Customs, Excise and Gold Tribunal - Delhi
Amrit Foods (A Division Of Amrit ... vs Cce on 29 March, 2006
Equivalent citations: 2006(106)ECC125, 2006ECR125(TRI.-DELHI), 2006(196)ELT108(TRI-DEL)
ORDER K.C. Mamgain, Member (T)
1. Under Civil Appeal No. 1329 of 2003 filed by M/s Amrit Foods and C.A. No. 7275 of 2003 filed by Revenue, this appeal was remanded by the Hon'ble Supreme Court for disposing of the classification of the products in dispute. Under the said Civil Appeal, The Hon'ble Supreme Court set aside the Final Order No. 262/02-D dated 13.11.2002 of the Tribunal in so far as it pertains to determination of classification of appellant's products and upheld the order of the Tribunal setting aside the penalty imposed under Rule 173Q of the Central Excise Rules, 1944.
2. M/s. Amrit Foods (A division of M/s.Amrit Banaspati Company Limited) are manufacturers of various dairy products. A team of Central Excise Officers visited their factory premises on 3.11.1999 and conducted inquiry about the products manufactured by them. During the inquiry, it was found that the unit is engaged in the manufacture of milk based products, namely, milk shake mix, soft serve mix, skimmed milk, toned milk, double toned milk and cream. It was informed by M/s.Amrit Foods that on 7.2.1996, they had informed the Assistant Commissioner that they were manufacturer of UHT treated dairy milk falling under chapter 4 which is subject to nil rate of duty and that they intended to manufacture some more dairy products falling under the said chapter which are also subject to nil rate of duty. They accordingly took exemption from obtaining registration. During the inquiry, the statements of Shri Naveen Mittal, Additional General Manager of M/s.Amrit Foods and other concerned persons were recorded. After conducting investigation, prima facie, it appeared that the soft serve mix, skimmed milk, etc. which were being manufactured by the appellants since their inception are not classifiable under chapter 4 as dairy products because of addition of stabilizers. Similar dispute was also raised on the classification of the products coffee creamer and cream packed. After detailed investigation show cause notice was issued to the appellants M/s.Amrit Foods alleging that they knew that their products contained the basic ingredients necessary for manufacture ice cream and they had undertaken some processes required for preparation of ice cream mix. They also knew that the ratio between ingredients, chosen by them was keeping in view the para meters of ice cream. These facts were not declared by the appellants to prevent the department from classifying their products under chapter 21 or 19 where in ice-cream and preparation based on milk products are respectively classifiable. On the basis of information furnished by the appellants, it was found that they have evaded duty of Rs. 1,27,39,935/- and have contravened the provisions of Rule 9(1) by removal of excisable goods without payment of duty, Rule 52A by removal of dutiable goods without cover of invoices, Rule 53 by not accounting production and clearances of the excisable goods in the statutory record i.e. RG-1 register, Rule 173B and 173C by not filing the declaration, Rule173F and 173G by not determining the correct Central Excise duty and payment thereof by following the prescribed procedures. Accordingly show cause notice was issued to them demanding of duty of Rs. 1,27,39,935/- and proposing classification of milk shake, soft serve mix, coffee creamer and cream packed under sub heading 1901.19. Penalty was also proposed on the appellants under Rule 173Q of the Central Excise Rules, 1944.
3. The show cause notice was adjudicated by the Commissioner under the impugned Order-in-Original No. 38/Comm./M-I/2001 dated 7.8.2001 in which he classified milk shake mix, soft serve mix, coffee creamer and cream packed manufactured by M/s.Amrit Foods under sub heading 1901.19 of the Central Excise Tariff and demanded duty of Rs. 32,81,260/- for the period from November, 1999 to August, 2000. He also imposed a penalty of Rs. 15 lakhs under Rule 173Q of the Central Excise Rules, 1944 on the appellants. The appeal filed by M/s.Amrit Foods before the Tribunal was decided vide Final Order No. 262/02-D dated 13.11.2002. By the said order, penalty of Rs. 15 lakhs imposed under Rule 173Q was set aside but the Tribunal did not find any infirmity in the order of the Commissioner with regard to classification and duty demand confirmed by the Commissioner. On appeal filed against the final order of this Tribunal, the Hon'ble Supreme Court upheld the order of the Tribunal setting aside the penalty but remanded back the matter of classification to be decided afresh as stated above.
4. It was argued by the learned Counsel for the appellant that the 4 products for which classification has been filed by them under heading 04.04 but which has been held classifiable under sub heading 1901.19 by the Commissioner, are as under:
(1) Milk Shake Mix, (2) Soft Serve Mix, (3) Coffee Creamer (4) Cream Packed The Commissioner has not given any detailed finding on the classification of coffee creamer and cream packed in the adjudication order. It was argued by the learned Counsel for the appellant that these products are covered under sub heading 0404.90. This position has not been disputed by the Revenue during arguments before us. Thus, we are left with the classification of milk shake mix (MSM) and soft serve mix (SSM).
