HEALTH INDIA LABORATORIES Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) THIS appeal is filed by M/s. Health India Laboratories Private Limited, Chennai (appellants or assessee) against the order of the Commissioner of Central Excise, Chennai -IV Commissionerate classifying the product "Indian Noni" manufactured by the assessee as a 'food preparation not elsewhere specified or included' under CSH 2108.99 (upto 27.2.05) and CSH 21069099 (from 28.2.05) of the Central Excise Tariff 1 schedule to the Central Excise Tariff Act, 1985. The order consequently demanded an amount of Rs. 4,93,87,230/ - being duty and cess payable on the product cleared by the assessee during the years 2004 -05, 2005 -06 and 2006 -07 (upto 25.4.2006) under Section 11A of the Central Excise Act 1944 (the Act) and imposed a penalty of equal amount under Section 11AC of the Act. The order directed recovery of interest of Rs. 27,02,035/ - under Section 11AB of the Act and appropriated Rs. 15 lakhs towards value of some quantity of the impugned product seized and provisionally released earlier, under Rule 25 of the Central Excise Rules, 2002.

(2.) THE facts of the case are that following investigation by the officers of the Commissionerate, it was tentatively found that the assessee had manufactured and cleared the product "Indian Noni" classifiable as a food preparation under CSH 210899 and 21069099 (after 28.2.05) of the Central Excise Tariff Act without payment of duty from 2003 onwards. On receipt of the Show Cause Notice, the assessee had contested the proposals on the ground that the impugned juice was made from fruits of morinda citrifolia, garcinia cambogia and leaves of stevia. The process of manufacture involved steam boiling, filtering, deaeration and homogenization of the above ingredients and adding of preservatives citric acid, sodium benzoate and flavours like sorbitol before packing the juice in pet bottles. No vitamins, minerals or micronutrients were added. They stated that a food supplement was a food stuff, with added vitamins whereas their product was food like any other fruit juice. They argued that the product obtained by preparation of vegetables, fruits, nuts or plants was covered by Chapter 20 of the CETA schedule and specifically as fruit juices of CSH 200990. As per Rule 3(a) of the Rules for Interpretation of Tariff, a specific entry had to be preferred to a residuary entry for classification of the goods. Sub Heading 2108 specifically excluded preparation of fruits and the impugned goods had received its essential character from fruits. Therefore, CSH 20099000 for mixture of juices was the appropriate heading for the impugned product. The assessee relied on HSN Explanatory Note (16) under Chapter Heading 21.06 as per which extracts from plants, fruits etc. became 'food supplement' only when vitamins were added to it. In view of Sub Heading 2009 specifically covering the impugned goods, proposal to classify the item under Chapter Heading 2106, a residuary heading was improper. The Note (16) supra contained the following statement.

(3.) THE Commissioner recorded the process of manufacture in the impugned order as follows: