V.K. Agrawal, Member (T)

1. In this Appeals, filed by M/s. Hindustan Gum and Chemicals Ltd., the issue involved in whether TPT-12 (treated Tamarind Kernel Powder) is classifiable under Heading 11.01 of the Schedule to the Central Excise Tariff Act as product of milling industry or under Heading 13.01 as a gum as confirmed by the Commissioner (Appeals) in the impugned Order.

2. Shri A.R. Madhav Rao, learned Advocate, submitted that the Appellants, in their two factories at Viramgam and Bhiwani, are engaged in the activity of getting Tamarind Kernel Powder (TKP) from various manufactures which is soluble in hot water only; that to make it soluble in cold water, they treat TKP by adding sodium hydroxide and acetic acide and water; that after drying, preservative viz, EDTA is added and packed; that the TKP so treated is sold as-TPT-12. The learned Advocate, further, submitted that the Central Board of Excise & Customs has clarified vide Circular No. 5/86 that tamarind seed power could be regarded as a product of the milling industry in terms of the broad Heading under chapter 11 of the Central Excise Tariff and that except for tamarind powder which is in packing for retail sale for prophylactic or therapeutic purposes, tamarind seed powder or TKP would be correctly classifiable under sub-Heading 1101.90 of the Tariff.

3.1 He also mentioned that the sole ground given by the Department for classifying the product under Heading 13.01 is the HSN Explanatory Notes to Heading 13.02, the Heading 13.01 of Central Excise Tariff covers lac; natural gums, resins, gum resins and oleoresins; that as per HSN Explanatory Notes, the items covered under Heading 13.01 are as under :-

(a) Lac which is a resinous substance produced on several kinds of tropical trees by an insect.

(b) Natural gums, resins, gum resins and oleoresins which are vegetable secretions which may solidify on contact with air.

3.2 He mentioned that thus the gums specified under Heading 13.01 are natural secretions from trees and vegetables; that even assuming Heading 13.01 of Central Excise Tariff Act does cover "gums" and not only "natural gums", yet such preparations as per HSN fall under "Mucilages and thickeners, whether or not modified, derived from vegetable products"; that there is no corresponding entry in Central Excise Tariff Heading 13.01; that moreover Heading 13.01 covers gums and not a product such as TKP-12 in question; that TKP is not a gum; that the relevant portion of the HSN Explanatory Notes reads as under :

"The natural gums, resins, gum-resins and oleoresins covered by this heading may be crude, washed, purified, bleached, crushed or powdered. They are, however, excluded from this Heading when they have been subjected to processes such as treatment with water under pressure, treatment with mineral acids or heat-treatment; for example: gums and gum-resins rendered water-soluble by treatment with water under pressure (Heading 13.02), gums rendered soluble by treatment with sulphuric acid (Heading 35.06), and resins which have been heat-treated to make them soluble in drying oils (Headings 38.06)".

3.3 He stated that it is thus clear that there being no corresponding entry to "Mucilages and thickeners, whether or not modified, derived from vegetable products", the TKP-12 can not be classified under Heading 13.01 of Central Excise Tariff Act and it is appropriately classifiable under Heading 11.01 only; that Chapter 13 of the Central Excise Tariff has not been aligned with HSN so as to cover derived vegetable products like mucilages and thickeners, whether or not modified.

4. The learned Advocate also contended that the process of treating the TKP does not amount to manufacture in view of the fact that the TKP continues to be TKP and sold as such in the market; that the TKP is soluble in hot water and useable; that by treating the TKP with chemicals, the same is made soluble in cold water; that moreover, the TKP is sold in the market as TKP only irrespective of whether it is hot water soluble or cold water soluble; that except for change in the viscosity of the TKP, there is no physical or chemical change in TKP; that it was not the case of the Department either in show cause notice or in Order-in Original that the process of treating TKP to make it cold water soluble would amount to manufacture. He relied upon the decision in the case of National Tar Products vs. CCE, Vadodara, 2001 (135) ELT 1388 (T) wherein it has been held that the mere fact of some chemical change in the product may not by itself satisfy the requirement laid down that the change in a resulted new, commercially distinct product emerging, which is the condition to say that manufacturer has taken place. There are numerous decisions that not all chemical change does not amount to manufacture."

