Customs, Excise and Gold Tribunal - Mumbai
Kolety Gum Inds. vs Commissioner Of Central Excise on 16 February, 2005
Equivalent citations: 2005(100)ECC97, 2005(183)ELT440(TRI-MUMBAI)
ORDER S.S Sekhon, Member (T)
1.1 The issue involved in the aforesaid appeal is regarding the classification and demand of duty on the 'gaur dal flour". By the impugned Order-in-Original, the Commissioner of Central Excise, Vapi had confirmed the demand of duty for the period from 28.2.97 to 31.3.2000 raised in the show cause notice dated 11.2.2002. The Commissioner also imposed a penalty equal to the amount of duty confirmed by the impugned order.
1.2 This 'gaur dal flour' is obtained by the following process -
"The appellants purchase split gaur dal. Water is added to purchase 'split gain dal' so as to soften it and pulverize the same, in a pulverizer for fine mesh. Then that is sieved and dried in centrifuged dryer. The flour so obtained is mixed and packed and ready for sale."
1.3 The Commissioner in the impugned order classified 'guar dal flour' under Sub-Heading No. 1301.10 of the Central Excise Tariff Act, 1985 & demanded duties with interest and imposed penalty. Hence this appeal.
2.1 After hearing both sides and considering the material it is found -
a) The appellants are manufacturing Tamarind, Kernel Powder and Gaur Dal Flour.
b) Guar plant, Cynamopsis tetrrafonolabus, a pod bearing legume produces seeds. The seed coats are removed by heating and Milling. The endosperm is separated from the germ by various milling process. The Milled endosperm, which is in flour powder form is commercial "guar gum" powder or as is seen form. The Kirk-Othmer Encyclopedia of Chemical Technology 4th Edition Vol. 12. The appellants are also obtaining the flour of the Guar Dal (Seeds split) procured by them. The flour is not being found to have undergone any chemical treatments to modify the same and or to improve or stabilise their mucilaginous properties (viscosity, solubility etc). Milled simplicitor powder is resulting in "Guar dal flour".
c) After ascertaining the nature of the entity under classification dispute herein, as above, one has to proceed to decide an appropriate classification :-
i) Section II of HSN and CETA 1985, Cover Vegetable Products i.e the entity being a vegetable product has to be first ruled out or ruled in a Chapter under this Section. Chapter 7 is ruled out and Chapter 11 has to be examined due to exclusion of application of Chapter note 2(c) of chapter 7 which reads as -"(c) flour, meal and powder of the dried leguminous vegetables of Chapter 7 (Chapter 11)
ii) Since it is a leguminous plant seed being milled, Chapter 11 as indicated vide not 2(c) to Chapter 7 is required to be examined.
iii) Since it is not prepared, modified flour, it is not excluded by note 1 to Chapter 11 of CETA 1985 General Note No. 3 of HSN which stipulates, what are to be covered and concluded under that chapter it reads as-
"(3) Products obtained by submitting new materials of other chapters (dried leguminous vegetables, potatoes fruit etc) to process similar to these indicated in paragraph (1) or (2) above."
Para (1) & (2) provide for milling, sewing & other process and the reading of the notes induces us to consider the process in this case conducted on leguminous Guar Dal to be covered as milling industry products covered under chapter 11 of CETA 1985.
iv) Once classification is arrived at as covered under chapter 11, the appropriate subheading would be 1101.00.
(c) Proceeding to examine the alternate of classification under Chapter 1301, it is found -
i) Chapter 13 of HSN is not fully aligned or subdivided into the subheading as in HSN. The Sub heading is CETA 1985 & HSN are CE.TA 1985 HSN 13.01 Lac; gums, resins & other vegetable soaps and extract 1301. 10 in relation to the manufacture of which any person in ordinary ..... on with the ......
13.01 Lac Natural Gums, RESINS, GUM RESINS & OLEORES1NS (FOR EXAMPLE .......) 1301. 10 Lac 1301. 20 Gum 1301.90 -others 130 1.90 other 13.02 -VEGETABLE SUPS AND EXTRACTS ......SUBSTANCES PECTINATES; AGAR-AGAR AND OTHER MUCILAGES AND THICKNERS, WHETHER OR NOT MODIFIED, DERIVED FROM VEGETABLE PRODUCTS. and ... -
- Vegetable Sups Mucilages and thickners whether or not modified derived from Vegetable products.
