Customs, Excise and Gold Tribunal - Delhi
Nestle India Ltd. vs Commissioner Of Central Excise on 5 May, 2004
Equivalent citations: 2004(169)ELT315(TRI-DEL)
ORDER V.K. Agrawal, Member (T)
1. The issue involved in this Appeal, filed by M/s. Nestle India Ltd. is regarding dutiability of inter-mixture of vitamins.
2. Shri V. Lakshmikumaran, learned Advocate, submitted that the Appellants manufacture infant foods chargeable to Nil rate of Central Excise duty; that for the purpose of manufacture of the infant foods, they buy various vitamins like vitamin A, Vitamin D, Vitamin E, etc. on payment of duty from the manufactures of vitamin; that depending upon the requirement of the particular vitamin content to be present in the finished product, the various vitamins are mixed in a pre-determined ratio with the help of electro mechanical devices by effecting a uniform dispersion of liquid, semi solid or solid ingredients of a mixture by means of mechanical agitation; that after mixing the vitamins, the item so obtained, which is called inter mixture of vitamins, is stored in plastic drums/aluminium bottles; that in order to identify the particular inter-mixture of vitamins which has to be used in the particular grade of finished product, a sticker is affixed on the drum giving the details regarding the content of the drum and are thereafter used in the manufacture of infant goods; that they do not sell any part of these inter mixtures of vitamins to any body and they have never cleared the same outsider the factory as these inter-mixture of vitamins are not saleable in the market as such it is of no use to any other infant food manufacturer whatsoever; that the Adjudicating Authority, under the impugned Order, has held that the process of mixing the various vitamins and the making of inter-mixture of vitamins amounts to manufacture within the meaning of Note 11 to Chapter 29 of the Schedule to the Central Excise Tariff Act on the ground that the process of mixing the vitamins would come under the category of "adopting of any other treatment to render the product marketable to the consumer".
3. The learned Counsel, further, submitted that as the Note 11 to Chapter 29 was introduced only with effect from 1.3.1997, the demand of duty prior to 1.3.1997 can not be confirmed against them; that the only case made out in the show cause notices is that they were affixing labels on the containers containing the inter-mixture of vitamins which would amount to labeling within the meaning of Note 11 and consequently the said process would amount to manufacture; that they had pointed out, in their reply, as to how the tying of a label which contains certain details like date of process, batch No., gross weight, net weight, etc. would not amount to labeling within the meaning of Note 11; that the Adjudicating Authority had not adverted to their submissions and she had totally given up the case made out in the show cause notice; that once having given up the case made out in the show cause notice, the impugned Order ought to have discharged the show cause notice; that the Commissioner has sought to sustain the duty demand by contending that the activity is covered within the last portion of Note 11 viz. "adoption of any other treatment to render the product marketable to the consumer." which is beyond the show cause notice. He also contended that the process undertaken by them can not come under the category of "adoption of any other treatment to render the product marketable to the consumer"; that the crucial requirement for the application of this portion of Note 11 is that but for the adoption of that treatment, the product should not be marketable to the consumer; that in other words, prior to the adoption of that treatment, the product should be in a non-marketable state; that if the product is otherwise marketable even without that treatment, the treatment can not amount to "adoption of any other treatment to render the product marketable"; that in the present case, the vitamins are otherwise marketable, question of Appellants doing any operation on them to make them marketable to the consumer jut can not arise; that thus the crucial requirement for the applicability of last portion of Note 11 is not satisfied and they activity can not be learned to amount to manufacture. He relied upon the decision in the case of Lakme Lever Ltd. Vs. CCE, Mumbai III, 2001 (127) ELT 790 (T) wherein it has been held that the process to fall within the clause must be one which confers upon the product the attributes of marketability which it did not possess earlier and if the product was already marketable, any amount of treatment to enhance its marketability, or impart more value addition to it would not amount to manufacture. Reliance has also been placed on the following decisions : -
(i) CCE, Indore Vs. Pure Pharma Ltd. 2002 (143) ELT 386 (T)
(ii) Ranbaxy Laboratories Ltd. Vs. CCE, Chandigarh, Final Order No. A/374/2003 NB(C) dated 9.7.2003.
