Case: Commnr.Of Central Excise,New Delhi Vs. M/S.Connaught Plaza Rest.(P)Ltd.N.D

2. During the relevant period, the respondent-assessee was engaged in the business of selling burgers, nuggets, shakes, soft-serve etc. through its fast food chain of restaurants, named above. In so far as the manufacture and service of ‘softis concerned, the assessee used to procure soft serve mix in liquid form from one M/s Amrit Foods, Ghaziabad; at Amrit Foods, raw milk was pasteurised, skimmed milk powder was added (the milk fat content in the said mixture is stated to be 4.9%, not exceeding 6% at any stage); sweetening agent in the form of sugar or glucose syrup and permitted stabilizers were added; the mixture, in liquid form, was then homogenized, packed in polyethylene pouches and stored at 0 to 40C. This material was then transported to the outlets under the same temperature control, where the liquid mix was pumped into avending machine; further cooled along with the infusion of air, and finally, the end product, ‘softwas drawn through the nozzle into a wafer cone or in a plastic cup and served to the customers at the outlet.3. For the periods from April 1997 to March 2000, three show cause notices came to be issued to the assessee. These alleged that the ‘softice-cream was classifiable under Chapter 21, relating toof the Tariff Act, attracting 16% duty under heading 21.05, sub-heading 2105.00and other edible ice, whether or not containingInvoking the proviso to sub-section (1) of Section 11A of the Act, additional duty was also demanded. A proposal for imposing penalty on the assessee and on their Managing Director was also initiated.4. While adjudicating on the first show cause notice, vide order dated 31st May, 2000, the adjudicating authority held that : ‘softwas classifiable under heading 04.04. Describing the goods asdairy produce; edible products of animal origin, not elsewhere specified orit held that the process undertaken by the assessee amounted to manufacture and the extended period of limitation was not applicable. However, while adjudicating on the second show cause notice, vide order dated 28th September, 2001, the adjudicating authority concluded that: soft serve was classifiable under heading 21.05; the process undertaken by the assessee for conversion of soft serve mix to ‘softamounted to manufacture and that the assessee was not entitled to small scale exemption because of use of the brand nameWhile adjudicating on the third show cause notice, the adjudicating authority reiterated that : ‘softwas classifiable under heading 21.05; the process undertaken by the assessee for conversion of soft serve mix to ‘softamounted to manufacture and small scale exemption was not available to the assessee because of use of the brand namean appeal filed by the assessee, the Commissioner of Central Excise (Appeals) reversed the above finding and classified ‘softunder the sub-heading 2108.91.5. Being aggrieved, cross appeals were filed, both by the revenue as also the assessee, before the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi, as it then existed, (for short. The appeals arising from the first two show cause notices were disposed of by the main order, dated 29th January, 2003. The appeal arising from the third show cause notice was disposed of by the Tribunal vide order dated 3rd August, 2004, following its earlier decision in order dated 29th January, 2003. The Tribunal came to the conclusion that the process undertaken by the assessee, namely, conversion of soft serve mix to ‘softamounted to manufacture and that ‘softwas classifiable under sub-heading 2108.91, describing the goods aspreparations, not elsewhere specified orot bearing a brandattracting nil rate of duty. The Tribunal held thusview of the technical literature, ISI Specification and provisions made in Prevention of Food Adulteration Act, 1955 and Rules made thereunder, the impugned product cannot be classified as ice-cream merely on the ground that the consumer understood the same as ice-cream or the ingredients of both the products are same. The statement given by the Managing Director also cannot be a basis for determining the exact classification of the product in the Central Excise Tariff. The ratio of the decision in the case of Shree Baidyanath Ayurved Bhavan Limited case is not applicable to the facts of the present matter. The dispute in the said case was as to whether the ‘Dant Manjanis Ayurvedic medicine or ‘ToothIn that context, the Supreme Court observed that resort should not be had to the scientific and technical meaning of the terms and expressions used but to their popular meaning, which does not mean that if a particular product is not ice-cream it can be classified as ice-cream because some consumers treated it as ice-cream. Accordingly, the product in question is not classifiable under Heading 21.05 of the Central Excise Tariff.It is manifest that the Tribunal based its conclusion on the technical meaning and specifications of the productstipulated in the Prevention of Food Adulteration Act, 1955 (for short) and rejected the common parlance test, viz. theunderstanding of the product. Being aggrieved by the said approach, the revenue is before us in these appeals.

