Customs, Excise and Gold Tribunal - Delhi
Swastik Udyog vs Collector Of Central Excise on 30 November, 1999
Equivalent citations: 2000(67)ECC678, 2000ECR928(TRI.-DELHI), 2000(116)ELT585(TRI-DEL)
ORDER A.C.C. Unni, Member (J)
1. Appellants are engaged in the manufacture of product 'pan chutney'. They filed declaration under Rule 147A of the Central Excise Rules, 1944 classifying their product under 2103.11 and claimed exemption under Notification No. 12/90-C.E., dated 20-3-1990. The department by show cause notice dated 4-3-1992 sought to classify the item under sub-heading 2107.91 which would result in a differential duty liability of Rs. 65,147.72 towards BED and Rs. 9772.16 as SED totalling 74,919.88 for the period 1-4-1992 to 11-1-1993. The original adjudicating authority confirmed classification under 2103.11 and held that the item is covered under Notification No. 12/90, dated 20-3-1990 as amended for nil rate of duty and the proceeding initiated by the show cause notice dated 4-3-1992 was dropped. Against the said order, the department filed appeal before the Collector (Appeals) and the Collector (Appeals) following the earlier order passed by him in Order-in-Appeal No. 67/94 set aside the Assistant Collector's order and held that pan chutney will be correctly classifiable under 2107.91. This appeal is against the said order.
2. Shri J.S. Agarwal, ld. Advocate appearing for the appellants have brought to our notice various dictionary definitions of the word 'chutney'. He has also drawn attention to further published material relating to allied edible preparations like sauce, ketch-ups etc. to show that equivalent of vernacular word 'chutney' was comparable to sauce, ketch-up etc.
3. Before considering the matter further, it will be useful to extract the relevant tariff headings which are given below. The appellants have claimed classification under Chapter heading 2103.11 which reads as follows :
'sauce, ketch-up and the like and preparations thereof Department seeks classification under tariff Heading 2107 which reads as under :-
"edible preparations; not elsewhere specified or included"
While products coming under Heading 2103.11 are eligible for exemption under Notification No. 12/90, no such exemption is available for items falling under Chapter 2107.91. Appellants have given the following supporting material in support of their arguments. Definition of 'chutney' in Hindi-English dictionary by Mahendra Chaturvedi and Bholanath Tiwari published by National Publishing House Delhi which gives the definition of 'chutney' as under :
'sauce indigenous sauce, to transform into pulp, to beat up thoroughly' (2) Definition of 'chutney' in Hindi English Dictionary by Dr. Hardev Bahari published by Rajpal and Sons, Delhi-6 which contains the definition of 'chutney' as under:
'sauce (of various kinds), ketchup; marmalade; pickle, to prepare;' to beat thoroughly"
Definition of sauce given in New Shorter Oxford English Dictionary by Lesley Brown reads (P-2963) "sauce/n. See also SASS n. The etymological sense is identical with that of salad; Any liquid or semi-liquid preparation eaten as an accompaniment to food; the liquid constituent of a dish.
Formerly also, any condiment for meat, fish etc; figure of speech - A thing which adds piquancy or excitement to a word, idea, action etc. ..."
"sauce / v.t. 1. Season, dress, or prepare (food) with sauce or condiments 2 fig. Provide a pleasing accompaniment to; make pleasant or agreeable, reduce the severity of; add piquancy or excitement.
Definition of 'ketch-up' in the same dictionary at page 1481 reads :
'ketch-up - Also catch-up A spicy sauce, now usually of a thick consistency, made from tomatoes, or from mushrooms, walnuts, etc. and used as a relish with meat, fish etc'
4. Ld. Counsel submitted that it is well settled that in classification matters, it is the commercial understanding of people who deal in them which should be accepted as a guide. In this connection, he relied on the Supreme Court decision reported in 1991 (51) E.L.T. 161 and the Tribunal decision as reported in 1993 (68) E.L.T. 93. He submitted that even accepting the dictionary meaning as correct, pan chutney cannot be classified under Chapter Heading 2107 which covers only 'edible preparations'. Concise Oxford Dictionary defines the word 'edible' as a thing fit to be eaten. The new Shorter Oxford Dictionary clarifies the word 'edible' as an article of food. It is obvious that pan chutney is not taken as a food. It cannot therefore, be considered to be an edible preparation; that is a preparation which is meant to be eaten as food. 'Pan Chutney' is never taken as a substitute for food. It is meant only to give a relish, taste or flavour. The pan chutney is taken by persons who take pan-for its relish taste and flavour. Pan can be taken even without application of the chutney. It is usually taken in a very negligible quantity while taking pan. Further, pan chutney manufactured by the appellants is manufactured without aid of power by boiling sugar in water and adding small quantities of menthol, perfume, silver leaves and saffron. When it cools down, it forms a pasty substance which is finally put into unit containers and marketed. Generally, the ratio of the ingredients is : sugar syrup up to 95% and menthol perfume, silver leavers and saffron to the extent of 1.225% each.
