Customs, Excise and Gold Tribunal - Delhi
Collector Of Central Excise vs Frozen Foods Pvt. Ltd. on 19 December, 1991
Equivalent citations: 1992(38)ECC280, 1992(59)ELT279(TRI-DEL)
ORDER N.K. Bajpai, Member (T)
1. This is an appeal of the department against the decision of Collector of Central Excise (Appeals), Pune, changing the classification of the product 'SURJE', manufactured by the respondents, from Chapter Heading 2107.91 to Chapter Heading 04.04 of the Central Excise Tariff. The appellants have prayed for restoring the classification of the product under Chapter Heading 2107.91.
2. The relevant facts briefly stated are that the respondents have been manufacturing the product as a job worker for M/s. Wander Ltd., Bombay. They filed Classification List No. 84/87 effective from 15 July, 1987 claiming the classification of the product under Chapter Heading 0404.00 but the Assistant Collector, Central Excise, Kolhapur did not accept this and, after consulting the Chemical Examiner and issuing a show cause notice, and hearing them decided that it was correctly classifiable under Chapter Heading 2107.91. When the respondents herein went in appeal, Collector (Appeals) reversed the order and hence this appeal has been filed to the Tribunal.
3. The respondents had submitted a letter dated 14th July, 1987 to the Assistant Collector along with their Classification List in which they had given detailed justification for claiming the classification of the product under Chapter Heading 0404 and the relevant extracts from this letter are important for deciding the matter. These are as under:-
"The product 'Surje' is a dietary supplement of superior proteins and is available in the pack of 210 ml for sale and the packs of 100 ml and 50 ml will be used for free samples.
"We enclose herewith a specimen label of the product Surje for your kind perusal.
"According to our perusal of Central Excise Tariff Act, 1985, the product Surje, a dietary supplement of superior proteins, does not have a corresponding entry for direct classification of the product. As per the Rules for the interpretation of the Schedule - Excise Tariff, the closest classification according to us is available under Tariff Item 04.04. The rationale for this classification is as follows:-
(1) As per Rule 2 the classification of goods consisting of more than one material or substance shall be according to the principle contained in Rule 3. As it is not confined to any of the titles, of Sections and Chapters and as it consists of more than one material or substance, Rule 3 of interpretation becomes applicable.
(2) As per Rule 3(a) the Heading 04.04 read in conjunction with Chapter Note 4 provides the most specific description suitable to the product Surje.
Chapter Note 4 states as follows:
"4. Heading 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."
The product Surje consists of whey proteins and casein peptides which are solely derived from natural milk, with added sugar, sweetening matter (sorbitol/glycerol) and vitamins and the product is flavoured.
You will, therefore, agree that the description as given in the relevant Chapter Note fits in with the product Surje, and therefore, rightly classifiable under the Heading 04.04.
(3) Without prejudice to what we have stated under point 2 if one were to apply Rule 3(b) of interpretation, the product Surje would once again fall under the Heading 04.04.
Rule 3(b) reads as follows:
"Mixtures, composite goods consisting of different materials or made up of different components and goods put up in sets which cannot be classified by reference to (a) shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable."
As Surje is a combination of various ingredients, it can be considered as a mixture consisting of different materials. The major claim of the product Surje is superior proteins. This claim of superior proteins is derived from the presence of whey proteins and casein peptides which contribute 100% of proteins in Surje. The other ingredients provide subsidiary role of convenience of administration and acceptance by the consumer. It can, therefore, clearly be stated that whey proteins and casein peptides are the raw materials which impart essential character to the product Surje. As whey proteins and casein peptides are solely derived from natural milk they are, therefore, covered under the Heading 04.04 in conjunction with Chapter Note 4.
You will agree that as per Rule 3(a) or 3(b) of the product Surje is rightly classifiable under Heading 04.04, and therefore, there is no need to go to Rule 3(c) as per the Rules of interpretation given under the Act."
4. At the request of the Chemical Examiner, the respondents explained the method of manufacture of the product in their letter dated 23 March, 1988 along with which they forwarded an Annexure containing extracts from various printed literatures supported by photocopies of the printed literatures containing 14 exhibits from Exhibit 'A' to 'N'. It was claimed in this letter that these technical references support the fact that casein peptides and whey proteins are derived from natural milk and are the sources of superior protein, which is imparted to their product 'Surje',
5. When the sample was sent to the Chemical Examiner, the request was for testing "for ascertaining the ingredients and percentage thereof." In his report dated 6th July, 1988, the Chemical Examiner replied as under:-
"Information printed on the label of the product 'Surje' on as under:-
SURJE 210 ml A delicious dietary supplement of superior proteins (Lactoglobalin + Lacta albumin + Casein peptides and Vitamins) Made from Sucrose, casein, peptides, whey proteins, sorbitol and glycerol, vitamins added.
Contain added flavours:
Each 15 ml (one table spoonful) provides approxi.
Proteins 2.0 gm Vitamin B1} 0.3 mgm. Vitamin B2} 0.5 mgm. wrongly typed as 'gm' in the report Vitamin B6} 0.6 mgm. Vitamin B12 0.5 meg. Folic acid 100.0 ml. Niacinamide 5.0 mg. Direction: One teaspoonful morning & evening.
Views of this office based on the salient information given on the table of the product are as under:
The Product 'Surje' contains mainly proteins, vitamins, small amount of sucrose, peptides, etc. It is an edible preparation for human consumption put up in unit containers intended for sale."
6. After a copy of this report was supplied to the respondents and they were granted another hearing by the Assistant Collector, he finally passed the order classifying the product under Chapter Heading 2107.91 mainly relying on the report of the Chemical Examiner.
7. While setting aside the Assistant Collector's orders, Collector (Appeals) observed as under:-
"I have gone through the written and oral submissions. The reasons for classifying it under 2107 have been neither given by the Superintendent (in the show cause notice), the Assistant Collector nor the Dy. Chief Chemist (the reference apparently is to the Chemical Examiner's report). In the Explanatory Notes it has been explained that this Chapter covers milk, cream, butter-milk, whey, butter, cheese, and curd and products consisting of natural milk constituents not elsewhere specified or included. It has further been clarified that these products other than butter, cheese and curd may contain small quantities of stabilising agents as well as very small quantities of anti-oxidants or of vitamins not normally found in the products. Now the Chapter excludes certain products in which the present product does not appear to be covered i.e., this product is not excluded from Chapter 4. Now Heading 0404 covers whey as also products consisting of natural milk constituents. It will be relevant to reproduce the description given in the Explanatory Notes:-
"This heading covers whey (i.e., the natural constituents of milk which remain after the fat and casein have been removed). Whey may be in liquid, paste or solid (including frozen) form, whether or not part of the lactose or some minerals have been removed and may be concentrated (e.g., in powder) or preserved.
"The heading also covers fresh or preserved products consisting of milk constituents, which do not have the same composition as the natural product, provided they are not specifically covered elsewhere. Thus, the heading includes products which lack one or more natural milk constituents have been added (to obtain, for example, a protein-rich product).
"Apart from natural milk constituents and the additives mentioned in the General Explanatory Note to this Chapter, the products of this heading may also contain added sugar or other sweetening matter."
"From the aforesaid description it is clear that the product under Heading 0404 apart from containing natural milk constituents (casein) and additives mentioned in the General Explanatory Notes (vitamins) they can also contain other constituent matter (sucrose/glycerol). Since the product manufactured by the appellants contains whey products, casein peptides, vitamins and glycerol, it qualifies for assessment under 0404. The appeal is accordingly admitted."
8. Among the grounds taken in appeal are that:-
(a) The product is sold in the market on medical advice as a "Dietary Supplement", in common parlance as tonic whereas Collector (Appeals) has classified it as "Dairy produce" in which form it is not sold;
(b) the first three headings of Chapter 4 cover:-
0401 - Milk and cream 0402 - Butter 0403 - Cheese and the fourth is 0404 - Other dairy produce; edible products of animal origin, not else-where specified or included.
which, in the natural and logical order, should cover products converted from milk by simple processes to obtain familiar dairy products such as curds, yogurts, whey, shrikhand, peda etc.
(c) though, by virtue of Note (4) to Chapter 4 Heading 0404 applies, inter alia, to whey and other products like butter milk, curdled milk, cream, yogurt, curd and products consisting of natural milk constituents, basic ingredients like proteins, lactose, fat, minerals, calcium, Amino acids etc., obtained by sophisticated chemical processes from milk or whey and used in the manufacture of another edible product cannot be classified under Chapter Heading 0404.
(d) from the products detailed out in Note (4) of Chapter 4 one finds that milk is the main ingredient, whereas in 'Surje', carrier and sweetening agents go in to form the major part i.e., 62% of the product leaving 37% of whey proteins and casein peptides and 1% of flavouring and vitamins. While products of Chapter 4 could contain sweetening agents, there is no mention of vitamins being allowed therein.
(e) In view of the following Note 1(a) to Chapter 30, (Pharmaceutical Products), a product like 'Surje', which is a dietary supplement, would be classifiable under Section IV which covers Chapters from 16 to 24. This note is as under:-
"1. This Chapter does not cover:-
(a) Foods or beverages (such as dietic, diabetic or fortified foods, food supplements, tonic beverages and mineral water) (Section IV)".
On scrutiny of Chapters 16 to 24 covered by Section IV, one finds that there is no other Chapter more appropriate than Chapter 21 (Miscellaneous Edible Preparations) and as such 'Surje' should be classified under Chapter 21 only. Of the different sub-headings of Chapter 21, the most appropriate for 'Surje' would be sub-heading 2107.91 - Edible preparations, not elsewhere specified or included put up in unit containers and ordinarily intended for sale.
(f) 'Surje', not being basically a milk product/dairy produce and being sold as a dietary supplement containing proteins, vitamins and, in common parlance as a tonic in medical shops and not as a milk food in general stores/food parlours, it falls appropriately under sub-heading 2107.91. It is a preparation made by mixing proteins and other ingredients like vitamins, sorbitol, glycerol, sucrose etc., and contains 67% of other ingredients like vitamins, sorbitol, glycerol, water etc., not obtained from milk.
