vil Appeal Nos
379 1988 and 3660 821987
From the Judgment and Order dated 261087 of the Customs Excise and Gold Control Appellate Tribunal in Appeal Nos
ED94383 D Order No 83887 D EDSB A No 411 and 41281 D  and 78780 D in Order No 786 to 7886 D Kuldip Singh Additional Solicitor General AK Srivastava and PParmeswaran and Mrs Sushma Suri for the Appellants
Soil J Sorabjee section Ganesh JR Gagrat PG Gokhale BR Agarwala and CM Mehta for the Respondents
The Judgment of the Court was delivered by SABYASACHI MUKHARJIJ
These appeals are under Section 35Lb of the Central Excises and Salt Act 1944hereinafter to as the Act  against the decision of the Customs Excise and Gold Control Appellant Tribunal New Delhi  Tribunal  for short dated 26the October1987
The respondent company has its factory at Chakala Andheri and is engaged in the manufacture of non alcoholic beverage bases falling under Tariff Item 68 of Central Excise Tariff
During the course of enquiry it was found that the company had during the period from Ist March 1975 to 18th April1979 manufactured non alcoholic beverage bases without holding proper Central Excise licence and had cleared the said goods without payment of the duty due thereon and had thereby evaded the duty amounting to PG NO 937 Rs35096322
According to the revenue prima facie it appeared that the respondent had contravened the provisions of Rules 91 53 173 ppI 173 pp3 73 pp6 and 174 of the Central Excise Rules 1944 Rules  for short inasmuch as during the period from 1st March 1975 to 18th April 1979 the respondent company had manufactured without valid licences required under Section 6 of the Act read with Rule 174 of the Rules goods not elsewhere specified and falling under Tariff Item 68 of the First Schedule of the Act viz non alcoholic beverage bases
The respondent company had further cleared the said goods without filing list of goods manufactured as required by Rule 173 pp3 of the Rules
The respondent had cleared the said goods without preparing gate passes as required under Rule 173 pp 6 of the Rules
and had further cleared the said goods without maintaining accounts as required under Rule 53 of the Rules
In the circumstances
notices were issued by the relevant officer asking the respondent company to show cause for recovery of the dues and also for imposition of penalty
When the matter came up for consideration before the Collector Central Excise he found that non alcoholic beverage bases were not themselves food or food products and accordingly did not quality for exemption under Notification No 5575 as amended
He accordingly confirmed the demand of central excise duty of Rs35096322 under Rule 92 read with Rule 10 of the Rules
He also imposed a penalty of Rs25000 under Rule 173Q of the Rules
Aggrieved therebythe respondent company filed an appeal before the Tribunal and contended that the question of the dutiability of non alcoholic beverage bases manufactured by the respondent had been settled by the Tribunal in its decision in the case of respondent itself ie
Parle Exports PLtd vs Collector of Central Excise Baroda which are the subject matter of the connected appeals ie CA Nos 3680 82 of 1987 The Tribunal following its earlier order allowed the appeal and hence the present appeal by the Revenue
The First Schedule of the Act which provides for the dutiability and the rates of duty applicable to various goods mentioned therein contains the expressions Food and Beverages It provides therein description of various types of goods and the rates of duties applicable thereto
In the said description Food and Beverages many items are included viz sugar produced in a factory ordinarily using power in the course of production of sugar 1A confectionery cocoa powder and chocolates in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power namely
boiled sweets toffees caramels candies nuts including almonds and fruit kernels coated with sweetening agent and PG NO 938 chewing gums cocoa powder drinking chocolates etc
It also includes items 1B prepared or preserved foods put up in unit containers and ordinarily intended for sale including preparations of vegetables fruit milk cereals etc and as item 1C food products in or in relation to the manufacture of which any process is ordinarily carried on with the aid of power namely biscuits pasteurised butter pasteurised or processed cheese aerated waters whether or not flavoured or sweetened and whether or not containing vegetable or fruit juice or fruit pulp etc
Tariff Item 68 of the First Schedule of the Act provides for duty on All other goods not elsewhere specified and manufactured in a factory but excluding inter alia alcohol all sorts including alcoholic liquor for human consumption and other items not necessary for our present purpose
The exemption Notification No 5575 CE dated 1st March 1975 reads as follows In exercise of powers conferred by sub rule 10 of rule 8 of the Central Excise Rules 1944 the Central Government hereby exempts goods of the description specified in the q Schedule annexed hereto and falling under Item No 68 of the First Schedule to the 1 of 1944 from the whole of the duty of excise leviable thereon 
THE SCHEDULE 1
All kinds of food products and food preparationsincluding i meat and meat products ii dairy products iii fruit and vegetable products iv fish and sea foods v bakery products and vi grain mill products
