Customs, Excise and Gold Tribunal - Bangalore
The Commissioner Of Central Excise And ... vs Crane Betel Nut Powder Works on 20 September, 2006
Equivalent citations: 2007(114)ECC241, 2007ECR241(TRI.-BANGALORE), 2007(208)ELT376(TRI-BANG)
JUDGMENT S.L. Peeran, Member (J)
1. This is a Revenue appeal filed against Order-in-Appeal No. 30/2004 (G) (D) CE dated 12.5.2004 passed by the Commissioner (A) rejecting the Revenue's appeal and affirming the Order-in-original No. 58/98 CE dated 16/2002 dated 26.6.2002 passed by the Deputy Commissioner of Central Excise holding that the product namely "Mouth Freshner" manufactured by the assessee would fall under Chapter sub-heading No. 0903.10 of the Schedule to the CET Act and not under Chapter Heading 2103.10 as "mixed condiments".
2. Revenue has challenged this order on the following grounds. It is contended in the appeal memo that the product "mouth freshner" is obtained by the following process: Aniseeds and Magajtarbuj seeds are purchased from the market. They are cleaned manually and roasted in vegetable oil. To these cleaned coriander seeds are added. Saccharin, Licoriaca, Menthol, Borneiol permitted flavours and preservatives are added to the said preparation of roasted Aniseeds and Magajtarbuj seeds and cleaned coriander seeds. The mixture is so prepared is filled into pouches and sold in the name of "Crane-Mouth Frenshner". The item is for human consumption as mouth freshner. Revenue contends that the item has to be classified only under Chapter Sub-Heading 2103.10 as the item is understood in the market as Spices. The popular meaning attached to them or as they were understood in commercial/trade parlance should be accepted and in this regard the ruling of the Apex Court judgment rendered in the case of Shree Baidynath Ayurved Bhavan Ltd. v. CCE, Nagpur 1996 (83) BUT 492 (SC) is relied. It is stated that the reliance placed by the Commissioner on Board's Circular No. 197/31/96-CX dated 15.4.1996 for classifying the product under Chapter heading 0903.10 is not correct. As the said Circular discusses about the classification of Dhana Dal/Dhania Ki Dal/Coriander Seeds put up for sale in pouches.
3. The learned JDR prayed for allowing the appeal as per the grounds made out in the appeal memo.
4. The learned Counsel filed a detailed written submission and pointed out that the Chemical Examiner had taken the samples and had also given an opinion as follows:
(i) SAMPLE TM 2/03 dated 8.9.2003 (Vide L. Cx. No. S21/115/03 Lab.Cx.No. 08/03 dt: 16-9-03) dated 2-11-2003 The Sample is in the form of brown coloured heterogeneous mixture of seeds. The write-up forwarded regarding the manufacturing process of mouth freshner states that the sample contains, Aniseeds, Magajtarbuj Seeds, Coriander seeds, Saccharin, Licorise, Menthol, Borneoil, permitted flavours and preservatives.
Based on the above and analytical findings the sample under reference may be considered as a preparation containing mixture of spices and other additives.
(ii) SAMPLE TM 3/03 DATED 3-11-2003 (Vide L.Cx. No. S21/147/03 Lab Cx. No. 11/03 dt: 14-11-03) dt: 2-12-03 The sample is in the form of white grains received in an original packing (CRANE-Mouth Freshner). It is composed of seeds of Aniseeds and additives. On the label and the write-up of manufacturing process of the sample, it is stated to contain Souff, Menthol, Sugar, permitted flavour and preservatives.
Based on the above & laboratory findings the sample under reference may be considered as a preparation containing sugar coated Aniseed (Souff) and other additives It is submitted by the learned Counsel that the opinion of the Chemical Examiner is in their support and the Revenue has not given any valid or cogent reasons for classifying the item under Chapter Heading 21.03 which has a tariff description as follows.
21.03 Sauces, ketchup and the like and preparations therefore; mixed condiments and mixed seasonings; mustard flour and meal and prepared mustard.
It is submitted by him that the Heading 21.03 would refers to Soya Sauce, Tomato ketchup and other tomato sauces, mustard flour and meal and prepared mustard and other. Therefore, the item does not fit into the description of the item under Chapter 21.03. The item would fall only under Chapter 9, which refers as Coffee, Tea and Spices.
