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Milak Brothers Vs. Collector of Customs - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Mumbai
Decided On
Reported in(1983)LC1062DTri(Mum.)bai
AppellantMilak Brothers
RespondentCollector of Customs
.....of s/bill no. 20871 dated 21st july, 1978 in respect of 700 cartons roasted salted groundnut kernel exported, as follows: m/s. milak bros., kandla free trade zone, gandhidham, gujarat claim refund of export duty on roasted salted peanuts covered by the above mentioned s/bill, on the ground that the subject goods were processed and as such should be classified on process food, whereas the export duty was leviable on h.p.s. ground nut and groundnut in shell. i have duly considered the fact of the case and the contentions of the exporters and observe that even though the goods are processed the fact remains that these are groundnuts kernel and have oil contents and further that the containers, in which they are marketed by the exporters themselves are marked as peanuts. i also observe.....
1. Mis. Milak Brothers, hereinafter referred as the exporter/appellant, filed a revision application dated November 15, 1980 before the Joint Secretary (Revision Application), Ministry of Finance, Government of India against Order-in-Appeal Nos. S/49-14/78-E dated 9th of November, 1979 which was a common order in sixty six appeals passed by the Collector of Customs (Appeals), Bombay. As per revision application, the said order was despatched on the 23rd May, 1980 and received by the importer on 27th May, 1980. Since these were not controverted, we accepted the dates as mentioned in the R.A. The related sixty six orders though passed by the Assistant Collector of Customs on different dates and in respect of different consignments of exports, are more or less similarly worded. The R.A. came to be transferred to the Tribunal by virtue of the provisions of Section 131-B of the Customs Act, 1962 hereinafter referred as the Act, as Appeal and came to be registered as No. 55O/8O-D by the Tribunal.

2. Vide Notice dated 31st of January, 1983, the hearing was fixed on 1st of March, 1983. On the said date, Shri M.G. Abrol, Consultant appeared along with Shri K.K. Kapoor. On a query from the Bench as to how in one appeal, sixty-six matters disposed of by the Collector of Customs A (Appeals) by a common order could be agitated, the Consultant submitted that intention was to contest all the sixty-six appeals and one R.A. had been filed under a mistaken notion. Shri Abrol accepted that sixty-six sets of fees would be payable and therefore, time was sought to pay sixty-five further sets of fees. At their request, the hearing was adjourned to 23rd of March 1983.

3. On 9th of March, 1983, the Registry of the Tribunal received a communication dated 8th of March, 1983 signed by Shri K.K. Kapoor, Consultant on behalf of the appellant stating that sixty-five more copies of revision applications were being submitted and payment was being made for similar number of sets and sought the Bench's permission for such deposit. At this stage, we like to make it clear that on 1st of March, 1983 the Bench had only observed that sixty-six sets of fees would be necessary and not the it sixty-five extra sets of appeals or revision applications should have been filed.

4. On 18th of March, 1983, exporter deposited sixty-five sets of fees of Rs. 125/- each, which was the fees payable at the time of filing revision application.

5. On 23rd of March 1983, to which date the hearing had been adjourned on 1st of March 1983, Shri Abrol appeared. After perusing the files the Bench made the following noting on the main file : Shri M.G. Abrol, Consultant, appears. He is directed to file proper paper book and in respect of paper book already filed index the same properly with the assistance of Registry within seven days. Case shall be mentioned before the Bench on 31st of March, 1983 for a firm hearing date. Announced- Shri Kunnikrisbnan for the Revenue is present.

6. On 25 of March, 1983, however, Shri M.G. Abrol appeared in the Court and submitted that he was not in a position to appear on 31st of March, 1983 and, therefore, hearing date should be given. Accepting his request, the date was given for 27th of April, 1983. To this effect, the Bench made a noting on 31st March, 1983 when, as per the Cause List, the case was placed before it.

7. On 27th of April, 1983, after hearing the parties, the Bench reserved judgment in respect of the sixty-six appeals. Separate Appeal Numbers in respect of sixty-five appeals were also given.

8. We have already observed above that the Assistant Collector of Customs passed sixty-six similar orders. As a sample, we are reproducing the Order No. S/11-233/78E/S/16-77/E dated 23rd October, 1978 in respect of S/Bill No. 20871 dated 21st July, 1978 in respect of 700 Cartons roasted salted groundnut kernel exported, as follows: M/s. Milak Bros., Kandla Free Trade Zone, Gandhidham, Gujarat claim refund of Export duty on roasted salted peanuts covered by the above mentioned S/Bill, on the ground that the subject goods were processed and as such should be classified on process food, whereas the export duty was leviable on H.P.S. ground nut and groundnut in shell.

