TMI Blog2007 (2) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... 06-07 (upto 25-4-2006) under Section 11A of the Central Excise Act 1944 (the Act) and imposed a penalty of equal amount under Section 11AC of the Act. The order directed recovery of interest of Rs.27,02,035/- under Section 11lAB of the Act and appropriated Rs. 15 lakhs towards value of some quantity of the impugned product seized and provisionally released earlier, under Rule 25 of the Central Excise Rules, 2002. 2. The facts of the case are that following investigation by the officers of the Commissionerate, it was tentatively found that the assessee had manufactured and cleared the product "Indian Noni" classifiable as a food preparation under CSH 210899 and 21069099 (after 28-2-2005) of the Central Excise Tariff Act without payment of duty from 2003 onwards. On receipt of the Show Cause Notice, the assessee had contested the proposals on the ground that the impugned juice was made from fruits of morinda citrifolia, garcinia cambogia and leaves of stevia. The process of manufacture involved steam boiling, filtering, deaeration and homogenization of the above ingredients and adding of preservatives citric acid, sodium benzoate and and flavours like sorbitol before packing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious raw materials that went into the production of the impugned goods. The main ingredients were morinda citrifolia, garcinia cambogia and stevia. They were used in the form of a mixture in the ratio 73:3.56:3.56, balance being other raw materials. The Commissioner found that the main ingredient morinda citrifolia was a fruit with bitter taste and offending smell. This was not eaten by people in India but was a tribal medicine in several countries used to treat various diseases. It was eaten by people in some African countries during times of famine. The other ingredient carcinia cambogia (Malabar tamarind) was grown in Asia and had several medicinal uses. Stevia, the third major ingredient, also called sweet leaf, was a sweetener widely used in several countries and was found useful in treating obesity, high blood pressure and hypertension. 4. The Commissioner recorded the process of manufacture in the impugned order as follows :- 'The basic raw materials Morinda Citrifolia (in the form of pulp or powder) and extracts of Garcinia Cambogia and Stevia are mixed together and : led in a kettle to 100 degree centigrade to obtain a decoction and the obtained decoction is passed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not be called an edible fruit owing to its offensive smell which induced vomiting. By boiling, the offensive odour and taste were removed and its nutritive and prophylactic properties were captured in the decoction. The final product did not contain any form of Noni fruit, but the essence of the fruit powder mixture (containing predominantly Noni fruit powder). Food preparations based on essences of fruit powder mixture were not covered under Chapter 20. Food preparations made by boiling the mixture of raw materials were not covered under Chapter 20. These were appropriately covered under Chapter Heading 21.06. 4.3 The cartons and labels advised dosages such as 5 ml twice daily for the first three days, 10 ml twice daily for the next three days and 15 to 30 ml twice daily from the 7th day onwards . This showed that the product was not fruit juice. The requirement to acclimatize the consumer's system to the drink (as advised in the "Directions for Drinking" supplied by the assessee), by the use of small incremental doses initially was not there in the case of normal fruit juices. The literature enlisted side effects which were also not attributable to normal fruit juice mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al. The Commissioner went on to find that 'Indian Noni' had no nexus with the fruits/fruit preparations mentioned in Chapter 20. It was an edible preparation in the nature of a tonic, a food supplement. Following the initial statements of Dr. P.I. Peter, CMD of the appellant firm, the literature and label on the product, the adjudicating authority decided that 'Indian Noni' was, classifiable as "fruit preparation not elsewhere specified or included" in the residuary Chapter Heading 2106.99 upto the period 27-2-2005 and under Tariff item 2106.90.99 from 28-2-2005 onwards under the I Schedule to CETA, 1985. 4.5 The Commissioner found that the appellants had failed to observe various Central Excise formalities after crossing turnover of Rs. 40 lakhs in the years 2004-05, 2005-06, and 2006-07. He also observed that even if the item was classified as fruit juice, the same was dutiable during 2005-06. The assessee had deliberately suppressed facts relating to manufacture and clearance of dutiable goods with intent to evade payment of duty. Therefore, extended period was found invokable. The goods seized and provisionally released earlier was liable for confiscation. He found that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso imposable under Section 11AC or Rule 25 in the circumstances. The dispute being one involving the question of classification could not attract any penalty as per various judicial authorities. 7. The representative of the appellants cited the decision of the Hon'ble Supreme Court in CCE, Shillong v. Woodcraft Products reported in 1995 (77) E.L.T. 23 (S.C.) to support the claim that the explanatory notes in HSN had to be adopted as a guide to classify products where the entries in the HSN and the CETA schedule were pari materia. He also cited the decision of the Apex Court in Akbar Badruddin Jiwani [1990 (47) E.L.T. 161 (S.C.)] to buttress the claim that when the rival entries were scientific in the HSN, a technical and scientific approach had to be followed. Therefore common parlance test could not be applied in the instant case. Several judgments were cited in support of the plea that specific entry had to be preferred to a residuary entry in classifying goods. 8. The appellants sought support for classification of the impugned product under Chapter heading 20.09 from the case law Forever Living Health v. CCE, Mumbai-I, 2006 (193) E.L.T. 45 (Tri.