9. Arguing for the department, Shri L.C. Chakrabarty, the learned SDR, submitted that it was evident from the ingredients of Surje that Vitamins were not permissible additives in terms of Note (4) of Chapter 4 and by this criterion alone, this product would get excluded from Chapter Heading 0404. The only additives which were mentioned in Note (4) were
(a) sugar or other sweetening matter or
(b) flavoured or
(c) containing fruit or cocoa.
10. To buttress his argument the learned SDR cited the decision of the Tribunal in the case of Dalmia Dairy Industries v. Collector of Central Excise [1989 (44) E.L.T. 164] in paragraph 8 of which it was specifically mentioned that 'Active-25', a food preparation of milk, and cream containing cocoa powder, malt minerals and vitamins did not fall under Chapter Heading 0401 which was for milk and cream in view of the various additions. He submitted that by application of the ratio of this decision, 'Surje' would automatically get excluded from Chapter Heading 0404.
11. Shri Chakrabarty thereafter took up the second argument whether 'Surje' was a product consisting of natural milk constituents with permissible additives specified in Note (4). According to the ingredients of 'Surje', it is made from sucrose, whey proteins, casein peptides, sorbitol, and glycerol with vitamins added. He submitted that the only two materials which have the nearest connection with natural milk constituents are whey proteins and casein peptides because glycerol, sorbitol, sucrose and vitamins were not even remotely connected with natural milk constituents. He referred to the Condensed Chemical Dictionary (X edition) by Gessner G. Hawley for the chemical composition and uses of all these items in support of his argument.
12. Referring to the composition of 'whey', as given in the Chemical Dictionary, he stated that dried whey contains about 13% proteins, 71% lactose, 2.3% lactic acid and 4.5% water. Since 'Surje' is made from whey proteins, these have to be fractionated out from whey and these alone are used. Whey proteins cannot therefore, be called natural milk constituents because they take the shape of chemical derivatives of milk, having come into existence by the process of fractionation.
13. Referring to the other constituent of 'Surje' viz., casein peptides, he cited Hawley's Chemical Dictionary according to which casein occurs in milk as a heterogenous complex called Calcium Caseinate and is the principal source of protein in milk. But what the respondents were using was not casein by itself but its polypeptides. A polypeptide is a polymer of amino acids. Proteins, according to Hawley, can be hydrolyzed to their constituent amino acids. These are therefore, not natural milk constituents. Summing up, Shri Chakrabarty explained how the whey proteins and casein poly peptides were not natural milk constituents and therefore, fell outside the scope of Note (4).
14. Shri Chakrabarty read out Note (4) which was as under:-
"4. Heading No. 0404 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."
15. He submitted that the expression 'natural milk constituent' had not been defined anywhere but a reference to it could be found in the Explanatory Notes of HSN on Chapter Heading 0404 which deals with whey in the following words:-
"This heading covers whey (i.e., the natural constituents of milk which remain after fat and casein have been removed).
16. While referring to the principle of 'Noscitur a sociis' in interpretation of statutes, he submitted that the meaning of a word is to be judged by the company it keeps, and cited the decision of the Supreme Court in the case of Rohit Pulp & Paper Mills Ltd. v. Collector of Central Excise [1990 (47) E.L.T. 491] in which this principle was applied for interpreting the word 'coated paper' in the context in which it was used. Similarly, if the expression 'natural milk constituents' used in Note (4) extracted above is interpreted, it cannot be given the widest possible interpretation because the other items mentioned were butter milk, curdled milk, cream, yogurt, whey which were all directly made from milk whereas 'whey proteins' and 'casein peptides', as was explained by him, were not directly derived like the others. Thus, the expression 'natural milk constituent' occurring in Note (4) did not cover these two important constituents of 'Surje' which could not therefore, be taken to Chapter Heading 0404 by virtue of Note (4).
17. Inviting attention to the General Notes in the Explanatory Notes of Chapter 4 of HSN, Shri Chakrabarty stated that this Note had not been incorporated in the Chapter Note of the Central Excise Tariff and, in its place, a different note had been embodied in the form of Note (4) as a result of which the scope of Item 0404 in the Central Excise Tariff could not be interpreted with reference to the General Explanatory Note of HSN, quite apart from the fact that Chapter Heading 0404 itself in the Central Excise Tariff was different from what it was in the HSN. Elaborating his submission, he stated that while the first three Chapter Headings of the Central Excise Tariff viz., 0401 to 0403 covered specific products, the fourth relates to 'other dairy produce' and did not mention any produce by name. He contended that 'Surje' being a chemical derivative of organic origin derived from milk did not also fall in the other item covered by Chapter Heading 0404 viz., 'Edible products of animal origin not elsewhere specified or included'.
