TaxTMI 
TaxTMI 
2015 (6) TMI 1014
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....PER R. PERIASAMI All the 20 appeals are taken up together as the issues involved are identical in nature relating to classification dispute of mixed spices (masala powder) under Chapter 9 or under Chapter 2103. 2. The brief facts of the case are that all the six appellants are manufacturers of various spice powders and mixed spices which are commonly called as masalas and they classified the goods as mixed spices under Chapter 0910 9100 of CETA whereas the Department proposed to classify them under Chapter Heading 2103 9040 as mixed condiments and mixed seasonings under Chapter 21 of CETA, 1985. The adjudicating authorities, after following the principles of natural justice, classified these products under Chapter 2103 9040 and confirmed the demands and also imposed equivalent penalty. The details of description, duty and penalty imposed on each appellants are listed as under:- I. M/s. Eastern Condiments P. Ltd. They are manufacturer of 13 items viz., Meat masala, sambar masala, Biriyani masala, rasam powder, pickle masala, vegetable masala, kulambu masala, thandoori masala, pav bhajji masala, garam masala, channa masala, chat masala and kabab masala etc. M/s. Easter....
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....ton masala, chicken masala, chilli chicken/65 masala, dhall powder, idly chilli powder, puliyodharai powder, bajji bonda mix, lemon rice powder, egg kuruma masala etc., M/s. Avitaa Food Products Appeal No. Demand Penalty Imposed Personal Penalty E/42108/2013 Rs.1,67,506/- Rs.1,67,506/- E/40992/2014 Rs.2,15,483 Rs.2,15,483 3. All these batch of appeals were extensively heard on 21.1.2015, 5.6.2015 and 10.6.2015 and the Ld. Counsel of each appellant submitted their arguments on the above dates. 5. Shri N. Venkataraman, Sr. Counsel appearing on behalf of M/s. Eastern Condiments Pvt. Ltd. (Appeal No. E/709/2009) led the arguments first and also submitted written synopsis. He submits that they are manufacturing 21 items of various masalas which are nothing but mixture of spices covered under Chapter 9. That the entire issue stands covered by the decision of the Honble High Court of Madras in the case of P.C. Duraisamy Vs. CCE in 2002 (140) ELT 77 (Mad.) and the Division Bench decision of the Honble High Court of Madras in the case of Sakthi Masala Pvt. Ltd. 2008 (229) ELT 34 (Mad.) He also submits that the Mumbai Bench....
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....996. He relied on the following decisions:- (a) CCE, Mumbai Vs. Narendrakumar & Co. - 2008 (232) ELT 866 (b) P.C. Duraisamy Vs. Assistant Commissioner of Customs, Central Excise, Erode I - 2002 (140) ELT 77 (Mad.) (c) Sakthi Masala Pvt. Ltd. Vs. CCE, Salem - 2008 (229) ELT 34 (Mad.) (d) Damodar J. Malpani Vs. CCE - Malpani 2002 (146) ELT 483 (SC) He also submits that since the issue is only a classification dispute, various Board circulars were issued on the classification of spices and mixed spices, therefore there is no suppression or mis-statement. Accordingly, extended period cannot be invoked. 7. LD. Counsel Shri N. Viswanathan, Advocate, representing M/s. Nazareth Foods Pvt. Ltd. and M/s. Aachi Masala Foods Pvt. Ltd. largely adapted the submissions of Shri N. Venkataraman, learned senior counsel. He submits that M/s. Nazareth Foods Pvt. Ltd. is a manufacturing firm and M/s. Aachi Masala Foods Pvt. Ltd. is a trading firm. He further submits that in the show-cause notice the Department has already allowed all the curry powders and masala powders classified under Chapter 9. The dispute in these appeals is with regard....
