2011 (5) TMI 534 - AT - Central Excise

Classification - Rasana Rozana Amrit manufactured in three different flavours Nimbu Paani, Mango and Orange - Whether the product is properly classifiable under heading 2001.10 as contended by the manufacturers or under heading 2108.99 as held by the Revenue authorities - Held that - As per the provisions of Rule 3(a) of the rules of interpretation of schedule-1, the heading which provides the most specific description shall be preferred to the one providing a more general description - Accordingly, it was held that since Chapter heading 21.08 covers edible preparation not elsewhere specified and as such it is residuary entry, the goods stands correctly classifiable under Chapter 20 being a mixture of different vegetations. Manufacture - whether M/s. Waves Foods Pvt. Limited who have supplied the raw materials as also machineries to M/s. Sabar Foods in terms of the contract dated 28.09.2002 have to be held as manufacturer or M/s. Sabar Foods are to be considered to be the manufacturer of the product - Held that - The authorities have not disputed the fact there is an agreement between M/s. Waves Foods Pvt. Limited and M/s. Sabar Foods for manufacture of goods for M/s. Waves Foods Pvt. Limited. In fact, it is also does not denied that the printing on the pouches reads as manufactured at M/s. Waves Foods Pvt. Limited by M/s. Sabar Foods, Village Salal, Distt Sabarkantha - Thus it also show that the goods were being manufactured by M/s. Sabar Foods in the premises of M/s. Waves Foods Pvt. Limited - It is settled legal position that the one who actually manufactures is to be considered as manufacturer and supplier of the raw material cannot be treated as manufacturer - From this angle also, confirmation of demand of duty against M/s. Waves Foods Pvt. Limited was not called for. Demand beyond the normal period of limitation - Held that - Non filing of declarations by the appellants was for the reasons that as the aggregate clearances value by M/s. Sabar Foods was below the small scale exemption limits, and as such no declarations was required to be filed - Further the identical products to be falling under Chapter 20, there could be bonafide belief on the part of the appellants that no duty is required to be paid by them - As such, held that the demand to be barred by limitation. Grant of benefit of Notification 08/2002 - Whether the appellants are entitled to the benefit on account of their factory being located in rural area - Held that - As the facts in respect are not clear, giving any decision in this issue, as the benefit to the appellants on the merits as also on limitation has already been extended. Penalties - Held that - As the confirmation of demand of duty stands set-aside against M/s. Waves Foods Pvt. Limited imposition of penalty on the said appellant, as also on the other appellants, is not called for and is accordingly, set-aside - All the appeals are disposed of.

Issues Involved:
1. Classification of Rasana Rozana Amrit drink mix.
2. Determination of the manufacturer between M/s. Waves Foods Pvt. Limited and M/s. Sabar Foods.
3. Eligibility for Notification 08/2002 benefits.
4. Applicability of the limitation period for raising the demand.
5. Imposition of penalties on the appellants.

Detailed Analysis:

1. Classification of Rasana Rozana Amrit Drink Mix:
The primary issue was whether Rasana Rozana Amrit drink mix should be classified under heading 2001.10 (preparation of vegetables, fruits, etc.) or under heading 2108.99 (edible preparations not elsewhere specified). The product contained fruit powder, vegetable extracts, and other ingredients. The lower authorities classified it under heading 2108.99 due to the low percentage (3.9%) of the mother mix. However, the Tribunal found that the product was a preparation of fruit juice and should be classified under heading 2001.10, citing various precedents and expert opinions. The Tribunal noted that the product's classification should not be influenced by definitions in the Prevention of Food Adulteration Act, which were not applicable to the product in question.

2. Determination of the Manufacturer:
The Tribunal had to decide whether M/s. Waves Foods Pvt. Limited or M/s. Sabar Foods should be considered the manufacturer. Despite M/s. Waves Foods supplying raw materials and machinery, the Tribunal held that M/s. Sabar Foods, which actually manufactured the goods, should be considered the manufacturer. This decision was based on the legal principle that the entity performing the manufacturing process is the manufacturer, not the supplier of raw materials.

3. Eligibility for Notification 08/2002 Benefits:
The Tribunal refrained from making a decision on the eligibility for Notification 08/2002 benefits, as the facts were not clear. However, this issue became academic since the Tribunal ruled in favor of the appellants on the classification and limitation issues.

4. Applicability of the Limitation Period:
The Tribunal addressed whether the demand raised was barred by limitation. The extended period was invoked by the lower authorities on grounds of non-declaration and alleged suppression of facts. The appellants argued that they were under a bona fide belief that their product was correctly classified under Chapter 20 and thus exempt from duty. The Tribunal agreed, citing the absence of any positive evidence of malafide intention and the bona fide belief supported by various Tribunal decisions. Consequently, the demand was held to be barred by limitation.

5. Imposition of Penalties:
Given the Tribunal's decision on classification and limitation, the imposition of penalties on M/s. Waves Foods Pvt. Limited and other appellants was deemed unwarranted. The penalties were set aside as the demand itself was invalidated.

Conclusion:
The Tribunal upheld the appellants' claim that Rasana Rozana Amrit drink mix should be classified under heading 2001.10. It determined that M/s. Sabar Foods, not M/s. Waves Foods Pvt. Limited, was the manufacturer. The demand was found to be barred by limitation due to the absence of malafide intent, and all penalties were set aside. The appeals were disposed of in favor of the appellants.

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