Reasoning: 15. According to the rules of interpretation for the First Schedule to the Tariff Act, mentioned in Section 2 of the Tariff Act, classification of an excisable good shall be determined according to the terms of the headings and any corresponding chapter or section notes. Where these are not clearly determinative of classification, the same shall be effected according to Rules 3, 4 and 5 of the general rules of interpretation. However, it is also a well known principle that in the absence of any statutory definitions, excisable goods mentioned in tariff entries are construed according to the common parlance understanding of such goods.16. The general rules of interpretation of taxing statutes were succinctly summarized by this Court in Oswal Agro Mills Ltd. & Ors. Vs. Collector of Central Excise & Ors. [1993 Supp (3) SCC 716 at page 720]; as followsThe provisions of the tariff do not determine the relevant entity of the goods. They deal whether and under what entry, the identified entity attracts duty. The goods are to be identified and then to find the appropriate heading,under which the identified goods/products would be classified. To find the appropriate classification description employed in the tariff nomenclature should be appreciated having regard to the terms of the headings read with the relevant provisions or statutory rules or interpretation put up thereon. For exigibility to excise duty the entity must be specified in positive terms under a particular tariff entry. In its absence it must be deduced from a proper construction of the tariff entry. There is neither intendment nor equity in a taxing statute. Nothing is implied. Neither can we insert nor can we delete anything but it should be interpreted and construed as per the words the legislature has chosen to employ in the Act or rules. There is no room for assumption or presumptions. The object of the Parliament has to be gathered from the language used in the statute.……….. ..*** *** ***…Therefore, one has to gather its meaning in the legal setting to discover the object which the Act seeks to serve and the purpose of the amendment brought about.The task of interpretation of the statute is not a mechanical one. It is more than mere reading of mathematical formula. It is an attempt to discover the intention of the legislature from the language used by it, keeping always in mind, that the language is at best an imperfect instrument for the expression of actual human thoughts. It is also idle to expect that the draftsman drafted it with divine prescience and perfect and unequivocal clarity. Therefore, court would endeavour to eschew literal construction if it produces manifest absurdity or unjust result. In Manmohan Das v. Bishun Das : (1967) 1 SCR 836 , a Constitution Bench held asordinary rule of construction is that a provision of a statute must be construed in accordance with the language used therein unless there are compelling reasons, such as, where a literal construction would reduce the provision to absurdity or prevent manifest intention of the legislature from being carried out.Therefore, in order to find an appropriate entry for the classification of ‘softit would be necessary to first construe the true scope of the relevant headings. As noted above, none of the terms in heading 04.04 and heading 21.05 have been defined and no technical or scientific meanings have been given in the chapter notes. Evidently, ‘softis not defined in any of the chapters aforesaid. Under these circumstances, it becomes imperative to examine if the subject good could come under the purview of any of the classification descriptions employed in the Tariff Act. Having regard to the nature of the pleadings, the issue is whether the termin heading 21.05 includes within its ambit the product ‘softt leads us to the pivotal question, whether, in the absence of a statutory definition, the termunder heading 21.05 is to be construed in light of its scientific and technical meaning, or, whether we are to consider this term in its common parlance understanding to determine whether its amplitude is wide enough to include ‘soft18. Time and again, the principle of common parlance as the standard for interpreting terms in the taxing statutes, albeit subject to certain exceptions, where the statutory context runs to the contrary, has been reiterated. The application of the common parlance test is an extension of the general principle of interpretation of statutes for deciphering the mind of the law maker;is an attempt to discover the intention of the legislature from the language used by it, keeping always in mind, that the language is at best an imperfect instrument for the expression of actual human[(See :Oswal Agro Mills Ltd (supra)].19. A classic example on the concept of common parlance is the decision of the Exchequer Court of Canadain The King Vs. Planter Nut and Chocolate Company Ltd. [(1951) C.L.R. (Ex. Court)The question involved in the said decision was whether salted peanuts and cashew nuts could be considered to be "fruit" or "vegetable" within the meaning of the Excise Tax Act. Cameron J., delivering the judgment, posed the question asa householder when asked to bring home fruit or vegetables for the evening meal bring home salted peanuts, cashew or nuts of any sort? The answer is obviouslythe test, the Court held that the wordsare not defined in the Act or any of the Acts in pari materia. They are ordinary words inuse and are therefore, to be construed according to their popular2. In light of these principles, we may now advert to the question at hand, viz. classification of ‘softunder the appropriate heading. As aforesaid, the Tribunal has held that in view of the technical literature and stringent provisions of the PFA, ‘softcannot be classified asunder Entry 21.05 of the Tariff Act. We are of the opinion, that in the absence of a technical or scientific meaning or definition of the termthe Tribunal should have examined the issue at hand on the touchstone of the common parlance test.33. As noted before, headings 04.04 and 21.05 have been couched in nontechnical terms. Heading 04.04 readsdairy produce; edible products of animal origin, not elsewhere specified orwhereas heading 21.05 readsand other edibleNeither the headings nor the chapter notes/section notes explicitly define the entries in a scientific or technical sense. Further, there is no mention of any specifications in respect of either of the entries. Hence, we are unable to accept the argument that since ‘softis distinct fromdue to a difference in its milk fat content, the same must be construed in the scientific sense for the purpose of classification. The statutory context of these entries is clear and does not demand a scientific interpretation of any of the headings. Therefore, in the absence of any statutory definition or technical description, we see no reason to deviate from the application of the common parlance principle in construing whether the termunder heading 21.05 is broad enough to include ‘softdo not see any merit in this averment. The manner in which a product may be marketed by a manufacturer, does not necessarily play a decisive role in affecting the commercial understanding of such a product. What matters is the way in which the consumer perceives the product at the end of the day notwithstanding marketing strategies. Needless to say the common parlance test operates on the standard of an average reasonable person who is not expected to be aware of technical details relating to the goods. It is highly unlikely that such a person who walks into aoutlet with the intention of enjoying anor ‘softif at all these are to be construed as distinct products, in the first place, will be aware of intricate details such as the percentage of milk fat content, milkfats, stabilisers, emulsifiers or the manufacturing process, much less its technical distinction fromOn the contrary, such a person would enter the outlet with the intention of simply having anor a ‘softyoblivious of its technical composition. The true character of a product cannot be veiled behind a charade of terminology which is used to market a product. In other words, mere semantics cannot change the nature of a product in terms of how it is perceived by persons in the market, when the issue at hand is one of excise classification.Such a hard and fast definition of a culinary product likeat has seen constant evolution and transformation, in our view, is untenable. Food experts suggest that the earliest form of ice cream may have been frozen syrup. According to Maguelonnein her History of Food,poured a mixture of snow and saltpeter over the exteriors of containers filled with syrup, for, in the same way as salt raises theof water, it lowers theThe author charters the evolution ofin the landmark work from its primitive syrupy form to its contemporary status with more than hundred different forms, and categorizes ‘softas one such form.On the basis of the authorities cited on behalf of the assessee, it cannot be said thatht to contain more than 10% milk fat content and must be served only frozen and hard. Besides, even if we were to assume for the sake of argument that there is one standard scientific definition ofat distinguishes it from other products like ‘softwe do not see why such a definition must be resorted to in construing excise statutes. Fiscal statutes are framed at a point of time and meant to apply for significant periods of time thereafter; they cannot be expected to keep up with nuances and niceties of the gastronomical world. The terms of the statutes must be adapted to developments of contemporary times rather than being held