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....ect of Sl. Nos. 24 (Bajji Bonda mix) and Sl. No. 27 (Payasam Mix). He referred para 12, 20 of the show-cause notice and submits that the allegations are contrary to Chapter Note 1 of Chapter 9. He submits that the only allegation of the department is that after mixing up the spices they lose their identity and the essential characteristics. Except this allegation no other material evidence put forth by Revenue. No samples were drawn nor any test carried out. Therefore, the burden of proof lies on the Department to establish that the products have lost their essential characteristics of spices. He also adopted the submissions made by learned Senior Counsel and the decisions relied by them. He drew attention to the definition of modern cookery for teaching and trade (page 56 & 57 of paper book) and as per this, all these curry powders are nothing but spices. He also produced a copy of Order-in-Original No. 2/2000 dated 8.8.2000 passed by the Commissioner of Central Excise, Bangalore and submits that, after remand by the Tribunal, the Commissioner in his denovo order classified the products under Chapter 9 and dropped the proceedings. Therefore, he submits that classification under 9 ....
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....(310) ELT 97 (b) Padmini Products Vs. CCE - 1989 (43) ELT 195 (SC) He also submits that the Department has invoked Section 11AC even for the second show-cause notice dated 31.3.2009. No Section 11 AC penalty is imposable. 12. Learned AR Shri Rammohan Rao, JC for Revenue, reiterates the findings of the adjudicating authorities. He summarized all the issues involved in the adjudication orders and also submitted a compilation of Board Circular, HSN and the decisions. He submits that the appellants main allegations are of two fold. Firstly, all the appellants submitted that there is no uniformity in the classification of the products and the second allegation is that the Department has not proved with evidence for classifying the goods under 2103. 13. The learned AR submitted his arguments first on the applicability of Board circular and second on classification. He referred the Boards circular No. 205/96 dated 30.4.1996, and submits that the products can be classified either under Chapter 9 or under Chapter 2103. Para 2, 3 and 4 of the circular clearly states that the products which have predominant mixture of spices/condiments / seasonings and are used as such or in....
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.... separate identity as sambar powder in the parlance. He further submits that the essentiality of the product is to be addressed in terms of the functionality, predominance use, test of substitution and a popular understanding of the product by the Trade/ consumer. Therefore, as per the popular usage, it is identified as sambar powder and not as spices. Once the spices are grounded and mixed with other items, the spices loss its originality. He submits that as per the decision of the Honble Supreme Court in the case of Milak Brothers Vs. UOI -1991 (51) ELT 204 (S.C., each case has to be examined on the facts. He also submits that the appellantscontention on the predominance is not the determining factor and it cannot be the main issue and it can only be taken as a consideration. He relied on the following case laws:- (a) Nestle India Ltd. Vs. CCE, Chandigarh II - 2011 (270) ELT 575 (b) Kesarwani Zarda Bhandar Vs. State of UP - 2008 (227) ELT 337 (SC) (c) Deputy Commissioner of Sales Tax Vs. Rani Food Products - 1988 68 STC 446 (Ker.) (d) Commercial Tax Officer Vs. Jalani Enterprises - (2011) 4 SCC 386 (e) CCE Vs. P....
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..... E/709/2009 are manufacturer of 13 items viz., Meat masala, sambar masala, Biriyani masala, rasam powder etc, and the period involved is April 2004 to March 2009. (ii) The second appellant M/s. Aachi Masala Foods (P) Ltd. in appeal E/226/2008, E/337/2008 and E/40288/2014, disputed only four items viz., Rice bath powder, Leman bath powder, tomato bath powder and sukkumalli powder and the period involved is 2002 to march 2010. (iii) In the case of M/s. Maami Foods Pvt. Ltd. in appeal E/353 & 354/2010 and E/40380 & E/40381/2014, they are manufacturers of 22 items the items under dispute are viz., Meat masala, sambar masala, Biriyani masala, rasam powder, pickle masala, vegetable masala etc, and the period involved is January 2004 to July 2008. They are not contesting the classification of Bajji bonda and payasam mix (at sl.No. 24 & 27). (iv) The appellant M/s. Avitaa Food Products in appeals E/638, E/299 & 300/2011 are the manufacturers of 36 items by and large same as the above appellants. M/s. Arumuga Consumer Care are manufacturer of 14 items (same as above) 18. On perusal of records, we find that There is no dispute on the classification of pure powd....
