Custom, Excise & Service Tax Tribunal
M/S. Cadchem Laboratories Ltd vs Cce, Chandigarh on 30 August, 2013
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST BLOCK NO.II, R.K. PURAM, NEW DELHI-110066.
Court No. II DIVISION BENCH
Appeal No. E/2484/ 2011
(Arising out of OIO No. 47/CE/CHD-II/2011 dated 01/08/2011 passed by the Commissioner Central Excise, Chandigarh-II)
Reserved on: 22/03/2013
Pronounced on:30/08/2013
M/s. Cadchem Laboratories Ltd. Appellant
Vs
CCE, Chandigarh Respondent
Apeal No. E/23/2011
(Arising out of OIO No.68/CE/CHD-II/2011 dt.30/09/2011 passed by Commissioner Central Excise, Chandigarh-II)
M/s. Cadchem Laboratories Ltd. Appellant
Vs
CCE, Chandigarh Respondent
Present for the Appellant: Shri Devinder Sharma, Advocate
Present for the Respondent: Shri Devender Singh, AR
Coram: Honble Mr.D.N.Panda, Judicial Member
Honble Mr.MANMOHAN SINGH, Technical Member
FINAL ORDER NO.57424-57425/2013
PER: D. N. PANDA
1. Both the appeals give rise to the common questions as to whether niacin manufactured by the appellant and used in manufacture of niacin feed premix is liable to excise duty valuing that goods under Rule 8 of the Central Excise Valuation (Determination of price of Excisable Goods) Rules 2000 and as to whether the appellant is entitled to duty exemption on niacin under Notification No. 10/96-CE dated 23/07/1996. So also the question whether cenvat credit of duty is available to the appellant arises in these appeals.
2. In appeal No. E-23/2012 duty demand of Rs.53,46,393/- was levied followed by other consequences of law for the period August 2010 to March 2011 u/s 11A of the Central Excise Act 1944 (herein after referred to as the Act) denying benefit under the aforesaid notification and recovery thereof was ordered with interest. So also penalty of Rs. 53,46,393/- was imposed on the appellant under Rule 25(1) (a), (b) & (d) of the Central Excise Rules, 1944 read with Section 11AC of the Act.
3. In appeal no E-2484/2011 consequence of adjudication was also similar for the period August 2009 to July 2010 raising duty demand of Rs.50,70,613/- denying duty exemption under the above notification followed by other consequences of law. Interest was levied on the demand and penalty of Rs.50,70,613/- was also imposed.
FACTUAL MATRIX
4.1 Admittedly averment of the appellant in para 3 of statement of facts of Appeal Memo in appeal No. E-23/2012 is that it was job worker for Jubilant Organosys Limited to manufacture Niacin, a dutiable goods liable to duty @10% and classified under the Chapter heading 2936 29 29 and such niacin captively consumed in the manufacture of niacin feed premix classifiable under chapter heading 2309 90 90 of Central Excise Tariff Act, 1985 and liable to nil rate of duty. Niacin was cleared without payment of duty conceiving that the pemix was animal feed for which niacin was exempt from duty under Notification No. 10/96-CE dated 23/07/1996.
4.2 Revenue denied above claim of the appellant on the ground that the premix manufactured by the appellant was not animal feed. Such stand of Revenue gave rise to the aforesaid consequences in adjudication.
4.3 Appellant admitted in its letters dated 17.6.2010 and 29.7.2010 addressed to jurisdictional Central Excise Authority that Niacin Feed Premix was not animal feed but was an ingredient to manufacture or prepare such feed. Relevant extracts from the said letters which finds place in adjudication order is re-produced below for appreciation:-
Letter dated 17.06.2010
3. It is further submitted that starch is added in the product to impart better mixing characteristics to the product when it is added to the animal feed.
