ORDER
S.L. Peeran, Member (J)
1. These appeals arise from a common Order-in-Appeal as the issue arise from same facts and circumstances, hence they are taken up together for disposal, as per law.
2. The short question that arises for consideration in these appeals is as to whether Instant Tea manufactured and exported by the appellants is liable for levy of cess in terms of the provisions laid down under the Tea Act, 1953. The definition of Tea under Section 3(n) of the Tea Act is as follows -.-
“Tea means the plant Camellia Sinensis (L) O. Kuntze as well as all varieties of the product known commercially as tea made from the leaves of the plant Camellia Sinensis (L)O. Kuntze including green tea”.
The authorities below have held that the instant tea manufactured and exported by the appellants is nothing but Tea in terms of the definition of the term “Tea” appearing in Section 3(n) of the Tea Act, 1953 and hence chargeable to cess in terms of the provisions of the Tea Act. It was contended by the Revenue in the show cause notices that instant tea powder falls under subheading 2101.20 of the Schedule of the CET Act, 1985. The appellants are a 100% EOU. The process of manufacture of instant tea has been described as under :-
“The main raw materials for the manufacture of Instant Tea powder namely, Green leaf is grinded and mined with tea waste in the ratio of 60 :40 (approx.) to form a slurry and is passed through a decanter for squeezing out the essence. The liquid obtained is classified and concentrated in evaporation and then spray dried and get instant tea powder. This is packed, labelled and cleared for export.”
3. It is contended tea waste is mainly procured from various factories of the appellants at Munnar without payment of cess and a small portion from outside factories. Tea waste and tea commonly known as black tea fall under same sub-heading of CET, namely 0902.09. Show cause notices were issued to the appellants demanding Cess payable under the Tea Act, 1953. When the case came before the Collector (Appeals), Madras, appellants contended that the cess is leviable under the Tea Act, 1953 and that classification under CET has no scope for levy of cess under the Tea Act. Therefore, appeal was allowed by the Collector (Appeals). On the basis of this order, the assessee is procuring tea waste from the units of the appellants without payment of duty. The show cause notice states that the definition of tea given in the Tea Act, 1953 irrespective of different classifications under the CET is relevant with regard to levy of cess under the Tea Act, 1953. The show cause notice extracts the definition and thereafter states that “Instant Tea Powder” satisfies the first condition of being commercially known as tea as indicated by the commercial name of the product. The condition that the product is made from the leaves of the plant also satisfies, therefore the show cause notice states that instant tea powder has to be treated as tea as far as Tea Act, 1953 is concerned and hence liable to cess. Therefore, demand was raised for the period 1-9-1995 to 29-2-1996 @15 paise per Kg. of the clearances made.
4. The appellants contended in their reply that show cause notice is patently illegal and erroneous. Section 25 of the Tea Act, 1953 imposes cess on tea produced in India and they state that instant tea is not tea falling within the definition of tea and hence question of levy of cess on instant tea does not arise. They state that CET also makes a distinction between tea and instant tea. Chapter 9 talks in tea whereas instant tea is classified under Heading 2101.20 as “extracts, essences and concentrates of tea”. Therefore, they state that the tea Act contemplates a levy of cess only on tea in its original form or as commercially understood viz. Black Tea, which is consumed as hot beverage. They state instant tea is a base for iced tea/cold beverage and cannot therefore, by any stretch of imagination, be taken or understood as tea. They also stated that instant tea powder is not commercially understood or treated as tea. The same is commercially understood and treated as a cold beverage as distinct from what tea is commercially understood and treated as and hence there is no basis for treating instant tea as tea for the purpose of levy of cess under the Tea Act. They also stated that entire production of instant tea is exported and the question of levy of cess therefore does not arise in view of exemption granted to instant tea produced by 100% EOU under the Central Excise Act and hence no cess can be levied on the same. The Assistant Commissioner in the impugned order has rejected the contentions and upheld the pleas raised in the show cause notice and confirmed the cess. On appeal, Collector (Appeals) also rejected the pleas and held the item to be leviable to cess as they are commercially known as tea and hence “Instant Tea” gets clearly covered in the Tea Act under the definition of Tea Act and for cess as per Section 35 of the said Act.
5. It was argued by the ld. Advocate that in terms of the final order No. E/136-169/98-D, dated 5-2-1988, the Tribunal dismissed the Revenue appeal in respect of tea waste on the ground that tea waste is not covered within the definition of tea and in this regard the Tribunal relied on the Board’s letter F. No. 262/3/95-CX.8 (Circular No. 214/48/96-CZ), dated 23-5-1996. It was further argued that tea and instant tea are two independent products and in respect of tea the commercial understanding is that the tea are prepared from the leaves of the plant Camellia Sinensis (L)O. Kuntze including green tea and these are mixed in hot water and the extract is the tea which are consumed. Such tea prepared when none of these leaves are not mixed in cold water. In this regard he also referred to the Prevention of Food and Adulteration Rules, 1955 wherein the understanding of the tea has also been given. He pointed out that in terms of the said Rules, the definition of tee means tea other than Kangra tea derived exclusively from the tea, buds and tender stems of plants of Camellia gems and the species [and includes (i) leaf, (ii) broken, (iii) fanning, and (iv) dust]. It further lays down specifications and the specification given are given below :-
(a) Total ash determined on the drier to a by weight 4.00 to 8.00% constant weight at 100°C
(b) Total ash soluble in boiling distilled not less than 40.0% of total water ash
(c) Ash insoluble in Hot not more than 1.00% by weight on dry basis
(d) Extract obtained by boiling dry tea not less than 32% (dried to constant weight at 100°C) with 100 parts of distilled water for one hour under reflux.
