1995(07)LCX0128

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

S/Shri K. Sankararaman, Member (T), G.A. Brahma Deva, Member (J) and Lajja Ram, Member (T)

HAMDARD (WAKF) LABORATORIES

Versus

COLLECTOR OF C. EX., MEERUT

Order No. 187/95-D, dated 10-7-1995 in Appeal No. E/270/95-D

Cases Quoted

Northland Industries v. Collector —1988 (37) E.LT. 229 (Tribunal)                                       [Paras 4, 5, 19, 26]

Dunlop India Ltd. v. UOI — 1983 ELT 1566 (S.C.)                                                                                        [Para 4]

Dy. C.S.T. v. G.S. Pai — AIR 1980 SC 611                                                                                                           [Para 4]

Baidyanath Ayurved Bhavan Ltd.v. Collector — 1985 (6) E.T.R 265                                                [Paras 5, 16]

Parle Exports Pvt. Ltd. v. Collector — 1987(10)LCX0055 Eq 1988 (033) ELT 0445 (Tribunal)                                          [Paras 5, 6, 13]

S. Narendra Kumar v. Collector — 1991(09)LCX0053 Eq 1992 (057) ELT 0466 (Tribunal)                                                          [Paras 5]

Collector v. Parle Exports Pvt. Ltd. — 1988(11)LCX0047 Eq 1988 (038) ELT 0741 (SC)                                      [Paras 6, 13, 20, 21, 25]

Collector v. Krishna Carbon Paper Co. — 1988(09)LCX0051 Eq 1988 (037) ELT 0480 (SC)                                                           [Para 6]

Leuko Plast India Ltd. v. State of Goa — 1988(02)LCX0079 Eq 1988 (036) ELT 369A (Bom.)                                                     [Para 6]

AMCO Batteries v. Collector — 1992(09)LCX0076 Eq 1993 (063) ELT 0534 (Tribunal)                                                                  [Para 6]

Eskeyef Ltd. v. Collector — 1990(09)LCX0104 Eq 1990 (049) ELT 0649 (SC)                                                                            [Paras 10,24]

Hamdard Dawakhana (Wakf) Delhi v. UOI — 401 C.A. No. 934/84                                                      [Para 12]

Brooke Bond India Ltd. v. UOI — 1980 ELT 0065 (0AP)                                                                                  [Para 13]

Gannon Dunkerly and Co. v. State of Rajasthan — 1992 (3) SCALE 173                                               [Para 14]

Oswal Agro Mills Ltd. v. Collector — 1993 AIR SCW 1782                                                                        [Para 15]

Meteor Satellite Ltd. v. Collector — 1990 (045) ELT 697                                                                              [Para 15]

Shramik Uttarsh Sabha v. Raymond Woollen Mills Ltd. — 1995 AIR SCW 1181                               [Para 16]

Dinesh Chandra Jamnadas Gandhi v. State of Gujarat — 1989(01)LCX0016 Eq 1989 (040) ELT 0230 (SC)                          [Para 16]

McDowell & Co. Ltd. v Collector — 1987(06)LCX0043 Eq 1988 (038) ELT 0454 (Bom.)                                                               [Para 19]

K.P. Verghese v. ITO — AIR 1981 SC 1992                                                                                                       [Para 21]

Indian Metals & Ferro Alloys Ltd. v. Collector — 1990(11)LCX0014 Eq 1991 (051) ELT 0165 (SC)                                          [Para 21]

Advocated By : Shri V. Lakshmi Kumaran. Advocate, for the Appellant.

 Shri M.K. Jain, SDR, for the Respondents.

[Order per : Lajja Ram, Member (T)]. - M/s. Hamdard (Wakf) Laboratories, Ghaziabad, have filed the present appeal being aggrieved with the order-in-appeal No. 500/CE/MRT/94, dated 10-1-1995, passed by the Collector of Central Excise(Appeals), Ghaziabad.

2. The matter relates to the classification of the product `Sharbat Rooh Afza’. Prior to the budgetary changes made in the year 1994, the product was being classified by the appellants under sub-heading No. 2107.91 of the Schedule to the Central Excise Tariff Act, 1985 (hereinafter referred to as the `Tariff’). Heading No. 21.07 of the Tariff covered - edible preparations, not elsewhere specified or included. On 23-3-1994, a revised classification list was filed by the appellants, classifying the `Sharbat Rooh Afza’ under sub-heading No. 2202.90 of the Tariff. This sub-heading covered - other non-alcoholic beverages not including fruit or vegetable juices of Heading No. 20.01. The appellants wanted this revised classification to be effective from 1-3-1994. It was alleged in the show cause notice dated 29-6-1994 that during the period 5-3-1994 to 20-6-1994, `Sharbat Rooh Afza had been cleared without approval of the classification list, and in violation of the directions contained in the letter dated 29-3-1994 from the Superintendent of Central Excise, wherein it was stated for clearance of Sharbat Rooh Afza under sub-heading No. 2202.90 of the Tariff, without approval of the classification list would constitute an offence. The Assistant Collector of Central Excise, Ghaziabad who adjudicated the matter came to a finding, vide his order dated 16-8-1994, that Sharbat Rooh Afza was not a beverage but a syrup. He referred to the Chapter Note 5(j) under Chapter 21 of the Tariff, and the Explanatory Notes to Heading No. 21.06 of the Harmonised Commodity Description and Coding System (HSN), which corresponds to Heading No. 21.07 of the Central Excise Tariff, and held that Sharbat Roof Afza contained fruit juice, and was classifiable under sub-heading No. 2107.91 of the Tariff, and that the benefit of exemption Notification No. 2/94-C.E., dated 1-3-1994. was not admissible to the product in question. He confirmed the demand of Rs. 10,91,63,032/-. The Collector of Central Excise (Appeals), Ghaziabad upheld the classification of the product under sub-heading No. 2107.91 of the Tariff, but ordered that the differential Central Excise duty payable by the appellants should be recalculated by the Assistant Collector of Central Excise, after allowing the abatement of duty and other admissible deductions, if any, from the wholesale price.

