SATNAM OVERSEAS LTD. Vs. COMMISSIONER OF C. EX.

JUDGEMENT

(1.) The issue involved in this appeal, filed by M/s. Satnam Overseas Ltd., is whether their product 'Rice and Spice' is eligible to excise duty.

(2.) Ms. Reena Khair, Ld. Advocate, submitted that the Appellants, a star trading house, are engaged mainly in export of Basmati Rice; that from 1995 onwards, they also started producing and selling a product known as "Rice and Spice" (Ready Mix) under the brand name "Super Kohinoor"; that the impugned product is prepared by mixing raw rice, de -hydrated vegetables and spices which are packed in pouches and sold in the domestic market; that the Additional Commissioner, under Adjudication Order No. 13/99, dated 17 -3 -99, demanded duty of excise and imposed penalty holding that the impugned product is a distinct preparation manufactured by under going certain processes which amounts to manufacture; that the Additional Commissioner also classified the product in question under sub -heading No. 2108.99 of the Schedule to the Central Excise Tariff Act with effect from 23 -7 -96 and prior to this date under sub -heading 2108.90; that the Commissioner (Appeals) has also rejected their appeal, under the impugned order. The Ld. Advocate, further, submitted that preparation of rice and spice does not constitute manufacture since they are merely mixing a few ingredients and packing them together; that the character of the product does not change as it continues to remain rice and is bought and sold as such. She also submitted that the product in question is classifiable under Heading 11.01, being a product of 'milling industry' that the rice, vegetable, etc. have not been subjected to any process other than mixing; that food stuffs are considered to be prepared when they have undergone the process of boiling, bakings, frying, roasting, smoking, swelling and toasting etc; that in the present matter, the rice and other ingredients have not undergone any of these processes; that, therefore, they can not qualify for as preparations; that Note 9 to Chapter 21 of the Tariff is not applicable since rice and spice is not a preparation falling under Heading 21.08; that Heading 21.08, being a residual entry, cannot be given preference over the specific Heading 11.01. She finally submitted that if the impugned product is held to be liable to duty, the price should be treated as cum duty price as held by the Supreme Court in the case of CCE, Delhi v. Maruti Udyog Ltd. [2002 (141) E.L.T. 3 (S.C.) - 2002 (49) RLT. 1 (S.C)]; that demand is barred by limitation as they entertained a bonafide belief that the impugned product is not liable to excise duty as similar other products were sold in the market without payment of duty and moreover all the ingredients used by them were exempted from payment of duty; that penalty under Section 11 AC of the Central Excise Act cannot be imposed for the period prior to the insertion of the said Section. She relied upon the judgment in CCE, Coimbatore v. Elgi Equipments Ltd., 2001 (128) E.L.T. 52 (S.C.).

(3.) Countering of the arguments, Shri Atul Dixit, ld. SDR, submitted that the Appellants are manufacturing a new product; that rice and dehydrated vegetable alongwith a small quantity of spices are mixed together in the mixer blender and the product is thereafter packed in vacuum sealed pouches; that de -hydrated vegetables are purchased separately for each variety of "Rice and Spice"; that the impugned product is not marketed as rice but as a new product as rice with flavour and as such it is a distinct commodity. He further submitted that Heading 11.01 applies to products of Milling Industry; that the Appellants are not milling industry; that after mixing of rice, vegetable and spice, the product does no more remain a product of milling industry. He also mentioned that demand is not time barred as they had suppressed the fact of manufacture and clearance of the excisable goods from the Department.