5. In support of his contention that the item will be more appropriately classifable under Tariff Heading 2103, ld. Counsel referred to the definitions of the words 'sauce', 'ketch-ups' etc. referred to above. Further, according to the 'International Book on Sauces' the purpose of sauce was to make plain food more palatable or palatable food edible. Sauce is aimed at giving both the tastes and flavours of different types of foods. Sauce have unlimited, range of flavours and aromas which can transform simple food into gourmet fare. Though it is true that sauce and ketch-ups are also not taken as food, he emphasised the use of the words 'and the like preparations' in Chapter Headings 2103.11. The words 'like' means "equal, matching, similar or having common characteristics". In the context of sub-heading 2103.11 'like preparations' would mean preparations which have like qualities of sauces, ketch-ups, etc. Sauce and ketch-ups are admittedly taken to make foods more tasty, to impart flavour, taste or relish. Applying the well known rule of interpretation of Statutes, namely, noscitur a sociis, the meaning of a word is to be gathered from the company it keeps. When two or more expressions susceptible of analogous meaning are coupled together, they should be understood in their cognate sense and they should take their colour from each other. When the legislature has used expression like preparations' after the words 'sauces, ketch-ups;' in Chapter 2103.11, it has to be taken that in preparations which has the like qualities or matching qualities as that of sauces or ketch-ups are meant to be included under Chapter 2103.11. In these circumstances, where the present product has the same characteristics and qualities as sauce and ketch-up inasmuch as they are consumed for the same purpose as sauce and ketch-ups, ld. counsel submitted that the correct classification of 'pan chutney' would be under Chapter Heading 2103.11 and not under 2107. He therefore, submitted that the classification suggested by the appellants may be accepted and the appeal allowed.
7. Shri V.M. Udhoji, ld. JDR submitted that the scope of Chapter Heading 2103 was relatable to 'sauce' and 'ketch-ups' and 'pan chutney' cannot be said to come within the category of preparations covered by 'sauce' and 'ketch-ups'. The fact that impugned goods were not 'sauce' or 'ketch-ups' has not been disputed by the appellants themselves. It is also an admitted fact that the word 'chutney' is an Indian vernacular word and the normally understood connotation of the word 'chutney' is that it must have vegetable base which is transformed into a pulp. In the product under dispute/there was no such vegetable base. The appellants, though they are marketing the product as 'pan chutney' cannot, by mere description of the product as 'chutney' make it a vegetable preparation as commonly understood. The composition and ingredients of the goods under dispute are clearly different from the composition or ingredients of the 'sauce' and 'ketch-ups' which had vegetable base such as tomato or other vegetable and was salty in taste whereas the 'pan chutney' was a sugar based sweet preparation. Therefore, he submitted that the findings of the Collector (Appeals) in the impugned order may be upheld and the appeal rejected. In support of his contention he also cited the Tribunal decision in Hah Chand Shri Gopal v. C.C.E., Meerut reported in 1996 (83) E.L.T. 281 (T) in which the Tribunal had confirmed the classification of the same product, viz. 'pan chutney' under Chapter sub-heading 2107.91.
7. We have taken note of the rival submissions. As regards the decision in Hah Chand Shri Gopal (supra) relied on by the ld. JDR, we find that in paragraph 6, Tribunal has observed that 'pan chutney' (the goods under consideration) "are not like the sauce and the ketchup, as not having the essence of the characteristics of an accompaniment to the eatables with regard to the sauce and substance of the nature of the raw materials, way of preparation, usage, packing and commercial understanding. The commerical understanding in the present context will be the understanding by the particular trade and the consumer where sauce and ketchup known and traded and consumed on the one hand, and the product under consideration is known and traded and consumed on the other." After extracting passages from the Supreme Court decisions in Oswal Agro Mills Ltd. and Ors. v. C.C.E. [1993 AIR SCW. 1782 ] and in Indian Cable Co. Ltd. v. C.C.E. [1994 AIR SCW 4071] the Tribunal had observed that 'pan chutney' is not a product, the like of sauce or ketchup. Thereafter, after taking note of the fact that 'chutney' goes with food articles, Tribunal observed that the product under consideration 'Pan chutney' was not associated with eatables. The Tribunal further observed in para 11 as under :
"In popular sense and in common parlance, this product could not be treated as chutney. No housewife will use it with eatables. It is not placed on' the dinning table....This product will be found in the 'pan' shops. It is not the name given by the assessee but the nature of the goods, their usage and known denomination "the words, the context, the subject matter, the effects and consequences or the spirit and reason of the law"[refer C.C.E. v. Parle Exports Pvt. Ltd. 1988 (38) E.L.T. 741 S.C.] which are relevant. Simply because the assessee calls it a 'chutney', it will not become a chutney for the purposes of Heading No. 21.03 of the Tariff."
