http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 12  

PETITIONER: COLLECTOR OF CENTRAL EXCISE, BOMBAY-I & ANR.

       Vs.

RESPONDENT: PARLE EXPORTS (P) LTD.

DATE OF JUDGMENT22/11/1988

BENCH: MUKHARJI, SABYASACHI (J) BENCH: MUKHARJI, SABYASACHI (J) RANGNATHAN, S.

CITATION:  1989 AIR  644            1988 SCR  Supl. (3) 933  1989 SCC  (1) 345        JT 1988 (4)   454  1988 SCALE  (2)1381  CITATOR INFO :  R          1991 SC 754  (13)  R          1991 SC1028  (15)  E          1991 SC2049  (6)  RF         1992 SC 152  (10,12)

ACT:     Central Excises and Salt Act, 1944/Central Excise Rules, 1944:  Sections 6 and 35L(b) First Schedule Tariff Item  No. 68/Rules 8, 9(1), 53, 173 and 174 and Notification No. 55/75 dated  March 1,  1975--Non-alcoholic beverages--Question  of dutiability--Gold  Spot base/Limca base/Thumps Up  base--Not intended to be given exemption . %     Statutory  Interpretation:  Courts  to  give  weight  to interpretation   put  upon  statute  at  the  time  of   its enactment.     Fiscal .Statute/Notification--Interpretation at time  of enactment/issue--To be  given due weight--Two views possible that in favour of assessee to be adopted.

HEADNOTE:     The respondent-company was engaged in the manufacture of nonalcoholic  beverage bases falling under Tariff Item 68 of Central  Excise   Tariff.  According  to  the  Revenue,  the company   manufactured  the  nonalcoholic   beverage   bases without  holding  proper Central Excise   Licence,  and  had cleared  the  said  goods without payment of  the  duty  due thereon.  The stand of the company was that the  goods  were exempt from duty under Notification No. 55/75 C.E. dated 1st March,  1975  which inter alia exempted "all kinds  of  food products  and  food preparations".  The Customs  and  Excise Collector  confirmed  the  demand  of  central  excise  duty against the company. In appeal, the Confirmed the demand  of and   Gold   (Control)  Appellate  Tribunal   accepted   the contention of the company.     The  Additional  Solicitor  General  on  behalf  of  the appellants  contended  that (i) non-alcoholic beverage  base though having some food  value, was not food product or food preparation.  at  any rate, in the  context of the  Act  and notification as such; (ii) the expression "food products and food  preparations" was used in contrast to  "beverages"  so

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 12  

far  as  the present Act and notifications  thereunder  were concerned;  (iii) in ordinary common and commercial parlance also  the goods in question were not known as food  products and/or food preparations as  such, and therefore these  were                                                   PG NO 933                                                   PG NO 934 not to be treated as exempt under the notification; and (iv) how  Government  understood  a matter at  the  time  of  the notification,  was a relevant factor and that was  a  factor which one should bear in mind.     K.P. Verghese v. Income Tax Officer Ernakulam, [1982]  1 SCR   629  and Government of India’s decision in  Re:  Asian Chemical Works, [1982] 10 ELT 609A, relied upon.     On  behalf of the respondent it was contended  that  the Tribunal  had acted on the varied materials, and  therefore, such  decision  of  the Tribunal should not  be  altered  or deviated from.     Collector  of  Customs, Bombay v. Swastic   Woollen  (P) Ltd., [1988] 37 ELT 474, relied upon.     Allowing the appeals, it was,     HELD:  (1)  The word ‘Food’ has no fixed  definition  of universal   application and its meaning varies from  statute to  statute.  But food is one which nourishes  and  sustains human  body for the purposes  of growth, work or repair  and for the maintenance of the vital process.[939D]     Brooke  Bond (India) Limited v. Union of  India,  [1980] ELT  65;  Brooke  Bond (India) Limited v.  Union  of  India. 119%41  15  ELT  32 and  The State  of  Bombay  v.  Virkumar Gulabchand Shah, [1952] SCR 877, referred to.     (2) The expression ‘food products’ is not defined in the Act.   The  exemption  includes  food  products   and   food preparations’ and  provides an inclusive definition of ‘food products’ and food preparations’. [946E]     (3)  The words used in the provision, imposing taxes  or granting exemptions, 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. [947F]     (4)  It  is a well-settled principle  of  interpretation that  courts  in construing a statute or  notification  will give  much weight to the interpretation  put upon it at  the time  of enactment or issue, and since by those who have  to construe, execute and apply the said enactments. l947E]                                                   PG NO 935     (5) The notification should not only be confined to  its grammatical   or  ordinary parlance but it  should  also  be construed in the light of the context. The expression should be  construed in a manner in which similar expressions  have been employed by those who framed the relevant notification, [948E]     Hindustan  Aluminium Corporation Ltd. v. State of  Uttar Pradesh, [1982] 1 SCR 129, referred to.     (6) The question of interpretation involves  determining the   meaning of a text contained in one or more  documents. Judges  are often criticised for being tied too  closely  to the  statutory words and for failing to give effect  to  the intention of the Parliament or the law-maker. [949C]     (7) According to the tradition of our law, primacy is to be given to the text in which the intention of the law-giver has been expressed. [949D]     (8) The principle is well-settled that when two views of a  notification   are possible, it should  be  construed  in favour  of the subject as  notification is part of a  fiscal enactment avoiding, however, as absurd meaning. [948F]     Coroline  M.  Armytage & Ors.  v.  Frederick  Wilkinson,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 12  