5. It was argued that the Commissioner in the adjudication order has classified these products under sub heading 1901.19 on the ground that in terms of description of ice cream available in the technical literature MSM and SSM are mixes/bases/preparations intended to be used as "Frozen Desserts" i.e. ice cream. It was argued that the process of manufacturing of these products was explained to the department during investigation as given at page 42 of the original paper book. For milk shake mix (MSM) and soft serve mix (SSM) raw milk is standardized, sugar and stablizer are added. UHT processing at 140 to 160 bar is done. Aseptic filing is done at 25C and storage is done from 0C to 4C. It was pleaded that the Commissioner has mainly gone by use of stabilizer holding that the stabilizer is used to maintain a uniform emulsion of oil in water throughout the self life and to improve the body and texture and to impart smoothness to the product as stated by Mr. P. Sree Sree in his statement. This conclusion of the Commissioner is not correct. Our attention was drawn to the Chapter Note 4 of the Chapter 4 which reads as under:
Heading No. 04.04 applies, inter alia, to butter milk, curdled milk, cream, yogurt, whey, curd and products consisting of natural milk constituents, whether or not containing added sugar or other sweetening matter or flavoured or containing added fruit or cocoa and includes fats and oils derived from milk (e.g. milk fat, butterfat and butteroil) dehydrated butter and ghee.
6. It was stated that the product is covered by the expression "products consisting of natural milk constituents whether or not containing added sugar or other sweetening matter or flavoured or containing added fruit or cocoa and includes fats and oils derived from milk." It was stated that in the milk they are only adding sugar, glucose and milk powder. Thus it is very well within the heading 04.04 as explained in chapter note 4 of chapter 4. Addition of stabilizers is permitted as can be seen from HSN Explanatory Notes and the Commissioner also accepted that the stabilizers are permitted to be added and examples of the same are given in HSN as illustrative. The main reason on which the Commissioner has not accepted classification of the products under heading 04.04 is that of usage of a small quantity of stabilizers has been permitted subject to condition that its functions in the products should be limited to maintenance of consistency and should not change the characteristics of the products. In the instant case, the intended use of stabilizers in the manufacture of subject goods, namely, SSM and MSM are three pronged i.e. to maintain a uniform emulsion of oil in water throughout the shelf life, to improve the body and texture and to impart smoothness to the product. The use of stabilizers should not interfere with basic characteristics of the products. In the instant case, the stabilizers is consciously selected so as to bring about desired change in the characteristics of the subject goods. Use of stabilizers in the manner specified in itself is sufficient ground to take the products SSM and MSM out of purview of the chapter 4." This finding of the Commissioner was contested on the ground that the use of stabilizers is permitted to maintain the consistency of the products. The stabilizers used by them are prescribed emulsifiers and/ or stabilizers mentioned under Prevention of Food Adulteration Rules, 1955. Therefore use of these products is only to maintain consistency during storage and transport of the goods and it does not change characteristics of the products. The product remains within heading 04.04 as sweetening agent such as sugar and glucose and skimmed milk powder only was added to the milk. Therefore the additions of stabilizers cannot take away these products from the purview of the chapter 4 to chapter 19. For classifying the products under chapter 19 to make a food preparation of products falling under heading 04.01 to 04.04, something more which is not permitted by chapter note 4 has to be added to make it a food preparation. But in this case no preparation other than those as mentioned under chapter note 4 of chapter 4 has been added except the stabilizers which are permitted to keep consistency of the products during storage and transport and self life. Therefore, addition of stabilizers cannot take away the product from the heading 04.04 to heading 19.01. It was therefore argued that both the products SSM and MSM are correctly classifiable under heading 04.04 of the Central Excise Tariff and that the demand confirmed by the Commissioner or the classification ordered under sub heading 1901.19 is not sustainable.
7. They relied on the decision of this Tribunal in the case of Nestle India Limited v. CCE, New Delhi 2001 (44) RLT 255 (T). Relying on paras 8 to 12 of the said decision of the Tribunal, emphasis was made on the following the observations It goes on to state that preparations falling in this Heading may be distinguished from the products of Heading 04.01 to 04.04 only when they contain, in addition to natural milk constituents, other ingredients not permitted in the products of those earlier Headings i.e. 04.01 to 04.04. This Note makes it abundantly clear that the milk product will go to Heading 19.01 only if it contains other ingredients not permitted by Headings 04.01 to 04.04. When it is seen that the products with which we are concerned do not contain any ingredient not permitted by Chapter Headings 04.01 to 04.04, that product can, under no circumstance, be classified under Heading 19.01. It was stated that the decision of the Tribunal was accepted by the Revenue as no appeal filed against it.
