1994(03)LCX0114

IN THE CEGAT, SPECIAL BENCH `D’, NEW DELHI

S/Shri S.K. Bhatnagar, Vice President and G.A. Brahma Deva, Member (J)

Third Member on Reference : Shri P.C. Jain, Member (T)

KRISHNA DISTRICT MILK PRODUCERS UNION

Versus

COLLECTOR OF C. EXCISE

Order No. M-169/93-D and E/154-161/94-D, dated 25-3-1994 in A. No. E/859/88-D and 7 others

CASE CITED

Lili Foam Industries (P) Ltd. v. Collector — 1990 (46) ELT 462                                                        [Para 5]

Advocated By : S/Shri V. Lakshmi Kumaran, Advocate, C.S. Rao, Consultant and V.K. Dorai Raj, Advocate, for the Appellants.

Shri J.N. Nair, DR, for the Respondents.

[Order per : G.A. Brahma Deva, Member (J)]. - Since the issue involved is common in these cases, they are clubbed together and are being disposed of by this common order.

2. The dispute relates to classification of the fruit drink viz. Orange, Mango, Pineapple and Guava with the brand name of `VOL fruit and PINAP’ in Appeal Nos. 4678/91-D and 5155/91-D and `MAAZA MANGO’ - A Mango Pulp based drink - in the remaining appeals. The point to be considered in these appeals is whether these products are to be classified under Heading 2001.10 of Central Excise Tariff Act, 1985 as claimed by the appellants or to be classified under Heading 2202.90 of Central Excise Tariff, as held by the Department. The relevant tariff Headings 20.01 and 22.02 are reproduced as under -

3.None appeared for the appellants - M/s. Krishna Distt. Milk Producers Union in Appeal Nos. 4678/91 and 5155/91-D at the time of hearing. However, we find that there was a request from them to decide the case on merits. M/s. Sri Sarvaraya Sugars Ltd. were represented by Shri C.S. Rao, learned Consultant, M/s. Hyderabad Bottling Company Pvt. Ltd. were represented by Shri V. Lakshmi Kumaran, learned Advocate and M/s. Spectra Structurals Pvt. Ltd. were represented by Shri V.K. Dorai Raj, learned Advocate, respectively. The Department was represented by Shri J.M. Nair, learned DR in all these cases.

4. Shri Lakshmi Kumaran, learned advocate appearing for the appellants M/s. Hyderabad Bottling Co. Ltd. submitted that demand relates to the period after 1-3-1987 and the goods in question were all along classified under Chapter 20 of the CET and there is no valid reason for changing the classification from 1-3-1987 either change in the process of manufacturing or change in the tariff entry. He said that process of manufacturing is not in dispute and item in question is nothing but a fruit juice as specified under Chapter 20 and further it is excluded under Chapter 22. Without going into the controversy whether it is a beverage or not since the fruit or vegetable juice of Heading 20.01 are excluded under Heading 22.02, the department was not justified in classifying these items under Chapter 22. Shri C.S. Rao and Shri Dorai Raj, appearing for the remaining appellants adopted the arguments of Shri Lakshmi Kumaran while referring to their respective cases.

5. Shri J. N. Nair, learned DR for the department, submitted that first of all that there was no dispute of classification of the product in question in the case of Hyderabad Bottling Company argued by Shri Lakshmi Kumaran since issue with reference to classification of the product was not considered by the lower authorities as the party themselves have filed a classification under Chapter 22 of CET. Accordingly, he is of the view that this matter will have to go back for reconsideration. However, since the issue is similar in other cases and the same was considered in detail in the respective impugned orders and pursuance of the submission made by Shri Lakshmi Kumaran that even though an assessee may not contest the correct rate of duty on a commodity cleared by him earlier, whenever the department seeks to reopen the assessment and demand differential duty for whatever reasons, it is open to the assessee to contest the demand of the higher differential duty with an argument that the rate of duty originally applied was wrong, relying upon the decision in the case of Lili Foam Industries (P) Ltd. v. Collector of Central Excise [1990 (46) ELT 462]., Shri Nair, submitted that the matter may be decided on merits instead of remand.

