ORDER
S.L. Peeran, Member (J)
1. This revenue appeal is filed against Order-in-Appeal No. 238/96 (M), dated 14-10-97 passed by CCE (A) Chennai, by which he has set aside the Order-in-Original classifying the item “sugar boiled milk” cleared by the assessee to their job worker for processing and manufacture of confectioneries. The OIO confirmed the allegation made in the SCN that boiled milk in sugar was “condensed milk” classifiable under chapter sub-heading 0401.14 attracting 10% BED ad valorem, and hence the demands on the condensed milk cleared during the period from January ’95 and December ’95 in terms of the SCN was required to be confirmed. Penalty of Rs. 100/- was also imposed for violation of Rules 173B, 173C, 52 and 52A of the C.E. Rules read with other proviso of the Act.
2. The Commissioner after detailed examination of the facts agreed with the assessee that they were only buying fresh milk from the market and evaporate the same to reduce the water contents which in turn, was used in their process to manufacture confectionery. Assessee’s contention that the item was not concentrated (condensed) milk whether sweetening’or not and it was not leviable for classifying under Chapter 4 and it was not put up in unit containers and not intended for sale as laid down in the said sub-heading was accepted by the Commissioner (Appeals). He noted that assessee was clearing the said item in empty liquid glucose drums and they were not intended for sale and the said drums were not unit containers as it did not have any specific measurement. The Board’s Circular No. 11/88, dated 24-3-88 was also relied. He noted their submission that the item still contained 80% moisture which is removed to the job worker under proper challans. The job workers were collecting job charges and duty was paid in terms of Apex Court judgment rendered in Ujjagar Prints they were reducing the milk content as it did not contain various enzymes and other preservatives to convert into a condensed milk for preservation purpose. What was cleared was milk alone except with reduced water content and it did not have longivity of more than 7 days.
3. The Commissioner gave the finding in para-4 in the light of Apex Court judgment rendered in Travancore Electro-Chemical Inds. Ltd. v. CCE, Cochin, reported in 1997 (94) E.L.T. 279 (S.C.) which is as follows :-
I have carefully considered the facts of the case. I have also considered the submissions of the appellants. The Supreme Court decision cited by the appellants is extracted below: (paras 3 and 4).
3. Shri S. Ganesh, the learned counsel for the appellant has assailed the said finding recorded by the Tribunal. The learned counsel has invited our attention to the recent decision of this Court in Dhran-gadhra Chemical Works Ltd. v. U.O.I. -1997 (91) E.L.T. 253 (S.C). In that case the appellant company was manufacturing Trichloroethylene as the end product. In the process of the manufacture of the said product Acetylene gas emerges. This Acetylene gas was in a crude form and was used by the assessee in the manufacture of the end product and the question was whether it was liable to excise duty under Tariff Item No. 14H (vi). On behalf of the appellant-assessee, it was urged that this gas in tbe crude form was not marketable or capable of being marketed and, therefore, the assessee was not liable to pay excise duty. It was pointed out that it could not be said to be marketable unless it was further treated by dissolving in acetone and compressed in cylinders so
that it could be taken out to the market for sale. Having regard to the decision in Moti Laminates Pvt. Ltd. v. Collector of Central Excise, Ahmeda-bad – 1995 (76) E.L.T. 241 (S.C.) that even though the goods are covered by the Tariff Item but unless marketable or capable of being marketed, they are not excisable to excise duty, this Court has held that it was essential for the authorities to record a clear finding on the question whether the acetylene gas in the form in which it emerged and was used for consumption was marketable or capable of being marketed. In that case no positive finding had been recorded and the matter was remanded to the Tribunal for recording a finding in that regard.
4. In the present case a finding has been recorded by the Tribunal that the Acetylene gas produced during the manufacturing process was marketable. But in arriving at the said finding the Tribunal has taken into account only the material that was placed by the Departmental Representative. The Tribunal has not taken into consideration the material that was placed by the appellant to show that the Acetylene gas that was produced contains impurities in excess of the permissible limit which renders it highly explosive and dangerous for handling and transport and that it is not marketable in the conditions prevalent in this country. The finding recorded by the Tribunal that the Acetylene gas that is produced during the course of manufacture of calcium carbide was marketable cannot, therefore, be upheld and the matter has to be remitted to the Tribunal for recording a fresh finding on this question keeping in view the material that has been placed by the appellant in that regard. The appeal is, therefore, allowed, the impugned judgment of the Tribunal is set aside and the matter is remitted to the Tribunal for considering the question whether the Acetylene gas that is produced in the factory of the appellant during the course of manufacturing of calcium carbide and Acetylene Black is marketable and is, therefore, ‘goods’ on which excise duty is payable under Tariff Item No. 14H (vi). No order as to costs.
