1988(07)LCX0033

BEFORE THE CEGAT, SPECIAL BENCH ‘D’, NEW DELHI

S/Shri G. Sankaran, Senior Vice-President (T) and V.T. Raghavachari, Member (J)

NORTHLAND INDUSTRIES

Versus

 COLLECTOR OF C. E.

Order No. 458/88-D, dated 11-7-1988 in Appeal No. E-3210/1987-D

Advocated By: Shri M. Chandrasekharan, Advocate, for the Appellants.

Shri L.C. Chakraborty, J.D.R., for the Respondent.

[Order per : G. Sankaran, Senior Vice-President (T)]. - This appeal is directed against Order-in-appeal No. 360-CE/DLH/87, dated 28-10-1987, passed by the Collector of Central Excise (Appeals), New Delhi.

2. The facts of the case, briefly stated, are that M/s. Northland Industries, New Delhi (hereinafter referred to as the appellants) are engaged in the manufacture of prepared and preserved foods. They filed a classification list (C.L. No. 656/86) effective; from 2-4-1986 in which the classification of “Canned fruits in syrups like fruit cocktail, peaches, guavas, red cherries, pineapple slices, pineapple tidbits, mango slices, grapes, apples, figs, litchis etc., in 450 gms. and 850 gms. cans” (Sl. No. 2 of the C.L.) was claimed under sub-heading No. 0801.10 of the First Schedule to the Central Excise Tariff Act (the Schedule is hereinafter referred to as the ‘Central Excise Tariff’) and of “Fruit Squashes and cordial of all fruits like orange, lemon, mango, pineapple, litchies etc., in 200,400 and 700 Mis bottles” under sub-heading No. 2001.10. The Assistant Collector of Central Excise, by his order dated 2-11-1986, classified canned fruits in syrups under sub-heading No.-2001.10 and Fruit squashes and cordials under sub-heading No. 2107.91. This order was upheld by the Collector (Appeals) by his impugned order. Hence the present appeal.

3. The basis of the classification ordered by the Assistant Collector is that only provisionally preserved fruits are classifiable under Chapter 08. Canned fruits can by no means be called provisionally preserved, since they can last for a long time. Hence, he ruled that canned fruits fell under sub-heading No. 2001.10. He relied on statutory Note 1 to Chapter 20 of the Central Excise Tariff and the Explanatory Notes to Chapter 8 o. the Harmonized Coding System of Nomenclature (HSN) on which the present Central Excise Tariff is based, in coming to this decision. Similarly, relying on statutory Note 5(j) to Chapter 21 of the Central Excise Tariff, the Assistant Collector held that squashes and cordials fell under sub-heading No. 2107.91 and not under Heading No. 20.01.

4. For convenience of reference, the relevant chapter notes and headings are reproduced below :-

CHAPTER 8

CHAPTER 20

Chapter Note 1.1 his chapter covers only products which are prepared or preserved by processes other than merely chilled or frozen or put in provisional preservative solutions, or dried, dehydrated or evaporated.

CHAPTER 21

Note 5. Heading No. 21.07, inter alia includes :

(i) Preparations for lemonades or other beverages, consisting, for ex ample, of flavoured or coloured syrups, syrup flavoured with an added concentrated extract, syrup flavoured with fruit juices and concentrated fruit juice with added ingredients.

5. We have heard Shri M. Chandrasekharan, Advocate, for the appellants and Shri L.C. Chakraborty, DR, for the respondent.

6. It was Shri Chandrasekharan’s submission that canned fruits in syrups were clearly covered by sub-heading No. 0801.10 of the Central Excise Tariff. Resort to Explanatory Notes was not called for. The canned fruit continued to be edible fruit in a more presentable form in a unit container. The Collector (Appeals) was wrong in ignoring the Supreme Court judgment in the case of Deputy Commissioner, Sales Tax, Ernakulam v. PIO Food Packers 1980 ELT 0343 (S.C.). Just as pineapple slices in cans contained to be pineapple, as held in that case, canned fruits in the present case too, contained to be edible fruits. Shri Chandrasekharan, however, made it clear that it was not his contention that them had been no “manufacture” and that canned fruits were not excisable. The counsel also relied upon the Supreme Court’s judgment in Sterling Food v. State of Karnataka and Another 1986(07)LCX0011 Eq 1986 (026) ELT 0003 (S.C.) wherein, applying the test laid down in the PIO Food Packers case (supra), the Court held that processed or frozen shrimps, prawns and lobsters continued to be the same commodity as raw shrimps, prawns and lobsters though the former were ready for the table while the latter were not and a degree of processing was involved in the conversion of the latter into the former.