The Tribunal then extracted the Tariff Heading No. 2107 as it existed before the 1995 Budget showing the description of goods under Heading No. 21.07 as "Edible preparations, not elsewhere specified or included". Sub-headings under Heading 21.07 were also reproduced. In paragraph 14 the Tribunal, relying on Para 10 of the Supreme Court decision in Madras Fertilizers Ltd. v. Assistant Collector of Central Excise [1994 (69) E.L.T. 625 (S.C)], held that an officer could reopen his own order on classification and rectify his mistake. In the end the Tribunal in para 15 held -
"15. Taking all the relevant considerations into account, we reject both the appeals and confirm the classification of the product "pan chutney" under sub-heading No. 2107.91 of the Tariff."
8. The discussions in Hari Chand case (supra), it would be seen, primarily dealt with 'chutney' as an accompaniment to eatables. It is not in dispute that 'chutni' or 'chutney' is an Indian vernacular word which has acquired common usage in other languages like English along with words like 'curry', 'masala', etc. 'Chutni' is a generic word and is invariably used along with some other adjectives like 'coconut', 'mango', 'pudhina' etc. to show the main ingredient with which it is made. Therefore, to be eligible for being classified along with items like 'sauce' or 'ketchup' covered by sub-heading 2103, the Tribunal reasoned that the item should be an accompaniment to eatables. Since 'pan-chatni' was, admittedly not an accompaniment to any 'eatables item, the view was taken in Hari Chand case (supra) that it will be classifiable under Heading 2107.
9. We now consider the arguments advanced by the present appellants on the question whether the description of the goods under Heading 2107 answers the item in question, viz, 'pan chatni'. Heading No. 21.07 relates to "Edible preparations, not elsewhere specified or included". To begin with, to come under Chapter Heading 2107, the product has first to be an 'edible' preparation. According to Concise Oxford Dictionary (New Seventh Edition), 'edible' means a thing fit to be eaten. The word 'eat' has been defined in the same Dictionary to mean "to take into mouth, chew and swallow (solid food, soup etc)". The word 'food' has been defined to mean "substance(s) to be taken into body to maintain life and growth". To qualify for being edible preparation, it is therefore, necessary that the substance should be capable of being taken as food and food is a substance which is taken into the body to maintain life and growth. It is common ground between the parties that "pan chutney" is not taken as a food, but only as an item which adds taste, flavour or relish to 'pan' which itself is not a food item taken into the body to maintain life and growth. We, therefore, find some force in the appellant's submission that the item in dispute cannot come within the ambit of items covered under 'edible preparations' under Heading 2107.
10. As regards the appellant's contention that their preparation is more akin to 'sauce' or 'ketchup', we find that though the definition relied on by the appellant's counsel relates to items of food, as a figure of speech, the word 'sauce' is also used to mean 'pleasing accompaniment to make different, pleasant or agreeable or to reduce the severity of (Shorter Oxford Dictionary, p. 2693): More importantly, the word 'chutney' being admittedly an Indian vernacular word, is used in common parlance to describe the preparations eaten as accompaniment to food which is unvariably in paste or semi-paste form. Applying the test of common parlance, its generic connotation and its usage as a figure of speech, the word 'chutney' in our opinion, can apply also to preparations other than those which are consumed purely as items of food. Pan chutney, which is admittedly not an item of food, is still an item which is consumed for adding relish, taste etc. to 'pan'. In that sense, 'Pan chutney' serves the same purpose to 'Pan' as sauce, ketchup to regular items of food, viz., adding taste, relish or piquancy. We are therefore, inclined to agree with the appellants that the more appropriate classification for their product 'pan chutney' would be 2103.11 and not 2107.
11. Since we find that the view we have taken is at variance with the view taken by the Tribunal in Hari Chand case (supra), we may refer the question of correct classification of 'Pan chutney' to a Larger Bench.
