Customs, Excise and Gold Tribunal - Tamil Nadu
Twenty First Century Pharmaceuticals ... vs Cce on 9 February, 2000
Equivalent citations: 2000(93)ECR88(TRI.-CHENNAI), 2000(126)ELT694(TRI-CHENNAI)
ORDER V.K. Ashtana, Member (T)
1. This is an appeal against the Order-in-Appeal No. 124/98 dated 31.3.1998 passed by the Commissioner (Appeals) wherein the question of excisability and classification of "Multinal Tablets" was considered and the Order-in-Original was upheld, which had classified the product under heading 3003.10. However, while the excisability of the product was upheld, the Order-in-Appeal changed the classification from Chapter 30 to 21. It also reduced the penalty from Rs. 5000/- to Rs. 2000/-, but held the product to be dutiable.
2. Heard Shri N. Venkatraman, learned advocate for the appellants, who submits as follows:
(a) The appellants received vacuum dried spirulina powder for conversion into saleable retail packs of the powder as well as into converting the same as tablets. As far as the packing of the item received in the same form as powder is concerned, the department has not raised any dispute or demand. Therefore, the dispute is limited to the question whether the conversion of spirulina powder received by them into tablets which are packed by the name of 'Multinal' amounts to manufacture and whether the said product would fall under Chapter 21, as the Order-in-Appeal impugned has not given any further sub-classification?
(b) The learned advocate submits that the conversion of spirulina powder into tablets would not constitute manufacture, as the end product is merely spirulina in tablet form.
(c) The technology involved in tableting the powder necessarily requires the addition of certain chemicals which perform three main functions:
i) Diluents - to increase the bulk so that when the powder is converted into tablet, the required weight of spirulina is contained in it.
ii) Preservatives - to ensure that spirulina in tablet form does not get contaminated by Oxidation etc. and is therefore, fit for human consumption.
iii) Binders and Lubricants which are necessary for the formation of tablets in the tableting machine.
The learned advocate submits that as far as the diluents are concerned, the need to dilute certain substances has been recognised in various industries and as per the decision of the Tribunal in the case of Jayu Products v. CCE as , it has been held that dilution of ultra marine blue with addition of China clay and water does not amount to manufacture. He further submits that as far as the use of solvents is concerned, it has been held in CCE v. Berger Paints as that mere addition of solvents does not amount to manufacture, there being no change in the character of the product. Thirdly, the learned advocate submits that addition of preservatives also does not amount to manufacture as is held in the decision of the Tribunal in the case of Jayu Products (supra), wherein acid dyes were added to preserve parity and shade of ultra marine blue.
As far as the addition of binders is concerned, the learned advocate submits that in a recent decision the Tribunal has considered this very issue with respect to the similar spirulina powder in the decision of Sanat Products Ltd. v. CCE as , wherein it was held that mixing the binder to the dried and powdered spirulina to facilitate easy filling into capsules does not alter the character of natural product and that the same product is not classifiable under sub-heading 21.08 of the Central Excise Tariff Act. The learned advocate further submits that even the change in form powder to tablet could not constitute manufacture as has been held by the Hon'ble Madras High Court in the case of Coromondal Prodora v. GOI and Ors. where the change in form in synthetic resin from solid to liquid would not constitute manufacture. In this case, the learned advocate submits that the change in form is from powder to tablet.
(d) Finally, the learned advocate submits that any process to constitute manufacture under Section 2(f) of the Central Excise Act, should satisfy the tests laid down by the Hon'ble Supreme Court in the case of UOI v. J.G. Glass Industries Ltd. as , wherein the Hon'ble Supreme Court has prescribed two tests as follows:
(i) whether by the said process a different commercial commodity comes into existence or whether the identity of the original commodity ceases to exist?
The learned advocate submits that when the spirulina is converted from powder to tablet form, it remains the same spirulina. Any buyer buys it because he needs spirulina. Therefore, the process of tableting does not result in the emergence of a different commercial commodity and the original identity of the spirulina does not cease to exist, as the tablet is purchased only by those, who desire to consume spirulina.
(ii) The second test prescribed is whether the commodity which was already in existence will serve no purpose or will be of no commercial use but for the said process?
The learned advocate submits that since the spirulina is also sold and consumed in powder form therefore, it cannot be said that but for converting the same into tablet, it cannot be consumed by human beings. Tableting merely allows more convenience in form of sale and consumption by the buyer and this increased convenience cannot be said to satisfy this test.
(e) In this connection, the learned advocate takes us through the affidavit of Shri V.S. Raghunathan, who is the Managing Director of the appellant company. He submits therein that the addition of diluents to increase the bulk, the addition of preservatives, the addition of lubricants and the addition of solvents are all technologically necessary for making tablets of spirulina from spirulina powder. Secondly, it has been averred that the addition of certain diluents like Dicalcium Phosphate and starch do not in any way increase the nutritional value of the spirulina tablets, even though there is a micro change in the quantity thereof in the tablets for the simple reason that these increases are so minimal that they cannot be said to in any way increase the nutritional value of the tablet spirulina. In this connection, he submits that as far as the increase in calcium by 0.83% w/w is concerned, this increase is absolutely insignificant because the Indian Pharmacopoeia, 1996 prescribes that the minimum dose of Dicalcium Phosphate should be 1 gm. for which to have any effect on the human body, whereas the 6.78 M.gm. of Dicalcium Phosphate is many hundred times less than the 1 gm. In the said affidavit, it is also averred that the conversion of spirulina powder into tablet sold in the brand name noted above, therefore, does not result in a new product and the diluents and binding agents etc. which are added do not react at all with spirulina, therefore, the spirulina still remains pure spirulina.
