Civil Appeal No. 8958 of 2003. Case: Satnam Overseas Ltd. Vs Commnr. of Central Excise. Supreme Court (India)
| Case Number | Civil Appeal No. 8958 of 2003 |
| Judges | Arjan Kumar Sikri and Rohinton Fali Nariman, JJ. |
| Issue | Central Excise Tariff Act, 1985; Central Excise Act, 1944 - Section 2; Kerala General Sales Tax Act - Sections 5A(1), 5(1); Central Excise Rules, 1944 - Rules 2, 3, 173B |
| Judgement Date | March 18, 2015 |
| Court | Supreme Court (India) |
Judgment:
Arjan Kumar Sikri, J.
1. The Appellant/Assessee challenges the correctness and validity of the final order dated 10.10.2002 passed by the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT), New Delhi in the appeal which was preferred by the Assessee against the order of Commissioner (Appeals) who had upheld the Order-in-Original dated 17.3.1999 passed by the Additional Commissioner pursuant to show cause notice dated 4.8.1997 issued by him. In the said show cause notice the Additional Commissioner had proposed to classify the product of the Appellant/Assessee under Heading 2108 of the Central Excise Tariff Act, 1985, as Miscellaneous Edible preparation not elsewhere specified or included.
2. It may be stated that Assessee is engaged in the packing combination of mixture of raw rice, dehydrated vegetables and spices in the name of 'Rice and Spice'. The exact process which is taken note of by the Tribunal as explained by Cl. R.L. Mehta, Deputy General Manager of the Assessee is as follows:
This product i.e. Rice Spice is a combination of Raw Rice, Dehydrated vegetables and certain spices and condiments mixed in a pre-determined proportion and that blended together in a mixer for uniformity and the blended mixer is heated, if required, to sterilize the product. The mixed product is the packed in pouches with Nitrogen flushing for a longer shelf life.
3. The defence put forth by the Assessee to the show cause notice issued by the Additional Commissioner was that the aforesaid process does not amount to 'manufacture' within the meaning of Section 2(f) of the Central Excise Act, 1944. It was also argued that, in any case, the product was not classifiable under Heading 2108 of the Central Excise Tariff Act, 1985 as claimed by the Revenue but it should be covered under Heading 11.01. That Heading applies to products of the milling industry, including flours, groats, meal and grains of cereals, and flour, meal or flakes of vegetables on which nil duty is payable. It was, thus, contended that in no case the Assessee was under any obligation to pay the duty on the aforesaid process.
4. The Additional Commissioner did not agree with the contention of the Assessee holding it to be a manufacturing process, and opinion of the Additional Commissioner is accepted by the Commissioner (Appeals) as well as by CEGAT.
5. Ms. Charanya, the learned Counsel appearing for the Appellant argued before us that the authorities committed serious error in holding the aforesaid process of the Assessee as "manufacturing process". Her arguments was that from the reading of the process described above, it would be manifest that it only involved mixing of raw rice, dehydrated vegetable with some spice and did not bring about any new product. It was submitted that the aforesaid mixture, which is sold in a packaged form, is raw food and still needs to be cooked to make it edible. She pointed out that on the packing/pouch of the product even the cooking instructions are mentioned in the following manner:
All cooking appliances vary in performance, these are guidelines only. Empty contents into 375 ml (2/3 pints) of cold water, stir well. Add I tablespoon of butter or margarine. Bring to boil, uncovered, in a small saucepan. Reduce heat, cover the saucepan and simmer gently for approximately 15 minutes or until all water is absorbed.
6. It was further submitted that there was no new product which came into existence as that product was still known as rice which did not lose its essential character and therefore it could not be treated as "manufacture'. In support the aforesaid submission Ms. Charanya referred to certain judgments which shall be discussed by us at the later stage.
7. In support of her other submission viz. that the product would still be classified under Heading 11.01, the learned Counsel referred to the 'Rule of Interpretation' contained in the Schedule of Excise Tariff known as "Rules for the Interpretation of this Schedule". In this behalf Rule 3 and in particular Clause (b) thereof was pressed into service. Therefore it would be apposite to take note of this clause as well which we reproduce below:
When by application of Sub-rule (b) of Rule 2 or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows:
(a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.
(b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets, which cannot be classified by reference to (a), shall be classified as if they consisted of the material or component which gives them their...
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