2002(11)LCX0060

IN THE CEGAT, COURT NO. IV, NEW DELHI

S/Shri V.K. Agrawal, Member (T) and Krishna Kumar, Member (J)

AMRIT FOODS CO. LTD.

Versus

COMMISSIONER OF C. EX., MEERUT-I

Final Order No. 262/2002-D, dated 13-11-2002 in Appeal No. E/2098/2001-D

Cases Quoted

Collector v. Wood Craft Products Ltd. — 1995(03)LCX0070 Eq 1995 (077) ELT 0023 (S.C.) — Referred [Para 4]

Dalmia Industries Ltd. v. Collector — 1992(02)LCX0029 Eq 1992 (061) ELT 0295 (Tribunal) — Referred [Para 4]

Kwality Ice Cream Company Ltd. v. Collector — 1999(10)LCX0275 Eq 1999 (114) ELT 0975 (Tribunal) — Referred [Para 3]

Nestle India Ltd. v. Commissioner — 2001(03)LCX0052 Eq 2001 (132) ELT 0134 (Tribunal) — Referred [Para 2]

Advocated By : Shri V. Lakshmikumaran, Advocate, for the Appellant.

Shri Hitesh Shah, JDR, for the Respondent.

[Order per : Krishna Kumar, Member (J)]. - This is an appeal against the order dated 7-8-2001 passed by the Commissioner of Central Excise, Meerut. The issue involved is regarding the classification of the products manufactured by the appellants.

2. Shri V. Lakshmi Kumaran, learned Advocate has appeared on behalf of the appellants and he submitted that the appellants are engaged in the manufacture of milk based products viz. milk shake mix, soft serve mix, skimmed milk, toned milk, double toned milk and cream. The contention of the learned Counsel is that the said products are classifiable under Heading 04.04 of the CETA attracting nil rate of duty and as such, the impugned order of the Commissioner holding that the products are classifiable under sub-heading No. 1901.19 of the CETA is apparently incorrect. He contended that the Chapter Note 4 of Chapter IV provides as under :

“Heading No. 04.04 applies, inter alia, to butter milk, curdled milk, cream, yogurt, whey, curd and products consisting of natural milk constituents, whether or not containing added sugar or other sweetening matter or flavoured or containing added fruit or cocoa and includes fats and oils derives from milk (e.g. milkfat, butterfat and butter oil) dehydrated butter and ghee.”

He belied the contention of the Revenue that since the stabilisers are added, these products go to Chapter IX. His contention is that adding emulsion after adding stabilizers is to give homogenous feeling and adding flavour also. He contended that the learned Commissioner has failed to appreciate that the General Explanatory Note III of Heading 19.01 of HSN make the matter clear beyond doubt as it clarifies the same (page 16 of memo of appeal). He submitted that the stabilizers added in the present case is to maintain uniform emulsion during transportation in liquid state during the shelf life. In addition, if the said stabilizers add to the body and texture and imparts smoothness to the product, the same will not for that reason take the product out of the purview of Chapter IV. Further, the addition of stabilizers, does not change the basic character of the products and the products can be used even without the addition of stabilizers, if consumed immediately. In support of his contention, he relied on the decision in the case of Nestle India Ltd. v. C.C.E. decided vide Final Order No. 84/2001-D, dated 21-3-2001 [2001(03)LCX0052 Eq 2001 (132) ELT 0134 (T)] wherein the Tribunal held that kesar kulfi mix, shahi rabri mix and kalakand mix are classifiable under Heading 04.04 of the Central Excise Tariff Act, 1985.

3. Shri Hitesh Shah, learned JDR has appeared on behalf of the Revenue and he submitted that the ice cream products are similar to the products in question. Section 1 of Tariff Chapter I to IV are not structured according to HSN and as such they would not have binding effect. General Explanatory Notes state that the small quantities are added to maintain consistency. He drew our attention to para (vii) of the Order-in-Original which provides that Mr. P. Sree Sree, Additional General Manager (Works) of M/s. Amrit Foods in his statement dated 26-7-2000 has stated that the ingredients of stabilizers used by the appellants are carbox methyl cellulose, guar gum, carageenam, mono-glycerides, di-glycerides, triglycerides, etc. It is noticed that none of these substances are common to substances mentioned in the Explanatory Notes to HSN. In support of his contention, the learned JDR relied on the decision in the case of Kwality Ice Cream Company Ltd. reported in 1999(10)LCX0275 Eq 1999 (114) ELT 0975 (T) wherein the Tribunal has considered the classification of ice cream mix/softy mix and has directed that in the facts and circumstances, the jurisdictional Assistant Commissioner has to classify the item under the appropriate sub-heading and to pass an order in accordance with law after affording an opportunity of hearing to the appellants. He also contended the solid state of softy in cone which is a frozen desert. On this the learned Advocate contended that both the products are softy mix and they are not for retail sale and written on the pack. The learned JDR also pointed out that the following ingredients are present in the items in question :

Milk, sugar, milk solids, non-fat, dextrose and permitted stabilizers

containing added flavour.