The learned Counsel submitted that the mixture is only a preparation containing mixture of spices as opined by the Chemical Examiner. It sold in the market as "Mouth Freshner", which is nothing but mixture of seeds (coriander, aniseeds) in palatable base and therefore, it does not require to be classified under Chapter Heading 21.03.
5. We have carefully considered the submissions and have perused both the orders. The finding given by the Commissioner is very exhaustive. He has analyzed every aspect of the matter and also in the light of the HSN Explanatory notes. The Revenue wants the product to be classified under Chapter Heading 21.03, which description deals only with sauces and ketchups. The item does not fit into the said items described in Chapter Heading 21. The learned JDR relied on the judgment rendered in the case of MTR Food Products v. CCE, Bangalore , which deals with Sambhar mix/Rasam mix, which has been held to be classifiable under Chapter Heading 21.04. These items are not consumed directly. They are required to be used for cooking purposes, as in the case of items falling under Chapter-Heading 21.04. Therefore, this judgment is clearly distinguishable. Even in terms of the Apex Court judgment rendered in the case of Shree Baidyanath (supra), the classification has to be done in the manner in which the goods are understood in the market and popularly known as. In that light, the item has to be considered only as "Spices" as held by the noted Board's Circular referred to by the Commissioner. We uphold the Commissioner's finding rendered in Para 5 to 16, which is noted herein below.
5. I have carefully considered the rival submissions. The issue under consideration in the instant appeal is classification of the goods called Mouth Freshner - whether to be classified under Chapter sub-heading No. 0903.10 or under Chapter sub-heading No. 2107.00 of the Tariff. Vide the impugned order, the learned Deputy Commissioner classified the goods under Chapter sub-heading No. 0903.10 of the Tariff and aggrieved by the aforesaid order, the revenue has preferred the instant appeal. The main contentions raised by the revenue in the grounds of appeal are as under:
(i) On examination of Chapters - 9, 21 and the HSN, it would be evident that ready to eat preparations which were nothing but mixed condiments shall be classifiable under Chapter -21;
(ii) The product mouth freshner was not marketed as spices in the trade and therefore, it cannot be classified under Chapter sub-heading No. 0903.10 of the Tariff;
(iii) The product mouth freshner was also not known as spices in the common parlance;
(iv) That the mouth freshner contained coriander seeds and the same were processed and that the coriander seeds were not the chief constituent of the product mouth freshner and that the so called preparation of spices was in the nature of ready to eat product for human consumption and that the product was marketed under a brand name and therefore, merits classification under - 21; and
(v) Reliance was placed on the following in support of the contention that the impugned product merits classification under Chapter -21:
(a) Case law of Jalani Enterprises v. CCE. Jaipur 2001 (182) E.L.T. 422 (Tri-Del);
(b) CBEC's Circular No. 197/3/96 -- CX dated 15.4.196; and
(c) Chapter Note No. 3 of Chapter - 9, Explanatory Notes of Section 21.03 of the HSN and the manufacturing process of the goods.
6. The respondents have filed elaborate cross-objections, as detailed supra, contesting the pleas raised by the revenue point-wise.
7. I find that the issue involved in the instant appeal, as was rightly contended by the respondents and their learned Counsel, has indeed been quite elaborately dealt with by the learned Deputy Commissioner while passing the impugned order and I do not find it necessary to reiterate all those observations/findings, here again. However, for better appreciation of the issue on hand, I reproduce hereunder Chapter Note - 3 of Chapter - 9 which reads thus:
Heading No. 09.03 covers spices, a group of vegetable products (including seeds, etc.), rich in essential oils and aromatic principles, and which, because of their taste, are mainly used as condiments. These products may be whole or in crushed or powdered form. The addition of other substances to spices shall not affect their inclusion in this heading provided the resulting mixture retain the essential character of spices included in this heading. The heading also includes products commonly known as "masalas".
8. The explanatory notes of Section 21.03 of the HSN reads thus:
Mixed condiments and mixed seasonings containing spices differ from the spices and mixed spices of heading Nos. 09.04 to 09.10 in that they also contain one or more flavouring or seasoning substances of chapters other than chapter 9, in such proportions that the mixture has no longer the essential character of a spice within the meaning of chapter 9.
