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TMI Blog2019 (10) TMI 762X X X X Extracts X X X X X X X X Extracts X X X X ..... or in the impugned order that any of the products in question satisfy the above description of 2202 10 as waters including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured. These products, therefore, cannot fall under 2202 10 20 as lemonade. Tariff Item No. 2202 10 20 would cover only those products which are essentially waters with added sugar and flavoured. The Supreme Court in its decision in Parle Agro (P) Ltd. [ 2017 (5) TMI 592 - SUPREME COURT ] examined at length the provisions of the Regulations framed under The Food Safety and Standards Act and more particularly to the provisions of Regulation 2.3.10 that requires fruit juice content in lime / lemon ready to serve beverage as not less than 5% and in all other beverages / drinks as not less than 10%. It was noticed that in Appy Fizz, the contents of apple is more than 10%. In the case of lime / lemon the fruit juice content the requirement is that it has to be not less than 5 %. The products bought and sold as fruit drink with lemon juice having a juice content of 5 per cent or more are described as Ready to Serve Fruit Drink and not as Lemonades or Lemon/Lime Fla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For The Appellant : Sh. A. P. Mathur, Advocate, for the Appellant in Excise Appeal No. 50661 of 2015 with Excise Appeal No. 50662 of 2015, Sh. B. L. Narasimhan Sh. Ayush Agarwal, Advocates, for the Appellant in Excise Appeal No. 70012 of 2015 For The Respondent : Sh. Kavin Gulati, Sr. Advocate, Sh. Vivek Sharma Sh. Nishant Mishra, Advocates on behalf of Intervenor in Excise Appeal No. 50661 of 2015 And Sh. Mohd. Altaf, Authorised Representative ORDER JUSTICE DILIP GUPTA : Doubting the correctness of an order passed by a Division Bench of the Tribunal at Mumbai in Hindustan Coca-Cola Beverages Private Limited vs. CCE, Thane-I reported in 2014 (310) ELT 145 (Tri. Mum.), a Division Bench of the Tribunal at Allahabad, while hearing Excise Appeal No. 50661 of 2015 and Excise Appeal No. 50662 of 2015, referred the matter for constitution of a Larger Bench for giving its opinion on whether the classification of Minute Maid Nimbu Fresh would fall under Tariff Item No. 2202 10 20 of the Central Excise Tariff Schedule or under Tariff Item No. 2202 90 20. This larger Bench has, accordingly, been constitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t less than 10%. ISSUE: 6. The issue that has arisen for consideration in all these three appeals relates to classification of MMNF, Nimbu Masala Soda and Nimbooz. To appreciate this issue it will be appropriate to refer to the relevant provisions. 7. Section 2 of the Central Excise Tariff Act, 1985 (hereinafter referred to as the Tariff Act) provides that the rates of duties of excise levied under the Central Excise Act, 1944 (hereinafter referred to as the Central Excise Act ) shall be specified in the First Schedule. Chapter 22 of the First Schedule to the Tariff Act deals with beverages, spirits and vinegar. Note 3 to this Chapter stipulates that for the purposes of Heading 2202, the term Non Alcoholic Beverages means Beverages of an alcoholic strength by volume not exceeding 0.5%. 8. Headings 2201 and 2202 of Chapter 22 are reproduced below:- Tariff Item Description of goods Unit Rate of duty ( 1) ( 2) ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2202 90 10 --- Soya milk drinks, whether or not sweetened or flavoured..................... 1 6% 2202 90 20 --- Fruit pulp or fruit juice based drinks.............................................. 1 12% 2202 90 30 --- Beverages containing milk.................. 1 12% 2202 90 90 --- Other.............................................. 1 12% 9. According to the Revenue, the three products MMNF , 7up Nimbooz Masala Soda and 7up Nimbooz would fall under Tariff Item 2202 10 20 under the description Lemonade , while according to the Appellants they would fall under Tariff Item No. 2202 90 20 under the description Fruit pulp or fruit juice based drinks . 10. It needs to be stated that Brindavan Beverages paid NIL rate of duty from March 2010 under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble under Tariff Item No. 2202 10 20 and attracted full rate of duty, but Pepsico was paying duty only at the rate of 6%. It was also stated that from the information mentioned on its Wrapper it appeared that the product was basically a natural flavoured based drink containing only 0.8% of concentrated lemon juice (lemon juice content in the beverage is 5%). It was also mentioned that the product was manufactured by adding lemon concentrate, and a product having lemon concentrate in any form appears to be classifiable under the Tariff Item No. 2202 10 20, which attracts Central Excise Duty at 12% from 17 March 2012. REPLY 14. A detailed reply was filed by both Brindavan Beverages and Pepsico. It may not be necessary to reproduce the entire reply at this stage but suffice it to state that it was pointed out that the products MMNF, Nimbu Masala Soda and Nimbooz were correctly classified under Tariff Item No. 2202 90 20 under the description of fruit pulp or fruit juice based drinks . It was also stated that MMNF is a drink containing lemon juice concentrate that is diluted by adding treated water and made fit for drinking by adding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of goods under dispute. 