1992(12)LCX0046

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

S/Shri K.S. Venkataramani, Member (T) and S.L. Peeran, Member (J)

COLLECTOR OF C. EX.

Versus

S.M. CONFECTIONERY WORKS

Order No. E/543 to 545/92-D, dated 14-12-1992 passed in Appeal Nos. E/2986, 3007 and 3009/92-D

Cases Quoted

U.O.I. v. Delhi Cloth and General Mills Co. Ltd. - 1977(001) ELT J 199 (S.C.) . [Para 16]

Bhor Industries Ltd. v. Collector - 1989(01)LCX0029 Eq 1989 (040) ELT 0280 (S.C.) . [Para 17]

Advocated By: Shri M.K. Jain, SDR, for the Appellants.

Shri G.L. Deshpande, Advocate, for the Respondents.

[Order per: K.S. Venkataramani, Member (T)]. - All the three appeals arise out of a common order of the Collector of Central Excise (Appeals), Indore dated 12-2-1992. The appellants in the 2nd & 3rd Appeals are M/s. S.M. Confectionery Works, who are the respondents in the appeal filed by the Collector. The Collector of Central Excise, Nagpur, is aggrieved with the order of the Collector (Appeals), because, according to the Collector of Central Excise, Nagpur, the goods manufactured by the respondents, ‘chironjidana’ is sugar produce and should have been correctly classified under sub-heading 1704.90 CET Act, 1985 as a sugar confectionery whereas the Collector (Appeals) has accepted the contention of the manufacturer that these are ‘prasad’ or ‘prasadam’ classifiable under sub-heading 2107.10 CETA. The brief facts, leading to these appeals, are as follows:

2. M/s. S.M. Confectionery Works, W/5, MIDC Amraoti (Respondents) is a S.S.I. Unit and engaged in the manufacture of sugar confectionery, not containing Cocoa, such as (a) hard boiled sugar confectionery (b) tablet and coated sweets falling under sub-heading No. 1704.90. In addition, they are also manufacturing “Chironjidana” (In some part of India it is also called as “Ilchidana”); Ghadi-sarkar; Rewadi and Gathi/Batasha. The party vide their classification lists No. 31/87-88 effective from 14-1-1988, 51/87-88 effective from 1-3-1988 and 10/89 effective from 1-4-1989, classified sugar confectionery not containing Cocoa (a) hard boiled sugar confectionery; (b) tablet, sweets; and (c) coated sweets, under sub-heading No. 1704.90 below item 6 and also declared “Chironjidana”, Ghadi-sakkar, Gathi/Batasha under sub-heading No. 2107.10 and Rewadi under sub-heading No. 2107.99 at ‘Nil’ rate of duty which were shown as “other goods” below Item 7 of the said classification lists. The above classification lists were approved as declared by the party. However, later on, the Assistant Collector, Central Excise Dn. Amraoti re-examined the classification of “Chironjidana” Ghadi-sakkar, Rewadi and Gathi/Batasha and following the principles of natural justice, passed Order No. 11/CL/89 dated 11-8-1989 by which he modified the classification of these other four items also under sub-heading No. 1704.90 leviable to Central Excise Duty at appropriate rate, instead of under Heading No. 2107.10/2107.99 at NIL rate as claimed by the party, from the effective dates of the classification lists in question. Based upon the order mentioned above, certain demands had also been raised which were confirmed by the Assistant Collector, Central Excise Dn. Amraoti, vide his Order No. 3S/89/D AMT dated 13-10-1989. Aggrieved by these orders, the party preferred appeals with Collector (Appeals), Indore, who vide his Order-in-Appeal No. R. 2-3-/NG/89 dated 1-2-1990 set aside both the orders of Assistant Collector, Central Excise Dn. Amraoti i.e. order dated 11-8-1989 of classification issue and order dated 13-10-1989 of consequential demand issue and remanded back the case for de novo adjudication by single Order-in-Appeal No. F. 2-3/NG/89 dated 1-2-1990.