I have duly considered the fact of the case and the contentions of the exporters and observe that even though the goods are processed the fact remains that these are groundnuts kernel and have oil contents and further that the containers, in which they are marketed by the exporters themselves are marked as peanuts. I also observe that even after roasting and salting the goods remain groundnut kernels and as such correctly assessable under item No. 20 of the Second Schedule of C.T.A.9. The above order number is as per photo copy of the Assistant Collector's order and Annexure 5 of the exporter's paper book.

10. Against the above Order, an appeal dated 2nd of January, 1979 was filed and the exporter stated that they were manufacturing processed food, i.e. roasted salted kernel which were being packed in consumer-packet tins. It was further averred that such manufactured goods were classified by the Processed Foods Export Promotion Council as processed food and not as Raw Groundnut kernels.

11. The other contentions raised by the exporter were that the meanings given to articles in a fiscal statute must be as the people in the trade and commercial circles conversant with the subject, generally treat and understand them in the usual course. According to the exporter, the goods which were being exported by them were not known and recognised in the trade and commercial circles as groundnut kernels. The argument was that the roasted groundnuts were known as "roasted salted peanuts" and after the processing their identity as groundnut kernel was completely lost.

12. The Collector of Customs (Appeal) Bombay, however, dismissed the appeal and it is considered convenient to reproduce relevant portions of his Order as below : The particulars of Appeals are furnished in the enclosed 'List of 66 Appeals of M/s Milak Brothers.' The appeals contain one of the two or both requests viz. (1) that no export duty should be charged on goods described as roasted salted peanuts, oil roasted salted peanuts, roasted salted peanuts, dry roasted peanuts, dry roasted blanched peanuts, dry roasted blanched peanuts, blanched peanuts dry roasted, Indian dry roasted unblanched peanuts, roasted salted vacuum packed peanuts, oil roasted and salted peanuts, and (2) no case should be charged on cashew nuts or roasted salted cashew nuts or cashew nuts in consumer packed tins.

The appellants have been fair in inviting attention to earlier decisions of the "Government of India, and the Central Board of Excise and Customs." In their Order Nos. 5363 and 5364/1976 it has been held by the Government of India that even if cashew kernel "is roasted and or salted it remains as cashew kernel and is accordingly subjected to the cess." In respect of peanuts, described variously as recorded earlier, the Central Board of Excise & Customs in their Order No. 384/76, and the Government of India in their Order No. 264 of 1977, held that even after blanching, roasting and salting the goods remained as groundnut kernels and were therefore correctly and appropriately covered by item 13(i) of the old Customs Export Tariff. The same goods now fall under item No. 20 of the Customs Export Tariff.

In view of the earlier decisions of the Central Board of Excise & Customs and of the Government of India, it needs consideration whether an authority lower than the aforesaid authorities can pass a verdict against the verdicts on the specific issues by the higher authorities. In my opinion, it is not permissible for the lower authorities to question the decision of the higher authorities, particularly when the decisions of the higher authorities are quasi-judicial.

It would appear from the foregoing that on both the issues involved the higher tribunals have already recorded decisions in quasi-judicial.

It Would appear from the Foregoing that on both the issues involved the higher tribunals have already recorded decisions in quasi-judicial proceedings. The undersigned has to respect their decisions and therefore reject all the 66 appeals whereby the appellants have asked for either refund of duty or refund of cess, paid by them from time to time in respect of goods exported under the Shipping Bills mentioned in the enclosure.

13. Shri M.G. Abrol, appearing for the exporter, submitted that the Collector of Customs (Appeals), Bombay completely misdirected himself in not applying his mind and simply dismissing the appeals on the ground that it was not permissible for him to take a view different than the one taken by the Central Board of Excise and Customs and the Government of India. At the same time, Shri Abrol was very vehement in submitting that the case should not be remanded back. In other words, he wanted adjudication on merits by us without availing of his right of getting adjudication on merits by the first appellate authority.

14. This aspect we are making clear because, but for his persistent argument, we were initially inclined to accept his preliminary argument that the Collector of Customs should have applied his mind and for the purpose case be remanded. At the same time, in our view, the import of the Order of the Collector of Customs is that for deciding the appeals he followed the reasonings given by the Central Board of Excise & Customs and the Central Government.