Electric light and power
 PG NO 939 The question is whether by the notification of exemption non alcoholic beverage bases have been exempted from payment of duty
The only question therefore in other words is whether non alcoholic beverage bases are food products  or food preparations  covered by the exemption notification No 5575 CE of Ist March 1975
We are not concerned with the question whether in a broad general sense non alcoholic beverage base is food or not
In Brooke Bond India Limited vs Union of India the question arose before a learned Single Judge of the High Court of Andhra Pradesh whether coffee chicory blend was food product and is an item which fell under Tariff Item 68 of the Tariff
The identical notification involved herein came up for consideration in that case
The question was whether it was food product or food preparation and as such exempt from excise duty
It was held by the learned Single Judge that what was exempt under the said notification was not food but food products and food preparations and it was further held that coffee chicory blend was neither food nor food preparation
Therefore it was not exempt from payment of excise duty under the said notification
The word food has no definition of universal application and it varied from statute to statute
In some cases the dividing line between the two might be thin and in some cases it might be varied but so far as coffee chicory blend was concerned there was little doubt that it was beverage and not food
The learned Judge referred to paragraph 109 of Volume 18 of Halsbury s Laws of England 4th Edn
In that paragraph coffee chicory products are mentioned under the general heading Food Dairies and Salaughter Houses  and sub heading Food generally
Coffee chicory blend is also mentioned in that paragraph
But the coffee and coffee products under the heading Food generally were in the context of the law of Food Adulteration and the Coffee and Coffee Produce Regulations q1967 in force in England
Reference was also made by the learned Judge to Corpus Juris Secundum Volume 36 at page 1041
The learned Judge in our opinion rightly observed that the aforesaid passage from the Halsbury s Laws of England and Corpus Juris Secundum could not be mechanically imported into the present case more particularly when we are concerned with the situation under the Tariff Schedule
Food  as has been noted has no fixed definition of universal application and its meaning varies from statute to statute
The dividing line the learned Judge observed between the beverage and food might be thin and in some case it might overlap
The learned Judge however observed that it was beverage rather than food
The accordingly held that the notification exempted not food but food products and food preparations and as such coffee chicory blend did not come within the purview of the exemption
The said decision was affirmed by the Division PG NO 940 Bench of that Court in Brooke Bond lndia Limited vs Union of India  Ors The Division Bench after exhaustively discussing the points in controversy and after referring to several authorities referred to the decision of Justice Vivian Bose of this Court in The State of Bombay vs Vir Kumar Gulabchand Shah 1982 SCR877 wherein he had observed in his own and inimitable language at pages 880 883 of the report as under Much learned judicial thought has been expended upon this problem what is and what is not food and what is and what is not a foodstuff and the only conclusion I can draw from a careful consideration of all the available material is that the term foodstuff is ambiguous
In one sense it has a narrow meaning and is limited to articles which are eaten as food for purposes of nutrition and nourishment and so would exclude condiments and spices such as yeast salt pepper baking powder and turmeric
In a wider sense it includes everything that goes into the preparation of food proper as understood in the narrow sense to make it more palatable and digestible
In my opinion the problem posed cannot be answered in the abstract and must be viewed in relation to its background and context
But before I dilate on this l will examine the dictionary meaning of the words The Oxford English Dictionary defines foodstuff a follows that which is taken into the system to maintain life and growth and to supply waste to tissue
In Webster s international Dictionary food is defined as nutritive material absorbed or taken into the body of an organism which serves for purposes of growth
work repair and for the maintenance of the vital processes
Then follows this explanation Animals differ greatly from plants in their nutritive processes and require in addition to certain inorganic substances water salts etc and organic
substances of unknown composition vitamins not ordinarily  classed as food though absolutely indispensable to life and contained in greater of less quantities in the substances eaten complex organic substances which fall into three principal groups Proteins Carbohydrates and Fats
 PG NO 941 Next is given a special definition for legal purposes namely As used in laws prohibiting adulteration etc
 food  is generally held to mean any article used as food or drink by man whether simple mixed or compound including adjuncts such as condiments etc and often excluding drugs and natural water
 The definition given of foodstuff  is 1