6. On merits, he submitted that Chapter 20 refers to preparation of fruit and fruit juice whereas Chapter 22 concerned with Beverages and in the absence of the definition of either fruit juice or beverages in the tariff the dictionary meaning has to be looked into. Accordingly, beverage is a broader term compared to juice and in the instant case, it is not a mere fruit juice but more than that since water is being added to the syrup and the mango pulp or original juice as the case may be, gets diluted giving it the characteristics of Beverage and accordingly, department was justified in classifying the items in question as other non-alcoholic beverages under Heading 22.02 of the CET. He said that Explanatory Notes to the HSN with reference to Chapter 20 as given in page 154 of the HSN is helpful to decide the issue and he referred to the relevant explanation which is as follows :-

“However, the addition of water to a normal fruit or vegetable juice, or the addition to a concentrated juice of a greater quantity of water than is necessary to reconstitute the original natural juice, results in diluted products which have the character of beverages of Heading 22.02. Fruit or vegetable juices containing a greater quantity of carbon dioxide than is normally present in juices treated with that product (aerated fruit juices) and also lemonades and aerated water flavoured with fruit juice are also excluded (Heading 22.02)”

7. We have carefully considered the arguments advanced by both the sides and perused the records. On going through the process of manufacture of the items in question, we find that fruit juices of various fruits like orange, mango, pineapple and guava are diluted to make them to be served as a ready drink, put up in unit bottles and declared measures. The meaning of beverage as per dictionary refers to to be served as a ready drink as it was rightly argued by the DR. The term Beverage is defined in the Chamber’s dictionary as `any liquid for drinking specially, tea, coffee, milk etc., a mixture of cider and water. It is not even the case of the parties that it is not a beverage. But their contention is that it mainly contains fruit juice and fruit juice falling under Heading 20.01 are excluded under Heading 22.02. We find that the process of manufacture of Maaza constitute of mixing mango pulp with raw syrup citric acid essence and water during various stages of manufacture. We are not convinced with the arguments advanced on behalf of the appellants that it continues to be a fruit juice. We concur with the argument of the learned DR that it is not a mere fruit juice but more than that since with the addition of water and other items, original concentrated juice gets diluted giving it the characteristic of a beverage. On going through the process of manufacturing of the items and seeing description given under Heading 22.02, it is clear that even if a beverage contained some quantity of fruit juice that fact by itself will not preclude the classification of an otherwise non-alcoholic beverage from being classified under Heading 22.02 Central Excise Tariff Act. Accordingly, we are of the view that classification of the goods under Heading 22.02 would be more appropriate. In the view we have taken, we uphold the impugned orders and accordingly appeals filed by the parties are hereby dismissed.

8. [Order per : S.K. Bhatnagar, Vice President]. - With due respects to Hon’ble Judicial Member, my views and orders in the matter are as follows :

9. I observe that there is a very thin line of distinction between fruit juices used as a drink and beverages containing fruit juices served as drink.

10. It appears that beverages may be alcoholic or non-alcoholic. The non-alcoholic beverages may be aerated or non-aerated and may be sweetened or not and may be flavoured with fruit juices or essences or extracts and may include drinks rendered ready for consumption as a beverage.

11. In fact Heading 22.02 of HSN covers - “Lemonade, flavoured SPA waters and flavoured aerated waters, and other non-alcoholic beverages, not including fruit and vegetable juices falling within Heading No. 20.07. In fact, this heading covers non-alcoholic beverages not classified under other headings, particularly headings 20.07 and 22.01".

12. It is also mentioned there that this heading does not include; (a) fruit and vegetable juices falling within 20.07 whether or not used as beverages."

13. It shows that beverages could be classified either under 22.02 or 20.07 or 20.01 but 22.02 of HSN does not cover those beverages including fruits and vegetable juices which fall under other Headings.

14. It also shows that fruit and vegetable juices falling within Heading 20.07 may or may not be used as beverages.

15. Heading 20.07 of HSN covers “Fruit juices (including grape must) and vegetable juices, whether or not containing added sugar, but unfermented and not containing spirit (+)”.

16. This Heading mentions the process to which the liquids obtained from fruits could be submitted. It also mentions, inter alia, that “provided that they retain their original character, the fruit and vegetable juices of the present Heading may contain substances of the kinds listed below, whether these result from a manufacturing process or having been added separately. The following list includes a number of items including sugar, salt, preservatives etc. It is also mentioned that the addition of water to a normal fruit or vegetable juice, or the addition to a concentrated juice of a greater quantity of water than is necessary to reconstitute the original natural juice, results in diluted products which have the character of beverages falling within Heading 22.02. Fruit or vegetable juices containing a greater quantity of carbon dioxide than is normally present in juices treated with that product (aerated fruit juices), and also lemonades and aerated waters flavoured with fruit juice are also excluded (Heading 22.02).

17. It is with reference to this context when we examine the Central Excise Tariff entries 20.01 and 22.02, we find that the latter covers, inter alia “. . . . . . . . other non-alcoholic beverages, not including fruit or vegetable juices of Heading 20.01"; And 20.01 covers, inter alia, preparations of fruits etc., including fruit juices. Further, the Chapter Note 1 of Chapter 20 indicates that it ”covers only products which are prepared or preserved by processes other than merely chilled or frozen . . . . . ."