9. In the instant appeal, the impugned product mouth freshner has aniseeds and coriander seeds as its principal constituents and to them vegetable oil, saccharin, licorica, menthol, bone oil, permitted flavours and preservatives are added. Thus, addition of flavouring or seasoning substances to the mixture of spices, in relation to the impugned product was not disputed. As was rightly contended by the respondents and their learned Counsel, the explanatory notes at Section 21.03 of the HSN stipulates that mixture of spices would fall under Chapter -- 21 only if the flavouring or seasoning substances added to them were in such proportion that the mixture has no longer the essential character of a spice. I find that in respect of the instant goods mouth freshner, addition of the flavouring or seasoning agents had never been in such proportion that the goods lost the identity of mixed spices - mixture of aniseeds and coriander seeds - and it is on record that the even after the addition of the flavouring or seasoning agents, the essential character of the impugned goods remained as a mixture of spices, as is an irrefutable fact and vehemently put forth by the respondents and their learned Counsel. I find that this is the specific point that has also been spelt out at chapter note No. 3 of Chapter-9. Thus, a clear reading of the process of manufacturing of the impugned goods "mouth freshner" and its constituents/ingredients, clearly establish that they fall clearly outside the purview of chapter - 21 and specifically fall under chapter - 9 by the very chapter notes and explanatory notes relied upon by the revenue in filing this appeal. On this count, I find that there is no merit at all in the argument of the revenue.
10. The department also placed reliance on the Board's Circular No. 197/31/96 - CX dated 15.4.1996 without specif5'ing any point relating thereto which justifies the appeal of the revenue. Therefore, I prefer to extract the said Circular hereunder:
Dhana Dal/Dhania Ki Dal/Coriander Seeds sold in pouches - Classification (Heading 09.03) Circular No. 197/31/96-CX, dated 15.4-1996 (From F.No. 21/2/95-CX.1) Government of India Ministry of Finance (Department of Revenue) Central Board of Excise and Customs, New Delhi Subject: Classification of Dhana Dal / Dhania Ki Dal/Coriander Seeds sold in pouches.
I am directed to say that the doubts have been raised whether product 'Dhana Dal'/Dhania Ki Dal/coriander seeds put up for sale in pouches is classifiable under Heading 09.03 as spices or under Heading 21.08 as miscellaneous edible preparations, not elsewhere specified or included. Gujarat Dhana Dal Manufacturers' Association has contended that 'Dhana Dal' is nothing but spices and as such it is correctly classifiable under Heading 09.03 of Central Excise Tariff.
2. It has been reported that coriander seeds are soaked in water before being put in a milling machine for removal of husk The husk so removed is reportedly sold as cattle feed while the seeds are dried and salted, mechanically sieved, roasted and then put up for sale either packed in gunny bags or in 3 gins., labelled small pouches. The product is known 'Dhana Dal' in wade.
3. It is observed from the HSN Explanatory Notes to Chapter 9 (coffee, tea, mate and spices) that the said Chapter also covers seeds of spices. Seeds of coriander are specifically covered by Heading 09.09 of HSN. From the said notes it is also clear that addition of substances such as salts, anti-oxidants etc. will not take out coriander seeds from the purview of Chapter 9. Coriander seeds belong to the family of spices and would remain therein whether in whole, crushed or powdered form even f these have been mixed with other spices and other products of Heading Nos. 09.04 to 09.10. Further note I (c) of Chapter 21 of HSN specifically excludes spices from the purview of Chapter 21. Further, as in the instant case, even if the products under reference, viz. Dhana Dal/Dhania 1(1 Dab' Coriander seeds are not used as spices i.e. as condiments, the product retains its identity as spices since the general Chapter Note of Chapter 9 defines spices, as those which are mainly used as condiments. The Chapter Note does not require that to be called as spices, such products (including 2 seeds etc.) should be solely used as condiments.
Analogy can be derived from the fact that aniseeds, which are also used as a freshener just like the product in question, does not merit classification under Chapter 21 but is to be treated as spices and is classified under Chapter sub-heading 0909.10 of the HSN.
4. In view of the above, Board is of the view that Dhana Dal / Dhania Ki Dal / Coriander seeds are rightly classification under Chapter Heading 09.03 of the Central Excise Tariff (emphasis supplied).
11. From a thorough reading of the aforesaid circular, I find that it filly supports the stand of the respondents and the impugned order and I am at a loss to understand as to how the contents of the aforesaid Circular justifies the argument of the revenue to classify the mouth feshner under Chapter - 21. The very Circular also states that aniseeds which are used as a freshner are to be treated as spices and merit classification under Chapter - 9. This strongly goes against the argument of the revenue that mouth freshner was not known as mixture of spices in trade /common parlance and therefore, merits classification under chapter - 21 for, aniseeds - though used as freshner like the impugned product - was classified under Chapter-9, by the very Circular.