3.  The matter was posted for hearing on 1-3-1995 when Shri V. Lakshmikumaran, Advocate with Shri R. Nambirajan, Advocate appeared for the appellants. Shri M.K. Jain, SDR represented the respondent.

4. Shri V. Lakshmikumaran, the learned Advocate stated that the matter related to the classification of the product - Sharabat Rooh Afza. The appellants were claiming the classification under sub-heading No. 2202.90 of the Tariff, while the Revenue were assessing the product under sub-heading No. 21.07 of the Tariff. He referred to the process of manufacture as contained in para 4 at pages 51-52 of the paper book. Attention was invited to the Supreme Court decision in their own case, copy at page 28 of the paper book. Three spoons of Sharbat Rooh Afza had to be diluted in a glass of water. Reference was made to the Tribunal decision in the case of Northland Industries v. Collector of Central Excise - 1988(07)LCX0033 Eq 1988 (037) ELT 0229 (Tribunal), wherein it has been observed that `squash’ which can be consumed after simple dilution with water was a beverage. The learned Advocate informed that the appellants had sought reclassification when the rate of Central Excise duty under Heading No. 21.07 had gone up, and the scheme of exemption notification brought their product at par with the aerated water concentrate base. Estoppel does not apply to taxation matters, as held by the Supreme Court in the case of Dunlop India Ltd. v. Union of India, 1983, ELT 1566 (0SC). It was contended that Sharbat Rooh Afza was not a syrup, and in common parlance, it was also not a beverage concentrate. In support of his contention, the learned Advocate relied upon the Supreme Court decision in the case of Deputy Commissioner of Sales Tax (Law) Board of Revenue (Taxes), Ernakulam v. M/s. G.S. Pai. - AIR 1980 (SC) 611.

5.  On 2-3-1995, Shri M.K. Jain, the learned SDR replied that prior to the 1994 Budget, the appellants were admittedly paying Central Excise duty under sub-heading No. 2107.91 of the Tariff. When the rate of Central Excise duty under sub-heading No. 2107.91 underwent a change, as a consequence of changes in the scheme of exemption, in the year 1994, the appellants wanted to change the classification of their product to sub-heading No. 2202.90, and claimed concessional rate of excise duty under exemption Notification No. 2/94-C.E., dated 1-3-1994. The goods remained the same, and the Tariff entries also remained the same. No reasons were given for change in the classification, but it was obviously as a consequence of changes in the exemption scheme. The Superientendent of Central Excise wrote to them on 24-3-1994 to know the reasons for the change, but no reasons were given for the change, and it was only pleaded that their earlier classification was erroneous. The product was a base for the beverage, and not the beverage itself. The ld. SDR referred to the Webstor Encyclopaedia and Hayward Dictionary to say that the goods were not a beverage. He referred to the label of the product, and stated that it was a concentrated product. He also referred to Chapter Notes 5(b), (c) and (j) under Chapter 21 of the Tariff. The expression “not including” means not containing for the purposes of Heading No. 22.02 of the Tariff. The ld. SDR submitted that the Hon. Supreme Court’s decision relied upon by the appellants was in the context of the Fruits Product Order, 1955; further as held by the Tribunal in the case of Shree Baidyanath Ayurved Bhavan Ltd. v. Collector of Central Excise, Patna, 1985 (6) E.T.R 265, the definition in other enactment was not relevant. In the case of Northland Industries v. Collector of Central Excise, 1988(07)LCX0033 Eq 1988 (037) ELT 0229 (Tribunal), the products were canned fruits in syrup and fruit squashes. In the case of Parle Exports Pvt. Ltd. v. Collector of Central Excise, 1987(10)LCX0055 Eq 1988 (033) ELT 0445 (Tribunal), it has been held that food products or the food preparations include beverage base, and that non-alcoholic beverage bases are classifiable under Heading No. 21.07 of the Customs Cooperation Council Nomenclature (CCCN). In the case of S. Narendra Kumar v. Collector of Central Excise, 1991(09)LCX0053 Eq 1992 (057) ELT 0466 (Tribunal), the milk masala, which was a mixture of edible nuts and other ingredients was held to be classifiable under sub-heading No. 2107.91 of the Tariff. The ld. SDR in support of his contention also relied upon the HSN, and submitted that reliance on HSN was permissible under law.

6. In rejoinder, the ld. Advocate stated that the Tribunal decision in the case of Parle Exports Pvt. Ltd. v. Collector of Central Excise, 1987(10)LCX0055 Eq 1988 (033) ELT 0445 (Tribunal) has been overruled by the Supreme Court in the case of Collector of Central Excise v. Parle Exports Pvt. Ltd., 1988 (38) E.L.T 741 (SC). As regards the dictionary meaning of the term `beverage’, he stated that as held by the Supreme Court in the case of Collector of Central Excise, Kanpur v. Krishna Carbon Paper Company, 1988(09)LCX0051 Eq 1988 (037) ELT 0480 (SC), the dictionary meaning was not always safe, and that help could be taken from other enactments, as held by the Bombay High Court in the case of Leuko Plast India Ltd. v. State of Goa, 1988(02)LCX0079 Eq 1988 (036) ELT 369A (Bombay). As regards the HSN Explanatory Notes, reliance was placed on the decision in the case of AMCO Batteries v. Collector of Central Excise, 1992(09)LCX0076 Eq 1993 (063) ELT 0534 (Tribunal) to say that when the language of the Tariff was clear, the HSN Explanatory Notes could not be pressed into service.

7. We have carefully gone through all the relevant aspects relating the product under consideration, and have given our due thought to the various submissions made by both the sides.