[1978] 3 A.C. 355, referred to.     (9)  The  notification must be read as a  whole  in  the context   of    the  other  relevant  provisions.   When   a notification  is issued in accordance  with power  conferred by  the statute, it has statutory force and  validity   and, therefore, the exemption under the notification is, as if it were contained in the Act itself- [947G-H]     Orient  Weaving Mills (P) Ltd. v. Union of India, [1962] Supp.3  SCR 481 and Kailash Nath v. State of U.P., AIR  1975 SC 790, referred to.     (10)  The  purpose  of exemption is  to  encourage  food production   and also give boost to the production of  goods in common use and need.  After all, the purpose of exemption is  to  help  production of food and  food  preparations  at cheaper price and also help production of items which are in common use and need, like electric light and power. [949A-B]                                                   PG NO 936     (11) Having regard to the language used it would not  be in consonance with the spirit and the reason of law to  give exemption   for  non-alcoholic  beverage  bases  under   the notification.  Bearing the aforesaid purpose, it  cannot  be contended  that expensive items like Gold spot-base,  Limca- base  or Thumps up-base were intended to be given  exemption at the cost of the public exchequer.[949E-F]    (12)  Non-alcoholic  beverage bases in  India  cannot  be treated or understood as new ’nutritive material absorbed or taken  into  the body of an organism which  serves  for  the purpose of growth, work or repair and for the maintenance of the vital process’ and an average Indian will not treat non- alcoholic   beverage   bases  as  food  products   or   food preparations in that light.[948G-H]

JUDGMENT:     CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 379 1988 and 3660-82/1987.     From  the  Judgment  and Order  dated  26.10.87  of  the Customs  Excise  and Gold (Control)  Appellate  Tribunal  in Appeal Nos. ED/943/83-D Order No. 838/87-D ED(SB) A. No. 411 and 412/81-D’ and 787/80-D in Order No. 786 to 788/6-D.     Kuldip   Singh,  Additional  Solicitor   General,   A.K. Srivastava  and P.Parmeswaran and Mrs. Sushma Suri  for  the Appellants.     Soil J. Sorabjee, S. Ganesh, J.R. Gagrat, P.G.  Gokhale, B.R. Agarwala and C.M. Mehta for the Respondents.     The Judgment of the Court was delivered by     SABYASACHI  MUKHARJI,J. These appeals are under  Section 35L(b) of the Central Excises and Salt Act, 1944(hereinafter to as ’the Act’) against the decision of the Customs  Excise and Gold (Control) Appellant Tribunal, New Delhi (’Tribunal’ for short) dated 26the October,1987.     The  respondent-company  has  its  factory  at   Chakala Andheri  and is engaged in the manufacture of  non-alcoholic beverage  bases  falling  under Tariff Item  68  of  Central Excise  Tariff. During the course of enquiry, it  was  found that the company had during the period from Ist March,  1975 to 18th April,1979 manufactured non-alcoholic beverage bases without  holding  proper  Central  Excise  licence  and  had cleared  the  said  goods without payment of  the  duty  due thereon  and  had  thereby  evaded  the  duty  amounting  to                                                   PG NO 937 Rs.3,50,963.22.  According  to the revenue, prima  facie  it appeared that the respondent had contravened  the provisions

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 12  

of  Rules 9(1), 53, 173 pp(I), 173 pp(3), ]73 pp(6) and  174 of  the  Central  Excise Rules,  1944  (‘Rules’  for  short) inasmuch  as during the period from 1st March, 1975 to  18th April, 1979 the respondent-company had manufactured  without valid licences required under Section 6 of the Act read with Rule  174  of the Rules, goods not elsewhere  specified  and falling  under Tariff Item 68 of the First Schedule  of  the Act,  viz.,  non-alcoholic beverage bases.  The  respondent- company  had further cleared the said goods  without  filing list of goods manufactured as required by Rule 173 pp(3)  of the Rules. The respondent had cleared the said goods without preparing  gate passes as required under Rule 173 pp (6)  of the  Rules. and had further cleared the said  goods  without maintaining accounts as required under Rule 53 of the Rules. In  the circumstances. notices were issued by  the  relevant officer  asking  the respondent-company to  show  cause  for recovery  of  the dues and also for imposition  of  penalty. When  the  matter  came  up  for  consideration  before  the Collector,   Central  Excise, he  found  that  non-alcoholic beverage bases were not themselves food or food products and accordingly   did   not   quality   for    exemption   under Notification No. 55/75 as amended. He accordingly  confirmed the  demand of central excise duty of Rs.3,50,963.22   under Rule 9(2) read with Rule 10 of the Rules. He also imposed  a penalty of Rs.25,000 under Rule 173Q of the Rules. Aggrieved thereby,the  respondent-company filed an appeal  before  the Tribunal   and   contended   that  the  question    of   the dutiability  of non-alcoholic beverage   bases  manufactured by  the respondent had been settled by the  Tribunal in  its decision  in  the  case  of  respondent  itself,  i.e.,Parle Exports  (P)Ltd.  v. Collector of  Central  Excise,  Baroda, [1987]  27  ELT  349 which are the  subject  matter  of  the connected  appeals,  i.e.  C.A. Nos.  3680-82  of  1987  The Tribunal following its earlier order allowed the appeal  and hence the present appeal by the Revenue.     The  First  Schedule of the Act which provides  for  the dutiability   and  the rates of duty applicable  to  various goods mentioned  therein  contains the expressions "Food and Beverages  It provides therein description of various  types of goods and the rates of duties applicable thereto. In  the said  description  "Food  and  Beverages"  many  items   are included, viz., sugar produced in a factory ordinarily using power   in   the  course  of  production  of   sugar,   (1A) confectionery,  cocoa  powder  and  chocolates,  in  or   in relation  to  the  manufacture of  which  any    process  is ordinarily  carried on with the aid of power namely.  boiled sweets, toffees, caramels, candies, nuts (including almonds) and  fruit    kernels  coated  with  sweetening  agent,  and                                                   PG NO 938 chewing gums, cocoa powder, drinking chocolates etc. It also includes  items (1B) prepared or preserved foods put  up  in unit containers and ordinarily intended for sale,  including preparations of vegetables, fruit, milk, cereals, etc.,  and as  item  (1C)  food  products, in or  in  relation  to  the manufacture  of which any process is ordinarily  carried  on with  the  aid  of  power,   namely,  biscuits,  pasteurised butter,  pasteurised  or processed cheese,  aerated  waters, whether  or  not flavoured or sweetened and whether  or  not containing vegetable or fruit juice or fruit pulp etc.     Tariff Item 68 of the First Schedule of the Act provides for  duty  on "All other goods not elsewhere  specified  and manufactured  in  a   factory"  but  excluding,  inter  alia alcohol,  all  sorts, including alcoholic liquor  for  human consumption  and other items not necessary for  our  present purpose. The exemption Notification No. 55/75 C.E. dated 1st

