TaxTMI 
TaxTMI 
2012 (12) TMI 149
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....akes, soft-serve etc. through its fast food chain of restaurants, named above. In so far as the manufacture and service of 'soft serve' is concerned, the assessee used to procure soft serve mix in liquid form from one M/s Amrit Foods, Ghaziabad; at Amrit Foods, raw milk was pasteurised, skimmed milk powder was added (the milk fat content in the said mixture is stated to be 4.9%, not exceeding 6% at any stage); sweetening agent in the form of sugar or glucose syrup and permitted stabilizers were added; the mixture, in liquid form, was then homogenized, packed in polyethylene pouches and stored at 0 to 40C. This material was then transported to the outlets under the same temperature control, where the liquid mix was pumped into a 'Taylor-make' vending machine; further cooled along with the infusion of air, and finally, the end product, 'soft serve', was drawn through the nozzle into a wafer cone or in a plastic cup and served to the customers at the outlet. 3. For the periods from April 1997 to March 2000, three show cause notices came to be issued to the assessee. These alleged that the 'soft serve' ice-cream was classifiable under Chapter 21, relating to "Miscellaneous Edible Pr....
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....' amounted to manufacture and that 'soft serve' was classifiable under sub-heading 2108.91, describing the goods as "Edible preparations, not elsewhere specified or included" - "not bearing a brand name", attracting nil rate of duty. The Tribunal held thus:- "In view of the technical literature, ISI Specification and provisions made in Prevention of Food Adulteration Act, 1955 and Rules made thereunder, the impugned product cannot be classified as icecream merely on the ground that the consumer understood the same as ice-cream or the ingredients of both the products are same. The statement given by the Managing Director also cannot be a basis for determining the exact classification of the product in the Central Excise Tariff. The ratio of the decision in the case of Shree Baidyanath Ayurved Bhavan Limited case is not applicable to the facts of the present matter. The dispute in the said case was as to whether the 'Dant Manjan Lal' is Ayurvedic medicine or 'Tooth Powder'. In that context, the Supreme Court observed that resort should not be had to the scientific and technical meaning of the terms and expressions used but to their popular meaning, which does not mean that i....
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....erve'. "Ice-cream", the world over, is commonly understood to have milk fat content around 10% whereas 'soft serve' does not contain milk fat of more than 5%. 9. Referring to the technical meaning of "ice-cream", given in Kirk-Othmer Encyclopedia of Chemical Technology, Third Edition - Volume 15 and "Outlines of Dairy Technology" by Sukumar De, learned counsel vehemently submitted that all these books describe "ice-cream" as a dessert, which is frozen to a hard stage, whereas, soft serve dispensed through the Taylor machine is served in a semi-solid state, by processing the pre-mix by blowing air into it. 'Soft serve' is not as hard as an ice-cream is, and thus, cannot be called as "ice cream" even if tested on the touchstone of the common parlance test. The main thrust of the submission of the learned counsel was that if the assessee markets 'soft serve' as "ice-cream", they will be liable to prosecution under the PFA, because the milk fat content in 'soft serve' is less than 10%, a statutory requirement for manufacture of "ice-cream". In support of the submission, learned counsel commended us to the decision of this Court in State of Maharashtra Vs. Baburao Ravaji Mharulkar & ....
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....iption of goods Rate of duty (1) (2) (3) (4) 21.05 2105.00 Ice cream and other edible ice, whether or not containing cocoa 16% 21.08 Edible preparations, not elsewhere specified or included 2108.91 Not bearing a brand name Nil" 13. Chapter 4 of the Tariff Act reads "dairy produce; edible products of animal origin, not elsewhere specified or included." Heading 04.04 is applicable to "other dairy produce; or edible products of animal origin which are not specified or included elsewhere." As is evident from Chapter note 4, the terms of heading 04.04 have been couched in general terms with wide amplitude. Chapter note 4 reads: "4. Heading No. 04.04 applies, inter alia, to buttermilk, curdled milk, cream, yogurt, whey, curd, and products consisting of natural milk constituents, whether or not containing added sugar or other sweetening matter or flavoured or containing added fruit or cocoa and includes fats and oils derived from milk (e.g. milkfat, butterfat and butteroil), dehydrated butter and ghee." 14. On the other hand, Chapter 21 of the Act is applicable to "Miscellaneous Edible Preparations". He....