18. From the manufacturing process as described before us it is evident that broadly speaking these products are fruit pulp based drinks which are sold in ready to serve condition. They are, therefore, apparently non-alcoholic beverages containing fruit juices. The appellants have also admitted that these are marketed as beverages. But they have not indicated the exact proportion of the ingredients.

19. In my opinion, reading both 20.01 and 22.02 harmoniously, it is the preparation of ingredients of the extent of dilution which is material; that is to say, if the product contains a major proportion of fruit juice, or liquidised fruit pulp, it will be classifiable as a preparation of fruit and would fall under Heading 20.01 CET; But if the extent of dilution is such that water is in larger/greater proportion than fruit juice or liquidised pulp, in that case, the product would be classifiable as beverage under Heading 22.02 (inclusion of a small quantity of fruit juice or liquidised pulp notwithstanding).

20. As neither side has filed any chemical test report and the exact extent of dilution has neither been disclosed nor considered by the authorities below, the impugned orders are set aside and the matters are remanded for de novo consideration in the light of the above observations.

DIFFERENCE OF OPINION

21. In view of the difference of opinion between the Hon’ble Judicial Member and the Vice President, the matter is submitted to the Hon’ble President for reference to a Third Member on the following point :

“Whether in the facts and circumstances of the case, the appeals are required to be rejected as held by Hon’ble Judicial Member or the matter is required to be remanded, in view of the observations and findings of the Vice President”

22. [Order per : P.C. Jain, Member (T)]. - Learned Judicial Member of the original Bench which heard these matters had rejected the appeals whereas the Hon’ble Vice-President, Technical Member on the original Bench had directed that the matters be remanded in view of the observations and findings made by him in the course of his order.

23. Question involved is whether fruit drinks, namely, orange, mango, pineapple and Guava with the brand name of `VOL fruit and PINAP’ and `MAAZA MANGO’ - a mango based drink - are to be classified under Heading 20.01, as claimed by the assessees/manufacturers or Tariff Heading 22.02, as claimed by the Revenue. Process of manufacture of MAAZA which is a mango pulp based drink, is described as consisting of `Maaza Mango Pulp with a raw syrup citric acid, essence and water during the various stages of manufacture’. It is also reported that on an average 2400 litres of Maaza contains 363 Kgs. to 365 Kgs. of mango pulp which comes to about 15%. Process of manufacture of the other fruit drinks i.e. orange, mango, pineapple and Guava by the brand name of VOL fruit and Pinap as described in the order-in-original and not controverted by the concerned appellant, namely, M/s. Krishna Distt. Milk Producers Union is as follows as set out in para 4 of the order-in-original dated 16-11-1990 passed by the Assistant Collector of Central Excise, Vijayawada :-

“the fruit juices of various fruits like Orange, Mango, Pineapple and Guava are diluted to make them to be served as ready drink put up in unit bottles of declared measure.”

24. The assessees’ case is that the products are sold as fruit juices. They are food products in terms of Fruit Products order. In the case of Maaza, it was also contended that the Central Food Technological Research Institute have clarified as contained in Board’s Circular No. 12/88-CX. I, dated 28-3-1988 issued from F. No. 16/5/87-CX. I that flavours, as understood in the field of food technology, are added in minute quantities to stimulate or adjust natural flavour of a product. Since Maaza contains natural pulp of mango as well as 15% by weight, it cannot be said that it is a flavoured beverage. The appellants/assessees have also contended that it falls under Tariff Heading 20.01 in view of the aforesaid circular of the Board.

25. I have heard the learned counsels, as mentioned in the preamble, of all the appellants except the one M/s. Krishna Distt. Milk Producers Union (KDMPU) which has requested for decision on merits and Smt. J.M.S. Sundaram, learened SDR, for the Revenue. It is apparent from the tariff descriptions of the two headings, as extracted in the order of the learned brother, Shri G.A. Brahma Deva that non-alcoholic beverages but not including fruit or vegetable juices of Heading 20.01 fall under Tariff Heading 22.02. It is nobody’s case that the products under consideration, namely the fruit drinks produced by KDMPU or Maaza produced by other appellants are not non-alcoholic beverages inasmuch as they are ready to serve drinks. Question of the products falling under Tariff Heading 22.02 is obviously dependent upon the fact whether these products fall under Tariff Heading 20.01 under the description `fruit juices’. It is to be noted that the expression `fruit juices’ is not defined under Tariff Heading 20.01 or in Chapter 20. Therefore, a normal and natural meaning as understood by the consumers and trade in general has to be given to this expression. As normally understood `fruit juice’ is extracted from a good ripe fruit. In this context, it is appropriate to rely on the HSN Explanatory Notes of Heading 20.09 which is identical to the Tariff Heading 20.01 of CETA 1985. These are produced as below :-

“As regards juices, unfermented and not containing added spirit, see Note 5 of this Chapter.

