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TMI Blog2005 (9) TMI 641X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 2(f)(ii) of the Central Excise Act would apply. The products of the appellant would consequently be deemed to have undergone a process of manufacture and would be eligible to duty under sub-heading 2107-00 of Chapter 21 of the First Schedule to the Central Excise Tariff Act. The classification, of the produce in question, as provided in Rule 1 of the Rules of Interpretation of the Central Excise tariff, is determined in terms of the Chapter Notes, and thus the other Rules of Interpretation will not come Into play. Since betel nuts are not merely cut into pieces, but undergo an elaborate process wherein several additives are mixed thereto, it is clear that the explanatory notes to HSN have no application to the case on hand. As rightly held by the CESTAT, the end product of the process is different from the original material and a new and distinct product known as supari powder has emerged. We agree with the Tribunal, that on subjecting the raw material to a process of manufacture it is not necessary that there should be a transmutation since supari powder would have the character of betel nut and it cannot be said that there is no manufacture for the reason that betel nuts rema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Excise, in Appeal No. 81/99(G)/EC dated 6-5-2004, was set aside. The Commissioner of Customs and Central Excise, in his order dated 6-5-2004, had set aside the order of the Assistant Commissioner of Customs and Central Excise, Guntur Division, dated 25-4-2005 (sic. 14-10-1998), classifying the product of the Appellant under Chapter subheading No. 2107.00 instead of sub-heading No.0801.00 of the schedule to the Central Excise Tariff Act, 1985, (hereinafter referred to as Tariff Act). The Appellant's contention that their products were required to be classified under Chapter sub-heading No.0801.00 was upheld by the Commissioner. 2. The facts, to the extent necessary for this appeal, are that the appellant herein produces betel nut powder known as supari , and clears the said goods on payment of duty at the appropriate rates specified in the Schedule. They were availing credit on various inputs and utilizing the said credit towards payment of duty on their final product. The Appellants filed a revised declaration with effect from 17-7-1997. They filed two supplementary declarations classifying their product viz., betel nut pieces under Ch. S. II No.0801, incorporating changes in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de. 5. In the Appeal filed by the Revenue, against the order of the Commissioner dated 6-5-2004, the Customs, Excise Service Tax Appellate Tribunal, South Zonal Bench at Bangalore, (hereinafter referred to as CESTAT), held that the end product of the process was different from the original material and a new and distinct product known as supari powder had emerged. The order of the Commissioner, dated 6-5-2004, was set aside. Hence the present Appeal. 6. Sri M. Naga Raghu, Learned Counsel for the Appellant, would submit that since there is no manufacturing process involved and betel nuts remain as such even after they are cut into pieces, the order of the CESTAT, setting aside the order of the Commissioner and confirming the order of the Assistant Commissioner, is liable to be set aside. Referring to several judgments of the Supreme Court and the High Courts in Panchalingala Carbonic Gas Pvt. Ltd. Kurnool v. State of A.P . Deputy Commissioner, Sales Tax v. Pio Food Packers . Starling Foods v. The State Karnataka . Krishna Chandra Dutta (Spice) Pvt. Ltd. v. Commercial Tax Officer 1994(70) ELT 501 (SC). Shyam Oil Cake Ltd. v. Collector of Central Excise, Jaipur 2004 (8) Supreme 473. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal may file an appeal to the High Court and such appeal under this Sub-section shall be- (a) file within one hundred and eighty days from the date on which the order appealed against is received by the Commissioner of Central Excise or the other party; (b) file within one hundred and eighty days from the date on which the order appealed against is received by the Commissioner of Central Excise or the other party; (c) in the form of a memorandum of appeal precisely stating therein the substantial question of law involved. (3) Where the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate that question. (4) The appeal shall be heard only on the question so formulated, and the respondents shall, at the hearing of the appeal, be allowed to argue that the case does not involve such question. (5) The High Court shall decide the question of law so formulated and deliver such judgment thereon containing the grounds on which such decision is founded and may award such cost as it deems fit. (6) The High Court may determine any issue which - (a) has not been determined by the Appellate Tribunal; or (b) has been wrongly determined by the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Solicitor General would contend that since the dispute in the present case is whether the goods of the appellant fall under sub-heading 0801.00 in Chapter-8 or sub-heading 2107.00 in Chapter-21 of the Central Excise Tariff Act, it is a dispute relating to the determination of a question having relation to the rate of duty and as such an appeal lies only to the Supreme Court under Section 35-L of the Central Excise Act and not to the High Court under Section 35-G. Reliance is placed on the judgment in Navin Chemicals Mfg. and Trading Co. Ltd. v. Collector of Customs 1993(68) ELT 3 (SC). 