15. Before proceeding further we like to make it clear that agitation regarding levy of cess on the exports of cashewnut is simply not before us as it was neither raised in the R.A. nor taken as a ground before us. We would like to observe that along with a letter dated 28th February, 1983 the appellant had filed copies of certain documents listed as follows: 2. Certificate dated 29.1.1973 from the Processed Foods Export Promotion Council, New Delhi.

3. Letter No. PFEPC/3-A/76-11625 dated the 29th September, 1976 from the Processed Foods Exports Promotion Council, New Delhi.

4. Specimen copies of Application for Refund preferred with Assistant Collector of Customs, along with forwarding letter No. Ex/26/ 78 dated 3.8.1978 and Ex/9/77 dated 17th February, 1977 addressed to the Asstt. Collector of Customs, Export Department, New Custom House, Bombay.

5. Two specimen copies of the following orders (original) passed by the Asstt. Collector of Customs, Export Dept, rejecting the refund claims.

6. Two specimen copies of Memo of Appeal No. Ex/9/77 dt. 13 11979 & Ex/26/72 dated 21st January, 1979.

7. Copy of Export Trade Notice No. 148/76 dated 8.9.1976 issued by the Joint Chief Controller of Imports & Exports.

8. Copy of Export Trade Notice No. 123/76 dated 17.7.1976 issued by the Ministry of Commerce, Office of the Jt. Chief Controller of Imports and Exports.

16. Though documents at SI. Nos. 2 to 8 are being taken by us on record, because these were stated to have been filed in the Revenue records earlier, we find no justification for taking the affidavit of one Shri Virendra Kumar Milak, Manager of the exporter. Therefore, the Affidavit at SI. No. 1 dated 24th of February, 1983 shall not be considered as forming part of the Tribunal record.

17. Next, Shri Abrol inviting our attention to the Central Government Order dated 14 of February, 1978 submitted that no reasons were given' by the. Special Secretary to the Government of India for dismissing the revision application filed against the Order dated 27.12.1976 passed by the Central Board of Excise & Customs, New Delhi. We like to notice the relevant Order to project that reasons are given for the revision "application, which are that though the goods were described as peanuts but even after blanching, roasting and salting, the groundnut kernels could not have, and did not, become something different: The Petitioners have contended that the goods exported by them are blanched, roasted and salted peanuts packed in vacuum, containers, that the goods are processed food and that they had lost their identity as mere groundnut kernels which were assessable to export duty, under Item 13 of the Old Export Customs Tariff. They have argued that the meaning given to articles in a fiscal statute must be as pepole in trade and commerce, conversant with the subject, generally treat and understand them in the usual course. The petitioners have contended that the goods in question are not known and recognised in the trade and commercial circles as groundnut kernel but are marketed as processed food. The petitioners have, therefore, submitted that levy of duty under Item 13(1) of the Old Export Customs Tariff (Item No. 20 of the New Export Customs Tariff) is erroneous.

Government fail to find any substance in the defence pleas raised.

The goods may be processed 'food', but they were nonetheless 'groundnut kernel'. Even the containers in which the goods were marketed by the petitioners themselves, described the goods as 'peanuts'. Government also observe that even after blanching, roasting and salting the goods remained groundnut kernel and were, therefore, correctly and appropriately covered by Item No. 13J) of the old Export Customs Tariff. In the circumstances, Government do not find any reason to interfere with the order-in-appeal passed by the Board. The Revision Application is without any merit and is accordingly rejected.

18. Next, Shri Abrol referred us to two Judgments of the Hon'ble Supreme Court, one in the case of State of Uttar Pradesh and Anr. v.Mfs Coat India Limited, cited as , and the other in the case of M/s Healihways Dairy Products Co, cited as . The first judgment concerned levy of sales tax under a particular Notification No. ST-1738/X-1012-1963/1.6.63. The Hon'ble Supreme Court observed that the word paper not having been defined either in the U.P. Sales Tax Act or the Rules made thereunder, it has to be understood according to the well-established cannon of constructions in the sense in which persons dealing in and using the article understand it. The mere fact that the word paper forms part of the denomination of a specialised article is not decisive of the question whether the article is paper as generally understood as that paper in the common parlance, or in the commercial sense means paper used for printing, writing or packing purposes. The decision in the case was that carbon paper which was specifically for copying purposes could not be said to be paper as envisaged by Entry 2 of the aforesaid notification. The question before us is entirely different and in our considered view the judgment has no relevance to the facts before us.

19. As for the proposition that a commodity should be known by its.

common use and as understood by the persons using it, there can be hardly any dispute that even the roasted groundnut kernel would be known as groundnut kernel and not as a processed food.

