ORDER
K.S. Venkataramani, Member (T)
1. C/COD/151/89/MAS – In view of the explanation contained in the application for condonation of delay and after hearing the learned Counsel Shri Nankani and the learned S.D.R., the delay is accordingly condoned.
2. Appeal No. C/S22/88/MAS/ & C/16/89/MAS – In these two appeals the same issue namely the import of Hop pellets and whether such imports are eligible under OGL under the Import Policy 1985-88 is involved. They are taken up together for disposal.
3. In Customs Appeal No. 522/88/MAS the appellants MK Fisheries imported a consignment of Hop pellets valued at Rs. 1,08,615.22 for which they filed two Bills of Entry (B/E) on 14-9-1987 in the Cochin Customs House for clearance and claimed that the import of the goods was covered by OGL Appendix 6 Item No. 1 which covers raw material, components, and consumables other than those included in Appendices 2, 3 Part A, 5 and 8. The Customs House, however, was of the view that the imported item namely Hop pellets will be covered by Serial No. 13 in Appendix 2 Part B of the Import Policy 1985-88 which reads “Brewery hops including hop extracts in any form”. Hence the import was held to be unauthorised. The Collector of Customs thereafter instituted proceedings which culminated in the order of adjudication dated 10-12-1987 by which he ordered confiscation of the goods levying a fine in lieu of confiscation of Rs. 20,000/. No personal penalty was imposed.
4. In the other appeal (C/16/89/MAS) the appellants namely Metro Exports imported the same goods and filed BE for their clearance on 22-9-1986 and claimed that they were covered by OGL, Appendix 6 item No. 1. The Customs House accepted their claim for clearance of the goods under OGL and the goods were assessed to duty and cleared out of Customs. The Collector of Customs however passed an order under Section 129 (D) (2) of the Customs Act on 15-9-1987 which was also communicated to the appellants M/s Metro Exports on the same day. In this order, the Collector of Customs was of the opinion that the goods imported namely Hop pellets are not covered by item No. 1 of Appendix 6 of the Import Policy Book 1985-88 and it would require a specific licence as the item figures at Serial No. 13 of Appendix 2, part B and in this view of the matter sought review of the order granting clearance of the goods passed by the proper officer. The Collector (Appeals) sent copies of the application for review and the enclosures to M/s Metro Exports, the appellants, calling upon to make their submissions and passed the impugned order dated 18-4-1988 allowing the application for review of the Collector of Customs, Cochin and directed the Department to initiate penal action against the appellants Metro Exports as the goods are not available for auction.
5. Shri S.D. Nankani, the learned Counsel represented both the appellants. It was his contention that Hop pellets are not covered by Serial No.13 of Appendix 2 Part B. On the other hand it was the contention of the appellants that Brewery hops are agricultural produces and Hop pellets are manufactured from Brewery Hops which serve as a raw-material for use in the manufacture of finished product namely Hop Pellets and as such Brewery Hops and Hop Pellets cannot be treated as one and the same. The learned Counsel in this connection referred to the course of production chart enclosed with the Appeal showing the process of raw hops into Hop Pellets after various process. In fact, according to the learned Counsel, the Collector’s order itself contains the observation that “Hop is a plant and which is processed into form of powder and pellets and extracts”. Even in the trade parlance, the two products are different according to the appellants. Further, it was contended that in the description given against Serial No. 13 of Appendix 2 Part B the words “in any form” relate to Hop extracts and not Brewery hops. It was argued that processed product like Hop pellets would not be covered by description Brewery Hop, As regards the other appellants, the learned Counsel adopted the arguments on merits regarding the claim for OGL import and further urged that the order passed by the Collector of Customs under Section 129 (D) (2) of the Customs Act, 1962 was vague as it was not clear whose order it was being sought to be reviewed whether that of the Assistant Collector accepting the claim under OGL or that of the proper officer granting clearance of the goods under Section 47 of the Customs Act, 1962. It was also contended that import in the case of Metro Exports was prior to the amendment of the entry Serial No. 13 of Appendix 2 Part Band the review in that case had been taken after clearance of the goods and the Public Notice bringing about the amendment was dated 1-9-1986 whereas the letter of credit for the import has been opened much earlier on 16-6-1986. The amendment was to add the words “in any form”.