18. He next proceeded to state the scheme of the Central Excise Tariff from Chapters 1 to 21 and submitted that 'Surje' having been ruled out of Chapter 4, would appropriately fall under Chapter 21 as a 'Miscellaneous Edible preparation'. He referred to the decision of the Tribunal in the case of Reckitt & Colman of India Ltd. v. Collector of Central Excise, Calcutta [1985 (22) E.L.T. 216] in which the expression 'Preparation' was defined in para 34 as "a product prepared by addition, mixing or other such similar process to the original commodity in order to derive a new commodity". He submitted that 'Surje' was a preparation in the sense in which the word has been defined in Reckitt and Colman's case. He also submitted that the words 'product' and 'preparation' have been given different meanings in the scheme of the Central Excise Tariff.
19. He explained with reference to ground (e) of the grounds of appeal that, being a dietary supplement, 'Surje' would fall under Section IV because of Note 1(a) to Chapter 30 alone.
20. Shri Chakrabarty thereafter cited the decision of the Tribunal in the case of Collector of Central Excise, Pune v. Frozen Foods (P) Ltd. [1987 (27) E.L.T. 195] about the classification of a product called 'SPERT' which was composed of the following ingredients:-
(a) Liquid glucose - 40.30 gms. (b) Skimmed milk powder - 24.30 gms. (c) Calcium caseinate - 18.00 gms. (d) Malt extract - 5.30 gms. (e) Sugar - 10.00 gms. (f) Vitamins cand - 1.10 gms.
21. This product was not considered to be a preparation with a basis of malt extract and milk foods, but a protein rich concentrated nutrient supplementary food.
22. Inviting reference to Note 5(a) of Chapter 21, Shri Chakrabarty submitted that the product 'Surje' was a protein concentrate inasmuch as 2.0 gms. of protein was contained in each 15 ml. (one table spoonful) of 'Surje' according to the indication on the label itself.
23. Arguing on behalf of the respondents, Shri V. Lakshmi Kumaran, the learned counsel, submitted that the Assistant Collector's order was a non-speaking order, where he merely relied on the so-called opinion of the Deputy Chief Chemist which itself is incorrect and vague. The prayer in the appeal for restoration of the Assistant Collector's order cannot be accepted because of the basic deficiencies and defects. On this ground alone, the appeal is to be dismissed. Extensive technical material was placed before the Deputy Chief Chemist as well as the Assistant Collector and this material has not been discussed at all. On this ground also the appeal deserves to be dismissed. Shri Lakshmi Kumaran submitted that the learned SDR had taken totally new ground and placed new facts for the first time before the Tribunal which were not even taken in the grounds of appeal. This is particularly relevant for his main argument that whey protein, casein peptides, vitamins are not natural milk constituents. The lower authorities had never doubted this proposition. Subject to the above submissions, Shri Lakshmi Kumaran made the following further propositions:-
(a) Chapter 4 of the Central Excise Tariff Act has not been completely aligned with Chapter 4 of HSN. Chapter Note (3) is not found in HSN and Chapter Note (4) of the Central Excise Tariff is different from that in HSN. The scope and coverage of goods under Heading 0404 of Central Excise Tariff is larger than what is covered under HSN because additives like fruits and cocoa are permitted additives under Central Excise Tariff.
(b) Chapter Note (4) provides more or less a dictionary as to the coverage of foods under Heading 0404. 'Surje' is not claimed to be a dairy produce, but Chapter Note (4) provides a legislative mandate to cover products containing natural milk constituents with added sugar or added cocoa or fruit pulp under Heading 0404 as products of animal origin.
(c) Enrichment of goods, falling under Chapter 4, by vitamins is not prohibited and, in fact, is permitted in HSN in General Notes (page 21 of appellants paper book Vol. 2.2). It is further stated therein that vitamins not found in milk can also be added and still the product would continue to fall under Chapter Note (4). Shri Lakshmi Kumaran claimed that since the coverage of goods under Central Excise Tariff Act is more than what is covered in HSN, these General Notes ipso facto will apply to Heading 0404 read with Chapter Note (4) of the Central Excise Tariff Act. He claimed that it was incorrect to say that Central Excise Tariff Act has discarded the General Explanatory Note of HSN.
(d) The Governing principles of classification of goods under Chapter 4 are -
(a) whether the product consists of natural milk constituents;
(b) whether it has any additives which are permitted under Chapter Note or the Explanatory Notes of HSN.
If the product consists of ingredients not permitted in this manner, the product would merit classification elsewhere in the tariff.
