TaxTMI 
TaxTMI 
2019 (10) TMI 762
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.... Bench of the Tribunal at Mumbai in Hindustan Coca-Cola Beverages Private Limited vs. CCE, Thane-I reported in 2014 (310) ELT 145 (Tri. Mum.), a Division Bench of the Tribunal at Allahabad, while hearing Excise Appeal No. 50661 of 2015 and Excise Appeal No. 50662 of 2015, referred the matter for constitution of a Larger Bench for giving its opinion on whether the classification of "Minute Maid Nimbu Fresh" would fall under Tariff Item No. 2202 10 20 of the Central Excise Tariff Schedule or under Tariff Item No. 2202 90 20. This larger Bench has, accordingly, been constituted. 2. A similar issue regarding classification of 7up "Nimbooz Masala Soda" and 7up "Nimbooz" manufactured by Pepsico India Holdings Pvt. Ltd. arose in Excise Appeal No. 70012 of 2015 and so this appeal was directed to be listed with the aforesaid two appeals. 3. The reference that needs to be answered by the Larger Bench in regard to these three appeals, can be stated as: Whether the product "Minute Maid Nimbu Fresh (hereinafter referred to as MMNF) manufactured by Brindavan Beverages Private Limited, and 7up "Nimbooz Masala Soda" or 7up "Nimbooz" manufactured by Pepsico India Holdings Private Lim....
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....2202, the term "Non Alcoholic Beverages" means Beverages of an alcoholic strength by volume not exceeding 0.5%. 8. Headings 2201 and 2202 of Chapter 22 are reproduced below:- Tariff Item Description of goods Unit Rate of duty (1) (2) (3) (4) 2201 Waters, including natural or artificial mineral waters and aerated waters, not containing added sugar or other sweetening matter nor flavoured; ice and snow 2201 10 - Mineral waters and aerated waters: 2201 10 10 --- Mineral waters............................. 1 12% 2201 10 20 --- Aerated waters............................ 1 12% 2201 90 - Other: 2201 90 10 --- Ice and snow................................ 1 Nil 2201 90 90 --- Other........................................... 1 12% 2202 Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured, and other non-alcoholic beverages, not including fruit or vegetable juices of Heading 2009. 2202 10 - Waters, including mineral waters and aerated waters, c....
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....se drink containing only 1% of concentrate of fresh lemon juice (lemon juice content in the beverage is 5.7%). Information available on website also showed that the MMNF was introduced as a refreshing lemon juice based drink developed especially for Indian consumers and that the "First Love" campaign centres around the core proposition of MMNF as being the next best alternative to home made lemonade. The show cause notice further mentioned that the said product was manufactured by adding lemon concentrate and the product having lemon concentrate in any form appears to be appropriately classifiable under Tariff Item No. 2202 10 20. 13. Pepsico was issued three show cause notices. The first show cause notice dated 13 June 2013 was issued for the period from April 2012 to March 2013, while the second show cause notice dated 16 April 2017 was issued for the period from April 2013 to October 2013 and the third show cause notice dated 11 November 2014 was issued for the period November 2013 upto August 2014. It was stated that Pepsico was manufacturing Nimbooz Masala Soda from March 2012, which appeared to be classifiable under Tariff Item No. 2202 10 20 and attracted full rate of dut....
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.... the drink contains actual lemon juice and not lemon flavor or essence and the concentration of lemon juice in the drink is between 5-6% and that it is classifiable under Regulation 2.3.10 as 'Ready to Serve Fruit Drink' under FFS Act 2006. Thus the party taking the support of FSS Act, 2006 and FSS Regulations 2011, intends to classify the goods as Ready to Serve Fruit Drink under Chapter head no. 2202 90 20 of CETA 1985." 17. This contention was repelled by the Adjudicating Authority holding that the Regulations are not required to be applied for classification under the Central Excise Act, and the observations are: "Therefore, I find that FSS Regulation 2011 are not required to be applied for classification purpose under Central Excise as the FSS Act and Regulations issued thereunder defines the goods in technical terms for the purpose and intent for which the Act has been enacted. Therefore, I do not see any need to refer to FFS Act, 2006 or FSS Regulations 2011 to decide the classification of goods under dispute." 18. The Adjudicating Authority then observed, in view of the Principles laid down under The General Rules for Interpretation of Tariff, that the produc....