Anything used as food 2
Any substance of food value as protein fat etc
entering into the composition of a food
 It will be seen from these definitions that foodstuff has no special meaning of its own
It merely carries us back to the definition of food because food stuff is anything which is used as food
So far as food is concerned it can be used in a wide as well as a narrow sense and in my opinion must depend upon the context and background
Even in a popular sense when one asks another Have you had your food one means the composite preparations which normally go to constitute a meal curry and rice sweetmeats pudding cooked vegetables and so forth
One does not usually think separately of the different preparations which enter into their making of the various condiments and spices and vitamins any more than one would think of separating in his mind the purely nutritive elements of what is eaten from their non nutritive adjuncts
So also looked at from another point of view the various adjuncts of what I may term food proper which enter into its preparation for human consumption in order to make it palatable and nutritive can hardly be separated from the purely nutritive elements if the effect of their absence would be to render the particular commodity in its finished state unsavoury and indigestible to a whole class of persons PG NO 942 whose stomachs are accustomed to a more spicely prepared product
The proof of the pudding is as it were in the eating and if the effect of eating what would otherwise be palatable and digestible and therefore nutritive is to bring on indigestion to a stomach unaccustomed to such unspiced fare the answer must I think be that however nutritive a product may be in one form it can scarcely be classed as nutritive if the only result of eating it is to produce the opposite effect and if the essence of the definition is the nutritive element then the commodity in question must cease to be food within the strict meaning of the definition to that particular class of persons without the addition of the spices which make it nutritive
Put more colloguially one man s food is another man s poison
I refer to this not for the sake of splitting hairs but to show the undesirability of such a mode of approach
The problem must I think be solved in a commonsense way
 Justice Bose noted that a comparison of war time measure in English and Indian Statutes might not be safe
But food is one which nourishes and sustains human body for the purposes of growth work or repair and for the maintenance of the vital process
In the Brooke Bond Ltd s case supra the Division Bench considered the meaning of the expression coffee chickory blend and upheld the decision of the learned Single Judge as mentioned hereinbefore
Mr Sorabjee learned counsel appearing for the respondent drew our attention to several items including Item 68 and the Central Excise Trade Notice dated 18th June 1975 which deals with exemption
The said Trade Notice inter alia reads as follows A number of doubts have been raised about the general scope of the terms food productspreparations  vide Entry No I in the Schedule to Notification No 5575 dated 1375
Specific queries have also been raised as to whether items like oil cakes rice bran
scented chunam katna starch quargum gur flour ice cream and ice candy ice supari groundnut kernels and cashew kernels could be regarded as covered under the above entry as claimed by the manufacturers of these goods
The matter has been examined and the following clarifications are used for the information of the trade
PG NO 943 The word food  is a general term and applies to all that is eaten by men for nourishment and takes in subsidiaries further i preparations for use either directly or after processing such as cooking dissolving or oiling in water milk etc
for human consumption and ii preparations used because of their nutritional or flavouring properties in the making of beverages or food stuffs for human consumption are classiable as food preparations
But such preparations which because of their ingredients and small proportion in which they are normally used are clearly added for other purposes or not classiable as food preparations underlined by us
Mr Sorabjee also drew our attention to the explanatory note in Heading No 2107 of CCCN which states inter alis as follows 2107 FOOD PREPARATIONS NOT ELSEWHERE SPECIFIED OR lNCLUDED
Provided that they are not covered by any other heading of the Nomenclature the present heading covers A Preparations consisting wholly or partly of foodstuffs used in the making of beverages or food preparations for human consumption
The heading includes preparations consisting of mixtures of chemicals organic acids calcium salts lecithin etc with food stuffs flour sugar milk milk powder etc for incorporation in food preparations either as ingredients or to improve some of their characteristics appearance keeping qualities etc Clause 2 of the said explanatory notes in heading No 2017 of CCCN contains the following 2 Flavouring powders for making beverages whether or not sweetened with a basis of bicarbonate of soda and glycyrrhizin or liquorice extract sold on the Continent as Cocoa powder
 PG NO 944 Our attention was also drawn to Item  12 of the same which runs as follows 12
Non alcoholic compound preparations often known as concentrated extracts used for making beverages liqueurs etc unless they are included elsewhere in the Nomenclature
These preparations are obtained by compounding vegetable extracts of heading 1303 with lactic acid tartaric acid citric acid phosphoric acid preserving agents foaming agents fruit juices etc and sometimes with essential oils
Alcoholic preparations of this type are excluded heading 2209 Mr Sorabjee further drew our attention to the Appendix 17 of Import Policy of 1981 82 which was relied upon by the Tribunal in the second decision ie the Parle Exports P Ltd case which is the subject matter of the connected appeals ie CA Nos 3680 82 of 1987
It was pleaded that it was always understood and treated as a part of the food product
Reliance was also placed on the reports of the Chief Chemist of the Central Excise Regional Laboratory Baroda to which Mr Sorabjee drew our attention
The reports dealing inter alia with some items stated as follow Gold Spot Base SRNo 1 Base A Lab No10 The sample is in the form of orange coloured liquid containing flavouring agents free from Alcohol
Please see note attached
No 2 Base Lab No 11 The sample is in the form of white powder
It is sodium Benzoate a chemical known to be used as a preservative
SR No3 
Base C Lab No 12 The sample is in the form of white powder
It is vitamin C ascorbic acid an organic chemical
Limca Base PG NO 945 SR No 4 Base A Lab No 13 The sample is in the form of white liquid containing flavouring agents
It is free from Alcohol
Please see note attached SR No 5 Base B Lab No 14 The sample is in the form of white powder
It is sodium Benvonate a chemical known to be used as a preservative
 The note appended to these reports stated inter alia the following NOTE The term food   as defined in the meant any article used as food or drink for human consumption other than drugs and water and includes a Any article which ordinarily enters into or is used in the composition or preparation of human foods and b any flavouring matter or condiments
Food products which are excluded from item C would fall under Item 68 of Central Excise Tariff read with the Notification 6278 dated 1378 excluded as amended
The term Food preparations on the other hand would cover a Preparation for use either directly or after processing such as cooking dissolving or boiling in water milk etc for human consumption
b Preparation consisting wholly or partly of food stuffs used in making of Beverages or food preparation for human consumption
This would also include concentrated extract for making non alcoholic beverages
BTN heading 2107 PG NO 946 In this connection attention is also invited to Bangalore Collectorate trade notice No 10375 dated 18675
In view of that has been stated above samples at Sl
No 1 4 8 9 13 and 15 may be deemed to fall in the category of food preparations
However before finalising the assessment it may be worthwhile ascertaining whether the above products are also known as food preparations in common parlance and trade
The views of the Director
Drugs  Food Laboratory Baroda may also sought if necessary Mr Sorabjee submitted that the Tribunal has relied on the Bangalore Collectorate Trade Notice as referred hereinbefore order of the Appellate Collector in the case of Bush Boake Allan India Limited and Heading No 2107 of CCCN Import Policy of the Government of India for 1981 82 as well as the observations in Encyclopaedia Britannica Volume 13 at pages 420 421
It was submitted that the said orders of the Tribunal had considered and taken into consideration all the relevant factors
The Tribunal has acted on the varied materials and therefore such decision of the Tribunal should not be altered or deviated from
Reliance was placed on the observations of this Court in Collector of Customs Bombay v Swastic Woollen P Ltd and Ors at paragraph 9
The expression food products is not defined in the Act The product exemption includes food and food preparations  and provides an inclusive definition of food products  and food preparations 
But the correct and the appropriate meaning of the expressions covered in the said notification has to be found out
The question is whether non alcoholic beverage base is either food product  or food preparation  in terms of the notification in question
Mr Sorabjee tried to suggest that fruit and vegetable juice might become fruit or vegetable products to come under Item 1iii of the Schedule to the exemption notification
Learned Additional Solicitor General Mr Kuldip Singh on the other hand submitted that non alcoholic beverage base though having some food value is not food product or food preparation at any rate in the context of the Act and notification as such
lle drew our attention to the first heading in the First Schedule to the Act dealing with Food and Beverages and pointed out that items 1 to IC deal with Food and Food Products while item 1D deals with beverages separately
He submitted before us that this indicates that PG NO 947 the expression food products and food preparations are used in contrast to beverages so far as the present Act and notifications thereunder are concerned
There is force in the submissions of the learned Additional Solicitor General
Our attention was drawn to a decision of the Government of India in Re Asian Chemical Works where the Government of India opined that Food flavours  and food preparations might improve taste or appearance of food products andor food preparations but by themselves could not be legitimately consumed directly or after processing such as cooking dissolving or boiling in water for human consumption independently
Mr Singh submitted that in ordinary common and commercial parlance also the goods in question are not known as food products andor food preparations as such therefore these are not to be treated as exempt under the notification
Mr Singh submitted that when a person says I have consumed food he does not mean or says that he has consumed non alcoholic beverage bases
Therefore those goods cannot be understood as covered by the notification of exemption
It was submitted that how Government understood a matter at the time of the notification is a relevant factor and that is a factor which one should bear in mind in view of the principles enunciated by this Court in KP Verghese vs Income Tax Officer Ernakulam  Anr  It is a well settled principle of interpretation that courts in construing a statute or notification will give much weight to the interpretation put up on it at the time of enactment or issue and since by those who have to construe
execute and apply the said enactments
How then should the courts proceed The expressions in the Schedule and in the notification for exemption should be understood by the language employed therein bearing in mind the context in which the expressions occur
The words used in the provision imposing taxes or granting exemption should be understood in the same way in which these are understood in ordinary parlance in the area in which the law is in force or by the people who ordinarily deal with them
It is however necessary to bear in mind certain principles
The notification in this case was issued under Rule 8 of the Central Excise Rules and should be read along with the Act
The notification must be read as a whole in the context of the other relevant provisions
When a notification is issued in accordance with power conferred by the statute it has statutory force and validity and therefore the exemption under the notification is as if it were contained in the Act itself
See in this connection the PG NO 948 observations of this Court in Orient Weaving Mills P Ltd vs The Union of India 1962 Supp
3 SCR 481
See also Kailash Nath vs State of UP AIR The principle is well settled that when two views of a notification are possible it should be construed in favour of the subject as notification is part of a fiscal enactment
But in this connection it is well to remember the observations of the Judicial Committee in Coroline M Armytage  Ors
vs Federick Wilkinson at 370 that it is only however in the event of there being a real difficulty in ascertaining the meaning of a particular enactment that the question of strictness or of liberality of construction arises
The Judicial Committee reiterated in the said decision at page 369 of the report that in a taxing Act provisions establishing an exception to the general rule of taxation are to be construed strictly against those who invoke its benefit
While interpreting an exemption clause liberal interpretation should be imparted to the language thereof provided no violence is done to the language employed
It must however be borne in mind that absurd results of construction should be avoided
In Hindustan Aluminium Corporation Ltd vs State of Uttar Pradesh  Anr 1982 l SCR 129 this Court emphasised that the notification should not only be confined to its grammatical or ordinary parlance but it should also be construed in the light of the context
This Court reiterated that the expression should be construed in a manner in which similar expressions have been employed by those who framed relevant notification
The Court emphasised the need to derive the intent from a contextual scheme
In this case therefore it is necessary to endeavour to find out the true intent of the expressions food products and food preparations having regard to the object and the purpose for which the exemption is granted bearing in mind the context and also taking note of the literal or common parlance meaning by those who deal with those goods of course bearing in mind
that in case of doubt only it should be resolved in favour of the assessee or the dealer avoiding however
an absurd meaning
Bearing the aforesaid principles in mind in our opinion the revenue is right that the nonalcoholic beverage bases in India cannot be treated or understood as new nutritive material absorbed or taken into the body of an organism which serves for the purpose of growth work or repair and for the maintenance of the vital process  and an average Indian will not treat non alcoholic beverage bases as food products or food preparations in that light
PG NO 949 We have also noted how these goods were treated by the Government as mentioned hereinbefore
There is no direct evidence as such as to how in commercial parlance unlike in ordinary parlance non alcoholic beverage bases are treated or whether they are treated as food products or food preparations
The purpose of exemption is to encourage food production and also give boost to the production of goods in common use and need
After all the purpose of exemption is to help production of food and food preparations at cheaper price and also help production of items which are in common use and need like electric light and power