(e) According to Shri Lakshmi Kumaran's interpretation, natural milk constituents will mean constituents of natural milk and not natural constituents of milk. Natural milk for the purpose of Chapter Note will mean milk from animal origin as compared to soya milk, coconut milk etc., which are all of vegetable origin. The argument that casein peptides are far remote from constituents of natural milk and hence 'Surje' is not covered under Chapter 0404 is not correct. This argument was made without prejudice to the submission that casein peptides and whey proteins are constituents of natural milk. Elaborating Shri Lakshmi Kumaran stated that whey protein is a milk constituent according to the publication "Developments in Food Proteins" edited by B.J.F. Hudson (p. 31) and "Applied Protein Chemistry" edited by R.A. Grant (p. 36) - copies of which have been submitted in the appellant's paper book. Similarly, casein itself is a milk constituent according to these very authorities. Since casein peptides are present in casein, these become a milk constituent. Casein consists of insoluble and soluble proteins and soluble proteins are known as peptides. Thus, soluble proteins present in casein which are known as casein peptides are nothing but milk constituents. Sorbitol, Glycerol and Sucrose, the other additives, are sweetening agents and are permissible in terms of Note (4). As regards Vitamins, Shri Lakshmi Kumaran explained that the vitamins in 'Surje' were the same as the vitamins in milk and, this being so, the addition of these vitamins did not alter the composition of the product as a natural milk constituent. He also submitted that since milk itself is the product of animal origin, the products containing constituents of milk would come under the category of products of animal origin. For this purpose, he placed reliance on the judgment of Andhra Pradesh High Court in the case of AP Rice Bran Solvent Extractors Association v. Union of India [1988 (37) E.L.T. 198] in which it was held that rice bran oil being derived from rice bran, which itself was derived from rice (paddy), rice bran oil was of plant origin. His argument was that what is to be noted is to see the source from where the products originate and not to see the product at the intermediate stage.
(f) Refuting Shri Chakrabarty's argument about the applicability of the principle of nosciter a sociis' as laid down by the Supreme Court in Rohit Pulp & Paper's case (supra), he submitted that for applying this principle, the word to be interpreted should be capable of more than one meaning and should be in the company of certain others which would have common linkage and, in that event, the word carrying two meanings would be given that meaning which is consistent with the common linkage or other word used. He submitted that in Chapter Note (4) the expression "the product consisting of natural milk constituents" is a separate category enlarging the scope or coverage under Heading 04.04 and not restricting the same. He thought, it was well-settled that tariff items would be given liberal interpretations to cover all products in all forms and species and the use of the word "inter alia" in Note (4) itself suggests that the heading is not exhaustive. For this purpose, he placed reliance on the judgment of the Tribunal in the case of The Western India Plywood Ltd. v. Collector of Central Excise, Cochin [1985 (19) E.L.T. 590]. He also relied on the judgment of the Supreme Court in the case of State of Bombay v. Hospital Mazdoor Sabha [AIR 1960 SC 610] to support the view that the doctrine of 'nosciter a sociis' could not apply to situations of the type under consideration. In view of these arguments, Shri Lakshmi Kumaran submitted that since 'Surje' was specifically covered under Heading 0404 the question of classifying it under Heading 21.07 did not arise, because the latter heading would cover only those preparations which are not covered under any other heading. He also refuted Shri Chakrabarty's argument about the distinction between 'products' and 'preparations' by saying that the department itself had accepted in its appeal memorandum that Shrikand and Peda are covered under Heading 0404. This was also confirmed by the tariff advice of the Central Board of Excise & Customs in F. No. 107/16/84-CX. I dated 24-2-1988. The next argument of Shri Lakshmi Kumaran was that protein concentrates mentioned in Chapter Note 5 (a) of Chapter 21 referred to protein concentrated from sources other than milk like soya protein, groundnut etc., since products consisting of milk proteins are specifically covered under Heading 0404. He placed reliance on the judgment of the Supreme Court in the case of Collector of Central Excise v. M/s. Protein Products of India [1988 (38) E.L.T. 749 (SC)] in which it was held that Gelatin is bone product, though it is derived by a complicated chemical process.
(g) Referring to Shri Chakrabarty's argument that in view of Note 1(a) of Chapter 30 where dietetic, diabetic or fortified foods, and food supplements were referred to as falling under Section IV, Shri Lakshmi Kumaran submitted that this was not a classification opinion on the products which were excluded from Chapter 30; it was merely an indication of the possible classification of some of the products which are excluded from Chapter 30.
(h) He also referred to Rule 3(a) of the Rules of Interpretation, according to which, between two headings, the heading which is more specific should be adopted and claimed that even according to Rule 3(b) 'Surje' will merit classification under Heading 0404.
(i) Referring to the judgment of the Tribunal in the case of Dalmia Dairy Industries (supra) cited by the learned SDR about the classification of the Product 'Active 25' Shri Lakshmi Kumaran submitted that it is because of the presence of malt to the extent of 10% that this product could not be classified as a natural milk constituent. Since Heading 19.01 covers milk extracts and food preparations based on milk extracts and also since Chapter Note (4) of Chapter 4 did not permit the use of malt or malt extract as additive except where it is a flavouring agent, the Tribunal rightly held that 'Active 25' was classifiable under Heading 19.01, which was more specific for a product containing malt extract. Such is not the case of 'Surje'.
24. Replying, Shri L.C. Chakrabarty, submitted that he had not gone beyond the point taken before the lower authorities. He stated that the Tribunal had always held that tariff classification being a matter of general importance, it was necessary that for deciding the correct classification, additional new ground not set out earlier could even be raised for the first time before the Tribunal. For this purpose, he referred to the decision of the Tribunal in the case of Collector of Central Excise, Calcutta v. Shalimar Paints Ltd., Howrah [1987 (29) E.L.T. 1001]. He also submitted that the Central Excise Tariff Act would prevail over the HSN and its Explanatory Notes in the matter of classification under the Central Excise Tariff Act.
