1. The common issue involved in these three Appeals, filed by M/s.
Jubilant Organosys Ltd., is whether their product "Anpol" is classifiable under sub-heading No. 3405.90 of the Schedule to the Central Excise Tariff Act, as confirmed by the Commissioner (Appeals) in the impugned Order, or under Heading No. 14.01 as claimed by the appellants.
2.1 Shri D. Sharma, learned Consultant, submitted that the Appellants manufacture poultry feed supplements using corncob produced by subjecting corncobs to process of grinding and sieving; that the residue, in the form of grit, generated during the processing of corncob is further subjected to the process of grinding and sieving and is graded according to size and is packed in bags under the brand name ANPOL; that the said grit being having high oil and water absorption capacity and being tough and free of dust is generally used in tumbling machines, vibro finishing machines, barrel finishing machines as polishing medium; that processing of unmanufactured products, undertaken by them, does not amount to manufacture; that the Central Board of Excise & Customs has clarified, vide Circular No.8115/87-CX.3, dated 23-6-87 that activities of breaking, sieving and packing of unmanufactured tobacco in retail pack would not result in its conversion into manufactured tobacco; that further the Board vide Circular No. 65/65/94-C, dated 7-10-94 has clarified that the process of removal of Isbagol Husk from Isbagol seeds cannot be regarded as process of manufacture. Reliance has also been placed on the decision in Hyderabad Industries v. Union of India - 1995 (78) E.L.T. 641 and 1999 (108) E.L.T. 321 (S.C.).
2.2 Shri Virag Gupta, learned Departmental Representative, countered by submitting that the Appellants have never raised the question of manufacture either before the Adjudicating Authority or before the first Appellate Authority; that at the stage of second Appeal they cannot raise a new plea that their process does not amount to manufacture; that in any case the appellants are subjecting the corncobs to the processes of hammering, drying, grinding and sizing to obtain corncob powder of specified mesh for manufacture of poultry feed and the residue of corncob is further crushed and sieved to obtain grit of varying mesh; that thus the entire processes undertaken by them bring into existence two new distinctly known products with new name, character and use; that accordingly the processes undertaken by them amount to manufacture. He also mentioned that neither the decision of Supreme Court nor Board's Circular are applicable as facts are completely different.
3. After considering the submissions of both sides, we agree with both the contentions advanced by the learned Departmental Representative, The Appellants cannot make out a completely new case at the stage of second Appeal. Moreover, the entire processes undertaken by them result in bringing into existence two new products - poultry food and polishing material.
4.1 The learned Consultant, further, submitted that the Commissioner (Appeals) has interpreted the Tariff in a manner which is contrary to the Rules of Interpretation; Rule 1 of the Rules for Interpretation of Tariff provides that titles of Sections and Chapters are for ease of references only and classification shall be determined according to the terms of the Heading and relative Section or Chapter Notes; that Note 1(b) to Chapter 34 specifically excludes "separate chemically defined compounds" from the purview of Chapter 34; that HSN Explanatory Notes amplify that in addition to separate chemically defined compounds, Chapter 34 does not cover natural products which are not mixed or prepared; that Explanatory Notes for Heading 34.05 also clarify that the Heading excludes abrasive powders (generally of Chapter 25 or 28) when not mixed; that, therefore, the Chapter Notes and HSN Explanatory Notes exclude natural products and separate chemically defined compounds even when the end use of the product is the same as that of the products of Heading 34.05. He, further, mentioned that Heading 34.05 covers polishes and creams and scouring pastes and powder and similar preparations whereas ANPOL is used as a polishing medium and, therefore, is not a product covered by Heading 34.05. The learned Consultant contended that ANPOL, being in the form of granules of vegetable material is classifiable under Chapter 4 which covers vegetable products not elsewhere specified or included; that ANPOL is composed of cellular tissue and is also akin to vegetable sponge and as such is covered under Heading 14.01 of the Tariff.
4.2 Alternatively he mentioned that the impugned product would be classifiable under Heading 23.01 of the Central Excise Tariff being the residue and waste from the food industries; that corncob is the waste that is generated in processing of maize (corn) and ANPOL gets generated in the further processing of the corncob; that therefore, ANPOL is also the residue from the food industry and merits classification under Pleading 23.01 of the Tariff; that the Directorate General of Foreign Trade has also classified the Corncob grit under Heading 23021002 of ITC (H.S.) EXIM CODE [Policy Circular No. 28 (RE-99), dated 18-8-99].