4. He also mentioned that all activities, covered by Note 11 to Chapter 29, are intended to make the product marketable to the retail consumer; that thus the expression "consumer" in the last portion of Note 11 should also be construed in the same manner and not a captive consumer like the Appellants; that for this reason also Note 11 is not attracted in the present case. this submission is supported by the decision in Pure Pharma Ltd., supra. He, further, submitted that merely because the Heading 29.36 separately covers vitamins and intermixture of Vitamins it can not ipsofacto be concluded that the process of mixing the vitamins in specified proportion would amount to manufacture. He relied upon the decision in the case of CCE Vs. Markfed Vanaspati Allied Industries, 2003 (153) ELT 491 (SC). wherein it has been held by the Supreme Court that "merely because there is a change in the tariff items the goods does not become excisable." Reliance has also been placed on the decision in the case of Goyal Gases Pvt. Ltd. Vs. CCE, Meerut, 2000 (115) ELT 467 (T) wherein it has been held by the Tribunal that process of filing of mixture of gases in cylinder does not amount to manufacture as no new product comes into existence and contended that in the present matter mixture of vitamins does not bring into existence a new product as each vitamin will function as the specific vitamin only; that the said decision has been upheld by the Supreme Court as reported in 2000 (119) ELT 5 (SC). Reliance has also been placed on the following decision : -
(i) Punjab Power Packs Ltd. Vs. CCE, Chandigarh 2001 (132) ELT 50 (T)
(ii) Laljee Godhoo & Co. Vs. CCE, Mumbai 2001 (132) ELT 287 (T)
(iii) Dolsun Containers Pvt. Ltd. Vs. CCE, Jaipur, 2003 (151) ELT 624 (T) Finally, he submitted that entire duty demand is barred by limitation since the ingredients of Proviso to Section 11 A(1) of the Central Excise Act are not present as they have been mixing the various vitamins since 20 years and they were under the bonafide belief that the activity undertaken by them does not amount to manufacture; that in the case of odoriferous compound made by Agarbathis manufacturers, it has been clarified by the Board vide Circular No. 495/61/99-CX dated 22.11.99 that such compound, being specific to a particular brand, not being capable of being bought and sold in the market is not an excisable product; that the inter mixture of vitamins made by them is also an individual recipe which can not be brought to the market for being bought or sold; that in any case demand for the period after February, 1999 is entirely barred by time in as much as in February, 1999, the department sought information from them regarding the intermixture of vitamins and same was furnished by them and hence there can not be any suppression of fact. Reliance has been placed on the decision in Modipon Fibre Co. Vs. CCE Meerut, 2001 (135) ELT 1420 (T). He also claimed MODVAT Credit of the duty paid on the inputs used in the making of intermixture of vitamins.
5. Countering the arguments, Shri V. Valte, learned Senior Department Representative, submitted that the process undertaken by the Appellants involves mixing of required vitamins in a pre-determined ratio with the help of electro mechanical device; that after mixture, Vitamins lose their identity and a new product known by a different name 'intermixture of vitamins' comes into existence; that Shri V.K. Pabbi, an Executive of the Appellant Company has deposed in his statement dated 1.8.2001 that Vitamin premix and Intermixture of vitamins are the same and are used for the same purpose that is the manufacture of baby foods; that the case records show that vitamins premix are available in the market and have also been imported by the Appellants themselves; that thus the intermixture of vitamins is capable of being bought and sold in the market. In support of his contention, learned Senior Departmental Representative produced a photocopy of a Bill of Entry No. 178859 dated 15.12.2000 for import of Vitamin Premix by M/s. Nestle India Ltd. He also produced copies of invoices of M/s. Remidex Pharma Pvt. Ltd. for sale of vitamin premix. He relied upon the decision in the case of Union of India Vs. Sonic Electrochem (P) Ltd., 2002 (145) ELT 274 (SC) wherein the Supreme Court has held that it is difficult lay down a precise test to determine marketability of articles. "The essence of marketability is neither in the form nor in the shape or condition in which the manufactured articles are to be found, it is the commercial identity of the articles known to the market for being bought and sold." Reliance has also been placed on the decision in the case of Gillooram Gaurishankar Vs. CCE, Jamshedpur, 2001 (136) ELT 434 (T) wherein it has been held that factum of actual marketing is not required to be established. He also mentioned that the plea that the Assessee is not the purchaser as it is only actual user of the product in dispute and therefore the goods fail the test of marketability was not accepted by the Tribunal in the case of Parle Products Ltd. Vs. CCE, Mumbai II, 2002 (143) ELT 6710 (T). Reliance has also been placed on the following decision :
(i) S.S. Bedi & Sons Vs. CCE, New Delhi-I 2002 (144) ELT 147 (T)
(ii) Cipla Ltd. Vs. CCE Bangalore 2002 (148) ELT 182 (T)
(iii) A.P. State Electricity Board Vs. CCE, Hydrabad 1994 (70) ELT 3 (SC) wherein the Supreme Court has held that the fact that the goods are not in fact marketed is of no relevance. So long as the goods are marketable, they are goods for the purpose of Section 3 of the Central Excise Act.