entirely inapplicable. It is for precisely this reason that this Court has repeatedly applied theevery time parties have attempted to differentiate their products on the basis of subtle and finer characteristics; it has tried understanding a good in the way in which it is understood in common parlance.It is significant to note that the question of classification of ‘softis based on a different set of facts in a different context. Heading 21.05 which refers tocream and otheris not defined in a technical or scientific manner, and hence, this does not occasion the need to construe the termother than in its commercial or trade understanding. Since, the first condition itself has not been fulfilled; the question of harmonizing heading 21.05 with 04.04 by resort to the scientific and technical meaning of the entries does not arise at all. Hence, we are of the opinion that the ratio of Akbar Badrudin Giwani (supra) does not apply to the facts of the present case.We are unable to persuade ourselves to agree with the submission. It is a settled principle in excise classification that the definition of one statute having a different object, purpose and scheme cannot be applied mechanically to another statute. As aforesaid, the object of the Excise Act is to raise revenue for which various goods are differently classified in the Act. The conditions or restrictions contemplated by one statute having a different object and purpose should not be lightly and mechanically imported and applied to a fiscal statute forof excise duty, thereby causing a loss of revenue. [See: Medley Pharmaceuticals Limited Vs. Commissioner of Central Excise and Customs, Daman [(2011) 2 SCC 601] and Commissioner of Central Excise, Nagpur Vs. Shree Baidyanath Ayurved Bhavan Limited [(2009) 12 SCC 419] ]. The provisions of PFA, dedicated to food adulteration, would require a technical and scientific understanding ofand thus, may require different standards for a good to be marketed asThese provisions are for ensuring quality control and have nothing to do with the class of goods which are subject to excise duty under a particular tariff entry under the Tariff Act. These provisions are not a standard for interpreting goods mentioned in the Tariff Act, the purpose and object of which is completelydo not see any merit in this contention. The learned counsel for the assessee had himself contended thatwas a dairy product and would have been classified under heading 04.04 if heading 21.05 had not been inserted into the Tariff Act. However, in the presence of heading 21.05,ot be classified asa dairy product under heading 04.04. Hence, it is obvious that in relation to heading 04.04, heading 21.05 is clearly a specific entry. Therefore, we cannot subscribe to the claim that heading 04.04 is to be regarded as a specific entry under Rule 3(a) of the General Rules of Interpretation, since such an interpretation would be contrary to the statutory context of heading 21.05. In conclusion, we reject the view taken by the Tribunal and hold that ‘softis to be classified asunder heading 21.05 of the Act.We are afraid we are unable to take this argument into account since such a plea was not urged before the Tribunal in the first place. Given that this is a statutory appeal under Section 35L of the Act, it is not open to either party, at this stage of the appeal, to raise a new ground which was never argued before the Tribunal. Our scrutiny of the arguments advanced has to be limited only to those grounds which were argued by the parties and addressed by the Tribunal in its impugned order. Since, the impugned orders at hand do not reflect the argument raised by the learned counsel for the assessee; we do not find any justification to entertain this submission. Nonetheless, for the sake of argument, even if we assume that this ground had been urged before the Tribunal, in our view, learnedreliance on this notification is misplaced. Upon a reading of the notification it is clear that the exemption in the notification is granted for the whole of excise duty which was payable on such softy ice cream and non alcoholic beverages dispensed through vending machines, but was not being levied during the relevant period, which is not the case here. In the present case, as aforenoted, three show cause notices had been issued to the assessee alleging that ‘softwas classifiable under heading 21.05 and attracted duty @ 16%. The show cause notices issued by the revenue also indicated that the assessee was liable to pay additional duty under Section 11A of the Act. This clearly shows that the excise duty was payable by the assessee and was being levied by the revenue. Therefore, thecase does not fall within the ambit of the said notification and is not eligible for the exemption granted todispensed through a vending machine for the relevant period.