Letter dated 29.07.2010
5In the case of Niacin Feed Premix, goods are either sold as such from depots or used for further processing in the manufacture of Animal Feed which is exempted from excise duty. [emphasis supplies]
4.4 According to Revenue, information available on the website of the appellant disclosed that Brolay N95 was the brand name of the niacin feed premix for marketing which is added to the animal feed. Such premix was not animal feed which remained undisputed by the appellant. Condition of the Notification No. 10/96-Ce dated 23/07/1996 was that the goods manufactured by an assessee if consumed within the factory of its production in the manufacture of animal feed, the goods so consumed is exempt from duty. But the appellant failing to fulfil such mandatory condition was not entitled duty exemption on the niacin not used in manufacture of animal feed. Appellants reliance on the judgement in the case of GOI Versus Indian Tobacco Association 2005 (187) ELT 162 (SC) claiming liberal construction did not get appreciation by learned Adjudicating Authority.
4.5 According to Revenue, statement dated 31.08.2010 recorded form Sh. Sunil Dutt, Authorised signatory of the appellant as well as the details of the product Brolay N95 available on the website of M/s. Jubilant Organosys Limited indicated that niacin feed premix was manufactured by appellant and such premix not being consumed within the factory of its production to manufacture animal feed, it does not fall within the scope of the exemption notification. Accordingly learned adjudicating authority held that scope of the notification can not be expanded to cover the goods not intended to be exempted by the notification following apex court Judgment in RAJASTHAN SPG. AND WVG. MILLS LTD. Versus COLLECTOR OF C. EX., JAIPUR reported as 1995(77)ELT 474(SC). Honble Court in Para 16, of the Judgement held as under:-
16. Lastly, it is for the assessee to establish that the goods manufacturted by him come within the ambit of the exemption notification. Since it is a case of exemption from duty, there is no question of any liberal construction to extend the term and the scope of the exemption notification. Such exemption notification must be strictly construed and the assessee should bring himself squarely within the ambit of the notification. No extended meaning can be given to the exempted item to enlarge the scope of exemption granted by the notification. (Emphasis added)
4.6 Learned Adjudicating Authority relied on the judgement in the case of CCE VS. Modi Rubber reported as 2001 (133) ELT 515 (SC) to support his decision of denial aforesaid. A three Judges bench in Para 7 of the Judgement held as under:-
7..It could not be the underlying intention of notification to grant the relief of duty on inputs as well as the corresponding outputs. Exemption notification cannot be unduly stretched to produce unintended results in derogation of the plain language emloyed therein. (Emphasis added)
4.7 According to learned adjudicating authority, the appellant was also not entitled to the duty exemption under the above said notification following the ratio laid down in CCE VS Mahaan diaries, reported as (2004) 166 ELT 23(SC). Iin Para 8, Honble Supreme Court held as under:
8. It is settled law that in order to claim benefit of a Notification a party must strictly comply with the terms of the Notification. If on wordings of the Notification the benefit is not available then by stretching the words of the Notification or by adding words to the Notification benefit cannot be conferred. The Tribunal has based its decision on a deciosion delivered by it in Rukmani Pakkwell Traders v, CCE, Trichy [1999 (109) E.L.T. 204]. We have already overruled the decision in that case. In this case also we hold the decision of the Tribunal is unsustainable. It is accordingly set aside. (Emphasis added)
4.8 He further relied on the judgment in the case of Union of India Versus Dharamendra Textile Processors reported as 2008 (231) ELT 0003 (SC) to deny duty exemption claimed by the appellant under the aforesaid notification. Honble Supreme Court in Para 13 of the judgment held as under:-
13. It is a well-settled principle in law that the court cannot read anything into a statutory provision or a stipulated condition which is plain and unambiguous. A statute is an edict of the legislature. The language employed in a statue is the determinative factor of legislative intent. Similar is the position for conditions stipulated in advertisements. [Emphasis supplied]
4.9 While learned Adjudicating Authority held that the appellant was not entitled to duty exemption under the aforesaid notification, he addressed the question of valuation of the goods also. According to him, the SCN itself indicated that the valuation of the goods was required to be done in terms of Rule 8 of the Central Excise valuation (Determination of Price of Excisable Goods) Rules, 2000 for which assessable value was to be worked out on the basis of CAS-4.
