2009 (11) TMI 716 - AT - Service Tax

Classification of goods - Ready-to-Eat edible preparations - eligibility of benefit of N/N. 6/2002-C.E., dated 91-3-2002 - Although the products manufactured by the assessee are classifiable under Chapter sub heading 2108.99 (presently 21069099) of the CETA, 1985, they did not appear to be covered within the scope of the above Notification - Held that - all the items are identical and they are only extension of product line, for example, the rice varieties which were in dispute earlier was restricted to bisibele bath and pongal while in the current case new varieties like tomato rice , lemon rice , sambar rice etc., are in dispute - As regards the other items also, we find that they are only an extension of the items which were initially manufactured/prepared in the year 2001. It is seen in the facts of this case that the items which are produced/manufactured by the appellants may fall under the category of ready for consumption/use. On a plain reading of the notification, that all edible preparations ready for consumption are exempt, does not flow from the words which are used in the said notification i.e. sweet meats, bhujia, mixture, chabena etc. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Denial of exemption under Notification No. 6/2002-C.E.
2. Demand and recovery of Central Excise Duty and Education Cess.
3. Interest under Section 11AB of the Central Excise Act, 1944.
4. Imposition of penalty under Rule 25 of Central Excise Rules, 2002.

Issue-wise Detailed Analysis:

1. Denial of Exemption under Notification No. 6/2002-C.E.:
The assessee classified their 'Ready-to-Eat' and 'Frozen Foods' under Chapter sub-heading 2108.99 (21069099 post 1-3-2005) and claimed full exemption under Sl. No. 14 of Notification No. 6/2002-C.E. The Show Cause Notice alleged that the products did not qualify for the exemption as they required pre-heating or dipping in hot water before consumption, unlike the products specified in the Notification which are ready for consumption. The adjudicating authority concluded that the assessee was not eligible for the exemption for 85 edible preparations, applying the principles of 'ejusdem generis' and 'noscitur a sociis.'

2. Demand and Recovery of Central Excise Duty and Education Cess:
The Show Cause Notices demanded Central Excise Duty of Rs. 97,80,439/- and Education Cess of Rs. 1,95,609/- for the period 1-11-2004 to 31-10-2005, and Rs. 29,43,285/- and Education Cess of Rs. 58,866/- for the period 1-11-2005 to 28-2-2006. The adjudicating authority confirmed the demand but did not impose any penalty.

3. Interest under Section 11AB of the Central Excise Act, 1944:
The Show Cause Notices also proposed to charge interest under Section 11AB of the Central Excise Act, 1944, which the adjudicating authority upheld.

4. Imposition of Penalty under Rule 25 of Central Excise Rules, 2002:
The Show Cause Notices proposed penalties under Rule 25 of Central Excise Rules, 2002, and Section 11AC of the Central Excise Act, 1944, for the respective periods. The adjudicating authority did not impose any penalty on the appellants.

Analysis and Judgment:

Res Judicata:
The appellants argued that earlier Show Cause Notices on the same issue were adjudicated in their favor, and the principle of res judicata should apply. The adjudicating authority's previous order dated 19-10-2001, which granted exemption under similar conditions, was not challenged by the revenue, thus precluding them from reopening the same issue.

Principles of 'Ejusdem Generis' and 'Noscitur a Sociis':
The appellants contended that these principles were incorrectly applied by the adjudicating authority. They argued that the rule of 'ejusdem generis' applies only when specific words are followed by general words, which was not the case here. They further argued that the legislative intent was always to exempt ready-to-eat preparations, as evidenced by historical exemptions and departmental clarifications.

Legislative Intent:
The appellants provided a legislative history showing continuous exemption for ready-to-eat preparations, indicating that the intention was not to subject these products to excise duty.

Comparative Analysis:
The appellants highlighted discrepancies in the adjudicating authority's decisions, noting that similar products were granted exemptions in other cases, such as Palak Paneer and Mutter Paneer.

Supreme Court Precedents:
The appellants cited several Supreme Court decisions establishing that non-challenge of an earlier order in an identical issue precludes the revenue from challenging a similar order in subsequent periods.

Conclusion:
The tribunal found that the items in question were an extension of previously exempted products and that the revenue could not reopen the issue. The tribunal set aside the impugned order, holding that the demand of duty against the appellant was not sustainable. The appeal was allowed to the extent challenged, without recording findings on other submissions.

Pronouncement:
The judgment was pronounced in open Court on 12-11-2009.

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