Parle Exports (P) Ltd. Vs. Collector of Central Excise - Court Judgment

Excerpt:
1. by adjudication order dated 12.6.80 the collector of central excise, baroda, held that the product "non-alcoholic beverage bases" manufactured by the appellants were excisable goods falling under item no. 68 of the cet (central excise tariff schedule) and that they did not constitute food products or food preparations eligible for exemption from duty under central excise notification nos. 55/75 dated 1.3.75. accordingly, he imposed on the appellants under central excise rule 173q (1), a penalty of rs. 70,000. he also ordered that the appellants should pay duty at the applicable rates on the goods manufactured and cleared by the appellants without payment of duty during the period from 18.6.77 to 5.10.78. the appeal preferred against this order before the central board of excise & customs (cbec) has been received, on transfer, in this tribunal for disposal as an appeal and has been numbered 787/80-d.2. similarly appeals nos. 411/81 and 412/81- originally filed as revision applications before the government of india and received in the tribunal, on transfer - are against orders nos. 1784/80 and 1785/80 dated 4.11.80 passed by' the appellate collector of central excise.bombay, whereby he upheld the assistant collector's orders to the effect that the nonalcoholic beverage bases manufactured by the appellants were not food products or preparations eligible for exemption from duty in terms of notification no. 55/75.3. the basic question which, therefore, arises for decision in all the appeals is whether the non-alcoholic beverage bases manufactured by the appellants would qualify for duty exemption as food products or preparations in terms of notification no. 55/75. it may be noted here that there is no dispute before us about the classification of the goods, the admitted position being that they fall under item no. 68 cet. the other questions which arises in appeal no. 787/80 are whether the notice of demand was barred by limitation and whether the imposition of penalty on the appellants was justified on the facts and in the circumstances of the case.4. we have heard shri anil dewan and dr. n. kantawala, counsels for the appellants and shri vineet kumar, senior departmental representative for the respondent.5. the learned counsel for the appellants drew our attention to trade notice no. 103/75 dated 18.6.75 issued by the collector of central excise, bangalore, explaining the scope of the terms "food products and food preparations" in entry no. 1 in the schedule to notification no.55/75 dated 1.3.75. it states that "preparations used because of their nutritional or flavouring properties in the making of beverages or foodstuffs for human consumption are classifiable as food preparations.but such preparations which because of their ingredients and small proportions in which they are normally used, are clearly added for other purposes, are not classifiable as food preparations". thus, non alcoholic beverage bases, it was argued, were covered by the scope of the notification as explained by the trade notice. further support was sought to be derived from two orders passed by the appellate collectors at madras and bombay. by order no. 578/78 dated 6.4.78 in the case of bush boake allan (india) ltd., the former had held that flavouring essenses for food products fell under item 68 cet and were eligible for duty exemption in terms of notification no. 55/75. it is seen that the appellate collector had based his conclusion essentially on the contents of the bangalore collector's trade notice 103/75 dated 18.6.75. to the same effect, it appears, the. appellate collector, bombay had also passed an order as seen from the appellate. collector's orders-in-appeal no. 1784/80 and 1785/80 dated 4.11.80 which is the order-impugned in two of the present appeals. while these orders favourable to the appellants may be of some persuasive value, we have to, in view of the present dispute, consider and resolve the question of eligibility for exemption in the light of the material placed before us.6. we notice that the collector of central excise, baroda, in his order-in-original dated 12.6.80 (appeal no. 787/80-d), and the appellate collector in orders no. 1784/80 and 1785/80 dated 4.11.80, (appeals nos. 411/80-d and 412/80-d) have both based their conclusions on the test: whether the "essences/concentrates" or "non-alcoholic beverage bases" could be offered as food products or food preparations to a normal human being who is hungry or to a guest who is to be entertained. the collector has relied, in this context, on the judgment of the andhra pradesh high court in brooke bond india ltd. v. union of india - 1980-elt-65, by which the court held that coffee-chicory powder could not be classified as "food product or food preparation". the appellate collector has, in addition, relied on the explanatory notes in the cccn (customs cooperation council nomenclature) which classified food flavourers, flavouring agents and essential oils under the heading of "essential oils ..." and not under food preparations or food products.7. taking the cccn first, it may be noted that heading no. 21.07 covers "food preparations, not elsewhere specified or