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 12  

March,  1975  reads  as follows:   "In  exercise  of  powers conferred  by sub-rule (10) of rule 8 of the Central  Excise Rules, 1944, the Central Government hereby exempts goods  of the  description specified in the q Schedule annexed  hereto and  falling under Item No. 68 of the First Schedule to  the Central  Excises  and Salt Act, 1944 (1 of 1944),  from  the whole of the duty of excise leviable thereon .                       THE SCHEDULE     1.    All    kinds   of   food   products    and    food preparations,including-     (i) meat and meat products;     (ii) dairy products;     (iii) fruit and vegetable products;     (iv) fish and sea foods;     (v) bakery products; and     (vi) grain mill products.     2. Electric light and power."                                                   PG NO 939     The   question  is,  whether  by  the  notification   of exemption  non-alcoholic beverage bases have  been  exempted from payment of duty. The only question, therefore, in other words,  is  whether non-alcoholic beverage bases  are  ‘food products’  or ‘food preparations’ covered by  the  exemption notification  No.  55/75 CE of Ist March, 1975. We  are  not concerned with the question whether in a broad general sense non-alcoholic  beverage base is food or not. In Brooke  Bond (India)  Limited  v.  Union  of India,  [1980]  ELT  65  the question  arose  before a learned Single Judge of  the  High Court  of  Andhra Pradesh whether coffee-chicory  blend  was food product and is an item which fell under Tariff Item  68 of  the Tariff. The identical notification  involved  herein came  up  for consideration in that case. The  question  was whether it was food product or food preparation, and as such exempt  from excise duty. It was held by the learned  Single Judge  that what was exempt under the said notification  was not food but food products and food preparations and it  was further held that coffee-chicory blend was neither food  nor food preparation. Therefore, it was not exempt from  payment of  excise duty under the said notification. The  word  food has  no  definition of universal application and  it  varied from  statute  to statute. In some cases the  dividing  line between the two might be thin and in some cases it might  be varied  but  so far as coffee-chicory  blend  was  concerned there  was little doubt that it was beverage and  not  food. The learned Judge referred to paragraph 109 of Volume 18  of Halsbury’s  Laws  of England (4th Edn). In  that  paragraph, coffee-chicory   products  are mentioned under  the  general heading  ‘Food,  Dairies  and Salaughter  Houses’  and  sub- heading  ‘Food  generally.  Coffee-chicory  blend  is   also mentioned  in  that  paragraph. But the  coffee  and  coffee products  under  the heading ‘Food generally-  were  in  the context  of the law of Food Adulteration and the Coffee  and Coffee-Produce  Regulations,   q1967 in  force  in  England. Reference was also made by the learned Judge to Corpus Juris Secundum, Volume 36 at page 1041. The learned Judge, in  our opinion,  rightly observed that the aforesaid  passage  from the  Halsbury’s  Laws of England and Corpus  Juris  Secundum could  not  be mechanically imported into the  present  case more  particularly when we are concerned with the  situation under the Tariff Schedule. ‘Food’, as has been noted, has no fixed  definition of universal  application and its  meaning varies  from  statute  to statute. The  dividing  line,  the learned Judge observed, between the beverage and food  might be  thin  and  in some case it might  overlap.  The  learned Judge,,  however, observed that it was beverage rather  than

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 12  

food.  The accordingly held that the  notification  exempted not food but food products and food preparations and as such coffee-chicory blend did not come within the purview of  the exemption.  The said decision was  affirmed by the  Division                                                   PG NO 940 Bench of that Court in Brooke Bond  (lndia) Limited v. Union of India & Ors., [1984] 15 ELT 32. The Division Bench  after exhaustively discussing the points in controversy and  after referring to several authorities referred to the decision of Justice Vivian Bose of this Court in The State of Bombay  v. Vir  Kumar  Gulabchand Shah, [1982] SCR/877, wherein he  had observed in his own and inimitable language at pages 880-883 of the report as under:     "Much  learned judicial thought has been  expended  upon this problem--what is and what is not food and what is   and what is not a foodstuff, and the only conclusion I can  draw from  a careful consideration of all the available  material is   that the term ’foodstuff is ambiguous. In one sense  it has  a  narrow meaning and is limited to articles which  are eaten as food for purposes of nutrition and nourishment  and so    would  exclude condiments and spices  such  as  yeast, salt,    pepper,  baking  powder and turmeric.  In  a  wider sense,   it    includes  everything  that  goes   into   the preparation  of  food  proper (as understood in  the  narrow sense)  to  make it more  palatable and  digestible.  In  my opinion,  the  problem  posed  cannot  be  answered  in  the abstract and must be viewed in   relation to its  background and  context. But before I dilate  on this, l  will  examine the dictionary meaning of the words    The   Oxford  English  Dictionary  defines  foodstuff   a follows:  "that which is taken into the system  to  maintain life and growth and to supply waste to tissue".      In Webster’s international Dictionary ‘food is  defined as:    "nutritive material absorbed or taken into the body of an organism  which serves, for purposes of growth. work  repair and for the maintenance of the vital processes".      Then follows this explanation:     "Animals  differ greatly from plants in their  nutritive processes   and  require in addition  to  certain  inorganic substances   (water, salts etc.) and organic. substances  of unknown  composition (vitamins) not ordinarily’  classed  as food ’though absolutely indispensable to life, and contained in  greater  of  less quantities in  the  substances  eaten) complex  organic substances which fall into three  principal groups, Proteins, Carbohydrates and Fats."                                                   PG NO 941      Next is given a special definition for legal  purposes, namely--      "As used in laws prohibiting adulteration etc.,  ‘food’ is generally held to mean any article used as food or  drink by  man,  whether  simple,  mixed  or  compound,   including adjuncts such as condiments, etc., and often excluding drugs and natural water."      The definition given of ‘foodstuff’ is--      "1. Anything used as food,      2.  Any  substance of food value as protein,  fat  etc. entering into the composition of a food."      It will be seen from these definitions that "foodstuff" has no special meaning of its own. It merely carries us back to the definition of "food" because "food stuff" is anything which is used as  "food".      So far as "food" is concerned, it can be used in a wide as  well as a narrow sense and, in my opinion,  must  depend upon  the context and background. Even in a  popular  sense,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 12  

