Corn Products Co. India Ltd. vs Union of India

Pendse, J.—Petitioner No. 1 is a company incorporated under the provisions of the Companies Act and manufactures diverse products including baking powder in their factory situated at Thane. The manufacture of baking powder is liable to payment of excise duty under Tariff Item No. 68 of the First Schedule to the Central Excises and Salt Act, 1944 (hereinafter referred to as the ''Act''). The Central Government in exercise of powers under Rule 8(1) of the Central Excise Rules, 1944 published exemption notification dated March 1, 1975 providing that goods of description specified in the schedule and falling under Item No. 68 of the First Schedule to the Act are exempted from payment of whole of duty of excise leviable thereon. The first entry in the schedule reads as under :-

"All kinds of food products and food preparations, including

(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."

Petitioner No. 1 company filed classification list in form I in respect of several products manufactured and claiming exemption under exemption notification dated March 1, 1975. The Assistant Collector of Central Excise by order dated April 7, 1978 held that baking powder is not a food product but an ingredient used in small quantities for flavour, colour or for other purposes and such item cannot be considered as food product and, therefore, manufacture of baking powder is not entitled to exemption under notification dated March 1, 1975. The company carried appeal before the Appellate Collector of Central Excise and Customs, Bombay, and the appeal was allowed by order dated October 3, 1979, holding that baking powder is either a food product or food preparation and manufacture of baking powder is entitled to exemption from payment of excise duty.

The Government of India, Ministry of Finance, Department of Revenue, served notice u/s 36(2) of the Act on the company to show cause why the order of the Appellate authority should not be reviewed. After giving hearing to the company, the Additional Secretary to the Government of India by order dated June 29, 1981 disturbed the finding of the appellate authority and held that manufacture of baking powder could not be covered by Item No. 1 of the schedule to the exemption notification dated March 1, 1975. The decision of the Government of India has given rise to the filing of the present petition under Article 226 of the Constitution.

The short question which falls for determination is whether manufacture of baking powder is entitled to exemption under Notification No. 55/75-C.E., dated March 1, 1975 and answer to the question would depend upon whether baking powder would fall within the expression ''food products'' or ''food preparations''. The expressions ''food products and'' ''food preparations'' are not defined under the Act and the Supreme Court in Collector of Central Excise, Bombay-I and Another Vs. Parle Exports (P) Ltd., has laid down the manner in which the Court should determine as to whether the manufacture is entitled to exemption notification. The Supreme Court was examining whether non-alcoholic beverage bases are ''food products'' or ''food preparations'' in terms of the notification in question. Mr. Justice Sabyasachi Mukharji (as he then was) speaking for the Bench observed in para 12 of the judgment :

"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 the 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. 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."

Before examining whether baking powder is a ''food product'' or ''food preparation'', it would be appropriate to refer to decision of the Supreme Court in The State of Bombay Vs. Virkumar Gulabchand Shah, . The Supreme Court was examining the question as to whether turmeric is a ''foodstuff'' within the meaning of the clause 3 of the Spices (Forward Contracts Prohibition) Order, 1944. Mr. Justice Vivian Bose speaking for the Bench observed that the expression ''foodstuff'' in one sense 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, but in a wider sense, it includes everything that goes into the preparation of food proper to make it more palatable and digestible. The Supreme Court the referred to the meaning of the expression in Webster''s International Dictionary and then Justice Vivian Bose in his inimitable style observed :-

"So far as "food" is concerned, it can be used in a wide as well as a narrow sense and, in my opinion, much must depend upon the context and background. Even in a popular sense, when one asks another, "Have your 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.

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 colloquially, "one man''s food is another man''s poison." I refer to this not for the sake of splitting hairs but to show undesirability of such a mode of approach. The problem must, I think, be solved in a common sense way."

Baking powder is a product formulated from various edible ingredients such as edible maize, starch special, soda bicarb and sodium aluminium sulphate. The finished product is marketed by the company in their brand name ''REX'' in different packings. Baking powder is extensively used in bakery preparations like biscuits, breads and also in Indian preparations like pakoda, idli, samosa, gulab jamun, etc. The use of baking powder makes the preparation light and crisp and adds consistency to the formulation and improves the taste. As observed by the Supreme Court, the problem must be solved in a commonsense way and the Court should ascertain as to how the expression ''baking powder'' is understood in common parlance. We have no hesitation in observing that any housewife would treat baking powder as a food preparation and in trade parlance baking powder is sold and known as a food preparation. The Legislature had clearly made distinction between the expressions ''food products'' and ''food preparations'' and, therefore, the submission of Mr. Desai, learned counsel for the revenue, that baking powder should not be treated as food preparation because baking powder is not consumed as a food item cannot be accepted. The expression ''food preparations'' need not include every item which is consumed as a food product. For illustration, Item No. vi of the schedule to the exemption notification refers to grain mill products. Now, by no stretch of imagination, it can be suggested that aata which is grain mill product can be consumed as a food product, but aata would certainly attract the expression ''food preparations'' because aata is used for the purpose of baking bread or preparing roti. In our judgment, Item No. 1 of the schedule to the exemption notification gives an inclusive definition of ''food products'' and ''food preparations'' and bare perusal of the same makes it clear that even though the item cannot be consumed as a food, still the exemption would be available if the item falls under the entry ''food preparations''.

Mr. Desai relied upon decision of the Allahabad High Court in Ashok Griha Udyog Kendra Pvt. Ltd. Vs. Collector of Central Excise and Customs, to urge that spices are neither ''food products'' nor ''food preparations'' even though spices are used in preparation of human food for the sake of giving flavour and taste to it. The Allahabad High Court did not assign any reasons for coming to this conclusion, but merely referred to the decision of a single Judge of the Andhra Pradesh High Court in Brooke Bond India Limited Vs. Union of India and Others, and where it was held that coffee-chicory-blend was neither a food product nor a food preparation but is merely a beverage. We are unable, with respect, to share the view of the Allahabad High Court. It is not possible to hold that spices which are used in preparation of human food are not food preparations as understood in the exemption notification. Mr. Desai submitted that the question to be posed is whether spices and baking powder can be consumed and would constitute a meal. In our judgment, the question posed is misconceived. The question should be whether baking powder is a food preparation and which is a crucial ingredient in preparation of food products. It is not correct to suggest that unless the item can be consumed as a part of the meal, the same would not fall under the expression food preparations. The acceptance of the submission of Mr. Desai would lead to very curious result and would make the expression ''food preparations'' in the exemption notification redundant. It is well-settled rule of interpretation that no expression or part of it should be made redundant while interpreting an expression. In our judgment, baking powder would clearly fall within the expression ''food preparations'' and, therefore, the manufacture of baking powder is entitled to claim exemption under notification dated March 1, 1975.

Accordingly, petition succeeds and the impugned order of the Additional Secretary to the Government of India dated June 29, 1981 holding that baking powder could not be covered by Item No. 1 of the schedule to the exemption Notification No. 55/75-C.E., dated March 1, 1975 is set aside and it is declared that the manufacture of baking powder is not liable to payment of excise duty under Tariff Item No. 68 as long as the exemption notification is in operation. It is made clear that the revisional order passed by the Government in respect of other items is not disturbed. The consequential order passed by the Assistant Collector in pursuance of the decision of the revisional authority is also set aside. The bank guarantees furnished by the petitioners in accordance with the interim order of this Court to stand discharged. In the circumstances of the case, there will be no order as to costs.