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TMI Blog2009 (12) TMI 786X X X X Extracts X X X X X X X X Extracts X X X X ..... alcoholic preparations of odoriferous substances with alcohol content exceeding 0.5% by volume of a kind used for the manufacture of beverages. They also misdeclared similar consignments as essential oils of CH 3301 and evaded duty due. Documents recovered during investigation from the premises of the importer and the CHA who processed the import documents showed that GIPL had issued instructions to the suppliers not to describe the goods as 'food flavours ' in the related airway bills and to the CHA not to declare the classification in the Bills of Entry without getting clearance from it. It was found that some documents such as material data sheets had been manipulated and that GIPL was in possession of documents such as certificates of analysis and ingredient declarations which indicated composition of the impugned goods to be different from that reflected in documents produced to the authorities. Every time a consignment was imported, GIPL wrote to the Deputy Commissioner of Customs justifying the exemption wrongly claimed. The executives of GIPL and the CHA gave confessional statements admitting that they had misdeclared or suppressed the true and complete description of compo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tures of odoriferous substances and mixtures (including alcoholic solutions) with a basis of one or more odoriferous substances of a kind used as raw materials in the industry". Entry added to CH 33.02 in 1996 read as follows : "other preparations based on odoriferous substances, of a kind used for the manufacture of beverages". Prior to reorganization of the entries in 1996, compound alcoholic preparations for the manufacture of beverages were excluded from CH 33 [(note 1(a)] and were covered by CH 22.08. Explanatory Notes (EN) clarified this provision as follows : "These products are generally a complex mixture of distillates, tincture, alcoholates and natural or synthetic essences, contain (in whole or part) aromatic principles and sometimes other constituents which characterize a particular beverage. As a result of which the beverage in question can be obtained simply by diluting the preparation with water, wine or alcohol" These carried a higher rate of duty compared to goods of CH 33.02. Notification No. 76/86-Cus. excluded these goods from the exemption allowed under that notification. This notification read as follows: "In exercise of the powers conferred by sub-secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... April 9, 1998. The decision involved peppermint flavour and peach flavour which consisted of water, modified food starch, peppermint essential oil, citric acid and sodium benzoate. The peach flavour consisted of propylene glycol, ethyl alcohol, fruit essences, ethyl acetate and other organic estersm acetic acid and other organic acids, acetyl aldehyde and other organic aldehydes, essential oils, and miscellaneous organic flavour compounds. The peppermint flavour was classified in sub-heading 3302.10.10, HTSUS, the provision for "mixtures of odoriferous substances and mixtures (including alcoholic solutions) with a basis of one or more of these substances, of a kind used as raw materials in industry: Of a kind used in the food or drink industries: Not containing alcohol," dutiable at 4.8 per cent ad valorem (1995). The peach flavour was classified in sub-heading 3302.10.30, HTSUS, the provision for "mixtures of odoriferous substances and mixtures (including alcoholic solutions) with a basis of one or more of these substances, of a kind used as raw materials in industry: Of a kind used in the food or drink industries : Containing over 20 per cent of alcohol by weight," dutiable at 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 'tariff ruling ') in support of the stand taken in the impugned order to find that the flavouring compounds involved are compound alcoholic preparations : "Before 1996, heading 2208 covered alcoholic preparations which (1) were compound (2) had an alcohol content exceeding .5% volume, and (3) contained all of the odoriferous substances and favoring ingredients which characterize a particular beverage. Heading 3302 covered alcoholic preparations which (1) were compound (2) had an alcohol content exceeding .5% volume, and (3) contained odoriferous but not all of the favoring ingredients in a beverage." Revenue also relied on "Additional notes" in the Combined Nomenclature 2008 of Irish Customs which clarified that 'compound alcoholic preparations' of entry 2106.90 were preparations containing more than 0.5% alcohol by volume. 