10. Learned Asst. Solicitor General would submit that the judgments of the Supreme Court, relied on by the Appellant, in Shyam Oil Cake Ltd. (5 supra); Hindustan Zinc Ltd. (6 supra); Steel Strips Ltd. (8 supra); Aman Marble Industries Pvt. Ltd (9 supra); G.S. Auto International Ltd. (11 supra); Bherhaghat Mineral Industries (12 supra); Technoweld industries (13 supra), are all matters, wherein an appeal had been preferred directly to the Supreme Court against the order of the Tribunal which itself establishes that the present appeal before this Court under Section 35-G of the Central Excise Act is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rts of the Central Excise Act, and since the dispute in the present case regarding classification of goods, relates directly and proximately to the rate of duty applicable thereto, an appeal would lie only to the Supreme Court, (against an order passed by the CESTAT), under Section 35-L(b) of the Central Excise Act. 13. Applying the law laid down by the Apex Court in Navin Chemical's (15 supra), we hold that, as an appeal lies, against the order of the Tribunal, in a dispute relating to the classification of goods, only to the Supreme Court under Section 35-L, an appeal before this Court, under Section 35-G of the Central Excise Act, is not maintainable. Does a substantial question of law arises for consideration in the present appeal? 14. While the learned Assistant Solicitor General would submit that no substantial question of law arises for consideration in the present appeal and the question, whether or not the Appellant's products come under a particular chapter entry in the Schedule to the Tariff Act, is not a substantial question of law, Sri M. Naga Raghu, learned Counsel for the appellant, in support of his submission that the present appeal, filed before this Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities. The Division Bench of the Rajasthan High Court held that the question, whether certain goods fall within a particular entry or not, was a question of law. Proceedings under Article 226 of the Constitution of India, whereunder the power of Judicial review is not circumscribed and is wide in its amplitude, are far wider in scope than proceedings under Section 35-G of the Central Excise Act, whereunder the scope is extremely limited and the jurisdiction of the High Court can be invoked only in the limited category of cases which satisfy the conditions prescribed thereunder. None of the aforesaid judgments, referred to by the learned Counsel for the Appellants, arise under Section 35-G of the Central Excise Act nor has it been held in any of these judgments that the question, whether goods should be classified under a particular entry or not, give rise to a substantial question of law. Reliance placed on the judgment of the Full Bench of Madras High Court in R. Subba Rao (supra) is also of no avail to the Appellants. While it is true that where there is room for reasonable doubt or difference of opinion, it could give rise to a substantial question of law, the Full Bench o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would not be termed to be a substantial question of law. Mere appreciation of facts, documentary evidence, meaning of entries and the contents of the document cannot be held to have raised a substantial question of law (Kondiba Dagadu Kadam v. Savitribai Sopal Gujar . Where the Tribunal is shown to have exercised its discretion in a judicial manner, it cannot be termed to be an error either of law or of procedure requiring interference under Section 35-G of the Central Excise Act. 17. The contention of Sri M. Naga Raghu, learned Counsel for the Appellant, that the difference of opinion, between the Commissioner of Central Excise (first appellate authority) and the CESTAT, has, by itself, resulted in a substantial question of law is palpably absurd and is liable to be rejected at the threshold. Accepting this farfetched contention would mean that every case, where an appellate authority reverses an order of the original authority, would give rise to a substantial question of law. 18. We are unable to accept the submission that the question, whether a process of manufacture is involved or not, would by itself, and nothing more, give rise to a substantial question of law. This questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sification of goods, which the CESTAT, on appreciation of the facts and the documentary evidence on record, has held to fall within Chapter Section 11 No. 2107.00. The CESTAT has exercised its discretion in a judicial manner and its conclusions are not contrary to law. We, therefore, hold that no substantial question of law arises for consideration in the present appeal necessitating its being entertained under Section 35-G of the Central Excise Act. Does the Appellant's Product Undergo A Process of Manufacture? 