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CASE NO.: Appeal (civil)  5646 of 1999

PETITIONER: Commissioner of Central Excise, Pune              

RESPONDENT: Abhi Chemicals & Pharmaceuticals Pvt. Ltd.        

DATE OF JUDGMENT: 21/02/2005

BENCH: S.N. Variava,Dr. AR. Lakshmanan & S.H. Kapadia

JUDGMENT: J U D G M E N T

Dr. AR. Lakshmanan, J.

This civil appeal is directed against the judgment and final order No.  243/99-D in Appeal No. E/2546/93-D dated 11.03.1999 passed by the  Customs, Excise & Gold (Control) Appellate Tribunal (for short ’the  CEGAT’) at New Delhi.   

The respondent is the manufacturer of Dailymix.  Four show cause  notices were issued alleging that they had mis-classified their products under  C.S.H. No. 2302.00 and cleared at nil rate of duty.  The show cause notices  added that these products are intermixture of vitamins and, therefore,  correctly classifiable under C.S.H. No. 2936.00 and as such chargeable to  duty at the rate of 15% advance (BED) + 5% BED (SED).

The Assistant Commissioner in his order dated 24.01.1991 held that  the products Dailymix and Briplex were correctly classifiable under Chapter  Sub-heading 2302.00.  He, however, confirmed the demand of  Rs.2,04,129.18.  In respect of ’RECOVIT’with which we are concerned in  this appeal, he held that it is classifiable under Chapter Sub-heading 2936.00  as animal feed supplement.  The conclusion of the Assistant Commissioner  was arrived at on the basis of Dy. Chief Chemist’s report which stated that  Recovit may be considered as an organic chemical (intermixture of  vitamins) marked as Annexure-P2.  The assessee filed an appeal before the  Commissioner (Appeals) who, by his order dated 27.07.1993, set aside the  order of the Assistant Commissioner and held that Recovit was correctly  classifiable under Chapter Sub-heading 2302.00 as animal feed.  The  revenue filed an appeal against the order of the Commissioner (Appeals)  which has been decided by the CEGAT vide its order dated 11.03.1999.  The  Tribunal has dismissed the appeal of the Department relying upon the  decision of a larger Bench of the Tribunal in the case of Tetragon Chemie  (P) Ltd. & Ors. Vs. CCE, Bangalore & Ors. reported in 1999 (82) ECR 98  dated 13.11.1998.  The Tribunal has further held that the contention of the  revenue that Recovit is merely a mixture of vitamins alone is not borne out  on facts.  The Tribunal held that such a product, however, if it contains other  things such as anti-oxidants, solvents, stabilisers and used as animal feed  will not be classified under Chapter sub-heading 2936, but will be correctly  classified under Tariff heading 23.02.  Aggrieved by the order of the  Tribunal, the Revenue has come up in appeal.

As stated earlier, we are concerned in this appeal in regard to the  classification of a product known as Recovit.  Now the question is whether  animal feed (Recovit) is classifiable under Tariff Heading 29.36 as  intermixture of vitamins or under Tariff heading 23.02 as animal feed.

We heard Mr. R.Venkataramani, learned senior counsel for the  appellant and Mr. Makarand D.Adkar, learned counsel for the respondent.  

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Learned senior counsel appearing for the appellant invited our  attention to the show cause notices issued and the orders passed by all the  authorities including the Tribunal and submitted that both the Commissioner  (Appeals) and the CEGAT have totally ignored the Dy. Chief Chemist’s  report dated 06.12.1990 in respect of Daily mix, Recovit etc. and that  Recovit should be treated as animal feed supplement containing vitamins  and minerals.  He would further submit that both the Commissioner  (Appeals) and the CEGAT have erred in placing total reliance on the  judgment of Tetragon Chemie (P) Ltd. (supra).  According to the learned  senior counsel, the product in that case consists of a mixture of vitamins,  minerals and various other ingredients which is not similar to the product  ’Recovit’ as the same consists of only intermixtures of vitamins and,  therefore, it is correctly classifiable under Chapter Sub-heading 2936.00.   Before proceeding further in considering the submission made by learned  senior counsel for the appellant, it is better to reproduce both the entries.   "Heading        Sub-                    Description of goods            Rate of No.             heading No.                                             duty