8. The product under consideration is `Sharbat Rooh Afza’, manufactured by M/s. Hamdard Dawakhana (Wakf), under the licence issued by the Ministry of Food, under the Fruits Product Order, 1955. Label on the `Sharbat’ bottle exhibits the picture of fruits and flowers. It is marketed as `Sharbat’ (syrup). Its manufacturing formula as per the label on the bottle is as under :

FORMULA

Each dose of 50 ml. (70 grams approx.) contains :

The product is in the form of a thick sweet aqueous solution. The sugar syrup inverted with citric acid is first made; after filtering and cooling of the syrup, distilled extracts of rose, kewra etc. are added, along with pineapple and orange juice to give it a particular aroma and flavour. Synthetic colour is also added to give it a particular presentation. In a doze of 50 ml.; the inert sugar base is 40 ml., and the pineapple juice is 4 ml. It has been stated that the Sharbat Rooh Afza can be used in various products icecream, faluda, kheer, kulfi, pudding etc., and when so used, then there is no need to use sugar in those products. For drink, 3 tea table spoon full of Sharbat Rooh Afza is to be used in a glass of water. With net contents of 700 ml., the retail price in Delhi as indicated on the label is Rs. 43.15 per bottle.

9. The appellants had classified their product Sharbat Rooh Afza, prior to 1-3-1994, under sub-heading No. 2107.91 of the Tariff. Heading No. 21.07 is extracted below : -

Under Chapter Note 5 of Chapter 21, Heading No. 21.07 inter alia includes the following:

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

(a) Protein concentrates and texturded protein substances;

(b) preparations for use, either directly or after processing (such as cooking; dissolving or boiling in water, milk or other liquids), for consumption;

(c) preparations consisting wholly or partly of foodstuffs, used in the making of beverages or food preparations for human consumption;

(d) powders for table creams, jellies, ice-creams and similar preparations whether or not sweetened;

(e) flavouring powders for making beverages, whether or not sweetened;

(f) peanut butter;

(g) preparations cnsisting of tea or coffee and milk powder, sugar and any other added ingredients;

(h) preparations (for example, tablets) consisting of saccharin and a foodstuff such as lactose, used for sweetenig purposes;

(i) pre-cooked rice cooked either fully or partially and their dehydrates; and

(j) preparations for lemonades or other beverages, consisting, for example of flavoured or coloured syrups, syrup flavoured with an added concentrated extract, syrup flavoured with fruit juices and concentrated fruit juice with added ingredients."

The Tariff rate under the above sub-heading had been increased from 15% to 50% ad valorem in 1992 Budget; however by amending Notification No. 6/92-C.E., dated 1-3-1992 (amending Notification No. 12/90-C.E., dated 20-3-1990), the effective rate was left at 15% ad valorem. Under Notification No. 4/93-C.E., dated 28-2-1993 this effective rate was increased to 20% . In the 1994 Budget, the above Notification No. 4/93-C.E., dated 28-2-1993 was rescinded by Notification No. 64/94-C.E., dated 1-3-1994, and under Notification No. 2/94-C.E., dated 1-3-1994, preparations for beverages were taken out of the purview of the exempted rate. Serial Nos. 25 and 26 of the Table annexed to the said Notification No. 2/94-C.E. are extracted below :

10. Under their classification list No. 123/R1/94, dated 23-3-1994, the classification of the product `sharbat rooh afza’ was changed by the appellants from sub-heading No. 2107.91 to 2202.90. Under classification list No. 89/R1/94 which had been filed on 1-3-1994, the classification of the product was shown under sub-heading 2107.91. There was no change in the product, or in the Tariff entry; only the scheme of exemption had undergone a change, vide Notification No. 2/94-C.E. As stated above under the classification list filed on 23-3-1994, the classification had been changed for sub-heading No. 2202.90. Heading No. 22.02 is extracted below :

“22.02 :

Natural or artificial mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured; other non-alcoholic beverages, not including fruit or vegetable juices of heading No. 20.01."

There had been no change in the product or in the Tariff entries, and as already stated above, the change was only in the scheme of exemption. Consequent upon the change in the scheme of exemption, the appellants sought to reclassify their product, not on the basis of their product as such, but to seek the reduction in the level of the levy, contending that their product was a beverage. They had pleaded that they had been classifying their product under sub-heading No. 2107.91 erroneously. Although there is no estoppel in law against the party in taxation matters, exemption notification cannot change the classification of the goods from one entry to another, as held by the Supreme Court in the case of Eskayef Ltd. v. Collector of Central Excise, 1990(09)LCX0104 Eq 1990 (049) ELT 0649 (SC). Para 14 from that judgement is reproduced below :

14. The exemption from payment of Central Excise duty which has been granted under notification dated 1-11-1982, as amended by notification dated 15-2-1984, is confined in its appilcation to goods specified in the Schedule annexed to the said notification which fall under item 68. The said notification does not grant exemption in respect of product falling in any other entry of the excise tariff. It cannot be construed as transferring a product from an entry other than Item 68 to Item 68. The insertion of animal feed supplement in the Schedule to the Notification dated 1-11-1982, by the Notification dated 15-2-1984, would not mean that a product which was liable to payment of Central Excise duty under item 14E prior to such insertion would cease to be so liable and would become exempt from such payment of duty by virtue of this notification. It is not disputed that prior to the notification dated 15-2-1984, the appellant was paying Central Excise duty on Neftin - 50 and Neftin - 200 as patent and proprietary medicines falling under Item 14E. In the absence of any notification granting exemption in respect of products falling under item 14E, Neftin-50 and Neftin-200, which are patent and proprietary medicines falling under Tariff Item 14E and which do not fall under the residuary entry at Item 68, cannot be claimed to be exempt from Central Excise duty as animal feed supplement under notification dated 1-11-1982, as amended by notification dated 15-2-1984."

11.   The appellants had claimed that their product is a non-alcoholic beverage, and is not a fruit or vegetable juice. As the product description shows, the Sharbat Rooh Afza is a flavoured /coloured syrup in which the inert sugar base constitutes 80% of the dose. Another 8% is made by pineapple juice. In a glass of water only three table spoonful of the syrup is enough to make a sweetened drink. There is no need for addition of sugar. In a number of other preparations also where Sharbat Rooh Afza could be used, there is no need to use sugar.

