Calcutta High Court (Appellete Side)
Hindustan Unilever Ltd. & Anr vs Central Board Of Excise & Customs & Ors on 20 April, 2011
Author: Indira Banerjee
Bench: Indira Banerjee
1
1.
20.04.2011.
d.d.
W. P. No.17748 (W) of 2010
Hindustan Unilever Ltd. & Anr.
Vs.
Central Board of Excise & Customs & Ors.
Mr. S. Ganesh, Sr. Adv.,
Mr. J. P. Khaitan, Sr. Adv.,
Mr. S. Banerjee,
Mr. S. Datta,
Mr. Agnibesh Sengupta
...... For the Petitioners.
Mr. Tapas Kumar Hazra,
Mr. Kausik Kanti Maiti
......... For the Commissioner
of Central Excise, Kolkata.
This writ application has been filed, inter alia, challenging a
circular being Circular No.931/21/ 2010-CX dated 15th July, 2010
issued by the Central Board of Excise and Customs, hereinafter
'the Board', directing that tea fortified with vitamins be classified
under Chapter 21 of the Customs Tariff Act, 1975 under Tariff Item
2101.20.
The short question involved in this writ application is whether
tea fortified with vitamins is liable to tariff under Chapter 21 of the
Customs Tariff Act, 1975 or under Chapter 9 of the Customs Tariff
Act, 1975.
The petitioner no.1 produces tea of different types, which are
sold under various brand names, such as, Red Label, Taj Mahal,
Taaza etc. According to the petitioners, tea fortified with vitamins
2
is also tea and, therefore, falls under Chapter 9 of the Customs
Tariff Act, 1975.
Tea, whether or not flavoured, is classified under Chapter 9 of
the First Schedule of the Central Excise Tariff Act, 1975 and has
been exempted from duty by Exemption Notification No.3/06.
The entries under Chapter 9 include Green Tea in bulk, as
well as in packets, green tea agglomerated I forms such as balls,
bricks or tablets, green tea waste, black tea fermented or not,
whether in bulk or in packets, black tea leaf, black tea dust, tea
bags, black tea agglomerated in different forms, such as, ball brick
and tablet and other forms and/or varieties of black tea.
The impugned circular inter alia provides as follows:
" 2. Preparation of tea and preparation with the basis of
tea are classifiable under the chapter heading 210120.
Preparation of tea as well as preparation with a basis of tea is
a product containing tea as one of the major component and
has other added ingredients to it. Flavoured tea contains tea
along with at least one flavouring agent and is a preparation of
tea, though not classifiable under this chapter by virtue of
Chapter Note 1(c) to the chapter 21. However all other
preparations of tea not specifically excluded by virtue of any
Section/Chapter Note will get classified I this chapter only.
3. The issue has been examined, the samples of the
product were perused and the commercial understanding of
the product and the details of the product mentioned on the
packing materials were taken note of. The tea fortified with
vitamins as described in para 1 is nothing but a preparation of
tea having added ingredients like stabilizers and vitamins in
addition to tea. Since no Section/Chapter Note excludes this
preparation from the purview of Chapter 21, it is clarified that
such preparations of tea namely tea fortified with vitamins will
be classified under Chapter 21. "
3
Chapter 21 of the First Schedule to the Central Excise Tariff
Act 1975, which relates to miscellaneous edible preparations,
expressly excludes flavoured tea from its coverage by insertion of
Note 1(C) and includes under Tariff Item 2101 edible preparations
of the following description:
" 2101 - Extracts, essences and concentrates, of coffee,
tea or mate and preparations with a basis of these products or
with a basis of coffee, tea or mate; roasted chicory and other
roasted coffee substitutes, and extracts, essences and
concentrates thereof.
2101 20 - Extracts, essences and concentrates, of tea or
mate, and preparations with a basis of these extracts, essences
or concentrates or with a basis of tea or mate :
2101 20 10 - Instant tea ............................
2101 20 20 - Quick brewing black tea ..........
2101 20 30 - Tea aroma ..............................
2101 20 90 - Other .................................. "
The petitioners submit that by reason of the directions as
contained in the impugned circular, tea fortified with vitamins
would be subjected to excise duty at 10.3 per cent, even though
tea, whether or not flavoured under Chapter 9, has been exempted
from Central Excise Duty .
