Case: M/S. Satnam Overseas Ltd Vs. Commnr. Of Central Excise, New Delhi

The appellant/assessee challenges the correctness and validity of the final order dated 10.10.2002 passed by the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT), New Delhi in the appeal which was preferred by the assessee against the order of Commissioner (Appeals) who had upheld the Order-in-Original dated 17.3.1999 passed by the Additional Commissioner pursuant to show cause notice dated 4.8.1997 issued by him. In the said show cause notice the Additional Commissioner had proposed to classify the product of the appellant/assessee under Heading 2108 of the Central Excise Tariff Act, 1985, as Miscellaneous Edible preparation not elsewhere specified or included.It may be stated that assessee is engaged in the packing combination of mixture of raw rice, dehydrated vegetables and spices in the name of Rice and Spice. The exact process which is taken note of by the Tribunal as explained by Cl. R.L. Mehta, Deputy General Manager of the assessee is asproduct i.e. Rice 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 the packed in pouches with Nitrogen flushing for a longer shelfdefence putforth by the assessee to the show cause notice issued by the Additional Commissioner was that the aforesaid process does not amount to `manufacture within the meaning of Section 2(f) of the Central Excise Act, 1944. It was also argued that, in any case, the product was not classifiable under Heading 2108 of the Central Excise Tariff Act, 1985 as claimed by the Revenue but it should be covered under Heading 11.01. That Heading applies to products of the milling industry, including flours, groats, meal and grains of cereals, and flour, meal or flakes of vegetables on which nil duty is payable. It was, thus, contended that in no case the assessee was under any obligation to pay the duty on the aforesaid process.The Additional Commissioner did not agree with the contention of the assessee holding it to be a manufacturing process, and opinion of the Additional Commissioner is accepted by the Commissioner (Appeals) as well as by CEGAT.

Court's reasoning:
Though the authorities below had decided against the assessee, this Court reversed the said view holding that the said process would not amount to `manufacture as the process involving manufacture does not always result in the creation of a new product. In the instant case notwithstanding the manufacturing process, it could not be said that a transformation had taken place resulting in the formation of a newis to be highlighted is that even after the betel nut which had been cut to different sizes and had undergone the process, the Court did not treat it as manufacture within the meaning of Sec.2(f) of the Act on the ground that the end product was still a betel nut and there was no change in the essential character to that article even when it was the result of treatment, labour and manipulation, inasmuch as even after employing the same it had not resulted in the manufacture of a new product as the end product continued to retain its originalthe test which was applied was that essential character of the product did not change and, therefore, it would not amount to manufacture. It was so held even when gum arebic as well as wheat flour were mixed in the process. A pertinent aspect which was noted was that mixing of these articles did not result in chemical reaction withcomment applies fully in the case before us. Although a degree of processing is involved in preparing pineapple slices from the original fruit, the commodity continues to possess its original identity, notwithstanding the removal of inedible portions, the slicing and thereafter canning it on adding sugar to preserve it. It is contended for the Revenue that pineapple slices have a higher price in the market than the original fruit and that implies that the slices constitute a different commercial commodity. The higher price, it seems to us, is occasioned only because of the labour put into making the fruit more readily consumable and because of the cane employed to contain it. It is not as if the higher price is claimed because it is a different commercially commodity. It is said that pineapple slices appeal to a different sector of the trade and that when a customer asks for a cane of pineapple slices he had in mind something very different from fresh pineapple fruit. Here again, the distinction in the mind of the consumer arises not from any difference in the essential identity of the two, but is derived from the mere form in which the fruit iswe apply the aforesaid principle to the facts of this case, it is clear that mere addition of dehydrated vegetables and certain spices to the raw rice, would not make it a different product. Its primary and essential character still remains the same as it is continued to be known in the market as rice and is sold as rice only. Further, this rice, again, remains in raw form and in order to make it edible, it has to be cooked like any other cereal. The process of cooking is even mentioned on the pouch which contains cooking instructions. Reading thereof amply demonstrates that it is to be cooked in the same form as any other rice is to be cooked. Therefore, we do not agree with the CEGAT that there is a transformation into a new commodity, commercially known as distinct and separate commodity.Since we are holding that the activity undertaken by the assessee does not amount to manufacture, this appeal is liable to succeed on this ground itself inasmuch in the absence of any manufacture there is no question of payment of any excise duty. We may, however, remark that even otherwise the classification of the product by the Revenue under sub-heading 21.08 may not be correct. In fact, the CEGAT has accepted that classification only on the ground that the product after mixing of raw rice with dehydrated vegetable and spice, has become a new product as it amounts to `manufacture and on that basis it has held that it no longer remains product of milling industry. As we have held that it does not amount to `manufacture as the essential characteristics of the product, still remains the same, namely, rice, a natural corollary would be that it continues to be the product of the milling industry and would be classifiable under sub-heading 11.01. Rate of duty on this product, in any case, is nil.