The question of interpretation involves determining the meaning of a text contained in one or more documents
Judges are often criticised for being tied too closely to the statutory words and for failing to give effect to the intention of the Parliament or the lawmaker
Such language it has been said in Cross s Statutory Interpretation Second Edn at page 21 appears to suggest that there are two units of enquiry in statutory interpretation the statutory text and the intention of the Parliament and the Judge must seek to harmonise the two
This however is not correct
According to the tradition of our law primacy is to be given to the text in which the intention of the law giver has been expressed
Cross refers to Blackstone s observations that the fairest and most rational method to interpret the will of the law maker is by exploring his intentions at the time when the law was made by signs the most natural and probable
And these signs are either the words the context the subject matter the effects and consequences or the spirit and reason of the law
We have no doubt in our opinion that having regard to the language used it would not be in consonance with the spirit and the reason of law to give exemption for non alcoholic beverage bases under the notification in question
Bearing the aforesaid purpose in our opinion it cannot be contended that expensive items like Gold Spot base Limca base or Thumps up base were intended to be given exemption at the cost of public exchequer
For the aforesaid reasons the appeals have to be allowed and the decision of the Tribunal reversed
We however
need not go into the question of penalty as well as the question of limitation which have been left open by the Tribunal in its order
It will be open for the parties to urge these points afresh before the Tribunal
We express no opinion on these aspects
The appeals to the extent indicated above are allowed
There will however be no order as to costs
RSS Appeals allowed


Summary:
The petitioner and the respondents in the SLP were partners in a partnership firm
On 8th November 1980 respondent No l issued a notice calling for dissolution of the firm alleging mismanagement loss and exclusion from the management and later filed a civil suit for i dissolution of the firm and ii accounts
On 4th November 1981 respondent No 9 who was defendant No 7 in the suit filed an application under Section 34 of the for stay of the suit
The Trial Judge after referring to the order sheet in the matter and noticing that the counsel for the petitioner had taken steps in the proceedings in the suit by seeking and securing adjournments for filing the written statement held that there was no jurisdiction to stay the suit under On appeal the Division Bench of the High Court confirmed the order of the Trial Judge and held that the petitioner having taken steps in the suit had thereby disentitled himself from asking for the stay of the said suit
Dismissing the petitioner s Special Leave Petition HELD 1
Arbitration is an alternative procedure for speedy adjudication of disputes between the parties and should normally be encouraged as parties have bound themselves to have their disputes adjudicated by arbitration so they should be held bound by the agreement
887B 2
Section 34 of the is the statutory provision which deals with the powers to stay legal proceedings where there is an arbitration agreement
One of PG NO 884 PG NO 885 the requirements is that the application for stay must be filed before the filing of the written statement or taking any other steps in the proceedings 887C 888E 3
The expression taking any other steps in the proceedings  does not mean that every step in the proceedings would come in the way of enforcement of the arbitration agreement
The step must be such as would clearly and unambiguously manifest the intention to waive the benefit of arbitration agreement and display an unequivocal intention to proceed with the suit giving up the right to have the matter disposed of by arbitration
891E FB 4
Each Court must find out from the context of each case what has happened and whether a step was taken in the suit which would disentitle the party from obtaining stay of proceedings
891C In the instant case it is indisputable that the proceeding was commenced by a party to an arbitration agreement against the other party to the agreement and the legal proceedings which was sought to be stayed was in respect of a matter agreed to be referred to arbitration
From the order sheet in the case as noted by the Trial Judge it appears that the counsel appearing for the petitioner had sought adjournment specifically for filing written statement  and obtained time on more than one occasion for such purpose
It was not only the time taken to consider whether written statement should be filed as a defence to the plaint but it was time taken to have the matter decided by the suit
The party evinced an intention to have the matter adjudicated by the Court and not keen to have the matter adjudicated by arbitration
If that is so the party has disentitled itself to ask for the stay of the said suit
The High Court was therefore
right in affirming the order of the Trial Judge
891F H892A State of Uttar Pradesh  Anr
vs Janki Saran Kailash Chandra  Anr 1974 1 SCR 31 and Food Corpn
of India  Anr
vs Yadav Engineer and Contractor   referred to
Law of Arbitration by RS Bachawat Ist Edn pp
498 499 referred to