(1)             (2)                             (3)                     (4)

23.01           2301.00 Residues and waste from the food        12%                                 industries, including bagasse, other                                 waste of sugar manufacture and                                  oil cakes

23.02           2302.00 Preparations of a kind used in  Nil                                 animal feeding, including dog                                 and cat food

XI. PROVITAMINS, VITAMINS AND HORMONES 29.36   2936.00 Provitamins and vitamins, natural or            15%                         reproduced by synthesis (including                         natural concentrates), derivatives thereof  used primarily as vitamins, and  intermixtures of the foregoing, whether or not in any solvent"

The assessee has declared these three products in that classification  list which had been approved by the Assistant Collector.  They are:- a)      Daily mix :-  \005.. b)      Recovit :- It is a mixture of vitamins but it contains stabilisers  and anti-oxidants also, in addition to solvents. c)      Briplex :- \005..  According to the assessee, the classification list for these products has  already been approved by the Assistant Collector and, therefore, the  Assistant Collector is not competent to change his own decision. The  assessee had claimed the classification of these products under Chapter sub- heading 2302 as animal feed supplement and the Department had claimed  that the correct classification would be under Chapter sub-heading 2936 as  organic chemicals.  It is stated that the product is used as animal feed only  and is meant for consumption by animals.  It is not fit for human  consumption.  It basically consists of mixture of vitamins, minerals, anti- oxidants and stabilisers.  The Assistant Collector has wrongly classified the  product under Chapter 29 as intermixture of vitamins merely because it  consists of solvents, stabilisers and anti-oxidants.  It was further stated that  once powder is meant for use as an animal feed supplement, it should be  classified under Chapter Sub-heading 2302.  In our view, the products which  have mixture of vitamins and minerals with addition of other ingredients and  which are used for animal feed and are not fit for human consumption are to  be classified as animal feed supplement under Chapter Heading 2302 and  not under Chapter 29.

Learned senior counsel for the Department sought to place reliance  upon the report of the Dy. Chief Chemist which has been annexed.  It has

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come on record that the product Recovit basically consists of mixture of  vitamins, solvents, anti-oxidants and stabilisers.  It has also come on record  that Recovit is used as animal feed only and is being consumed by animals  only.  It is a finding of fact recorded by the Commissioner (Appeals) and  also by the Tribunal.  It may not be out of place to mention that the  composition of product was argued before the Tribunal.  However, the  Department could not contradict or dislodge the findings recorded by the  Commissioner (Appeals). Both the Commissioner (Appeals) and the  Tribunal examined the facts of the case and decided the matter in favour of  the assessee.

Our attention was invited to the reply affidavit filed by the assessee in  this appeal.  It is seen that a trade notice No. 34/1990 was issued by the  Collector of Central Excise and Customs, Pune whereby it was clarified by  the Department that the product having vitamins, stabilisers, anti-oxidants  and solvents merits classification under Chapter 29 Heading 29.36 and not  under Heading 23.02 of the schedule to the Central Excise Tariff Act, 1985.   Apparently based on the above trade notice, a show cause notice was issued  which led to the present appeal.  Trade notice No. 34 of 1990 reads as  follows:-

"OFFICE OF THE COLLECTOR OF CENTRAL EXCISE & CUSTOMS, PUNE  PMC’S COMMERCIAL BUILDING, HIRABAUG, TILAK ROAD, PUNE \026 2. ********** PUNE CENTRAL EXCISE & CUSTOMS, COLLECTORATE TRADE NOTICE NO. 34 / 1990 ( 1/Ch. 23 / 90)

Sub :-  Central Excise Classification of intermixtures of Vitamins used as animal feed  supplements whether classifiable under Heading 23.02 or in Chapter 30 or  Chapter 29 \026 regarding.

A doubt has been raised regarding the correct classification of products which  consists of only different vitamins in definite proportions and no other ingredients except  the solvents or stabilisers or anti-oxidants.  Such products are generally used as animal  feed supplements.  The doubt raised is whether the such products which are mixtures of  vitamins are classifiable under heading 23.02 or as medicaments under heading 30.03 or  an inter mixture of vitamins under heading 29.36.