(e) Alkalinity of soluble ash not less than 1.0% not more than 2.2.% expressed as KO/-on dry basis
(f) Crude Fibre determined on tea dried to not more than 17 per cent, constant weight at 100°C.
It shall not contain any added colouring matter or added flavouring matter provided that tea for export may contain added flavour under proper label declaration as provided in sub-rule (y) of Rule 42 : Provided further that the tea used in the manufacture of flavoured tea shall conform to the standards of tea.
6. Pointing out to the above specification, ld. Counsel pointed that the specification clearly indicates that the extract is to be obtained by boiling dried tea (to a constant rate of 100°C), therefore he submits in terms of these understandings, the item in question cannot be considered as tea. He submitted that in the present item, i.e. instant tea, the hot water soluble compound has been removed and so also cold insoluble compound to make it an instant tea so that it can get dissolved in ice cold water. He submitted that instant tea is a water soluble tea powder derived by dehydration acquaeous extract of tea, therefore it is not commercially known as tea as understood in India and hence it does not satisfy both the definition of tea in terms of the Tea Act as well as the commercial understanding. He further pointed out that no levy has been imposed on other three manufacturers in India namely Nestle, Brookbond and Goodric who also manufacture and export the entire production. He submits that merely because green tea has been added to instant tea that by itself would not bring the item within the ambit of the definition “Tea” as per Tea Act. He submits that the burden for classification has to be discharged by taxing authorities themselves and in this case they have not done so. In this regard he relies on the judgment rendered by the Hon’ble Supreme Court in the case of Union of India v. Garware Nylons Ltd. as reported in 1996 (87) E.L.T. 12 (S.C.).
7. Ld. DR contended that the aspect pertaining to solubility in hot or cold water is not the criteria so long as it is referred as tea; it comes within the ambit of the definition and hence, it is required to be levided with tax. He submits that commercially it is tea and its feature of not dissolving in hot water and dissolving only in cold water is not material for the purpose of levy.
8. We have heard both sides in the matter. On a careful consideration of the submission, we have to see as to whether instant tea is covered by the definition of the term tea appearing in Section 3(n) of the Tea Act which has already been extracted above. We notice that the definition of Tea refers to the plant Camellia Sinensis (DO. Kuntze including green tea. The definition of instant tea under the Tea Waste (Control) Order, 1959 means ‘a water-soluble tea powder derived by dehydration of aqueous extract of tea’. The Prevention of Food Adulteration Rules, 1955 also defines Tea and also gives specifications of the term Tea. On a careful perusal of these definitions from these three legislations, it is clear that tea as understood in the Tea Act and the Food Adulteration Rules, 1955 is different from instant tea as defined under the Tea Waste (Control) Order, 1959. The process of manufacture of instant tea clearly indicates that the appellants grind green leaf and mixed with tea water in ratio of 60 : 40 to form a slurry and is passed through a decanter for squeezing out the essence. The liquid obtained is classified and concentrated in evaporators and then spray dried to get instant tea. It was also clarified that hot water soluble compound is removed from the instant tea including cold insoluble compound. The instant tea is not mixed in hot water to get extract of tea decoction, but it is mixed in cold water or chilled water to make it completely dissolved and it is taken instantly. Therefore, the instant tea is a product manufactured from tea leaves by a different process and is not tea within the strict definition of the term ‘Tea’ appearing in the Tea Act, 1953 and it also does not satisfy the definition of ‘Tea’ under the Prevention of Food Adulteration Rules. Therefore, it follows that the Commissioner’s understanding of ‘tea’ within the Tea Act as understood by a common man is different from a commercial understanding of the item in question namely “instant tea”. The Commercial understanding of the term “tea” is as per the understanding given for term tea in terms of the Prevention of Food Adulteration Rules, i.e., tea should be mixed in the boiling water and extract is obtained leaving the leaves and the ash as residue. While in the present case, there is no tea leaves in existence but a sweet smelling powder as noticed by us from samples produced, which gets totally dissolved in the chilled cold water. The property of the tea and instant tea is different in as much as the ‘tea’ under the Tea Act and is prepared out of hot water and only the decoction is taken for consumption, while the ‘instant tea’ is completely dissolved in cold water and is not soluble in hot water. Therefore, the product is totally different and it cannot be called as a ‘Tea’ in terms of Section 3(n) of the Tea Act, which is very specific in its definition. It is also interesting to note that the Tribunal has already held that ‘tea waste’ is not ‘tea’ within the definition of the Act for the purpose of levy of cess. Therefore we have to hold that the Revenue has not proved and has not discharged their burden that ‘instant tea’ is commercially known as tea within the term of definition of tea appearing in Section 3(n) of the Tea Act. The comparison can be made to Milk and Condensed Milk. Both are not same products, but are different products. Although condensed milk has been manufactured from milk, but it cannot be considered as a milk. Likewise, instant tea has been manufactured from green tea, but yet due to various processes which has undergone and a new product has come into existence, it cannot be called tea within the definition of the term “Tea” under the Tea Act. In that view of the matter we accept the contention of the appellants by setting aside the impugned order and allowing the appeal.