Punjab-Haryana High Court
Food Specialities Limited vs Union Of India (Uoi) And Anr. on 27 March, 1990
Equivalent citations: 1990(29)ECC145, 1991(51)ELT310(P&H), (1990)98PLR362
JUDGMENT Gokal Chand Mital, J.
1. Purely a legal issue arises in the writ petition, whether partly skimmed milk powder is a separate marketable commodity as compared to skimmed milk powder and whether both the commodities are subject to levy of excise duty under Sub-heading 0401.13 of Chapter 4 of the Central Excise Tariff. In case partly skimmed Milk powder is not leviable to Central excise, question regarding the jurisdiction of the respondents to levy central excise would be the next for determination.
2. These legal issue arise on the following facts : --
Food Specialities Ltd, (hereinafter referred to as 'the petitioner'), is manufacturing a product known as "Nestle Everyday Daily Whitener for tea and coffee" and on the packing the ingredients mentioned are partly skimmed milk and Suppose, and the analysis of the contents of milk fat are mentioned 19.0 per cent. A copy of the label is Annexure P-1 to the petition.
From 1.3.1983 to 28.2.1989, skimmed milk powder was exempted from excise duty. During that period excise duty was sought to be levied on the item in dispute and ultimately the petitioner succeeded that excise duty was not leviable. (See order Annexure P 7) Although the contention of the petitioner was that its product was partly skimmed milk and since even on skimmed milk no excise duty was leviable, the following observations were made in the conclusing part of the order :--
"There is no distinction in the tariff itself between the completely and partly skimmed milk."
In spite of the aforesaid finding, the product in question was classified under sub-head 0401.13. Since no excise duty was levied on the product in dispute, it was not necessary for the petitioner to go up further in appeal on the finding that the product in dispute was covered by sub-head 0401.13.
3. When with effect from 1.3.1989, skimmed milk powder was subjected to excise duty, by making amendment in the sub heading 0401.13, the petitioner immediately filed classification list on 3.3.1989 saying that its product was covered by sub heading 0401.19, the residuary clause under Chapter 4 of the Central Excise Tariff, and. it did not fall under Sub-heading 0401.13. For this contention, detailed reasons were furnished by the petitioner. Since the product could not be taken out of the factory premises without payment of excise duty, the petitioner paid excise duty under protest and sought determination of the point raised by it. The respondents gave no decision on the matter and kept on collecting the excise duty on the basis of the earlier decision, Annexure P-7, and since the petitioner was being subjected to heavy excise duty, it approached this Court through civil writ petition under Article 226 of the Constitution of India to challenge the levy of excise duty and also claimed refund of the amount of excise duty already collected by the respondents on the product in question.
4. The relevant central excise tariff relating to milk and its products as contained in Chapter 4 deserves to be reproduced :
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Chapter 4 Dairy Produce, etc. 4.1
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1. The expression "milk" means full cream milk or partially or completely skimmed milk.
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Heading Sub-head- Description of goods Rate of No. ing No. duty
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(1) (2) (3) (4)
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04 01 MILK AND CREAM, CONCBN-
TRATED OR CONTAINING ADDED SUGAR OR OTHER SWEETENING MATTER
- In or in relating to the manufacture of which any process is ordinarily carried on with the aid of power : Nil 0401.11 Flavored Milk, whether sweetened or not, put up in unit containers and ordinarily intended for sale.
0401.12 Skimmed milk powder, especially Nil
prepared for feeding infants.
0401.13 Skimmed milk powder, other than 15%
powder specially prepared for feeding
infants, put up in unit container
and ordinarily intended for sale.
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(1) (2) (3) (4)
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0401.14 Concentrated (Condensed) milk, 15%
whether sweetened or not, put up
in unit containers and ordinarily
intended for sale.
0401.19 --other Nil
A reading of opening part 1 of the tariff would show that the expression 'Milk' means full cream milk or partially or completely skimmed milk. Skim milk is also known to be of two types according to the tariff itself, namely partially skimmed milk or completely skimmed milk.
5. When we go to the heading 04.01 of the Central Excise Tariff, it has 5 sub headings, out of which first two and the last are not subject to any excise duly, whereas the 2nd and the 3rd sub headings are subject to excise duty. Skim milk powder specially prepared for feeding infants is exempted from excise duty. (See Sub-heading 0401.12). However, under Sub-heading 0401.13, skimmed milk powder is subjected to 15% duty which we are informed has been reduced to 10 per cent. While in the heading of the Excise Tariff, there is reference of partially skimmed milk, in the Sub-heading, there is no separate sub-clause for partially skimmed milk While the argument of the department is that the partly skimmed milk also falls in the Sub-heading 0401.13, the case of the petitioner is that it falls in sub heading 0401.19, that is, 'Milk of kinds other than shown above this clause. To put it more precisely, the case of the petitioner is that since partially skimmed milk is hot specifically covered by Sub-heading 0401.13, it will necessarily fall under sub heading 0401.19 that is, the residuary clause 'other' and, since Sub-heading 0401.19 is duty free, partly skimmed milk is also duty free.
