Customs, Excise and Gold Tribunal - Delhi
Mafco Ltd. vs Collector Of Central Excise on 23 July, 1993
Equivalent citations: 1994(71)ELT241(TRI-DEL)
ORDER Jyoti Balasundaram, Member (J)
1. The brief facts of the case are as follows :
2. The appellants are engaged in the manufacture and clearance of prepared or preserved vegetables, fruits, corns. etc. According to the Department, the said goods were liable to Central Excise duty and therefore, show cause notices for the period from 1-3-1986 to June 1986, July 1986 to December 1986 and January 1987 to June 1987 were issued proposing classification of frozen peas, mango pulps and shelled corn under Heading 2107.91 of the Central Excise Tariff Act, 1985 and demanding varying amounts of duty. The assessees contended that the goods are not liable to duty under Heading 2107.91 because they are specified under Chapter 20, the products cannot be included in Chapter 20 as they would get excluded by virtue of Note 1 thereto; exemption under Notification No. 234/82 dated 1-11-1982 was being available to the goods till the introduction of the new Tariff w.e.f. 28-2-1986 and therefore, there was no deliberate omission/commission on their part; Notification No. 185/86 dated 1-3-1986 would in any event be available to them. A corrigendum to the show cause notices was issued on 17-9-1987 intimating the assessees that the goods under reference would be classifiable under Heading 2001.10. The Assistant Collector upheld classification of green peas under Heading 2001.10, holding that the product is a prepared one because it goes through a series of processes like washing, cleaning, grading blanching etc. Mango pulp was held to be classifiable under the same sub-heading on the ground that the process of ripening, pulping after grading, heating or blanching after standardisation by sugar and citric acid etc. lead to the end product i.e. fruit pulp which is a prepared product. Shelled corn was classified under Heading 2107.91. Demands of Rs. 17,44,619.50 were confirmed on green peas and mango pulp and Rs. 70,584 on shelled corn. Penalty of Rs. 1,000 was also imposed. The Collector (Appeals) upheld classification of green peas and mango pulp under Heading 2001.10. However, he classified shelled corn under Heading 1101.19 as a product of milling industry. Hence, this appeal.
3. We heard Shri V. Lakshmi Kumaran, Learned Counsel and Shri J.N. Nair, Ld. JDR. The processes of preparation of the product in question are as follows :
"Manufacturing process involved in preparation of frozen vegetables.
1. Receipt of Vegetables at factory, washing, cleaning & other preparation (grading etc.).
2. Depoding or cutting (in case of green peas, depoding is done, in case of beans, spinach, etc. cutting is done).
3. Heating or blanching in water (hot water) to destroy enzymes.
4. Cooling and packing - Cooling the vegetable in cold water to 4-5 Cent, and then packing.
5. Vegetables are then frozen in a compartment in 32 Cent.
6. Storage at low temperature.
Process for manufacturing Mango Pulp -
1. Receiving and weighment of mangoes
2. Ripening of mangoes
3. Pulping of mangoes, into pulp after grading
4. Heating or blanching of pulp at high temperature after standardisation of the product by sugar and citric acid if necessary.
Certificates in this respect from Central Food Technological Research Institute produced on 25th September, 1987.
5. Cooling and packing
6. Freezing of the pulp - 32 Cent.
7. Storage 3.1. The learned Counsel submits that the process of preparation of vegetables and shelled corn does not amount to manufacture as green peas and shelled corn are merely peeled, blanched, preserved and packed and the vegetables remain as vegetables and unless and until they are converted into some other product known in the market by a different name, there can be no manufacture. During the course of the hearing the learned Counsel submitted samples of these products in packed condition duly sealed by the Central Excise Officer. He further submitted that lowering of the temperature is the only method of preserving the vegetables and by this method the vegetables in their natural form are made available at the time when they are not otherwise available in the market as being out of season.
In the alternative, he pleaded that if it is held that the process of preparation of green peas and shelled corn amounts to manufacture, correct classification of these two items would be under Heading 07.02 of the CET, 1985 which covers "other edible vegetables, roots and tubers". He stated that Chapter 7 deals with edible vegetables and roots; Heading 07.01 covers "dried vegetables including potatoes, onions and mushrooms, whole, cut, sliced, broken or in powder but not further prepared; dried leguminous vegetables including peas and beans, shelled, whether or not skinned or split". Since the green peas in question are not dried, they would not fall for classification under 07.01 and would fall under Heading 07.02. He further submitted that the Heading itself clearly indicates that cutting, slicing, breaking or powdering, shelling, skinning or splitting are not considered as preparations so as to take the vegetables out of the purview of the Chapter 7 and bring them within the scope of Chapter 20. The learned Counsel also submitted that under Note 1 to Chapter 20, it is essential to indicate that the items have not been prepared or preserved by processes other than merely chilling or freezing, etc. and in the case of the appellants, the peas are preserved by freezing i.e. lowering the temperature and, therefore, would go out of the coverage of Chapter 20. Regarding shelled corn, his submission is that, in the event of the process of its preparation being held to amount to manufacture, the item would be properly classifiable under Chapter 7 and not under Heading 1101.19 as held by the lower appellate authority as Chapter 11 covers products of milling industry and shelled corn is not such a product.