3. The Assistant Collector of Central Excise, Amraoti Division, Amraoti after following the procedural formalities and the principles of natural justice, passed Order-in-Original No. 4/CL/90/AMT on 22-8-1990 classifying “Chironjidana” Ghadi-sakkar, Rewadi and Gathi/Batasha under sub-heading No. 1704.90. Assistant Collector of Central Excise, Amraoti also confirmed five demands, totalling Rs. 19,191.00 under his Order No. 11/Adj/90/AMT dated 4-9-1990 issued under C.No. V(17) 15-47/89/Adj.

4. Being again aggrieved, the party filed two appeals Nos. (i) 264/CX/Appl/NGP/90 against approval of the goods in question under sub-heading No. 1704.90 and (ii) No. 265-C.E./Appl/NGP/90 against adjudication Order No. 11/Adj/90/AMT dated 4-9-1990 with the Collector (Appeals), Indore, who vide his Order-in-Appeal No. 120-C.E./IND/92 dated 12-2-1992 upheld the Assistant Collector of Central Excise, Amraoti’s Order-in-Original No. 4/CL/90/AMT passed on 22-8-1990 so far as the classification of Ghadi-sakkar, Rewadi and Gathi/Batasha under S. No. 1704.90 is concerned. But the Collector (Appeals), Indore in his same order treated “Chironjidana” as prasadam’ and classified it under sub-heading No. 2107.10, solely relying upon Chemical Examiner’s report that “Chironjidana” which is in the form of globules, with uneven surface made of sugar (Sucrose), sucrose content more than 90%, and generally used as ‘prasadam7. The Collector (Appeals), Indore vide his order dated 12-2-1992 (supra), accordingly, reduced the amount of confirmed demand of Rs. 19,191.00 to the above extent and set aside the penalty imposed by the Assistant Collector, Central Excise, Amraoti.

5. Arguing the case of the Assessee Appellant, Sh. G.L. Deshpande, Learned Counsel, submitted that the Appellate Collector failed to appreciate that the disputed products were commonly used as prasadam for offering to God, in the temples. In such case, the authorities are bound to apply the common parlance test for deciding the classification under the Central Excise Tariff Act. The appellant had produced the photographs showing sale of the disputed items in the shops in the vicinity of temple. The affidavits of the shopkeepers were also filed before the Assistant Collector, wherein they had deposed that the disputed items were invariably used as prasadam. The orders passed by both the authorities below ignoring the common parlance test, are not sustainable in law.

6. The Learned Counsel, further, urged that the goods manufactured by them cannot be considered as confectionery going by the definition of the term which is a mixture and a preparation especially for home consumption made by mixing diverse ingredients, a preparation of fruits, nuts roots or other morsels with sugar. In the products, manufactured by them, there is no such admixture of ingredients, but they are made only of sugar as has been brought out by the Chemical Examiner’s test report. Therefore, these goods cannot be classified as sugar confectionery. The Learned Counsel also pointed out that the Collector (Appeals) should have applied the same logic to the other products as he had applied in the case of ‘chironjidana’ because the other products are also similarly composed of sugar and are also used as prasad in temples.

7. Shri M.K. Jain, the Ld. S.D.R., contended that the main ingredient in the product is sugar and Glucose Sucrose contents is 90% and above. The goods are in the nature of hard boiled sweets and are clearly covered by the Heading 17.04 as ‘sugar confectionery’. The Collector (Appeals), therefore, ought to have confirmed the classification of chironjidana under sub-heading 1704.90. The Ld. S.D.R., further, urged that the Chemical Examiner’s report, on which the Collector has relied, is not categorical that the goods are prasadam because the Chemical Examiner has suggested, enquiries to be made to ascertain the actual practice in respect of the use of these goods. The assessee had not described the goods as prasad in their classification list.

8. The submissions made by both the parties, herein, have been carefully considered. The issue is regarding the classification of chironjidana, Gathi/Batasha and Rewadi as between the competing headings 1704 and 2107 CETA’ 1985.

