1986 (7) TMI 358 - AT - Central Excise

Summary

Issues Involved:
1. Dutiability of chicory powder under Tariff Item 68 CET.
2. Eligibility for exemption under Notification No. 55/75.
3. Validity of retrospective demand for duty.

Detailed Analysis:

1. Dutiability of Chicory Powder under Tariff Item 68 CET:
The primary issue was whether the process of roasting and grinding chicory roots with the aid of power to produce chicory powder constitutes "manufacture" under the Central Excises and Salt Act. The appellants contended that this process does not amount to manufacture, relying on a previous Tribunal judgment in M/s. Pyrites, Phosphates and Chemical Ltd., where crushing and sieving did not result in a new product. However, the Tribunal referenced a later decision involving Rock Phosphate, where the processes of breaking, powdering, and sieving were deemed to amount to manufacture as they produced a marketable commodity. Applying this reasoning, the Tribunal concluded that roasting and grinding chicory roots to produce chicory powder creates a new and distinct commercially marketable commodity, thus constituting manufacture under the Act.

2. Eligibility for Exemption under Notification No. 55/75:
The appellants claimed that chicory powder should be exempt from duty under Notification No. 55/75, which exempts "all kinds of food products and food preparations." They cited the Prevention of Food Adulteration Act to argue that chicory powder qualifies as a food product. However, the Tribunal emphasized that terms in one statute should not be interpreted by another statute's definitions. The Tribunal noted that chicory powder is not consumed as food or beverage but is used as an additive to coffee. Referring to the Andhra Pradesh High Court's decision that a coffee-chicory blend is not a food product, the Tribunal held that chicory powder does not qualify for exemption under Notification 55/75.

3. Validity of Retrospective Demand for Duty:
In Appeal No. 1071 of 1981, the appellants argued against the retrospective demand for duty from 1-9-1979 to 28-2-1980, citing a letter from the Collector dated 19-7-1975, which stated that chicory powder was not dutiable. They contended that they stopped paying duty based on this official communication and that any demand for duty should be prospective from the date of the show cause notice (29-2-1980). The Tribunal referenced decisions in M/s. Nuchem Plastic Ltd. and M/s. Inarco Ltd., which held that the Department should not change its stance without compelling reasons and that demands should be prospective if no such reasons exist. The Tribunal found that the appellants had relied on the Collector's letter and had not paid duty accordingly. Therefore, the demand for duty should be enforceable only from the date of the show cause notice (29-2-1980), not retrospectively.

Conclusion:
The appeal of M/s. Radio Electronics (Appeal No. 1073/81-D) was dismissed, confirming the lower authorities' orders. However, the appeal of M/s. Eagle Chicory (Firm) (Appeal No. 1071 of 81-D) was allowed, setting aside the orders of the lower authorities regarding the recovery of duty for the period prior to 29-2-1980, and clarifying that duty under Tariff Item 68 was payable from 29-2-1980 onwards.