The preliminary objection taken by Mr. Hazra, appearing on
behalf of the respondents, to the maintainability of the writ
petition, on the ground of existence of an alternative remedy of appeal against an order of assessment cannot be sustained. In the instant case, a circular of the Board is under challenge. The Commissioner (Appeals) cannot decide the question of legality of 4 the circular. Mr. Ganesh's argument that as subordinate authority, the Commissioner (Appeals) cannot be expected to take a view, which is different from the circular, cannot be ruled out. The matter would necessarily have to be decided by this Court. It is true that an appeal has been filed. Mr. Ganesh gave an undertaking to the Court to withdraw the appeal.
It is pleaded that for production of tea fortified with vitamins, the petitioner no.1 merely sprays vitamins in liquid form on black tea, which is otherwise classifiable under Chapter 9. Mr. Ganesh, Senior Counsel appearing on behalf of the petitioners, submitted that the tea does not undergo any transformation as a result of the process of spraying vitamins in liquid form. No new or distinct product is produced. The product does not have any distinct name, characteristic or use.
In Union of India & Ors. Vs. Delhi Cloth and General Mills Co. Ltd. & Ors., reported in AIR 1963 Supreme Court 791, cited by Mr. Ganesh, a five-Judge Bench of the Supreme Court held that the word "manufacture" is generally understood to mean bringing into existence a new substance. The Supreme Court observed and held as follows:
" The word "manufacture" used as a verb is generally understood to mean as "bringing into existence a new substance" and does not mean merely "to produce some change in a substance," however minor in consequence the change may be. This distinction is well brought about in a passage thus quoted in Permanent Edition of Words and Phrases, Vol.26, from an Americal Judgment. The passage runs thus :-
"Manufacture implies a change, but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But 5 something more is necessary and there must be transformation; a new and different article must emerge having a distinctive name, character or use."
In Union of India Vs. Ahmedabad Electricity Co. Ltd., reported in 2003 (158) E.L.T. 3 (S.C.), the Supreme Court held:
" 15. What is the meaning of 'manufacture' in the context of excise law? We have already quoted the definition of the word "manufacture" as contained in Section 2(f) of the Act. According to this definition, manufacture includes any process incidental or ancillary to the completion of a manufactured product. The word 'manufacture' used as a verb is generally understood to mean as bringing into existence a new substance. It does not mean merely to produce some change in a substance. To quote from a passage in the Permanent Edition of Words and Phrases Vol.XXVI "manufacture implies a change, but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation: a new and different article must emerge having a distinctive name, character or use".
'Manufacture' may involve various processes. The aim of any manufacturing activity is to achieve an end product. Depending on the nature of manufacturing activity involved, processes may be several or one. The natural meaning of the word 'process' is a mode of treatment of some material in order to produce a good result. Every process which is incidental or ancillary to the completion of manufactured product is included within the meaning of manufacture. The word 'process' has not been defined in the Act. In its ordinary meaning 'process is a mode of treatment of certain material in order to give a desired shape to the material. It is an activity performed on a given material in order to transform it into something.
16. The word "manufacture" has been defined in various judgments of this Court. In South Bihar Sugar Mills v. Union of India [AIR 1968 SC 922], this Court observed :
"The Act charges duty on manufacture of goods. The word "manufacture" implies a change every change in the raw material is not manufacture. There must be such a transformation that a new and different article 6 must emerge having a distinctive name, character or use."
In M/s. Ujagar Prints and Ors.(II) vs. Union of India & Ors., reported in (1989) 3 Supreme Court Cases 488, the Supreme Court held that the test to ascertain that there was manufacture is whether the change or the series of changes brought about by the application of processes took the commodity to a point where commercially it could no longer be registered as the original commodity, but was, instead, recognized as a distinct and new article that had emerged as a result of the processes.
Mr. Ganesh also cited another judgment of the Division Bench of the High Court of Delhi in Collector of Central Excise Vs. J.K. Synthetics Ltd., Kota, reported in 1981 E.L.T. 5 (Del.), where the Division Bench held that it was settled proposition that an intermediary product used for obtaining an end product in a single uninterrupted process would not attract duty. It would be dutiable if it was obtained by one process and was used for being converted into another product by a separate distinct process.
In Union of India Vs. J.G. Glass Industries Ltd., reported in 1998 (97) E.L.T. 5(S.C.), also cited by Mr. Ganesh, the Supreme Court held that there was a two-fold test to determine whether there was manufacture. First, it would have to be seen whether a different commercial commodity came into existence or whether the identity of the original commodity ceased to exist and secondly, whether the commodity which was already in existence would serve no purpose or would be of no commercial use, but for the said process.
