1994(06)LCX0048

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

S/Shri Harish Chander, President and P.K. Kapoor, Member (T)

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

COLLECTOR OF C. EX., CHANDIGARH

Versus

SUKHJIT STARCH & CHEMICALS LTD.

Misc. Order No. M-31/94-D and Final Order No. E/309/94-D, dated 16-6-1994 in

Appeal No. E/5759/92-D

Cases Quoted

Collector v. Anil Starch Products — 1989(03)LCX0044 Eq 1989 (041) ELT 0539 (Tribunal)                        [Paras 6, 8, 19]

Reckitt & Colman of India Ltd. v. Collector — 1985 (022) ELT 216                     [Paras 18, 24, 27]

Chetna Polycoats (P) Ltd. v. Collector — 1988 (037) ELT 253                                           [Para 25]

Advocated By : Smt. J.M.S. Sundaram, SDR, for the Appellant.

 Shri Soli Sorabjee, Sr. Advocate and Ms. Nisha Bagchi, Advocate, for the Respondents.

[Order per : Harish Chander, President]. - Collector of Central Excise, Chandigarh has filed an appeal being aggrieved from the order passed by the Collector (Appeals), Central Excise, Chandigarh.

2. Briefly the facts of the case are that M/s. Sukhjit Starch and Chemicals Ltd. Phagwara, respondents, filed classification list No. 4/CL/91 effective from 1st May, 1991 and No. 24/CL/91 effective from 25th July, 1991. In these two classification lists, the respondents claimed the classification of item liquid glucose and malto dextrin under Heading 1702.19 attracting basic excise duty under protest. Respondents’ view was that their product was under sub-heading 1702.29 of Central Excise Tariff, 1985. In view of the respondents’ protest, sample of liquid glucose and malto dextrin (special glucose) were drawn and sent to the Chemical Examiner, Central Revenue Control Laboratories, Hill Side Road, New Delhi. The Chemical Examiner’s reports say that the sample satisfies the Indian Standard Specification No. 873-1974 given for liquid glucose. It is other than preparation. The percentage of reducing sugar expressed as anhydrous dextroses 38.8% in case of one sample and 28.5% in case of other sample. It was mentioned that the product satisfied are of other than preparations. Therefore, show cause notice was issued vide letter 23rd September, 1990 wherein the respondent was asked to show cause to the Assistant Collector, Central Excise Division as to why their product liquid glucose and malto dextrin should not be classified under sub-heading 1702.19 of the Central Excise Tariff Act, 1985 attracting basic excise duty at the rate of 15% ad valorem and why their classification lists No. 4/CL/91 effective from 1st May, 1991 and No. 24/CL/91 effective from 25th July, 1991 should not be approved after vacating the words “under protest” for items liquid glucose and Malto dextrin under sub-heading 1702.19 as the chemical reports show them as liquid glucose classifiable under sub-heading 1702-19 as claimed by the respondent. A personal hearing was given by the Assistant Collector and he had considered the show cause notice and the reply and the oral submissions as well as relevant portion of HSN. He has dealt with the samples sent to the Chemical Examiner who had reported as under :-

“(i) Liquid glucose : Malto Dextrin (special glucose)

The sample is in form of transparent, viscous liquid. It satisfies the Indian Standard Specification No. 873-1974 given for liquid glucose. It is other than preparation. The percentage of reduced sugar expressed as anhydrous dextrose is 38.8%.

(ii) Malto Dextrin :

The sample is in form of brown colour, viscous liquid. It satisfied the Indian Standard Specification No. 873-1974. It is other than preparation. The percentage of reducing sugar expressed as anhydrous dextrose is 28.5.%."

He further observed that from the reading of Heading 17.02 and sub-heading 1702.19, it was clear that sub-heading 17.02 covers `other sugars, including chemically pure lactose, maltose, glucose and fructose in any form’ except Palmyra sugar (as Palmyra sugar is covered under sub-heading 1702.11, whereas sub-heading 1702.29 covers preparation of other sugars, other than preparation in which the reducing sugar expressed as anhydrous dextrose amount to more than 80% by weight - 1702.21. He further observed that the said products cannot be called 100% pure glucose as is evident from the chemical examiner’s report. Further the said products are in liquid form, whereas sugar or other sugars are in solid (crystalline or amorphous) forms therefore, the products under reference cannot be said to be other sugars. However, these products can be said to be preparations of other sugars. This view gets further consolidated when we go through the scheme of division of Heading 17.02. First division of this sub-heading includes “other sugars including chemically pure lactose, maltose, glucose and fructose in any form and second division includes preparation of other sugars”. He further observed that this sub-division preparation of other sugars was further divided into two parts (i) 1702.21 (—) in which the reducing sugars expressed as anhydrous dextrose amount to more than 80% by weight (ii) 1702.29 (—) others. He further observed that preparations in which the anhydrous dextrose amount to more than 80% falls under sub-heading 1702.21. In view of this acquous products wherein percentage of anhydrous dextrose is 28.5% or 38.8% can be said to be the other sugars or chemical pure glucose, when products containing anhydrous dextrose is more than 80% are construed as preparation of other sugars. Accordingly, he had taken the view that the liquid products containing anhydrous dextrose less than 80% by weight shall merit classification under sub-heading 1702.29 as others. Accordingly, he had ordered the classification of liquid glucose and malto dextrin under sub-heading 1702.29 and had approved the classification list No. 4/CL/91 with effect from 1st May, 1991 and No. 24/CL/91 with effect from 25th July, 1991 be approved accordingly.

3. The revenue being not satisfied with the order passed by the Assistant Collector had filed a review application before the Collector (Appeals) under Section 35E(2) of the Central Excises and Salt Act, 1944 and the Collector (Appeals) had confirmed the findings of the Assistant Collector and had rejected the appeal.