included". the explanatory notes thereunder make it clear that the heading includes inter alia flavouring powders for making beverages, whether or not sweetened, with a basis of bicarbonates of soda and glycyrrhisis or liquorice extract. non-alcoholic compound preparations (often known as "concentrated extract") used for making beverages (liquors etc.) (obtained by compounding vegetable extracts with lactic acid, tartaric acid, citric acid, phosphoric acid, preserving agents, foaming agents, fruit juices etc. and some times with essential oils) are also included in the heading. from the list of raw materials used in the manufacture of the subject products (whose assessment is in dispute), as furnished in the annexure to the letter dated 8.9.78 from the appellants to the superintendent of central excise, ahmedabad, it is seen that the composition, by and large, conforms to what is set out in the cccn notes (-essential oils, flavours, cloudifier, foaming agents, preservatives, vitamins, food colour). it appears, therefore, that the products are such as would merit classification under heading no. 21.07 of the cccn. though we are conscious of the fact that cccn headings and notes are not to be applied for resolving disputed question of interpretation of entries in the central excise tariff schedule and notifications, we feel that, in the absence of any definition of the terms in the said schedule and notification no. 55/75, we can draw upon the meaning assigned to the expressions in parallel provisions. and the cccn is but an internationally accepted tariff classification and it has its own persuasive value unless, of course, the expressions to be interpreted have, been given in the central excise provisions a different meaning. & we do, however, agree with the lower authorities that the definitions in the prevention of food adulteration act are of no avail in the present context because the object of that act is different : to lay down stringent controls over all articles which go into the making of or preparation of any item of food or drink so as to protect the health of human beings.9. the view that the subject non-alcoholic beverage bases or concentrates are covered by the expression "food products and food preparations" is also supported by the import policy of the government of india for the period april 1981 to march 1982, which lists, in appendix 17, "nonalcoholic beverage bases" under the heading "foods".the i.t.c. policy is a document for regulation of import trade. if it shows non-alcoholic beverage bases as an item under the category of "food", it is as good a piece of evidence as any in support of the appellant's contention that such beverage bases are classifiable as food products and food preparations.10. in the brooke bond india ltd. case (supra), the andhra pradesh high court has held that coffee and coffee-chicory blend are beverages and not food and, therefore, not entitled to exemption as food products or food preparations under notification no. 55/75. the product under consideration by us is different from the one in the brooke bond case.further, the material contained in the cccn and i.t.c. policy, in our opinion, can be taken as a good index to, and an aid for, the proper understanding of the terms used to describe goods in trade and commerce. when government itself places the goods (non-alcoholic beverage essences) in the category of "food" in the import trade policy document, we think there is no good reason not to act on the said understanding in interpreting the term in the central excise notification, which, has to be understood as trade understands it. in these circumstances, with respect, we are of the view the andhra pradesh high court's decision does not help the respondent.11. we further note that the encyclopaedia britannica, volume 13 at page 420-421, sets out the different classes of foods. it says that foods can be divided into nine classes and one of the classes mentioned is beverages. there is a section on beverages wherein it is stated that although most adults drink one to two litres of water a day, much of this is in the form of coffee, tea, fruit juices, "soft drinks", beer, wines or spirits, or other liquids. in general, these are appreciated more for their taste and the substances they contain, or for their effects, than for their nutritive value.12. it may be seen that the above authoritative work of reference classifies beverages including soft drinks under the category of foods.if this be so, there seems to be no good reason why non-alcoholic beverage essences should not also be classified as food products or food preparations if not as foods 13. we do not accept the learned senior departmental representative's contention that the bangalore collector's trade notice, the cccn, the import policy, the madras and bombay appellate collector's orders are all of no avail in determining the present dispute. we have already given reasons in support of our conclusion.14. in the result, we hold that the subject non-alcoholic beverage bases were eligible for duty exemption in terms of serial no. 1 of the schedule to notification no. 55/75.15. in the above view of the matter, the appeals succeed. in consequence, the other issues do not survive for consideration.