25. He refuted Shri Lakshmi Kumaran's argument that just because vitamins added in the product 'Surje' are also contained in milk, it does not automatically follow that such a product would be covered by the words "natural milk constituents". Shri Chakrabarty contended that the respondents had to show that the vitamins in 'Surje' are natural milk constituents - a claim which was never made. In fact the respondents' claim is that no matter from which source the vitamins came, as long as they can show that milk also contains the same vitamins, the respondents are entitled to add such vitamins to the product.
26. In the expression 'natural milk constituents', Shri Chakrabarty explained, the word 'milk' was used as an adjective and it therefore, meant natural constituents of milk. Referring to the presence of Lactoglobulin and lacta-albumin which were whey proteins, Shri Chakrabarty stated that the method of manufacture of 'Surje' explained by the respondents in their letter of 23rd March, 1988 showed that the first step was to mix protein contributing ingredients and these were not the same as are found in whole milk as could be seen from the publication "Applied Protein Chemistry" by R.A. Grant (copy of which he had submitted in his paper book). He submitted that what the respondents were using was not whey in solid form as derived from natural milk and the product was not therefore, covered by Note (4). He also submitted that while the label of the product contains the names of only two of the whey proteins, Lactoglobulin and Lactaalbumin, whole milk contained a number of other whey proteins which were not contained in the product. He submitted that the product was more appropriately covered by Note 5(a) of Chapter 21, which related to protein concentrates because of the composition in which only two of these whey proteins were present.
27. Referring to Note 1(a) of Chapter 30, Shri Chakrabarty emphasised that the mention of the words "Section IV" to indicate the classification of dietetic, diabetic or fortified foods is clearly indicative of the classification of such products in the Central Excise Tariff. He also contested the argument of Shri Lakshmi Kumaran that such an indication in the Chapter Note was not conclusive evidence of classification of a product and, could, at best be only an indication of possible classification of some of the products which are excluded from the scope of Chapter 30. He submitted that Section Notes, and Chapter Notes were part of the tariff and invited attention to Rule 1 of the Rules for the Interpretation of the Tariff Schedule which is as under:-
"The titles of Section and Chapter are provided for ease and reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided that such Headings or Notes had been otherwise required, according to the provisions hereinafter contained." (Emphasis supplied)
28. Shri Chakrabarty concluded that in view of the indication that dietetic and food supplements fall under Section IV, the classification of the product would go out of Chapter 4 which was not part of Section IV.
29. Refuting the argument of Shri Lakshmi Kumaran about the ratio of the Supreme Court decision in the case of Collector of Central Excise v. Protein Products of India (supra) that Ossein and Gelatin obtained by Chemical treatment of bones were covered by the term "bone products", he submitted that while ossein was a straight product, 'Surje' is a composite product. He therefore, thought that the ratio of this judgment as well as that of the AP Rice Bran case (supra) were not applicable to 'Surje'. He explained that the expression used in Notification No. 55/75 which was the subject-matter of interpretation by the Supreme Court Protein Product's case, was 'bone products' and not 'natural bone products', whereas the expression used in Note 4 is 'natural milk constituents'.
30. Referring to the plea of Shri Lakshmi Kumaran that 'Surje' was a product of animal origin, Shri Chakrabarty submitted that this was not so because it is not made from animal origin, but was a composite product. He referred, for this purpose to Explanatory Note of HSN to Chapter Headings 0407 to 0410 which related to products of animal origin and submitted that dairy products are specified in the HSN under Chapter Headings 0401 to 0406 only. Thereafter, HSN covers all products of animal origin and 'Surje' is not made of any of the products referred from 0407 to 0410. He also submitted that Interpretative Rules will not apply to the classification of 'Surje' because 'Surje' is not a product of animal origin.
31. We have carefully considered the submissions of both sides and perused the case records and the additional material in the paper book submitted by the learned SDR. We have also studied the propositions on behalf of the respondents submitted by Shri V. Lakshmi Kumaran, their learned counsel.
32. Chapter sub-heading 0404.00 being relevant for our consideration is extracted below:-
"04.04 0404.00 Other dairy produce; edible products of animal origin, not elsewhere specified or included."
34. A comparison of the Chapter Headings of HSN and the Central Excise Tariff makes interesting reading and, Shri Lakshmi Kumaran as well as Shri Chakrabarty had referred to this comparison in their arguments.
HSN CENTRAL EXCISE TARIFF
Chapter 4 - Dairy produce; Birds eggs; Dairy produce; Edible products
Natural honey, Edible products of animal origin; not elsewhere
of animal origin not elsewhere specified or included.
specified or included.
04.01 Milk and cream, not concentrated, Milk and cream concentrated or
nor containing added containing added sugar or other
sugar or other sweetening matter sweetening matter.