7In the instant case, tea is a commodity which can be sold commercially even without being sprayed with liquid vitamins. Moreover, tea, as a commodity, does not undergo any change by fortification with vitamins. As rightly argued by Mr. Ganesh, tea remains tea. The fortification of tea with vitamins, does not constitute manufacture.
It is a well-settled principle of interpretation that taxing statutes must strictly be construed as understood in popular or commercial parlance and not technically as held in M/s. Indo International Industries Vs. Commissioner of Sales Tax, Uttar Pradesh, reported in (1981) 2 Supreme Court Cases 528 and in Dunlop India Ltd. Vs. Union of India & Ors., reported in (1976) 2 Supreme Court Cases 241, cited by Mr. Ganesh.
Tea fortified with vitamins, which is tea would necessarily fall within Chapter 9 which includes both green tea and black tea in different forms, even in the form of ball, bricks, tablets or in tea bags. There is no specific entry in Chapter 21 for tea fortified with vitamins. In case of ambiguity the interpretation which is in favour of the Assessee, has to be preferred.
The items which are included in Chapter 21 under Tariff Item 2101 involve a process of manufacture which brings about such changes that the product which is produced can not longer be classified as tea. Extracts, essences and concentrates of tea, mate and preparations based on tea, instant tea and quick brewing tea undergo a process of manufacture and emerge as a distinct item. Tea aroma is also not the same as tea. The residuary item 'others' has to be construed in the context of the specified items to mean items similar to those listed under Item Tariff No.2101. Tea 8 fortified with vitamins is not similar to any of the items enumerated under the said Item Tariff.
The specific exclusion of flavoured tea from Chapter 21 by insertion of Note 1(c) cannot and does not lead to the inference that vitaminized tea which has not expressly been excluded, would be included in Chapter 21, even though vitaminized tea is also tea. Flavoured tea may have expressly been excluded as tea is flavoured by adding extracts or concentrates of totally different items, such as, mint, lemon, strawberry and the like, and could, therefore, be construed as a different drink based on tea, but for the exclusion. In case of tea fortified with vitamins this was not considered necessary.
Mr. Ganesh referred to a decision of the CESTAT, South Zonal Bench, Bangalore in Sampre Nutritions Ltd. Vs. Commissioner of Central Excise, Hyderabad, reported in 2004 (169) E.L.T. 42. The CESTAT held that addition of vitamin does not alter the identity character and use of product classifiable as sugar confectionery under heading 17.04 of Chapter 17 of the First Schedule to the Central Excise Tariff Act, 1975. The real identity of the product in question remains sugar confectionery and is not vitamin 'C'.
It is true that a decision of the CESTAT is not binding on this Court. However, a decision of the CESTAT is binding on the department. The department is bound by the reasoning as contained in the said judgment and order. No appeal was preferred against the decision of the Tribunal.
9In Indian Oil Corporation Limited Vs. Collector of Central Excise, Baroda, reported in (2007) 13 Supreme Court Cases 803, cited by Mr. Ganesh, the Supreme Court held as follows:
" Since no appeal was preferred against the order passed by the Tribunal in Hindustan Petroleum Corpn. Ltd. and the same has become final, the Department is not entitled to raise the same point in other cases in view of the decisions of this Court in Union of India v. Kaumudinin Narayan Dalal, CCE v. Tata Engg. & Locomotives Co. Ltd., Birla Corpn. Ltd. v. CCE and Jayaswals Neco Ltd. v. CCE wherein it has been held that if no appeal is filed against an earlier order or the earlier appeal involving the identical issue was not pressed by the Revenue, the Revenue is not entitled to press the other appeals involving the same question. In Birla Corpn. Ltd. this Court observed as follows:
"5. In the instant case the same question arises for consideration and the facts are almost identical. We cannot permit the Revenue to take a different stand in this case. The earlier appeal involving identical issue was not pressed and was therefore, dismissed. The respondent having taken a conscious decision to accept the principles laid down in Pepsico India Holdings Ltd. cannot be permitted to take the opposite stand in this case. If we were to permit them to do so, the law will be in a state of confusion and will place the authorities as well as the assessees in a quandary."
Birla Corpn. Ltd. is being followed consistently.