5. Finally, the learned Advocate submitted that the demand can not be made, for longer period of limitation; that the Appellants have duly filled classification declaration and the process of manufacture for their Bhiwani Unit; that such a declaration was also filed for Viramgam unit (though without the process of manufacture); that not filing of process of manufacture at Viramgam was a bonafide clerical mistake for which no malafide can be alleged; that it has been held by the Supreme Court in CCE, Hyderabad vs. M/s. Chemphar Drugs & Liniments, : 1989 (43) ELT 195 (S.C) that whether there was any fraud or willful misstatement or suppression is a question of fact depending on the facts and circumstances of each particular case and mere non-declaration of goods did not amount to any conscious or deliberate withholding of information; that the Board has clarified in the Circular the TKP is classifiable under Chapter 11; that they had obtained legal advice in the matter of declaration of classification of TKP under Chapter 11; that in these circumstances they can not be alleged of any suppression of facts or wilful misstatement; that it is a case of bonafide classification dispute; that in any case classification declarations are open to scrutiny and proper enquiry. He relied upon the judgment in Cadila Laboratories Pvt. Ltd. vs. CCE, Vadodara, : 2003 (152) ELT 262 (S.C)

6. Countering the arguments, Shri A.S. Bedi, learned Senior Departmental Representative, submitted that the process adopted by the Appellants amounts to manufacture as they are purchasing TKP and by the process employed by them, they are manufacturing "chemically treated TKP"; that a new product having a new name character and use emerges as a result of process undertaken by the Appellants; that it is apparent from the statements of Shri Sukhvir Singh, Production Manager, and Shri Kamal Madan, General Manager, that the purpose of Chemical reaction is to impart viscosity to TKP in cold water as TKP has practically no viscosity in cold water and that after treatment it is known as printing gum; that Shri Rajkumar, manager of M/s. Maruti Textiles Pvt. Ltd, engaged in dyeing and printing of fabrics has stated in his statement that TPT 12, Guargum powder, TPS 16 A, etc. are used by them; that the main function of TPT-12 or guargum powder is to strengthen binding the colour with fabrics and pasting of fabrics on rubber blanks; that TPT 12 or guargum powder are purchased by them from the Appellants. The learned Senior Departmental Representative, further, submitted that it has also been admitted by Shri Kamal Madan that the average price of the impugned product is Rs. 44/- per kg whereas the price of TKP purchased by them is Rs. 16.50 per kg only; that this is enough to show that a new product has emerged as a result of processes undertaken by the Appellants; that Shri A.P. Dadoo, President of the Appellant Co. has also admitted in his statement about the changes in the physical properties of TKP after the chemical treatment given in their unit; that decision in National Tar Products is not applicable as the ratio applies to the facts of each case; that in that matter the chemical change brought by air blowing of bitumen at high temperature only resulted in increase of its softening point which did not result in emergence of another product completely different in nomenclature structure and use.

7. The learned Senior Departmental Representative, further contended that the impugned product is no more a product of Milling Industry warranting classification under heading 11.01 of the Tariff; that TPK purchased by the Appellant is a product of Milling industry; that the said TPK is put to chemical process by the Appellants which brings into existence a new product known as printing gum and as such it is no more a product of milling industry and squarely falls under Heading 13.01 which applies to all types of gums. He also mentioned that Boards Circular No. 5/86 dated 14.8.86 is not applicable to the impugned product as it is a changed/modified product as a result of processes undertaken by them. He finally submitted that the extended period of limitation is invokable as they have misdeclared their product as TKP and not gum and in addition have suppressed the manufacturing process which they are legally required to furnish along with the classification declaration. He referred to the Boards Circular No. 124/35/95-CX dated 10.5.1995 regarding filing of classification declaration; Note 2 below proforma for filing declaration under Rule 173-B of the Central Excise Rules, 1944 the assessee is required to furnish "List of critical raw materials along with manufacturing process of each item" along with the declaration. He relied upon the decision in Tata Chemicals Ltd. Vs. CCE, Rajkot : 1996 (84) ELT 248 (T) wherein it has been held that an assessee, working under S.R.P. is required to furnish all the required details at the time of availing of the facility under the Rules.