12. I further find that as was rightly contended by the respondents, chapter note I (c) of Chapter - 21 of HSN clearly excluded spices from the purview of chapter - 21 and in such a scenario, the appeal filed by the revenue seeking to classify the impugned goods mouth freshner - which is admittedly and predominantly a mixture of spices i.e. aniseeds and coriander seeds - under Chapter -21, I find is self contradictory. Further, as was contested by the respondents and their learned Counsel, recourse also should be made to chapter note 1 (c) of Chapter - 21 of the HSN in this regard and the same was already dealt with by the learned Deputy Commissioner in the impugned order and I am in agreement with the aforesaid findings on this count. Thereby, on this count too, I do not find any merit in the instant appeal.
13. I further find that reliance was placed in the instant appeal on the case law of Jalani Enterprises v. CCE, Jaipur . In order to get at the hard facts of the said case and its relevance to the instant appeal, I extract hereunder the relevant portions of the aforesaid case:
6. In order to decide as to whether the product jaljira is classifiable under Chapter or 21 of the CETA it would be beneficial to refer to the relevant Chapter Headings and the Chapter Notes of both these Chapters.
Chapter 9: Chapter Heading 0903 reads - Spices
Chapter Note 3 of Chapter 9 reads as under
Heading No. 09.03 covers spices-a group of
vegetable products (including seeds, etc.) rich
in essential oils and aromatic principles, and
which, because of their taste, are mainly used
as condiments. These products may be whole
or in crushed or powdered form. The addition
of other substances to spices shall not affect
their inclusion in this heading provided the
resulting mixtures retain the essential
character of spices included in this heading.
The heading also includes products
commonly known as 'Masalas'.
Chapter 21: Chapter heading 2108 reads - 'Edible
preparations not elsewhere specified or
included.'
Chapter Note 9(b) of Chapter 21 reads -
Preparations for use either directly or after
processing (such as cooking, dissolving or
boiling in water, milk or other liquids), for
human consumption.
The ban perusal of Chapter Note 3 of Chapter 9 reproduced above show that it envisages classification thereunder only Lithe products satisfied the three conditions, namely, (a) Are mainly used as condiments, (b) Additions of other substances to spices shall not effect their inclusion under Chapter 9 provided the resulting mixture retains the essential character of spices; and (c) Are commonly known as masalas. The product jaljira of the appellants does not satisfy these conditions, as it is not used mainly as condiments, rather is used only cold drink after addition of water. By merely printing the words 'masala on the packing of the jaljira by the appellants, did not make it a masala, in fact The product jaljira is also not known in the market as masala but as a drink which could be taken by mixing in the water. Even on the packing the appellants had shown a glass of water containing jaljira.
7. The appellants have, no doubt, alleged that the product 'jaljira was prepared by them, from suit (40%). kalanamak (1%). Nimbu Ka Sat (citric acid) (8%). Sonth (10%). Kalimirch (10%). Pudhina (10%). Hing (1%). Jira (18%) and Lalmirch (2%) but that itself is not enough to hold that jaljira is a masala/spice especially when it is not even commonly known as such but rather it is known as drink. It is well settled that the goods have to be class tiled accordingly to the popular meaning attached to them by those using the product, as observed by the Apex Court in Shree Baidyanath Ayurved Bhavan Ltd. v. CCE, Nagpur . Similarly in Novopan India Ltd v. Collector the Apex Court has observed that commercial/trade understanding is the true test for the classification of the goods and not what scientific books like Encyclopedia Britannica, may say. This very view has been again reiterated by the Apex Court in Purewal Associates Ltd. v. CCE .
8. Viewed in this context, the product, 'jaljira' although prepared by adding some spices cannot be logically said to be 'masala' as it is never understood or take n/accepted/used or called as spice or condiment both in trade parlance as well as common parlance. It is always understood, as drink by the traders and consumers as it is mainly used as drink and not as spice/condiment.