when  one asks another "Have you had your food?", one  means the composite preparations which normally go to constitute a meal-curry and rice, sweetmeats, pudding, cooked  vegetables and  so forth. One does not usually think separately of  the different preparations which enter into their making, of the various  condiments and spices and vitamins, any  more  than one  would  think  of  separating in  his  mind  the  purely nutritive elements of what is eaten from their non-nutritive adjuncts.      So  also,  looked at from another point  of  view,  the various adjuncts of what I may term food proper which  enter into its preparation for human consumption in order to  make it palatable and nutritive, can hardly be separated from the purely  nutritive  elements if the effect of  their  absence would be to render the particular commodity in its  finished state unsavoury and indigestible to a whole class of persons                                                   PG NO 942 whose  stomachs  are accustomed to a more  spicely  prepared product.  The  proof of the pudding is, as it were,  in  the eating, and if the effect of eating what would otherwise  be palatable and digestible and therefore nutritive is to bring on  indigestion to a stomach unaccustomed to  such  unspiced fare, the answer must, I think, be that however nutritive  a product  may  be in one form it can scarcely be  classed  as nutritive if the only result of eating it is to produce  the opposite effect; and if the essence of the definition is the nutritive element, then the commodity in question must cease to  be food, within the strict meaning of the definition  to that  particular class of persons, without the  addition  of the  spices which make it nutritive. Put more  colloguially, "one  man’s food is another man’s poison". I refer  to  this not  for  the  sake  of splitting  hairs  but  to  show  the undesirability of such a mode of approach. The problem must, I think, be solved in a commonsense way."      Justice  Bose  noted  that  a  comparison  of  war-time measure  in English and Indian Statutes might not  be  safe. But food is one which nourishes and sustains human body  for the  purposes  of  growth,  work  or  repair  and  for   the maintenance of the vital process. In the Brooke Bond  Ltd.’s case  (supra), the Division Bench considered the meaning  of the  expression  "coffee-chickory  blend"  and  upheld   the decision   of   the  learned  Single  Judge   as   mentioned hereinbefore.      Mr.   Sorabjee,  learned  counsel  appearing  for   the respondent,  drew our attention to several  items  including Item 68 and the Central Excise Trade Notice dated 18th  June 1975  which  deals with exemption. The  said  Trade  Notice, inter alia, reads as follows:      "A number of doubts have been raised about the  general scope  of the terms ‘food products/preparations’ vide  Entry No.  I  in  the Schedule to  Notification  No.  55/75  dated 1.3.75. Specific queries have also been raised as to whether items  like  oil cakes, rice bran.  scented  chunam,  katna, starch,  quargum, gur, flour, ice cream and ice candy,  ice, supari,  groundnut  kernels,  and cashew  kernels  could  be regarded as covered under the above entry as claimed by  the manufacturers of these goods.      2.  The  matter  has been examined  and  the  following clarifications are used for the information of the trade.                                                   PG NO 943      The  word ‘food’ is a general term and applies  to  all that   is  eaten  by  men  for  nourishment  and  takes   in subsidiaries, further;      (i)  preparations  for use, either  directly  or  after processing  such as cooking, dissolving or oiling in  water,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 12  