4. Being aggrieved from the aforesaid order, the revenue has come in appeal before the Tribunal.

5. Mrs. J.M.S. Sundaram, the learned SDR is present on behalf of the appellant. She pleaded that the issue in dispute is regarding the classification of the item liquid glucose and malto dextrin. The revenue has claimed the classification under sub-heading 1702.19, whereas the assessee/respondent has claimed the assessment under sub-heading 1702.29. She argued that sub-heading 1702.19 pertains to other sugars including chemically pure lactose, maltose, glucose and fructose and the rate of duty is 15%. She referred to the grounds of appeal which appear on page 28 of the appeal paper book where there is a reference to the chemical examiner’s reports which appear on pages 7 and 8 of the paper book. She referred to the chemical examiner’s report and argued that the Assistant Collector has erred in not taking into account the full report of the chemical examiner while holding that the percentage of reduced sugar expressed as anhydrous dextrose was 38.8% and the percentage of reducing sugar expressed as anhydrous dextrose was 28.5% in liquid glucose : Malto Dextrin (special glucose) and malto dextrin, respectively. She argued that liquid glucose is clearly covered more specifically under sub-heading 1702.19 which includes “other sugars including chemically pure lactose, maltose, glucose and fructose in any form. She further referred to Rule 3 of the Rules of Interpretation. Liquid glucose in all forms is covered by sub-heading 1702.19. She argued that the Assistant Collector and the Collector (Appeals) have erred in coming to the conclusion. She argued that Chapter Heading 1702 covers other sugars and sub-heading 1701 covers cane or beet sugar and chemically pure sucrose in solid form and the two impugned items being not covered under sub-heading 17.01 are covered under Heading 17.02 in the main definition of other sugars. The word ”including" in the Chapter Heading extends the coverage of the heading to include chemically pure lactose, maltose, glucose and fructose. She further argued that sub-heading 1702.19 covers all other sugars other than Palmyra sugars. She also argued that the Board’s clarification in the case of `Glucose D’ was distinguished as in that case the duty paid dextrose monohydrate was seived and blended with additional ingredients resulting in a new and commercially different product. She pleaded for the acceptance of the appeal.

6. Shri Soli Sorabjee, the learned Sr. Advocate with Ms. Nisha Bagchi, the learned advocate has appeared on behalf of the respondent. The learned Senior Advocate pleaded that the respondent is engaged in the preparation of liquid glucose and malto dextrin for which he is claiming classification under Tariff Item 1701.29 of the Central Excise Tariff as “preparations of other sugars”. Shri Sorabjee, the learned Senior Advocate argued that it is an admitted position that the respondent’s preparation is not chemically pure glucose and it is also an admitted position as emerges from the reports of the Chemical Examiner dated 5-8-1991 incorporating the ISI definition by reference as also from the Board Order No. 1/93-C.E., dated 11th March, 1993 is that the respondent’s products are refined and concentrated aqueous solution of D glucose, maltose and other polymers of D glucose obtained by controlled hydrolysis of starch containing material. He referred to page 7 of the paper book where the Chemical Examiner’s report has mentioned that the sample is in the form of transparent, viscous liquid. It satisfies the Indian Standard Specification No. 873-1974 given for liquid glucose. It is other than preparation. The percentage of reduced sugar expressed as anhydrous dextrose is 38.8%. The percentage of reducing sugar expressed as anhydrous dextrose is 28.5%. Shri Sorabjee referred to IS 873-1974. He referred to ISI standard. He referred to para 1 of ISI specifications and 2.1 relating to terminology. Shri Sorabjee, the learned Senior Advocate argued that it satisfies the definition and specifications as given in ISI standards. He argued that the percentage of reducing sugar is 28.5% and 38.8%. He referred to page 4 of the IS Standard 873-1974 and referred to paras No. 1.1, 2.1 and 4.3 and in para 4.3 it has been laid down that : “When determined according to the method prescribed in Appendix B, the dextrose equivalent (DE) value for different grades shall be as follows :-

