1995 (7) TMI 154 - AT - Central Excise

Issues Involved:

1. Classification of the product 'Sharbat Rooh Afza' under the Central Excise Tariff.
2. Applicability of exemption Notification No. 2/94-C.E., dated 1-3-1994.
3. Interpretation of the terms "beverage" and "preparation for beverages" under the Central Excise Tariff.

Detailed Analysis:

1. Classification of the product 'Sharbat Rooh Afza' under the Central Excise Tariff:

The appellants, M/s. Hamdard (Wakf) Laboratories, classified 'Sharbat Rooh Afza' under sub-heading 2202.90 of the Central Excise Tariff, which covers "other non-alcoholic beverages not including fruit or vegetable juices of Heading No. 20.01". The Revenue, however, classified the product under sub-heading 2107.91, which includes "edible preparations, not elsewhere specified or included".

The Assistant Collector of Central Excise and the Collector of Central Excise (Appeals) upheld the classification under sub-heading 2107.91, arguing that 'Sharbat Rooh Afza' is a syrup and not a beverage. The product contains an 80% inert sugar base and 8% pineapple juice, and is used in various food preparations without the need for additional sugar.

The Tribunal majority agreed with this classification, noting that 'Sharbat Rooh Afza' is marketed as a syrup and its label and manufacturing process support this classification. The Tribunal also referenced Chapter Note 5(j) under Chapter 21, which includes preparations for beverages consisting of syrups.

2. Applicability of exemption Notification No. 2/94-C.E., dated 1-3-1994:

The appellants sought a concessional rate of excise duty under exemption Notification No. 2/94-C.E., which they claimed applied to their product under sub-heading 2202.90. However, the Assistant Collector and the Collector (Appeals) denied this benefit, arguing that the product was correctly classified under sub-heading 2107.91 and thus not eligible for the exemption.

The Tribunal majority upheld this decision, stating that the exemption notification cannot change the classification of the product. The product must be classified based on its nature and the applicable tariff headings, not based on the exemption notification.

3. Interpretation of the terms "beverage" and "preparation for beverages" under the Central Excise Tariff:

The appellants argued that 'Sharbat Rooh Afza' should be classified as a beverage under sub-heading 2202.90. They cited Supreme Court decisions and other legal precedents to support their claim that the product is a beverage concentrate.

The Tribunal majority, however, found that 'Sharbat Rooh Afza' is a syrup and not a beverage. They referenced the product's label, manufacturing process, and usage, concluding that it fits the description of preparations for beverages under Chapter Note 5(j) of Chapter 21. The Tribunal also noted that the product's classification should be based on its general usage and known trade denominations.

Separate Judgments:

- Majority Decision (Lajja Ram and G.A. Brahma Deva): The product 'Sharbat Rooh Afza' is classified under sub-heading 2107.91 as a syrup and is not eligible for the benefit of exemption Notification No. 2/94-C.E. The appeal is dismissed.

- Dissenting Opinion (K. Sankararaman): The product should be classified under sub-heading 2202.90 as a non-alcoholic beverage. The appeal should be allowed.

Conclusion:

In view of the majority decision, 'Sharbat Rooh Afza' is classified under sub-heading 2107.91 of the Central Excise Tariff and is not eligible for the exemption under Notification No. 2/94-C.E. The decision of the Collector (Appeals) is upheld, and the appeal is dismissed.

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