04.02 Milk and cream concentrated or Butter, whether pasteurised or
containing added sugar or other not.
sweetening matter
04.03 Butter milk, curdled milk and Cheese, pasteurised or
cream, yogurt, kephir and other processed.
fermented or acidified milk and
cream, whether or not
concentrated or containing added
sugar or other sweetening matter
or flavoured or containing added
Fruit or Cocoa
04.04 Whey, whether or not concentrated Other dairy produce; edible products
or containing added sugar of animal origin not else-where
or other sweetening matter; specified or included.
Products consisting of natural
milk constituents whether or not
containing sugar or other
sweetening matter not elsewhere
specified or included
04.05 Butter and other fats and oils
derived from milk
04.06 Cheese and curd
04.07 Birds eggs, in shell, fresh,
preserved or cooked
04.08 Birds eggs not in shell and egg
yolks, fresh, dried, cooked by
steaming or by boiling in water,
moulded, frozen or otherwise
preserved whether or not
containing added sugar or other
sweetening matter
04.09 Natural honey
04.10 Edible products of animal origin
not elsewhere specified or
included.
35. A comparison of the two shows that -
(a) Chapter 4 of HSN specifically mentions certain additional items viz., Birds eggs and Natural Honey by name and
(b) Birds eggs are covered by Headings 0407 and 0408 and Natural Honey by Heading 0409, whereas these items are not specifically mentioned in Chapter 4 of Central Excise Tariff; nor are there any sub-headings for them.
(c) Whereas Heading 0403 of HSN covers products like butter milk, curdled milk and cream, yogurt, kephir and other fermented or acidified milk and cream and there is a separate Heading 0404 for
(i) whey and
(ii) products consisting of natural milk constituents and yet another Heading 0410 for "edible products of animal origin not elsewhere specified", in HSN, in the Central Excise Tariff Heading 0404 practically covers all the items of these three headings of HSN viz., 0403, 0404 and 0410. Another difference which is of significance for our purpose is that it is by Note (4) that the scope of the sub-heading "other dairy produce" is defined to include, inter alia, whatever items find specific mention in sub-headings 0403 and 0404 of HSN. The only item left out of this Note (4) which are covered by sub-heading 0404.00 are edible products of animal origin not specified elsewhere. In other words, Note (4) is confined to explaining the scope of the expression "other dairy produce" only because what it explains by way of illustration covers products like butter milk, curdled milk, cream, yogurt, whey, curd and products consisting of natural milk constituents which, by their plain meaning, refer to what is collectively called 'dairy produce'. This meaning also becomes clear when we see the use of the expression "inter alia" in Note (4). The scope of the left out item of sub-heading 0404.00 viz., "edible products of animal origin not elsewhere specified or included" is explained in the Explanatory Notes to sub-heading 0410 of the HSN.
35A. Shri Lakshmi Kumaran had categorically stated at the hearing that it was not their claim that 'Surje' was classifiable as "other dairy produce". He has also stated so in his written note. The necessary consequence of this assertion is that 'Surje' must be classified as an edible product of animal origin if it falls under Chapter sub-heading 0404.10. That the scope of this sub-heading is very different in HSN is quite clear from the Explantory Note to Heading 0410 in HSN. Thus, by a simple comparison of the entries in the two tariffs, 'Surje' gets excluded from Chapter Heading 0404. The application of the principle of 'nosciter a sociis' to Note (4) would also exclude a product like 'Surje' from Chapter Heading 0404.
36. In his written note, Shri Lakshmi Kumaran has submitted as under:-
"4. Chapter Note (4) provides more or less a dictionary as to the coverage of foods under Heading 0404. 'Surje' is not claimed to be a dairy produce but Chapter Note (4) provides a legislative mandate to cover products containing natural milk constituents with added sugar or added cocoa or fruit pulp under Heading 0404 as products of animal origin."
That there is no question of addition of sugar or cocoa or fruit to products of animal origin is clear from a reading of Heading 0410 in the HSN from which it has been incorporated into the Central Excise Tariff in its original form. The heading is "Edible products of animal origin, not elsewhere specified or included." The Explanatory Note says that this heading covers products of animal origin suitable for human consumption not specified or included elsewhere in the Nomenclature. The examples given are those of turtles' eggs and salanganes' nests. We could include in this heading other items - birds eggs and natural honey - which find separate mention in the HSN - in the Central Excise Tariff because of the merger of Headings 0407, 0408, 0409 and 0410 into one sub-heading 0404.10 in the Central Excise Tariff. Thus, a product like 'Surje' would not be classified as an edible product of animal origin under sub-heading 0404.10 of the Central Excise Tariff and Chapter Note (4) would not extend to the edible products of animal origin.
37. This is the conclusion to which we are led by a plain comparison of the entries in the Central Excise Tariff and the HSN to which our attention was invited by the learned SDR as well as by Shri Lakshmi Kumaran.