Shri Sorabjee referred to the Board’s order No. 1/93-C.E., dated 11th March, 1993 and laid special emphasis on para No. 2 where it has been mentioned : “Liquid glucose is obtained by hydrolysing starch with acid and/or enzymes. It always contains, in addition to dextrose, a variable proportion of ditri and other polysachharides (maltose, maltotriose, etc.). It is usually in the form of a colourless, more or less viscous liquid. It is extensively used in confectionary, biscuit and food canning industries. Shri Sorabjee referred to the Board’s notice in respect of glucose `D’ reported in 1990 (047) ELT T9 ”Glucose `D’ manufactured out of duty paid dextrose Monohydrate (Heading 17.02). A doubt has been raised about the classification of glucose `D’ manufactured falling under sub-heading 1702.19. The matter has been examined. Glucose `D’ is manufactured by mixing Dextrose Monohydrate with 0.6% of Calcium Phosphate and Vitamin-D in blending machine. It is felt that such Glucose `D’ is correctly classifiable under sub-heading No. 1702.21 of CET as preparation of other sugars. Shri Sorabjee referred to the reply to the show cause notice filed by the respondent which appears on pages 11, 12 and 13 of the paper book. He laid special emphasis on paras 02, 03, 04 and 06. He pleaded that it has been mentioned therein that the respondents are manufacturer of liquid glucose/malto dextrin which are preparation of other sugars as per Indian Standard Specification No. 873-1974. These preparations are used in confectionary, biscuits and food canning industries where requirements of reducing sugar is less than 47%. In para No. 03 it has been mentioned that “the Heading 17.02 of Chapter 17 has clearly classified other sugars under two descriptions i.e. other sugars including chemically pure lactose, maltose, glucose and fructose in any form and preparation of other sugars. In para No. 04 it has been mentioned that ”other sugars include chemically pure glucose i.e. dextrose which is in two forms i.e. in powder form or in crystalline form and clearly classifiable under sub-heading 1702.19 and preparations of other sugars have clearly been specified under sub-heading i.e. 1702.21 and 1702.29 i.e. 1702.21 for those preparations where reducing sugars expressed as anhydrous dextrose amount is more than 80% by weight and 1702.29 for other preparations where reducing sugars expressed as anyhydrous dextrose amount is less than 80% by weight." In para No. 06 it has been mentioned that “Liquid glucose is not chemically pure glucose by any stretch of imagination as chemically pure glucose consists of 100% reducing sugar as glucose and it is only chemically pure glucose which is classifiable under Heading/sub-heading 17.02/1702.19 and not liquid glucose which is merely a preparation containing reducing sugars less than 80% expressed as anhydrous dextrose. So the liquid glucose/malto dextrin are correctly classifiable under Heading/sub-heading 17.02/1702.29. Shri Sorabjee, the learned Senior Advocate argued that the percentage of reducing sugar is 28.5%. He referred to Heading 1702.21 — in which the reducing sugars expressed as anhydrous dextrose amount to more than 80% by weight and 1702.29 — other. Shri Sorabjee, the learned Senior Advocate stated that the Assistant Collector has not dealt with how it is being assessed in other Collectorates. He referred to the dictionary meaning of the word ”preparation". He also referred to HSN. He argued that commercial glucose is preparation of other sugars. It is obtained by hydrolysing starch with acid. He referred to the judgment of the Tribunal in the case of Collector of C. Excise v. Anil Starch Products reported in 1989(03)LCX0044 Eq 1989 (041) ELT 0539 (Tri.). He referred to para No. 14 of the said judgment wherein it has been observed as under :-

“It is nobody’s case that the subject goods are Dextrose Monohydrate or Anhydrous Dextrose. The Department contends that it is ”Glucose in whatever form" or “Liquid Glucose”. From the extracts from the book “Materials and Technology referred to earlier, placed before us, it is seen that Glucose Syrup is a viscous, non-crystallizing syrup prepared by the partial hydrolysis of starch. There is a passage to the same effect in the book ”The Condensed Chemical Dictionary" Tenth Edition revised by Gessner G. Hawley. As seen from page 505 of the book “Concise Chemical and Technical Dictionary’ edited by H. Bennett, published by the Chemical Publishing Company, New York, ”Liquid Glucose" is glucose syrup containing 10 to 20% water, dextrin, and other substances which prevent the glucose from crystallizing. In the present case, it may be seen from the flow-chart (Annexure `A’ to the Memo of Appeal) that the starting point is Dextrose Monohydrate and not Starch. The subject Anhydrous Molasses is not, therefore, Glucose Syrup or Liquid Glucose, which, as the books show, is the result of hydrolysis of starch. The contention that the subject goods are liquid glucose is, therefore, not tenable.."

Shri Sorabje, the learned Senior Advocate, further argued that Heading 1702.30 pertains to sugar syrups not containing added flavouring or colouring matter, artificial honey, whether or not mixed with natural honey, caramel. Shri Sorabjee has pleaded for the dismissal of the appeal.

7. Mrs. J.M.S. Sundaram, the learned SDR, argued that the product falls under Heading 1702.19 is not correct. She argued that it is not the case of the Department that it is chemically pure sugar. She argued that it falls under Heading 1702.19 as “other sugars, including chemically pure lactose, maltose, glucose and fructose in any form and preparations thereof” and falls under other sugars. She argued that sugar comes first and not the preparation which comes first. She again referred to Chemical Examiner’s report where it was mentioned that the product was liquid glucose other than sugars has to exist first. She argued that the Board’s circular is binding on the lower authorities. She pleaded for the acceptance of the appeal.

8. We have heard both the sides and have gone through the facts and circumstances of the case. Both the sides have filed written arguments and we have duly considered the same. For the proper appreciation of the classification aspect, a perusal of the Tariff is very essential. We are reproducing Heading 17.02 as under :-

It is an admitted fact that the respondent is manufacturer of liquid glucose and malto dextrin. The Chemical Examiner’s report which appears on pages 7 and 8 of the paper book is reproduced below :-

“(i) Liquid glucose : Malto Dextrin (special glucose).

The sample is in form of transparent, viscous liquid. It satisfies the Indian Standard Specification No. 873-1974 given for liquid glucose. It is other than preparation. The percentage of reducing sugar expressed as anhydrous dextrose is 38.8%. C. No. 87 Chem/Food Products/91/CL C/Food dated 5-8-1991."

“(ii) Malto Dextrin :

The sample is in form of brown colour, viscous liquid. It satisfies the Indian Standard Specification No. 873-1974 given for liquid glucose. It is other than preparation. The percentage of reducing sugar expressed as anhydrous dextrose is 28.5%. C. No. 87 Chem/Food Products/91/CLC Food-4 dated 5-8-1991."

A perusal of the same shows that the Chemical Examiner while examining the samples has duly looked into the ISI Standards and he has mentioned that it satisfies the Indian Standard Specification No. 873-1974 given for liquid glucose. The percentage of reducing sugar expressed as anhydrous dextrose is 38.8% and 28.5%. The respondent in reply to the show cause notice mentioned as under :-

“01. That we had filed a classification list inadvertently claiming classification of our Liquid Glucose and Malto Dextrin under sub-heading 1702.19 and on realising the error we filed a revised classification list under reference vide our letter No. SSC/CE/429 dated 22nd April, 1991 to the Superintendent, Central Excise, Range II, Phagwara for correct classification of the said products under sub-heading 1702.29.