Judgment:
1. By adjudication order dated 12.6.80 the Collector of Central Excise, Baroda, held that the product "Non-alcoholic beverage bases" manufactured by the appellants were excisable goods falling under item No. 68 of the CET (Central Excise Tariff Schedule) and that they did not constitute food products or food preparations eligible for exemption from duty under Central Excise notification Nos. 55/75 dated 1.3.75. Accordingly, he imposed on the appellants under Central Excise Rule 173Q (1), a penalty of Rs. 70,000. He also ordered that the appellants should pay duty at the applicable rates on the goods manufactured and cleared by the appellants without payment of duty during the period from 18.6.77 to 5.10.78. The appeal preferred against this order before the Central Board of Excise & Customs (CBEC) has been received, on transfer, in this Tribunal for disposal as an appeal and has been numbered 787/80-D.2. Similarly appeals Nos. 411/81 and 412/81- originally filed as revision applications before the Government of India and received in the Tribunal, on transfer - are against orders Nos. 1784/80 and 1785/80 dated 4.11.80 passed by' the Appellate Collector of Central Excise.

Bombay, whereby he upheld the Assistant Collector's orders to the effect that the nonalcoholic beverage bases manufactured by the appellants were not food products or preparations eligible for exemption from duty in terms of notification No. 55/75.

3. The basic question which, therefore, arises for decision in all the appeals is whether the non-alcoholic beverage bases manufactured by the appellants would qualify for duty exemption as food products or preparations in terms of notification No. 55/75. It may be noted here that there is no dispute before us about the classification of the goods, the admitted position being that they fall under item No. 68 CET. The other questions which arises in appeal No. 787/80 are whether the notice of demand was barred by limitation and whether the imposition of penalty on the appellants was justified on the facts and in the circumstances of the case.

4. We have heard Shri Anil Dewan and Dr. N. Kantawala, Counsels for the appellants and Shri Vineet Kumar, Senior Departmental Representative for the respondent.

5. The learned counsel for the appellants drew our attention to Trade Notice No. 103/75 dated 18.6.75 issued by the Collector of Central Excise, Bangalore, explaining the scope of the terms "food products and food preparations" in entry No. 1 in the Schedule to notification No.55/75 dated 1.3.75. It states that "preparations used because of their nutritional or flavouring properties in the making of beverages or foodstuffs for human consumption are classifiable as food preparations.

But such preparations which because of their ingredients and small proportions in which they are normally used, are clearly added for other purposes, are not classifiable as food preparations". Thus, non alcoholic beverage bases, it was argued, were covered by the scope of the notification as explained by the trade notice. Further support was sought to be derived from two orders passed by the Appellate Collectors at Madras and Bombay. By order No. 578/78 dated 6.4.78 in the case of Bush Boake Allan (India) Ltd., the former had held that flavouring essenses for food products fell under item 68 CET and were eligible for duty exemption in terms of notification No. 55/75. It is seen that the Appellate Collector had based his conclusion essentially on the contents of the Bangalore Collector's Trade Notice 103/75 dated 18.6.75. To the same effect, it appears, the. Appellate Collector, Bombay had also passed an order as seen from the Appellate. Collector's Orders-in-appeal No. 1784/80 and 1785/80 dated 4.11.80 which is the order-impugned in two of the present appeals. While these orders favourable to the appellants may be of some persuasive value, we have to, in view of the present dispute, consider and resolve the question of eligibility for exemption in the light of the material placed before us.

6. We notice that the Collector of Central Excise, Baroda, in his Order-in-original dated 12.6.80 (appeal No. 787/80-D), and the Appellate Collector in orders No. 1784/80 and 1785/80 dated 4.11.80, (appeals Nos. 411/80-D and 412/80-D) have both based their conclusions on the test: whether the "essences/concentrates" or "non-alcoholic beverage bases" could be offered as food products or food preparations to a normal human being who is hungry or to a guest who is to be entertained. The Collector has relied, in this context, on the judgment of the Andhra Pradesh High Court in Brooke Bond India Ltd. v. Union of India - 1980-ELT-65, by which the Court held that coffee-chicory powder could not be classified as "food product or food preparation". The Appellate Collector has, in addition, relied on the explanatory notes in the CCCN (Customs Cooperation Council Nomenclature) which classified food flavourers, flavouring agents and essential oils under the heading of "Essential Oils ..." and not under food preparations or food products.