4.10 Appellant vide its letter dated 29.08.2011 supplied cost of production data certified by its Chartered Accountant claiming that the same was in accordance with CAS-4. But ld. Authority below found that cost of production of the goods was determined by appellant based on cost of Beta Piocline a different product manufactured by one M/s Jubilant Life Sciences Ltd. Gajraula, U.P. added by job charges thereto. Accordingly, he held that cost of manufacture of the intermediate goods needed to be determined on the basis of landing cost of all the raw materials in the factory of the appellant plus expenses on account of various parameters like Material Consumed, Direct Wages and Salaries, Direct Expenses, Works Overhead, Quality Control Cost, Research and Development Cost, Administrative Overhead, (related to production), Opening Work in Progress, Closing Work in Progress, input received free of cost etc. as well as profit margin of the appellant.
4.11 It was observed by the learned Adjudicating Authority that the appellant had taken the value of raw material Beta Piocline as the cost of production and not the landed cost of raw materials of intermediate goods manufactured and secondly, the details of the job charges at their own end was not supplied by appellant to determine cost of manufacture thereof. Therefore, it was ordered that cost of production of the said goods was to be re-determined as per CAS-4.
5.1 On behalf of the appellant, it was submitted that niacin manufactured by the appellant was captively used in the manufacture of animal feed supplement and such supplement is animal feed. Accordingly benefit of notification aforesaid is not deniable to the appellant. To support this contention, reliance was placed by appellant on the three Judges bench decision of Apex court in the case of Sun Export Corporation vs. CC, Bombay-1997 (93) ELT 641 (SC). This decision was made on 7.7.1997. According to the appellant, in para 13 of the judgement, the principle laid down by Honble Bombay High Court was approved by the apex court holding that animal feed supplement shall enjoy the benefit of exemption. So, also in the case of CCE, Bangalore vs. Tetragon Chemie Pvt.Ltd.-2001 (132) ELT 525 (SC) rejecting appeal of Revenue, three Judges Bench allowed stand of assessee and order of Tribunal reported in 2001 (138) ELT (Tri-LB) was approved. The decision was made on 24.7.2001. On the basis of these two judgements, it was submitted that animal feed supplement used in animal feed is covered by heading 2302 of Central Excise Tariff Act, 1985 and appellant was eligible to the notification benefit.
5.2 It was alternate argument on behalf of the appellant that in case the Tribunal denies the exemption it deserves to be held that duty payable on Niacin shall enjoy cenvat credit and valuation of the goods to be made in terms of CAS-4. So also when the appellant made full disclosure of the fact to the investigating authority, interpretation difficulty having arisen leading the appellant to believe bonafide that animal feed supplement was animal feed and niacin manufactured by the appellant enjoys exemption granted by the aforesaid notification, there should not be penalty on the appellant.
6.1 Repelling aforesaid propositions of the appellant, it was submitted on behalf of Revenue that the appellant manufactured niacin feed premix using niacin a dutiable goods without animal feed being manufactured by use of such niacin. Accordingly, it was not entitled to the duty exemption on niacin. Premix manufactured by the appellant was not animal feed. Niacin was not consumed in the factory of the appellant to manufacture animal feed. This has violated condition of the exemption notification aforesaid. Animal feed and niacin feed supplement are distinct goods and cannot be interpreted to be one and the same goods due to their very nature and marketing of the premix under a brand name as stated herein before. Both are recognised in market distinctly as well as by law for which appellant shall not enjoy the exemption benefit in respect of niacin. Chapter 23 of the Central Excise Tariff Act, 1985 has undergone amendment and the impugned periods are governed by such amendment recognising different goods under different subheadings under chapter 23. Premix was an ingredient to animal feed along with other ingredients. Such premix was subject to nil rate of duty. No cenvat credit is admissible to the appellant.