8. On behalf of the Revenue, it was argued that the Chapter Note 4 of Chapter 4 does not make any reference to the addition of stabilizers. The Explanatory notes to HSN can only be persuasive in nature, they cannot be binding. Reliance was placed on the decision of the Tribunal in CCE v. Frozen Foods Pvt. Ltd., It was stated that if we go through the Central Excise Tariff it can be seen that in certain entries or Chapter Notes addition of stabilizers mentioned. Reference was made to Chapter 38 of Central Excise Tariff. It was stated that what is being named by the appellant as stabilizers are not in fact stabilizers but these are emulsifiers. Our attention was drawn to the use of various emulsifiers as mentioned in Hawley's Condensed Chemical Dictionary Eleventh Edition. Carboxy methyl cellulose is stated to be used in food product (dietetic food and ice cream) where it acts as water binder, thickner, suspending agent and emulsion. Similarly, carrageenan is used emulsifier in food products. Guargum is used as emulsifiers in food products e.g. ice cream, frozen dessert. Monoglyceride is used as emulsifier.
9. It was argued by the Revenue that the stabilizer is defined in Hawley's Condensed Chemical Dictionary Eleventh Edition as Any substance which tends to keep a compound, mixture, or solution from changing its form or chemical nature. Stabilizers may retard a reaction rate, preserve a chemical equilibrium, act as antioxidants, keep pigments and other compounds in emulsion form, or prevent the particles in a colloidal suspension from precipitating. Whereas emulsion is stated to be A stable mixture of two or more immiscible liquids held in suspension by small percentages of substances called emulsifiers. These are of two types: (1) Proteins or carbohydrate polymers which act by coating the surfaces of the dispersed fat or oil particles thus preventing them from coalescing; these are sometime called protective colloids. (2) Long-chain alcohols and fatty acids which are able to reduce the surface tension at the interface of the suspended particles because of the solubility properties of their molecules... A wide variety of food and industrial products are emulsions of one kind or another... All emulsions are comprised of a continuous phase and a disperse phase; in an oil-in-water (o/w) emulsion, such as milk, water is the continuous phase and butterfat (oil) the disperse phase; in a water-in-oil (w/o) emulsion, such as butter, free fat (from crushed fat globules) is the continuous phase and unbroken fat globules plus water droplets are the disperse phase. It was stated that the addition of stabilizers changes the very character of the products as has been stated by Mr. P. Sree Sree, Additional General Manager (Works) of M/s.Amrit Foods in reply to question No. 9 in his statement dated 26.7.2000. Mr. P. Sree Sree, Additional General Manager (Works) of M/s.Amrit Foods has clearly stated that the stabilizer is used to maintain a uniform emulsion of oil in water throughout the shelf life and to improve the body and texture and to impart smoothness to the product. It was argued that if the role of stabilizer is limited to maintain a uniform emulsion of oil in water throughout the shelf life would have a different thing but since it improves the body and texture and also imparts smoothness to the products which changes their basic characteristics of the products and hence it cannot fall under heading 04.04. Since stabilizers are emulsifiers, these are functioning in dual role as stabilizers and emulsifiers and change the characteristic of the products. The Commissioner was correct taking out these products from heading 04.04 to 19.01.
10. Reliance was also placed by the Revenue on the following decisions:
(1) CCE v. Dinshaw Frozen Foods wherein it was held in Para 9 that Next is the question of classification of the product softy (Shake) Mix. It is contended by the Revenue that it is preparation of milk inasmuch as it contains about 87% milk as mentioned in the impugned order. It is a ready-to-serve beverage which is obviously non-alcoholic beverage. It is therefore, clearly covered under the scope of Tariff sub-heading 2202.90, as is apparent from a description of the said heading. In para 10 of the said order, the Tribunal has given the finding that the lower appellate authority has forgotten to appreciate the fact that, 'ready-to-serve beverage' is implied under the description of Tariff Heading 22.02. Foods preparations of milk and cream as mentioned under 19.01 would not cover preparations of the nature of ready-to-serve beverages. Preparations of milk covered under Tariff Heading 19.01 would cover milk preparations which can be served after mixing with water or boiled water or milk to make it a beverage. There being no doubt that the product softy (Shake) Mix is ready-to-serve beverage. Therefore, it is proper to classify it, under Tariff Heading 2202.90. (2) Kwallity Ice Cream Co. v. CCE, New Delhi Reliance was placed on para 4 wherein it was held that, we find that there is some force in the arguments advanced on behalf of the department in ruling out the item under Heading 21.05. But at the same time we find that the Commissioner has not classified the item under sub-heading 19. In the facts and circumstances, we are of the view that the jurisdictional Assistant Commissioner has to classify the item under the appropriate sub-heading.