12. In their reply dated 2-8-1994 to the show cause notice dated 26-6-1994, the appellants had stated in para 5 - “the mentioning of the phrase ‘non-alcoholic sweetened beverage’ on the label of the product ‘Sharbat Rooh Afza’ is in pursuance to the decision of the Hon. Supreme Court in our own case as a compromise formula which is also incorporated as a conditon by the Ministry of Food while granting the FPO licence”. It is seen that the Hon. Supreme Court in the case referred to above, by the appellants, of their own case Hamdard Dwakhana (Wakf) Delhi v. Union of India in Civil Appeal No. 934/84; had referred to the product as a syrup. The hon. Supreme Court held that `Sharbat Rooh Afza’ would satisfy the definition of `sharbat’ as given in the Fruits Product Order, 1955. As per the clause 2 (j) of the Fruits Product Order, 1995, ‘Sharbat’ means any non-alcoholic sweetened beverage or syrup containing not less than 10% fruit juice or flavoured with non-fruit flavours such as rose, khus, kewra etc. The classification under the Central Excise Tariff was not before the Hon. Supreme Court or the Ministry of Food. The term `beverage’ on the label had been used to meet the requirement of a different enactment. In the Cental Excise Tariff, `beverage’ has been expressed differently from the preparation for beverages, and as per Chapter Note 5 (j) under Chapter 21, such preparations may consist of syrups. The Note No. 5 under Chapter 21 has already been extracted above in para No. 9.

13. The classification of the goods as described in the Central Excise Tariff has to be determined according to the general usage and known denominations of the Trade. As held by the Supreme Court in the case of Collector of Central Excise v. Parle Exports Pvt. Ltd., 1988(11)LCX0047 Eq 1988 (038) ELT 0741 (SC), the expressions in the Tariff Schedule have to be understood by the language employed therein bearing in mind the context in which the expressions occur (para 12). The Supreme Court added that “the words used in the provision imposing taxes or granting exemption should be understood in the same way in which these are understood in ordinary parlance in the area in which the law is in force or by the people who ordinarily deal with them”. On coming to a decision whether non-alcoholic beverage base is a kind of food product or food preparation, the Hon. Supreme Court in that case in para 15 listed the most natural and probable signs to interpret the meaning of a text contained in one or more documents as “the words, the context, the subject matter, the effects and consequences or the spirit and reason of the law”. The expression `beverages’ in Heading No. 22.02 of the Tariff has been used in the company of `mineral water’, `aerated watrers’, `fruit or vegetable juices’. In the context, the expression `beverage’ has been used therein, it may be difficult to say that it also represents the syrup (sharbat). As aerated water base is not the aerated water, or the ethyl alcohol is not a fermented or distilled alcoholic beverage, so the syrup in the form the sharbat under consideration before us is, may not be considered as such, a beverage. For that matter the coffee chicory mixture in the form of a powder has been placed in the category of beverages in the case of Brooke Bond India Ltd. v. Union of India, 1980 ELT 0065 (0AP) ; and it was argued before the Tribunal in the case of Parle Exports Pvt. Ltd. v. Collector of Central Excise, 1987(10)LCX0055 Eq 1988 (033) ELT 0445 (Tribunal) that non-alcoholic beverage bases were beverages (Para 5) ; but can mixtures or powders and bases be placed in the company of aerated waters and juices for the purposes of their classification under Heading No. 22.02 of the Tariff". The answer is obviously `no’.

14. In the Central Excise Tariff, various commodities are grouped in a Heading or sub-heading mainly on consideration of tax parity. As clarified in the statement of objects and reasons while introducing the Central Excise Tariff Bill 1985, the goods of the same class were grouped together to enable parity in the treatment. It is within the competency of the Parliament to exercise an extremely wider discretion in classifying items for tax purposes, so long as there is no clear and hostile discrimination against particular persons or classes [refer para 48 of M/s. Gannon Dunkerly & Co. v. State of Rajasthan, 1992 (3) SCALE on page 173]. The product and the tariff description leave no doubt that the Sharbat Rooh Afza is a `sharbat’ (syrup) which in common parlance is distinct from the liquids, such as mineral water, aerated water, alcohol etc.

15.  The Supreme Court in the case of Oswal Agro Mills Ltd. v. Collector of Central Excise, 1993 AIR SCW 1782 had observed in para 3 of their judgement that “to find the appropriate classification, description employed in the tariff nomenclature should be appreciated having regard to the terms of the Headings, read with the relevant provisions or statutory rules of interpretation put up thereon”. In the case of Meteor Satellite Ltd. v. Collector of Central Excise, 1989(11)LCX0066 Eq 1990 (045) ELT 0697 (T), the Tribunal after noting that the Central Excise Tariff Act, 1985 is aligned to the Harmonised Commodity Description and Coding System (HSN), had observed that a reference to the Explanatory Notes to HSN will be appropriate as an aid to the classification of items under the Central Excise Tariff Act, 1985. In the alphabetical index to the HSN, compound preparations for making non-alcoholic beverages have been shown as classified under Heading No. 21.06 In the Customs Tariff in Note 3 under Chapter 22 it has been explained that for the purposes of Heading No. 22.02 the term non-alcoholic beverage means beverages of an alcoholic strength by volume not exceeding 0.5% volume. The Customs Cooperation Council Nomenclature (CCCN) under Heading 21.07 which covers “food preparations not elsewhere specified or included”, Note 18 provides that the above Heading includes flavoured or coloured syrups being sugar solutions with natural or artificial substances added to give them the flavour. It has been explained that such preparations are intended to be consumed as beverages after simple dilution with water or after further treatment. It has been added that certain preparations of this kind are intended for adding to other food preparations. The appellants had submitted that HSN Heading No. 21.06 covers “other food preparations not elsewhere specified”, while Heading No. 21.07 of the Central Excise Tariff covers “other edible preparations not elsewhere specified”. We do not consider that this difference between the two expressions will vitiate the conclusion of the lower authorities. The Collector of Central Excise (Appeals) had observed as under :

“The appellants contention that Heading No. 21.06 given in the HSN and 21.07 of the Tariff are not identical has no bearing on the issue as there is basically no material difference in the words `food preparations’ and `edible preparations’ as the basic concept of both the words is that the preparations should be eatable by a human being”.