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....l setting to discover the object which the Act seeks to serve and the purpose of the amendment brought about. The task of interpretation of the statute is not a mechanical one. It is more than mere reading of mathematical formula. It is an attempt to discover the intention of the legislature from the language used by it, keeping always in mind, that the language is at best an imperfect instrument for the expression of actual human thoughts. It is also idle to expect that the draftsman drafted it with divine prescience and perfect and unequivocal clarity. Therefore, court would endeavour to eschew literal construction if it produces manifest absurdity or unjust result. In Manmohan Das v. Bishun Das : 1 SCR 836, a Constitution Bench held as follows: "...The ordinary rule of construction is that a provision of a statute must be construed in accordance with the language used therein unless there are compelling reasons, such as, where a literal construction would reduce the provision to absurdity or prevent manifest intention of the legislature from being carried out." 17. Therefore, in order to find an appropriate entry for the classification of 'soft serve', it would be ne....
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....n the Act or any of the Acts in pari materia. They are ordinary words in every-day use and are therefore, to be construed according to their popular sense. 20. In Ramavatar Budhaiprasad Etc. Vs. Assistant Sales Tax Officer, Akola (1962) 1 SCR 279, the issue before this Court was whether betel leaves could be considered as "vegetables" in the Schedule of the C.P. & Berar Sales Tax Act, 1947 for availing the benefit of exemption. While construing the import of the word "vegetables" and holding that betel leaves could not be held to be "vegetables", the Court observed thus: "...But this word must be construed not in any technical sense nor from the botanical point of view but as understood in common parlance. It has not been defined in the Act and being a word of everyday use it must be construed in its popular sense meaning "that sense which people conversant with the subject matter with which the statute is dealing would attribute to it." 21. In Commissioner of Sales Tax, Madhya Pradesh Vs. Jaswant Singh Charan Singh (1967) 2 SCR 720, the Court had to decide whether "charcoal" could be classified as "coal" under Entry I of Part III of Schedule II of the Madhya Pradesh....
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....ot open to question. Technical and scientific tests offer guidance only within limits. Once the articles are in circulation and come to be described and known in common parlance, we then see no difficulty for statutory classification under a particular entry." 23. In Shri Bharuch Coconut Trading Co. and Ors. Vs. Municipal Corporation of the City of Ahmedabad & Ors. 1992 Suppl.(1) SCC 298, this Court applied the test as "would a householder when asked to bring some fresh fruits or some vegetable for the evening meal, bring coconut too as vegetable (sic)?" The Court held that when a person goes to a commercial market to ask for coconuts, "no one will consider brown coconut to be vegetable or fresh fruit much less a green fruit. No householder would purchase it as a fruit." Therefore, the meaning of the word 'brown coconut', and whether it was a green fruit, had to be "understood in its ordinary commercial parlance." Accordingly it was held that brown coconut would not be considered as green fruit. 24. In Indian Aluminium Cables Ltd. Vs. Union of India & Ors. (1985) 3 SCC 284, this Court observed the following: "...This Court has consistently taken the view that, in det....
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....ugh it comes within the ambit of the technical term used in a particular entry, has acquired some other meaning in market parlance. For example, if a type of explosive (RDX) is known in the market as Kala Sabun by a section of the people who uses these explosives, the manufacturer or importer of these explosives cannot claim that the explosives must be classified as soap and not as explosive." 27. There is a catena of decisions that has dealt with the classification of Ayurvedic products between the categories of medicaments and cosmetics and in the process made significant pronouncements on the common parlance test. 28. In Shree Baidyanath Ayurved Bhavan Ltd. Vs. Collector of Central Excise, Nagpur (1996) 9 SCC 402, at page 404 this Court while applying the common parlance test held that the appellant's product "Dant Lal Manjan" could not qualify as a medicament and held as follows: "The Tribunal rightly points out that in interpreting statutes like the Excise Act the primary object of which is to raise revenue and for which purpose various products are differently classified, resort should not be had to the scientific and technical meaning of the terms and expressi....
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....ccording to their popular meaning. In other words they have to be constructed in the sense that the people conversant with the subject-matter of the statute, would attribute to it. Resort to rigid interpretation in terms of scientific and technical meanings should be avoided in such circumstances. This, however, is by no means an absolute rule. When the legislature has expressed a contrary intention, such as by providing a statutory definition of the particular entry, word or item in specific, scientific or technical terms, then, interpretation ought to be in accordance with the scientific and technical meaning and not according to common parlance understanding. Classification of 'Soft-Serve ' 32. In light of these principles, we may now advert to the question at hand, viz. classification of 'soft serve' under the appropriate heading. As aforesaid, the Tribunal has held that in view of the technical literature and stringent provisions of the PFA, 'soft serve' cannot be classified as "ice-cream" under Entry 21.05 of the Tariff Act. We are of the opinion, that in the absence of a technical or scientific meaning or definition of the term "ice-cream" or 'soft serve', the T....