These are as follows :

9. The composition of the products ‘chironjidana and ghadi-shakkar’ have been given in the test report of the Chemical Examiner, which is on record. The samples were to be tested as regards percentage of ingredients used and to ascertain whether the product is classifiable under sub-heading 1704.90 or as ‘Prasadam’ under sub-heading 2107.10. In respect of chironjidana, the Chemical Examiner opined as follows:

“Sample is in the form of Globules with uneven surface made of sugar Sucrose). Sucrose contents more than 90%.

Please see note below:

Note: Such preparations are generally used as prasadam. However, actual use may be ascertained."

10. In respect of Ghadi-shakkar, the opinion was expressed as follows:

“Sample is in the form of crystalline lumps made of sugar. Sugar (Sucrose) content is more than 90%. Attention is invited to Notification 15/89 C.E., dated 1-3-1989.”

11. The assessee has also enclosed, with their appeal, an examination report of the products dated 25-10-1989 from the Chief Chemist Incharge, Public Health Laboratory, Amravati. It relates to Ghadi-shakkar, Batasha and Chironjidana. It shows that Sucrose contents in Ghadi-shakkar is 99.56%; in Batasha it is 93.18% and in Chironjidana it is 94.06%. The question is whether the products by their nature, as above, which are predominantly made of sugar, will fall outside Chapter 17 and within Chapter 21 CETA. Sub-heading 1704 covering sugar confectionery (including white chocolate) not containing cocoa, is identical with the sub-heading 1704 of the HSN and since the Central Excise Tariff Act largely follows HSN, it is well-settled that the Explanatory Note thereto should be taken as a guideline having persuasive value though not statutory authority. The sub-headings 1704.10 and 1704.90 are also identically worded in HSN and in Central Excise Tariff Act. The Explanatory Note under heading 1704 in HSN is as follows:

“This heading covers most of the sugar preparations which are marketed in a solid or semi-sold form. generally suitable for immediate consumption and collectively referred to as sweetmeats, confectionery or candies “ It is, further, stated therein that it includes, inter alia, boiled sweets (including those containing malt extract).

12. From the process of manufacture of the products, in question, as described in the Orders of the Collector (Appeals) and the Assistant Collector, all of them are boiled sweets and as such this would be covered by the scope of Heading 17.04 of the Tariff going by the guideline available in the HSN Explanatory Note as above. It may also be noted that even in the erstwhile CET, boiled sweets were covered under Item 1A(i) of the CET. The Assistant Collector, in his order, has also noted this aspect and also observed that such goods under the old Tariff are entitled for exemption under Notification 86/68 dated 30-4-1968. In such a view of the matter, the classification of these goods under sub-heading 1704.90 would be more appropriate. The contention that these goods should be considered as ‘prasad’ or ‘prasadam’ or as “other edible preparations”, under Heading 21.07 and under sub-heading 2107.10 and Heading 2107.99 is not acceptable for the reason that ‘prasad’ or ‘prasadam’ is by concept an edible preparation prepared in the temple or religious place and distributed therefrom to the devotee. Such is not the case here. The goods are freely available in places other than temples. It is also not the case of the assessee appellant that all their production of these products are sold only to the temples because there is no direct sales shown to only temples from the assessee appellants. The arguments that in any case such products are predominantly used as ‘prasad’ or ‘prasadam’ may not be sufficient for their classification under Heading 21.07 for the reasons already stated above. In this view of the matter, the Collector (Appeals) acceptance of chironjidana as ‘prasad’ classifiable under 21.07 is also not sustainable because the Chemical Examiner was not categorical in his opinion and had required that the actual practice be ascertained and it is found that these products are commercially manufactured in the factory and the assessee sells them to the dealer and the goods are generally available in shops and are not confined only to temples. Therefore, the Collector’s order is not sustainable in regard to classification on chironjidana. All the products, on the other hand, are classifiable under sub-heading 1704.90 as ‘sugar confectionery’ for the reasons aforesaid. However, the perusal of the classification list, submitted by the assessee, also indicates that they had claimed exemptions under Notification 33/86 for the products. There is no ground given as to why the exemption under Notification was not considered by the Assistant Collector. In this context, it is also worth noting that the Chemical Examiner also had indicated that Notification 15/89, which is similar to Notification 33/86 should also be considered. The Notification exempts among other things, candy sugar under certain conditions. In the interest of justice, it is directed that the eligibility of the products to these notifications should also be considered and the duty liability re-determined if any based on the eligibility or otherwise to the Notification. In the result, the appeals, by the assessee appellants, are rejected and the appeal by the Department is allowed in the above terms.