(iv) PEFCO industries Ltd. Vs. CCE, Bombay-II, 1995 (78) ELT 498 (T).
6. The learned Senior Departmental Representative also submitted that as held by the Supreme Court in the case of CCE, Bombay Vs. S.D. Fine Chemicals Pvt. Ltd. 1995 (77) ELT 49 (SC), the definition of expression "manufacture" under Section 2 (f) of the Central Excise Act is not confined to the natural meaning of the expression 'manufacture', but is an expansive definition; that certain processes, which may not have otherwise amounted to manufacture, are also brought within the purview of and placed within the ambit of the said definition; that not only processes which are incidental and ancillary to the completion of manufactured product but also those processes as are specified in relation to any goods in the Section or Chapter Notes of the Tariff are also brought within the ambit of the definition. The learned Senior Departmental Representative mentioned that the process of intermixing of vitamins adopted by the Appellants tantamounts to "manufacture" in terms of Section 2(f) of the Central Excise Act. Regarding invokability of extended period of limitation, the learned Senior Departmental Representative contended that the very fact the Appellants had themselves imported premix of vitamins, is sufficient for them to know that Central Excise duty is a payable on the intermixture of vitamins; that they had suppressed the fact of manufacturing inter mixutre of vitamins as they had not filed any declaration and as such extended period of limitation is invokable. He relied upon the decision in Gujarat Insecticides Ltd. Vs. CCE, Vadodara, 2002 (147) ELT 86 (T) and Gillooram Gaurishankar, supra.
7. We have considered the submissions of both the sides. The learned Advocate for the Appellants has emphasised that the only case made out in the show cause notice was that they were affixing labels on the containers containing inter-mixture of vitamins and this process of labeling would amount to manufacture in terms of Note 11 to Chapter 29 and that the Commissioner has confirmed the duty relying upon the last portion of Note 11 that is 'adoption of any other treatment to render, the product marketable to the consumer' which is beyond the scope of the show cause notice. A perusal of show cause notice dated 7.8.2001 does not support this contention as the entire process undertaken by the Appellants is mentioned in the show cause notice and it is alleged that "the inter mixtures of different vitamins amounts to manufacture as per the Chapter note 11 of Chapter 29 of the Central Excise Tariff Act, 1985...." In fact in Paragraph 4 of the show cause notice it is mentioned that "a new commodity with different name and use emerges which is known to the market as such and can ordinarily come to the market for being brought and sold. In Para 5 of the show cause notice it is mentioned that inter mixture of vitamins are classifiable under Heading 29.36 of the Tariff and are chargeable to duty as :
"(a) These "intermixture of vitamins" or premixture of vitamins have shelf life; are movable and can be marketed and are being marketed thus these are capable of being bought and sold in the market;
(b) The manufacture of "intermixture of vitamins" involves the manufacturing process as per Chapter Note 11 to chapter 29 of the said Schedule which reads as "adoption of any other treatment to render the product marketable to the consumer shall amount to manufacture." [Emphasis Provided]. it is thus apparent that the impugned Adjudication Order is not beyond the scope of the show cause notice.
8. According to the learned Advocate the crucial requirement for the application of the last portion of Note 11 is that but for the adoption of that treatment, the product should not be marketable to the consumer and as the vitamins, starting materials, are marketable, Note 11 is not applicable. Note 11 to Chapter 29 reads as under :
"In relation to products of this Chapter, labeling or relabelling of containers and repacking from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer, shall amount to manufacture."