6.2 Learned representative for Revenue emphasised that the product Brolay N95 cleared by the appellant had following features:
Composition:
Contains Niacin Feed Grade Not less than 95%
Features:
Brolay-N95 is a white crystalline odourless powder that has excellent flawability and niacin content not less than 95%
Benefits:
* Prevents bone abnormality
* Prevents black tongue disease
* Prevents dermatitis
* Improves hatchability
* Enhances egg production
* Maintains uniform growth
Recommended Inclusion Rate:
Chicks : 35-45 g/MT of feed
Broilers : 35-40 g/MT of feed
Layers : 35-40 g/MT of feed
Breeders : 35-40 g/MT of feed
Thus, it shows that the impugned products is added to animal feed & is not animal feed by itself.
It was further submitted on behalf of Revenue that as per the explanatory notes under Heading 23.09 HSN (pp. 177-178), the preparations for a kind used in animal feeding have been explained as under:
2309-Preparations of a kind used in anima feeding
2309.10- Dog or Cat food, put up for retail sale
2309.90 Other
This heading covers sweetened forage and prepared animal feeding stuffs consisting of a mixture of several nutrients designed:
(1) To provide the animal with a rational and balanced daily diet (complete feed)
(2) To achieve a suitable daily diet by supplementing the basic farm produced feed with organic or inorganic substances (supplementary feed): or
(3) For use in making complete or supplementary feeds.
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(I) Sweetened Forage
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(II) Other Preparations (A) Preparations designed to provide the animal with all the nutrient elements required to ensure a rational & balanced daily diet (Compete Feeds)
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(B) Preparations for supplementing (balancing) Farm- Produced Feed) (Feed Supplements) (C) Preparations for use in making the complete feeds for supplementary feeds described in (A) and (B) above These preparations, know in trade as premixes, are, generally speaking, compound compositions consisting of a number of substances (sometimes called additives) the nature and proportions of which vary according to the animal production required. These substances are three types:
(1) Those which improve digestion and, more generally, ensure that the animal makes good use of the feeds and safeguard its health: Vitamins or provitamins, amino-acids, antibiotic, coccidstats, trace elements, emulsifires, flavourings and appetizers, etc. (2) Those designed to preserve the feeding stuffs (particularly the fatty components) until consumption by the animal: stabilizers, antioxidants, etc. (3) Those which sever as carriers and which may consist either of one or more organic nutritive substances (manioc or soya flour or meals, middlings, yeast, various residues of the food industries, etc. or of inorganic substances (e.g., magnesite, chalk, kaolin, salt phosphates).
The concentration of the substances described in (1) above and the nature of the carrier are determined so as to ensure, in particular, homogeneous dispersion and mixing of these substances in the compound feeds to which the preparations are added.
6.3 According to ld. JCDR, a two Judges bench of Apex Court in the case of CCE, Guntur vs. Surendra Cotton Oils Mills & Fert. Co.-2001 (127) ELT 3(SC) decided on 15.12.2000 defined what is animal feed in para 4 and 5 of the judgment as under which supports case Revenue. For convenience of reading the said paras are reproduced as under:-
4. Be it recorded that the term animal feed has not been defined in the Tariff Act and as such we are left with no alternative excepting noting the ordinary dictionary meaning of the word or the user and understanding of the word in common parlance. In IS 9703-1980 it is found in para 0.2 as below:-
In the field of animal feeds manufacturing industry a large number of feeding stuffs (ingredients) are utilised, which may be by-products of other industries and also subjected to certain processing before utilization.
5. IS 9703 thus recognises a distinction between the feeding stuffs (ingredients) and animal feed. The understanding of the Indian Standard Institution as referred in IS 9703, thus goes to suggest that ingredients by themselves cannot be termed to be animal feed. It may be a component or ingredient or a basic stuff, but it cannot be termed to be animal feed. A very common example on this scope remains that of oil cakes whereas oil cakes are used as protein supplement in livestock food stuffs and mixed with the animal feed, oil cakes by themselves cannot be termed to be an animal feed, since animal feed not only consists of its ingredients but the total bulk in form, shape and size which would feed an animal. Animal feed thus cannot be an ingredient or part of the feed but in its entirety and as a whole taken together with even vitamins as calcium mix. [Emphasis supplied]
7 Heard both sides and perused the record. Noticing that both appeals having common fact and cause of action, those were heard analogous and disposed by this common order.