21. Since the matter has been argued extensively on merits, we do not propose to dismiss the appeal only on the ground of its not being maintainable under Section 35-G of the Central Excise Act, though we are in complete agreement with the learned Assistant Solicitor General on both counts viz., (1) the dispute, relating to classification of entries under the Central Excise Tariff Act and the order passed in this regard by CESTAT, can only be questioned by way of an appeal to the Supreme Court under Section 35-L of the Central Excise Act; and (2) No substantial question of law arises for consideration in the present case and the appellant is therefore not entitled to in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o manufacture since the commodity continued to possess its original identity notwithstanding the removal of inedible portions, the slicing and thereafter canning it or adding sugar to preserve it. In Bherhaghat Mineral Industries (12 supra) crushing of dolomite lumps into chips and powder was held as not amounting to a process of manufacture which brings about a new commercial commodity. In Technoweld Industries (13 supra), the process of drawing wires from wires rods was held as not amounting to manufacture since both wire rods and wires continued to remain the same product. In Krishna Chander Dutta (Spice) Pvt Ltd. (4 supra), whole black and white pepper and pepper powder were held to be the same goods. Similarly, whole turmeric and turmeric powder were held to be the same goods and as not amounting to manufacture. 25. Relying on the aforesaid judgments, Sri M. Naga Raghu, Learned Counsel would submit that, since betel nuts, even after their being cut into pieces, continued to remain betel nuts and are understood as such in commercial parlance, no process of manufacture is involved irrespective of the fact that it is considered as involving a process of manufacture under chapter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excisable goods ' has been defined by Clause (d) of Section 2 to mean, 'goods' specified in the Schedules. Rates of excise duty are specified in the First Schedule to the Central Excise Tariff Act, 1985. The First Schedule is commonly referred to as the Central Excise Tariff and contains 96 Chapters grouped in 20 Sections. It is selectively aligned with the Harmonised System of Nomenclature (HSN), an International Nomenclature adopted by more than 130 countries including India for international trade between the member countries. Explanatory Notes to HSN have a persuasive value where chapters and entries in the Tariff have been fully or broadly aligned with HSN; otherwise not. (Bharat Forge and Press Industries (P) Ltd. v. Collector 1990 (45) ELT 525(SC). Bakelite Hylam Ltd. (10 supra) The scheme in the Schedule is to divide the goods in two broad categories - one, for which rates are mentioned under different entries and other the residuary. 30. For classification of goods, the Central Excise Tariff contains Rules for Interpretation of the Schedule. These are Statutory Rules. Besides this, there are 'Section Notes' and 'Chapter Notes' which explain the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The duty is levied on goods, and since the expression goods has not been defined, either in the Acts or the rules made thereunder, the legislature must be taken to have used that word in its ordinary, dictionary meaning. The dictionary meaning is that to become goods it must be something which can ordinarily come to the market to be bought and sold. (South Bihar Sugar Mills Ltd. v. Union of India . A.P. State Electricity Board v. Collector of C. Ex., Hyderabad . Hindustan Polymers v. Collector of Central Excise ). The essential ingredient is that there should be manufacture of goods. The goods being articles, which are known to those who are dealing in the market, having their identity as such. Marketability, is an essential ingredient in order to be dutiable under the Schedule to Central Excise Tariff Act, 1985. (Bhor Industries Ltd. v. Collector of Central Excise . Collector of Central Excise v. Ambalal Sarabhai Enterprises ). Importance, of Chapter Notes and the Rules of Interpretation, in Classification of Goods 33. Section 11 of the First Schedule classifies vegetable products and Section IV classifies prepared foodstuffs, beverages, spirits and vinegar; tobacco and manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rule 2 or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows: (a) The heading which provides the most specific description shall be preferred to headings providing a more general description.... (b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets, which cannot be classified by reference to (a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable. (c) When goods cannot be classified by reference to (a) or (b), they shall be classified under the heading which occurs last in the numerical order among those which equally merit consideration. 4. Goods which cannot be classified in accordance with the above rules shall be classified under the heading appropriate to the goods to which they are most akin. 34. In terms of the Rules of Interpretation of the Excise Tariff Schedule, classification has to be determined according to the terms of the headings and relative Section or Chapter Notes and the Rules of interpretation come into play ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther treatment on the goods to render the product marketable to the consumer, and the word manufacture shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account; 37. Products, referred to in the notes under the Chapters in the Schedule to the Central Excise Tariff Act, amount to manufacture as a consequence of the new inclusive definition of manufacture , under Section 2(f) of the Excise Act whereunder activities, which otherwise do not amount to manufacture , are treated as manufacture and made liable to duty. (O.K. Play India Ltd. v. Commissioner of Central Excise, New Delhi-II . 