5. The learned Advocate also submitted that if ANPOL is classified under Heading 34.05, they are eligible to S.S.I., exemption under Notification No. 1/93-C.E., dated 28-2-1993 for a part of the period in dispute as M/s. Anichem India Ltd. was on independent legal entity prior to its merger with M/s. Vam Organic Chemicals Ltd. effective from 22-10-99; that moreover they will also be eligible for statutory deduction under old Section 4(4)(d)(ii) of the Central Excise Act as held by the Larger Bench of the Tribunal in the case of Srichakra Tyres Ltd. v. CCE [1999 (108) E.L.T. 361 (T-LB)] which has been upheld by the Supreme Court as reported in 2002 (142) E.L.T. A279. Finally he submitted that the larger period of limitation is not invocable as they had filed their first declaration on 10-2-1997 along with the manufacturing process; that Registration Certificate issued to them by the Department clearly mentions ANPOL under Heading No. 14.01 of the Tariff; that they had again filed a declaration under erstwhile Rule 173B of the Central Excise Rules, 1944 on 3-6-98; that the case for the Department for classification of ANPOL under Heading 34.05 is based entirely on the end use; that therefore, the process of manufacture is not a material fact for determining the classification; that they were not under any legal obligation to disclose the end use of the product in the declaration; that they were under a belief that the products generated in the processing of agricultural waste are exempted from duty as these are classified under Chapter 14 or Chapter 23; that their belief is strengthened by the classification issued by the DGFT; that accordingly no penalty under Section 11AC of the Central Excise Act is imposable on them; that no penalty is imposable under Rule 173Q of the Central Excise Rules, 1944. Reliance has been placed on the decision in Padmini Products v. CCE, 6. Countering the arguments, Shri Virag Gupta, learned Departmental Representative, submitted that the impugned product is not classifiable under Heading 14.01 as the said Heading applies to vegetable material in natural form; that ANPOL is also not covered by Chapter 23 as it is not residue/waste derived from vegetable materials as it is a product manufactured from corncob by adopting manufacturing process and is made for polishing purposes; that ANPOL is a product which is specifically produced according to the demand of the customers; that Heading 34.05 covers polishes and creams; that the basic characteristic of the said Heading is that the goods must have a property of polishing and it should be understood in common parlance as polishing medium; that once the goods is found to fall in any of the categories mentioned in Tariff description, it cannot be excluded from it. Finally, he submitted that extended period of limitation is invocable as they had simply mentioned the product ANPOL (Grit) under Heading 14.01 which is not giving full information to the Department. In reply, the learned Advocate relied upon the decision in Henna Export Corporation v. CCE, 1993 (67) E.L.T.907 (T) wherein Henna Powder in bulk has been classified by the Tribunal under Heading 14.01 of the Tariff.
7. We have considered the submissions of both the sides. The rival Tariff Headings of the Schedule to the Central Excise Tariff Act read as under : 1401.00 Vegetable plaiting materials; vegetable products, not elsewhere specified or included.
2301.00 Residues and waste from the food industries, including bagasse, other waste of sugar manufacture and oil cakes.
34.05 Polishes and creams, for footwear, furniture, floors, coach-work, glass or metal; scouring pastes and powders and similar preparations (whether or not in the form of paper, wadding, felt, non-wovens, cellular plastics or cellular rubber, impregnated, coated or covered with such preparations) excluding waxes of Heading No. 34.04.
8. We observe that as per the process mentioned by the Appellants, they process corncob, which is generated as a waste in the processing of corn. Thus their manufacturing process arises from processing of waste.
This itself goes to show that their product cannot be classified under Heading 14.01 which covers vegetable plaiting. 0materials; and vegetable products, not elsewhere specified. The impugned product is neither vegetable plaiting material nor a vegetable product as the process itself starts on corncob which is generated as a waste. HSN Explanatory Notes for Heading 14.04 clearly mentions that "This Heading covers all vegetable products, not specified or included elsewhere in the Nomenclature" and it includes (A) raw vegetable material which may be untreated, cleaned, dried, ground or powdered such as wood, bark, roots, fruit, berries and seeds, gall nuts, stems, stalks, leaves and flowers, lichens, (B) cotton linters, (C) Hard seeds, pipe, hulls and nuts of a kind used for carving, (D) Other vegetable products such as Esparto, Raw stalks of broom, etc. It is thus apparent that Heading 14.01 does not cover waste products. According to the process employed by the Appellants, corncobs are subjected to processes of hammering, drying, grinding and sizing to obtain corncob powder of specified mesh for manufacture of poultry feed. The residue of corncob is further crushed and sieved to obtain grit of varying mesh which is marketed as ANPOL. It is not disputed by the Revenue that the impugned product is a residue of corncob which is crushed and sieved and in which nothing else is mixed. Thus it remains a residue from the food industry which is classifiable under Heading 23.01 of the Central Excise Tariff, Merely because of its property, it can be used as polishing medium it is not classifiable under sub-heading 3405.90 of the Tariff. In H.S.N., sub-heading 2302.10 applies to residues of Maize (corn). Explanatory Notes of HSN also mentions that "The Heading also covers whole maize (corn) cobs ground with or without their husks, not fulfiling the criteria as to starch content and ash content provided for products from the milling of maize (corn) in Note 2(A) to Chapter 11." We, therefore, hold that the impugned product is classifiable under Heading 23.01 of the Central Excise Tariff. We, therefore, set aside the impugned orders and allow all the three appeals.