-Mumbai)]. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecified or included'. 11. There is no dispute as to the ingredients contained in the impugned product; 73% of the raw materials is a fruit called "morinda citrifolia", 3.56% is a sweet leaf called "stevia", another 3.56% is another fruit called "garcinia cambogia . The product also contains citric acid (10%) sodium benzoate (1.62%), flavours such as sorbitol (2.7%), and carboxy methyl cellulose. The product is manufactured by boiling morinda citrifolia (in the form of pulp or powder) and extracts of garcinia combogia and stevia together at 100 degrees centigrade. Citric acid, sodium benzonate and sorbitol are added to the filtered decoction. The resultant product is filtered and homogenized in a homogenizer to obtain the final product. Indian Noni is rich in vitamins minerals and contained small amounts of proteins, carbohydrates and fat. 12. The assessee had claimed through its literature that the product had several curative properties against various diseases, it developed immunity in a person against major diseases and enhanced health and well being. Fruit juice is not prepared by boiling fruit extracts like in the instant case. The main raw material is not an edible f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, the chapter headings of Chapter 20 and Chapter 21 were pan materia with the corresponding headings in HSN. Applying Rule 1, the impugned product appeared to fit both in the entry for mixture of juices of Chapter 20 and food supplements of Chapter 21. We have to decide which of the above is the more appropriate entry. 16. In Akbar Badruddin Jiwani v. Collector of Customs - 1990 (47) E.L.T. 161 (S.C.) the Apex Court held: "It is well settled that in Taxing Statute the words used are to be understood in the common parlance or commercial parlance but such a trade understanding or commercial nomenclature can be given only in cases where the word in the Tariff Entry has not been used in a scientific or technical sense and where there is no conflict between the words used in the Tariff Entry and any other Entry in the Tariff Schedule." 17. In view of the two entries claiming the product for classification in either, common parlance test and trade understanding cannot be resorted to in classifying the product in the instant case. Classification has to be necessarily guided by HSN explanatory notes and common parlance test has to be discarded. 18. During the material peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d; lactose syrup, glucose syrup and malto dextrine syrup Kg 16% 2106 90 50 Compound preparations for making non-alcoholic beverages Kg 16% 2106 90 60 Food flavouring material Kg 16% 2106 90 70 Churna for pan Kg 16% 2106 90 80 Custard powder Kg 16% Other 2106 90 91 Diabetic foods Kg 16% 2106 90 92 Sterilized or pasteurized miltone Kg Nil 2106 90 99 Other Kg 16% 20. The heading 21.06 of Central Excise Tariff covers different entries including diverse food preparations such as protein concentrates, pan masala, supari, choorna for pan, diabetic foods etc. The classification decided by the Commissioner is 21069099 under 'sub-heading 210690 - Other', the lone preceding sub-heading in the chapter sub-heading 21.06 being protein concentrates and textured protein substances. As per the HSN, heading 21.06.90 obviously covers only food preparations not elsewhere specified other than 'protein concentrates and textured protein substances'. 20.1 Judgments of the Apex Court mandate th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f any doubt the HSN is a safe guide for ascertaining the true meaning of any expression used in the Act. The ISI Glossary of 'Terms has a different purpose and, therefore, the of specific purpose of tariff classification for which the internationally accepted nomenclature in HSN has been adopted, for enacting the Central Excise Tariff Act, 1985, must be preferred, in case of any difference between the meaning of the expression given in the HSN and the meaning of that term given in the Glossary of Terms of the ISI." 14. It is further observed in Para 18: "…Since the Central Excise Tariff Act, 1985 is enacted on the basis and pattern of the HSN, the same expression used in the Act must, as far as practicable, be construed to have the meaning which is expressly given to it in the HSN when there is no indication in the Indian Tariff of a different intention." 21. HSN Explanatory Note (16) under sub-heading 21.06 reads as follows :- "Preparations, often referred to as food supplements, based on extracts from plants, fruit concentrates, honey, fructose, etc. and containing added vitamins and sometimes minute quantities of iron compounds. These preparations are often put up in p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the essential character of the preparations is given by such fruit, nuts or other edible parts of plants (heading 20.08)." 23. As per the above exclusion under Note (16) of heading 21.06, preparations made front fruit, nuts or other edible parts or plants of heading 20.08 are not covered by heading 21.06 provided that the essential character of the preparations is given by such fruit, nuts, or other edible parts of plants. This fortifies the finding that Indian Noni is a fruit juice falling under 20.09 as fruits and vegetables give essential character to the preparation. It cannot be denied that the essential character of the product is given by the fruits Noni, Garcinia and the Stevia leaves. 24. In view of our analysis and finding as above, we hold that the product in question is rightly classifiable under Chapter Heading 20.09 (upto 27- 2-2005) and under Heading 20099000 of the Central Excise Tariff for the remaining period. The appeal therefore succeeds and is allowed. 25. Since we have allowed the assessee's appeal on classification, we have not considered the other issues raised in the appeal. (Pronounced in open Court on 13-2-2007) - - TaxTMI - TMITax - Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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