12. Accordingly, we direct the Registry to place the matter before the Hon'ble President for constituting a Larger Bench.
Sd/-
A.C.C. Unni Member (J) P.C. Jain, Vice President
13. I have perused the order proposed by my learned Brother Shri A.C.C. Unni, Member (Judicial) but I regret with respect that I am unable to persuade myself with the conclusion reached by him. Question involved in the present case is whether "pan chatni" is classifiable under TH 21.03 as a preparation alike to sauces or ketch-up or it is an edible preparation not elsewhere specified or included under TH 21.07.
14. As regards the appellants' contention that it does not fall under TH 21.07 on the ground that it is not a thing fit to be eaten in the sense of a food required to maintain life and growth of the body, I am afraid that such a restricted meaning to the word "edible preparation" will not be a correct one in the context of Chapter 21 and earlier Chapters contained in Section IV of the CETA, 1985. This section pertains to prepared food stuffs, beverages and vinegar, tobacco and manufactured tobacco substitutes. Such a proposition, as mentioned above, is also apparent from the expression "not elsewhere specified or included in Heading 21.07". This means the preparations mentioned earlier in this Section and in particular in this Chapter 21 are all "edible preparations". What is includible in 21.07 are only preparations which have not been specified elsewhere or which have not been included elsewhere. I am, therefore, unable to subscribe to the narrow meaning advanced by the learned advocate for the appellants to discard TH 21.07 for the product "pan chatni".
15. In my view the said product "pan chatni" would not fall under TH 21.03. As mentioned in the said heading preparations like sauces, ketch-up have some herbal base like vegetable e.g. Podhina (mint) chatni or coconut chatni, tomato sauce or tomato ketch-up. Therefore, the product should have some Herbal base for it to be classified under TH 21.03 along with sauce, ketch-up, etc. From a reading of the judgment of the Tribunal in the case of the identical product in Hari Chnnd's case, supra it is apparent that the Tribunal in that case has not merely gone by the argument that sauce and ketch-up are mere accompaniments to some snacks to be eaten but it has also arrived at the conclusion by the trade understanding of the product, the nature of goods, their usage, the words, the context, subject matter, effects and consequences or the spirit or the reason of the law as ruled by the Apex Court in Parle Export's case, supra. It will be over simplifying the reading of the judgment of the Tribunal in Hari Chand's case that "pan chatni" is not a chatni in the sense of sauce or ketch-up merely on the basis of sauce and ketch-up being an accompaniment to eatables.
16. Since out of the two rival headings TH 21.03 has been ruled out on the basis of Tribunal's earlier judgment in Hari Chand's case, the only heading left is TH 21.07.
17. In view of the above, following restpectfully the judgment of the Tribunal in Hari Chand's case I reject the appeal.
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P.C. Jain Vice President DIFFERENCE OF OPINION
18. In view of the difference of opinion between the two Members; the following question is referred to the Third Member :
"Whether in the facts and circumstances of the case, the product 'Pan Chatni' manufactured by the appellants is classifiable under Tariff Heading 2103 or Tariff Heading 2107".
Sd/- Sd/- P.C. Jain A.C.C. Unni Vice President Member (J) G.A. Brahma Deva, Member (J)
19. G.A. Brahma Deva, Member (J) The dispute is in respect of classification of product viz Tan chutney'. Whether Pan chutney is classifiable under tariff Heading 2103 as claimed by the party or under 2107 as per the department is an issue to be considered in this appeal. Hon'ble Member Shri A.C.C. Unni, Member (Judicial) was of the view that the item in question is appropriately classifiable under 2103.11 as claimed by the party, however, in view of the earlier decision of the Tribunal in the case of Hari Chand Shri Gopal v C.C.E., Meerut reported in 1996 (83) E.L.T. 281 (T) he proposes to refer the question of correct classification of Pan chutney to a larger bench. On the other hand, the then Hon'ble Vice President Shri P.C. Jain following the decision of the Hari Chand (supra) held that item is classifiable under tariff Heading 21.07 in dismissing the appeal. Hence, this difference of opinion.