38. The definition manufacture under Section 2(f) is an inclusive definition. Clause (ii) of Section 2(f) creates a legal fiction in the sense that goods, specified in the Chapter Notes as amounting to manufacture, are deemed to fall within the definition of manufacture under Section 2(f)(ii). It is well settled that full effect must be given to the statutory fiction and it should be carried to its logical conclusion and to that end i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be determined having regard to the Chapter Notes. The product of the appellant falls, within the expression Betel nut powder known as supari , as defined in Note-4 of Chapter-21, since it is not in dispute that the product is a preparation containing Betel nut. Under note 7 of Chapter-21 adoption of any other treatment to render the product marketable to the consumer is held as amounting to manufacture. In the case on hand, since Note 4 of Chapter 21 specifically states that the process indicated amounts to manufacture, the deeming provision in Section 2(f)(ii) of the Central Excise Act would apply. The products of the appellant would consequently be deemed to have undergone a process of manufacture and would be eligible to duty under sub-heading 2107-00 of Chapter 21 of the First Schedule to the Central Excise Tariff Act. The classification, of the produce in question, as provided in Rule 1 of the Rules of Interpretation of the Central Excise tariff, is determined in terms of the Chapter Notes, and thus the other Rules of Interpretation will not come Into play. Harmonised System of Nomenclature HSN) 42. Since the controversy in this appeal is whether or not the products, of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufacture, that in the case of Chapter 21 there is no specific definition in relation to betel nut powder and that betel nuts split into pieces would rightly fall under ch.8 of the Schedule for which the rate of duty is nil, that cut supari is not considered as a manufactured product to fall under Ch. S.II No. 2107.00, since, to fall under Ch. S.II. No. 2107.00 and for levying duty, supari must be in the form of powder. 45. Mr. M. Naga Raghu, learned Counsel for the appellant, contends that since HSN, has been expressly acknowledged to be the basis of the structure of the Central Excise Tariff Act and the tariff classification made therein, in case of any doubt, HSN serves as a guide for ascertaining the true meaning of any expression used in the Act and that the goods of the appellant, on the basis of the classification prescribed under the HSN, would not fall under Chapter-21. It is contended that betel nuts were classified under Chapter 8 of the Central Excise Tariff Act, 1985 which tariff was based on the explanatory notes to HSN. In terms of the Chapter notes at Chapter-8 of the HSN, fruits and nuts of the said chapter may be whole, sliced, chopped, shredded, stoned, pulped, g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdingly, it is proposed to specify the Central Excise Tariff suggested by the Study Group by a separate Tariff Act instead of the present system of the tariff being governed by the First Schedule to the Central Excises and Salt Act, 1944. 3. The main features of the Bill are as follows: (i) The tariff included in the Schedule to the Bill has been made more detailed and comprehensive, thus, obviating the need for having a residuary tariff Item. Goods of the same class have been grouped together to enable parity in treatment. 4. The Bill seeks to achieve the above objects. 47. It is significant, as expressly stated, in the Statement of Objects and Reasons, that Central Excise Tariffs are based on the HSN and the internationally accepted nomenclature of HSN was taken into account to reduce disputes on account of tariff classification . Accordingly, for resolving any dispute relating to tariff classification, a safe guide is the internationally accepted nomenclature emerging from the HSN. This being the expressly acknowledged basis of the structure of the Central Excise Tariff in the Act and the tariff classification made therein, in case of any doubt the HSN is a safe guide for ascert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the original material and a new and distinct product known as supari powder has emerged. We agree with the Tribunal, that on subjecting the raw material to a process of manufacture it is not necessary that there should be a transmutation since supari powder would have the character of betel nut and it cannot be said that there is no manufacture for the reason that betel nuts remain as such. The CESTAT rightly held that, while it may remain so, when other ingredients are added to it, it cannot be said that this process did not bring into existence a new and distinct commodity, that if one asked for betel nut the shop keeper would not give supari and that, in other words, betel nut was different from supari powder. The CESTAT, while holding that note 4 in Chapter 21 could not be disregarded, relied on several judgments including those of the Madhya Pradesh High Court in S.N. Sunderson (Minerals) Ltd. v. Supted. (Preventive), C.Ex., ldore, the Allahabad High Court in Kothari Chemicals v. Union of India , and the Karnataka High Court in Sree Ramakrishna Soapnut Works . 51. In a catena of judgments of the Supreme Court, referred to above it has been held that, goods to attract excis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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