(3) Dalmia Dairy Industries Ltd. v. CCE 1989 ELT 164 (T). Reliance was placed on paras 11 and 12 wherein it was held that, The appellants claim that their product is a product consisting of natural milk constituents, whether or not containing sweetening matter or flavoured or containing added fruit or cocoa. If we look into the Harmonized Commodity Description & Coding System [Explanatory Notes pertaining to Chapter 4], we find that this Chapter specifically excludes food preparations based on dairy products and in particular those falling under Heading 19.01... The main object in the preparation of malt extract from the malt is to obtain an easily digestive extract rich in maltose and dextrins and having a pleasant taste and flavour. Malt extract can be easily incorporated with milk and dried to have malted milk powder. In the other literature titled 'Flavour 81', our attention to the Introductory part of which is drawn, it is stated that as a source of flavoursome compounds, malt is undoubtedly the raw material whose specification is most readily controlled. It is stated that as a source of a flavouring compound, malt is undoubtedly the brewing raw material, with a characteristic aroma which develops, during the course of the curing operation, as a result of several enzymic and chemical reactions. And finally the Tribunal held classification of product under Heading 04.01 as "Milk and Cream, Concentrated or containing added sugar or other sweetening matter.
11. We have considered the arguments of both the sides. We find that the dispute of classification of milk shake mix (MSM) and soft serve mix (SSM) has to be decided on the basis of Chapter Note 4 of Chapter 4. According to Chapter Note 4 of Chapter 4, the product consisting of natural milk constituents, whether or not containing added sugar or other sweetening matter or flavoured or containing added fruit or cocoa includes fats and oil derived from milk. The case of the appellant is that the product manufactured by them contains only natural milk constituents except stabilizers added by them within prescribed quantity as permitted under the Prevention of Food Adulteration Rules in accordance with HSN Explanatory Notes to Chapter 4. It is stated by them that for the product to be classified under sub-heading 1901.19, HSN Explanatory Notes had given examples on page 147 of Harmonized Commodity Description and Coding System Second Edition Volume 1 Section III "Food preparations of goods of headings 04.01 to 04.04, not containing cocoa or containing less than 5% by weight of cocoa calculated on a totally defatted basis, not elsewhere specified or included. The preparation of this heading may be distinguished from the products of headings 04.01 to 04.04 in that they contain, in addition to natural milk constituents other ingredients not permitted in the products of those earlier headings. These products will go to the sub heading 1901.19 only if it contains in addition to natural milk constituents other ingredients which are not the products of chapter 4. In the present case except the stabilizers which are added in the milk is sugar which is stabilizing agent and dextrose which is also sugar. There are only addition of stabilizers. The dispute of the department is that stabilizers are emulsifiers and these are changing the characteristics of the products and its body and texture and gives smoothness to the products. This finding of the Commissioner is based on reply to question No. 9 of the statement dated 26.7.2000 of Shri Mr. P. Sree Sree. The Revenue has strongly relied upon this statement in support of their contention. In addition to that, the Revenue has argued that ageing process is also being done which is for packed ice cream mix. We find that the appellants claim is that the stabilizers are added for keeping the products stabilize during its storage and transport and its shelf life. The product stabilizers are Emulsifier and maintains consistency of the products. They are not adding additional quality to the products. We find that this is squarely decided in case of Nestle India Limited v. CCE, New Delhi (supra) by this Tribunal. In the said decision, it is made clear that the milk product will go to the heading 19.01 only if it contains other ingredients not permitted by heading 04.01 to 04.04. We find that in the present case no other ingredients except permissible stabilizers have been added. Addition of stabilizers is essential to maintain the consistency and shelf life of the products. HSN Explanatory Note also qualifies the addition of stabilizers without changing its classification from chapter 4 to 19. The ratio of the decisions relied upon by the Revenue has no relevance to the present dispute. We, therefore, classify the products SSM and MSM under sub heading 0404.90 of the Central Excise Tariff. The other two products i.e. coffee creamer and cream packed are also classified under sub heading 0404.904. There is no reason given in the impugned order for classifying the product under Chapter 19. This is not disputed by the Revenue. We, therefore, set aside the order of the Commissioner and classify the products under sub heading 0404.90.
The appeal is accordingly allowed with consequential relief, if any, to the appellants.
This also disposes of Miscellaneous Application.
(Order dictated and pronounced in the open Court on 29.3.2006)