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....ifiable under Tariff Item No. 2202 10 20 and did not agree with the contention of the appellant that MMNF is not a flavoured drink. It observed that the decision of the Tribunal in the case of Commissioner of Central Excise, Bhopal Vs. Parle Agro Pvt. Ltd. 2008 (226) ELT 194 (Tri-Del) classifying "Appy Fizz" as a fruit juice based drink under Tariff Item no. 2202 90 20 would not help the appellant because Appy Fizz contains a far more higher and significant percentage of apple which is 23%, whereas in the case of MMNF, the juice concentrate is admittedly only 1%. Reliance placed by the appellant on the provisions of Food Adulteration Rules to contend that since the Total Soluble Solid was not less than 10% and the lemon juice content was also not less than 5%, it should be treated as a "fruit based drink" was not accepted for the reason that the labels indicated that the brix content was 5.7% and the Lemon juice concentrate was only 1%. 22. Another Division Bench for the Tribunal at Allahabad, while hearing the Appeal filed by Brindavan Beverages found itself unable to agree with the reasoning given by the Mumbai Tribunal in Hindustan Coca Cola Beverages. The Bench noticed the T....
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....lations to understand whether the products are fruit based drinks; (iv) That if the common parlance test is applied, then the products in question are described in the labels and bought and sold as fruit drinks and not as lemonades. There are many products available in the market which are bought and sold as lemonades or lemon flavoured drinks which are not described as fruit drinks. A comparison of the labels or products that have been filed by the Appellant during the course of hearing would indicate that all the products which are bought and sold as fruit drinks with lemon juice have a juice content of 5 per cent or more and do not describe the product as lemonade or lemon flavoured drink. On the other hand, the products which are sold as carbonated sweetened beverages are bought and sold either as lemonades or lemon flavoured drinks with a further indication that they contain no fruit or no fruit juice. The first group of products which are lemon juice based drinks having a juice content of 5 per cent or more cannot be said to be lemonades in the Tariff parlance and also commercial parlance and cannot be covered under 2202 10 20; (v) That the products in quest....
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....ken in the preparation of one batch of Minute Maid Nimbu Fresh (MMNF). 25. Shri Kavin Gulati, learned Senior Counsel, appearing for the Intervenor in Excise Appeal No. 50661 of 2015, also reiterated the submissions made by Shri B.L. Narasimhan and further submitted : (i) That water including aerated water which contain added sugar or other sweetening matter or flavoured form part of Sub-Heading 2202 10, while other non-alcoholic beverages would be under Sub-Heading 2202 90; (ii) That Entries under Heading 2202 of the Tariff Schedule are not aligned with HSN; (iii) That the labels on the products in question specifically state 'contains no fruit juice or fruit pulp"; and (iv) That the Heading which provides more specific description is required to be preferred to the Headings which provide more general description and since Heading 2202 09 20 provides a more specific description, this Heading is required to be preferred. 26. Shri Mohd. Altaf, learned Authorised Representative of the Department, submitted : (i) That the advertisement material, and the common parlance test and the specific entry in the Tariff Schedule establish that t....