20. Heard both sides with reference to the difference of opinion.
21. Arguing for the appellants, Shri J.S. Agarwal, learned Advocate submitted that Pan chutney is neither a food nor an edible preparation. Pan chutney is never taken as a substitute for food. It is meant only to give a relish,, taste or flavour. Referring to the chapter Heading 2103.11 he said that it is like sauce or 'ketch-ups' and not edible preparations. He emphasized the words 'and the like preparations' thereof in the tariff entry and he said that the expression flows from the context and accordingly, since the Pan chutney is like sauce and ketch-ups, it is appropriately classifiable under Heading 2103 and not as edible preparations under 2107. He said that though Pan chutney as such was eatable but it was neither food nor substitute for food. In support of his contention, item is neither food product nor food preparation but only for flavour, he cited a series of decisions including Ashok Griha Udyog Kendra (Pvt.) Ltd., [1982 (10) E.L.T. 309 (All.)], Kothari Chemicals v. U.O.I. [1996 (86) E.L.T. 209 (All.)], Frozen Foods Pvt. Ltd., v. C.C.E. [1998 (98) E.L.T. 295 (S.C.)] and Union of India v. Kalyani Breweries Ltd. [1999 (113) E.L.T. 39 (Cal)]. He also referred to the observation made by the Hon'ble Member (Judicial) in paras 4 and 7 in support of his contention.
22. Shri V.M. Udhoji, learned JDR on the other hand justified the proposed order of the Hon'ble Vice President in classifying the item under 21.07 following the decision of the Tribunal in the case of Hari Chand Shri Gopal v. C.C.E., Meerut referred to above.
23. I have carefully considered the matter. It was the contention of the party that it is not a thing fit to be eaten in the sense of a food required to maintain life and growth of the body and accordingly it is not edible preparation to be classified under 2107. In this context the observations made by the Vice President is relevant and same is as under :-
"I am afraid that such a restricted meaning to the word "edible preparation" will not be a correct one in the context of Chapter 21 and earlier Chapters contained in Section IV of the CETA, 1985. This section pertains to prepared food-stuffs, beverages and vinegar, tobacco and manufactured tobacco substitutes. Such a proposition, as mentioned above, is also apparent from the expression "not elsewhere specified or included in Heading 21.07". This means the preparations mentioned earlier in this Section and in particular in this Chapter 21 are all "edible preparations". What is includible in 21.07 are only preparations which have not been specified elsewhere or which have not been included elsewhere. I am, therefore, unable to subscribe to the narrow meaning advanced by the learned advocate for the appellants to discard TH 21.07 for the product "Pan chutni".
24. I find that the very issue had come up for consideration before the Tribunal in the case of Hari Chandi Shri Gopal (supra) and wherein it was held that item is classifiable under sub-heading 2107.91 of the tariff. While arriving at the conclusion the Tribunal has observed that simply because the manufacturer had named his product as "Pan chatni" it does not become a Chatni as commonly undrestood. The observation in para 11 is relevant. Para 11 is as under :-
"11. In popular sense and in common parlance, this product could not be treated as Chatni. No house-wife will use it with eatables. It is not placed on the dining table. With Chatni we think of our desi snacks such as pakoras, samosas, idli, dhokia and the like. This product will be found in the 'pan' shops. It is not the name given by the assessee but the nature of the goods, their usage and known denomination "the words, the context, the subject matter, the effects and consequences or the spirit and reason of the law" [refer CCE v. Park Exports Pvt. Ltd. 1988 (38) E.L.T. 741 (S.C.)], which are relevant. Simply because the assessee calls it a 'Chatni' it will not become a Chatni for the purposes of Heading No. 21.03 of the Tariff".
25. Further, in para 6 of the above judgment it was observed that "It is a legitimate rule of construction under the Doctrine of Noscitur A Sociis to construe words in an Act of Parliament with reference to the words found in immediate connection with them i.e. when two or more words which are susceptible of analogous meaning are clubbed together, they are understood to be used in their cognate sense. They take, as it were, their colour from each other, the meaning of the more general is restricted to a sense analogous to a less general. The expression 'and the like' had to be interpreted in the context of the items listed specifically to which this expression qualifies".
26. I find that the issue with reference to the classification has been properly considered by the Tribunal in the aforesaid case. Furthermore, it was informed by both the sides that the appeal filed by the assessee against the said decision has been dismissed by the Supreme Court. Since the view of the Tribunal has been upheld by the Apex Court, I do not feel it necessary to refer it to a larger Bench to decide the issue of classification as proposed by the Hon'ble Member (Judicial). Accordingly, the view expressed by the Hon'ble Vice President is concurred with and file is sent to the original Bench to pass an appropriate order accordingly.
Sd/-
G.A. Brahma Deva Member (J) Appeal No. E/2304/94-D:
A.C.C. Unni, Member (J)
27. In the light of the majority opinion it is held that 'Pan chutney' will be classifiable under Tariff Heading 2107 and the Appeal is rejected.