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...."ice-cream" or a 'softy icecream', oblivious of its technical composition. The true character of a product cannot be veiled behind a charade of terminology which is used to market a product. In other words, mere semantics cannot change the nature of a product in terms of how it is perceived by persons in the market, when the issue at hand is one of excise classification. 35. Besides, as noted above, learned senior counsel, appearing for the assessee quoted some culinary authorities for the submission that ice cream must necessarily contain more than 10% milk fat content and be served only in a frozen to hard stage for it to qualify as "ice cream". It was argued that classifying 'soft serve', containing 5% milk fat content, as "ice cream", would make their product stand foul of requirements of the PFA which demands that an "ice-cream" must have at least 10% milk fat content. 36. Such a hard and fast definition of a culinary product like "ice- cream" that has seen constant evolution and transformation, in our view, is untenable. Food experts suggest that the earliest form of ice cream may have been frozen syrup. According to Maguelonne Toussaint-Samat in her History of Food, "T....
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.... frozen and hard. Besides, even if we were to assume for the sake of argument that there is one standard scientific definition of "ice cream" that distinguishes it from other products like 'soft serve', we do not see why such a definition must be resorted to in construing excise statutes. Fiscal statutes are framed at a point of time and meant to apply for significant periods of time thereafter; they cannot be expected to keep up with nuances and niceties of the gastronomical world. The terms of the statutes must be adapted to developments of contemporary times rather than being held entirely inapplicable. It is for precisely this reason that this Court has repeatedly applied the "common parlance test" every time parties have attempted to differentiate their products on the basis of subtle and finer characteristics; it has tried understanding a good in the way in which it is understood in common parlance. 39. Learned counsel for the assessee had strongly relied on Akbar Badrudin Giwani (supra) to buttress his claim, that in matters pertaining to classification of commodity taxation, technical and scientific meaning of the product will prevail rather than the commercial parlance,....
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....was couched in a scientific and technical sense and had to be harmonized with the other entry. It would have run counter to the statutory content of the legislation, to construe the term "marble" in its commercial sense. 41. It is significant to note that the question of classification of 'soft serve' is based on a different set of facts in a different context. Heading 21.05 which refers to "ice cream and other edible ice" is not defined in a technical or scientific manner, and hence, this does not occasion the need to construe the term "ice-cream" other than in its commercial or trade understanding. Since, the first condition itself has not been fulfilled; the question of harmonizing heading 21.05 with 04.04 by resort to the scientific and technical meaning of the entries does not arise at all. Hence, we are of the opinion that the ratio of Akbar Badrudin Giwani (supra) does not apply to the facts of the present case. 42. Learned counsel for the assessee had vociferously submitted that the common parlance understanding of "ice-cream" can be inferred by its definition as appearing under the PFA. According to Rule A 11.20.08 the milk fat content of "ice-cream" and "softy ice-c....
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....ading 21.05 is clearly a specific entry. Therefore, we cannot subscribe to the claim that heading 04.04 is to be regarded as a specific entry under Rule 3(a) of the General Rules of Interpretation, since such an interpretation would be contrary to the statutory context of heading 21.05. In conclusion, we reject the view taken by the Tribunal and hold that 'soft serve' is to be classified as "ice-cream" under heading 21.05 of the Act. 45. At this stage it may be relevant to refer to Trade Notice No. 45/2001 dated 11th June, 2001 of Mumbai Commissionerate IV which came to our notice. According to the said notification, "softy ice-cream/soft serve" dispensed by vending machines, sold and consumed as "ice-cream", is classifiable under Entry 21.05 of the Act. The same is reproduced below: "Classification of Softy Ice Cream being sold in restaurant etc. dispensed by vending machine -[ Mumbai Commissionerate IV Trade Notice No.45/2001, dt. 11.6.2001] Ice Cream dispensed by vending machine falling under chapter 21 has been made liable to nil rate of duty vide Sl. No.8 of Notification No.3/2001-CE dated 1.3.2001. Doubts have been raised as regards to the classi....
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....machine exempted during period 1-3- 1997 to 28-2-2001 Whereas the Central Government is satisfied that a practice that was generally prevalent regarding levy of duty of excise (including non-levy thereof) under section 3 of the Central Excise Act, 1944 (1 of 1944) (hereinafter referred to as the said Act), on softy ice cream and non-alcoholic beverages dispensed through vending machines, falling under Chapters 20, 21 or 22 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), and that such softy ice cream and non-alcoholic beverages dispensed through vending machines were liable to duty of excise which was not being levied according to the said practice during the period commencing on and from the 1st day of March, 1997 and ending with 28th February, 2001. Now, therefore, in exercise of the powers conferred by section 11C of the said Act, the Central Government hereby directs that the whole of the duty of excise payable on such softy ice cream and non alcoholic beverage dispensed through vending machines, but for the said practice, shall not be required to be paid in respect of such softy ice cream and non alcoholic beverages on which the said ....