16. The appellants have referred to the provisions of the Fruits Product Order, 1955. The Central Excise Tariff Act, 1985 and the Fruits Product Order1955 do not operate in the same field. There is no commonality in their objects and in their provisions. They are not complementary to each other. The obvious intent of the legislature which enacted them was not that they should operate in tandem and complement each other. The two statutes could not be read together. (Refer para 13 of the case of Shramik Uttarsh Sabha v. Raymond Woollen Mills Ltd., 1995 AIR SCW 1181. Fruits Products Order, 1955, dated 3-5-1955 has been made under section 5 of the Essential Commodities Act, 1955. The Essential Commodities Act was enacted for the purpose of controlling the production, supply and distribution of and trade and commerce in certain commodities in the interest of the general public. Clause 7 of the Fruits Product Order, 1955 prescribes that every manufacturer shall manufacture fruit products in conformity with the sanitary requirements and the appropriate standard of quality and composition specified in the second schedule to that order. It was added that every other fruit and vegetable product not so specified, shall be manufactured in accordance with the standard of quality and composition laid down in that behalf by the licensing officer. It is thus seen that the order imposed regulations of a qualitative character in the porduction and marketing of specified goods. The expression `beverages’ and `products’ in that order had to be seen in the above context. Insofar as the Central Excise Tariff Act, 1985 is concerned, its objective is to classify the goods for the levy of Central Excise duty. In this connection, para 3 of the statement of objects and reasons of the Central Excise Bill, 1985 as introduced in the Lok Sabha on 13-12-1985 as given at page B32 of 1986 (23) ELT, may be referred to. Seen in this context, could the product sharbat rooh afza be considered as a beverage, when the manufacturers themselves have described the product as sharbat (syrup). “The question of what a word means in its context within the Act is a question of legal interpretation and therefore, one of law. The choice of the proper rule of construction to be applied to ascertain their meaning is again a matter of law”. [refer Supreme Court decision in the case of Dineshchandra Jamnadas Gandhi v. State of Gujarat, 1989(01)LCX0016 Eq 1989 (040) ELT 0230 (SC) para 11]. In the case of Shree Baidyanath Ayurved Bhawan Ltd. v. Collector of Central Excise, Patna, 1985 (6) E.T.R. 265 (Tribunal), the Tribunal had observed that for the purpose of classification of dantmanjan under the Central Excise Tariff, the provisions contained in the Drugs and Cosmetics Act could not be resorted to.

17. The appellants had argued that their product is not flavoured, and the addition of distilled extracts of rose, kewra etc. are not for the purpose of flavouring the product. The effect of using distilled extracts of rose, kewra etc. is to impart a particular flavour to the product. The purpose with which the flavouring ingredients are used, is not material.

18. The product is a finished product and cannot be considered as incomplete or unfinished for the purpose of Rule 2(a) of the Interpretative Rules.

19. In the case of Northland Industries v. Collector of Central Excise, 1988(07)LCX0033 Eq 1988 (037) ELT 0229 (Tribunal), the products were different, and the composition of the subject goods was not on record (refer para 14 of the decision). The Tribunal had observed that the product squashes and cordials before them were “preparation”, and that preparations for beverages were covered under Heading No. 21.07. Squash was considered not be a preparation. It is seen that under Heading No. 22.02, there is no mention of the “preparations”. The Heading No. 22.02 has already been extracted above (para 10). The Collector of Central Excise (Appeals) had ruled out the classification under Heading No. 22.02. He had observed as under :

“A close look of the above Chapter Headings/ sub-headings indicates that Chapter Heading 21.07 specifically and 22.02 both covers non-alcoholic beverage. While Chapter Heading 21.07 covers non-alcoholic beverages containing fruit juices and vegetable juice, the Heading No. 22.02 covers the other non-alcoholic beverages which do not contain in it the fruit juices or vegetable juices of Chapter 20. So far deciding the classification of any product as a non-alcoholic beverage under Chapter Heading No. 21.07 or 22.02, the presence of fruit juices of Chapter 20 is a deciding factor.

From the process of manufacture disclosed by the appellants, it is an admitted fact that the `sharbat rooh afza’ besides other ingredients contains pineapple juice and orange juice of Chapter Heading 20.01 in `sharbat rooh afza’ keeps the product outside the purview of Chapter Heading 22.02.

Beverage is a specific drink like lemonade, citer, etc. `Rooh Afza’ is also a beverage when diluted with water or milk etc. and its ultimate use is as a beverage. It is also a fact that the product is a non-alcoholic beverage’ and is indicated as such on the label itself. I do not find any material difference for the purpose of appropriate classification of goods whether it is used directly as `beverage’ or as a base for beverage. For deciding the classification the specific entry in the tariff heading/sub-heading supported by Section/Chapter notes is the main factor. Since, Heading No. 22.02 specifically excludes the `other non-alcoholic beverages containing fruit juices’, the product `sharbat rooh afza’ manufactured by the appellants is appropriately classifiable under heading No. 21.07 and sub-heading No. 2107.91 of the Central Excise Tariff Act, 1985. The classification as given in clause (12) of Heading No. 21.06 at p. 161 of HSN, the preparations intended to be consumed as beverages after simple dilution with water or after further treatment are covered under Heading No. 21.06 (Headings No. 21.07 of Central Excise Tariff)".

We do not consider that the squashes, and the product under consideration in the present proceedings, are the same. In fact, in the case of McDowell & Company Ltd. v. Collector of Customs, 1987(06)LCX0043 Eq 1988 (038) ELT 0454 (Bombay), the concentrated whisky has been distinguished from whisky, and concentrated brandy from brandy (refer para 9).