4. Shri J.N. Nair, learned DR contends that the process of blanching, grading, depoding etc. are preparations amounting to manufacture and as these are processes other than mere chilling, both items are correctly classifiable under Chapter 20 by virtue of Note 1 thereto. He cites the decision of the Tribunal in the case of Safari Industries India Pvt. Ltd. v. Collector of Central Excise reported in 1991 (54) E.L.T. 308 in support of his argument that when an item manufactured is covered by an entry in the Tariff it becomes excisable goods. He, therefore, supports the classification of these two items arrived at by the Collector (Appeals).
5. After hearing both sides we are inclined to agree with the learned Counsel for the appellants that the process of preparation of green peas and shelled corn does not amount to manufacture. The items are merely cleaned, cut, deep-frozen and packed. The items remain as they are and the processes undertaken do not change their character. The Hon'ble Supreme Court has held in the case of Pio Packers reported in 1980 (6) E.L.T. 343 that in order to consider something as a preparation it is necessary to establish that the items cease to be the same after the processes such as cutting, chopping, pulping and preservation. It has been rightly argued by the learned Counsel that the green peas and shelled corn are not in any way different from the natural products save for their preservation by freezing. We are, therefore, of the view that the process of preparation of peas and shelled corn does not result in manufacture within the meaning of Section 2(f) of the CESA, 1944 so as to attract levy of duty. We, therefore, set aside the demand of duty levied on these two products.
6. As regards fruit pulp the learned Counsel's submission is that the process consists only in peeling of the skin, removal of kernel and pulping and sugar and acetic acid have been added at permitted levels for the purpose of arresting deterioration of the fruit pulp and not as preservatives. He drew our attention to the opinion dated 25-9-1986 of the Central Food Technological Research Institute, Mysore in this regard. The said opinion is reproduced below:
"Central Food Technological Research Institute, Mysore-570013 FT/ID/276(1)/VHP/86 25 September 1986 To M/s. MAFCO Limited, Bombay - 20.
Dear Sirs, Kindly refer to your letter No. TM/Excise/86 dated 2nd September 1986.
It is not correct to consider addition of citric acid or sugar at the levels being incorporated by you as preservative in frozen pulp as well as fruit slices. As you may be knowing the major methods of preservation include use of chemical preservatives, application of heat, removal of moisture and reduction of product temperature to a level at which no microbes can proliferate it. In your particular case for the manufacture of frozen products, you seem to have adopted the last mentioned method viz., lowering of temperature to preserve the product. In frozen fruit pulps, it is the normal practice to add marginal levels of sugar and sometimes citric acid as a pre-preservation step to standardise the sensory quality of the product. In fact under the FPO, addition of sugar and acid is permitted for such purposes. It is common knowledge that incorporation of sugar and acid at the levels permitted by FPO are not capable of inhibiting, retarding or arresting the process of product deterioration and hence they cannot be considered as preservatives in this context. The same applies to frozen fruit slices in syrups and other low-temperature preserved products. We hope we have been able to clarify the matter without any ambiguity. In case you need any further information please let us know. Thanking you and assuring you of our co-operation.
Yours faithfully Sd/-
V.H. Potty Chairman / Technology Application Division"
His alternate argument is that the fruit pulp would fall for classification under Chapter 8, under Heading 0801.10 as "edible fruit put up in unit container and ordinarily intended for sale whether or not containing any added ingredient including sugar or other sweetening matter". He relies upon the decision of the Tribunal in the case of Northland Industries v. Collector of Central Excise reported in 1988 (37) E.L.T. 229, wherein the Tribunal held, that Chapter 8 covers canned fruits. The learned Counsel also refers to the HSN Explanatory Notes under Chapter 8 which mentions that fruits and nuts of this Chapter may be whole, sliced, chopped, shredded, stoned, pulped, peeled or shelled in different processes.
7. The learned DR submitted that the fruit pulp would be correctly classifiable under Heading 20.01 as a preparation of fruit as it is a product which is prepared by a process other than mere chilling or freezing or putting in provisional preservative solution.