9. Since the point involved in the present case is identical to the point involved in Hindustan Petroleum Corpn. Ltd. and the Department having accepted the principle laid down in Hindustan Petroleum Corpn. Ltd. the Department cannot be permitted to take a different stand in the present appeals. "
Mr. Ganesh rightly argued that there being no appeal, the decision of the CESTAT has assumed finality. The department is bound to apply the same to other assessees similarly 10 circumstanced. The Department cannot be permitted to take a different stand in this case.
In M/s. Radhasoami Satsang, Saomi Bagh, Agra vs. Commissioner of Income Tax, reported in (1992) 1 Supreme Court Cases 659, cited by Mr. Ganesh, the Supreme Court held that even though res judicata did not strictly apply to assessment for different years, finding of facts on any fundamental aspects, which were common in previous years pertaining to the assessee, and which remained unchallenged, could not be allowed to be disturbed in subsequent years.
In J.K. Synthetics Ltd. & Anr. Vs. Union of India & Ors., reported in 1981 E.L.T. 329 (Del.), cited by Mr. Ganesh, the High Court of Delhi held that an order passed by a Court of Law or revisionary authority is final and conclusive qua the parties. It is not open to the Central Excise Authorities to change their stand capriciously and put the assessee to inconvenience and harassment, if the position is exactly the same legally and factually as it was on an earlier occasion.
In J.K. Synthetics Ltd. (supra), the Division Bench of Delhi High Court enumerated the circumstances in which an authority could depart from its earlier stand. The High Court held that this could only be done for cogent reasons, for example, when fresh facts were brought on record or the process of manufacture had changed or the relevant tariff entry had undergone modification subsequent to the earlier decision, or where there had been a pronouncement of a High Court or the Supreme Court which necessitated the reconsideration of the issue.11
It is true, as argued by Mr. Hazra, that the examples given in J. K. Synthetics Ltd. (supra) are illustrative and not exhaustive. However, the proposition of law which emerges from the aforesaid judgment is that the authorities cannot depart from their earlier stand, if facts and circumstances are more or less the same.
The decisions cited by Mr. Ganesh may not pertain to the same product. However, the principles laid down are common. To constitute manufacture, the product has to undergo such change as to be converted into a new and different product.
In Commissioner of Customs and Central Excise, Goa Vs. Phil Corporation Limited, reported in (2008) 17 Supreme Court Cases 569, cited by Mr. Hazra, the Supreme Court found that edible fruit and nuts were chargeable under heading no.8.01, sub- heading 0801.00 of Chapter 8. Note III of Chapter 20, however, provided "In relation to products of this Chapter, labelling 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'." It was in the context of the aforesaid note that Supreme Court held, upon reference to Harmonised System of Nomenclature that processed cashew nuts, peanuts, almonds, dried roasted and/or oil roasted, salted and seasoned and packed in different containers would be classifiable under Chapter 20. The judgment has no application in the facts of the instant case.
In Nestle India Limited Vs. Commissioner of Central Excise, Chandigarh, reported in (2009) 12 Supreme Court Cases 294, the impugned decision of the Tribunal in favour of the Excise 12 Authorities was set aside and the matter remitted to the Tribunal for decision along the lines indicated in the aforesaid judgment.
As rightly pointed out on behalf of the petitioners, on an earlier occasion, power tea fortified with vitamins, produced by the petitioner company, was assessed to duty under Chapter Heading 2101. On appeal, the Appellate Commissioner on appeal passed an order dated 29th October, 2003 holding that power tea with vitamins manufactured by M/s. Hindustan Lever Limited, that is, the petitioner no.1 was not classifiable under sub-heading 2101.20, but was classifiable under Chapter 0902 of Central Excise Tariff Act. The demand of Central Excise raised vide show-cause notices being C. No.V/21/15/67/2000 B3 dated 23rd May, 2001, C. No.V/09/15/12/2002 B3 dated 28th March, 2002 and C. No.V/09/15/12/2002 B3 dated 8th May, 2002 was dropped. The aforesaid decision has assumed finality, there being no further appeal therefrom. A different stand cannot now be taken.
The writ application is, therefore, allowed. The impugned Circular dated 15th July, 2010 is set aside. The order in original dated 21st January, 2010 passed by the respondent no.3 is also set aside. It will be open to the respondent authorities to assess the duty payable in respect of the financial year in question in the light of the observations made above.
Urgent certified photostat copy of this order, if applied for, be supplied to the parties subject to compliance of all requisite formalities.
( Indira Banerjee, J ) 13