As per the last portion of this Note, any treatment which renders the product marketable to the consumer shall amount to manufacture. From the perusal of this Note, it does not flow that the last portion of the Note will be applicable only to a product which prior to the adoption of that treatment was in a non-marketable state. That may be one of the situation but not the only situation. Even if a product is by itself marketable and the assessee undertakes some treatment on the product which render it marketable in some other form the said treatment would be covered by the phrase "any other treatment to render the product marketable to the consumer". In the instant matter, the Appellants mix the various vitamins in a pre-determined ratio which render them marketable to the consumer as inter mixture of vitamins. The vitamins, that is the starting material, were marketable, prior to the treatment as individual vitamins, whereas the treatment rendered by the Appellants has made them marketable as inter mixture of vitamins. In the case of Lakme Lever, supra, the Appellants have merely packed 12 assorted colour. In view of these facts, the Tribunal observed that the process should be one which confers upon a product the attributes of marketability which it did not posses earlier. The vitamins, in the original forum, do not have the attribute of marketability as inter mixtures of vitamins which the treatment rendered by the Appellants has attributed. Similarly in Lupin Laboratories case, four tablets were put in a single pack with a view to maintain the continuity and regularity of intake of these four drugs which were the main anti-tuberculosis drugs. These four tablets were not mixed together to form only one tablet. We, therefore, hold that the process carried out by the Appellants render the product marketable as inter mixture of vitamins and as such the activity amounts to manufacture.
9. We also do not find any force in Appellant's contention that Note 11 is not attracted as they are captively consuming the inter-mixture of vitamins and there is no sale. It can not be claimed by the Appellants that the impugned product can not be brought to market for being bought and sold. They have themselves imported vitamin pre-mix from abroad and M/s. Remidex Pharma Pvt. Ltd. are marketing vitamin Premix which go to show the marketability of the impugned product. Further, the Supreme Court has held in A.P. State Electricity Board, supra, the "The fact that the goods are marketable, they are goods. for the purpose of Section 3. It is also not necessary that the goods in question should be generally available in the market." The Supreme Court has further elaborated in Sonic Electrochem case that "the fact that the product in question is generally not being brought and sold or has not demand in the market would be irrelevant." Now we come to the question of invokability of the extended period of limitation. The demand of duty has been confirmed for the period from July, 1996 to December, 2000 and show cause notice has been issued on 7.8.2001. Thus the demand, as per the Appellants themselves, for the period prior to July 2000 will be barred by limitation if extended period is not attracted. It is not disputed by the Appellants that they had not filed any classification declaration with the Department in respect of manufacture of intermixture of vitamins. In such a situation the extended period of limitation is invokable as the fact of manufacture has been suppressed by them. This was the judgment of the Supreme court in BPL India Ltd. Vs. CCE, Cochin, 2002 (143) ELT 3 (SC) wherein it has been held that the Appellants action was with intent to evade payment of duty as they had manufactured the goods and removed the same without any intimation to the Department. There is no material to show on the basis of which they entertained the bonafide belief that the vitamins intermixture is not excisable. The Circular in respect of Agarbathi mix was firstly issued in November, 1999 and secondly it was in respect of mixing of a few aromatic chemicals with a base oil in a container in liquid from normally carried out in a continuous manner in the course of manufacture of Agarbathi. The circular is of not general application and the process is quite different in both cases. We, however, agree with the learned Advocate that after May, 1999 when they furnished the information about mixing of vitamins to the Department, extended period can not be invoked. Further as Note 11 to Chapter 29 was introduced only with effect from 1.3.97, no duty of excise can be demanded in terms of the said Note prior to 1.3.1997. We also agree with the learned Advocate that they will be eligible to avail the MODVAT Credit of the duty paid on inputs used in the making of inter mixtures of Vitamins subject to their production of duty paying documents, within two months of receipt of this Order, to the satisfaction of the jurisdictional Adjudicating Authority whom the matter is remanded for computing the duty of excise payable by the Appellant. As the amount of duty is to be redetermined, we leave the question of penalty open to be decided by the jurisdictional Adjudicating Authority. The present penalty imposed under the impugned order is thus set aside. The Appeal is disposed of in the above manner.