Customs, Excise and Gold Tribunal - Delhi
Collector Of C. Ex. vs Balaji Vegetable Products on 21 August, 1989
Equivalent citations: 1990ECR388(TRI.-DELHI), 1990(45)ELT118(TRI-DEL)
ORDER D.M. Vasavada, Member (J)
1. This appeal arises out of Order-in-Appeal No. 479-CE/KNP/85, dated 30-8-1985 passed by the Collector of Central Excise (Appeals), New Delhi arising out of Order-in-Original No. 12/STP/84, dated 22-8-1984 passed by the Assistant Collector of Central Excise Division, Sitapur.
2. Brief facts of case, as stated in the appeal memo, may be summarised as under:
The respondents are the manufacturers of vegetable product falling under Tariff Item 13. The respondents availed of credit benefits in terms of Notification No. 201/79, dated 4-6-1979 as amended by Notification No. 105/82-C.E., dated 28-2-1982 in respect of Vitamins A & D falling under Tariff Item 68, which, according to the Revenue, was not admissible to them after issuance of amending Notification No. 105/82 as Vitamins A & D were not raw materials/component parts in terms of notification. The total credit so availed of by the respondents during the period 1-3-1982 to 28-6-1984 amounted to Rs. 22,694.85 P. So, a show cause notice dated 7-7-1984 was issued to the respondents and after adjudication, the Assistant Collector raised a demand for the amount of credit, so availed by the respondents. The matter went in appeal before the Collector (Appeals), who allowed the appeal and set aside the order passed by the Assistant Collector. Aggrieved by the said order, the Revenue has preferred this appeal.
3. We have heard Shri S. Chakravorty, Ld. J.D.R. for the department and Shri S.N. Mathur, Ld. Consultant for the respondent.
4. Shri S. Chakravorty, Ld. J.D.R. contended that the impugned order whereby the Collector (Appeals) held that the respondents are entitled to avail of the benefits of Notification No. 201/79 as amended by Notification No. 105/82 in respect of Vitamins A & D (which are admittedly added to the product, namely, hydrogenated vegetable oil manufactured by the respondents) is not correct because the Vitamins are not raw materials nor component parts; that they are added after the vegetable product is in fully manufactured condition. The addition of Vitamin A only done as per requirement of certain regulations of Government of India and that too after the product, in question, is fully manufactured and has become liable to attract excise duty. Addition of Vitamin D is not even obligatory under any rules or regulations and that is also added along with Vitamin A after the product is fully manufactured. He, further contended that, in fact, it is not obligatory, under the Vegetable Oil Product Control, Order 1975 for manufacture of vegetable product to use Vitamins A & D and that Vitamin A is added only to confirm a particular standard of quality. He, further contended that under the said order, items "raw materials" and "Vitamins" are grouped under heads 13A(1) and 13A(4) separately which would confirm that vitamins are not raw materials for the manufacture of the product, in question. The Vitamins A & D also cannot be called "component parts" because these words are used in relation to machinery, etc. only. He cited C.C.E., Chandigarh and Anr. v. Kashmir Vanaspati and Anr.-1987 (31) E.L.T. 218 (Tribunal) wherein connotation of words "raw material" and component part and their ambit and scope are laid down.
5. Now, it is admitted by Shri Mathur for the respondent that Vitamins A & D are not the raw materials for the product, in question, so any discussion on that point is not necessary. Ambit and scope of the word "component and part" has been laid down in the said judgment as under:
"Component part" - Ambit and Scope. - For an article to be called a component part, it is not necessary that even after it becomes part of another article, it should still retain its identity. All that is necessary to make an article, a component part is that it goes into composition of another article. If an article is an element in the composition of another article made out of it, such an article may well be described as a 'component part' of the other article."
6. Shri Mathur, further, submitted that vide Notification No. GSR 310 (E), dated 30th May, 1975, the Government of India, Ministry of Agriculture and Irrigation (Deptt. of Food), has, in exercise of powers conferred by Sub-clause (1) of Clause 4 of the Vegetable Oil Product Control Order, 1947 issued an order called the Vegetable Oil Product (standards of quality) Order. 1975. Under provision of Section 2 of the said order, no person can manufacture or sell any vegetable oil product unless it conforms to the standards of quality and other requirements for vanaspati as specified in the first schedule thereof. Copy of the schedule is not produced, but he showed us that by Appendix 'B' of Prevention of Food Adulteration Rules, 1955, definition of standards of quality of different products has been laid down and as per A19 'vanaspati' (which means any refined vegetable oil) has to contain not less than 25 I.U. of synthetic Vitamin 'A' per gram.
7. He, further, referred us to the definition of word "adulterated" as laid down under Section 2(ia) of the Prevention of Food Adulteration Act, 1954 (as amended upto 1986), relevant portion of which is as under :
"2(ia) - "Adulterated" - an article of food shall be deemed to be adulterated -
(a) * * * * (b) * * * * (1) * * * *
(m) if the quality or purity of the article falls below the prescribed standard or its constituents are present in quantities not within the prescribed limits of variability but which does not render it injurious to health."
8. He, further submitted that as per the above provisions of the Prevention of Food Adulteration Rules, the respondent has to add Vitamin "A' before marketing the product, otherwise, the respondent will be liable for prosecution under provisions of Section 7 read with provisions of Section 16 of the Prevention of Food Adulteration Act. As per provisions of Section 7, no person can manufacture or sell any adulterated food. So according to him, Vitamin 'A' is an integral part of the product, in question, in as far as it cannot be manufactured and marketed without adding Vitamin 'A'. As far as Vitamin 'D' is concerned, it is added to improve quality of the product and both these should be considered as component parts of the product in question. We are of the opinion that contention of Shri Mathur is quite correct.