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....r 22 of the First Schedule to the Tariff Act has two Headings, namely, 2201 and 2202. The description of goods under Heading 2201 is 'waters not containing added sugar or other sweetening matter nor flavoured; ice and snow', while the description of goods in Heading 2202 is 'waters containing added sugar or other sweetening matter or flavoured, and other non-alcoholic beverages, not including fruit or vegetable juices of Heading 2009. Chapter 20 deals with 'Preparations of Vegetables, Fruit, Nuts or other parts of Plants'. Heading 2009 deals with 'Fruit juices (including grape must) and vegetable juices, unfermented and not containing added spirit, whether or not containing added sugar or other sweetening matter'. It is these items that are excluded from non-alcoholic beverages mentioned in the second part of Heading 2202. Non-alcoholic beverages have been defined in Note 3 of Chapter 22 to mean beverages of an alcoholic strength by volume not exceeding 0.5% volume. 31. A perusal of Heading 2202 would indicate that it is divided into two sub groups; the first one covers 'waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or fla....
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.... substances. Any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance. The classification of goods consisting of more than one material or substance shall be according to the principles of Rule 3. 3. When by application of rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows: (a) the heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods. (b) mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to (a), shall be classified as if they....
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....ers and aerated waters, containing flavouring elements as lime/lemon. It, therefore, follows that products which are not essentially waters with flavouring elements as lime/lemon, would not fall for classification under 2202 10 20. Thus, unless the products MMNF, Nimbu and Nimbooz satisfy the description of single dash 2202 10 as "waters including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured", they cannot straightway be classified under the three dash "---" 22020 10 20 as lemonade. It is not even the charge in the show cause notice or in the impugned order that any of the products in question satisfy the above description of 2202 10 as "waters including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured." These products, therefore, cannot fall under 2202 10 20 as lemonade. Tariff Item No. 2202 10 20 would cover only those products which are essentially waters with added sugar and flavoured. If the flavouring element or agent is lime or lemon, then the product would get classified under 2202 10 20 as Lemonade. On the other hand, if the products are not essentially waters with flavouri....
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.... This heading covers non-alcoholic beverages as defined in Note 3 to this Chapter, not classified under other headings, particularly heading 22.09 or 22.01. (A) Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured. This group includes, inter alia: (1) Sweetened or flavoured mineral waters (natural or artificial) (2) Beverages such as lemonade, orangeade, cola, consisting of ordinary drinking water, sweetened or not, flavoured with fruit juices or essences, or compound extracts to which citric acid or tartaric acid are sometimes added. They are often aerated with carbon dioxide gas, and are generally presented in bottles or other airtight containers". 41. The Explanatory Notes to Heading 2201, reproduced above, also explain the scope of the first portion of Heading 2202 and the scope of flavoured water. It specifically states that the Heading excludes sweetened or flavoured (orange, lemon etc.) mineral waters (natural or artificial) (Heading 2202). What is, therefore, covered under the first part of Heading 2202 under Sub-Heading 2201 10 is flavoured water and when water is....
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....xaminer 's report to submit that there are 13.7% by weight are soluble solids in the product. The respondent also relied upon the text to Prevention of Food Adulteration Rules 1955 to submit that fruit beverage or fruit drink must contain total soluble solids not less than 10%. ------- 6. The Revenue relied upon HSN Explanatory Notes of Chapter 22. We find that our tariff is not fully aligned with the HSN Explanatory Notes. In the HSN Explanatory [Notes] there are two sub-headings under Heading No. 2202 one is "water including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured" and second is in respect of others. Whereas Central Excise Tariff under Sub-heading No. 2202 there are specific headings in respect of soya milk, drinks etc. As per the Central Excise Tariff, the waters; including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured are classifiable under sub-heading No. 2202.10. The drinks based on fruit juice are specifically classifiable under Item No. 2202 90 20 of the Tariff. In the present case, there is no dispute regarding the contents of the product. Revenue....
