1988 (11) TMI 108 - SC - Central Excise

Appeals Court: Non-alcoholic bases not 'food products' for tax exemption. Penalty and limitation issues remanded.

COLLECTOR OF CENTRAL EXCISE Versus PARLE EXPORTS (P) LTD.

COLLECTOR OF CENTRAL EXCISE Versus PARLE EXPORTS (P) LTD. - 1988 (38) E.L.T. 741 (SC), [1989] 75 STC 105 (SC), 1989 AIR 644, 1988 (3) Suppl. SCR 933, 1989 ... Issues Involved:1. Validity of the Central Excise duty demand.2. Classification of non-alcoholic beverage bases under Tariff Item 68.3. Applicability of Exemption Notification No. 55/75-CE.4. Interpretation of 'food products' and 'food preparations.'5. Relevance of previous judicial decisions and trade notices.6. Commercial and common parlance understanding of non-alcoholic beverage bases.7. Purpose and intent of the exemption notification.8. Penalty and limitation issues.Detailed Analysis:1. Validity of the Central Excise duty demand:The respondent-company was found to have manufactured non-alcoholic beverage bases without a proper Central Excise license from 1st March 1975 to 18th April 1979 and cleared the goods without payment of the due duty, evading Rs. 3,50,963.22. The Collector, Central Excise confirmed this demand under Rule 9(2) read with Rule 10 of the Central Excise Rules, 1944, and imposed a penalty of Rs. 25,000/- under Rule 173Q.2. Classification of non-alcoholic beverage bases under Tariff Item 68:The respondent's non-alcoholic beverage bases were classified under Tariff Item 68 of the Central Excise Tariff, which includes 'all other goods not elsewhere specified and manufactured in a factory.' The Tribunal had earlier decided in favor of the respondent, following its decision in Parle Exports (P) Ltd. v. Collector of Central Excise, Baroda, which was challenged by the Revenue.3. Applicability of Exemption Notification No. 55/75-CE:The core issue was whether non-alcoholic beverage bases qualify as 'food products' or 'food preparations' under Exemption Notification No. 55/75-CE. The notification exempts 'all kinds of food products and food preparations' from excise duty. The Tribunal had previously ruled that non-alcoholic beverage bases were covered by this exemption.4. Interpretation of 'food products' and 'food preparations':The court examined various definitions and judicial precedents to determine the scope of 'food products' and 'food preparations.' It referenced the Brooke Bond (India) Limited v. Union of India case, where coffee-chicory blend was not considered a food product. The court emphasized that 'food' has no fixed universal definition and varies from statute to statute. The distinction between food and beverages was crucial, with beverages being treated separately under the Act.5. Relevance of previous judicial decisions and trade notices:The court considered previous decisions, including the Brooke Bond case and the Government of India's decision in Re: Asian Chemical Works, which opined that food flavors and preparations improving taste or appearance do not qualify as food products. The court also reviewed trade notices, such as the Central Excise Trade Notice dated 13th June 1975, which clarified the scope of 'food products/preparations.'6. Commercial and common parlance understanding of non-alcoholic beverage bases:The court noted the lack of direct evidence on how non-alcoholic beverage bases are perceived in commercial parlance. However, it concluded that in ordinary parlance, these bases are not considered food products or food preparations, as an average person would not regard non-alcoholic beverage bases as food.7. Purpose and intent of the exemption notification:The court emphasized that the purpose of the exemption notification was to encourage food production and make essential goods more affordable. It argued that exempting expensive items like Gold-Spot base, Limca-base, or Thumps up-base would not align with this intent.8. Penalty and limitation issues:The court did not address the penalty and limitation issues, leaving them open for the Tribunal to consider afresh. The appeals were allowed to the extent indicated, and the Tribunal's decision was reversed regarding the applicability of the exemption notification.Conclusion:The appeals were allowed, and the Tribunal's decision was reversed. The court held that non-alcoholic beverage bases do not qualify as 'food products' or 'food preparations' under the exemption notification. The penalty and limitation issues were left open for further consideration by the Tribunal. There was no order as to costs.