02. That we are manufacturing Liquid Glucose/Malto Dextrin which are preparations of other sugars as per Indian Standard Specification No. 873-1974. These preparations are used in confectionary, biscuits and food canning industries where requirements of reducing sugar is less than 47%.

03. That Heading 17.02 of Chapter 17 has clearly classified other sugars under two descriptions i.e. Other sugars including chemically pure Lactose, Maltose, Glucose and Fractose in any form and preparation of other sugars.

04. That other sugars include chemically pure glucose i.e. Dextrose which is in two forms i.e. in powder form or in crystalline form and clearly classifiable under sub-heading 1702.19 and preparations of other sugars have clearly been specified under sub-heading i.e. 1702.21 and 1702.29 i.e. 1702.21 for those preparations where reducing sugars expressed as Anhydrous Dextrose amount is more than 80% by weight and 1702.29 for other preparations where reducing sugars expressed as Anhydrous Dextrose amount is less than 80% by weight.

05. That Department’s own circular No. 7/90-CX. 1, dated 7-3-1990 classifies Glucose `D’ under sub-heading 1702.21 i.e. preparation of other sugars rather than under 1702.19 and which is nothing but dextrose Monohydrate mixed with 0.6% of Calcium Phosphate + Vitamin `D’. It makes abundantly clear that only chemically pure Glucose is classifiable under the Heading 1702.19 and its other preparations under 1702.21 or under 1702.29.

06. That Liquid Glucose is not chemically pure Glucose by any stretch of imagination as chemically pure Glucose consists of 100% reducing sugar as Glucose and it is only chemically pure Glucose which is classifiable under Heading/sub-heading 17.02/1702.19 and not Liquid Glucose which is merely a preparation containing reducing sugars less than 80% expressed as Anhydrous Dextrose. So the Liquid Glucose/Malto Dextrin are correctly classifiable under Heading/sub-heading 17.02/1702.29.

07. That the department had drawn a sample of our product on 17-5-1991 and 25-5-1991 for analysis by the Departmental Chemical Examiner at Delhi and Chemical Examiner’s Report clearly shows the percentage of reducing sugar in our products as 28.5% for Malto Dextrin and 38.8% for Liquid Glucose i.e. well below 80% specified for products classifiable under sub-heading 1702.21.

08. That the Departmental Chemical Examiner’s report clearly states that the products satisfied the specification prescribed in Indian Standards : 873-1974 whereas Glucose (Dextrose) falls under Indian Standard Specifications No. IS: 874-1975.

09. That the Chemical Examiner’s Report nowhere shows the products to be classifiable under sub-heading 1702.19.

10. That Liquid Glucose/Malto Dextrin are being classified under sub-heading 1702.29 in other Central Excise Divisions/Ranges as is evident from the Photostat copies of Gate Pass GP 1/invoices in respect of M/s. Indian Maize Products, M/s. Raja Ram Corn Products, Sukhjit Starch Mills (our sister concern under Hyderabad Collectorate) and M/s. Bharat Starch & Chemicals Ltd., Yamunanagar.

11. That Department’s interpretation on which the Show Cause Notice is based is merely misconceived, incorrect and as such legally not sustainable.

12. That the Show Cause Notice, based only on inferences, assumptions, and presumptions and also without any tangible evidence, is vitiated in itself by an error of law as has been held by Supreme Court in the case of Oudh Sugar Mills Ltd. v. Union of India, 1978 (2) ELT (J 172) and accordingly such a Show Cause Notice is liable to be set aside on this short ground alone."

Shri Sorabjee, the learned Senior Advocate has referred to the decision of the Tribunal in the case of Collector of Central Excise v. Anil Starch Products reported in 1989(03)LCX0044 Eq 1989 (041) ELT 0539 (Tri.). Para No. 14 from the said judgment is reproduced below :-

“14. It is nobody’s case that the subject goods are Dextrose Monohydrate or Anhydrous Dextrose. The Department contends that it is ”Glucose in whatever form" or “Liquid Glucose”. From the extracts from the book “Materrials and Technology” referred to earlier, placed before us, it is seen that Glucose Syrup is a viscous, non-crystallizing syrup prepared by the partial hydrolysis of starch. There is a passage to the same effect in the book “The Condensed Chemical Dictionary” Tenth Edition revised by Gessner G. Hawley. As seen from page 505 of the book “Concise Chemical and Technical Dictionary” edited by H. Bennet, published by the Chemical Publishing Company, New York. “Liquid Glucose” is glucose syrup containing 10 to 20% water, dextrin; and other substances which prevent the glucose from crystallizing. In the present case, it may be seen from the flow-chart (Annexure `A’ to the Memo of Appeal) that the starting point is Dextrose Monohydrate and not Starch. The subject Anhydrous Molasses is not, therefore, Glucose Syrup or Liquid Glucose which, as the books show, is the result of hydrolysis of starch. The contention that the subject goods are Liquid Glucose is, therefore, not tenable."

Shri Sorabjee, the learned Senior Advocate, referred to the dictionary meaning of the word “preparation” which means made or prepared. In the Condensed Chemical Dictionary, ninth edition revised by Gessner G. Hawley the definition of “glucose” and “glucose syrup” has been given as under on page 415 :-

“glucose (dextrose, grape sugar, corn sugar) C₆H₁₂O₆H₂O.

Properties : Colorless crystals or white granular powder, odorless, sweet taste. Sp. gr. 1.544; m.p. 146^oC; soluble in water, slightly soluble in alcohol. It has the D (right-handed) confirguration and is dextrorotatory. Combustible. Nontoxi.

Occurrence : Formed in plants by photosynthesis; also in the blood.

Derivation : Hydrolysis of corn starch with acids or enzymes; a component of invert sugar and glucose syrup. In a recently (1974) discovered process, glucose has been obtained from cellulose by enzyme hydrolysis.