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.... When the goods are not defined in the Tariff Schedule, then the same have to be understood in the sense in which people conversant with the product and people who deal in the product understand and buy and sell the product, which is known as the common parlance test. In the absence of a definition in the Tariff Schedule, resort can also be taken to the provisions of supporting legislation like the Food Safety and Standards Act. These two aspects, therefore, need to be examined. COMMON PARLANCE TEST 49. If this test has to be applied, then the labels in which the products are described assume importance to determine whether the products are sold as "Fruit Juice based Drinks" or as "Lemonades". During the course of hearing of the Appeals, a compilation of labels of different products manufactured by different manufacturers has been filed. The compilation is divided into two groups, namely, "lemon/lime juice based fruit drinks (carbonated and non-carbonated)" and "lemonades - lemon/lime flavoured drinks (carbonated and non-carbonated)". 50. The tabular chart of the labels of the first group lemon/lime juice based fruit drink is as follows : SAMPLES OF LEMON/ LIME JUICE BA....
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....a India Pvt. Ltd. Manufactured by: Brindavan Beverages Pvt. Ltd. Ready -To-Serve Fruit Drink Water, Sugar, Concentrate of fresh lemon juice(1%)*, Acidity Regulator (330), Common salt & antioxidant(300), *Lemon juice content in the beverage is 5.7% 1% lemon juice concentrate, equivalent to 5.7% lemon juice 9 7 UP Nimbooz PepsiCo India Holdings Pvt. Ltd. Ready To Serve Fruit Drink Water, Sugar, Concentrated Lemon Juice (0.8%)*, Acidity Regulators(296,330), Salt, Preservatives(202) *Equivalent to 5% real lemon juice (reconstituted) 0.8% lemon juice equivalent to 5% real lemon juice 10 7 UP Nimbooz Masala Soda PepsiCo India Holdings Pvt. Ltd. Carbonated Fruit Drink Carbonated water, Sugar (10.1%), Concentrated Lemon Juice (0.8%), Salt Sequesterant (452(i)) Acidity regulator (330), Preservative(202). *Equivalent to 5% real lemon juice (reconstituted) Concentrated Lemon Juice (0.8%), equivalent to 5% real lemon juice 51. The tabular chart of the labels for the second group 'lemonades' is as follows : LEMONDAES - LEMON/ LIME FLAVOURED DRINKS (CARBONATED AND NON-CARBONATED) S. No. Product Name Manufactured by Description ....
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....1, Permitted Natural Colour No Fruit juice or Pulp 10 Rasi's 1 UP Lime Lemon Flavour Ravitheja Food Industries Sweetened Carbonated Water Carbonated water, sugar, Acidity Regulator (296, 330), Class II Preservatives(211), Contains Added Flavors Contains No Fruit 11 Kalimark Solo Lemon Kali Aerated Water Works (P) Ltd Sweetened Carbonated Beverage Carbonated Water, Sugar, Citric Acid and No Fruit Juice No fruit Juice 12 Lemon Soft Drink Radhay 9 Beverages Soft Drink Carbonated Water, Sugar, Caramel, Acidity Regulators, Sequestering Agent, Emulsifying &Stablising Agents, Permitted Class II and Added Flavours Contains No Fruit 13 Wild Vitamin Drink Reload Lemonade Flavoured Mangal Industries Ltd, Andhra Pradesh Non Carbonated Non Alcoholic Flavoured Drink Reverse Osmosis Water, Granulated Sugar, Citric Acid, Natural Flavors, Calcium Lactate, Magnesium Lactate, Vitamin C, dl-Alpha Tocopheryl Acetate, Gum Acacia, Monopotassium Phosphate, Easter Gum, Vitamin B3, Vitamin A, Zinc Aspartate, Vitamin B5, Vitamin B6, Vitamin B9, Vitamin B12 Contains No Fruit or Pulp 14 Duke's Lemonade PepsiCo India Holdi....