milk etc. for human consumption; and      (ii) preparations used because of their nutritional  or flavouring  properties  in the making of beverages  or  food stuffs  for  human  consumption,  are  classiable  as   food preparations.  But such preparations which because of  their ingredients and small proportion in which they are  normally used,   are  clearly  added  for  other  purposes,  or   not classiable as food preparations."                                           (underlined by us).      Mr. Sorabjee also drew our attention to the explanatory note  in Heading No. 21.07 of CCCN which states, inter  alis as follows:   "21.07--FOOD  PREPARATIONS  NOT  ELSEWHERE    SPECIFIED OR lNCLUDED.      Provided that they are not covered by any other heading of the Nomenclature the present heading covers:      (A)   Preparations  consisting  wholly  or  partly   of foodstuffs,  used  in  the  making  of  beverages  or   food preparations  for  human consumption. The  heading  includes preparations  consisting of mixtures of  chemicals  (organic acids,  calcium   salts,  lecithin etc.)  with  food  stuffs (flour, sugar, milk, milk powder, etc.) for incorporation in food  preparations either as ingredients or to improve  some of  their  characteristics  (appearance  keeping   qualities etc.)"      Clause (2) of the said explanatory notes in heading No. 20.17 of CCCN contains the following:      "(2)  Flavouring powders for making beverages,  whether or  not  sweetened with a basis of bicarbonate of  soda  and glycyrrhizin or liquorice extract (sold on the Continent  as "Cocoa powder")."                                                   PG NO 944      Our attention was also drawn to Item ( 12) of the  same which runs as follows:      "(12). Non-alcoholic compound preparations (often known as  "concentrated  extracts")  used  for  making   beverages (liqueurs,  etc.) unless they are included elsewhere in  the Nomenclature. These preparations are obtained by compounding vegetable  extracts  of  heading  13.03-with  lactic   acid, tartaric  acid,  citric acid,  phosphoric  acid,  preserving agents,  foaming agents, fruit juices, etc.,  and  sometimes with essential oils. Alcoholic preparations of this type are excluded (heading 22.09)"      Mr. Sorabjee further drew our attention to the Appendix 17 of Import Policy of 1981-82 which was relied upon by  the Tribunal in the second decision, i.e. the Parle Exports  (P) Ltd.  case  which  is the subject matter  of  the  connected appeals, i.e. C.A. Nos. 3680-82 of 1987. It was pleaded that it  was always understood and treated as a part of the  food product.  Reliance  was also placed on the  reports  of  the Chief  Chemist  of the Central Excise  Regional  Laboratory, Baroda to which Mr. Sorabjee drew our attention. The reports dealing inter alia with some items stated as follow:           "Gold Spot Base:           S.R.No. 1 Base-A (Lab. No.10)      The  sample  is in the form of orange  coloured  liquid containing flavouring agents free from Alcohol. (Please  see note attached).      S.R. No 2 Base (Lab. No. 11)      The  sample  is  in the form of white  powder.   It  is sodium   Benzoate-a-chemical   known  to  be   used   as   a preservative.      S.R. No.3 . Base-C (Lab. No. 12)      The  sample  is  in the form of white   powder.  It  is vitamin ‘C’(ascorbic acid) an organic chemical.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 12  

    Limca Base:                                                   PG NO 945      S.R. No. 4 Base-A (Lab. No. 13)      The  sample is in the form of white  liquid  containing flavouring agents. It is free from Alcohol. (Please see note attached.)      S.R. No. 5 Base-B (Lab. No. 14)      The sample is in the form of white powder. It is sodium Benvonate-a-chemical known to be used as a preservative."      The  note appended to these reports stated  inter  alia the following:               "NOTE"      "The term "food’’ as defined in the Prevention of  Food Adulteration  Act,  1954 meant any article used as  food  or drink  for human consumption other than drugs and water  and includes:      (a)  Any  article which ordinarily enters into,  or  is used in the composition or preparation of human foods; and      (b) any flavouring matter or condiments.      Food  products which are excluded from item  (C)  would fall  under Item 68 of Central Excise, Tariff read with  the Notification  62/78  dated 1.3.78 excluded as  amended.  The term "Food preparations" on the other hand would cover;      (a)  Preparation  for  use  either  directly  or  after processing (such as cooking, dissolving or boiling in water, milk etc.) for human consumption.      (b)  Preparation  consisting wholly or partly  of  food stuffs  used in making of Beverages or food preparation  for human consumption.      This would also include concentrated extract for making non-alcoholic beverages.            (Ref. B.T.N. heading 21.07)                                                   PG NO 946      In  this  connection  attention  is  also  invited   to Bangalore   Collectorate  trade  notice  No.  103/75   dated 18.6.75.      In  view of that has been stated above samples at   Sl. No.  1,  4,  8, 9, 13 and 15 may be deemed to  fall  in  the category  of food preparations. However,  before  finalising the  assessment, it may be worthwhile  ascertaining  whether the  above products are also known as food  preparations  in common parlance and trade. The views of the Director.  Drugs & Food Laboratory, Baroda may also sought, if necessary."      Mr. Sorabjee submitted that the Tribunal has relied  on the   Bangalore  Collectorate  Trade  Notice   as   referred hereinbefore,  order of the Appellate Collector in the  case of  Bush Boake Allan (India) Limited, and Heading No.  21.07 of CCCN, Import Policy of the Government of India for  1981- 82 as well as the observations in Encyclopaedia  Britannica, Volume  13 at pages 420-421. It was submitted that the  said orders  of  the  Tribunal  had  considered  and  taken  into consideration  all  the relevant factors. The  Tribunal  has acted on the varied materials, and therefore, such  decision of  the  Tribunal should not be altered  or  deviated  from. Reliance  was  placed on the observations of this  Court  in Collector of Customs, Bombay v, Swastic Woollen (P) Ltd. and Ors., [1988] 37 ELT 474 at paragraph 9. The expression "food products"  is not defined in the Act The  product  exemption includes  ‘food  and  food  preparations’  and  provides  an inclusive   definition   of  ‘food   products’   and   ’food preparations’.  But the correct and the appropriate  meaning of  the expressions covered in the said notification has  to be found out.      The question is whether non-alcoholic beverage base  is either ‘food product’ or ‘food preparation’ in terms of  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 12  