Grades : Technical; U.S.P., anhydrous, hydrated.

Uses : Confectionery; infant foods, medicine, brewing and wine-making; intermediate; caramel colouring; baking and canning."

“glucose syrup (corn syrup). A mixture of D-glucose, maltose and malto dextrins made by hydrolysis of corn starch by the action of acids or enzymes. The degree of conversion of the starch varies, with consequent effect on the dextrose equivalent (D.E.) or reducing power of the syrup. Its primary uses are in the food incus.. a sweetener (high D. E.) or as thickness or bodying agents in soft drinks (low D. E.). See also glucose.”

The meaning of the word “preparation” in Webster’s Third New International Dictionary, page 1790, is as follows :-

“Something that is prepared; something made, equipped or compounded for a specific purpose, caffeine is one of the more common ingredients found pharmaceutical.”

In the Ballentine’s Law Dictionary, third Edition page 980 the meaning of the word “preparation” is as under :-

“Preparation. That which is prepared, something made, equipped, or compounded for a particular purpose Anno : 77 ALR2d 1246. A drug, A patent medicine. An element considered in determining the offense of an attempt to commit a crime. Devising or arranging the means or measures necessary for the commission of the offense, as distinguished from an attempt which is the direct movement toward commission after the preparations are made. 21 Am J2d Crim L.g. 111.

No definite line can be drawn between an “attempt” and “preparation” to commit a crime, but the question is one of degree. The accused has frequently been held to have passed beyond “preparation”, although interrupted before the last of his intended steps. United States v. Coplon (CA2 NY) 185 F2d 629, 28 ALR2d 1041."

We have reproduced the Chemical Examiner’s Report above. A perusal of the same shows that the percentage of reducing sugar expressed as anhydrous dextrose is 38.8% and 28.5%. It is an admitted fact that the respondents are manufacturing liquid glucose and malto dextrin which are preparations of other sugars as per Indian Standard Specification No. 873-1974 and these are used in the confectionary, biscuits and food canning industries where requirement of reducing sugar is less than 7%. In para No. 06 of the reply to the show cause notice on page 12 of the paper book it has been mentioned that “Liquid glucose is not chemically pure Glucose by any stretch of imagination as chemically pure Glucose consists of 100% reducing sugar as Glucose and it is only chemically pure Glucose which is classifiable under Heading/sub-heading 17.02/1702.19 and not Liquid Glucose which is merely a preparation containing reducing sugars less than 80% expressed as anhydrous dextrose. So the liquid Glucose/Malto Dextrin are correctly classifiable under Heading/sub-heading 17.02/1702.29.” Mrs. Sundaram, the learned SDR has heavily relied that the other sugar has to exist first from which the preparation is made and the Chemical Examiner has stated that the items are other than preparations. They had classified as other sugars only. The argument of the learned SDR is not acceptable. The definition of “Other Sugars” as given in HSN is as under :-

“(A) OTHER SUGARS

This part covers sugars, other than sugars of Heading 17.01 or chemically pure sugars of Heading 29.40, in solid form (including powders), whether or not containing added flavouring or colouring matter. The principal sugars of this heading are :

(1) Lactose (also known as milk sugar) C₁₂H₂₂-O₁₁), which occurs in milk and is produced commercially from whey. This heading covers both commercial and chemically pure lactose.

Commercial lactose, when refined, is a white, slightly sweet, crystalline powder. Chemically pure lactose, whether anhydrous or hydrated, occurs as hard colour less crystals, which absorb odours.

Lactose is used extensively, with milk, in the preparation of infant foods; it is also used in confectinary, in jam-making or in pharmacy.

(2) Invert sugar, the main constituent of natural honey. It is usually prepared commercially by the hydrolysis of refined sucrose solutions and consists of equal proportions by weight of glucose and fructose. It may be presented in solid form or as a viscous syrup [See Part (B)]. It is used in pharmacy, in bread making, in the manufacture of fruit preserves and artificial honey and in the brewing industry.

(3) Glucose, which occurs naturally in fruits and honey. Together with an equal part of fructose it constitutes invert sugar.

The heading includes dextrose (chemically pure glucose) and commercial glucose. Dextrose (C₆H₁₂O₆) is a white crystalline powder. It is used in the food and pharmaceutical industries.

Commercial glucose is obtained by hydrolysing starch with acids and/or enzymes. It always contains, in addition to dextrose, a variable proportion of di-, tri- and other polysaccharides (maltose, maltotriose, etc.). It has a reducing sugar content, expressed as dextrose on the dry substance, of not less than 20%. It is usually in the form of a colourless, more or less viscous liquid (glucose syrup, see Part (B) or of lumps or cakes (glucose aggregates) or of an amorphous powder. It is used mainly in the food industry, in brewing, in tobacco fermentation and in pharmacy."

9. The adjudicating authority as well as the appellate authority in the order have referred to the tariff as well as relevant portion of HSN. From a perusal of the Heading 1702 and sub-heading 1702.19 it is clear that Heading 1702.19 covers other sugars, including chemically pure lactose, maltose, glucose and fructose in any form except Palmyra sugar as Palmyra sugar is covered under Heading 1702.11, whereas Heading 1702.29 covers preparation of other sugar other than preparation in which reducing sugar expressed an anhydrous dextrose amount to more than 80% by weight - sub-heading 1702.21. The products in question before us are not 100% chemically pure glucose. The products are in liquid form, whereas sugars are in solid (crystalline or amorphous) forms. Therefore, the products cannot be treated as other sugars, including chemically pure lactose, maltose, glucose and fructose in any form. The heading is in two divisions, other sugars, including chemically pure lactose, maltose, glucose and fructose in any form. 1702.19 - other - preparations of other sugars :

1702.21 — In which the reducing sugars expressed as anhydrous dextrose amount to more than 80% by weight.