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....xtures retain the essential character of the goods of those headings. Otherwise such mixtures are not classified in this Chapter; those constituting mixed condiments of mixed seasonings are classified in heading No. 21.03. Supplementary Note (3) reads as under. 3. The addition of other substances to spices shall not affect their inclusion in spices provided the resulting mixtures retain the essential character of spices and spices also include products commonly known as masalas. HSN Explanatory note for chapter 9 which is reproduced as under:- 1. Mixtures of the products of headings Nos. 09.04 to 09.10 are to be classified as follows : (a) Mixtures of two or more of the products of the same heading are to be classified in that headings; (b) Mixtures of two or more of the products of different headings are to be classified in heading No. 09.10. The addition of other substances to the products of headings Nos. 09.04 to 09.10 (or to the mixtures referred to in paragraphs (a) or (b) above) shall not affect their classification provided the resulting mixtures retain the essential character of the goods of those headings. Otherwise such mixtur....
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....d. 20. Further, it is pertinent to see the definitions of spices as provided under Spices Board Act, 1986. Under Section 2(n) of SB Act spices means the spices specified in the schedule. In the schedule to Section 2(n), 52 items are listed eg. as chilly, ginger, turmeric, coriander etc. and the note to the schedule it is clarified that spices in any form are covered under spices including curry powders, spice oil, oleoresins and other mixtures where spice content is predominant. A combined reading of chapter note one and supplementary note 3 read with HSN explanatory note it is evident that mixtures of various spices with or without addition of other items are classifiable under chapter 0904 to 0910 as it retains its essential character. On perusal of the ingredients and the test reports of various masalas, we find that the percentage of spices content is 95% to 96% and the remaining are other materials. Further, we find that Boards Circular dated 15.04.1996 and 30.04.96 also clarified on the issue of classification of spices of various food mixture known as masalas and condiments falling under chapter 9 and chapter 2103. In this regard the Tribunals Mumbai Co-ordinate Bench in ....
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....a, as the essential character is of asafoedita and not wheat flour or edible gum. The analogy would apply in this case also as it is undisputed that 95% to 96% of the ingredients of the products in question are spices. Learned Jt. CDR placed heavy reliance on the decision of the Honble Supreme Court in the case of A.P. Products (supra) to submit that grinding and mixing of various spices and condiments in certain proportion, the ingredients lose their identity/character and a new product separately known in the market emerges i.e. the products in question are mixed seasonings. We find that in the case A.P. Products (supra) the Apex court was seized with a fact, which was totally different than the facts in this case. In that case the question before the Apex court was whether the resultant product would get covered under a specific entry of the schedule to the AP Sales Tax Act. It is also seen that Apex court was deciding the issue specifically as regards the inclusion in the schedule to the AP sales tax act. In our considered view the ratio laid down by the Honble Supreme Court was in respect of the facts and circumstances, of the case before them and may not be applicable in this....
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....served that while in some places the products in question are being classified as either spices of Chapter 9 of CET or as Mixed Condiments and mixed seasonings of Heading 21.03 of CET, in others the same products are being classified under Heading 2108.90 as edible preparations not elsewhere specified or included. In the latter case, Chapter Notes 9(b) & 9(c) of Chapter 21 are being relied upon for classifying these products under the subheading 2108.90. Trade interests have, however, argued that these products are merely additives for different food items and not readily consumable products through the simple processes of cooking, frying, boiling or adding with water, oil or milk. Hence it is claimed that the products in question cannot be classified under sub-heading 2108.90 of CET. 3. The matter has been examined. Spices are specifically covered under Chapter 9 of Central Excise Tariff and mixed condiments and mixed seasonings under Heading 21.03 of Central Excise Tariff. Heading 21.08 of CET on the other hand is a residuary entry which refers to edible preparations not elsewhere specified or included. While there are no definitions available for spices and mixed condim....
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....cts which in addition to spices, flavouring and seasoning substances also contain, other foodstuffs in such quantity that the products as such or after processing are capable of being used as food preparations for human consumption in their own right will go out of Chapter 9 or Heading 21.03 of CET and merit classification in the residuary Heading 21.08 provided they are not covered or included in any other heading of CET. 4.2 Viewed in the context, products like sambar powder, rasam powder, puliyogare mix or powder, vanghibhath mix or powder consisting or mainly spices and required to be added to cooked dal or cooked rice mainly for spicing, flavouring or seasoning would appear to merit classification as spices or mixed condiments and seasonings. On the other hand, products like instant sambar mix, instant rasam mix, instant spiced bhath mix (Bisibelebath) or instant Kharabhath mix consisting of dal or rice flakes or sooji along with spices and other substances and which can be made up into food preparations by simply mixing and boiling/cooking in water would merit classification as miscellaneous edible preparations of Heading 2108 of Central Excise Tariff. 5. In....
