TMI Blog2015 (10) TMI 1725X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the impugned product. There is change of character of the goods of different properties as per viscosity used in various industries. - the activities undertaken by the Appellant would amount to manufacture. - Decided against the assessee. Classification - Held that:- the Guar Dal Flour/Powder was modified by chemical reaction in order to improve their properties as per end use of the product in various industries. So, it is rightly covered under Chapter 13 of the CETA. Extended period of limitation - bonafide mistake - Held that:- Considering the overall facts and circumstances of the case, we are of the view that the extended period of limitation cannot be invoked. In the case of M/s Ravi Gum Industries [2007 (10) TMI 272 - CESTAT, AHMEDABAD], the Appellant is a job worker. As the matter is related to interpretation of manufacturing and classification of the goods, imposition of penalty on the Appellants cannot be sustained. Demand of duty confirmed for the normal period of limitation with Interest - Penalty waived - Decided partly in favor of assessee. - Appeal No.E/196,197,1305-1308/2003 - Order No.A/11271-11276/2015 - Dated:- 28-8-2015 - MR. P.K. DAS, ME ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent back to Division Bench. On perusal of the order of Hon ble Supreme Court, we find that the Hon ble Supreme Court set aside the impugned orders and directed that the matter shall be decided by the Larger Bench within six months from that date. So, we proceed to decide the appeals as per direction of the Hon ble Supreme Court. 4. The relevant portion of the Order dt.01.05.2015 of the Hon ble Supreme Court is reproduced below:- It is argued by Mr. Radha Krishnan, learned Senior Counsel appearing for the Appellants that it was pointed out before the Tribunal that in the case of Dilip Gum Industries Vs CCE, Rajkot (Order No.A/772-773/WAB/2004/C-II), dt.01.09.2004, the Tribunal held that Guar Gum is classifiable under Heading 1301.10. The Tribunal further noted that in another judgment given by the another Bench of the Tribunal viz. Hindustan Gum Chemicals Ltd Vs CCE Ahmedabad-II [2004 (91) ECC 289] where the case is concerned Tamarind Kernal Powder (a kind of gum only), it was held to be classified under Chapter 11 as the product of milling industry and not a gum fall under Heading 13.01. Submission of Mr.K. Radhakrishnan is that in the aforesaid situation, the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers visited the premises of M/s Kraps. The said officers were of the opinion that M/s Kraps was engaged in the manufacture of Guar Dal Powder, known as Guar Gum, classifiable under Sub Heading No.1301.10 of the Schedule to the Central Excise Tariff Act, 1985 (in short the CETA) and liable to pay duty and they cleared the goods without obtaining Central Excise registration for manufacture and clearance of the same. The officers also recorded the statements of Shri R.P. Gupta, Managing Director of M/s Kraps on different dates. The Central Excise Officers also seized the goods on the reasonable belief that the same were excisable goods. 5.1 A show cause notice dt.19.12.2000 was issued by the Commissioner of Customs Central Excise, Surat-II, proposing that the goods should be classified under Heading No.1301.10 of CETA, demand of duty of ₹ 92,53,196.00 alongwith interest and to impose penalty, for the period 1997-98 to June 2000. It has also proposed to confiscate the seized goods under Rule 173Q(1) of erstwhile Central Excise Rules, 1944. 5.2 By the impugned order, the Adjudicating authority confirmed the classification of Guar Dal Powder as Guar Gum under sub-heading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order, the Commissioner (Appeals) upheld the Adjudication order, subject to penalty imposed under Rule 173Q of erstwhile Rules on M/s Ravi Gum was set aside and the penalties imposed on other Appellants were reduced. 6.4 M/s Ravi Gums and other Appellants filed appeals before the Tribunal. By Final Order No.A/2706-2709/WZB/AHD/2007, dt.12.10.2007, the Tribunal, following the Tribunal s earlier decision in the case of M/s Kraps Chem P. Ltd (supra), set aside the impugned order, and allowed the appeals with consequential relief to all the Appellants. Revenue filed the appeals against the order of the Tribunal before the Honble Supreme Court. By Order dt.01.05.2015, the Hon ble Supreme Court set aside the Tribunals order and remanded the matter to the Tribunal as stated above. 