1302.31- Agar Agar 1302.32- Mucilage & thickners whether or not modified derived from locus bean locust bean seeds or guar seeds.
1302.33 - other.
This comparative reading would indicate that the coverage under heading 1301 of CETA 1985 is selective, called out of the detailed list of products covered under heading 1301 & 1302 of HSN. While Lac. gums (without qualified natural as in HSN) resin (minus Oleo resins) and other Vegetable Saps and Extracts are only covered under CETA 1301. The entire group consisting of 'OTHER MUSCILAGES AND THICKNESS, WHETHER OR NOT MODIFIED DERIVED FROM VEGETABLE PRODUCTS' of heading 1302 of HSN are not included by the entry 1301 in CETA 1985. The coverage of 1301 if CETA is clipped. This snipping would induce a finding that entities falling under 1302.32 of HSN. i.e. Muscilage and thickness whether or not modified derived from locust beans, locust bean seeds' or guar seeds would be excluded from heading 1301 of Chapter 13 of CETA 1985. Thus Guar Dal Flour whether milled or further worked to be stabilized will not fall under heading 1301 of CETA 1985.
ii) I) The gums are classified in Encyclopedia of Chemical Technology Kirk Othmer -4th Edition as algal, botanical and microbial. Botanical gums are chiefly classified into two broad categories, namely, seed gums and plant exudates extracts gums. The seed gums are subdivided into guar gum and locust bean gum. The plant exudates extracts cover gum Arabic, gum ghatti, gum karaya, gum tragacanth and pectin. At page 850 of Vol. 12 of the aforesaid Encyclopedia botanical gums are explained in detail. In this page, it is stated as under: -
The botanical gums represent a family of polysaccharides obtained from a wide variety of plant sources. They are subdivided into exudates gums, seed gums, and gums obtained by extraction of plant tissue."
Under the heading "seed gums" at page 854 of the aforesaid Technical Book, guar gum has been explained as under:
Guar Gum: Gaur gum [9000-30-0] is derived from the seed of the guar plant, Cyamopsis tetragonolobus, a pod-bearing nitrogen-fixing legume grown extensively in Pakistan, India, and on a commercial scale since 1946, in the south western United States. During processing, the seed coat is removed by heating and milling. The endosperm, comprising approximately 40% of the seed, is then separated from the germ by various milling processes. The final milled endosperm, which is commercial guar gum, has a typical analysis of crude fiber, 2.5%; moisture, 10-15%; protein, 5-6% and ash, 0.5-0.8%.
Thus, the term 'gums' as used in heading 1301 of CETA 1985 has to be interpreted. It is not qualified by the word "Natural" as in HSN heading 1301. Surely it cannot be read in CETA 1985 to include even artificial gums. Tariff Heading No. 13.10 does not cover seed gum. It would cover gum which is / are in the nature of plant exudates /extracts -Significance of the word "other" as appearing in expression "other vegetable saps and extracts" cannot be ignored while reading the Tariff entry.
The coverage of the goods under Heading No. 13.01 would be of "Lac; gums, resins and other vegetable saps and extracts"
The term "gums" as appearing in the aforesaid expression should be in the nature of plant exudates /extracts since the other term like "resins, vegetables saps and extracts" as appearing in the expression, description of the goods under Heading No. 13.10 are of plant saps /extracts. This submission of the Ld. Advocate is fully supported by the principle of interpretation known as Noscitur a Sociis. Reliance placed by the Advocate on the Supreme Court decision in Pardeep Aggarbatti, Ludhiana v. State of Punjab and Ors. -(1997) 8 SCC 511 where the principles of Noscitur a Sociis was applied for the purpose of interpretation of taxing entry would squarely apply in interpreting the entry 1301 in CETA 1985 in this manner as it is found that, in the aforesaid case of Pardeep Aggarbatti, the appellant was a registered dealer in "Dhoop and agarbatti". The entry No. 16 of Schedule 'A' to the Punjab General Sales Tax Act, 1948 covered "cosmetics, perfumery and toilet goods excluding tooth paste, tooth powder, kum kum and soap". With effect from 28.9.1979 the new entries introduced in the said Schedule read as under:
16 cosmetics and toilet goods excluding tooth paste, tooth powder, kum kum and soap".