7. Referring to the Explanatory Notes in Chapter 8 of the H.S.N. :

“This Chapter covers fruit, nuts and peel of citrus fruit or melons (including watermelons), generally intended for human consumption (whether as presented or after processing). They may be fresh (including chilled), frozen (whether or not previously cooked by steaming or boiling in water or containing added sweetening matter) or dried (including dehydrated, evaporated or freeze-dried); provided they are unsuitable for immediate consumption in that state, they may be provisionally preserved (e.g., by sulphur dioxide gas, in brine, in sulphur water or in other preservative solutions). “

the counsel submitted that the proviso therein was not applicable to the instant case since the canned fruits were suitable for immediate consumption. The Assistant Collector was wrong in saying that only provisionally preserved fruits were classifiable under Chapter 8.

8. Replying to the above submissions, Shri LC. Chakraborty, DR, drew our attention to Chapter Note 1 to Chapter 20 reading thus :-

“1. This Chapter covers only products which are prepared or preserved by processes other than merely chilled or frozen, or put in provisional preservative solutions, or dried, dehydrated or evaporated.”

Provisionally preserved fruits were, therefore, out of the scope of Chapter 20. Canned fruits were not provisionally preserved.

9. We have carefully considered the submissions of both sides.

CANNED FRUITS IN SYRUP

10. The process of manufacture of canned fruits is stated to be as follows :-

“Fresh fruits purchased from the market are washed, the inedible portions are taken out and the edible portions of the fruits are put into cans after adding sugar. The cans are then sealed.”

Looking to the process of manufacture, and applying the principles laid down by the Supreme Court in the PIO Food Packers case and the Sterling Foods case, there can be no doubt that essentially the canned fruit is not different from the naturally occurring fruit. The latter has been made more presentable by removal of the inedible portions of the fruit and, by canning, the fruit has been made more long-lasting. But the canned fruit nevertheless is only fruit. It is not something else. In this view of the matter, and considering the words employed in sub-heading No. 0801.10, the subject fruit put up in unit containers would prima facie fall under the heading. The lower authorities have, however, classified the goods under sub-heading No. 2001.10. Prima facie Chapter 20 covers preparations of fruits, not fruits themselves. The subject goods do not seem to be preparations in the sense jams, jellies, marmalades, juices etc., are. But, the lower authorities have placed reliance on Chapter Note 1 to Chapter 20 (reproduced earlier). The subject canned fruits are no doubt not provisionally preserved. For the reasons stated above, they cannot be brought under Chapter 20 unless they are preparations of fruit which, in our opinion, they are not. Chapter 8 seems more apt. For ruling out Chapter 8, the lower authorities have invoked the aid of the Explanatory Notes to Chapter 8 of the H.S.N. These notes have no statutory force and can be looked at only for their persuasive value provided, of course, they do not point to a different result than the one dictated by the Headings and the Statutory Chapter and section notes. We have already extracted the relevant explanatory notes. The very opening sentence states that Chapter 8 covers fruits generally intended for human consumption whether as presented or after processing. That is to say, fruits and processed fruits, as in the instant case, are covered by the chapter. The proviso reading:-

“Provided they are unsuitable for immediate consumption in that state, they may be provisionally preserved (e.g. by sulpher dioxide gas, in brine, in sulphur water or in any other preservative solutions).”

It can be read to only signify that fruits provisionally preserved (for e.g. by sulpher dioxide gas), but unsuitable in that state for immediate consumption would not be out of the purview of Chapter 8. It cannot, and does not, mean, as the lower authorities have held, that only provisionally preserved fruits are classifiable under Chapter 8. The Explanatory, Notes go on to say that fruits of Chapter 8 remain classified therein even if put up in airtight packings (cans, in the instant case): The further note that “In most cases, however, products put up in these packings have been prepared or preserved otherwise than as provided in the headings of this chapter and are therefore excluded (Chapter 20)” cannot have any relevance in the context of the Central Excise Tariff. This is because unlike the existence of 14 headings in Chapter 8 of the H.S.N. - many of them clarify the processing or preservation (as for e.g. 08.04,08.05, 08.06,08.11), the new Central Excise Tariff introduced by the Central Excise Tariff Act, 1985 (5 of 1986) has only 2 sub-headings in Chapter 8 and the terminology does not closely follow the H.S.N. pattern.