8 From the aforesaid factual matrix it is clear that stand of Revenue is niacin feed premix manufactured by the appellant was not animal feed for which it is not entitled to the duty exemption on niacin. Record also reveals that animal feed premix was branded as Proolay N95 which is distinct goods without that being an animal feed. Appellant failed to prove that it manufactured animal feed in essence and substance what that is commonly understood in the market. Niacin feed premix and animal feed are two distinct goods as may be appreciated from their nature and class as is revealed from Chapter 39 of Central Excise Tariff Act, 1985 because chapter 23 has recognised preparation of a kind used in animal feeding without that being animal feed. That chapter does not say animal feed supplement is same as animal feed. The said chapter in so far as that is relevant for these appeals is reproduced below for appreciation with the clear proposition that there was no classification dispute in the present appeals:
CHAPTER 23 Residues and waste for the food industries; prepared animal fodder NOTE Heading 2309 includes products of a kind used in animal feeding, not elsewhere specified or included, obtained by processing vegetable or animal materials to such an extent that they have lo0st the essential characteristics of the original material, other than vegetable waste, vegetable residues and by-products of such processing:
Tariff Items Description of goods Unit Rate of duty
(1) (2) (3) (4)
2309 PREPARATIONS OF A
KIND USED IN ANIMAL Kg. Nil
FEEDING
2309 10 00 - Dog or cat food, put up
for retail sale Kg. Nil
2309 90 Other:
2309 90 10 --- Compounded animal feed Kg. Nil
2309 90 20 --- Concentrates for compound
animal feed Kg. Nil
--- Feeds for fish (prawn, etc.):
2309 90 31 --- Prawn and shrimps feed Kg. Nil
2309 90 32 --- Fish meal in powdered form Kg. Nil
2309 90 39 --- Other Kg. Nil
2309 90 90 --- Other Kg. Nil
9 To appreciate object and mandate of the Notification No. 10/96-CE., dated 23/07/96 as well as specific condition prescribed therein to be fulfilled to avail duty exemption in respect of the goods manufactured and consumed within the factory to manufacture animal feed, in so far as that is relevant for the purpose of decision in these appeals is extracted as under:
NOTIFICATION NO 10/19996-Central Excise, DATED: July 23, 1996 In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excises and Salt Act, 1944 (1 of 1944), the Central Government being satisfied that it is necessary in the public interest so to do, hereby exempts all goods falling within the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), from the whole of the duty of excise leviable thereon which is specified in the said Schedule, subject to the condition that the said goods are consumed within the factory of their production in the manufacture of goods specified in column (3) of the Table hereto annexed and falling under Chapter, heading No. or sub-heading No. of the said Schedule as specified in the corresponding entry in column (2) of the said Table.
TABLE S. No. Chapter or heading No. or sub-heading No. Description (1) (2) (3) xx xx Xx
4. 23
Animal feed xx xx Xx (Notification No. 10/96-C.E., dated 23-7-1996 as amended by Notifications No. 11/2000-C.E., dated 1-3-2000, No. 18/2006-C.E., dated 1-3-2006, No. 48/2006-C.E., dated 30-12-2006, No. 39/2011-CX, dated 12-09-2011 and No. 25/2012-C.E., dated 08-05-2012.) 10 Admittedly the contextual facts depict that Naecin feed premix was manufactured by the appellant out of niacin manufactured by it without any classification dispute in the present appeals as stated hereinbefore. Niacin feed premix is a mixture of chemicals and such ingredient was to be added to animal feed which is not in dispute. The premix perse is not an animal feed what that is normally under stood in market. Mandatory requirement of the notification aforesaid is that niacin should be consumed within the same factory to manufacture animal feed. The premix manufactured by the appellant was a preparation of a kind used in animal feeding and that is covered by the tariff heading 2309 of the Central Excise Tariff Act, 1985. Rules of classification is not decisive for grant of exemption which is governed by the terms of the grant prescribed therein. Essential condition of the notification as above cannot be given go bye to claim exemption. Meaning of the term animal feed has been defined by Apex Court in the case of Collector of C. Ex., Guntur V. Surendra Cotton Oil Mills & Fert. Co 2001 (127) ELT 3 (SC), distinguishing the ratio laid down in the case of Sun Export Corporation V. Collector 1997 (93) ELT 641 (SC) held as under:
4. Be it recorded that the term ?animal feed has not been defined in the Tariff Act and as such we are left with no alternative excepting noting the ordinary dictionary meaning of the word or the user and understanding of the word in common parlance. In IS 9703-1980 it is found in para 0.2 as below :-
In the field of animal feeds manufacturing industry a large number of feeding stuffs (ingredients) are utilised, which may be by-products of other industries and also subjected to certain processing before utilisation.