E/Appeal Nos. 2986/92-D, E/3007/92-D and E/3009/92-D & E/STAY/1787/1992-D

[Assent per: S.L. Peeran, Member (J)]. - I have gone through the order prepared by my learned brother Shri K.S. Venkataramani, Member (T). I agree with his findings that the items in question namely Chironjidana, Ghadi-shakkar (Mishri), Rewadi, Gathi/Batasha are all ‘Sugar Confectionery’ falling as “other” in sub-heading 1704.90 with rate of duty 12%. I also agree that the lower authorities should consider the prayer of the appellants for the grant of the exemption under Notification No. 15/89 which is similar to Notification No. 33/86.1 would like to add separately my findings on this aspect of the matter also.

14. The appellants in the memo of appeal have stated that sugar confectionery is manufactured by mixing sugar with glucose, colour, essence and citric acid, milk powder, coconut powder, starch, ghee etc. They contended that in the manufacture of the products Chironjidana/ Ghadi-sakkar, Rewadi, Gathi/Batasha no other ingredients are added or mixed with sugar. They have stated the sugar is boiled and made into liquid form and thereafter kept in trays, moulds of requested shape and dried, and then filled in plastic box and sold to confectionery shop and sweet marked for being sold “Prasad” in temples and at religious fairs. These boxes are not designed to hold pre-determined quantity and no label is printed on the body of the pack. It is the ground of the appellant that as there are no ingredients added while preparing these products, they cannot be sugar confectionery and hence they cannot be classified under sub-heading No. 1704.90 and sugar confectionery. In this connection it is necessary to know the process of manufacture of these products as given by the department and the appellant which has been recorded by the Collector (Appeals) in the impugned order.

They are noted as herein below:

“As stated by the appellants in the normal parlance, confectionery products are those which are prepared by mixing sugar with glucose, colour, essence, citric acid, milk powder, coconut powder, starch, ghee etc. The appellant has stated that there are no other ingredients except sugar in all their products namely - Chironjidana, Ghadi Shakkar (Mishri) Rewadi or Gathi. However, the process of manufacture of these products as given by the department and the appellant are as follows:-

(a) Chironjidana - For the manufacture of Chironjidana either 100% sugar is taken or 85% to 95% Sugar is mixed with 5% to 15% Glucose and then dissolved in water and the solution is boiled. This solution for a certain period to 250 ⁰C and the heated solution obtained is poured into rotating copper pot. Due to the rotation the mixture solidified into small rough round forms known as chironji.

I find that the product is chemically tested vide test No. 1/SN/90 dated 3-4-1990 wherein vide report No. EX/NR/-2/90 dated 21-9-1990 the Chemical Examiner has stated that the sample is in the form of Globules content more than 90%. The chemical examiner has also stated in the note, below that such preparations are generally used as prasadam and that actual use may be ascertained. In view of the clear report of Chemical Examiner and in the light of the Supreme Court judgment referred to by the appellant I consider that these items would fall under heading 2107.90 and not as sugar confectionery.

Ghadi Shakkar (Mishri): Here sugar and glucose are mixed with water in the percentage of 80-20 and the solution is boiled for certain time and then the thick boiled solution is poured into steel trays and kept for few days for solidifying. Thereafter, it is broken and crushed into pieces. The product so obtained is known as Ghadi Shakkar. Since admittedly glucose is one of the ingredients, the product would be correctly classified as sugar confectionery under sub-heading 1704.90 as done by the Assistant Collector.

Rewadi:- Here also sugar and glucose are used in the proportion of 70% to 30% and then mixed with water and then the boiled mixture is poured into a revolving pan containing thilly (Til); as the pan revolves thilli gets stuck to the outer portion of the sweet; it is called rewadi.

Since admittedly Glucose and thill are used in the preparation of the item, this is also to be correctly classified under 1704.90, as approved by the Asstt. Collector.