The matter has been examined and it is observed that such animal feed  supplements which are just inter mixture of vitamins only and that there are no other  ingredients except solvents, stabilisers or anti-oxidants are specifically covered under  heading 29.36 of C.E.T. as inter mixture of vitamins.  Even though they are used as  animal feed supplements, they can be classified under heading 23.02 as preparations of  kind used in animal feeding, because this is a general heading.  Inter mixture of vitamins  are specified in so many words in heading 29.36 and accordingly products of the type  referred above are correctly classifiable under heading 29.36.

All Trade Associations and Chambers of Commerce and Industries are requested  to bring the contents of this Trade Notice to the notice of their member constituents.

Hindi version is enclosed. ATTESTED:                                                       Sd/- SUPERINTENDENT (TECH)                           (L. Joyaseelan) C. EX & CUS. PUNE \026 2                              Additional Collector                                                         Central Excise & Customs Pune. F.No. V.Ch. 23 (8)2/TC/90                          Pune, the 30th June, 1990."

Trade Notice No. 34 of 1990 seems to have been issued on the basis  of the Board Circular No. 1 of 1990 dated 01.01.1990.  The Central Board of  Excise and Customs vide its circular No. 188/22/96-CX dated 26.03.1996  has clarified that when premix contains in addition to active substances,  stabilisers, anti-oxidants etc. and if such preparations are of a kind used in  animal feeding the same is classifiable under Heading 23.02.  The said  circular reads as follows:-

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"Animal Feed Supplements Circular No. 188/22/96-CX Dated 26/3/96 Government of India Ministry of Finance Department of Revenue Central Board of Excise and Customs, New Delhi

Subject:        Classification of Animal Feed Supplements under Sub-heading No. 23.02  or 29.36 or Chapter 30 \026 Instructions \026 Regarding.

       It has been brought to the notice of the Board that a large number of products with  supplements’/additives/premixes etc. but are being classified either under heading 23.02  or heading 29.36 or under Chapter 30 of the Central Excise Tariff in various  Commissionerates.

2.      It would be recalled that in its Circular No.1/90 dated 1.1.1990, issued from  F.No.15/20/89-Cx.I, Board had observed that animal feed supplements which are just  inter-mixtures of vitamins only without other ingredients, except solvents, stabilizers or  anti-oxidants, cannot be classified under heading 23.02 even though they are used as  animal feed supplements.  Board had observed that such inter-mixtures of vitamins are  specifically covered under heading 29.36.

3.      Trade interests have however represented that animal feed supplements use  vitamins, pro-vitamins, amino-acids, anti-biotics, ’Coccidiostats’ etc. in very small  quantities (micro-quantities) and that the feed supplements contain other organic and in- organic feed ingredients as well.  They have also represented that such micro-nutrients do  not have any independent identity as pure chemicals, that they cannot be easily separated  into individual pure chemicals: nor do they conform to standard laid down for  medicaments.  As such, it is claimed that animal feed supplements cannot be classified  under Chapter 29 or Chapter 30 of the Central Excise Tariff merely because they contain  the said micro-nutrients.

4.      The matter has been further examined by the Board in consultation with the Chief  Chemist, Central Revenue Chemical Laboratory (CRCL), New Delhi.

5.      Heading 23.02 of Central Excise Tariff i.e. "preparations of a kind used in animal  feeding including dog and cat food" corresponds to Heading 23.09 "Preparations of a  kind used in animal feeding" of the HSN.  As per Explanatory notes under Heading 23.09  of the HSN, the said heading covers complete animal feeds, supplementary animal feeds  and preparations for use in making the complete feeds or supplementary feeds.  The  preparations for use in making complete feeds or supplementary feeds are known in the  trade as "premixes".  These preparations are compound composition consisting of a  number of substances \026 each type of these substances being present in the ’premix’ in  varying propositions to serve a particular purpose.  The explanatory notes under Heading  23.09 of HSN (pp, 177-178) further indicate that pre-mixes contain, in addition to the  active substances (vitamins, amino-acid, anti-biotics, coccidiostats etc.) and stabilizers,  anti-oxidants etc., certain organic or in-organic nutritive substances known as carriers  which help in homogeneous dispersion and mixing of the active substances in the  compound feeds to which the preparations referred to in the said explanatory notes are  added.