5. IS 9703 thus recognises a distinction? between the feeding stuffs (ingredients) and animal feed. The understanding of the Indian Standard Institution as referred in IS 9703, thus goes to suggest that ingredients by themselves cannot be termed to be animal feed. It may be a component or ingredient or a basic stuff, but it cannot be termed to be animal feed. A very common example on this score remains that of oil cakes - whereas oil cakes are used as protein supplement in livestock food stuffs and mixed with the animal feed, oil cakes by themselves cannot be termed to be an animal feed, since animal feed not only consists of its ingredients but the total bulk in form, shape and size which would feed an animal. Animal feed thus cannot be an ingredient or a part of the feed but in its entirety and as a whole taken together with even vitamins and calcium mix.
6. The whole? substance thus is the mix and not any specific item as such. Reference has been made to the decision of this Court in Sun Export Corporation, Bombay v. Collector of Customs, Bombay & Anr. - 1997 (93) E.L.T. 641 (S.C.) = 1997 (6) SCC 564 wherein this Court recorded with concurrence the observations of the Gujarat High Court in the case of Glaxo Laboratories (India) Ltd. v. State of Gujarat [1979 (43) STC 386 Gujarat] to the affect that it cannot be said that animal feed concentrates are not animal feed. In the same manner products which supplement animal feed and which generally added to animal feed are also covered by the generic term animal feed.
7. The situation however, is not the same in the instant matter. In the case of Sun Exports Corporation (supra), it was animal feed and animal feed supplements and by reason of the exemption notification for animal feed, this Court came to a definite conclusion that animal feed includes animal feed supplements and as such M/s. Sun Exports Corporation was declared to be entitled to refund under the relevant exemption notification. The brief facts as appears from the decision (at page 565) leading to these appeals are as follows:
The appellant Corporation imported six consignments of goods [Pre-mix of Vitamin AD-3 Mix (feed grade)] at Bombay and seven consignments of similar goods at Calcutta. These consignments were assessed to duty under the heading 29.01/45(17) of the Customs Tariff Act, 1975 read with Item 68 of the Central Excise Tariff Act, 1985. The Corporation paid the duty. Later on, it claimed refund of the duty paid as countervailing duty contending inter alia that the goods imported were classifiable under Item 23.01/07 as Animal Feed and as per Notification No. 234/82-C.E., dated 1-11-1982, those goods were exempted from levy of duty. Accordingly, applications were filed for refund of the countervailing duty/additional duty paid on such imports. The Assistant Collector (Refunds) concerned rejected the claim of the appellant holding that the goods imported were assessable to duty under the heading 29.01/45(17) of the then prevailing First Schedule to the Customs Tariff Act read with Item 68 of the Central Excise Tariff and therefore, the Exemption Notification dated 1-11-1982 was of no avail to the Corporation.
3. Aggrieved by the rejection of refund applications the?appellant preferred separate appeals one set before Collector of Customs (Appeals), Bombay and another set before Collector of Customs (Appeals), Calcutta. The appellate authority at Bombay accepted the claim of the appellant and granted the relief holding that the goods imported were in the nature of Animal Feed Additives and as such fall under the heading 23.01.07. However, the appellate authority at Calcutta rejected the claim of the appellant and dismissed the appeal accepting the view of Assistant Collector (Refunds).