Here, in this case, as contended by the appellants the condensed milk is not put up in unit containers and it does contain 80% of moisture and impurities. Therefore, it is not marketable as such. Further, the appellants have provided a chart differentiating the commercial Standardised Condensed Milk from that of the one manufactured by Parrys Confectionery Limited (i.e. the appellants), which is as follows :-
COMPARISON OF COMMERCIAL SCM & PCL MILK
COMMERCIAL PRODUCT
PCL PRODUCT
1.
STANDARDISED MILK WITH REGULATED FAT CONTENT USED & PASTEURISED TO DESTROY SPOILAGE ORGANISMS & ENZYMES.
PASTEURISED MILK IS USED & EVAPORATED MILK NOT STANDARDISED
2.
CREAM IS ADDED TO MAINTAIN FAT: SNF AS 1:2.44 .
NO EXTRA CREAM IS ADDED MILK IS JUST CONCENTRATED
3.
METHOD OF PROCESS LACTOSE IS ADDED TO INDUCE
CRYSTALLISATION and PRODUCE SMOOTH TEXTURE
NO LACTOSE IS ADDED TEXTURE VARIES
4.
SCM IS HEAT STERALISED BEFORE FILLED INTO BARRELS/STANDARD
CONTAINERS MEANT FOR SALES.
NOSTERALISATION
5.
NITROGEN IS FILLED ON THE OVERHEAD SPACE OF BARREL TO IMPROVE SHELF LIFE
NO NITROGEN IS FILLED
6.
SHELF LIFE : FOUR TO SIX MONTHS
SHELF LIFE : 7 TO 10 DAYS MAXIMUM
7.
PRODUCED AS PER IS : 1165 -1988& SOLD
PRODUCED TO PCL REQUIREMENTS ONLY
Therefore from the above it is clear that the condensed milk produced by the appellants by evaporation process of the boughtout milk is not marketed and not marketable. Therefore its classification under sub-heading 0401.14 does not survive the test of reasoning. Therefore applying the ratio of the Supreme Court decision cited above and also on consideration of the differentiation chart provided by the appellants. I hold that the charges in the impugned order that the appellants have not filed any declaration under 173B and price declaration under 173-C and clearance without payment of duty etc. are not sustainable.
4. Ld. DR, Shri C. Mani referred to the grounds of appeal and argued that what was cleared was condensed milk and the fact that it was removed in drums in loose form or in tankers to industrial consumer is required to be considered as marketable. It is wrong to conclude that only condensed milk to be in sealed container of 500 gms. 1 Kg., 2 Kgs. or 5 Kgs. denominations only will have marketability as these are placed in retail shops for being sold to consumers for production of sweets or ice-cream. He contended that in both kinds of sales marketability existed. Only if condensed milk is spoiled on account of being non-hygenic, not properly protected, or exposed to bacteria, it will not be marketable, while in the present case, it was being cleared to job worker which itself showed that it was marketable. He prayed for setting aside the order and confirming the Order-in-Original.
5. Ld. Senior Counsel, Shri M. Chandrasekar assisted by Shri A. Vijayaraghavan contended that there was no sale nor the item intended for sale and neither it was ‘condensed milk’ in the form in which it is marketed and sold in the market. It is not packed in unit containers and hence it does not satisfy the conditions laid down in Chapter heading 0401.14 for classifying the item as “concentrated (condensed) milk whether concentrated or not put up in unit container and ordinarily intended for sale”. He points out to the finding recorded by the Commissioner and also to the judgment of the Apex Court noted therein. He submits that there was no sale as they were clearing it to the job worker under proper documentation; who were manufacturing the confectionery for the assessee on job work charges and duty paid in terms of the judgment of Ujjagar Prints. He also strongly relied on the judgment of Apex Court rendered in HMM Ltd., 1994 (74) E.L.T. 19 wherein the Apex Court has laid down that Horlicks is not marketable without being put up in unit containers and in terms of description of item IB, the product has to be prepared or preserved foods put up in a unit container and ordinarily intended for sale. These are the same words which are now incorporated in Chapter sub-heading 0401.14 and the Apex Court held that unless horlicks
is put up in unit container and they are ready for sale, it cannot be brought within the item IB. He submits that this judgment squarely applies to the facts of this case. He also relied on the judgment rendered in Hindustan Milk Food Mfg. Co., 1982 (10) E.L.T. 739 (GOI) with regard to classification of the product under item IB of CETA. The Govt. of India also took the same view that goods should be put up in unit containers and to be ordinarily intended for sale. He also relied on the ruling rendered in the case of Agro Foods Punjab Ltd. v. CCE, 1990 (49) E.L.T. 404 (T) wherein the Tribunal has examined the primary requirement for classification under Tariff item IB or under new Tariff Heading 2001.10 and has held that for classifying under those headings, the item should be of such quantities (of whatever size) packed in unit container of that size. The Tribunal noted the expression “unit container” to have reference to prepared or preserved goods, ordinarily intended for sale with pre-determined quantity. He points out that empty drums in which glucose was imported was being used for clearing the milk