18. The Adjudicating Authority then observed, in view of the Principles laid down under The General Rules for Interpretation of Tariff, that the products would more appropriately be classifiable under Tariff Item No. 2202 10 20 as they have the characteristics of lemonade. The relevant observations are: Going by the contention of the party the product is classifiable under the Tariff Heading 2202 90 20. Considering the contention of the party we may treat the item prima facie classifiable under two heading viz. 2202 10 20 and 2202 90 20. The General Rules for interpretation of Tariff will get attracted in such situation. Rule 3 (a) of the General Rules for the interpretation of the Schedule to the Central Excise Tariff Act, will be relevant in this situation. This Rule 3(a) requires that the heading which provides the most specific description shall be preferred to headings providing more general description. Going by the facts of the case I find that the goods are more appropriately classifiable under Chapter Head No. 2202 10 20 of the CETA, 1985 as the drink has the characteristics of lemonade. 19. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uice concentrate was only 1%. 22. Another Division Bench for the Tribunal at Allahabad, while hearing the Appeal filed by Brindavan Beverages found itself unable to agree with the reasoning given by the Mumbai Tribunal in Hindustan Coca Cola Beverages. The Bench noticed the Tariff Item No. 2202 10 with a single dash was divided into three categories, including lemonade with Tariff Item No. 2202 10 20, while Tariff Item No. 2202 90 with single dash had four categories including Fruit Pulp or Fruit Juice based drinks with Tariff Item No. 2202 90 20. Thus comparison of the two Tariff Items falling under two separate single dash groups cannot be made for classification. In the first instance, six digit classification has to be arrived at and then it has to be proceeded by arriving at eight digit classification. This process was not adopted by the Mumbai Tribunal in Hindustan Coca Cola Beverages and, therefore, it expressed its disagreement. According to the Bench, the product in question was lemon juice based drinks and, therefore, would fall under Tariff Item No. 2202 90 20. SUBMISSIONS 23. The contention of Shri B.L. Narsimhan, learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d drinks with a further indication that they contain no fruit or no fruit juice. The first group of products which are lemon juice based drinks having a juice content of 5 per cent or more cannot be said to be lemonades in the Tariff parlance and also commercial parlance and cannot be covered under 2202 10 20; (v) That the products in question have lemon juice to the extent of 5 per cent or more than 5 per cent. Thus, the products satisfy the commercial parlance test for classifying the product under the category of Fruit Juice Based Drinks under 2202 90 20; (vi) That in matters of classification, the burden is on the Department to support its contention with evidence when it seeks to classify the product under a Heading different than the one under which the assessee is claiming classification. But, in the present case, no evidence either oral or documentary has been led by the Revenue to establish that the products are bought and sold and known by the people dealing in the products as lemonade or sweetened flavoured water; (vii) That licence was granted to the Appellants by the Food Safety and Standards Authority under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... des more specific description is required to be preferred to the Headings which provide more general description and since Heading 2202 09 20 provides a more specific description, this Heading is required to be preferred. 