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....he case of Shree Baidyanath (supra), the classification has to be done in the manner in which the goods are understood in the market and popularly known as. In that light, the item has to be considered only as Spicesas held by the noted Boards Circular referred to by the Commissioner. 13. It is settled law that the classification of a product is decided on the question of market understanding of the product. The respondents herein had lead evidences before the lower authorities as regards the market understanding of the product. The respondent had produced before the lower authority, certificates given by reputed consumers of that products and of Institute of Hotel Management, Catering Technology & Applied Nutrition, so as to indicate that the masalas manufactured by the respondents, are of best quality spices and given the flavor of the spices it gives a perfect fragrant and taste to the food. This evidences are not rebutted by the Revenue even today. We find that this provisions of law is now squarely covered by the decision of the Honble Supreme Court in the case of Union of India v. Garware Nylons Ltd. (S.C.) [1996 (87) E.L.T. 12 (S.C.)] wherein their Lordships were co....
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.... also seems to be an identical as of the Board. Our attention was drawn by the ld. Counsel, to the classification of the product in question in various Commissionerates. The respondents under the RTI Act, sought information of the identical products, as is manufactured by them, from various Commissionerates. We find that the various Commissionerates spread all over India, had clearly spelt out, that the products in question are classified under Chapter 09 and in some of the Commissionerates, the assesses had not taken out the Central Excise registration certificate also. We find from the chart produced by the ld. Counsel, the ingredients of the products in question are identical to the products which are manufactured by other assessee situated in different Commissionerates. The question of uniformity taxation is of prime importance. We find that the Honble Supreme Court in the case of Damodar J. Malpani v. Collector of Central Excise as reported at [2002 (146) E.L.T. 483 (S.C.)] 16. As regards the other products like Rasam Powder, Chaat Masala, Tea Masala, we find that the reasoning given by us in respect of all other products in question as indicated in the above paragrap....
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....be added to cooked dal or cooked rice mainly for spicing, flavouring or seasoning would appear to merit classification as spices under sub-heading No. 0903.00 attracting NIL rate of duty. On the other hand, products like instant Sambar Mix, Instant Rasam Mix, Instant spiced bhath Mix, (Bisibelebath) or Instant Kharabhath Mix consisting of Dal or Rice flakes or Sooji along with spices and other substances and which can be made up into preparations by simply mixing and boiling/cooking in water would merit classification as miscellaneous edible preparations under sub-heading No. 2108.90 of Central Excise Tariff attracting 20% duty. I submit that regarding Paras 5 and 6 it is submitted that as per the instructions given in the Ministrys letter F. No. 16/4/95-CX, dated 30-4-1996 (Circular No. 205/39/96-CX) all the goods manufactured by the petitioner except branded soap-nut powder, branded sundavathal, branded appalam and unbranded Turmeric are classified under sub-heading No. 0903.10 as spices and the same has since been approved. 6. In the course of hearing of the writ petition the learned Counsels appearing for the respondents vehemently contended that the writ peti....
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....ion, are nothing but illegal Though, normally, Courts will not interfere at the stage of show cause notice, as has been held by this Court in the earlier round of litigation itself, when the very issuance of show- cause notice is illegal, the question of subjecting the appellant petitioner to reply to the same does not at all arise. When the products have undergone only a change in the English name , the Revenue, only to give a different interpretation to the order of this court in W. P. No. 7029 of 1996, wherein the Revenue has been given liberty to proceed against the appellant - petitioner it there is any other item manufactured by the petitioner, not coming within the aforesaid entry 20 . With regard to the other three products namely (1) Garlic Rice Powder, (20 ) Lemon Rice powder and (3) Bajji Bonda powder, we are able to see that they did not figure in the above said writ petition, but the petitioner appellant was issued with Registration Certificate and he filed Classifications under Rule 173B, wherein all the six products under dispute were classified under chapter 9 become final as not questioned or challenged by the Revenue at any point of time. Therefore, havin....