6. In support of the argument, besides relying on the expression 'Milk' contained in the Central Excise Tariff, which recognised partly skimmed milk as a separate item of milk product, the petitioner has strongly relied upon the 'Indian Standard Specifications For Milk Powder' issued by the Indian Standard Institution (for short ISI', and the Prevention of Food Adulteration Rules, 1955 (for short 'P.F.A. RULES,), Act, 1954. framed under the Prevention of Food Adulteration (hereinafter called 'the 1954. Act'). For facility of reference, they are being reproduced hereunder :--
"Indian Standard Specification for Milk Powder issued by ISI IS: 1165-1975 Clause 2. 1 : The material shall be of the following three types :--
(a) Whole milk powder,
(b) Partly skim milk, powder and
(c) Skim milk powder."
Clause 2. 1. 1. deals with whole Milk Powder and Clause 2. 1. 2. deals with partly skim milk powder, whereas clause 2. 1. 3. talks of skim milk powder Clause 3. 2 says that the milk powder shall also comply, with the requirements given, in table 1. The relevant data of table 1 is as follows:--
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TABLE 1: REQUIREMENTS FOR MILK POWDER (Clause 3.2)
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Sr. CHARACTERI- REQUIREMENT FOR METHOD
No. STIC MILK POWDER OF REF. TO
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Whole Partly Skim
Skim
(vi) Fat, percent Not less Above1.6 Not more
by mass, than 26.0 and below than
26.0 1.5.
Prevention of Food Adulteration Rules, 1955
7. Rule 5 of the Rules provides for standard of quality of the various articles of Food specified in Appendix B to the Rules. Clause 11 of the Appendix B relates to Milk products. Sub-clause 11.01 10 relates to skimmed milk and the distinction is as follows :--
"11.01.10 :--SKIMMED MILK means the product prepared from milk from which almost all the milk fat has been removed machanically."
Sub-clause 11.01.11 prescribed the standard for different classes and designation of milk and against item fat skimmed milk it is proved that milk fat is not to be more than 0.5 per cent.
8. Sub-clause 11.03 describes the various products obtained from milk and this description includes "Milk Powder, Skimmed Milk Powder and Partly Skimmed milk Powder. Sub-clause 11.02.15 gives the meaning of Skimmed Milk Powder and it provides that skimmed milk powder shall not contain more than 1.5 percent milk fat. Sub-clause 11.02.16 describes the meaning of partly skimmed milk powder and it provides that such a product shall contain fat more than 1.5 and less than 26.0 per cent. Under sub clause 11.02.14 Milk powder shall contain milk fat not less than 26 per cent.
9. Rule 37 of the Rules provides that a label shall not contain a false or misleading statement consisting the food contained in the package or the quality or the neutritive value etc. The meaning is that the label should contain the correct particulars of the contents regarding quality etc. Rule 42 of the Rules provides for the form of labels. Label at Clause (f) has been provided for partly skimmed milk powder and label at Clause (g) has been provided for skimmed milk powder. The contents of the two powders have to give the percentage of milk fat contained therein.
10. International Standard of Milk and Milk Products issued by joint venture of FAO/WHO, on Food standard programme was also produced before us. There also, whole milk powder has to contain minimum milk fat of 25 percent, partly skimmed milk powder has to have minimum milk fat of more than 1.5 percent and less than 26 percent, and skimmed milk powder has to have maximum milk fat contents of 1.5 per cent. The Indian Standard matches with the International standards.
11. A reading of the ISI standards, PFA Rules, as also the International Standard shows that whole milk powder is separate from partly skim milk powder and partly skim milk powder is different from skim milk powder. All the three qualities of powder are universally known and recognised and that is why even in the Central Excise Tariff, in the opening skim milk powder and partly skim milk powder have been separately mentioned, while giving the meaning of the expression 'Milk'. Therefore, it was well known to the authorities making the tariff that partly skimmed milk powder is separate from skimmed milk powder and. it was open to them to levy the excise duty, on both the items or any one of them or on none. As already noticed, earlier to Ist March, 1989, there was no excise duty leviable on skimmed milk powder, whether partly or completely but witheffect from 1-3-1989, the skimmed milk powder was sought to be subjected to excise levy under Sub-heading 0401.13. Under Sub-heading 0401.12, skim milk powder especially prepared for feeding infants was specifically excluded from levy of excise duty and merely because under Sub-heading 0401.13 it was again mentioned by way of abundant caution "other than powder, specially prepared for feeding infants" would not mean that partly skim milk powder would stand covered by the Sub-heading relating to the skim milk powder. That is why all types of milk or milk powder not specifically provided for in Sub-headings 0401.11 to 0401.14 would fall in the residuary Sub-heading 0101.19, that is, relating to "other kinds of milk and products", on which there is no excise duty.
