TMI Blog1991 (12) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... onsulting the Chemical Examiner and issuing a show cause notice, and hearing them decided that it was correctly classifiable under Chapter Heading 2107.91. When the respondents herein went in appeal, Collector (Appeals) reversed the order and hence this appeal has been filed to the Tribunal. 3. The respondents had submitted a letter dated 14th July, 1987 to the Assistant Collector along with their Classification List in which they had given detailed justification for claiming the classification of the product under Chapter Heading 0404 and the relevant extracts from this letter are important for deciding the matter. These are as under :- The product Surje is a dietary supplement of superior proteins and is available in the pack of 210 ml for sale and the packs of 100 ml and 50 ml will be used for free samples. We enclose herewith a specimen label of the product Surje for your kind perusal. According to our perusal of Central Excise Tariff Act, 1985, the product Surje, a dietary supplement of superior proteins, does not have a corresponding entry for direct classification of the product. As per the Rules for the interpretation of the Schedule - Excise Tariff, the closes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduct Surje. As whey proteins and casein peptides are solely derived from natural milk they are, therefore, covered under the Heading 04.04 in conjunction with Chapter Note 4. You will agree that as per Rule 3(a) or 3(b) of the product Surje is rightly classifiable under Heading 04.04, and therefore, there is no need to go to Rule 3(c) as per the Rules of interpretation given under the Act." 4. At the request of the Chemical Examiner, the respondents explained the method of manufacture of the product in their letter dated 23 March, 1988 along with which they forwarded an Annexure containing extracts from various printed literatures supported by photocopies of the printed literatures containing 14 exhibits from Exhibit A to N . It was claimed in this letter that these technical references support the fact that casein peptides and whey proteins are derived from natural milk and are the sources of superior protein, which is imparted to their product Surje . 5. When the sample was sent to the Chemical Examiner, the request was for testing for ascertaining the ingredients and percentage thereof. In his report dated 6th July, 1988, the Chemical Examiner replied as under :- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant to reproduce the description given in the Explanatory Notes :- This heading covers whey (i.e., the natural constituents of milk which remain after the fat and casein have been removed). Whey may be in liquid, paste or solid (including frozen) form, whether or not part of the lactose or some minerals have been removed and may be concentrated (e.g., in powder) or preserved. The heading also covers fresh or preserved products consisting of milk constituents, which do not have the same composition as the natural product, provided they are not specifically covered elsewhere. Thus, the heading includes products which lack one or more natural milk constituents have been added (to obtain, for example, a protein-rich product). Apart from natural milk constituents and the additives mentioned in the General Explanatory Note to this Chapter, the products of this heading may also contain added sugar or other sweetening matter. From the aforesaid description it is clear that the product under Heading 0404 apart from containing natural milk constituents (casein) and additives mentioned in the General Explanatory Notes (vitamins) they can also contain other constituent matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eous Edible Preparations) and as such Surje should be classified under Chapter 21 only. Of the different sub-headings of Chapter 21, the most appropriate for Surje would be sub-heading 2107.91 - Edible preparations, not elsewhere specified or included put up in unit containers and ordinarily intended for sale. (f) Surje , not being basically a milk product/dairy produce and being sold as a dietary supplement containing proteins, vitamins and, in common parlance as a tonic in medical shops and not as a milk food in general stores/food parlours, it falls appropriately under sub-heading 2107.91. It is a preparation made by mixing proteins and other ingredients like vitamins, sorbitol, glycerol, sucrose etc., and contains 67% of other ingredients like vitamins, sorbitol, glycerol, water etc., not obtained from milk. 9. Arguing for the department, Shri L.C. Chakrabarty, the learned SDR, submitted that it was evident from the ingredients of Surje that Vitamins were not permissible additives in terms of Note (4) of Chapter 4 and by this criterion alone, this product would get excluded from Chapter Heading 0404. The only additives which were mentioned in Note (4) were (a) sugar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Summing up, Shri Chakrabarty explained how the whey proteins and casein poly peptides were not natural milk constituents and therefore, fell outside the scope of Note (4). 14. Shri Chakrabarty read out Note (4) which was as under :- 4. Heading No. 0404 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. 15. He submitted that the expression natural milk constituent had not been defined anywhere but a reference to it could be found in the Explanatory Notes of HSN on Chapter Heading 0404 which deals with whey in the following words :- This heading covers whey (i.e., the natural constituents of milk which remain after fat and casein have been removed). 