6.      In this view of the matter, it would appear that preparations containing the active  substances (vitamins or provitamins, amino-acid, antibiotics, coccidiostats etc.) along  with the said carriers would fall under Heading 23.02 of the CET provided such  preparation are of a kind used in animal feeding.  It may however be noted that Heading  23.098 of the HSN excludes products of Chapter 29 and medicaments of Heading 30.03  or 30.04.  Hence, while deciding the classification of the products claimed to be animal  feed supplements are ordinarily of commonly known to the trade as products for a  specific use in animal feeding.

7.      In view of the foregoing discussions, the classification of each product being  claimed as animal feed supplements may be decided on merits in the light of the above  and in accordance with the explanatory notes to Heading 23.09 or the HSN read with  Chapter Note 1 of Chapter 23 of the CET.

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8.      Board’s Circular No.1/90 dated 1.1.1990 stands modified to the extent indicated  above.                                                                         Sd/-                                                                    (S.C. Bhatia)             F.No.23/1/94-CX.1                                            Under Secretary to the Govt. of  India"

It may be extremely relevant to point out that the Board’s Circular No.  1 of 1990 dated 01.01.1990 stands modified accordingly.  Similarly, the Dy.  Director General of Foreign Trade vide its policy Circular No. 44 (RE  99/1997-2002 dated 25.11.1999 has re-confirmed that if such pre-mixes are  for use exclusively for animal feed as supplements, the same continued to be  classified under Heading 23.09 of the Customs Tariff Act, 1975.  Policy  circular No. 44 runs as follows:-  "POLICY CIRCULAR No.44(RE-99)/1997-2002 Dated 25th November, 1999

Attention is invited to Policy Circular No. 22(RE-99)/1997-2002 dated 27.7.99, regarding  classification of animal feed supplements.

In this regard it is further clarified that ’Pre-mixes’ containing vitamins or pro-vitamins,   aminoacids, coccidiostats etc. for use exclusively in animal feed as supplements continue  to be classified under the Heading 23.09, as per Explanatory Notes to Harmonized  Commodity Description and coding system. This issues with the approval of DGFT.

                                                               Sd/-                                                            (O.P. Hisaria)                                               Deputy Director General of Foreign Trade   F.No.01/89/180/00072/AM99/PC I-A Dated 25th November, 1999 Issued by: Ministry of Commerce Directorate General of Foreign Trade New Delhi."

It may also be relevant to point out that on 27.09.1990, the Central  Excise Department has drawn a sample of the product Recovit and the same  was sent for chemical analysis to the Deputy Chief Chemist at Mumbai.   While drawing the sample, a test memo was prepared by the Inspector under  F. No. BR II/CL/Abhi/90 dated 27.09.1990.  It can be seen from the said test  memo that the said product Recovit had in addition to the intermixture of  vitamins other ingredients such as anti-oxidants, solvents and stabilisers and  that the product prepared cannot, therefore, be called as only intermixture of  vitamins.   The said test memo reads as follows:- "OFFICE OF THE SUPERINTENDENT OF CENTRAL EXCISE, BHOSARI RANGE II, BHOSARI, PUNE \026 411 039 TEST MEMO F.No.BR II/CL/ABHI/90/                             Bhosari, the 27.09.1990 The Deputy Chief Chemist, Central Excise Laboratory, Estrella Batteries Compound, Dharawi Road, Matunga, BOMBAY \026 400 019.

Dear Sir, A sample of Recovit has been sent by hand delivery dated 27.09.90 for test. 1. Name of the factory & address        :       Abhi Chemical & Pharmaceutical   Pvt. Ltd. T36\02638, MIDC, Bhosari, Pune\02626.

