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M/s. Satnam Overseas Ltd. Versus Commnr. of Central Excise, New Delhi

Manufacture - packing combination of mixture of raw rice, dehydrated vegetables and spices in the name of 'Rice and Spice'. - Classification under Heading 11.01 or under sub-heading 21.08 - Held that:- it is clear that there is no dispute about the legal proposition that the process would be treated as “manufacture” only if new product known to the market comes into existence with original product losing its original character. - mere addition of dehydrated vegetables and certain spices to the r .....

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e cooked. Therefore, we do not agree with the CEGAT that there is a transformation into a new commodity, commercially known as distinct and separate commodity. - Activity undertaken by the assessee does not amount to manufacture, this appeal is liable to succeed on this ground itself inasmuch in the absence of any manufacture there is no question of payment of any excise duty. - We may, however, remark that even otherwise the classification of the product by the Revenue under sub-headin .....

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continues to be the product of the milling industry and would be classifiable under sub-heading 11.01. Rate of duty on this product, in any case, is 'nil'. - Decided in favour of assessee. - Civil Appeal No. 8958 of 2003 - Dated:- 18-3-2015 - A. K. Sikri And Rohinton Fali Nariman,JJ. For the Appellant : M/s. L.Charanaya, V.Lakshmikumaran,M. P. Devanath,Vivek Sharma,Aditya Bhatacharya, Prashanth S.Shivadass,R.Ramachandran and Mr. Rajesh Kumar,Advs. For the Respondent : Mr. A.K.Sanghi,Sr.Adv. Ms. .....

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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. 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 a .....

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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, .....

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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 pac .....

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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. 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 .....

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s 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 .....

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n by pointing out that a specific finding was arrived at by the Tribunal, affirming the finding of the quasi-judicial authorities below to the effect that a new product had come into existence as a result of the processes undertaken by the assessee. It was specifically held by the CEGAT that rice did not remain rice at all as a mixed product containing rice, vegetable and spices emerges after the specific process was undertaken by the assessee. He also referred to those observations of the CEGAT .....

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xistence a new product, that particular edible product had to be fallen under Chapter 11 of the Tariff as it is not a product of milling industry not classifiable under Chapter 11 of the Tariff. From the aforesaid arguments advanced by counsel on the either side, it is clear that there is no dispute about the legal proposition that the process would be treated as manufacture only if new product known to the market comes into existence with original product losing its original character. The only .....

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e assessee was engaged in the business of marketing betel nuts in different sizes after processing them by adding essential/nonessential oils, menthol, sweetening agent etc. Initially, the assessee cleared the goods under Chapter Sub-heading 2107 of the Central Excise Tariff and was paying duty accordingly. However, the assessee filed a revised classification declaration under Rule 173B of the Central Excise Rules, 1944, with effect from 17th July, 1997, claiming classification of its product un .....

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he authorities below had decided against the assessee, this Court reversed the said view holding that the said process would not amount to manufacture' as the process involving manufacture does not always result in the creation of a new product. In the instant case notwithstanding the manufacturing process, it could not be said that a transformation had taken place resulting in the formation of a new product. The relevant portion of the judgment is reproduced below: 30. In our view, the proc .....

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es a change, but every change of not manufacture and yet every change of an article is the result of treatment, labour and manipulation is apposite to the situation at hand. The process involved in the manufacture of sweetened betel nut pieces does not result in the manufacture of a new product as the end product continues to retain its original character though in a modified form. What is to be highlighted is that even after the betel nut which had been cut to different sizes and had undergone .....

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learned counsel for the appellant is Commissioner of Central Excise vs. Laljee Godhoo & Co. (2007 (216) ELT 514 (S.C). Vide this judgment the Court affirmed the view taken by the CEGAT, holding that the process of subjecting raw asafoetida (hing) resulting in formation of compounded asafoetida does not amount to manufacture, even when this process has undergone chemical change, because of the reason that the said chemical change had not brought even after it underwent a process, any new pro .....

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hus: The gum Arabic and wheat flour are blended in the sigma mixers. Filtered water mixed asafoetida is then poured slowly into the mixer over the gum and wheat flour. This gets the product ready. Further the resultant product is given a heat treatment by suction in pipes through which a heater is attached and the moisture is sucked out. The powder is then passed through a hammer mill where it is crushed thoroughly. This powder is then passed through a sieve, which contains magnet balls absorbin .....

