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CASE NO.: Appeal (civil)  654 of 2002

PETITIONER: M/s. Adhunik Food Products (P) Ltd., U.P.

RESPONDENT: Commissioner of Central Excise, Meerut

DATE OF JUDGMENT: 20/04/2007

BENCH: S.H. KAPADIA & B.SUDERSHAN REDDY

JUDGMENT:

J U D G M E N T

KAPADIA, J.

A short point which arises for determination in this  civil appeal is : whether ’puffs’ obtained by the swelling or  roasting of cereals constitute preparations of cereals  under Chapter Heading 19.04.  According to the  appellant ’puffs’ from cereals fall under Chapter Heading  21.07 (Edible preparations).

The assessee manufactures ’puffs’ from cereals  namely wheat and soya nuts. The said product is packed  in unit containers and supplied to Integrated Child  Development Scheme (for short ’ICDS’)  in Haryana.

On 21.3.1997 a show-cause notice was issued by  the Department raising a demand on the assessee for  mis-declaration of the said products as  ’chabena/prasad’.  In the said show cause notice it was  further alleged that the products were sold under the  brand name ’bonton’.  Under the said show cause notice  it was also alleged that the said ’puffs’ were sold in the  market as breakfast cereals, high in protein and low in  cholesterol.  It was  further alleged that the said products  were sold to five star hospitals and public schools. In the  circumstances the assessee was called  upon to pay to  the Department Rs.2.31 crores as duty for the aforesaid  period.  This demand has been confirmed by the  authorities below as well as by the Tribunal.  Hence this  civil appeal.

In this case we are concerned  with two sets of the  same entry since the show cause notice covers the period  of 5 years between 1992-93 to 1996-97.

For the period 1994-95 we quote hereinbelow  Chapter Heading 19.04  "CHAPTER 19 PREPARATIONS OF CEREALS, FLOUR, STARCH  OR MILK; PASTRY COOKS’ PRODUCTS

Notes:  

       1.      xxx             xxx             xxx

       2. Heading No.19.04 does not cover

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preparations containing more than 8% by  weight of cocoa powder or coated with  chocolate or other food preparations  containing cocoa of Chapter 18. Heading  No. Sub- heading  No. Description of goods Rate of  duty (1) (2) (3) (4) 19.04

Prepared foods obtained by  the swelling or roasting of  cereals or cereal products  (for example, corn flakes);  cereals, other than maize  (corn), in grain form, pre- cooked or otherwise  prepared  

1904.10 Put up in unit containers  and ordinarily intended for  sale  10%

1904.90 Other Nil

For the same period we quote hereinbelow Chapter  Heading 21.07: "CHAPTER 21 MISCELLANEOUS EDIBLE PREPARATONS

Notes :                  1 to 4.         xxx             xxx             xxx

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

(a)     protein concentrates and textured  protein substances;

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

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

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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 consisting of tea or coffee  and milk powder, sugar and any other  added ingredients;

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

(i)  pre-cooked rise 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.               (emphasis supplied)

Heading  No. Sub- heading  No. Description of goods Rate of  duty (1) (2) (3) (4) 21.07

Edible preparations, not  elsewhere specified or  included

2107.10 Prasad or prasadam Nil

2107.20 Sterilised or pasteurized  miltone Nil

Other:

2107.91

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Put up in unit containers  and ordinarily intended for  sale  50%

2107.99 Other 50%

At this stage it may be noted that Chapter sub- heading 2107.91 during the relevant period attracted  50% duty.  However, the effective rate of duty was nil  in  view of general exemption No.83 (item No.25) of the  Notification No.2/1994 dated 1.3.1994. We quote  hereinbelow item No.25 of General Exemption No.84 vide  Notification No.2/1994. "GENERAL EXEMPTION NO.83 Effective rate of duty for certain specified goods  of  Chapters 4 to 22 \026

In exercise of the powers conferred by sub- section (1) of section 5A of the Central Excises and  Salt Act, 1944 (1 of 1944), the Central Government,  being satisfied  that it is necessary in the public  interest so to do, hereby exempts goods specified in  column (3) of the Table hereto annexed and falling  under the Chapter or sub-heading No. of the  Schedule to the Central Excise Tariff Act, 1985 (5 of  1986), specified in the corresponding entry in  column (2) of the said Table, from so much of the  duty of excise leviable thereon which is specified in  the said Schedule, as is in excess of the amount  calculated at the rate specified in the   corresponding entry in column (4) thereof.