2. Description of sample                :       Animal Feed Supplement \026 Recovit.

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3. Identification mark, if any          :       Batch No. 338-A. 4. Date of Drawal and Batch No. :       27-9-90 Batch No.338-A 5. No. of containers                    :       4 Nos. 6. Quantity                             :       100 ml. 7. The sample is to be tested for       :       The party has classified this product                                                  under Chapter Heading 2302.00.   The                                                 classification may please be confirmed.  8. Other information                             (i) Chemical nature & %age of   :       As per separate sheet attached.      ingredients in the product

(ii) Brief outline of manufacturing     :       As per separate sheet attached.               Process

(iii) Mode of its application           :       Animal feed supplement      (and use)

(iv) Any printed literature if          :       Label enclosed.      Available may be sent.

                                                                     Sd/- For Abhi Chemical & Pharmaceutical Pvt. Ltd.    Inspector of Central Excise     Sd/-                                                        Bhosari Range II, Bhosari (Authorised signatory)                          PUNE \026 39

DECLARATION

Four representative samples of Recovit at Abhi Chemical & Pharmaceutical Pvt. Ltd.  have been drawn by the Inspector of Central Excise, Bhosari Range II, Bhosari, Pune \026  411039 and these have been sealed in our presence.  One of the sealed samples have been  given to us.  We are perfectly satisfied with the manner of sampling.

For Abhi Chemical & Pharmaceutical Pvt. Ltd.         Sd/-                                                         (Authorised signatory)"                                  

"CHEMICAL NATURE AND PERCENTAGE OF INGREDIENTS IN RECOVIT AS  FOLLOWS:

S.No.   Name of ingredients             Chemical nature                 % in product 1.      Tween \026 80 (Polysorbate)     Brownish yellow oily liquid     34.97% 2.      Bulytated Hydroxy Anisol        Crystalline powder              0.02% 3.      Bulytated Hydroxy Toulene       Crystalline powder              0.02% 4.      Vitamin A Palmitate             Yellow oily substance           2.57% 5.      Vitamin B3                      White powder                    0.01% 6.      Vitamin B 12                    Red orange powder               0.0026% 7.      Vitamin E Acetate               Pale yellow golden              4.37%                                         Viscuss liquid

8.      Glycerine                       Colourless viscuss liquid       26.85% 9.      Sodium Ascorbate                White crystalline powder        9.62% 10.     Gracial Acetic Acid             Colourless liquid               0.34% 11.     Water                                                           21.23%

OUTLINE OF MANUFACTURING PROCESS  Step 1.         Mix Vit A, Vit E, Vit D3, BHA & BHT completely in vessel. Step 2. Warm Tween \026 80 upto 40 degree C and add to it mixture No.1 in a thin  stream. Stirr it well.

Step 3.         Add Glycerine in a think stream with stirring in 2. Step 4. Take 60 Ltrs water (D’mineralised) add to it Sodium Ascorbate dissolve it  completely adjust FH to 6.0 with Glacial Acetic Acid add this soln. To  main soln. Stir for 15 minutes.  And filter then add vit B12 (Prepare with

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small qty. of D.M. water and add to main soln.) Product is kept over night  & ready for filling.

For Abhi Chemical & Pharmaceutical Pvt. Ltd.         Sd/-                                                         (Authorised signatory)"                                  

The order passed by the larger Bench of the CEGAT dated 13.11.1998  was also placed before us.  We have gone through the same and we approve  the classification laid down by the CEGAT in regard to the subject-matter of  controversy and the principles laid down therein.  In fact, the said order of  the larger bench was challenged before this Court.  This Court in Collector  of Central Excise, Bangalore vs. Tetragon Chemie P. Ltd. reported in 2001  (132) E.L.T. 525 (Three-Judge Bench) upheld the view taken by the  Tribunal that the products in question are animal feed supplements and that  the animal feed supplements were rightly included in Tariff Item 23.02  being preparation of a kind used in animal feeding including dogs and cats  food.  The Bench has agreed with the conclusion of the Tribunal that even  food supplements like the products of the respondents therein which are used  in animals feeding would fall under Heading 23.02.  This Court while  affirming the decision of the Tribunal dismissed the civil appeals.   

For the foregoing reasons, we are of the opinion that the contentions  in the civil appeal are apparently contrary to the stand taken by the  Department in the circulars mentioned supra and we, therefore, have no  hesitation in dismissing the appeal as bereft of any merits.  However, we say  no costs.