Gathi/Batasa :- This is also a hard boiled sugar confectionery attached to a thread in which glucose is also used and so the item is clearly classifiable under heading 1704.90.

Thus the Asstt. Collector’s order of classifications and confirmation of demand are modified to the extent as indicated in the foregoing paras. Considering the fact that the very products had earlier been approved by the Deptt., with NIL duty, there was no warrant to invoke me penal provisions under the Central Excise Rules. I, therefore, set aside the penalty imposed by the Asstt. Collector."

15. As can be seen from the above paragraphs, the products are not just prepared from sugar alone but the appellants have mixed the same with 5% to 15% glucose and they have carried on certain processes to prepare the product, as in the case of Chironjidana. In the case of Ghadi Shakkar glucose b added to 20% and in Rewadi also to an extent of 30%. In the case of Rewadi they are also adding ‘Til’ which get stuck to the outer portion of the sweet and in the case of Batasha also Ghee and other ingredients are also added. Therefore, the appellants contention that they are not sugar confectionery cannot be accepted. The learned SDR brought to our notice the definition of confectionery, confectionery and biscuits, confectionery, Indian, Confectionery Sugar (foreign) “appearing in pages 176 and 177 of words and phrases of Central Excise and Customs by Shri S.B. Sarkar. The same is noted herein below:

Confectionery: Confectioner’s work of art; sweetmeats in general (Chambers 20th)

Confectionery and biscuit: Confectionery is essentially a sweetmeat. Sugar is a main ingredient. Sometimes chocolates, fruits, nuts, eggs, milk products, flavours and colours are added. In some other preparations maida and sugar are the main ingredients to which other items are added e.g. in cakes and pastries. Biscuits, on the other hand, are a kind of dry bread in which sugar is an almost insignificant ingredient. In common parlance also, biscuit is not included in the item ‘confectionery’. Annapurna Biscuits (Mfg.) Co. v. S/OUP - 1978 (002) ELT (J 657) (All.). (The decision was confirmed by the Supreme Court) (See ‘Biscuit’).

Confectionery Indian : The principal raw materials are sugar, chhana (casein) and khoa (evaporated milk), pulse meal, wheat flour, rice flour, suji (semolina), ghee (hydrogenated and other veg. oil) and colouring materials. Indian confectionery may be classified into five groups: (1) mithai made from sugar, rice flour and pulse meal; (2) sweets made from sugar and chhana; (3) chhana products boiled in sugar syrup; (4) fried wheat flour products treated with sugar syrup; (5) miscellaneous.

The first group comprises Bundia, Mihidana, Bundi-laddu, Darbesh, Jilebi, Motichur etc. They are made by frying a homogeneous batter made from pulse meal, rice flour and water, in ghee and soaking the product in sugar syrup. Different products are made from batters of different consistencies and from different pulse meals. Sweetened fritters are taken in handfuls and made into balls to give Mihidana and Bundi-laddu. Coloured and plain fritters are mixed with khoa previously brayed and sifted, raisins etc. added, and the mixture made, into balls of Darbesh. For preparing Jilebi, maida and suji are kneaded with a little curd and aniseed water, and fermented - the dough is mixed with rice flour or Besan and made into a batter. Amriti is similar to Jilebi, but is made of Kalai pulse paste, rice flour. Sandesh belongs to the second group and is prepared by having lumps of the freshly kneaded dough of chhana cooked with sugar on a low fire till all the moisture is driven out. The proportion of chhana to sugar varies according to the type of sandesh required; a wide variety of textures, coarse and fine ground, hard or soft, are possible. The product may be flavoured with powdered nutmeg, mace, cardamom and sometimes rose water or rose otto or fruit juices. The cooked product is pressed into a variety of shapes and sizes in wooden moulds.

