2006 (11) TMI 38 - AT - Central Excise

Soft Drink Concentrate - For exemption ingredients in nature of food and with nutritive value - Assessee demanded for exemption under Notification No.5/98-C.E. - Depatment treated the concentrate as food preparation and assessee had place on record affitdavits in support of its common parlance recognition

Summary

Issues Involved:
1. Classification of Rasna Soft Drink Concentrate (SDC) under the Central Excise Tariff.
2. Eligibility for concessional rate of duty under Notification No. 5/98-C.E., dated 2-6-1998.
3. Applicability of the Supreme Court's decision in CCE v. Parle Exports (P) Ltd.
4. Common parlance test for classification.
5. Nutritive value of ingredients in SDC.
6. Impact of amendments in Central Excise Tariff and HSN alignment.

Issue-wise Detailed Analysis:

1. Classification of Rasna Soft Drink Concentrate (SDC) under the Central Excise Tariff:
The respondents, manufacturers of Soft Drink Concentrate (SDC) falling under CETA Sub-heading 2108.99, claimed concessional duty under Notification No. 5/98-C.E., which provides an 8% duty rate for preparations in the nature of instant food mix. The Excise authorities contended that SDC is not a food mix and should attract an 18% duty rate. The Assistant Commissioner confirmed the higher duty rate, but the Commissioner (Appeals) set aside this order, classifying SDC as a food preparation eligible for the concessional rate.

2. Eligibility for Concessional Rate of Duty:
The key issue was whether SDC could be classified as an "instant food mix" under Sr. No. 7 of the Table to Notification No. 5/98-C.E. The Tribunal examined the ingredients of SDC, which include natural essential oils, food acids, dextrose, lactose, stabilizers, emulsifiers, preservatives, and colors. The Tribunal noted that these ingredients have nutritive value and are derived from fruits and plants, thus supporting the classification of SDC as a food preparation eligible for the concessional duty rate.

3. Applicability of the Supreme Court's Decision in CCE v. Parle Exports (P) Ltd.:
The Revenue relied on the Supreme Court's decision in Parle Exports, which held that non-alcoholic beverage bases are not food products or preparations. However, the Tribunal distinguished the present case, noting that the product in Parle Exports was for industrial use and did not contain nutritive ingredients, while SDC is directly consumed by consumers and contains nutritive ingredients. The Tribunal concluded that the Supreme Court's decision in Parle Exports was not applicable to the present case.

4. Common Parlance Test for Classification:
The Tribunal considered affidavits from various individuals, including a housewife and traders, which supported the classification of SDC as an instant food mix. The Tribunal noted that common parlance recognizes SDC as similar to other food mixes like Rasam mix, Vada mix, and idli mix. The Tribunal also noted that under the Gujarat Sales Act, SDC is classified as a food article and taxed accordingly.

5. Nutritive Value of Ingredients in SDC:
The Tribunal emphasized the nutritive value of SDC's ingredients, such as dextrose (glucose) and lactose (milk sugar), which are recognized as making positive nutritional contributions. The Tribunal also referred to technical literature and government communications that classified SDC as a food product.

6. Impact of Amendments in Central Excise Tariff and HSN Alignment:
The Tribunal noted that during the relevant period, the Central Excise Tariff was aligned with the Harmonized System of Nomenclature (HSN). The Tribunal also noted that SDC was classified under ITC (HS) code 2106, covering food preparations not elsewhere specified. The Tribunal highlighted that subsequent amendments to the Central Excise Tariff in 2005-06 specifically included soft drink concentrates under food preparations, supporting the classification of SDC as a food preparation.

Judgment:
The Tribunal, by majority, held that Rasna Soft Drink Concentrate is in the nature of instant food mix and hence eligible for the benefit of exemption under Sr. No. 7 of the Table to Notification No. 5/98-C.E., dated 2-6-1998. The appeal by the Revenue was rejected, and the order of the Commissioner (Appeals) was upheld. However, a dissenting opinion by one member held that SDC should not be classified as an instant food mix, relying on the Supreme Court's decision in Parle Exports. The matter was referred to a third member, who agreed with the majority view, leading to the final decision in favor of the respondents.