12. In view of the fact that partly skimmed milk powder is commercially known as a separate marketable commodity as compared to skim milk, merely because in sub leading; 0401.13 the exception provided is for 'Milk Powder specially prepared for feeding infants, would not justify to read in that sub heading that partly skimmed milk is covered by that Sub-heading. It is, necessary to repeate here that in subheading 0401.12 skimmed milk powder specially prepared for infants was excluded from the levy of excise duty and, therefore, by making it further clear in the following sub heading would not mean that partly skimmed milk powder would be covered by that Sub-heading.
13. The only other argument raised on behalf of the respondents to bring the partly skimmed milk under Sub-heading 0401.13 is that earlier in the case of, the petitioner, decision was rendered vide order, Annexure P-7 to the effect that partly skimmed milk powder is covered by Sub-heading 0401.13 and since that order was not appealed against by the petitioner, that binds them. We have carefully gone through the order, Annexure P 7. Although it is 7 pages long but on a reading of the same it shows that six pages are the reproduction of the reply of the petitioner to the show cause notice and only in the end in few lines the entire controversy has been decided, which reads as under:
"I have carefully gone through the records, reply to show cause notice and submissions made at the time of personal hearing. There is no distinction in the Tariff itself between the completely and partly skimmed milk. As such 'Every Day Whitener' is correctly classifiable under Sub-heading 0401.13."
Since the Excise Authority found that there was no distinction in the Tariff between completely and partly skimmed milk powder, the excise liability was deleted and the matter was decided in favour of the petitioner. The wrong view taken by the authority to bring the product in dispute under Sub-heading 0401.13, did not effect the right of the petitioner to challege it whenever it was sought to be subjected to excise duty on the pretext that it was skimmed milk powder. As already noticed, till 28-2-1989, even skimmed milk powder was exempted from excise duty, and, therefore, proceedings were wrongly initiated to levy the excise duty earlier, in which the petitioner succeeded.
14. For the reasons recorded above, we are of the view that the partly skimmed milk powder does not fall under Sub-heading 0401.13 and would thus be covered by the residuary Sub-heading 0401.19, as partly skimmed milk powder is a separate marketable commodity known in the commercial world. It is also known to the authorities, who prepared the Central Excise Tariff for levy of excise duty on milk and milk products, and was also known to the authorities who famed Rules under the Prevention of Food Adulteration Act, 1954, and the authorities who prepared ISI specifications for products.
15. It will be useful to notice that if proper standard of the goods specified under the law is not made or the label contains mis-description, the manufacturer can be brought to prosecution. The fat contents of skimmed milk and partly skimmed milk are totally different and on the description to be put on the container, correct particulars have to be mentioned. The petitioner has complied with all this in the present case. It is nobody's case that the contents of the product in dispute are such which come within the definition of skimmed milk and not partly skimmed milk. Facts being beyond dispute that the petitioner sells the product in dispute containing 19% milk fat, it would neither be full cream milk nor skimmed milk, and, therefore, would fall squarely under residuary Sub-heading 0401.19 and under this Sub-heading, excise duty is not leviable.
16. Before parting, one more argument raised on behalf of the respondents may be noticed. It was urged that the matter in dispute was appealable. The matter is never appealable. It is the order or the judgment which is appealable, if the remedy of appeal is provided in the Statute When order Annexure P-7 was passed, no excise duty was leviable either on the skimmed milk or the partly skimmed milk. On the product in dispute, excise duty was wrongly levied and the petitioner succeeded before the authority in getting the levy deleted.
17. It was also urged by the counsel for the respondents that order Annexure P-7 should have been appealed against and since no appeal was filed, the writ petition does not lie, We are unable to appreciate this argument either. When petitioner succeeded in getting the levy of excise duty deleted by order Annexure P-7, where was the cause for filing of appeal. The cause occured when the petitioner's product was subjected to excise duty, w. e. f. 1-3-1990. The same was objected to, and instead of deciding the objections, the petitioner was forced to pay the excise duty under protest to get their goods cleared for sale in the market. No determination was made after 1-3-1989 and no order was passed, and, therefore, the petitioner could not go up in appeal. Hence, this objection raised on behalf of the respondents is without merit.
18. Moreover, in the return the stand of the highest authority in the Central Government is that item in dispute is covered by Sub-heading 0401.13 and even if appeal was to be filed, it would have been an exercise in futility. Hence, we find no ground not to entertain the writ petition against the impugned action of the respondents on partially skimmed milk powder, which under the Excise Tariff is not subject to excise duty. Hence, the collection of excise duty is without jurisdiction.
19. For the reasons recorded above, we allow the writ petition and issue a writ of prohibition restraining the respondents from collecting the excise duty on the commodity in dispute, which is admittedly partly skim milk powder under the guise of existing Sub-heading 0401.13 and hold that under the existing Tariff, no excise duty is leviable on the commodity in dispute.
20. We also issue a writ, order and direction to the respondents to refund the amount of excise duty collected by them on the commodity in dispute with effect from 1-3-1989, to the. petitioner within a period of six months from today, failing which the petitioner would be entitled to have interest thereon at the rate of 12 percent per annum. However there will be no order as to costs.