1702.29 — Other. In the matter before us, the percentage of reduced sugar expressed as anhydrous dextrose is 38.8% and 28.5%. Accordingly, we are of the view that the correct classification of the liquid glucose and malto dextrin will fall under sub-heading 1702.29. We do not find any infirmity in the order passed by the lower authorities. Accordingly, we do not find any merit in the revenue’s appeal. The same is dismissed.

10. [Contra per : P.K. Kapoor, Member (T)]. I have carefully gone through the order proposed by the Hon’ble President but I have not been able to persuade myself to agree with it , for the following reasons :-

11. The only question that arises for consideration in this case is whether `Liquid Glucose’ and `Malto Dextrine’ are classifiable under sub-heading 1702.29 of the Schedule to Central Excise Tariff Act, 1985 as held by the lower authorities or under sub-heading 1702.19 of the said Schedule.

12. The respondents’ case is that the disputed `Liquid Glucose’ and `Malto Dextrine’ are preparations which not being chemically pure sugars would not be classifiable under sub-heading 1702.19. In support of their contentions that the products have to be deemed as `preparations of other sugars’ covered by sub-heading 1702.29 they have mainly placed reliance on the relevant Indian Standard Specification No. 873-1974 according to which the products in question are a refined and concentrated aqueous solution of D-Glucose, maltose and other polymers of D-Glucose which is obtained by controlled hydrolysis of starch containing material and it contains in addition to dextrose a variable proportion of di, tri and other polysaccharides (Maltose Maltriose) etc. It has been stated that the process of controlled hydrolysis results in mother liquid which is a combination of other sugars i.e. maltose bi, tri and polysaccharides etc. in the form of acqueous solution which is further subjected to refining, purifying, filtering and concentration resulting in the ultimate product namely, Liquid Glucose/Maltodextrine. It has been contended that the process of refining and concentrating the solution of other sugars results in products which are preparations of other sugars. In this regard the respondents have also referred to meaning of the word “preparation” in Webster’s Third New International Dictionary and Ballentrine’s Law Dictionary. It has been contended that the products in question being `preparations of other sugars, (in terms of the Rule 3(a) of the Rules for Interpretation of the Schedule for their classification, the specific entry “1702.29 - Preparation of other sugars -other” shall be preferable. It has also been argued that in the whole of the Chapter there being only one sub-classification namely, “preparation of other sugars” wherein the percentage of reducing sugars in terms of Dextrose anhydrous has been considered to be the deciding factor for classification of a `preparation’, the respondents’ products having dextrose content of less than 80% by weight would be correctly classifiable under sub-heading 1702.29.

13. From the case records it is seen that the samples of `Liquid Glucose’ and `Maltodextrine’ were tested by the Chemical Examiner, who while confirming that `Liquid glucose’ produced by the respondents was in the form of a transparent, viscose liquid having reduced sugar content of 38.8% expressed as anhydrous dextrose and conforming to the Indian Standard Specifications No. 873-1974 for liquid glucose; and he also confirmed that it was “other than preparation”. Similarly, according to the Chemical Examiner, the Malto-Dextrine in question was brown colurd viscous liquid having reduced sugar content of 28.5% expressed as anhydrous dextrose and satisfying the Indian Standard Specification 873-1974. According to the test report Malto Dextrine in question was also other than a preparation. It is thus seen that the Chemical Examiner had given a definite finding that the appeallants, products could not be deemed as preparation.

14. In support of their claim that their products namely, Liquid Glucose and Malto Dextrine have to be deemed as `Preparations of other sugars’ the respondents have mainly referred to the process of preparation of the products in question by controlled hydrolysis of starch containing material, the reduced sugar content and other contents of the two products as given in the relevant Indian Standard Specification. In this regard it is seen that having regard to the provisions of Indian Standard Specification No. 873-1974 the Chemical Examiner has given a categorical finding that the products in question cannot be deemed as “preparation of other sugars”. It is also seen that according to the following extracts from the notes to sub-heading 17.02 of the HSN which is an internationally recognised text and has been accepted as having considerable persuasive value in the classification of goods under the Central Excise Tariff Schedule, the products `Liquid Glucose’ and Maltodextrine’ fall in the category of “Other Sugars” and they are not treated as preparations :-

“(A) OTHER SUGARS

This part covers, other than sugars of heading 17.01 or chemically pure sugars of heading 29.40 in solid form (including powders), whether or not containing added flavouring or colouring matter. The principal sugars of this heading are :-

(1) ...........................

(2) ...........................

(3) ...........................

 Commercial glucose is obtained by hydrolysing starch with acid and/or enzymes. It always contains, in addition to dextrose, a variable proportion of di-, tri- and other polysaccharides (maltose, maltotiose, etc.). It has a reducing sugar content, expressed as dextrose on the dry substance, of not less than 20%. It is usually in the form of a colourless, more or less viscous liquid [glucose syrup, see Part (B)] or of lumps or cakes (glucose aggregates) or of an amorphous powder. It is used mainly in the food industry, in brewing, in tobacco fermentation and in pharmacy.

(4) ..........................

(5) ....................................

(6). Malto-dextrins (or dextri-maltoses), obtained by the same process as commercial glucose. They contain maltose and polysaccharides in variable proportions. However, they are less hydrolysed and therefore have a lower reducing sugar content than commercial glucose. The heading covers only such products with a reducing sugar content, expressed as dextrose on the dry substance, exceeding 10% (but less than 20%) . Those with a reducing sugar content not exceeding 10% fall in Heading 35.05. Malto-dextrins are generally in the form of white powders, but they are also marketed in the form of a syrup [(see Part (B)]. They are used chiefly in the manufacture of baby food and low-calory dietetic foods, as extenders for flavouring substances or food colouring agents, and in the pharmaceutical industry as carriers."