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....p." Therefore, the Supreme Court judgment, in fact, does not favour the appellants case. It would be not out of place to mention that even Encyclopedia Britanica, which may be considered as an authentic Encyclopedia, describes lemonade as '...made with lemon, sugar and water, is a popular warm-weather beverage...". The argument of the appellant that Lemonade is not a fruit based drink fruit fails." 55. The Mumbai Tribunal placed emphasis on the contents of the website that described MMNF as a drink close to "house made nimbu pani" and that MMNF offers "ghar ki yaadon ka ras" in every sip. The conclusion drawn by the Bench is not correct. Merely because MMNF is described as a drink which is close to "house made nimbu pani" would not lead to an inference that in common parlance understanding it would be lemonade. This apart, the Bench drew a wrong inference that since the website mentions MMNF offers "ghar ki yaadon ka ras" in every sip, it would mean "similar to home made lemonade". The correct translation of the word "ras" is 'juice' and not lemonade and so it would mean similar to home made juice. 56. The Revenue, however, contends that the products are 'Lemonades' falling u....
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....'. In fact, what has been relied upon by the Revenue is the decision of the Tribunal in Hindustan Coca Cola Beverages Pvt. Ltd. The correctness of this decision has been doubted by another Division Bench resulting in the present reference. SUPPORTING LEGISLATION 58. Fruit juice based drinks have not been defined in the Tariff Schedule. The Food Safety and Standards Act, 2006 consolidates the laws relating to food and to establish the Food Safety and Standards Authority for India for laying down science based standards for articles of food and to regulate their manufacture, storage, distribution, sale and import, to ensure availability of safe and wholesome food for human consumption and for matters connected therewith or incidental. The Food Safety and Standards (Licensing and Registration of Food Businesses) Regulations, 2011 (hereinafter referred to as the 'Regulations') that have been framed under Section 92 read with Section 31 of the Food Safety and Standards Act, 2006 deals, in Chapter II, with Food Products Standards. Regulation 2.3 deals with 'Fruit & Vegetable Products' and in particular Regulation 2.3.10 deals with 'Thermally Processed Fruit Beverages/Fruit Drinks/R....
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....nt (b) All other beverages/drink Not less than 10.0 percent 3. The product shall have the colour, taste & flavour characteristic of the product & shall be free from extraneous matter." 61. It would, therefore, be seen that Regulation 2.3.10 deals with 'Non-Carbonated Fruit Beverages' and Regulation 2.3.30 deals with 'Carbonated Fruit Beverages'. The fruit juice content (m/m) for both the Non-Carbonated and Carbonated Fruit Beverages has been indicated. In the case of 'Non-Carbonated Fruit Beverages', the Total Soluble Solid (m/m) should not be less than 10% and the fruit juice content for Lime/Lemon ready to serve beverage has been mentioned to be not less than 5.0 per cent. In the case of Carbonated Fruit Beverage, the Total Soluble Solid (m/m) should also not be less than 10% and the Fruit content of Lime or Lemon juice should not be less than 5%. It has also been stated that the product shall have the colour, taste and flavour characteristic of the product and shall be free from extraneous matter. 62. Having reproduced the provisions of the Regulations, it needs to be examined as to whether the aforesaid provisions of the Regulations can be of any h....
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....ady to Serve Fruit Beverages ... ... ... 52. It is on the record that the contents of food product of "Appy Fizz‟ are more than 10%. 53. Thus, according to the Government of India, Ministry of Food Processing Industries the product containing 10% of fruit juice are commonly known as fruit drinks. The appellant has also filed the order of 19th August, 2015 issued by the Food Safety and Standards Authority of India, Ministry of Health & Family Welfare where following permission was granted by Food Safety and Standards Authority of India, Ministry of Health & Family Welfare by order dated 19th August, 2015 : "It is to inform you that you are now allowed to Manufacture, Store and Sale the product 'Appy Fizz' in pet bottles under the category 2.3.10 i.e. Thermally Processed Fruit Beverages/Fruit Drink/Ready to serve Fruit Beverages of Food Safety and Standards (Food Product Standards & Food Additives) Regulations, 2011 with name of the food item as Fruit Pulp or Fruit Juice based Drinks for which you are already holding a licence." 55. What is the process for manufacture in accordance with the Food Safety and Standards Act, 2011 and the Regulati....