Rasagolla, Pantooa, Chamcham and like products come in the third group. They are prepared by boiling chhana in sugar syrup. In making rasagolla, arrowroot, suji or maida and sugar are mixed with chhana and the balls are boiled in thin sugar syrup in deep pans till the balls begin to sink in the syrup - they are then transferred into hot syrup stock for a few hours. In Rajbhog, scented khoa is inserted into the dough ball before cooking in a syrup. Panooa is made by frying dough in ghee over slow fire till brown and soaking the fried mass in syrup. Khoa is added to chhana. Gulabjamoon is prepared from a stiff dough, pulverized and sifted khoa and maida.

Khaja, Gaja etc. belong to the fourth group. Wheat flour is kneaded after adding water and ghee to give a soft dough. The dough is rolled into a sheet on a flat plate with a rolling pin. The sheet is cut into different shapes and sizes, fried in ghee until brown and crisp, and transferred to a warm thick syrup, later taken out and dried. (See Gulabjamun).

Pera is made from concentrated sweetened milk. The mixture of milk and sugar is boiled under stirring until it thickens and becomes elastic. It is cooked and shaped into small flattened cakes or peras. Barfis are made from khoa powder mixed with sugar under gentle heating.

Candied or crystallised fruit (Indian) is prepared by impregnating fruit with syrup - these are glaced by a coating of heavy syrup which dries to a firm structure. A large variety of fruits are candied. Petha (Benincasa hispida) is particularly popular. The pieces are rendered firm by immersion in lime water and pricked, to make them translucent and facilitate the penetration of sugar respectively. They are cooked for 10 minutes in boiling water containing alum to whiten them and to render them soft and spongy. They are then transferred to sugar syrup and cooked intermittently. The cooked slices are dried after adding a few drops of keora (Pandamus tectorius) essence - Ind. Part II, P. 176. 1951 (See Candied fruits’ Murabba).

Confectionery, Sugar (foreign): The simplest form of sugar confectionery is hard candy or hard sugar boilings, e.g. acid drops, pear drops, bull’s eyes. A solution of cane sugar to which invert sugar or glucose is added is cooked in steam jacketted vessel, then transferred to vaccum cooker and cooked till a supersaturated solution with a glass-like consistency is obtained. This is cooled rapidly, flavouring and colouring added and mixed, and the product cut into small pieces. A particular variety of hard sugar boiling is the so-called pulled or satin goods or Satinettes - the cooled sugar boiling is kneaded, pulled and lapped a number of times during which air bubbles get into the mass. The cooking temperature of hard-boiled products is 300-310°F. For the pulled or satin goods, the temperature is lower at 280-290°F. These candies may also be used to have Filled Goods or Soft Centred Products (honey, jam, chocolate etc. inserted into the sugar batch in rope form). Toffee is cooked to a higher temperature (290-300°F) than caramel (See ‘Caramel’) so that caramelisation occurs, and the resulting product is cut, not cast. Plain toffee is prepared from sugar and corn syrup only. Milk and fats are added to the better varieties. Unwrapped toffee contains flour.

Coated confections or Comfits or Dragees consist of nuts or seeds or boiled goods or chewing gum coated with a hard glossy sugar covering, Fondants have the same composition as hard sugar boilings (Sugar 60, water 20, corn syrup 20) cooked at 234-240°F. The syrup produced, when dropped into cold water, forms a soft ball which flattens on removal. The super staturated solution from the cooker is carefully cooled and whipped to induce the formation of minute crystals of sucrose. The product is ripened or cured for 24 hours when the water distributes itself uniformly through the mass.

Lozenges are prepared by cold mixing of icing sugar, gum arable, gelatine or stearine and flavouring materials. Plain lozenges are made by cutting pieces from a shut of dough and drying them in air. Cut lozenges are made from mixtures of icing sugar and flour in low priced goods with gums as binding agents. The mixture is rolled or extruded into sheets, cut into required shapes and sizes, and hardened by heating. Compressed lozenges are prepared with stearine and gelatine as binding agents. Lozenges should have good snap or brittleness, for which thorough and intimate mixing of the dough is essential.

Jolly crystal is made by mixing refined sugar with gelatine solution, flavour and colour. No cooking is required. Jujubes are made by mixing cooked glucose and sugar solution with gelatine solution, flavouring and colouring materials. The product, after removal from the moulds, is slightly moistened with water and coated with refined white sugar -Ind. Part II, P. 172,1951."

