Commercial meaning of "food products" denied exemption for vinegar, while an unsupported extended limitation demand was set aside.

Synthetically manufactured vinegar was held not to fall within "all kinds of food products" under Notification No. 55/75-C.E., because the expression was construed in its ordinary commercial sense and vinegar, used as a condiment or for pickling, was not treated as a food product or food preparation; the exemption claim failed. The demand covered by the 14-12-1977 show cause notice was also held time barred, as the department did not establish any basis for invoking the extended limitation period; that demand was set aside. The assessee therefore obtained partial relief, with exemption denied but the earlier demand excluded as barred by limitation.

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Issues: (i) Whether synthetically manufactured vinegar was entitled to exemption as an "all kinds of food products" under Notification No. 55/75-C.E. dated 1-3-1975; (ii) whether the demand covered by the show cause notice dated 14-12-1977 was barred by limitation.

Issue (i): Whether synthetically manufactured vinegar was entitled to exemption as an "all kinds of food products" under Notification No. 55/75-C.E. dated 1-3-1975.

Analysis: The exemption was intended for specified classes of goods and the expression "all kinds of food products" had to be construed in its ordinary commercial sense. Vinegar was described as a sour liquid used as a condiment or for pickling, and its use for seasoning or taste did not bring it within the same class as food products or food preparations. The reasoning of the Allahabad High Court on masalas and flavouring substances was found persuasive, and no contrary authority under the notification was shown.

Conclusion: Vinegar was not covered by Notification No. 55/75-C.E. and the claim for exemption failed.

Issue (ii): Whether the demand covered by the show cause notice dated 14-12-1977 was barred by limitation.

Analysis: The record showed that the department did not press any basis for invoking the extended period, and there was no foundation for treating the demand as within time under the longer limitation. On the facts noted, the demand relating to the earlier period could not be sustained as time barred.

Conclusion: The demand covered by the show cause notice dated 14-12-1977 was barred by limitation.

Final Conclusion: The exemption claim in respect of vinegar was rejected, but the time-barred demand was set aside, resulting in partial relief to the assessee.

Ratio Decidendi: An item used only as a condiment or seasoning aid does not become a "food product" for the purpose of a fiscal exemption notification unless the notification, read in its commercial context, clearly so covers it; a demand unsupported by a valid basis for the extended limitation period cannot be sustained.

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