ORDER
V.K. Agrawal, Member (T)
1. The issue involved in this appeal, filed by M/s. Satnam Overseas Ltd., is whether their product ‘Rice & 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 & 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.
4. We have considered the submissions of both the sides. The process of manufacture has been given by Col. R.L. Mehta, Dy. General Manager of the Appellants in his statement dated 10-4-97 as follows – “This product i.e. Rice N Spice is a combination of Raw Rice, dehydrated vegetables and certain spices and condiments mixed in a pre-determined proportion and that blended together in a mixer for uniformity and the blended mixer is heated, if required to sterlize the product. The mixed product is then packed in pouches with Nitrogen flushing for a longer shelf life”. It is thus apparent that a new product comes into existence as a result of the processes undertaken by them. Rice does not remain rice at all as a mixed product containing rice, vegetables and spices emerges after the processes undertaken by them. It has been held by the Supreme Court in Empire Industries Ltd. v. UOI, 1985 (20) E.L.T. 179 (S.C.) that “The Taxable event under the Excise Law is ‘manufacture’. The moment there is transformation into a new commodity commercially known as a distinct and separate commodity having its own character, use and name, whether be it the result of one process or several processes ‘manufacture’ takes place and liability to duty is attracted”. We, therefore, hold that the processes employed by the Appellant amounts to manufacture as a new commodity commercially known as a distinct and separate commodity having its own character, use and name emerges. We also agree with both the lower Authorities that the impugned product is classifiable under Heading 21.08 as it is an edible preparation which is not specified anywhere in the Tariff. The product in question is not classifiable under Chapter 11 of the Tariff as it is not a product of Milling Industry. The extended period of limitation for demanding duty is invokable as the fact of manufacture and removal of excisable goods was suppressed from the Department. The Appellants have not brought any material on record to show that they entertained a bonafide belief that the product was not excisable. The Supreme Court in the case of BPL India Ltd. v. CCE, Cochin, [2002 (143) E.L.T. 3 (S.C.) = 2002 (50) RLT 249 (S.C)] has held that extended period is invokable as the assessee did not disclose the manufacture and removal of excisable goods. We, however, agree with the Ld. Advocate that the price has to be treated as cum-duty price and the assessable value has to be determined by deducting the element of duty as held by the Apex Court in the case of Maruti Udyog Ltd. (supra). The duty will, thus be recomputed by the Adjudicating Authority and intimated to the Appellants who are liable to pay the same. The penalty under Section 11AC of the Central Excise Act is not imposable in respect of the clearance of impugned product effected prior to insertion of Section 11AC in the Central Excise Act as held by the Apex Court in the case of CCE v. Elgi Equipments Ltd. We are also of the view that a penalty equivalent to the amount of duty is not imposable in the present matter. The interest of justice will be met if a penalty of Rs. 50,000/- is imposed on the appellants. We order accordingly.
5. The appeal is disposed of in the above terms.