The items in question are meant for institutional sales only and not for retail sale. The product soft serve mix is maintained at a degree of 8 to 9 centigrade and shake mix is maintained at a temperature of 30 to 40 degree centigrade. The learned JDR drew our attention to para (xii) of the Order-in-Original at page 159 which provides that as per the statement dated 26-7-2000 of Mr. Sree Sree, General Manager (Works) of the appellant, the process of manufacture of soft serve mix/milk shake mix is the same as in the case of ice-cream as per the New Encyclopedia Britanica except that the process of incorporation of air and freezing are not undertaken in the factory of the appellants. That all the basic ingredients required for manufacturing of ice cream were available in their produce and even the aging process at temperature between 0ºC to 4ºC took place in their factory; that freezing point of ice-cream is usually 2ºC whereas soft serve mix and milk shake mix are advised to be used between 9ºC to 8ºC and minus 4ºC to minus 3ºC and his contention, therefore, was that the Nestle India case is not applicable in the facts of the present case and the products in question would be classifiable under Chapter Heading 19.01 relating to food preparation. In this regard, he also drew our attention to page 171 (internal page 16 of the Order-in-Original) wherein the learned Commissioner has inter alia observed that “it is true that several of these processes are common to various dairy products and they are not specific to ice-cream alone. The show cause notice itself mentions that the processes of freezing and incorporation of air is not done in the factory of the appellants as is the case in the manufacture of the ice-creams. I may observe here that noticee while arguing his cases in defence has missed a very vital point. The notice to show cause proposes classification of subject goods including SSM and MSM under sub-heading No. 1901.19 of the Tariff and not as ice-cream that is as mix or base for making ice-cream. I am also of the opinion that merely owing to the fact that SSM and MSM, while they are served, are not in a solidified form they will cease to fall in the category of ice-cream. Ice-cream may be consumed in several physical forms, the same being the prerogative on the consumers. Depending on the market demand, i.e. its popularity, its physical form may be varied from solid to soft/semi solid.”

4. In rejoinder, the learned Counsel also relied on the decision in the case of Dalmia Industries Ltd. reported in 1992(02)LCX0029 Eq 1992 (061) ELT 0295 (T) wherein the Tribunal has considered the classification of partially skimmed milk sweetened and to which additives like vitamins, and minerals were added to be classifiable under sub-heading 0401.19. The learned JDR relied on the decision in the case of Wood Craft Products Ltd. reported in 1995(03)LCX0070 Eq 1995 (077) ELT 0023 (S.C.) wherein the Hon’ble Supreme Court in para 18 has observed that the Tribunal as well as High Court fell into error overlooking the fact that the structure of Central Excise Tariff is based on the internationally accepted nomenclature found in the HSN and, therefore, any dispute relating to tariff classification must as far as possible, be resolved with reference to the nomenclature indicated by the HSN unless there be an express different intention indicated by the Central Excise Tariff Act, 1985 itself. The definition of a term in the ISI Glossary, which has a different purpose, cannot, in case of a conflict, override the clear indication of the meaning of an identical expression in the same context in the HSN. In the HSN, block board is included within the meaning of the expression “similar laminated wood” in the same context of classification of block board. Since the Central Excise Tariff Act, 1985 is enacted on the basis and pattern of the HSN, the same expression used in the Act must, as far as practicable, be construed to have the meaning which is expressly given to it in the HSN when there is no indication in the Indian Tariff of a different intention. The learned JDR contended that this case was also argued in Nestle’s case. He finally reiterated the order of the learned Commissioner and submitted that the appeal of the appellants may be dismissed.

5. We have heard the rival submissions and carefully perused the records and the case laws cited by both sides. We find from the impugned order that while imposing the penalty of Rs. 15 lakhs under Rule 173Q, the learned Commissioner has failed to indicate as to which sub-clause thereof has been contravened by the appellants. Therefore, in our opinion, the imposition of the penalty is not justified and the same is set aside. However, as regards classification of the products in question as ordered by the learned Commissioner, we find adequate force in the contention of the learned JDR and also from the impugned order it is seen that before arriving at the conclusion of classification, the learned Commissioner has considered all the points raised by the learned counsel before this Tribunal and as such, we do not find any infirmity in the order with regard to classification ordered by the learned Commissioner. We, therefore, do not interfere with the classification issue and the duty demand as confirmed by the learned Commissioner. The appeal is thus partially allowed.

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Equivalent 2003 (153) ELT 190 (Tri. - Del.)