7. The learned Advocates Shri Gajendra Jain, Shri Jigar Shah and Shri Anand Nainawati appearing on behalf of the M/s Kraps and its Directors submit that the demand of duty alongwith interest and penalty would not sustain, mainly on three counts. Firstly, the process undertaken by the Appellant would not amount to manufacture under Section 2(f) of the Central Excise Act, 1944. It is a mere mixing of Gaul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a change of character, use and identity of the goods. The Chemical Examiner has also reported that the sample is in the form of white powder and it qualifies as Guar Gum. Further, the gum is clearly covered in the heading 13.01 of the CETA. There is no indication in Chapter 13 of CETA that a part of the gum would cover in Chapter 11. Furthermore, the Appellant had not disclosed in the declaration that they were using power and therefore, the extended period of limitation would be invoked. The Appellant had not taken any registration and imposition of penalty is warranted. The learned Authorised Representative also submitted written submission with compilation of case laws during the course of hearing. 10. After hearing both the sides and on perusal of the records, we find that the first issue is that whether the process undertaken by the Appellant would amount to manufacture. The learned Advocate submits that the Appellants had mixed Guar Dal Flour/Powder (75%), Guar Dal Powder/Saw Dust (5-10%) and TKP (10-15%) in a blender. There was no chemical reaction amongst the ingredients of the mixture. The product, after process, was sold as Guar Dal Powder. The Guar Dal Flour/Powder af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redients used in different grades of their finished products are as follows:- (1) For Paper Industries:- They supplied Guar Dal Powder known as paper aid which contains Guar Dal flour of 100 Hp or 150 Mesh + TKP (Tamarind Seed Powder) 30% to 50% and Glyxol and Methanol about 1% and no other inputs were used for making of this grade of finished goods supplied to Paper Industries. They used to blend the whole inputs with the help of blender which was working with the aid of power for about 1 to 2 hours. Thereafter, they used to test the finished goods for checking of its viscosity and solubility with the help of Viscometer and such finished products were having Viscosity 800 to 1200 CPS and solubility in water tested. There was no criteria for the solubility percentage. (2) For Mosquito Coils and Explosive Industries:- Finished product supplied to Mosquito coils manufacturer and manufacturers of explosive item, the grade of their finished goods remains same. The ingredients used for making these products were Guar Dal Flour of 200 Meshm+ TKP about 5 to10% or Guar dust of 5 to 10% and when used both percentage remains same. On being asked, he deposed that except above inputs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would amount to manufacture. 13. The Tribunal in the case of M/s Hindustan Gums Chemicals Ltd 2012 (supra), while dealing with the product Treated Tamarind Kernal Powder produced by the Appellant held that the process undertaken by the Appellant would amount to manufacture. The relevant portion of the findings of the Tribunal in the case of M/s Hindustan Gums Chemicals Ltd 2012 (supra) is reproduced below:- 13. We have considered arguments on both sides. We find that the chemical process carried out gives the product a different molecular structure and makes it suitable for a different use. Any person wanting to use Tamarind Powder as thickener in textile industry will not buy and use such powder unless it is subjected to the processes that the appellants are carrying out. So prima facie the processes constitute a manufacturing process. We have also considered the decisions of the Apex Court cited by the Counsel. In para 10 above we have noted the facts, circumstances and law that resulted in the quoted decisions. In the case of Thungabhadra Industries the decision was not in the context of the meaning of manufacture in Central Excise Act. The decisions was only to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle emerges which has distinct name, character or use. (c) CCE Vs Osnar Chemicals Pvt.Ltd. 2012 (276) ELT 162 (SC) It has been held that mixing polymer and additives to heated Bitumen resulting in emergence of Polymer Modified Bitumen (PMB) and Crumbled Rubber Modified Bitumen (CRMB) would not amount to manufacture. There was no change in characteristics or identity of Bitumen only its grade or