11. In the light of the foregoing discussion, the subject canned fruits are, in our view, classifiable under Heading No. 08.01, sub-heading No. 0801."10.

FRUIT SQUASHES AND CORDIALS

12. We shall now consider the classification of fruit squashes and cordials. The contention of the appellants is that squashes are nothing but fruit juice preparations, they are not syrups flavoured with fruit juice since squashes have to contain a minimum of 25% fruit juice in accordance with the Indian Food Laws and that they are not manufactured out of concentrated fruit juice. It is contended that in the circumstances, they are classifiable under sub-heading No. 2001.10 and not 2107.91 as held by the lower authorities. The Assistant Collector has relied on Chapter Note 5(j) of Chapter 21 (extracted earlier) in support of the classification under sub-heading No. 2107.91. He has held that all fruit beverages are covered by this heading whether they consist of concentrated fruit juice or syrup flavoured with fruit juices. He has also held on a reading of the Heading No. 20.01 that preparations of fruit juices are not included therein.

13. The counsel for the appellants submitted that, as preparations of fruit, the subject squashes and cordials were more appropriately classifiable under Chapter 20 than the residuary Chapter 21. Chapter Note 5(j) to Chapter 21 relied on by the Assistant Collector would not apply to their goods since they were not concentrated fruit juices nor syrups flavoured with fruit juices. In this context, he referred to the definition of the terms fruit juice, beverages, squash in the Prevention of Food Adulteration Rules in support of his stand. For the Department, Shri Chakraborty reiterated the reasoning contained in the Assistant Collector’s order. He also submitted that it was not proper to rely on definitions in other enactments for the purpose of interpreting entries in the Central Excise Tariff.

14. We have carefully considered the submissions of both sides. The competing sub-headings are 2001.10 and 2107.91 (reproduced earlier). From a bare reading of Heading No; 20.01, it will be clear that preparations of fruit juices; whether or not containing added sugar or other sweetening matter are covered by it. But, are squashes and cordials preparations of fruit juices? And, why has the Assistant-Collector classified them under sub-heading 2107.91 ? Prima facie, if squashes and cordials are covered by the Heading 20.01 (“fruit juices”), they would not be covered by the residuary Heading No. 21.07 (“Edible preparations, not elsewhere specified or included”). Unfortunately, the composition of the subject quashes and cordials is not on record though there is no dispute that these are squashes and cordials. The Assistant Collector has relied on Statutory Note 5(j) to Chapter 21 in support of his conclusion. (This note has been reproduced earlier). The note has the effect of including within Heading No. 21.07, preparations for lemonades or other beverages, consisting, for example, of flavoured or coloured syrups, syrup flavoured with an added concentrated extract, syrup flavoured with fruit juices and concentrated fruit juices with added ingredients. The Assistant Collector has observed in his order that it is evident that all beverages are covered herein whether consisting of concentrated fruit juice or syrup flavoured with fruit juices. It seems to us, however, that what is covered are preparations for beverages and not beverages themselves, preparations of fruit juices are, in terms, covered by Heading No. 20.01. The Assistant Collector has construed the heading to mean that only fruit juices have been included herein, not preparations of fruit juices. He has come to this conclusion on the basis that the preparations of fruit included in the heading are only jams, fruit, jellies, marmalades, fruit or nut puree. The word “preparations” at the commencement of the entry does not qualify the phrase “fruit juices”. In other words preparations of fruit juices are not included. Since squash is a beverage and can be consumed after simple dilution with water, squashes and cordials are covered more specifically by the term beverages. As noted earlier, we are of the view that, in the light of Note 5(j) to Chapter 21, Heading No. 21.07 covers preparations for beverages and not beverages themselves. On the other hand, preparations of fruit juices are specifically covered by Heading No. 20.01. The appellants’ contention is that squashes are not syrups flavoured with fruit juices for all fruit squashes must contain, in accordance with law, a minimum of 25% fruit juice which is a substantial quantity and hence squashes cannot be treated as having fruit juices as flavouring agent. Nor are they manufactured out of concentrated fruit juices.

15. In the absence of any definition in the Tariff, we may, with advantage, look at the definitions in the Fruit Products Order, 1955, and Prevention of Food Adulteration Rules, 1955. We are conscious of the fact that definitions in other enactments cannot be the basis of construing entries in the Tariff Schedule. But it is permissible to look at these definitions to have an idea as to how the authorities concerned with the particular industry have viewed the subject especially when the products of that industry must conform to the requirements laid down in those other enactment’s. And, that should give a fair indication of what the industry understands by the terms.

