or commercial nomenclature when the definition provided in the statute is extremely clear and does not suffer any ambiguity. In case where the application of commercial meaning or trade nomenclature runs counter to the statutory context in which the word is used in the tariff item then the trade meaning or commercial nomenclature should be ignored. 9.4 As per Rule 3(a) of the General Rules for the Interpretation of Central Excise Tariff the heading which provides the most specific description shall be preferred to headings providing a more general description.
9.5 We have also seen that the appellants have contended that they were denied the cross examination of Prof. Lele on whose report the adjudicating order has been passed is in violation of principles of natural justice. As Prof. Lele held in his report is based on market survey which is reproduced herein:-
B: Market Survey:
Kesari Masala Mix Composition in Indian Market:
* Cream coloured coarsely ground blend with rich flavour of saffron and pleasant soothing flavour of green cardamom combined with sliced almonds and pistachios. (http://www.pravinmasale.com/products/ProductsDetails.asp?ID=35) * An exotic, nuts and spices blend. Added to milk, it makes for a wholesome and nourishing drink. It also adds flavour and richness when added to Ice-creams, Kulfi, Milk Shakes, Kheer etc. and can also be used to garnish Indian sweets. (http://www.everestspices.com/milk.htm) 9.6 We have seen the report of Prof. Lele. It is not disputed that it is on the basis of market survey which is based on website of Pravin Masala, which is not even registered with the Central excise department. Moreover, for the purpose of export, Pravin Masala has declared the subject product under the heading 0910 9100 as spices. Therefore, the report of Prof. Lele cannot be relied upon by holding that the product is food flavouring material and is classifiable under heading 21.06. We further find that the alternative argument of the appellant that even if the product is classifiable under 21.06 product would be exempted under sr.no. 30A of the notification no. 3/2006 dated 1.3.2006 as amended by notification 3/2007 CE dated 1.3.2007 is not required to be adjudicated upon as the product is held to be classifiable under heading 2008 1900 for the purpose of central excise tariff. Therefore, we hold that the product namely Kesari Milk Masala is classifiable under chapter heading 2008 1990. Hence with the above observation, the impugned order is set aside. Appeal is allowed with consequential relief, if any.
(Pronounced in Court on ..) (P.R. Chandrasekharan) (Ashok Jindal) Member (Technical) Member (Judicial) SR 15