notification in question. Mr. Sorabjee tried to suggest that fruit  and vegetable juice might become fruit  or  vegetable products  to come under Item 1(iii) of the Schedule  to  the exemption notification.      Learned Additional Solicitor General, Mr. Kuldip Singh, on the other hand submitted that non-alcoholic beverage base though  having some food value, is not food product or  food preparation,  at  any rate, in the context of  the  Act  and notification  as such. lle drew our attention to  the  first heading in the First Schedule to the Act dealing with  "Food and Beverages" and pointed out that items 1 to IC deal  with Food  and Food Products while item 1D deals  with  beverages separately. He submitted before us that this indicates  that                                                   PG NO 947 the  expression  "food products and food  preparations"  are used  in contrast to "beverages" so far as the  present  Act and  notifications thereunder are concerned. There is  force in  the  submissions  of the  learned  Additional  Solicitor General.      Our attention was drawn to a decision of the Government of  India  in Re: Asian Chemical Works, [1982] 10  ELT  609A where  the Government of India opined that  ‘Food  flavours’ and ‘food preparations, might improve taste or appearance of food  products and/or food preparations, but  by  themselves could  not  be  legitimately  consumed  directly  or   after processing such as cooking, dissolving, or boiling in  water for  human  consumption independently. Mr.  Singh  submitted that  in  ordinary common and commercial parlance  also  the goods in question are not known as food products and/or food preparations as such, therefore, these are not to be treated as  exempt under the notification. Mr. Singh submitted  that when  a person says "I have consumed food" he does not  mean or  says that he has consumed non-alcoholic beverage  bases. Therefore,  those goods cannot be understood as  covered  by the  notification  of exemption. It was submitted  that  how Government   understood  a  matter  at  the  time   of   the notification,  is  a relevant factor and that  is  a  factor which  one  should bear in mind in view  of  the  principles enunciated  by  this Court in K.P. Verghese  v.  Income  Tax Officer,  Ernakulam & Anr., [1982] 1 SCR 629. It is a  well- settled   principle   of  interpretation  that   courts   in construing  a statute or notification will give much  weight to the interpretation put up on it at the time of  enactment or  issue, and since by those who have to construe.  execute and apply the said enactments.      How then should the courts proceed? The expressions  in the Schedule and in the notification for exemption should be understood by the language employed therein bearing in  mind the  context in which the expressions occur. 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. It   is,  however,  necessary  to  bear  in   mind   certain principles.  The notification in this case was issued  under Rule 8 of the Central Excise Rules and should be read  along with  the Act. The notification must be read as a  whole  in the  context  of  the  other  relevant  provisions.  When  a notification is issued in accordance with power conferred by the  statute,  it  has statutory  force  and  validity  and, therefore, the exemption under the notification is, as if it were contained in the Act itself. See in this connection the                                                   PG NO 948 observations of this Court in Orient Weaving  Mills (P) Ltd. v.  The  Union of India, [1962] Supp. 3 SCR  481.  See  also