15. In support of their contention that their products `Liquid glucose’ and `Malto-dextrin’ are preparations of other sugars the respondents have referred to the Board’s Order No. 1/93-C.E., dated 11-3-1993 which in para 2, gives the details of various constituents of `Liquid glucose’. It is seen then in para 3 of this order, which has been issued in exercise of the powers under Section 37B of the Central Excises and Salt Act, the Board has expressed the view that the product is classifiable under sub-heading 1702.19.

16. The respondents have also referred to the following meaning of the word “preparation” in Webster’s Third New International Dictionary :-

“Something that is prepared: Something made, equipped or compounded for specific purpose, Caffine is of the more common ingredients found in pharmaceutical”.

However, the contention that the products in question have to be deemed as “preparations of other sugars” does not have any force since as discussed above the said products obtained by subjecting starch containing material to controlled hydrolysis and certain other processes results, in “Liquid glucose” and `Malto-dextrin’ which despite the limited reduced sugar content of 38% and 28.5% (expressed as anhydrous dextrose) respectively and the contained matter and impurities continued to be a variety of sugar according to the relevant Indian Standard Specification, and the relevant notes to sub-heading 1702 of HSN. The products in question not being Sugars derived from cane or beet, they would not be classifiable under Heading 17.01. Since they are also not `Palmyra Sugar’ of 1702.11 they would be correctly classifiable as “Other Sugars” under the sub-heading 1702.19 which unlike certain items viz. lactose, maltose, and glucose in any form specified under that sub-heading, need not necessarily be in chemically pure form.

17. The respondents’ products being only a variety of `Other Sugars’ of Heading 17.02, even according to the dictionary meaning of the word `preparation’ they cannot be treated as `preparations of other sugars’ since for conversion of the sugars in question into “preparation” something will have to be made out of such sugars i.e. they will have to be mixed or compounded with other materials. In fact the classification of Glucose `D’ under Tariff Item 1702.21 [1990 (047) ELT - T.8] cited by the appellants supports the view that `Liquid glucose’ and `Malto-dextrin’ are not `preparations of other sugars’, since they have not been subjected to any further processing through addition or mixing of other items like Dextrose, Monohydrate, Calcium Phosphate and Vitamin D etc. as in the case of Glucose -D.

18. It is seen that the view that the disputed products just by themselves without addition of other ingredients or by process of mixing or other such processes cannot be deemed as “preparations of other sugars” finds support from the Tribunal’s observations in regard to the meaning of the term `Preparations’ in the case of Reckitt and Colman of India Ltd. v. Collector of Central Excise, reported in 1985 (022) ELT 216. Para 34 of the said decision being relevant is reproduced below :-

“But then the further question is whether they could be further called preparations on the basis of flour. As mentioned earlier the contention for the department is that the word ”preparations" would only mean the end-result, giving rise to a product, and not necessarily to a product arrived at by way of a process of addition to the original material. But in the context of the words used in item 14 this meaning does not appear to us to be appropriate. We feel so since flour itself is a product obtained by grinding the grain. If therefore the grain in the form of flour is itself to be treated as a preparation, then the words “preparation with a basis of flour” would appear to be a tautological repetition. Therefore, in the context of the use of the words in the notification it appears to us that “preparations” as used in the said item 14 would have to be a product prepared by addition, mixing or other such similar process to the original commodity in order to derive a new commodity. In that sense mere grinding of barely grain to prepare barley flour or barley powder (as in the case of Purity Barley) would not appeal to us to amount to a preparation."

19. The Tribunal’s decision in the case of CCE v. Anil Starch Products reported in 1989 (041) ELT 539 which was cited by the respondents is not relevant to the issue involved in this case since the question that came up for consideration in that case was whether `Anhydrous Molasses’ which emerges at an intermediate product during the manufacture of “Anhydrous Dextrose ” was Glucose Syrup or Liquid Glucose.

20. In view of the above discussion, I hold that the `Liquid glucose’ and `Malto-dextrin’ in question fall in the category of `Other Sugars’ and would be classifiable under sub-heading 1702.19 of the Central Excise Tariff Act, 1985.

21. I, therefore, allow the appeal.

POINT OF DIFFERENCE

Whether on the facts and circumstances of the case, Liquid Glucose and Malto Dextrin are classifiable under sub-heading 1702.29 of the Central Excise Tariff, 1985 as held by the President or under sub-heading 1702.19 as held by the Member (Technical).

22. [Order per : P.C. Jain, Member (J)]. - Point of difference is set out above at page 26.

23. The disputed products, namely, liquid glucose and malto-dextrine arise as a result of partial hydrolysis of starch containing material. According to the Chemical Examiner’s reports, reproduced at page 12 (para 8) both the products are in the form of viscous liquid. They satisfy the Indian Standard Specification No. 873-1974 given for liquid glucose. It is also stated by the Chemical Examiner that the disputed products are “other than preparation”. Percentage of reducing sugar expressed as anhydrous dextrose is 38.8% in one product and 28.5% in the other product.