20. In the case of Collector of Central Excise v. Parle Exports Pvt. Ltd., 1988(11)LCX0047 Eq 1988 (038) ELT 0741 (SC), the matter before the Hon. Supreme Court was whether non-alcoholic beverage base was a food product or food preparation. It was in this context that the term beverage vis-a-vis food was used in that judgment.

21. In view of the above discussion, there appears to be no doubt that the Sharbat Rooh Afza is a sharbat (syrup), for the purposes of the Central Excise Tariff, and not a beverage, and does not merit classification under Heading No. 22.02. It is also not eligible for concessional rate of duty under Notification No. 2/94-C.E. We may also refer to the changes effected in the 1995 Budget, that is subsequent to the hearing before us. Heading No. 21.07 has been substituted by Heading No. 21.08 in the 1995 Budget as under :

`Sharbat’ has been specifically included under sub-heading No. 2108.20. It has been explained in Note 6 under Chapter 21 that for the purpose of sub-heading No. 2108.20, the expression `sharbat’ means any non-alcoholic sweetened beverage or syrup containing not less than 10% fruit juice or flavoured with non-fruit flavours such as rose, khus, kewra but not including aerated preparation. It is practically the same definition as contained in the Fruits Product Order, and in respect of which the Honourable Supreme Court had observed the Sharbat Rooh Afza would satisfy the definition of sharbat as given in the Fruits Product Order, 1955 (refer para 12 above). It clearly reflects the classification of the product sharbat rooh afza as a sharbat (syrup) under sub-heading No. 2107.91 before the 1995 Budget. Even in the case of executive instructions the Hon. Supreme Court had held that the meaning ascribed by the very authority which has been the author to the statutory provisions and responsible for its administration, has to be given much weight [refer K.P. Varghese v. Income Tax Officer Ernakulam, AIR 1981 SC 1922, and Collector of Central Excise v. Parle Exports Pvt. Ltd., 1988(11)LCX0047 Eq 1988 (038) ELT 0741 (SC) para 11, and Indian Metals and Ferro Alloys Ltd. v. Collector of Central Excise, 1990(11)LCX0014 Eq 1991 (051) ELT 0165 (SC)]. Hence in this case, it is the proposal made before the Parliament itself.

22. Taking all the relevant consideration into account, we find no merit in this appeal. The appeal is rejected and the impugned order passed by the Collector of Central Excise (Appeals), Ghaziabad is confirmed. Ordered accordingly.

23. [Contra per : K. Sankararaman, Member (T)]. - I have carefully gone through the order (hereinafter referred to as the proposed order) which has been prepared by my learned brother, Shri Lajja Ram. I have perused the record and the decisions cited. I regret my inability to agree with my learned brother’s finding that the product in question, Sharbat Rooh Afza, is classifiable under sub-heading 2107.91 of Central Excise Tariff as had been held by the Assistant Collector of Central Excise, Division I, Ghaziabad and by Collector of Customs and Central Excise (Appeals), Ghaziabad and not under sub-heading 2202.90 as claimed by the appellants, M/s. Hamdard (Wakf) Laboratories. Their alternative plea that the goods were covered by Serial No. 26 of exemption Notification No. 2/94-C.E., dated 1-3-1994 to attract the exempted rate of 20% ad valorem has also been held to be inadmissible. The facts involved, the findings of the authorities below, the grounds of appeal and the rival submissions of the learned counsel and Departmental Representative have been exhaustively dealt with in the proposed order. The grounds leading to the said findings with which I am not in agreement are discussed below:

24. The appellants had been classifying the subject product under sub-heading 2107.91 earlier. After the presentation of Finance Bill, 1994, they had reclassified the goods under sub-heading 2202.90. There was no change in the product or in the Tariff entries. Only the exemption notification had undergone a change. The appellants had not been able to explain why they had changed the classification but had only pleaded that they had previously classified their product under Heading 2107.91 erroneously. While noting their argument that there is no estoppel in law against them in taxation matters, brother Shri Lajja Ram had observed that exemption notification cannot change the classification of the goods from one entry to another. He has relied upon the judgement of the Honourable Supreme Court in Eskayef Ltd. v. Collector of Central Excise, 1990 (049) ELT 1049 (SC). Para 14 of the said judgement has been extracted in para 10 of his order. I do not share the view that this judgement supports the finding that the appellants could not change the classification of their product because of an exemption notification. In the Eskayef case, the product in question was clearly held to be classifiable as Patent and Proprietary Medicines falling under Tariff Item 14E which was the position even after the amendment of the relevant notification. It was held that in the absence of any notification granting exemption for such goods falling under Item 14E, the goods in question falling under that item and not under the residual Item 68 could not be claimed to be exempt from duty as animal feed supplement under amended notification which covered the latter item. In the present case, the appellants had classified their product, Sharbat Rooh Afza under sub-heading 2107.91 as Edible Preparations, not elsewhere specified or included, put up in unit containers and ordinarily intended for sale. If due to change in the relevant exemption notifications, they found that they were to pay more duty and if they claimed another classification, that claim has to be examined on merits and cannot be shut out on the ground that exemption notification cannot change the classification of the goods. No doubt, an exemption notification, by itself, cannot change the classification, if it is correct but where the correctness of the old classification is itself disclaimed and an alternate one is claimed, that has to be examined and decided. I shall proceed to do so in the course of this order.

25. In para 13 of his order, after referring to the case of Collector of Central Excise v. Parle Exports Pvt. Ltd., 1988 (038) ELT 741 about understanding expressions in the Tariff Schedule by the language employed and the context in which the expression occurs, my learned brother has observed that the expression beverages in Heading 22.02 of the Tariff has been used in the company of mineral water, aerated water, fruit or vegetable juices and in the context the expression “beverage” has been used therein, it may be difficult to say that it also represents Sharbat. He has, therefore, held that mixtures or powder and bases cannot be placed in the company of aerated waters and juices for classification under 22.02 of the Tariff and that the product Sharbat Rooh Afza is a Sharbat (Syrup), distinct from liquids such as mineral water, aerated water, alcohol. While I agree with the last mentioned observation as there cannot be any quarrel about the statement that Rooh Afza is a distinct from mineral water, aerated water alcohol etc., the earlier observation that beverage in Heading 22.02 of the Tariff has been used in the company of Mineral Water, aerated waters, fruit or vegetable juice does not bear scrutiny and nothing really turns on that. The actual Tariff entry reads as follows :

“Natural or artificial mineral waters and aerated waters containing added sugar or other sweetening matter or flavours; other non-alcoholic beverages, not including fruit vegetable juices of heading No. 22.01.”