(f) In this connection, the learned advocate finally takes us to the Notes under Chapter 21 of the HSN, wherein he submits that though the Order-in-Appeal has not classified the product at the four or six digit level, however, the most appropriate classification which could have been proposed by the Revenue, though not admitted by him, would be under sub-heading 21.06 as food preparations not elsewhere specified or included, as the department may treat this as food supplement. He submits that Note 16 to Heading 21.06 of the HSN on page 172 of the Second edition 1996 mentions that such preparations would be contained added vitamins and sometimes minute quantities of iron compounds. In this case, no addition of any kind of vitamin or iron in edible form or in any other form has been done. Therefore, this very Note of HSN goes in their favour and rules out the classification under Chapter 21 as a food supplement preparation.
3. Learned D.R. Shri S. Kannan, on the other hand, stresses that when the spirulina powder is changed into tablet, it becomes a new commercial commodity. He further draws our attention to the comments of the Revenue dated 9.7.1999 addressed to the D.R. on the aforementioned affidavit that this physical change from powder to tablet form is not only a complete physical change but the properties of ingredients have also changed by this tablet, as can be seen from the composition of powder vis-a-vis tablets submitted by the appellants themselves in the analysis report of M/s. SGS. He also relies on the decision of the Tribunal in the case of Indian Cable Co. Ltd. v. CCE as , wherein conversion of PVC resin into PVC compound has been held to manufacture. The learned D.R. is at pains to submit that in the tablet form the protein content of the product reduced from 64.31% to 51.76% while there is variation in carbohydrate, moisture, calcium etc. and therefore, a new product comes into existence. He also submits that the product is known in the market as Multinal tablets and not as spirulina.
4. We have carefully considered the rival submissions and records of the case. We find that the only issue for determination before us is whether conversion of spirulina powder into tablet form, albeit, with the addition of the required binding agents, diluents, lubricants, preservatives and solvents would constitute an act of manufacture and if so, where would the end product be classified in the Tariff. On a careful consideration, we are of the view that this conversion docs not amount to manufacture at all for the following reasons:
(i) The principle active ingredient, and for which alone it is purchased by a buyer in the market, remains the same, namely spirulina. This is the known source of food which provides high concentration of protein in the powder form as 64.31% and in the tablet form as 53.76%. Even though there is a slight decrease in the percentage of protein available in the tablet form, the decrease extent due to deterioration in the processing is so insignificant that the availability of high concentration of protein is still feasible in the tablet form. Therefore, there is no material change in the purposes for which it is either purchased or consumed.
(ii) In view of the decisions cited by the learned advocate to the effect that the change inform or addition of diluents, or addition of preservatives, or addition of solvents, per se do not amount to manufacture respectively, therefore, we are led to the inescapable conclusion that by adding these substances, which is the technological necessity to convert into tablet form, there is no manufacture involved in this process.
(iii) In fact, we are convinced by the submissions of learned advocate that since spirulina in powder form and spirulina in tablet form are essentially spirulina, therefore, we find that the tests laid down by the Hon'ble Supreme Court in the case of J.G. Glass Industries Ltd. (supra) are not satisfied with respect to the process of tableting constituting the manufacture under Section 2(f) of the Act. We note that spirulina is also marketed in powder form and therefore, it cannot be said that its conversion into tablet form is necessary for the purposes of marketing and consumption of the product.
(iv) Above all, our decision is also taking into consideration the ratio of the Tribunal's decision in the case of San at Products Ltd. (supra), wherein the Tribunal had held that when the binder is added to dried and powdered spirulina to facilitate easy filling into capsules, the spirulina still remains natural product covered under Chapter 22 of HSN and therefore, is not excisable. In the present case, apart from adding the binders certain other chemicals are added to dilute and lubricate etc. Which are technically necessary for making it into tablets. For the reasons already discussed above, the ratio of this decision would also apply to the facts of this case.
(v) We have also examined the role played by the Dicalcium Phosphate, when it is added as a diluent in this process. After taking into consideration, the minimum dosage of 1 gm. thereof under the Indian Pharmacopoeia, we agree with the submissions of learned advocate that the increase in calcium content in view of this addition is so insignificant in terms of the minimum standards prescribed by the said Pharmacopoeia, that it does not in any toay significantly increased the nutritional value of the products.
(vi) Finally, we also place reliance on the Note 16 to Heading 21.06 of the HSN and take note of the facts that since neither vitamin nor iron is added while the powder is converted into tablets, therefore, it cannot be said that this process of tableting has resulted into manufacture of a preparation for supplementing food.
5. In view of the aforesaid analysis and findings, we are of the clear opinion that the spirulina when converted into tablets as mentioned above does not amount to manufacture and no new excisable commodity emerges out of this process. Therefore, the impugned order is set aside and the appeal is allowed, with consequential relief, if any, as per law.
(Pronounced and dictated in open court).