24. Revenue, which is appellant herein, has stressed that the Chemical Examiner has clearly opined that the products are “other than preparation” and therefore, sub-heading 1702.29 is ruled out. It is also stated that the HSN Explanatory Notes support the classification under sub-heading 1702.19, as held by the Technical Member. It is further pointed out that the lower authorities treating the products as `preparations’ have ruled out 1702.19 on the ground that it is a mixture of `other sugars’ and these are not pure sugars in solid form for various types mentioned in Heading 17.02. Learned SDR, Smt. J.M.S. Sundaram submits that such an interpretation is erroneous because Heading 17.02 merely extends the scope of that heading by specifically including chemically pure lactose, maltose, glucose and fructose. Heading 17.02 is not exhaustive description. HSN Explanatory Notes, as reproduced in the learned Technical Member, Shri P.K. Kapoor’s order (at pages 22-23 of the order) clearly cover the products under consideration. It is also urged that “preparation” would imply that `other sugars’ must come into existence first, then only `preparation of other sugars’ can be made. It is also submitted that, `preparation’ would contain other ingredients as well. But no other ingredients are contained apart from `other sugars’. That being the position in the instant case, the goods under consideration cannot be treated as preparation of other sugars. She relies for this proposition on the Tribunal’s judgment in the case of Reckitt & Colman, referred to in the learned Technical Member’s judgment as also on 1993(07)LCX0073 Eq 1994 (071) ELT 0254 (Tri.) = 1993 (49) E.C.R. 526. She also relies on CBE & C’s Circular No. 1/93, dated 11-3-1993 issued from F. No. 14/1/91-CX. 1 under Section 37B of the Central Excises & Salt Act, 1944.

25. Shri Ashok Desai, learned Senior advocate for the respondents submits that Chemical Examiner has to analyse the sample and give the factual data observed in analysis of the samples. He is not entitled to opine about classification of the goods which is necessarily implied in his present opinion : `it is other than preparation’ It is also urged that Chemical Examiner’s opinion is merely his ipse dixit without any reason as to why the products cannot be treated as preparation. He submits that the products being mixture of two `sugars’ of other varieties is a preparation of `other sugars’. He further submits that partial hydrolysis of the material containing starch results in a mixture of other sugars which is itself a preparation of other sugars and is used for various purposes. No useful purpose is served by first refining into different other sugars and then making their preparation. There is no rule of law that in making preparation of other sugars, latter must be brought into existence as separate commodities first and then `preparation’ should be made. Such a plea is against any commercial sense when the same product could be made in a cheaper manner. Board’s circular, he submits, is not binding on quasi-judicial authorities. He relies on AIR 1969 S.C. 48, AIR 1970 S.C. 1472 and AIR 1982 S.C. 67. On the plea of HSN Explanatory Notes, learned advocate points out that these do not have any statutory force. These are also not of any persuasive value because the HSN Headings 17.02 and CETA, 1985 Heading 17.02 are not fully aligned. For this proposition he relies on 1988(07)LCX0042 Eq 1988 (037) ELT 0253 (para 6).

26. In her rejoinder, learned SDR, Smt. Sundaram submits that Chemical Examiner’s report is evidence of an expert and is at once reliable and admissible. She relies on 49 E.C.R. 526 supra. She submits that the two headings - in HSN and CETA, 1985 - are aligned, although there is a difference in sub-headings. HSN Explanatory Notes would be a reliable guide for classification. Regarding the Board’s circular, she submits that the department has not placed reliance on it the respondent has brought it on record.

27. I have carefully considered the pleas advanced from both sides. I notice that one of the major planks of the department’s case against the concurrent findings of the two lower authorities is that the Chemical Examiner has opined that the products are other than preparations of other sugars. Copies of the reports have already been set out. It is observed therefrom that the Chemical Examiner has merely stated as above without giving any reason for that opinion. On the other hand, factual data, as observed by him on analysis of the samples, clearly points out that the products are mixtures of other sugars in liquid form. Dextrose content on dry content basis is less than 80%. The word `preparation’ is a word of wide import. Preparation of other sugars would include within it preparation of two or more other sugars or preparation of one or more than one sugars with any other ingredients. Decision of Reckitt Colman relied upon by the learned SDR for the Revenue was analysing the expression “preparation on the basis of flour” occurring in a notification. The word `basis’ implied that the preparation must have `flour’ as a major ingredient and there should be some other minor ingredients. It was not examining the expression “preparation” simplicitor. Nevertheless, in the instant case, as noted earlier, we have not just one variety of `other sugar’ but a mixture of varieties of `other sugars’.

28. Another major plea is reliance of HSN Explanatory Notes. It is well-settled that HSN Explanatory Notes are useful guide only if the headings under the HSN and under the CETA are materially aligned. To appreciate the said plea, I reproduce below, Heading 17.02 of HSN and Heading 17.02 of CETA, 1985 :

This heading covers other sugars in solid form, sugar syrup and also artificial honey and caramel.

Heading 17.02 of CETA, 1985

Other sugars, including chemically pure lactose maltose, glucose and fructose in any form and preparations thereof; sugar syrups not containing added flavouring or colouring matter, artificial honey, whether or not mixed with natural honey; caramel."

29. Material differences to be noticed are as follows :-

(i) HSN Heading 17.02 speaks of inclusion of chemically pure lactose, maltose, glucose and fructose in solid form whereas CETA Heading 17.02 speaks of the aforesaid chemical pure sugars in any form.

(ii) HSN Heading 1702 does not speak of “preparations thereof” whereas CETA 17.02 speaks of `preparations thereof’ i.e. preparations of other sugars.

(iii) HSN sub-heading clubs different varieties of sugar alongwith its syrup in separate sub-headings e.g. Lactose and its syrup in 1702.10, whereas all sugar syrups are clubbed together in different sub-heading 1702.30 in CETA 1985 apart from two sub-headings 1702.11 and 1702.19 for all `other sugars’.

29.1. `Preparation of other sugars’ is a new category of goods included in CETA. HSN Notes would not at all throw any light on “preparation of other sugars”. HSN Explanatory Notes are in my view totally irrelevant in so far as classification of `preparation of other sugars’ is concerned. No reliance can be placed on them for the controversy in hand.

30. In view of the foregoing discussion, I agree with the Hon’ble President that the products under consideration would be under sub-heading 1702.29 as other preparations of `other sugars’.

31. In view of the majority opinion of the Members the appeal is dismissed.

_______

Equivalent 1994 (72) ELT 753 (Tribunal)