26. Shri Mohd. Altaf, learned Authorised Representative of the Department, submitted : (i) That the advertisement material, and the common parlance test and the specific entry in the Tariff Schedule establish that the products are Lemonades and single dash - , two dash -- and three dash --- are important and pertinent only when there is a confusion in classification. (ii) That the Commissioner in the adjudication order has given cogent reasons for classification of the products as Lemonades and the requirement of the Regulations are not required to be applied for classification purposes under the Tariff Schedule; (iii) That the products are known as Lemonade in market parlance; (iv) That the percentage of concentrate indicates that it has been used to just impart flavour to the drink and it cannot be treated as having an essential character of a juice; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices, unfermented and not containing added spirit, whether or not containing added sugar or other sweetening matter . It is these items that are excluded from non-alcoholic beverages mentioned in the second part of Heading 2202. Non-alcoholic beverages have been defined in Note 3 of Chapter 22 to mean beverages of an alcoholic strength by volume not exceeding 0.5% volume. 31. A perusal of Heading 2202 would indicate that it is divided into two sub groups; the first one covers waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured , while the second group covers other non-alcoholic beverages not including fruit or vegetable juices of Heading 2009 . 32. The first group is covered by a single dash - under Sub Heading 2202 10 and contains Aerated Waters , Lemonade and Other having triple dash --- . The Tariff Item Nos. of these three articles are as follows: 2202 10 10 : Aerated Waters 2202 10 20 : Lemonade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o mixtures or combinations of that material or substance with other materials or substances. Any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance. The classification of goods consisting of more than one material or substance shall be according to the principles of Rule 3. 3. When by application of rule 2(b) 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. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods. (b) mixtures, composite goods consisting of different materials or made up of different components, and goods put ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 10 having waters containing added sugar or other sweetened water or flavoured. Thus, for a product to be classified under 2202 10 20 it must be in the nature of waters, including mineral waters and aerated waters, containing flavouring elements as lime/lemon. It, therefore, follows that products which are not essentially waters with flavouring elements as lime/lemon, would not fall for classification under 2202 10 20. Thus, unless the products MMNF, Nimbu and Nimbooz satisfy the description of single dash 2202 10 as waters including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured , they cannot straightway be classified under the three dash --- 22020 10 20 as lemonade. It is not even the charge in the show cause notice or in the impugned order that any of the products in question satisfy the above description of 2202 10 as waters including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured. These products, therefore, cannot fall under 2202 10 20 as lemonade. Tariff Item No. 2202 10 20 would cover only those products which are essentially waters with added sugar and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22.02 - Waters, including mineral waters and aerated waters containing added sugar or other sweetening matter or flavoured and other non-alcoholic beverages, not including fruit or vegetable juices of heading 20.09. 2202.10 - Waters, including mineral waters and aerated waters containing added sugar or other sweetening matter or flavoured 2201.90 - Other This heading covers non-alcoholic beverages as defined in Note 3 to this Chapter, not classified under other headings, particularly heading 22.09 or 22.01. (A) Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured. This group includes, inter alia: (1) Sweetened or flavoured mineral waters (natural or artificial) (2) Beverages such as lemonade, orangeade, cola, consisting of ordinary drinking water, sweetened or not, flavoured with fruit juices or essences, or compound extracts to which citric acid or tartaric acid are sometimes added. They are often aerated with carbon dioxide gas, and are generally presented in bottles or other airtight co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 90 20 and not under Tariff Item No. 2202 10. The relevant paragraphs 4 and 6 of the judgment are reproduced below: 4. The contention of the respondent is that as per the certificate given by Ministry of Food and Processing industries, New Delhi the product in question contains 23% of apple juice. As the product in question is juice based drink, therefore, rightly classifiable under sub-heading No. 2202 90 20 of the Tariff. The respondent also relied upon the chemical examiner s report to submit that there are 13.7% by weight are soluble solids in the product. The respondent also relied upon the text to