7. We have carefully considered the case records and the submissions both written and oral by both sides. The impugned flavour compounds are the following. Sl. No. Description 1. Vanilla Flavour 2. Berry Flavour 3. Tabac Top Note KN 4. Tab Cig AMB Type 5. Berry Flavour 6. Peppermint Wash Flavour 7. Arancio 8. Impact IMP KN 9. Tab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 57 - 62% Propylene glycol E1520 37 - 42% Nature identical flavouring substance - Vanillin <2% Flavouring preparation (natural) - Immortelle extract <2% Artificial falouring substance - Ethyl maltol <2% 10. Tab Flue cured KN Ethyl alcohol 56 - 61% Propylene glycol E1520 37 - 42% Nature identical flavouring substance - Vanillin <2% Flavouring preparation (natural) - Immortelle extract <2% Artificial falouring substance - Ethyl maltol <2% 11. Citra Fresh Lime Essence Ethyl alcohol 47 - 52 Water 42 - 47 Natural flavouring 2-7 12. Orange Flavour Ethyl alcohol 46 - 51% Iriacetin E1518 37 - 42% Flavouring preparation (natural) - Orange oil 3 - 8% Natural flavouring substance - Limonene 1 - 5% Polysorbate 60 E435 <2% Nature identical flavouring substance - Octanal <2% BHA E320 <0.1% Alpha - Tocopherol E307 <0.1% 13. Cranberry Cranberry juice concentrate 86 -91 &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Top Note KN Propylene glycol E1520 57-62% Water 22-27% Flavouring preparation (natural) - Prune extract 5 - 10% Ethyl alcohol 1 - 5% Triacetin E1518 1 - 5% Benzyl alcohol <2% Nature identical flavouring substance Isoprophyl alcohol <2% Caramel color E150 <2% 21. Cherry Flavour Propylene glycol E1520 89.2% Ethanol 1.6% Nature identical flavouring substances Flavouring preparations Natural flavouring substances Of these, eight were Vanilla Flavour (code No. 96524742), Berry Flavour (code No. 96439025 & 96518625), Arancio (code No. 96518118), Citra Fresh Lime Essence (code No. 97505503) and Cranberry (code Nos. 96634848, 96641216 & 96619050) and were used for manufacture of beverages (henceforth referred to as beverage flavours). Each of these is one or more odoriferous substances or a mixture of such substances, imported as a solution in, (as per assessee), or as a compound of, (as per Revenue), alcohol. In many cases there are also solvents/carriers/preservatives such as ethylen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und alcoholic preparation' at 20 degrees centigrade.) On a careful reading of the exclusion clause of the notification, it would be clear to qualify for exemption three conditions are to be satisfied i.e., (i) it should be a compound, (ii) it should also be of a kind used for the manufacture of beverages and (iii) the same should have an alcoholic strength by volume exceeding 0.5 percent determined at 20 degrees centigrade. Thus, even though there is no specific mention or explanation either in the chapter heading 33.02 or Section Notes/Chapter Notes in the Customs Tariff from the exclusion clause in Notification No. 21/2002-Cus., dated 1-3-2002, it could be made out as to what the item 'compound alcoholic preparation' is. In the instant case M/s GIPL fairly admit in their reply dated 28-2-2007 that the alcoholic strength by volume in the imported flavours in question is exceeding 0.5% and such flavours are used for the manufacture of beverages. However they claim that the Customs exemption Notification No. 76/86-Cus., dated 17-2-1986 explains about "the compound alcoholic preparations". The relevant portion of the said Notification No.76/86-Cus., dated 17-2-1986 is reproduced bel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents, to call them "a compound". Further, M/s. GIPL have admitted that such flavours are used in beverage industry and the alcoholic strength therein by volume exceeds 0.5%. Accordingly the imported flavours in this case satisfy all the criteria to call them compound alcoholic preparations. M/s GIPL have not advanced any other argument to substantiate their claim that the imported flavours are not compound alcoholic preparations. In view of the above, I hold that the imported flavours impugned in the show cause notice are compound alcoholic preparations and the same are not entitled to concessional rate of duty as provided in Notification No. 21/2002-Cus., dated 1-3-2002 and accordingly, M/s GIPL are liable to pay the differential duty in respect of those flavours. Further, as the subject items were imported into India by misdeclaring their contents and by wrongly claiming the benefit of exemption under Notification No. 21/2002-Cus., dated 1-3-2002, such items totally valued at Rs. 2,20,82,822/- are liable to confiscation under Section 111(m) of the Customs Act, 1962." 8. The issue to be decided is whether the impugned goods of CSH 3302.10 are compound alcoholic preparations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m from CSH 2208.10 in 1996 to CSH 210690.12. EN on this entry CSH 2208.10 used to be - "The heading also covers compound alcoholic preparations of a kind used in the manufacture of various beverages (e.g., aperitives, liqueurs and non-alcoholic beverage. These products, generally a complex mixture of distillates, tinctures, alcoholates and natural or synthetic essences, contain all of the odoriferous substances and other flavoring ingredients (e.g., citric acid) which characterize a particular beverage and sometimes other constituents (sugar, etc.). As a result, the beverage in question can be obtained simply by diluting the preparation with water, wine or alcohol, with or without addition, for example of sugar or carbon dioxide gas. This heading excludes : (a) similar compound preparations having an alcoholic strength by volume not exceeding 0.5% vol. (heading 21.06). (b) Alcoholic preparations of a kind used for the manufacture of beverages, based on one or more odoriferous substances but not containing all of the flavoring ingredients which characterize a particular beverage (heading 33.02)." In the Irish Customs tariff, entry CSH 2106 90 20 is, Compound alcoholi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch flavour. Peppermint flavour consisted of water, modified food starch, peppermint essential oil, citric acid and sodium benzoate. The peach flavour consisted of propylene glycol, ethyl alcohol, fruit essences, ethyl acetate and other organic esters, acetic acid and other organic acids, acetyl aldehyde and other organic aldehydes, essential oils, and miscellaneous organic flavour compounds. The peppermint flavour was classified in sub-heading 3302.10.10, HTSUS, the provision for "mixtures of odoriferous substances and mixtures (including alcoholic solutions) with a basis of one or more of these substances, of a kind used as raw materials in industry: Of a kind used in the food or drink industries: Not containing alcohol," dutiable at 4.8 per cent ad valorem (1995). The peach flavour was classified in sub-heading 3302.10.30, HTSUS, the provision for "mixtures of odoriferous substances and mixtures (including alcoholic solutions) with a basis of one or more of these substances, of a kind used as raw materials in industry: Of a kind used in the food or drink industries : Containing over 20 per cent of alcohol by weight," dutiable at 5 percent ad valorem (1995).We find that these deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es C, we find that GIPL had not canvassed such a case before the adjudicating authority. In any case, since the assessee had claimed the benefit of the entry Sl. No. 119 it is for the assessee to show that the impugned goods satisfied the description of the entry. Revenue does not have to show that the goods do not satisfy the definition to qualify for the benefit. Moreover the literature produced by the ld. Counsel for the Revenue establishes beyond doubt that the alcohol content in the flavour compounds shown in the ingredient list furnished by GIPL is at 20 degrees C and the international practice is not to mention the temperature. EN throughout also refers to the alcohol content of CAP without mentioning any temperature. 12. As regards the flavours not sold to manufacturers of beverages, it is not established in the order that they are of a kind used for the manufacture of beverages. Commissioner found all flavour compounds involved to be general purpose flavours. He relied on the opinion of the flavourist of GIPL to hold that the remaining flavour compounds, are of a kind used in the manufacture of beverages. We find that all the confessional statements were retracted an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the appellants were instrumental and thereby rendered the goods liable for confiscation under Section 111(m) of the Act. The Commissioner has rightly held that the appellants are liable for penalty under Section 112(a) of the Act. As regards the employees of GIPL, we find that the penal liability of the employees of GIPL has to be redetermined as the revised liability of GIPL is to be decided. 16. As regards the appeal filed by Shri Veeresh Gowda, Director of M/s Manjunatha Shipping Pvt. Ltd., CHA, who processed the documents relating to import of the impugned consignments , the CHA acted on the information furnished to him by GIPL. Penalty is imposed on the appellant u/s 112(a) as he had not advised the importer as envisaged in Rule 13 of Custom House Agents Regulations 2004. Unless it is found that false details in the import documents filed with the department were entered by the CHA knowingly, CHA cannot prima facie be held to have abetted misdeclaration of the goods under import and rendered the impugned goods liable for confiscation under the Act. We observe that in a recent judgment of the Hon'ble High Court of Delhi in the case of Jasjeet Singh Marwaha v. Union of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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