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his judgment was upheld by this Court in the said case. This para is to the following effect: It is common ground that the processes to which the raw asafoetida is subjected, resulting in the lump or powder which is sold does not bring about any chemical change in the asafoetida.The process, as we have seen, is nothing more than the addition to the asafoetida of wheat flour and gum arabic.It is stated that gum Arabic is added in order that the particles of the asafoetida and wheat flour adhere t .....

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d form only as an addition to food preparation, flavouring agent or for the medicinal properties that it is reputed to possess. Again the test which was applied was that essential character of the product did not change and, therefore, it would not amount to manufacture. It was so held even when gum arebic as well as wheat flour were mixed in the process. A pertinent aspect which was noted was that mixing of these articles did not result in chemical reaction with asafoetida. Last judgment to whi .....

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be sealed under temperature and then put in a boiled water for sterlisation. Identical question was posed viz. whether this process amounted to manufacture'. Giving the answer in the negative, the Court held that even when with each process suffered, the original commodity experienced a change, such a change would not amount to manufacture' unless it seized to be the original commodity and a new and distinct article was produced therefrom. This is explained in detail in paras 4 and 5 of .....

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test is whether the article produced is regarded in the trade, by those who deal in it, as distinct in identity from the commodity involved in its manufacture. Commonly, manufacture is the end result of one or more processes through which the original commodity is made to pass. The nature and extent of processing may vary from one case to another, and indeed there may be several stages of processing and perhaps a different kind of processing at each stage. With each process suffered, the origina .....

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Although it has undergone a degree of processing, it must be regarded as still retaining its original identity. 5. A large number of cases has been placed before us by the parties, and in each of them the same principle has been applied: Does the processing of the original commodity bring into existence a commercially different and distinct article ? Some of the cases where it was held by this Court that a different commercial article had come into existence include Anwarkhan Mehboob Co. v. The .....

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though the original commodity has undergone a degree of processing it has not lost its original identity include Tungabhadra Industries Ltd., Kurnool v. Commercial Tax Officer, Kurnool (where hydrogenated groundnut oil was regarded as groundnut oil) and Commissioner of Sales Tax, U.P., Lucknow v. Harbiles Rai and sons (where bristles plucked from pigs, boiled, washed with soap and other chemicals and sorted out in bundles according to their size and colour were regarded as remaining the same com .....

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acter of the product did not undergo any change, which is the determinative factor, inasmuch as pineapple remained the pineapple; albeit in slice form and continued to be known as pineapple in the market. For this proposition the Court decided to rely upon a foreign judgment where the U.S. Supreme Court had held that dressed and frozen chicken was not a commercially distinct article from the original chicken. Detailed discussion of the said judgment appears in para 7 which reads as follows: 7. W .....

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lso observed: ……………………there is hardly less difference between cotton in the field and cotton at the gin or in the bale or between cotton seed in the field and cotton seed at the gin, than between a chicken in the pen and one that is dressed. The ginned and baled cotton and the cotton seed, as well as the dressed chicken, have gone through a processing stage. But neither has been manufactured in the normal sense of the word. Referring to Anh .....

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entity through the processing stage we cannot say that it has been manufactured. The comment applies fully in the case before us. Although a degree of processing is involved in preparing pineapple slices from the original fruit, the commodity continues to possess its original identity, notwithstanding the removal of inedible portions, the slicing and thereafter canning it on adding sugar to preserve it. It is contended for the Revenue that pineapple slices have a higher price in the market than .....

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he had in mind something very different from fresh pineapple fruit. Here again, the distinction in the mind of the consumer arises not from any difference in the essential identity of the two, but is derived from the mere form in which the fruit is desired. Learned counsel for the Revenue contends that even if no manufacturing process involved, the case still falls within Section 5(1)(a) of the Kerala General Sales Tax Act, because the statutory provision speaks not only of goods consumed in the .....

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under goes transformation and it becomes a distinctive and new product. When we apply the aforesaid principle to the facts of this case, it is clear that mere addition of dehydrated vegetables and certain spices to the raw rice, would not make it a different product. Its primary and essential character still remains the same as it is continued to be known in the market as rice and is sold as rice only. Further, this rice, again, remains in raw form and in order to make it edible, it has to be c .....

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