16-A Perfumery including dhoop and aggarbatti"
The Supreme Court after considering the issue as to whether "dhoop" and "aggarbatti" would fall within the meaning of term "perfumery" as appearing in Sl. No. 16 as it stood prior to the amendment held in paragraph 9 and 10 as under:
9. Entries in the Schedules of sales lax and excise statutes list some articles separately and some articles are grouped together. When they are grouped together, each word in the entry draws colour from the other words therein. This is the principle of noscilur a sociis.
10. We are in no doubt whatever that the word "perfumery" in the said Entry 16 draws colour from the words "cosmetics" and "toilet goods" therein and that, so read, the word "perfumery" in the said Entry 16 can only refer to such articles of perfumery as are used, as cosmetics and toilet goods are, upon the person. The word "perfumery" in the context in which it is used has, therefore, no application to "dhoop" and "aggarbatti......."
Thus, by application of principles of Noscilur a Sociss the Supreme Court held that the term "perfumery" as appearing in the company of the words 'cosmetics and toilet goods' would not cover "dhoop" and "aggarbatti". Applying the said principle laid down in the aforesaid decision to the present case, it is found that the term "gums" as appearing in the description of goods falling under Heading No. 13.01 would cover only such gums which are in the nature of plant saps /extracts. As per the dictionary meaning of the terms "resin", "sap" and "extracts", would cover only plant exudates /extracts. They will not cover plant storage products ie seed Endosperm or other storage gums in other plant parts. Therefore, the word "gums" appealing in the company of the words in heading 1301 of CETA 1985 should be confined to only 'gum' which are in the nature and derived from plant exudates /extracts. The 'guar dal flour' being 'a seed gum' and not a plant sap/ extract gum would not be covered by the term 'gums' as appearing in the description of the goods falling under Heading No. 13.01. The entity in dispute cannot be classified under heading 1301 of CETA 1985 as it stands.
d) In view of the above findings, 'guar dal flour' would fall under Heading No. 11.01 only. Submissions of the appellant for classification under 1101 find support from Circular F.No. 10/18/86 CX 1 dated 14.8.1986 issued by Central Board of Excise and Customs with reference to the tamarind kernel powder.
e) This view is also supported by the decision of the CESTAT in the case of Kraps Chem Pvt Ltd v. CCE reported at 2005 (179) ELT 589 and Hindustan Gum & Chemicals Ltd v. Commissioner -2004 (163) ELT 196.
f) The show cause notice dated 11.2.2002 proposes to demand of duty for the period from 28.2.1997 to 31.3.2000, is for the period beyond one year prior to the date of issue of show cause notice. For the purpose of raising the above demand proviso to Section 11A(1) of the said Act had been invoked to sustain the same. In para 12 of the show cause notice, it was alleged that the appellants had contravened the provisions of Central Excise Rules. However, in this paragraph no allegation is found what and whether these contraventions were with intent evade payment of duty. In para 13 of the show cause notice it was alleged that the appellants had manufactured the goods in question, with the aid of power and this act of contravention on the part of the appellants was alleged to be committed by recourse to suppression of facts with an intent to evade payment of Central Excise duty. In para 16(i) of the show cause notice, the first proviso to Section 11A(1) was invoked for the purpose of demanding duty. The Order-in-Original merely confirmed the demand on the ground that the appellants had during the period in question cleared the goods without payment of duty leviable on the goods by suppressing the facts from the department with intent to evade payment of duty. The aforesaid allegation in the show cause notice and confirmation of the same in the impugned order, are factually incorrect. There is no intention on the part of the appellants to evade payment of duty established / existing. During the course of investigation the proprietor of the appellants in Statement dated 6.8.2001 has stated that the appellants had approached the department with the declaration which was not accepted on the ground that Guar Gum /Guar Dal flour are not excisable. The other persons who are in this trade of Guar Gum /Guar Dal flour were declaring the goods as falling under Chapter 11 as product of milling industry. Therefore the appellants had bonafide believed that there was no liability to duty on the goods in question. In this view it cannot be upheld that the appellants had suppressed the facts or contravened the provisions of Central Excise Rules with intent to evade payment of duty. Hence, the invocation of extended period of limitation is incorrect and unsustainable in law. The appellants had maintained regular books of accounts for the Gaur Gum Guar Dal Flour made in the factory and those records were made the basis for raising the demand. Therefore, it is submitted that the appellants had not suppressed the facts to evade the payment of duty including the Central Excise department.
3. In view of the findings, the classification is to be upheld under chapter heading 1101.00 & the duty & interest demands and penalty are to be set aside and appeal allowed.
4. Ordered accordingly.
(Pronounced in Court)