2012 (10) TMI 301 - HC - Central Excise

Whether tea fortified with vitamins is liable to tariff under Chapter 21 of the Customs Tariff Act, 1975 or under Chapter 9 of the Customs Tariff Act, 1975 Held that - power tea fortified with vitamins, produced by the petitioner company, was assessed to duty under Chapter Heading 2101. However, the Appellate Commissioner on appeal passed an order holding that power tea with vitamins manufactured was not classifiable under sub-heading 2101.20, but was classifiable under Chapter 0902 - The demand of Central Excise was dropped. The aforesaid decision has assumed finality, there being no further appeal therefrom. A different stand cannot now be taken. - Decided in favor of assessee. Since no appeal was preferred against the order passed by the Tribunal in one case and the same has become final, the Department is not entitled to raise the same point in other cases. Decisions in Indian Oil Corporation Limited v. Collector of Central Excise, Baroda, 2006 (8) TMI 8 - SUPREME COURT OF INDIA and J.K. Synthetics Ltd. & Anr. v. Union of India & Ors., 1981 (4) TMI 96 - HIGH COURT OF DELHI followed. Decision in Commissioner of Customs and Central Excise, Goa v. Phil Corporation Limited 2008 (2) TMI 3 - SUPREME COURT OF INDIA distinguished.

Summary

Issues Involved:
1. Classification of tea fortified with vitamins under the Customs Tariff Act, 1975.
2. Maintainability of the writ petition.
3. Definition and scope of "manufacture" under excise law.
4. Interpretation of taxing statutes.
5. Binding nature of previous judicial decisions on the department.

Detailed Analysis:

1. Classification of Tea Fortified with Vitamins:
The primary issue was whether tea fortified with vitamins should be classified under Chapter 21 or Chapter 9 of the Customs Tariff Act, 1975. The petitioners argued that fortified tea remains tea and should fall under Chapter 9, which includes all forms of tea and exempts it from duty. In contrast, the impugned circular from the Central Board of Excise and Customs classified it under Chapter 21, specifically under Tariff Item 2101.20, which includes preparations with a basis of tea.

The court observed that Chapter 21 deals with miscellaneous edible preparations and expressly excludes flavored tea. It was noted that the items under Chapter 21 involve a manufacturing process that changes the product's nature, unlike fortification with vitamins, which does not transform tea into a new product. Therefore, tea fortified with vitamins should be classified under Chapter 9.

2. Maintainability of the Writ Petition:
The respondents argued that the writ petition was not maintainable due to the existence of an alternative remedy of appeal against an order of assessment. However, the court held that the Commissioner (Appeals) could not decide on the legality of the circular issued by the Board. Since the circular was under challenge, the matter had to be decided by the court. The petitioners also undertook to withdraw any pending appeals, making the writ petition maintainable.

3. Definition and Scope of "Manufacture":
The court examined the definition of "manufacture" under excise law, referencing several Supreme Court judgments. It was established that "manufacture" implies bringing a new substance into existence, not merely producing some change in a substance. The court concluded that spraying vitamins on tea does not constitute "manufacture" as it does not transform tea into a new product with a distinct name, character, or use. Therefore, fortified tea remains tea and does not fall under the ambit of Chapter 21.

4. Interpretation of Taxing Statutes:
The court emphasized that taxing statutes must be strictly construed as understood in popular or commercial parlance, not technically. In case of ambiguity, the interpretation favoring the assessee should be preferred. Given that tea fortified with vitamins remains tea, it should be classified under Chapter 9, which includes all forms of tea.

5. Binding Nature of Previous Judicial Decisions:
The court noted that previous decisions of the CESTAT and other judicial authorities, which had not been appealed, were binding on the department. The department could not take a different stand in this case. The court cited several judgments to reinforce that the authorities could not depart from their earlier stand if the facts and circumstances were the same.

The court also highlighted that the principles laid down in previous judgments, even if not pertaining to the same product, were applicable. The product must undergo a significant change to be considered "manufactured."

Conclusion:
The writ application was allowed, and the impugned circular dated 15th July 2010, and the order-in-original dated 21st January 2010, were set aside. The court directed the respondent authorities to assess the duty payable in light of the observations made. The judgment reinforced that tea fortified with vitamins should be classified under Chapter 9 of the Customs Tariff Act, 1975, and not under Chapter 21.