6. Shri K.K. Bhatia, the learned S.D.R. appearing for the Department contended that item No. 13 in Appendix 2, Part B is an inclusive definition of wider coverage. He also referred to the literature produced by the appellants that hops are used in the Brewery. Industry which are described as dried female flower Clusters of the common Hop. There is no substance in the plea of the appellants according to the learned S.D.R. that Hop Pallets are manufactured products because in pelletising process no change to bring about a new product occurs; it is a change in the form of the product only. The Infirmities pointed out in the review order under Section 129(D) (2) are highly technical and have been well answered by the Collector (Appeals).
7. We have given careful consideration to the submissions made by the learned Counsel and the learned SDR. The central issue is whether Hop pallets imported by the appellants herein would be eligible for clearance under Appendix 6, item No. 1 OGL of the Import Policy 1985-88. The Department holds that OGL entry specifically excludes the items which figures in Appendix 2,3 Part B, 5 and 8 and that Serial 13 of Appendix 2 Part B specifically covers the goods imported because against that Serial number the description is ‘Brewery Hop including Hop extracts in any form’ which is an inclusive definition wide enough to cover Hop pellets. The appellant herein however claim that Hop pellets are manufactured out of Brewery Hop and are distinct therefrom. Examining this connection, it is found that in order to bring the item under OGL, Appendix 6 Serial No. 1, it has to be shown that the goods are not included in Appendix 2. However, Serial No. 13 of Appendix 2, Part B is an inclusive description which covers Brewery Hop including Hop extracts in any form. A perusal of the literature regarding Hop pellets produced by the appellants also shows the process to which Brewery Hops are subjected. In essence these process are of cleaning, separation of foreign matter, sifting, homogenisation and pelletization. In the literature relating to Hopstabil submitted by the appellants, it is described as “During production of Hopstabil pellets, the raw hops are cleaned, carefully dried, milled and homogenized a number of times”. “Extract and powder from the same batch are converted into a homogeneous product in a newly developed plant, carefully pelletized, cooled and conveyed to the packaging department via homogenizing coils”. In this connection, it is also useful to bear in mind certain judicial pronouncements as regards what would constitute manufacture. The Supreme Court had occassion to deal with the issue in the case of Union of India v. Delhi Cloth and General Mills reported in 1977 E.L.T. (J199) (S.C.) and South Bihar Sugar Mills v. Union of India reported in 1978 E.L.T. (J 336) (S.C.). It was held that manufacture implies a change but every change in the raw material is not manufacture and yet every change of an article is the result of treatment, labour or manipulation. But something more is necessary and there must be such a transformation of a product (raw material) that a new and different article must emerge having a distinct name, character or use. Therefore, manufacture does not mean merely to produce some change in its substance. Therefore, it is clear that the processing cannot be equated with manufacture. Mere change in the physical form, shape or substance of a commodity would not by itself lead to the conclusion that a new article has been manufactured. But where the article after change in its physical form cannot be used for the purpose it could have been used before such change, the change in physical form will amount to manufacture. Therefore, in the present case the whole process would seem to produce no new manufactured goods different from the starting material, Brewery hop. On the other hand, it would more readily answer to the description of pelletized Brewery hop. It is also seen that the end use of Brewery Hop as well as Hop pellets is the same, namely utilization for the manufacture of quality Beer in Breweries. In this view of the matter the amendment to Serial No. 13 of Appendix 2 Part B dated 11-9-86 which added the words ‘in any form’ would not make any difference because we have held that Hop pellets are nothing but pelletized Brewery Hop which item was already covered by existing entry at Serial No. 13 of the said Appendix to the Import Policy Book 1985-88. As regards the infirmities pointed out by the appellants in giving direction to the Assistant Collector by the Collector for review of the order under Section 129(D) (2), it is seen that these are technical and not such as to be fatal to the review application. We are also in agreement with the reasoning adopted in this regard by the Collector (Appeals) in the impugned order. In the result, we see no reason to interfere with the order passed by the lower authorities and the appeals are accordingly rejected.