without any measurement and they were not having any specific quantity. The import was made at the job worker place. Hence, the terms cannot be considered as unit container as it did not have pre-determined quantity. Likewise, whenever it is sold in packed in such unit containers, the assessable value should include the cost of contents and containers as held in the case of Agro Foods Punjab Ltd. (supra) which is not the facts in the present case. He also relied on the judgment rendered in M.P. Vegetable Fruits Products v. CCE, Raipur, 1995 (76) E.L.T. 393 (T) wherein the Tribunal held in para 5 of its order that “Tomato Puree” should be packed in unit containers and intended for sale for classifying to be under sub-heading 2001.10. As they were cleared in barrels or drums, they would not come under the heading required for classifying such item put up for sale in unit containers and hence the residuary sub-heading 2001.90 was adopted by the Tribunal. He also referred to the Allahabad Col-lectorate Trade Notice No. 38/86 dated 9-9-86 which also clarified the classification of fruit juice in jerry cans and noted that expression “ordinarily intended for sale”, applies only to unit container in which sale actually takes place, and would not refer to the sale of the product itself which may ultimately take place in different containers, “Unit containers” means a container in which prepared or preserved food is intended to be sold by the manufacturer and it may be a small container like tin, can, box, jar, bottle or bag in which the product is sold by retail, or it may be a large container like drum, barrel or canister in which the product is packed for sale to other manufacturers or dealers. Ld. Sr. Counsel submits that as the terms of the Tariff entry 0401.14 has not been set aside and the item is not in marketable condition and marketed as “condensed milk” and no evidence to that effect has been produced by Revenue, therefore, there is no merit in the appeal and requires to be rejected.
6. We have carefully considered the submissions made by both sides and have perused both the orders and the grounds made out by the Revenue. In order to classify an item under Tariff Heading 0401.14, the item has to be “concentrated (condensed) milk, whether sweetening or not, put up in unit container and ordinarily intended for sale”. In this case, the item has not become concentrated (condensed) milk for the reason that what was
cleared was only boiled milk which had still 80% moisture and had not reached a stage of ‘condensed milk’ intended for sale in unit containers. The Commissioner (Appeals) in the extracted portion of the order has noted the difference between the commercial product which is sold as condensed milk and the one which is cleared by the assessee. To treat an item as ‘condensed milk’, it has to satisfy the regulation of the IS Standards fixed for the purpose of sale. Standardised milk with regulated fat content is used and pastuerised to destroy spoilage organizms and enzymes. Cream is added to maintain fat : SNF as 1:2.44. Lactose is added to induce crystallisation and produce smooth texture. Further, SCM is heat steralised before filled into barrels/standard containers meant for sales. Nitrogen is filled on the overhead space of barrel to improve shelf life. The shelf life of the commercial product is four to six months. It satisfies the IS standard 1166-1986. The product in question is only pasteurised milk and evaporated milk is not standardised. No extra cream is added and milk is just concentrated. Lactose is not added and texture varies. There is no steralisation and nitrogen is not filled. Shelf life is only 7 to 10 days and it does not satisfy the requirement of IS standards 1166-1986. Therefore the items are not being removed and the unit container of specific quantity and it is not intended for sale. It cannot be considered as concentrated (condensed) milk not having been put up in unit container and not ordinarily intended for sale, it is not classifiable under 0401.14 of the Tariff as suggested by the revenue. In the SCN, the Commissioner (Appeals) has looked into all the papers and has taken into consideration, including the ruling of the Apex Court to arrive at a correct conclusion that the item is not marketed as ‘condensed milk’ and it is put up in unit container is satisfied and the Tariff and it is not intended for sale. He also noted from the judgment cited that the item has to be put up in a unit container as has been described and discussed in the Agro Foods Punjab Ltd. in para 9 which is extracted herein below :-