Prevention of Food Adulteration Rules 1955 to submit that fruit beverage or fruit drink must contain total soluble solids not less than 10%. ------- 6. The Revenue relied upon HSN Explanatory Notes of Chapter 22. We find that our tariff is not fully aligned with the HSN Explanatory Notes. In the HSN Explanatory [Notes] there are two sub-headings under Heading No. 2202 one is water including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured and second is in respect of others. Whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... content which would be more than 5%. This apart, the decision of the Tribunal in Parle Agro (P) Ltd. (Delhi) was considered extensively and approved by the Supreme Court in Parle Agro (P) Ltd. (SC). The three products MMNF, Nimbooz Masala Soda and Nimbooz would, therefore, be classified under Tariff Item No. 2202 90 20 as fruit pulp or fruit juice based drinks and not under Tariff Item No. 2202 10 20 as Lemonade 48. The issue can also be examined from another angle. Lemonade and Fruit juice based drinks have not been defined in the Tariff Schedule. When the goods are not defined in the Tariff Schedule, then the same have to be understood in the sense in which people conversant with the product and people who deal in the product understand and buy and sell the product, which is known as the common parlance test. In the absence of a definition in the Tariff Schedule, resort can also be taken to the provisions of supporting legislation like the Food Safety and Standards Act. These two aspects, therefore, need to be examined. COMMON PARLANCE TEST 49. If this test has to be applied, then the labels in which the products are desc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hajmola Yoodley Nimboora Shikanji Chitale Agro Industrial Pvt. Ltd., Sangli, Maharashtra Ready-To-Serve Fruit Beverage Water, sugar, lemon juice Concentrate (0.7%),Mixed fruit juice conc.(0.65%) [Pineapple juice conc., Apple juice conc., Grape juice conc., Pear juice conc.],., salts, acidity regulator, stabilizer Contains 10.15% fruit juice content 0.7% Lemon Juice Concentrate, Contains 10.15% fruit juice content 5 Divian Delight Nimbu Fresh Tethy Foods And Beverage Pvt. Ltd, Indore, MP Ready To Serve Fruit Drink Water, Lemon Juice Concentrate (0.7%)*, Sugar, Acidity Regulator (INS 330,331 ) Permitted ClassII Preservatives (INS 211, 202) Stabilizer (INS 414) Salt. * Equivalent to 5 % Lemon Juice 0.7% Lemon Juice Concentrate Equivalent to 5 % Lemon Juice 6 Sparkling Twiss Lemon with a twist of Mint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S. No. Product Name Manufactured by Description Ingredients % of Fruit Juice 1 Arora Lemon Arora Soft Drinks, New Delhi Sweetened Carbonated Beverage Carbonated water, Sugar, Contains permitted Class II Preservatives (E-211), Emulsifying stabilizing agents (E-414,E-445), Acidity Regulator (E-330), Added Flavors (natural nature identical, artificial flavouring substances) (Lemon) Contains No Fruit 2 Taan Western Beverages Pvt. Ltd., Goa Sweetened Carbonated Beverage Carbonated water, Sugar, Common salt, Acidulant (330), Stabilizers (419,445), Permitted Class II Preservatives (211), Acidity Regulator( 331),quinine hydrochloride, Contains Added Flavor, Lemon Flavour Contains No Fruit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Carbonated Water, Sugar, Acidity Regulators, Permitted Class II Preservatives, E211, Permitted Natural Colour No Fruit juice or Pulp 9 Kick Up Lemon KPJ Products Sweetened Carbonated Beverage Carbonated Water, Sugar, Acidity Regulators, Permitted Class II Preservatives, E211, Permitted Natural Colour No Fruit juice or Pulp 10 Rasi s 1 UP Lime Lemon Flavour Ravitheja Food Industries Sweetened Carbonated Water Carbonated water, sugar, Acidity Regulator (296, 330), Class II Preservatives(211), Contains Added Flavors Contains No Fruit 11 Kalimark Solo Lemon Kali Aerated Water Works (P) Ltd Sweetened Carbonated Beverage Carbonated Water, Sugar, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals. In contrast, the labels under the second category describe the products as Sweetened Carbonated Beverages or Non Carbonated Non Alcoholic Flavoured Drink with a clear statement that they contain no fruit juice or fruit pulp. 53. A comparison of the labels of both the aforesaid groups leaves no manner of doubt that the products bought and sold as fruit drink with lemon juice having a juice content of 5 per cent or more are described as Ready to Serve Fruit Drink and not as Lemonades or Lemon/Lime Flavoured Drinks. On the other hand, the products which are sold as Sweetened Carbonated Beverage have no fruit juice content in them and they are bought and sold either as Lemonades or Lemon Flavoured Drinks with a clear stipulation that they contain no fruit juice or fruit pulp. It can, therefore, safely be assumed that the first group of products which are Lemon Juice Based Drinks having a juice content of 5 per cent or more are not Lemonades in the commercial parlance and, therefore, will not be covered under Tariff Item No. 2202 10 20 and will be covered under Tariff Item No. 2202 90 20. 