38. We now proceed to take up the other points raised by Shri Lakshmi Kumaran during the hearing and incorporated in his written note of propositions on behalf of the respondents. We agree with the learned SDR that this Tribunal has taken the view that questions,relating to tariff classification being of general interest, and, it being the duty of the Tribunal to decide the correct tariff classification, fresh arguments for this purpose can be taken up before the Tribunal. We accordingly accept the submissions of the learned SDR on this question. So far as the applicability of the Explanatory Notes of HSN is concerned, the position is clear that these are, at best, only of persuasive value and are not part of the tariff and are not of binding nature. It would not, therefore, be correct to start with the presumption that the additives mentioned in the General Explanatory Notes of Chapter 4 are permissible additives for purposes of tariff classification under the Central Excise Tariff. Such additives find specific mention in Note (4) and these are sugar or other sweetening matter, flavours, added fruit or cocoa. There is no mention of vitamins in Note (4) and therefore, we agree with the contention of the learned SDR that, on the ground of addition of vitamins alone to the product, it goes out of Chapter 4.
39. We have already explained that Note (4) does not specifically refer to edible products of animal origin. Shri Chakrabarty had taken great pains to explain how casein peptides are far remote from natural constituents of milk and, being a fourth generation product, were not covered by the expression natural milk constituent. He had also explained that the respondents were using chemical derivatives of organic origin derived from milk and these could not be regarded as natural milk constituents. Thus, the whey proteins and casein peptides used by the respondents in their product are not natural milk constituents and cannot be so regarded for purposes of Note (4).
40. So far as vitamins are concerned, we have already explained that their addition is not permitted by Note (4). The fact that natural milk contains certain vitamins and some of these vitamins are used in 'Surje' and therefore, 'Surje' should be regarded as a product consisting of natural milk constituents, is not acceptable because they are not natural milk constituents. Shri Chakrabarty had strongly contested this argument and we agree with him.
41. The next argument is that since milk itself is a product of animal origin, the products containing constituents of milk would come under the category of products of animal origin. While this may be generally true, what is to be remembered is that for the purpose of tariff classification under the Chapter (4), a clear distinction has been made between dairy produce which covers milk and milk products on the one hand and 'edible products of animal origin' on the other. While milk and cream, butter and cheese have been separately classified under Headings 04.01 to 04.03 of the Central Excise Tariff, the 'other dairy produce' and 'products of animal origin' have been put together under Heading 0404. Here again, Note (4) specifically refers to products like butter milk, curdled milk, cream, yogurt, whey, curd and products consisting of natural milk constituents as distinct from edible products of animal origin. This distinction for purposes of tariff classification is quite clear although, as we have indicated above, milk being a product of animal origin, it may be otherwise considered to be product of animal origin. Once this distinction is clearly understood, it would be easy to see how the principles of 'nosciter a sociis' propounded by the Supreme Court in the case of Rohit Pulp's case (supra) would fully apply for the interpretation of Note (4). Thus, the expression "products consisting of natural milk constituents" takes colour from the items enumerated in Note (4) before this expression is used. To appreciate the point, we once again reproduce Note (4) -
"Heading No. 0404 applies, inter alia, to butter milk, curdled milk, cream, yogurt, whey, curd and product consisting of natural milk constituents... "
41A. The use of the words 'inter alia' in Note (4) would support such a conclusion because Heading 04.04, itself, is not confined to 'other dairy produce', but also includes "edible products of animal origin, not elsewhere specified or included". We do not think that the expression "the product consisting of natural milk constituents" is a separate category as claimed by Shri Lakshmi Kumaran. It has to remain within the bounds of the coverage of "other dairy produce".
42. As for the argument that protein concentrates mentioned in HSN Chapter Note 5(a) of Chapter 21 would refer to protein concentrated from sources other than milk like Soya protein, groundnut, etc., there is no warrant for such a claim. The items which are covered under Chapter IV find specific mention in headings and sub-headings, of that Chapter. We do not find any mention of the expression "protein concentrates" in this Chapter and for this reason alone, protein concentrates would be covered under Chapter 21 by virtue of Note 5(a).
43. We agree with the contention of Shri Chakrabarty that because of interpretative Rule 1, classification of a product is to be determined according to the terms of the headings and relative Section of Chapter Notes. By application of this principle, the indication in Note 1(a) of Chapter 30 that dietitic, diabetic or fortified foods and food supplements are covered by Section IV is a clear indication of the classification of these products. This note has therefore, legal force and is not merely an indication of the possible classification as contended by Shri Lakshmi Kumaran.
44. Shri Lakshmi Kumaran has stated that the ratio of Dalmia Dairy Industries' decision (supra) was not applicable to the present case because of the presence of malt, which was not accepted as a flavouring agent by the Tribunal. In that case, the Tribunal had held in para 8 of its order that 'Active 25' which was a food preparation of milk and cream was not classifiable as 'milk' under Heading 0401 because of various additions. There is nothing in this decision to suggest that the presence of malt alone had led to this decision. In fact, cocoa, malt, vitamins and minerals were the other additions besides permissible addition of sugar. A similar view is therefore, possible in respect of 'Surje' which has vitamins as an additive which is not permitted by Note (4) besides other constitutes which are not natural milk constituents. Thus, having considered all the arguments placed before us, we come to the conclusion that the product manufactured by the respondents viz., 'Surje' is not classifiable under sub-heading 0404.10, as an edible product of animal origin. It appropriately falls under Chapter Heading 2107.91. The appeal is therefore, allowed.