8. We agree with the learned Counsel that the process of preservation of fruit pulp does not amount to manufacture. The mango pulp remains mango 246 EXCISE LAW TIMES [ Vol. 71 pulp after the processes are carried out and no new product with a different name, character or use emerges as a result of the process, as has been held by the Hon'ble Supreme Court in a series of decisions, it is not every process that amounts to manufacture. We also note that the aspect of manufacture was not in dispute before the Tribunal in the case of Northland Industries as is clear from para 6 of that order. In the light of the above discussion we hold that the process of preparation of fruit pulp does not amount to manufacture within the meaning of Section 2(f) of the CESA, 1944, so as to attract levy of duty. The citation relied upon by the learned DR is distinguishable on facts - the Tribunal held in that case that where specific entry in the Tariff is applicable to the goods manufactured (emphasis supplied) they become excisable and hence as between 8307 and 8302.90 the aluminium frames manufactured by the appellants are excisable goods and hence the concept of marketability by the appellants is not a determining factor. In the present appeal however, the appellants dispute the aspect of manufacture. We, therefore, set aside the duty demand on this item. We also set aside the penalty imposed on the appellants.
9. In the result, the impugned order is set aside and the appeal allowed with consequential relief to the appellants.
S.K. Bhatnagar, Vice President
10. With due respects to Hon'ble Judicial Member my views and orders in the matter are as follows :
11. In the case of frozen peas, I consider that subjecting fresh green peas (seeds) to the process of blanching (in hot water at high temperature), chilling/cooling and then freezing do cause some change in as much as blanching destroys enzymes and therefore the chemical composition changes and the taste etc. may be affected to varying degrees. The extent of change and the effect if any, on nutritive value is however, not clear as sufficient material has not been produced before us by either side. However, all these processes taken together do not appear to affect the peas materially (to any substantial extent) and so to say the appearances are kept. With the result that in popular perspective they still remain green peas although frozen. In terms of the marketability test, that is how the item is treated by the sellers and purchasers of the goods, (the product, although packed and sold in frozen state), remains a packet of peas.
12. Hence in the absence of any specific Section Note or Chapter Note in the tariff treating, blanching or these processes taken together as amounting to manufacture, it could justifiably be held that no process of manufacture is involved.
13. In respect of shelled corn the details of the process(es) to which they are subjected and their effects on the products, have not been submitted by either side and therefore it is not possible to record any specific finding.
14. In respect of mango pulp, I observe that the raw material is unripe mango which is subjected to (a) ripening. (b) grading, (c) making of pulp, (d) standardising by addition of sugar and citric acid, (e) blanching, (f) cooling and packing and (g) freezing.
15. I consider that these processes taken together (as a whole) result into conversion of unripe mangoes into a distinct product namely, the standardized 1994] MAFCO LTD. v. COLLECTOR OF CENTRAL EXCISE, POONA 247 and preserved pulp of ripe mangoes marketed as a different commodity.
16. I also consider that no prudent man will mistake ripe mango pulp for unripe mangoes.
17. According to the H.S.N. the Heading 24.06 covers fruits otherwise prepared or preserved whether or not containing added sugar or spirit.
This heading includes fruits (whether whole, in pieces or crushed) prepared or preserved, otherwise than by any of the processes specified in the Heading of Chapter 8 or in the preceding Headings. The products may be sweetened with synthetic sweetening agents (eg. sorbitor) instead of sugar. The products of this Heading are generally put up in cans, jars air-tight containers.
18 In case of Central Excise Tariff Chapter 20 relates to products which are prepared or preserved by processes other than merely chilled or frozen or put in provisional preservative solutions and covers preparations of vegetables, fruits, nuts or other parts of plants - whether or not containing added sugar or other sweetening matter. Hence the most appropriate Heading is 20.01.
19. (Chapter 8 is not applicable as that Chapter relates to edible fruits and nuts; peels of citrus fruite or melons and does not cover preparations thereof. In the instant case, the product can no longer be treated as mango. It can only be treated as a preparation of mango prepared by a method other than mere chilling, and preserved).
20. In view of the above, I hold that mango pulp marketed by the appellant is a manufactured product classifiable under 20.01.
21. In view of the above findings, the appeal is allowed only in respect of peas. It is remanded in respect of shelled corn for de novo consideration and rejected in respect of mango pulp.
Dated : 20-7-1993 Sd/-
S.K. Bhatnagar Vice President G.A. Brahma Deva, Member (J)
22. I have gone through the two different orders written by Hon'ble Member (Judicial) and Hon'ble Vice President. On going through the reasoning given in their respective orders, I concur with the view taken by the Hon'ble Member (Judicial). Accordingly, the appeal deserves to be allowed.
Final Order
23. In view of the majority opinion, the appeal is accepted.