16. While referring to the principle of Noscitur a sociis in interpretation of statutes, he submitted that the meaning of a word is to be judged by the company it keeps, and cited the decision of the Supreme Court in the case of Rohit Pulp Paper Mills Ltd. v. Collector of Central Excise [1990 (47) E.L.T. 491] in which this pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nse in which the word has been defined in Reckitt and Colman s case. He also submitted that the words product and preparation have been given different meanings in the scheme of the Central Excise Tariff. 19. He explained with reference to ground (e) of the grounds of appeal that, being a dietary supplement, Surje would fall under Section IV because of Note 1(a) to Chapter 30 alone. 20. Shri Chakrabarty thereafter cited the decision of the Tribunal in the case of Collector of Central Excise, Pune v. Frozen Foods (P) Ltd. [1987 (27) E.L.T. 195] about the classification of a product called SPERT which was composed of the following ingredients :- (a) Liquid glucose - 40.30 gms. (b) Skimmed milk powder - 24.30 gms. (c) Calcium caseinate - 18.00 gms. (d) Malt extract - 5.30 gms. (e) Sugar - 10.00 gms. (f) Vitamins cand - 1.10 gms. 21. This product was not considered to be a preparation with a basis of malt extract and milk foods but a protein rich concentrated nutrient supplementary food. 22. Inviting reference to Note 5(a) of Chapter 21, Shri Chakrabarty submitted that the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the product would continue to fall under Chapter Note (4). Shri Lakshmi Kumaran claimed that since the coverage of goods under Central Excise Tariff Act is more than what is covered in HSN, these General Notes ipso facto will apply to Heading 0404 read with Chapter Note (4) of the Central Excise Tariff Act. He claimed that it was incorrect to say that Central Excise Tariff Act has discarded the General Explanatory Note of HSN. (d) The Governing principles of classification of goods under Chapter 4 are - (a) whether the product consists of natural milk constituents; (b) whether it has any additives which are permitted under Chapter Note or the Explanatory Notes of HSN. If the product consists of ingredients not permitted in this manner, the product would merit classification elsewhere in the tariff. (e) According to Shri Lakshmi Kumaran s interpretation, natural milk constituents will mean constituents of natural milk and not natural constituents of milk. Natural milk for the purpose of Chapter Note will mean milk from animal origin as compared to soya milk, coconut milk etc., which are all of vegetable origin. The argument that casein peptides are far remote from constitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmon linkage or other word used. He submitted that in Chapter Note (4) the expression the product consisting of natural milk constituents is a separate category enlarging the scope or coverage under Heading 04.04 and not restricting the same. He thought, it was well-settled that tariff items would be given liberal interpretations to cover all products in all forms and species and the use of the word inter alia in Note (4) itself suggests that the heading is not exhaustive. For this purpose, he placed reliance on the judgment of the Tribunal in the case of The Western India Plywood Ltd. v. Collector of Central Excise, Cochin [1985 (19) E.L.T. 590]. He also relied on the judgment of the Supreme Court in the case of State of Bombay v. Hospital Mazdoor Sabha [AIR 1960 SC 610] to support the view that the doctrine of nosciter a sociis could not apply to situations of the type under consideration. In view of these arguments, Shri Lakshmi Kumaran submitted that since Surje was specifically covered under Heading 0404 the question of classifying it under Heading 21.07 did not arise, because the latter heading would cover only those preparations which are not covered under any other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Surje . 24. Replying, Shri L.C. Chakrabarty, submitted that he had not gone beyond the point taken before the lower authorities. He stated that the Tribunal had always held that tariff classification being a matter of general importance, it was necessary that for deciding the correct classification, additional new ground not set out earlier could even beraised for the first time before the Tribunal. For this purpose, he referred to the decision of the Tribunal in the case of Collector of Central Excise, Calcutta v. Shalimar Paints Ltd., Howrah [1987 (29) E.L.T. 1001]. He also submitted that the Central Excise Tariff ACT would prevail over the HSN and its Explanatory Notes in the matter of classification under the Central Excise Tariff Act. 25. He refuted Shri Lakshmi Kumaran s argument that just because vitamins added in the product Surje are also contained in milk, it does hot automatically follow that such a product would be covered by the words natural milk constituents . Shri Chakrabarty contended that the respondents had to show that the vitamins in Surje are natural milk constituents - a claim which was never made., In fact the respondents claim is that n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n or Chapter Notes and, provided that such Headings or Notes had been otherwise required, according to the provisions hereinafter contained." (Emphasis supplied) 28. Shri Chakrabarty concluded that in view of the indication that dietetic and food supplements fall under Section IV, the classification of the product would go out of Chapter 4 which was not part of Section IV. 29. Refuting the argument of Shri Lakshmi Kumaran about the ratio of the Supreme Court decision in the case of Collector of Central Excise v. Protein Products of India (supra) that Ossein and Gelatin obtained by Chemical treatment of bones were covered by the term bone products , he submitted that while ossein was a straight product, Surje is a composite product. He therefore, thought that the ratio of this judgment as well as that of the AP Rice Bran case (supra) were not applicable to Surje . He explained that the expression used in Notification No. 55/75 which was the subject-matter of interpretation by the Supreme Court Protein Product s case, was bone products and not natural bone products , whereas the expression used in Note 4 is natural milk constituents . 