As can be seen from the reading of tine above terms appearing in the Words and Phrases of Central Excise and Customs, by Shri S.B. Sarkar the products involved in this case would come within the said terms and they can be classified as sugar confectionery and the appellants contention that they are not to be considered as sugar confectionery has to be rejected.

16. The appellants have contended that the items are to be declared as ‘Prasad’ and ‘Prasadam’ carrying nil rate of duty under Tariff Item 2107.10. As we have held that the items are squarely falling under sub-heading 1704.90 and they are to be treated as sugar confectionery, their plea for classifying the products as ‘Prasadam’ is rejected. However, I wish to add that Prasad or Prasadam is an offering made before the deity and sold by certain temple authorities with a religious significance attached to the said item. The item which has been offered to the religious deity and which has certain religious significance is generally sold within the precincts of the temple. Normally, it is the devotees alone who buy these items at whatever rates fixed by the authorities without any concept of bargain, and taken with devoted feelings as the Prasadam carries the blessings of the deity and that it would bring good omen to the persons consuming it. The temple authorities may charge some amount for the Prasad or Prasadam but the charges may not be the market price of the item delivered. The reason being the Prasadam is considered as blessed item and it is priceless. However, the temple authorities collect some charges with a view to maintain the temple. Now the question as to whether the ‘Prasad’ or ‘Prasadam’ can be considered as ‘goods’ leviable for Central Excise duty. The preamble of the Act reads “whereas it is expedient to consolidate a demand relating to Central duty of excise on goods manufactured or produced in (certain parts) of India and to salt. The definition of the term the excisable goods is given in Section 2(d) which reads on “excisable goods” means goods specified in the (Schedule to the Central Excise Tariff Act, 1985) as being subject to a duty of excise and includes salt. The Hon’ble Supreme Court of India in the case of Union of India and Others v. Delhi Cloth and General Mills Co. Ltd. and Others reported in 1977 (001) ELT (J 199) has laid down that to become “goods” an article must be something which can ordinarily come to the market to be bought and sold and has further held that the meaning of the word ‘goods’ provide strong support for the view that ‘manufacture’ which is liable to excise duty under Central Excises and Salt Act, 1944 must be bringing into existence a new substance known to the market. The Hon’ble Supreme Court’s findings given in paras 14 to 20 is given below :

“14. The other branch of Mr. Pathak’s argument is that even if it be held that the respondents do not manufacture ”refined oil, as is known to the market they must be held to manufacture some kind of “non-essential vegetable oil” by applying to the raw material purchased by them, the processes of neutralisation by alkali and bleaching by activated earth and/or carbon. According to the learned Counsel ‘manufacture’ is complete as soon as by the application of one or more processes, the raw material undergoes some change. To say this is to equate “processing to manufacture” and for this we can find no warrant in law. The word “manufacture” used as a verb is generally understood to mean as “bringing into existence a new substance” and does not mean merely “to produce some change in a substance however minor in consequence the change may be. This distinction is well brought about in a passage thus quoted in Permanent Edition of Words and Phrases, Vol. 26, from an American Judgment. The passage runs, thus :-

“Manufacture implies a change, but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation; a new and different article must emerge having a distinctive name, character or use.”

15. It is helpful to consider also in this connection the ordinary meaning of the word “goods’. For, by the very words of the Central Excises and Salt Act, 1944, excise duty is leviable on ”goods”. The Act itself does not define “goods” but define “excisable goods” as meaning “goods specified in the First Schedule as being subject to a duty of excise and includes salt”. On the meaning of the words ‘goods’ an interesting passage is quoted in the Words and Phrases, Permanent Edition, Vol. 18 from a judgment of a New York Court thus:-

“The first exposition I have found of the word ”goods" is in Bailey’s Large Dictionary of 1732, which defines it simply “merchandise”; and by Johnson, who followed as the next lexicographer it is defined to be movable in a house; personal or immovable estates; wares; freight; merchandise."

16. Webster defines the word “goods” thus :- Goods, noun, plural; (1) movables; household furniture; (2) Personal or movable estate, as horses, cattle, utensils etc. (3) Wares; merchandise; commodities bought and sold by merchants and traders."