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 12  

Kailash  Nath  v.  State  of U.P., AIR  1957  SCR  790.  The principle   is  well-settled  that  when  two  views  of   a notification are possible, it should be construed in  favour of  the  subject  as  notification  is  part  of  a   fiscal enactment.  But in this connection, it is well  to  remember the  observations of the Judicial Committee in  Coroline  M. Armytage & Ors. v. Federick Wilkinson, [1878] 3 A.C. 355  at 370 that it is only, however, in the event of there being  a real difficulty in ascertaining the meaning of a  particular enactment  that the question of strictness or of  liberality of construction arises. The Judicial Committee reiterated in the said decision at page 369 of the report that in a taxing Act provisions establishing an exception to the general rule of  taxation are to be construed strictly against those  who invoke its benefit. While interpreting an exemption  clause, liberal  interpretation should be imparted to  the  language thereof,  provided  no  violence is  done  to  the  language employed.  It  must, however, be borne in mind  that  absurd results of construction should be avoided.      In  Hindustan Aluminium Corporation  Ltd. v.  State  of Uttar Pradesh & Anr., [1982] l SCR 129 this Court emphasised that  the  notification should not only be confined  to  its grammatical  or  ordinary  parlance but it  should  also  be construed in the light of the context. This Court reiterated that the expression should be construed in a manner in which similar  expressions have been employed by those who  framed relevant  notification.  The Court emphasised  the  need  to derive  the  intent from a contextual scheme. In  this  case therefore, it is necessary to endeavour to find out the true intent   of   the  expressions  "food  products   and   food preparations"  having regard to the object and  the  purpose for  which  the  exemption is granted bearing  in  mind  the context  and  also  taking note of  the  literal  or  common parlance  meaning  by those who deal with  those  goods,  of course bearing in mind. that in case of doubt only it should be  resolved  in  favour  of  the  assessee  or  the  dealer avoiding, however. an absurd meaning. Bearing the  aforesaid principles  in  mind, in our opinion, the revenue  is  right that  the  nonalcoholic beverage bases in  India  cannot  be treated or understood as new ‘nutritive material absorbed or taken  into  the body of an organism which  serves  for  the purpose of growth, work or repair and for the maintenance of the vital process’ and an average Indian will not treat non- alcoholic   beverage   bases  as  food  products   or   food preparations in that light.                                                   PG NO 949      We have also noted how these goods were treated by  the Government  as  mentioned hereinbefore. There is  no  direct evidence as such as to how in commercial parlance unlike  in ordinary parlance, non-alcoholic beverage bases are  treated or  whether  they  are  treated as  food  products  or  food preparations. The purpose of exemption is to encourage  food production and also give boost to the production of goods in common  use and need. After all the purpose of exemption  is to help production of food and food preparations at  cheaper price and also help production of items which are in  common use and need, like electric light and power.      The question of interpretation involves determining the meaning of a text contained in one or more documents. Judges are  often  criticised  for being tied too  closely  to  the statutory  words  and  for failing to  give  effect  to  the intention of the Parliament or the lawmaker. Such  language, it  has  been said, in  Cross’s  "Statutory  Interpretation" (Second Edn.) at page 21, appears to suggest that there  are two  units  of  enquiry  in  statutory   interpretation--the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 12  

statutory text and the intention of the Parliament--and  the Judge must seek to harmonise the two. This, however, is  not correct.  According to the tradition of our law, primacy  is to  be given to the text in which the intention of the  law- giver  has  been  expressed. Cross  refers  to  Blackstone’s observations  that the fairest and most rational  method  to interpret  the  will of the law-maker is  by  exploring  his intentions  at the time when the law was made, by signs  the most  natural and probable. And these signs are  either  the words,  the  context, the subject matter,  the  effects  and consequences,  or the spirit and reason of the law. We  have no doubt, in our opinion, that having regard to the language used  it would not be in consonance with the spirit and  the reason  of law to give exemption for non-alcoholic  beverage bases  under  the  notification  in  question.  Bearing  the aforesaid  purpose, in our opinion, it cannot  be  contended that  expensive  items like Gold-Spot  base,  Limca-base  or Thumps  up-base were intended to be given exemption  at  the cost of public exchequer.      For  the  aforesaid  reasons, the appeals  have  to  be allowed  and  the  decision of the  Tribunal  reversed.  We, however. need not go into the question of penalty as well as the question of limitation which have been left open by  the Tribunal  in its order. It will be open for the  parties  to urge these points afresh before the Tribunal. We express  no opinion  on  these  aspects.  The  appeals  to  the   extent indicated  above  are allowed. There will,  however,  be  no order as to costs.           R.S.S.                         Appeals allowed.