7. Taking the CCCN first, it may be noted that heading No. 21.07 covers "food preparations, not elsewhere specified or included". The explanatory notes thereunder make it clear that the heading includes inter alia flavouring powders for making beverages, whether or not sweetened, with a basis of bicarbonates of soda and glycyrrhisis or liquorice extract. Non-alcoholic compound preparations (often known as "concentrated extract") used for making beverages (liquors etc.) (obtained by compounding vegetable extracts with lactic acid, tartaric acid, citric acid, phosphoric acid, preserving agents, foaming agents, fruit juices etc. and some times with essential oils) are also included in the heading. From the list of raw materials used in the manufacture of the subject products (whose assessment is in dispute), as furnished in the annexure to the letter dated 8.9.78 from the appellants to the Superintendent of Central Excise, Ahmedabad, it is seen that the composition, by and large, conforms to what is set out in the CCCN notes (-essential oils, flavours, cloudifier, foaming agents, preservatives, vitamins, food colour). It appears, therefore, that the products are such as would merit classification under heading No. 21.07 of the CCCN. Though we are conscious of the fact that CCCN headings and notes are not to be applied for resolving disputed question of interpretation of entries in the Central Excise Tariff Schedule and notifications, we feel that, in the absence of any definition of the terms in the said Schedule and notification No. 55/75, we can draw upon the meaning assigned to the expressions in parallel provisions. And the CCCN is but an internationally accepted tariff classification and it has its own persuasive value unless, of course, the expressions to be interpreted have, been given in the Central Excise provisions a different meaning. & We do, however, agree with the lower authorities that the definitions in the Prevention of Food Adulteration Act are of no avail in the present context because the object of that Act is different : to lay down stringent controls over all articles which go into the making of or preparation of any item of food or drink so as to protect the health of human beings.

9. The view that the subject non-alcoholic beverage bases or concentrates are covered by the expression "food products and food preparations" is also supported by the import policy of the Government of India for the period April 1981 to March 1982, which lists, in Appendix 17, "Nonalcoholic beverage bases" under the heading "Foods".

The I.T.C. policy is a document for regulation of import trade. If it shows non-alcoholic beverage bases as an item under the category of "food", it is as good a piece of evidence as any in support of the appellant's contention that such beverage bases are classifiable as food products and food preparations.

10. In the Brooke Bond India Ltd. case (supra), the Andhra Pradesh High Court has held that coffee and coffee-chicory blend are beverages and not food and, therefore, not entitled to exemption as food products or food preparations under notification No. 55/75. The product under consideration by us is different from the one in the Brooke Bond case.

Further, the material contained in the CCCN and I.T.C. policy, in our opinion, can be taken as a good index to, and an aid for, the proper understanding of the terms used to describe goods in trade and commerce. When Government itself places the goods (non-alcoholic beverage essences) in the category of "food" in the Import Trade Policy document, we think there is no good reason not to act on the said understanding in interpreting the term in the Central Excise Notification, which, has to be understood as trade understands it. In these circumstances, with respect, we are of the view the Andhra Pradesh High Court's decision does not help the respondent.

11. We further note that the Encyclopaedia Britannica, Volume 13 at page 420-421, sets out the different classes of foods. It says that foods can be divided into nine classes and one of the classes mentioned is beverages. There is a Section on beverages wherein it is stated that although most adults drink one to two litres of water a day, much of this is in the form of coffee, tea, fruit juices, "soft drinks", beer, wines or spirits, or other liquids. In general, these are appreciated more for their taste and the substances they contain, or for their effects, than for their nutritive value.

12. It may be seen that the above authoritative work of reference classifies beverages including soft drinks under the category of foods.

If this be so, there seems to be no good reason why non-alcoholic beverage essences should not also be classified as food products or food preparations if not as foods 13. We do not accept the learned Senior Departmental Representative's contention that the Bangalore Collector's Trade Notice, the CCCN, the Import Policy, the Madras and Bombay Appellate Collector's orders are all of no avail in determining the present dispute. We have already given reasons in support of our conclusion.

14. In the result, we hold that the subject non-alcoholic beverage bases were eligible for duty exemption in terms of Serial No. 1 of the Schedule to notification No. 55/75.

15. In the above view of the matter, the appeals succeed. In consequence, the other issues do not survive for consideration.