8. It is on? this factual backdrop this Court in paragraph 14 of the report observed as below:
14. We have carefully gone through the minority and the?majority views of the Tribunal. We find that Shri K. Gopal Hegde who has dealt with the issue in extenso, has taken note of the ratio laid down by the Bombay and Gujarat High Courts as well as a subsequent decision of the Tribunal itself in CCE v. Punjab Bone Mills [1988 (38) E.L.T. 389 (Tribunal) (Appeal No. 615/85-C with E/Cros/64/1988-C)] for coming to a conclusion that the goods imported by the appellants are eligible for exemption under Notification No. 234/82. However, this view was the minority view and, therefore, the exemption claimed by the appellant was denied. The majority view, it appears, was influenced by the fact that a decision of the Tribunal in Aries Agro-Vet Industries (P) Ltd. v. CCE [1984 (16) E.L.T. 467 (Tribunal)] taking a similar view, was challenged by filing Civil Appeal No. 17 of 1984 and that was dismissed at the admission stage. It must be noted that presumably the amendment to Exemption Notification No. 234/82 by a subsequent Notification No. 6/84-C.E., dated 15-2-1984 was not before the Court for consideration. The majority view also failed to take note of the subsequent amendment to the main exemption notification as well as the effect of the amendment as noticed by the Bombay High Court in Glindia Ltd. case [1988 (36) E.L.T. 479 (Bom.)]. Since we have already extracted in extenso the decision of the Bombay High Court, we do not think it necessary to repeat the same.
9. While it is true that the decision in? Sun Exports Corporations case (supra) delved into animal feed but by reason of the factual situation as noticed above, the same is clearly distinguishable and, in fact, does not lend any assistance in the matter in issue.
10. It is on this perspective it cannot but be? held that the oil cakes and rice bran as exported by the respondents cannot thus be termed to be animal feed warranting invocation of Heading 21 of the export tariff under the Customs Act. 11 There were no technical literature of the product available on record to appreciate that niacin feed premix is same as animal feed. Nothing could be proved by appellant to the effect that niacin feed premix was sold as animal feed in the market. Goods of each kind have its own characteristic, nature and use proving its own identity. Accordingly an ingredient cannot be construed to be same goods that emerge by combination of several ingredients. Following Apex Court decision in Surendra Cotton Oil case above, it is inconceivable how premix shall enjoy duty exemption when there was no fulfilment of essential condition of the Notification aforesaid.
12 The case of Tetragon before larger bench of Tribunal reported in 2001 (138) ELT 414 (LB) relates to the classification as to whether preparations of a kind used in animal feeding consisting of one or more vitamins mixed with diluents etc., are classifiable under Heading 29.36 as held in the case of M/s Ranbaxy laboratories Limited or under Heading 23.02 as held in the case of M/s Glaxo Labs (I) Limited and m/s Roche Products Limited. In appeal by revenue to Apex Court, in the judgment reported as Collector of Central Excise, Bangalore V. Tetragon Chemie P. Ltd - 2001 (132) ELT 525 (SC) categorically stated that the short question that arises for consideration in the present case relates to the products of the respondents which they represent as being animal feed supplements. It is not in dispute that the products of the respondents consist of one or more vitamins mixed together with dilutants and these products are used in a small quantity for improving animals performance. In Tetragons case the Collector of Central Excise came to the conclusion that the product did not fall under Entry 2302 because the product had to be added in a small quantity to the main feed to get desired performance of the live stocks or to enhance the performance of the live stocks beyond the normal levels. He further observed that he would have accepted the plea of the assessees that the products were animal feed had the product manufactured by them been directly used as such for animals feeding. The claim of the assessee was rejected because according to the Collector the products merely were to enhance the performance of live stocks by addition of these supplements to the animal feeds. Honble Court observed that the Collector regarded the products in question as animal feed supplements. On appeal to the Tribunal it came to the conclusion that animal feed supplements were rightly included in Tariff Item 2302 being preparation of a kind used in animal feeding including dogs and cats food. Apex Court agreed with the conclusion of the Tribunal that even food supplements like the products of the assessee which are used in animals feeding would fall under the Heading 2302. Thus it is abundantly clear that Apex Court judgment in the case of Tetragon was on a context different from the issue of exemption notification benefit which is involved in the present appeals.