Heading  No. Sub- heading  No. Description of goods Rate of  duty (1) (2) (3) (4) 25 2107.91 (i) Soya textured protein,  Soya yoghurt, soya tofu,  soya based food  preparations for infant use,  soya milk powder, soya  noodles, soya macaroni and  soya tempeh, whether or  not containing other food  ingredients but not  containing cocoa; (ii) Powders of fruitsand  vegetables; (iii) Papad, idli-mix, vada- mix,  dosa-mix, jalebi-mix,  gulabjamun-mix or

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namkeens, such as bhujyia,  chabena. Nil  

Heard learned counsel on both sides.   In the present matter the show cause notice   concentrated more on the denial of exemption claimed by  the assessee, than the classification. We may make it  clear that the ’puffs’ prepared from cereals cannot fall  within the item ’Prasad/prasadam’.  To that extent we  are in agreement with the impugned order of  adjudication.   The main question which was required to be  decided was whether ’puffs’ made from cereals would at  all fall  under Chapter Heading 19.04 or whether they  would fall under Chapter Heading 21.07 (remoulded as  Chapter Heading 21.08 during the Assessment Year  1996-97).   For the sake of clarity we also quote hereinbelow the  remoulded Chapter Heading 21.08. "CHAPTER 21 MISCELLANEOUS EDIBLE PREPARATONS

Notes :                  1 to 8.         xxx             xxx             xxx

       9.  Heading No.21.08, inter alia, includes:

(a)     protein concentrates and textured  protein substances;

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

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beverages, whether or not sweetened;

(f)  peanut butter;

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

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

(i)  pre-cooked rise 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.      

Heading  No. Sub- heading  No. Description of goods Rate of  duty (1) (2) (3) (4) 21.08

Edible preparations, not  elsewhere specified or  included

2108.10 Preparations for lemonades  or other Beverages intended  for use in the manufacture  of Aerated Water  40%

2108.20 Sharbat 20%

2108.30 Prasad or Prasadam Nil

2108.40 Sterilised or pasteurized  miltone

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Nil

Other:

2108.91 Not bearing a brand name Nil

2108.99 Other 20%

In the entire discussion in the impugned judgment  there is no finding given by the Tribunal as to whether  ’puffs’ prepared from cereals would fall under the  Chapter Heading 19.04.  As far as ’puffs’ prepared from  soya nuts are concerned there is no finding as to the  quantity of puffed soya nuts sold by the assessee during  the above period to ICDS, Haryana and the quantity of  the said product sold by the assessee during the said  period to public schools and five star hospitals.  There is  also no finding as to whether ’puffed soya nuts’ were  supplied to ICDS, Haryana under the brand name  ’bonton’ or whether they were supplied without any  brand name being affixed to the unit containers.   These  questions are important since the entry 2108.91 refers to  nil rate of duty for "Other Edible Preparations" as long as   the product is supplied without a brand name.  These  questions are also important to be decided particularly   since the General Exemption No.83 states that the  benefit of exemption shall be given only if the product is a  soya based food preparation for infant use.  According to  the assessee puffed soya nuts is a soya based food  preparation under item No.25 of the Notification No.2 of  1994 (General Exemption No.83).  According to the  assessee puffed soya nuts were supplied to the schools  under ICDS programme.  None of the questions have  been decided.   

In the circumstances, we set aside the impugned  judgment of the tribunal and remand the matter to the  adjudicating authority for fresh determination in  accordance with law.  The appeal is accordingly allowed  with no order as to costs.