quality was improved. The impugned process did not result in transformation of Bitumen into new product having different identity, characteristics and end use, which remains same. (d) Laljee Godhoo Co. Vs CCE 2001 (132) ELT 287 (T) It has been held that blending of gum Arabic and wheat flour in sigma mixers and then pouring of filtered water mixed asafetida resulting in lump or powder and no chemical change brought about in asafetida. There is no change in essential character of product and process does not amount to manufacture. In the above cases, there was no change of character, use of identity of the goods. In the present case, it is already observed that the process undertaken by the Appellant, would change the character, identity and end use of the product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erm resin, saps, and extracts would cover only plant exudates/extracts. So, the word gum appearing in Heading No.1301 would cover only gums, which are in the nature of plant exudates and extracts. It is supported by the principle of interpretation known as Noscitus a Sociis. The Hon ble Supreme Court in the case of Pardeep Agarbatti, Ludhiana Vs State of Punjab Others 1997 (8) SCC-511 applied the principle of Noscitus a Sociis for the purpose of interpretation of taxing entry. We find that the maxim of Noscitus a Sociis would apply where a word or phrase can not be construed as it stood, and it is to be judged in the light of its surrounding words. In the present case, we are unable to accept the submissions of the learned Advocate for the reason that Heading No.1101 covers the products of Milling Industries, including flour, groats, meal, grains of cereals and flour, meal or flakes of vegetables. On the other hand, Heading No.1301 categorically covers gum . In our considered view, the description of Heading No.1301 does not distinguish between seed gum and plant exudates/extracts. The classification of goods would not depend upon varieties of goods, unless it is mentioned speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the other Heading 13.01 mentions gums which is a description which will cover the product better. The Appellants are relying on the entries in Heading 13.01 of the HSN which mentions natural gums to argue that the impugned product will fall outside the scope of Heading 13.01 of Central Excise Tariff. The word Natural occurring in 13.01 of HSN is conspicuous by its absence in Heading 13.01 of the Central Excise Tariff. 20. Let us now examine the matter with reference to HSN notes. As per HSN notes. Tamarind kernel powder is mentioned in the notes under Heading 11.06 and Heading 13.02 of HSN is reproduced below. Note (C) under Heading 11.06 (C)?Flour, meal and powder of the products of Chapter 8. The principal fruits or nuts of Chapter 8 which are made into flours, meals or powders are chestnuts, almonds, dates, bananas, coconuts and tamarinds. The heading also includes flour meal and powder of peel of fruits. However the heading does not cover tamarind powder in packings for retail sale for prophylactic or therapeutic purposes (Heading 30.04) Note C (5) under Heading 13.02 Cotyledon flour of tamarind seeds (Tamarindus indica). These flours ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Declaration dt.29.09.1997. The learned Authorised Representative on behalf of the Revenue submits that the Appellant had not disclosed that the process was undertaken with the aid of power. On perusal of the Declaration, we find that the Appellant had given the process carried out by them and the blender is switched on, implied the use of power, as under:- The blender is switched on, guar dal powder stored in raw material godown is weighed and put in the ribbon blender with the help of material handling equipment. When blender is filled with required quantity, additives are added to prepare the guar dal powder as per consumer needs, the finished guar powder is drawn and tested in lab, and then packed in 50 Kgl. HDPE bags and finally dispatched to customer. 21. In any event, there were contrary decisions of the co-ordinate Benches of the Tribunal on this issue. The learned Advocate submits that the Appellant acted on a bonafide belief and the goods were treated as non-excisable in the entire trade and parlance. It is noticed that the appellants own case, the Tribunal in earlier occasion, observed that the impugned goods are NIL rate of duty under Chapter 11 of CETA. S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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