54. The observation made by the Mumbai Tribunal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e finding in that regard and the material may be either oral or documentary. It is for the taxing authority to lay evidence in that behalf even before the first adjudicating authority. Especially in a case as this, where the claim of the assessee is borne out by the trade inquiries received by them and also the affidavits filed by persons dealing with the subject matter, a heavy burden lay upon the revenue to disprove the said materials by adducing proper evidence. Unfortunately, no such attempt was made. As stated, the evidence led in this case conclusively goes to show that Nylon Twine manufactured by the assessees has been treated as a kind of Nylon Tarn by the people conversant with the trade. It is commonly considered as Nylon Yarn. Hence, it is to be classified under Item 18 of the Act. The Revenue has failed to establish the contrary. We would do well to remember the guidelines laid down by this Court in Dunlop India Ltd. v. Union of India (AIR 1977 SC 597 - at page 607), in such a situation, wherein it was stated:- ......... When an article has, by all standards, a reasonable claim to be classified under an enumerated item in the Tariff Schedule, it wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redients appropriate to the product and processed by heat, in an appropriate manner, before or after being sealed in a container, so as to prevent spoilage. 2. The product may contain food additives permitted in these regulations including Appendix A. The product shall conform to the microbiological requirements given in Appendix B. The product shall meet the following requirements:- (i) Total Soluble solids (m/m) Not less than 10.0 percent ( ii) Fruit content (m/m) (a) Lime/Lemon ready to serve beverages Not less than 5.0 percent (b) All other beverages/drink Not less than 10.0 percent 60. Regulation 2.3.30 which deals with Carbonated Fruit Beverages or Fruit Drinks is reproduced below : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be examined as to whether the aforesaid provisions of the Regulations can be of any help to ascertain what fruit juice based drinks would be. 63. This issue was examined by the Supreme Court in Parle Agro (P) Ltd. The Appellant Parle Agro (P) Ltd. was engaged in manufacture of fruit juice based drink known as Appy Fizz . It classified the product as a fruit juice based drink under the Kerala Value Added Tax Act 2003. A notice was, however, issued to it proposing to classify it under aerated branded soft drinks having a tax liability of 20% as against 12.5% for fruit juice based drinks. The Supreme Court examined whether the common parlance test was the only test to be applied for understanding the different entries and whether the decision and opinion of Food Safety Authorities on the product in question was relevant. In regard to the first issue, the Supreme Court observed that the common parlance test or commercial parlance test were not the only test which can be applied for interpreting the entries. The Supreme Court observed that scientific and technical meaning of the word aerated used under different Statues can also to be looked into for finding out t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding a licence. 55. What is the process for manufacture in accordance with the Food Safety and Standards Act, 2011 and the Regulations framed therein and what is the nature and characteristic of the product which has been licensed to be manufactured to the appellant cannot be said to be an irrelevant factor while examining the nature and contents of the product. Whether the product is an aerated branded soft drink or can be covered by residuary of Item 5 of Entry 71 is a question on which the manufacture licence, orders issued by Food Safety and Standards Authority of India were relevant facts which were although cited before the Committee of Joint Commissioners but were brushed aside relying on the Kerala High Court s order in M/s. Trade Lines. We, thus, are of the opinion that the manufacture licence dated 19th August, 2015 granted to appellant and the opinion of the Government of India, Ministry of Food Processing Industries dated 28-3-2005 were relevant for finding the nature of the product of the appellant for the purpose of classification and the Committee of Joint Commissioners as well as High Court erred in not adverting to and considering the aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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