20. Coming to the second judgment, the Hon'ble Supreme Court held that the Central Government when it mentioned condensed milk in the notification dated 1.3.1970 it meant to exclude from exemption only condensed milk of full cream milk and not the condensed skimmed milk prepared from skimmed milk, for purpose of levy of excise duty.

Therefore, condensed skimmed milk was not excluded from exemption under the said notification.

21. This judgment is also based on the well-known and accepted principle that for purpose of levee of excise duty or any other similar tax, the description of goods as popularly and commonly understood has to be taken as the description of the goods in the relevant provisions of the statute or the rules. This judgment clearly supports the Revenue stand because, as observed by us earlier, groundnut kernels even after roasting and blanching do not change the basic characteristic.

22. As for the proposition canvassed on behalf of the appellant in the above case that commodity should be known by general use and what the people would normally know, we can cite another important Supreme Court Judgment which is in the case of Points & Spencers cited as AIR 1975 SC 3C01980 Cen-Cus 397D, where the Lordships dealt with various items like textiles, vegetables etc., Therefore, accepting the principle which is enunciated by various judgments, we are inclined to take the view that even after roasting and blanching, groundnut kernel would not be something different.

23. The next argument for the exporter was that the process of manufacture and packing as undertaken which included chilling, freezing and drying had the effect of destruction of enzymes and, therefore, after such process groundnut kernels must be held to have attained different characteristics and, therefore, outside the poi view of CET Item 20 which permitted levy of duty on groundnut kernel and groundnut in shell only. This argument is untenable because when the only pleading before the lower authorities was that the exporter was roasting and blanching the groundnut kernel, we shall be enlarging the area of dispute if we are to investigate and analyse the exporter's version that the process was very complicated and process of drying, chilling and packing made all the difference to the commodity exported.

This aspect is considered important because, as observed above, the learned Consultant did not want to go back to have fresh adjudication from Collector of Customs (Appeals). That besides, we have already held that whatever may be the language used, the Collector of Customs (Appeals) Order was based on the reasonings adopted by the C.B.E.C. and the Central Government and not that he wanted to take a different view and found himself helpless because of the decisions of the higher authorities.

24. Another argument on which great emphasis was sought to be laid was that whereas groundnut kernel is used for germination and extraction, since after roasting germination simply was not possible, the roasted groundnut kernel became processed food. The learned Consultant also reiterated the contentions taken before the first appellate authority.

25. Next, it was pleaded that export of groundnut kernel was managed by Indian Oil & Produce Exporters' Association whereas the appellant's export was being regulated by the Processed Food Export Promotion Council. Laying emphasis that both the Bodies were constituted by the Central Government, Shri Abrol submitted that it must necessarily follow and be held that the processed groundnut kernel attained the character of processed food. We reject such pleading as completely misplaced. Simply because two different government organisations were handling export of groundnut kernel, one in raw and the other in processed form, it did not mean that the process of roasting brought about a change which can be said to have the effect of changing the basic characteristic and even name.

26. The learned Consultant then referred us to the Explanatory Notes to Chapters 8, 12 & 20 of the Brussels Tariff Nomenclature for his urging that though the Heading of Chapter 8 is "Edible fruit and Nuts : Peel of Melons or Citrus Fruit", groundnuts etc., were specifically excluded. Referring us to Chapter 12, he submitted that though the groundnuts find place in Item 12.01, but roasted groundnuts were specifically excluded, to be included in Chapter 20.06. We do not understand as to what support Shri Abrol wanted to draw from the said pleading because, though Brussels' Tariff Nomenclature--now known as Customs Cooperation Council Nomenclaturemay be taken as guidelines, but it certainly cannot have the effect of, and should not be read in supersession of our own Tariff Classification. This aspect is clear because under Chapter 8 of BTN groundnuts are simply not mentioned, again in Chapter 12 groundnuts, though mentioned but roasted groundnuts are specifically taken to Chapter 20. If the intention of the Indian Legislature was to have a similar framework in the Export Tariff, it would have been on the line of Brussels Tariff Nomenclature, but there being only one place, i.e. Chapter 20 where groundnuts find place, to urge that the roasted groundnut kernel should be taken under the heading as processed food seems rather strange to us.

27. For the Revenue Shri Kunnikrishnan with equal force contended that the Tariff should be governed by its wordings and no extraneous consideration should be brought in. His submission was that the wording in Item 20 of the Export Tariff reads simply "groundnut kernels", and does not exclude roasted, salted or any other type of kernels.