30. Referring to the plea of Shri L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sugar or other sweetening matter; Products consisting of natural milk constituents whether or not containing sugar or other sweetening matter not elsewhere specified or included Other dairy produce; edible products of animal origin not elsewhere specified or included. 04.05 Butter and other fats and oils derived from milk 04.06 Cheese and curd 04.07 Birds eggs, in shell, fresh, preserved or cooked 04.08 Birds eggs not in shell and egg yolks, fresh, dried, cooked by steaming or by boiling in water, moulded, frozen or otherwise preserved whether or not containing added sugar or other sweetening matter 04.09 Natural honey 04.10 Edible products of animal origin not elsewhere specified or included 35. A comparison of the two shows that - (a) Chapter 4 of HSN specifically mentions certain additional items viz., Birds eggs and Natural Honey by name and (b) Birds eggs are covered by Headings 0407 and 0408 and Natural Honey by Heading 0409, whereas these items are not specifically mentioned in Chapter 4 of Central Excise Tariff; nor are there any sub-headings f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovides more or less a dictionary as to the coverage of foods under Heading 0404. Surje is not claimed to be a dairy produce but Chapter Note (4) provides a legislative mandate to cover products containing natural milk constituents with added sugar or added cocoa or fruit pulp under Heading 0404 as products of animal origin. That there is no question of addition of sugar or cocoa or fruit to products of animal origin is clear from a reading of Heading 0410 in the HSN from which it has been incorporated into the Central Excise Tariff in its original form. The heading is Edible products of animal origin, not elsewhere specified or included. The Explanatory Note says that this heading covers products of animal origin suitable for human consumption not specified or included elsewhere in the Nomenclature. The examples given are those of turtles eggs and salanganes nests. We could include in this heading other items - birds eggs and natural honey - which find separate mention in the HSN - in the Central Excise Tariff because of the merger of Headings 0407, 0408, 0409 and 0410 into one sub-heading 0404.10 in the Central Excise Tariff. Thus, a product like Surje would not be cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 40. So far as vitamins are concerned, we have already explained that their addition is not permitted by Note (4). The fact that natural milk contains certain vitamins and some of these vitamins are used in Surje and therefore, Surje should be regarded as a product consisting of natural milk constituents, is not acceptable because they are not natural milk constituents. Shri Chakrabarty had strongly contested this argument and we agree with him. 41. The next argument is that since milk itself is a product of animal origin, the products containing constituents of milk would come under the category of products of animal origin. While this may be generally true, what is to be remembered is that for the purpose of tariff classification under the Chapter (4), a clear distinction has been made between dairy produce which covers milk and milk products on the one hand and edible products of animal origin on the other. While milk and cream, butter and cheese have been separately classified under Headings 04.01 to 04.03 of the Central Excise Tariff, the other dairy produce and products of animal origin have been put together under Heading 0404. Here again, Note (4) specificall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion IV is a clear indication of the classification of these products. This note has therefore, legal force and is not merely an indication of the possible classification as contended by Shri Lakshmi Kumaran. 44. Shri Lakshmi Kumaran has stated that the ratio of Dalmia Dairy Industries decision (supra) was not applicable to the present case because of the presence of malt, which was not accepted as a flavouring agent by the Tribunal. In that case, the Tribunal had held in para 8 of its order that Active 25 which was a food preparation of milk and cream was not classifiable as milk under Heading 0401 because of various additions. There is nothing in this decision to suggest that the presence of malt alone had led to this decision. In fact, cocoa, malt, vitamins and minerals were the other additions besides permissible addition of sugar. A similar view is therefore, possible in respect of Surje which has vitamins as an additive which is not permitted by Note (4) besides other constitutes which are not natural milk constituents. Thus, having considered all the arguments placed before us, we come to the conclusion that the product manufactured by the respondents viz., Surje i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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