16. The Fruit Products Order, 1955, issued under Section 3 of the Essential Commodities Act, 1955, defines ‘fruit products’ as meaning inter alia squashes and cordials and ready-to-serve beverage. There is little doubt, therefore, the squashes and cordials are not ready-to-serve beverages but fruit products or preparations which (there is no dispute on this in the present instance) can yield ready-to-serve beverage on dilution with water. The following definitions are found in the Prevention of Food Adulteration Rules, 1955:-

“Fruit Juice means the unfermented and unconcentrated liquid expressed from sound, ripe, fresh fruit, and with or without :-

(a) sugar, dextrose, invert sugar, or liquid glucose, either singly or in combination.

(b) water, peel-oil, fruit essences and flavour, common salt, ascorbic acid, citric acid, (tartatic acid and malic acid) and permitted colours and preservatives.

The acidity of the finished product calculated as citric acid shall not be less than 4 per cent in the case of pure lemon juice or pulp and not less than 5 per cent in the case of pure lime juice but shall not exceed 3.5 per cent in the case of other juices.

[The total soluble solids for sweetened fruit juice (except tomato juice) shall not be less than 10 per cent].

[It may also contain emulsifying and stabilising agents as prescribed in Rule 61(-)C]."

“Fruit Squash means the expressed juice of the sound, ripe fruit with the pulp, containing sugar, dextrose, invert sugar or liquid glucose either singly or in combination and with or without :-

(a) water, peel-oil, fruit essences and flavours, common salt.

(b) citric acid, ascorbic acid.

(c) permitted preservatives and colours.

The total soluble solids w/w in the finished product shall be not less than 40 per cent.

[The minimum percentage of fruit juice in the final product shall be not less than 25.0 per cent w/w].

It may also contain permitted emulsifying and stabilising agent as prescribed in Rule 61-C."

“Fruit Beverage or Fruit Drink means any beverage or drink which is purported to be prepared from fruit juice and water or carbonated water, and containing sugar, dextrose, invert sugar or liquid glucose either singly or in combination and with or without :-

(a) water, peel-oil, fruit essences and flavours.

(b) citric acid, ascorbic acid.

(c) permitted preservatives and colours.

The total soluble solids w/w in the final product shall be not less than 10 per cent.

[The minimum percentage of fruit juice in the final product shall be not less than 5.0 per cent w/w].

[It may also contain permitted emulsifying and stabilising agent as prescribed in Rule 61 -C]."

It is clear from the above that “fruit juice” is the unconcentrated juice with or without the addition of certain specified ingredients whereas “fruit squash” is juice of the fruit with certain ingredients (which are optional in the case of “fruit juices”) present - sugar, dextrose, invert sugar or liquid glucose either singly or in combination.

17. Part II of the Fruit Products Order, 1955 sets out the specifications inter alia for fruit juice, squashes and cordials. It also says :-

“Fruit juice shall be unconcentrated liquid product expressed from ripe fruit and may contain portions of the pulp and other cellular matter natural to the fruit. Concentrate, squash and crush shall contain fruit pulp. Cordials shall be the clear final product prepared by adding sugar to the clarified juice that is from which pulp and other cellular matter have been removed. The only substances that may be added to fruit juice or pulp are water, peel-oil, fruit essences and flavours, common salt, sugar, invert sugar and/or liquid glucose, ascorbic acid, citric acid, permitted colours and preservatives.”

18. We wish samples of the goods in dispute had been drawn and tested. Be that as it may, there can be little doubt that squashes and cordials which the present goods admittedly are, are not fruit juice as such but preparations thereof.

19. The Assistant Collector, in our view, is not right when he says that the word “preparations” in the entry in Heading No. 20.01 does not qualify the words “fruit juices and vegetable juices, whether or not containing added sugar or other sweetening matter”. This result flows from the arrangement of the words and punctuation’s employed. Given this position, and having regard to the fact that Heading No. 21.07 is a residual heading, we are of the opinion that the subject squashes and cordials which are preparations of fruit juices are correctly classifiable under Heading No. 20.01, sub-heading No. 2001.10.

20. In the result, the appeal succeeds. The impugned order is set aside and the appeal is allowed.

Equivalent 1988 (37) ELT 229 (Tribunal)