28. As for reference to Brussels Tariff Nomenclature, Shri Kunni-krishnan submitted that Chapters 8, 12 & 20 should be closely read along with their Headings and when sub-divisions are there and when after excluding the roasted kernel in Chapter 12 the same has been brought in specifically in Chapter 20 and there being no corresponding pattern in our Tariff, to say that roasted kernel should be taken out of Item 20 would be entirely wrong.

29. Shri Kunnikrishnan next argued that removal of enzymes etc., to improve the quality for export does not take the groundnut kernel from its classification under Item 20.

30. He next referred us to the Supreme Court Judgment in the case of Hansraj Goverdhandas cited as for the proposition that when two views are held to be possible, the view taken by the Revenue should not be disturbed. We do not propose to go into this judgment at any length because according to us two views are not possible.

31. While observing this, we reject Shri Abrol's contention in his rejoinder that Hansraj Goverdhandas judgment did not dilute his case and it was the Revenue who was enlarging the terminology of the groundnut kernel.

32. We have given our thoughtful consideration to the submissions of the parties. The exports of groundnuts both in shell and without shell which are known as groundnut kernel are dutiable and there is no dispute on this count as far as the period relating to the present appeal is concerned. The question for our consideration is whether the process adopted and undertaken by the exporter as pleaded, before exporting the groundnut kernel could have the effect of taking it out of the Tariff Item No. 20.

33. As per the assessee's averments in the revision application, they were doing the process of roasting and packing groundnut kernel which they branded as salted peanuts. No other process was indicated or elaborated. Though Shri Abrol persistently referred us to the process which they have mentioned in the exporter's petition for special leave to appeal under Article 136:1) of the Constitution of India, filed against the Order dated 14th of February, 1978 supra, but he failed to satisfy us as to why we should take the facts as stated in the SLP as the facts for the present appeals. In the first place, as per the learned Consultant himself, though the appeal came up for consideration before the Hon'ble Supreme Court, he made a mention there that the revision application which was filed before the Government and which has been transferred to the Tribunal was hoeing decided and it was in the fitness of things that the Tribunal's decision be awaited.

34. In the case before us, we are not prepared to travel beyond the facts as emanating from records before us and we are not taking the averments in the appeal before the Hon'ble Supreme Court, as proved facts and, therefore, constituting the necessary basis for adjudicating the present appeal. We have reproduced the Order of the Central Government against which the appeal before the Supreme Court is pending, to project that the short decision was that the groundnut kernel even after roasting and blanching remained groundnut kernel and that in our considered view would be the correct approach even by us.

Handling of export of groundnut kernel by one organ and roasted and blanched groundnut kernels by another agency of the Government, according to us, would be irrelevant considerations. Even if one were to assume that groundnut kernel could be considered as processed food, but that in itself could not take it out of the purview of Tariff Item 20. It would have been a different matter if roasted and blanched groundnut kernels had been placed under a different heading, stipulating a lower rate of duly and the Revenue had argued that in spite of there being a separate heading, the Export Tariff should be Item No. 20, but such is not the case. Therefore, we find no justification to accept the exporter sib plea that the process of roasting and blanching and further giving of brand name of roasted peanuts should take the exporter's products out of the ambit of Tariff Item 20.

35. The Revised Indian Trade Classification or the Trade Control Classification excludes certain type of groundnuts from this general description because of mentioning either "seeds, namely, groundnuts, etc.", or "fruits, namely, groundnuts, etc." Similarly, the Brussels Tariff Nomenclature Explanatory notes which excludes groundnuts from Chapter 8 arid includes groundnuts in Chapter 12 excluding roasted groundnuts which is specifically included in Chapter 20 have also to be read alongwith heading description and chapter notes. These headings, descriptions and chapter notes specify seeds, fruits, etc. signifying that other than what are fruits or seeds are excluded. This means that as far as BTN is concerned groundnuts which conform to the respective generic headings are classifiable under the respective catagories. In our Export Tariff there are no such exclusions.

36. In Trade & Commerce, groundnut is known as groundnut or peanut, whether roasted, salted or not, The transformation which is said to have taken place by removal of a flooding or destruction of enzymes merely improves the quality of the product exported and does not change the peanuts or groundnuts into any new commodity.

37. Therefore, whatever may be the reasons which prompted the Collector of Customs (Appeals), Bombay, to reject the exporter's appeal, his ultimate decision being correct, we confirm the rejection of the assessee's refund claim.

38. Before parting, we would like to observe that if we have not referred to any particular argument advanced by the parties, it is because the' same has not been considered worth taking notice of. At the same time, we must record our appreciation for the parties' representatives for proper and learned assistance.

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