It will thus be seen that the expression, other non-alcoholic beverages is separated from the products described earlier by a semi colon and it not to be taken that the beverages should be of the type of mineral waters and aerated waters. Even if Rooh Afza does not belong to such type, it does not get excluded from the expression, other non-alcoholic beverage since, as I have observed, the said expression is not to be given a restricted meaning aligned to aerated waters as held in the proposed order. The question whether Rooh Afza is a non-alcoholic beverage within the meaning of Tariff Heading 22.02 is to be examined independently without seeking to confine it to the class of aerated waters or mineral waters. At this stage, the finding of my learned brother in para 21 of his order that Rooh Afza is a Sharbat (Syrup) and not a beverage is to be examined for its validity and correctness. The name of the product shown in the label pasted on the bottle is Sharbat Rooh Afza and has been described as non-alcoholic sweetened beverage. This has been their practice, long before the present controversy arose. I am of the view that the terms beverage and Sharbat are two different expressions of the same product. The expression beverage refers to drink. In respect of this very product, the Honourable Supreme Court had held that the Sharbat in question fell within the purview of clause 3(d)(v) of the Fruit Product Order, 1955 which covered squashes, crushes, cordials, barley water, barrelled juice and ready to serve beverages or any other beverages containing fruit juices or fruit pulp. Thus the terms Sharbat and beverages are interchangeable with each other. The words are of common occurrence and significance in everyday household context and it cannot be said that the equivalence of these terms was only with reference to Fruits Control Order and not applicable to Central Excise Tariff entry.

26. As has come out in the preceding discussions and in the impugned order, the competing entries in the Tariff which come into reckoning in the present case are -

The former is what had been claimed by the appellants but not accepted by the Collector (Appeals). The latter is what has been held as the correct classification by him. The Collector (Appeals) had stated in his order that both the headings 21.07 and 22.02 cover non-alcoholic beverage and that the fact that Sharbat Rooh Afza comes under the category of any other beverage containing fruit juice is not under dispute but as it contains, besides other ingredients, pineapple juice and orange juice, the product is outside the purview of chapter heading 2202. His findings have been extracted in the proposed order. The alternative classification 2107.91 has been preferred, relying upon Chapter Note 5 (j) of Chapter 21 laying down that 21.07 includes preparations for lemonades or other beverages, consisting, for example, of flavoured or coloured syrups, syrup flavoured with an added concentrated extract, syrup flavoured with fruit juices and concentrated fruit juice with added ingredients. The contention raised against the application of the above Note for deciding in favour of this heading 2107.91 was that the product is not a flavoured syrup and that the orange and pineapple juices and other extracts have been added not for flavouring but for their food and medicinal value, as recommended in Unani System for general cooling of the body during the summer season. In the proposed order it has been observed that the purpose for which the flavouring ingredients are used is not material. With respect, I would hold that the question whether such use is just for flavouring or for flavouring at all will be quite material. I am inclined to accept the plea that the purpose of adding the different ingredients in Rooh Afza is not for flavouring but for imparting medicinal properties besides adding to its food value. Actually, by virtue of Chapter Note 5(j) of Chapter 21, Heading 21.07 would cover preparations for beverages consisting of flavoured syrups or syrup flavoured with fruit juices. In this connection, the contention that Rooh Afza is a beverage by itself and not a preparation for beverage assumes importance and makes that classification inapplicable. Collector (Appeals) had, in his impugned order, held that Rooh Afza is a non-alcoholic beverage indicated as such on the label itself. He found no material difference for the purpose of classification whether it is used directly as beverage or as a base for beverage. While an observation of this type by the Collector cannot, by itself be the basis for a finding by the Tribunal, I would go along with the same in holding on merits that Rooh Afza is itself a beverage and not a preparation or base for beverage. In this connection, the observations of the Tribunal in Para 14 of the order in Northland Industries v. Collector of Central Excise reported in 1988 (037) ELT 229 are relevant. It was held therein that since squash is a beverage and can be consumed after simple dilution with water it is covered more specifically by the term `beverage’ and hence Heading 20.01 was preferred to Heading 21.07 which covers preparations for beverages and not beverages themselves. The same ratio will apply in the present case for preferring Heading 22.02 to 21.07.

27. Reliance had been placed by the authorities below on the HSN notes for deciding in favour of Heading 21.07. Thus vide clause 12 of Heading 21.06 of HSN, preparations intended to be consumed as beverages after simple dilution with water or after further treatment are covered under that Heading which corresponds to 21.07 of Central Excise Tariff. The difference between the descriptions of these two Headings namely Food Preparations and Edible Preparations was felt to be not material to warrant acceptance of the objection that, because of the said difference, the HSN notes cannot be pressed into service in the present case. During argument, certain judgements of High Courts and Tribunal decisions were cited in support of the contention that where the Tariff entry is not aligned to the HSN, the HSN notes are not to be applied for interpreting the Tariff entry. As already considered above, the HSN note is not conclusive of the matter of classification of the product under dispute under Tariff Heading 21.07 because the products described are preparations for beverages.

28. In the proposed order, note has been taken of the changes introduced in the 1995 Budget. Sharbat has been classified under the new sub-heading 2108.20. Note 6 of Chapter 21 defining Sharbat has also been taken note of. It has accordingly been concluded that it clearly reflects the classification of the product Sharbat Rooh Afza as a Sharbat (syrup) under sub-heading 2107.91 before the 1995 Budget. I am not inclined to accept the finding that because the specific entry Sharbat has been created in 1995 Budget under sub-heading 2108.20, it should have fallen under the Entry 2107.90 as preparations for other beverages, for example, flavoured syrup, syrup flavoured with fruit juice etc., before the 1995 Budget. The new sub-heading 2108.20 cannot be taken to be carved out of the old Entry 2107.91 if the latter had not covered the item Sharbat prior to the change. Merely because Sharbat is now accommodated in Chapter 21 it cannot be taken that Chapter had covered that product earlier also. We have to go by the relevant Tariff entries at the material time. Also relevant will be the question whether there was a more appropriate Tariff entry to cover such goods. It is in this context 2202.90 becomes relevant as discussed earlier. In this exercise, we find sub-heading 2107.90 covered Edible preparations not elsewhere specified or included, put up in unit containers and ordinarily intended for sale. The former entry is too general referring as it does to other edible preparations whereas the latter sub-heading 2202.90 is more specific covering other non-alcoholic beverages, not including fruit or vegetable juices of Heading 20.01. Only by virtue of Chapter Notes 5(b), (c) and (j) had the general entry edible preparations not elsewhere specified or included been defined to include preparations for beverages consisting of flavoured or coloured syrups etc. But even then, sub-heading 2202.90 appears to be more specific covering as it did other non-alcoholic beverages not including fruit or vegetable juices of Heading 30.01. Even the Collector (Appeals) had held that the choice was between these two Headings both of which covered beverages but 22.02 was ruled out by him only because of the qualifying entry “not including fruit or vegetable juices of Heading 20.01". This is the most vital aspect of the case on which the entire issue hinges for the purpose of classification and which, to my mind, will push to the background all other issues considered so far in this case including several decisions of the Supreme Court which have been referred to in the proposed order. I shall accordingly turn to the same for detailed scrutiny.

29. The expression “not including fruit juice” has been held to be the same as “not containing fruit juice” by the Collector (Appeals). In fact, Shri M.K. Jain, learned Senior Departmental Representative referred to the dictionary meaning of the word “include” and pointed out that one of the meanings of it is “contain”. On that basis the Collector’s finding was strongly supported. I, however, do not agree with this view. The Dictionary defines several meanings for the words and the actual meaning to be taken is to be decided from the context. It is the contention in the appeal which was also reiterated in the course of the arguments before us by Shri Lakshmikumaran, learned counsel for the appellants that what are excluded from 2201.90 are fruit or vegetable juices themselves which fall under Heading 20.01 and not beverages containing such juices. This is now examined further.

30. In the Tariff, even in this very Heading itself, the word “contain” is used where the presence of an ingredient in the product or the contents thereof is to be referred to. Thus the entry is “Natural and artificial mineral waters” and “aerated waters containing sugar .........”. Entry 22.01 likewise reads “aerated waters not containing added sugar”. The word include is not used as the equivalent of contain. That word (include) is used when the intention is to state whether the entry includes or covers a particular product. Thus Heading 2204.00 refers to ethyl alcohol of any strength whether denatured or not but not including liquor for human consumption. Also the other entry in contention in this case namely 2107 also refers to edible preparations, not elsewhere specified or included. This will support the plea of the appellants. Such an interpretation gets direct support interestingly and intriguingly from the Notes in the HSN itself with source, as a general proposition, was resisted by the learned counsel for the appellants. Heading 22.02 in HSN reads “waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured and other non-alcoholic beverages not including fruit or vegetable juice of Heading No. 20.09. The underlined portion is exactly identical with the corresponding entry in 22.02 of the Central Excise Tariff which is the issue before us, the only difference being the Heading for fruit or vegetable juice. The notes under the Heading 22.02 specifically provide that the heading does not include (emphasis supplied) -

(a) ........

(b) ........

(c) fruit or vegetable juices whether or not used as beverages (heading 20.09).

It is thus clear that fruit or vegetable prices are not included in the particular Heading. It is not that they should not be contained in the non-alcoholic beverages covered in the said Heading. As the entries in the Excise Tariff and the HSN closely correspond to each other, the significance of the expression “not including” has the same effect in the Excise Tariff which bears out the view taken by me earlier. Once this issue is settled and the expression “not including” is found to be not equivalent to “not containing”, the ruling out by the Collector (Appeals) of classification 2202.90 for the product in question turns out to be wrong. As already analysed in paragraph 28 ante, as this classification is more specific than the general description “other edible preparations” under Tariff Heading 2107.90, the classification under 2202.90 has to be preferred. This view which is based on the actual wording employed in the relevant Tariff entry would, in my respectful view, not be inconsistent with the ratio of the cases referred to in the proposed order of learned brother Shri Lajja Ram.

28. As the view taken by me is in favour of accepting the classification of the product in question under 2202.90 which is the plea taken by the appellants the alternative plea of theirs that if the classification is decided under Heading 2107.90 then the benefit of Notification 2/94, dated 1-3-1994 should be available to them loses its significance though, in my view, that plea is also acceptable.

29. In conclusion, I hold that for the reasons discussed by me, the product Rooh Afza was classifiable under Heading 2202.90 of the Central Excise Tariff at the material time. The appeal is allowed accordingly.

30. [Order per : G.A. Brahma Deva, Member (J)]. - I have had the advantage of going through the two separate orders written by my learned Brothers Shri Lajja Ram and Shri K. Sankararaman. On going through the respective orders written by them, I agree with the reasoning and conclusion arrived at by my learned brother Shri Lajja Ram in classifying the product Rooh Afza as a sharbat (syrup) under sub-heading 2107.91 for the period in question covered by the appeal and, accordingly, the appeal is liable to be rejected as proposed.

31. In view of the majority decision, it is held that the product, Sharbat Rooh Afza was classifiable under Tariff sub-heading 2107.91 of the Central Excise Tariff and was not eligible for the benefit of exemption Notification 2/94, dated 1-3-1994 and not under sub-heading 2202.90 as claimed by the appellants during the material period. The decision of Collector (Appeals) is upheld and the appeal is dismissed.

Equivalent 1995 (79) ELT 601 (Tribunal)