9. On going through the expression ‘Unit Container’ and Tariff entries of old IB and new Tariff entries, we find that though the term ‘Unit Container’ was not inserted in the old tariff, still as such it was discussed in thread bare with reference to notification and instructions issued by the Ministry in the decision of M/s. HPMC. Further the description of tariff which was consolidated under old Tariff IB has been distributed in the several Chapters under Section IV in the new Tariff Act. But in substance it remains the same. There is no material change in the description of tariff entry except bifurcation and distribution under different sub-headings in different chapters under the same umbrella of Section IV in the new tariff. The products in question in the present case particularly come under Chapter 20 of the new Tariff Act, wherein the Chapter 20 divided into two sub-headings 2001.10 and 2001.90 as against IB and 68 of the old Tariff Act. The description under 2001.10, i.e., put up in unit containers and ordinarily intended for sale used in the same sense with the same wordings used in IB of old Tariff. The definition of Unit container which was taken note of as per instructions in the old tariff has become part of the new tariff with specific insertion. The description under IB of the old tariff as well as under new tariff 2001.10 relates to sales in unit containers in which alone the goods are ordinarily intended to be sold though the unit containers may be of any particular but uniform size. The primary requirement (for classification under Tariff Item 1B or under new tariff 2001.10) would be that sales
should be of such quantities (of whatever size) packed in unit containers of that size. Whenever it was sold in packed in such unit containers the assessable value is inclusive of cost of contents and container. The expression ‘unit containers’ has been used with reference to prepared or preserved goods ordinarily intended for sale with pre-determined quantity. Normally these goods are in standard packs (it may be bottles, cans, cardboard, cartons, etc.) and are prominently labelled to show the nature of the contents, the quantity, the date of manufacture and date of expiry (where applicable), the marker’s name, the recommended maximum retail price, etc. These aspects have been dealt in detail in the case of M/s. HPMC cited Supra and we hold that there is no difference either in the entry in between IB of the old Tariff and new tariff 2001.10 or in the issue involved in both the cases following the ratio of the decision in the case of M/s. HPMC we hold that clearance in barrels does not amount to sale of the contents as put in a unit container. Accordingly, the goods in question are not classifiable under sub-heading 2001.10 but they are classifiable under subheading 2001.90.
7. This aspect of the matter was also examined by the Apex Court in the case of HMM Ltd. v. CCE reported in 1994 (74) E.L.T. 19 (S.C.). The description in item IB had same conditions as in the present tariff. The Apex Court held that unless horlics is put up in unit containers, it is not marketed in terms of tariff description. This judgment applies to the facts of the present case. Likewise the rulings of the Tribunal in the case of Agro Foods Punjab Ltd. (supra) and M.P. Vegetable Fruits Products v. CCE (supra) also apply to the facts of this case. A doubt pertaining to the classification of fruit juice which is put up in unit container and ordinarily intended for sale is also clarified by the Allahabad Collectorate by Trade Notice No. 38/86, dated 9-9-1986 which is also extracted herein below :-
FRUIT JUICE IN JERRY CANS [CHAPTER 20]
A doubt has been raised as to whether fruit juices removed by the as-sessee in jerry cans and sold in open glasses of 200 ml through vending machines, could be covered under sub-heading 2001.10 of Central Excise Tariff which, inter alia, covers, fruit juices put up in unit containers and ordinarily intended for sale.
2. It has been observed that the expression “ordinarily intended for sale”, applies only to unit containers in which sale actually takes place, and would not refer to the sale of the product itself which may ultimately take place in different containers, ‘Unit containers’ means a container in which prepared or preserved food is intended to be sold by the manufacturer and it may be a small container like tin, can, box, jar, bottle or bag in which the product is sold by retail, or it may be a large container like drum, barrel or cannister in which Ihe product is packed for sale to other manufacturers or dealers. In the instant case, fruit juice removed in jerry cans from the factory is sold in open glasses of 200 ml. through vending machines. The open glasses in which sale ultimately takes place cannot be considered as ‘unit containers’. Accordingly fruit juice sold in the above manner would not qualify or classification under sub-heading 2001.10 of the Central Excise Tariff. The correct classification of such fruit juices cleared in jerry cans and sold in open glasses through vending machines would be sub-heading 2001.90.
[Allahabad Collectorate Trade Notice No. 38/86, dated 9-9-1986]
8. The above Trade Notice clearly pin points the findings given by the Commissioner in the light of Apex Court judgment. We are in agreement with the said understanding of the Allahabad Collectorate Trade Notice with regard to item being put up in unit container and ordinarily intended for sale. In the present case the item is not condensed milk and it is not intended for sale nor marketed as ‘condensed milk’ nor it is put up in unit container and hence the findings arrived at in the impugned order is correct legal and proper. There is no merit in this revenue appeal and hence it is rejected.