13 The exemption from payment of central excise duty granted under notification dated 23/7/1996 is different from the notification No. 234/82 dated 01/11/1982 withamendment thereto which was subject matter of adjudication before apex Court in the case of Sun Export Corporation V. Collector of Customs, Bombay 1997 (93) ELT 641 (SC).
14 The Show Cause Notice shows manufacturing process of Niacin granule and powder is as under:
Stage 1 Beta picoline, Sulphuric acid and mother liquor are mixed in mixing vessel Stage 2 The material is subject to oxidation where nitric acid is added.
Stage 3 Crystallized Stage 4 Centrifugation. The liquor which is extracted is added to stage 1 Stage 5 Solid from stage 4 is dissolved in water and material is precipitation with ammonia gas Stage 6 Centrifugation and material is washed with RO water.
Stage 7 Drying Stage 8 Compaction in compacter Stage 9 Material is multimilled Stage 10 Sifting and packing. The granules retained on the top of sieve are packed as granules and the powder is packed as niacin powder.
15 Similarly Show Cause Notice also shows the process involved in manufacture Niacin feed-premix is as under:
Stage 1 Beta picoline, Sulphuric acid and mother liquor are mixed in mixing vessel Stage 2 The material is subject to oxidation where nitric acid is added.
Stage 3 Crystallized Stage 4 Centrifugation. The liquor which is extracted is added to stage 1 Stage 5 Solid from stage 4 is dissolved in water and material is precipitation with ammonia gas Stage 6 Centrifugation and material is washed with RO water.
Stage 7 Drying Stage 8 The material is multimilled Stage 9 The material is blended with starch powder in a ration so as to have about 5% starch in the final product.
Stage 10 The power is packed as niacin feed pre-mix.
16 Record reveals that on being questioned by Revenue as to at what stage of the segregation of two goods i.e. Niacin & Niacin feed premix takes place, the authorized signatory Sh. Kishore Deshmukh replied that the stage was 8. On being specifically asked about the difference between the Niacin before mixing with Starch and the Niacin which is cleared on payment of duty Sh. Deshmukh stated that both the product are Niacin except that the Niacin which is consumed in the manufacture of Niacin Feed Premix is not subjected to the quality checks like Sulphate content and that is not monitored because the same is to be used for manufacture of a product which is not used for human consumption. Both products were different from the manufacturing stage itself.
17 Aforesaid factual matrix, ratio laid down by apex Court in Surendra Cotton Oil Mill case (supra), rules of interpretation relied on by learned Adjudicating Authority exhibit that the appellant only manufactured a mixture of chemicals in its factory which is called as Niacin Feed Premix but did not manufacture animal feed in the same factory using niacin. Therefore it was not eligible to the duty exemption under the notification aforesaid. Legislature consciously granted duty exemption to the intermediate product if such product is used in the same factory to manufacture the notified finished goods as tabulated under column 3 to the Table under Notification No. 10/96-CE dated 23/7/1996. Such exemption being granted at public cost that cannot be liberally construed to grant undue benefit to the appellant. Therefore learned adjudicating authority has rightly denied benefit of duty exemption on niacin following the apex Court decisions stated by him in the adjudication order.
18 In view of the above, duty shall be levied on niacin in accordance with law and the goods in question shall be valued in accordance with CAS -4. No cenvat credit is available on niacin being used in the goods subjected to nil rate of duty. Interest on duty demand shall follow. No penalty shall be levied on the appellant for the confusion of the legal position as has been noticed above. Both the Appeals are disposed accordingly.
(Pronounced in the open court on 30.08.2013) (MANMOHAN SINGH) (D.N. PANDA) TECHNICAL MEMBER JUDICIAL MEMBER *satish* ??
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E-2484/2011 and E-23/2011 21 ]