17. These definitions make it clear that to become “goods” an article must be something which can ordinarily come to the market to be bought and sold.

18. These considerations of the meaning of the word “goods” provides strong support for the view that “manufacture” which is liable to excise duty under the Central Excises and Salt Act, 1944 must be the “bringing into existence of a new substance known to the market”. “But”, says the learned Counsel, look at the definition of “Manufacture” in the definition clause of the Act and you will find that “manufacture” is defined thus:

“Manufacture includes any process incidental or ancillary to the completion of a manufactured product ”Section 2(f).

19. We are unable to agree with the learned Counsel that by inserting this definition of the word “manufacture” in Section 2(f) the legislature intended to equate “processing” to “manufacture” and intended to make mere “processing” as distinct from “manufacture” in the sense of bringing into existence of a new substance known to the market, liable to duty. The sole purpose of inserting this definition is to make it clear that at certain places in the Act the word ‘manufacture’ has been used to mean a process incidental to the manufacture of the article. Thus in the very Item under which the excise duty is claimed in these cases, we find the words “in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power”. The definition of ‘manufacture’ as in Section 2(f) puts it beyond any possibility of controversy that if power is used for any of the numerous processes that are required to turn the raw material into a finished article known to the market the clause will be applicable; and an argument that power is not used in the whole process of manufacture using the word in its ordinary sense, will not be available. It is only with this limited purpose that the legislature, in our opinion, inserted this definition of the word ‘manufacture’ in the definition section and not with a view to make the mere “processing” of goods as liable to excise duty.

20. Mr. Pathak wanted to derive some assistance for his argument from the words “all sorts” as used in the clause. According to him, the words “all sorts” will be superfluous unless interpreted to mean “whether bringing into existence a new substance or not”. The reasoning is clearly fallacious. The words “all sorts” have been used to make it clear that “vegetable non-essential oils” whether raw or refined and from whatever raw material produced will be liable to excise duty. Refined oil is one sort, raw oil is another sort. But as the duty is on the manufacture of goods, that is, on the bringing into existence a new substance known to the market, the raw oil or the refined oil must be some substance known to the market before it can be subjected to duty."

17. In the case of Bhor Industries Ltd. v. CCE - reported in 1989(01)LCX0029 Eq 1989 (040) ELT 0280 (SC), the Hon’ble Supreme Court has laid down that an article is not liable to excise merely because of its specification in the Tariff Schedule unless it is “goods” known to the market.

18. Therefore, it follows that a manufactured item should have a market and it should be sold. Sale implies a bargain and there is profitability and gain attached to it. There are no religious sentiments and the item is purchased by one and all. In the light of the intendment of the legislature to impose duty on goods which are brought to the market for sale the items ‘Prasad’ or ‘Prasadam’ cannot be considered as goods. The mere entry ‘Prasad’ or ‘Prasadam’ which is purely a religious offering made to the deity cannot be brought within the ambit of the Act. The mere specification in the tariff schedule will not make the item goods and exigible; merely because the devotee has purchased it from the temple precincts it cannot be considered as an exigible commodity. The item may be goods before they are taken for presentation to the deity and at that stage the excisability of the product could be considered. The said item before presentation to the deity would not be ‘Prasad’ or ‘Prasadam’ but it would be known in the stage in which it is. Therefore, the item, after it is presented to the deity by the temple authorities and offered to devotees on charges, cannot be considered as ‘goods’. The term ‘goods’ as has been noted in the definitions, does not carry any religious sentiments nor does it have any blessings of deity. Goods are commodities which are brought to the market for sale, while the ‘Prasad’ or ‘Prasadam’ are the blessings of a deity which has a great religious significance. Therefore, in my opinion ‘Prasad’ or ‘Prasadam’ cannot be made exigible. In the result I agree with my learned Brother’s findings that the item in question have to be considered as sugar confectionery falling under sub-heading 1704.90 of the Central Excise Tariff. 1985.

Equivalent 1993 (66) ELT 469 (Tribunal)