The fruit and vegetable juices of this heading are generally obtained by pressing fresh; healthy and ripe fruit or vegetables. This may be done as the household lemon-squeezer, or by pressing which may or may not be preceded either by crushing or grinding (for apples in particular) or by treatment with cold or hot water or with steam (e.g. tomatoes, black currants and certain vegetables such as carrots and celery).

The liquids thus obtained are then generally submitted to the following processes :

(a) Clarification, to separate the juice from most of the solids, by means of clarifying substances (gelatin, albumin, infusorial earth, etc.) or of enzymes, or by centrifuging.

(b) Filtration, often by means of filter plates faced with Kieselguhr, asbestos, cellulose, etc.

(c) De-aeration, to eliminate oxygen which would spoil the colour and flavour.

(d) Homogenisation, in the case of certain juices obtained from very fleshy fruits (tomatoes, peaches, etc.),

(e) Sterlisation, to prevent fermentation, Various methods may be employed, for example, pasteurisation (prolonged or `flash’), electric sterilisation in machines fitted with electrodes, sterilisation by filtration, preservation under pressure using carbon dioxide, refrigeration, chemical sterilisation (e.g., by means of sulphur dioxide, sodium benzoate, treatment with ultra violet rays or ion exchangers.

As a result of these various treatments the fruit or vegetable juices may consist of clear unfermented liquids. Certain juices, however, in particular those obtained from pulpy fruits such as apricots, peaches and tomatoes) still contain part of the pulp in finely divided form, either in suspension or as a deposit.

......................................................................................

However, the addition of water to a normal fruit or vegetable juice, or the addition to a concentrated juice of a greater quantity, of water than is necessary to reconstitute the original natural juice, results in diluted products which have the character of beverages of Heading 22.02. Fruit or vegetable juices containing a greater quantity of carbon dioxide than is normally present in juices treated with that product (aerated fruit juices), and also lemonades and aerated water flavoured with fruit juice are also excluded (Heading 22.02)."

It is apparent from the process of manufacture undertaken by the appellants herein in so far as Maaza is concerned that fruit drink `Maaza’ is based on Mango pulp. It may not be called a mango juice in view of the distinction in process of its manufacture from that stated in HSN Explanatory Notes extracted above. Assuming that process employed is immaterial to the product being named as `fruit juice’, then questions raised by the Hon’ble Vice President in his orders assume importance. It is necessary to know the dryweight fruit contents in original/natural mango juice. Further, what are included in Tariff Heading 20.01 are, inter alia, (i) preparations of fruit and (ii) fruit juices. The process of manufacture of Maaza, as set out above, in my view makes `Maaza’ a preparation of mango fruit based on mango pulp although it is at the same time a non-alcoholic beverage. Preparation of fruit is clearly covered under Tariff Heading 20.01. Non-alcoholic beverage excluding fruit juice is covered by Tariff Heading 22.02. Nevertheless, Maaza cannot be treated, as mentioned above, a fruit juice. It would, therefore, appear to fall under both Tariff Headings 20.01 and 22.02. Classification of Maaza in my opinion has not been approached from the aforesaid angle and has not been pressed by either side from the aforesaid angle at all. Both sides i.e. the assessees and the Revenue are pressing for classification of Maaza from the angle of addition or non-addition of water to the mango pulp whether it is more or less to reconstitute it into a natural juice or not. Mango pulp has not been shown to be commercially known as “concentrated mango juice”. Question of addition of water in such quantities so as to reconstitute a concentrated juice into a natural juice arises only when the original product to which water is added is known as “concentrated juice”. These are questions of fact which need to be looked into by the original authority to give a categorical finding whether `fruit drink’ Maaza is a fruit preparation apart from a fruit juice. I am, therefore, of the view that classification of `Maaza’ requires to be re-adjudicated in the light of the foregoing observations and the relevant matters require to be remanded to the original authority.

26. As regards the question of other fruit drinks, the process of manufacture, as set out in the order-in-original in the case of KDMPU appears to settle the position. It is admitted by the appellants herein (KDMPU) that they add water to the concerned fruit juice. Therefore, the fruit drink produced by them cannot be considered a fruit juice falling under Tariff Heading 20.01 in view of HSN Notes. Therefore, Tariff Heading 22.02 would be the appropriate Heading for these two products, namely, `VOL FRUIT DRINK’ AND `PINAP’ produced by KDMPU.

27. In view of the aforesaid discussion, appeals of KDMPU are rejected, as held by the Judicial Member and the other apeals are required to be remanded to the original authority for readjudication in the light of observations of the Hon’ble Vice President in his order and in my order above.

FINAL ORDER

In view of the majority opinion the appeals of KDMPU are rejected and the other appeals are remanded to the original authority for re-adjudication in the light of observations of the Vice President.

Equivalent 1994 (071) ELT 1026 (Tribunal)