9. It is contended by the Revenue that process of manufacture of vegetable product is complete as soon as it has been hardened and it is at this stage leviable to CE duty irrespective of the fact whether any additives are added to it after the manufacture. It is stated in the appeal memo and also contended by Shri Chakravorty that as soon as process of deodorisation is complete, hydrogenated vegetable oil is ready and as Vitamins A & D are added at subsequent stage, they cannot be considered to be component parts. He has cited the following authorities in respect of his this contention :-
(1) Ballarpur Industries Ltd. v. Collector of Central Excise, New Delhi -1989 (21) ECR 33 (Cegat SB-C) wherein, with reference to 7 items, it was held that all those inputs were essentially required for the manufacture of the product, in question, in that case (namely, paper or paper board). So, according to Shri Chakravorty, this is the criteria laid down by the Tribunal. But, in the present case also, as we discussed above, vitamins, especially, Vitamin 'A' is a necessary ingredient as it is a statutory requirement for manufacture of the product, in question. So, this judgment does not help the Revenue.
(2) Panyam Cements & Mineral Industries Limited, Ballary v. Collector of Central Excise, Belgaum -1989 (13) E.T.R. 181 (Tri.) - In this case, the issue was dutiability of calcium carbide manufactured by the assessee and used by them in the manufacture of 'Acetylene Black'. It was contended by the assessee that the 'goods' were not marketable without being packed into airtight drums in accordance with the provisions of Carbide of Calcium Rules 1937 and so unless the product is marketable, it will not attract central excise duty. The Tribunal negatived this contention holding that manufacture of calcium carbide is complete after the process of seiving is carried out and at this stage it is a finished product which is either used for captive consumption (as in the case of the assessee) or it is sold in the market. For the purpose of captive consumption, it need not be packed in accordance with the provisions referred to above. But, that would not mean that as it is not marketable, it is not 'goods'. It will attract C.E. duty. This authority also does not help the Revenue because, in the present case, there is no question of captive consumption and product will be marketable only after vitamins are added.
(3) OJAS Corporation v. Collector of Central Excise, Baroda -1988 (35) E.L.T. 189 (Tri.) wherein it was held that when the soap is manufactured in the form of blocks, the product then emerges is soap and the process of cutting into chips cannot be taken as a process in the manufacture of soap. But, here also, the issue is different and this citation also does not help the Revenue.
(4) Amrit Vanaspati Co. v. Collector of Central Excise, Meerut -1988 (35) E.L.T. 479 (Tri.) - Wherein Nickel Catalyst activated carbon and phosphoric acid are held not to be raw material or components. But then this citation also does not help the contention of the Revenue.
10. Against this Shri Mathur contended that as per supplement of the manual of departmental instruction on excisable manufactured products pertaining to vegetable product issued by Central Board of Excise and Customs, vanaspati manufacture should conform to the specifications as laid down and one of the specifications is that it should be fortified with synthetic Vitamin 'A' by adding 25 (I.U.) per gram. Flow chart of the vegetable product has also been given in this manual (at page 20) and as per this, fortification of the vegetable products, with vitamin is to be done before the product is to be taken to the cooling room and for filling up in the tins. If they are filled in tins, they arc subsequently taken to the cooling room and if the product is taken to cooling room first, subsequently it is to be filled in the poly jars and then tins or jars (as the case may be) are to be taken to store room for despatch. Principle for fixing R.G. 1 stage is also stated in this manual as under :
"From the manufacturing process and the flow chart thereof, it would be seen that before the fortification of vegetable product with vitamins which is a statutory requirement, the process of manufacture is not complete and the product does not assume a form in which it is capable of being sold. Since the process of manufacture is continuous it is not possible to ascertain the quantity manufactured before the stage of packing in unit containers. Further before the stage of packing, there is no stage for storage of the product. Therefore, in the factories where vegetable product is stored after the fortifications of vitamins and the quantity is ascertainable before the stage of packing, in those cases the R.G. 1 stage should be at the point of storage while in the factories where there is no such stage the process being continuous, the R.G. 1 stage should be after the product is filled in unit containers."
11. Shri Mathur contended that the product, in question, will attract duty only after it reaches R.G. 1 stage and by that time Vitamins A & D are already added to the same and, contention of the Revenue that the product, in question, will attract duty before vitamins are added, is not correct. So, we are of the opinion that contention raised by the Revenue is not correct and in the present case the product, in question, will attract excise duty only when it reaches R.G. 1 stage and so C.E. duty paid on Vitamins A & D will be eligible for set off under provisions of Notification No. 201/79 as amended by Notification No. 105/82 and we do not find any impropriety in the impugned order.
12. In the impugned order, the Collector (Appeals) has referred to the contention of the respondent that a show cause notice was time-barred and that there is substance in it. But, he did not decide that point as he allowed the appeal on merits. Copy of demand-cum-show cause notice is dated 7-7-1984 and it is alleged therein that the assessee has taken credit for the period from 1-3-1982 to 28-6-1984 and that they have wrongly availed of the credit. There is no allegation, whatsoever either of wilful suppression of facts or of any mis-representation or of any fraud therein. So, the extended period of limitation could not be invoked and so demand for any period beyond six months from the date of show cause notice would, obviously, be time-barred. So from that point of view also, part of demand raised is time-barred and to that extent, this appeal will be partly time-barred also.
13. So, the appeal is dismissed and impugned order is confirmed.