9. The Board's Circular No. 197/31/96-CX, dated 15-4-1996 referred by the counsel before us, does not in any manner advance the case of the appellants for classifying the product jaljira under Chapter 9 of the CETA. That circular pertains to the classification of Dhana Dal/Dhania Ki Dal/Coriander seeds sold in pouches. The Board only classified through that circular that even if these products were not used as spices i.e. as condiments, the products retained their identity as spices since the general Chapter Note 3 of Chapter 9 defines spices as those which are mainly used as condiments. But in the instant case, the product jaljira is never used mainly as condiment. It is rather used a drink in the picture drawn by them on the packings. Even the appellants themselves had showed it as a drink in the picture drawn by them on the packings.
10. The applicability of the Board's Circular No. 205/39/96-CX. dated 30-4-1996 relied upon by the appellants, had been also rightly ruled out by the Commissioner in the impugned order, to the product jaljira of the appellants. That circular only laid down guidelines for classification of various traditional convenience food mixes, masalas, spices and condiments such as pulliyogare powder, vangibath mix, instant sambar mix, vangibath powder, sambar powder, instant bisibelebath rasam powder, bisibelebath masala, mix spiced chutney powder, curry powder, pickle masala, garam masala etc. under Chapters 9 and 21 of the CETA. But the product in question jaljira does not at all fall under Chapter 9 of the CETA being not commonly known as masala, but a drink, as observed above.
11. Moreover, even the Board itself through its latest Circular No. 9/1/99-CX. 1, dated 21-12-2000 on the classification of jaljira masala, had clarified that this product was classifiable appropriately under Heading 21.08 of the CETA as essentially it is used as a drink in admixutre with water, in view of Chapter Note 9(b), under Chapter 2] of the CETA. This circular was issued by the Board after examining the representations received from Jaljira Masala Manufacturers 'Association of Rajasthan where the appellants are also carrying on their business. That Association requested the classification of the jaljira masala' under Chapter 9 of the CETA as masala/spice but the Board through its above said circular classified that it was not classifiable under Chapter 9, but under Chapter 21 (Heading 21.08) of the CETA.
12. Heading 21.08 reproduced above, covers edible preparations not elsewhere specified or included and Chapter Note 9(b) appended to this chapter further clarifies that preparations for use either directly or after processing such as cooking, dissolving or boiling in water or other liquids for human consumption are included therein. The product jaljira' of the appellants squarely falls within the four corners of this Chapter 21 read with its Chapter Note 9(b) of the CETA. The Board's circular dated 21-12-2000, referred to above also makes the position quite clear about the classification of the jaljira manufactured by the appellants, under Chapter 21 and not Chapter 9 of The CETA.
13. in the light of the discussion made above, the impugned order of the Commissioner (Appeals) upholding the order-in-original of the Deputy Commissioner classifying the product jaljira under Chapter 21 sub-heading 2108.99 (branded) and 2108.91 (unbranded) of the CETA, is perfectly valid and does at suffer from any legal infirmity. That being so, there is no merit in appeal No. E/2521/2000-D of the appellants (emphasis supplied).
14. From the aforesaid case law, I find that 'jaljira' was prepared by them from salt (40%), kalanamak (1%), Nimbu Ka Sat (citric acid) (8%), Sonth (10%), Kalimirch (10%), Pudhina (10%), Hing (1%), Jira (18%) and Lalmirch (2%) and thereby, the Honourable Tribunal observed that 'jaljira' although prepared by adding some spices, cannot be logically said to be 'masala'. Thus, the constituents of jaljira are not spices as is the case with the impugned goods mouth freshner as was rightly contended by the respondents and their learned Counsel. Further more, I find that the goods jaljira was always understood, as drink by the traders and consumers as it is mainly used as drink and not as spice/condiment which is not the case with mouth freshner. Thereby, I hold that the aforesaid case law or the goods involved therein, as was rightly contended by the respondents, have no relevance to the instant appeal. On this ground too, I hold that the appeal of the revenue fails on all its fours.
15. The respondents also raised the plea of limitation and I find that they had filed a classification declaration under Rule 173B of the erstwhile Central Excise Rules, 1944 on 23.10.2000 and that a show-cause notice was issued to them on 6.12.2001 covering the clearances of the goods from November, 2000 to June, 2001 i.e. within the normal period of one year and therefore, I do not find it necessarily to go further into this aspect of the case, inasmuch as on sheer merits itself, I find that the contention of the respondents prevails.
The above reasoning given by the Commissioner is correct and does not require any interference. There is no merit in this appeal and the same is rejected.
(Operative portion of this Order was pronounced in open court on conclusion of hearing)