8. We have considered the submissions of both the sides. The rival tariff Headings read as under :-

11.01 Products of the milling industry, including flours, groats, meal and grains of cereals, and flour meal or flakes or vegetables.

13.01 Lac; gums; resins and other vegetable saps and extras.

9. The facts which are not in disputed are that the tamarind kemel powder purchased form the market is treated chemically by the Appellants by adding sodium hydroxide and acetic acid and water. They also add EDTA, preservative and the product is then packed and sold under the Name TPT-12. According to the Appellants the process is undertaken to make TKP cold water soluble as the TKP purchased by them from the market is soluble only in hot power. They have contended that even after the process being undertaken by them, TKP continues to be TKP and sold as such in the market. Their plea was accepted by the Original Adjudicating Authority. The Revenue, on the other hand, contends that the chemical reaction carried out is for the purpose of imparting viscosity to TKP in cold water and a new product emerges possessing the properties of gum being used in the printing industry. Revenue has relied upon the HSN Explanatory Notes below Heading 13.02 of the HSN according to which cotyledon flour of tamarind seeds are included in Heading 13.02 even if modified by heat or chemical treatment. The learned Advocate for the Appellants have argued forcefully that Chapter 13 of the Central Excise Tariff Act, 1985 has not been aligned with HSN so as to cover derived vegetables products like mucilages and thickeners, whether or not modified. The Revenue has not controverted this averment. Further, the learned Advocate has relied upon the Boards Circular F. No. 10/18/86-CXI dated 14.8.86 wherein it has been clarified as under :

"Heading No. 11.01 of the new tariff covers products of the milling industry including flours, groats, meal and grains of cereals, and flour, meal or flakes of vegetables. It is seen that under the HSN, sub-Heading 1106.30 covers flour, meal and powder of the products of Chapter 8 of HSN (viz. edible fruits and nuts peels of fruits, etc.). HSN Explanatory Notes which amplify the scope of the aforesaid sub-Heading 1106.30 specify that powders, meal or flours of nuts or fruits of almonds, dates, bananas, coconuts and tamarind are covered by the sub-Heading. The notes also state that the Heading does not cover tamarind powder in packings for retail sale for prophylactic or therapeutic purposes (Heading 30.04). It is seen that while the broad Chapter Heading for Chapter 11 of HSN as well as Chapter 11 of the Central Excise Tariff is common viz., "products of the milling industry, malt, starches, insulin, wheat gluten" there is no specific entry under Chapter 11 of the Central Excise Tariff covering flour, meal and powder of products of Chapter 8 corresponding to sub-Heading No. 1106.30 of HSN. Ministry therefore, observe that tamarind seed power could be regarded as a product of the milling industry in terms of the broad Heading under Chapter 11 of the Central Excise Tariff, In the absence of a specific entry corresponding to sub-Heading 1106.30 of the HSN, the product under consideration would appear to be correctly classifiable under the residuary sub-Heading 1101.90 of Central Excise Tariff. Ministry accordingly is of the view that except for tamarind powder which is in packings for retails sale for prophylactic or therapeutic purposes (classifiable under Chapter 30), tamarind seed powder or TKP would be correctly classifiable under sub-Heading 1101.90 of the new Central Excise Tariff."

10. It is thus apparent from this Circular that except for tamarind powder which is in packings fro retail sale for prophylactic or therapeutic purposes, tamarind seed powder or TKP would be correctly classifiable under sub-Heading 1101.90 the Tariff. Accordingly the product in question is classifiable under Heading 11.01 only. We also agree with the learned Advocate that extended period of limitation for demanding the duty is not invokable in the present matter inasmuch as it has not been controverted by the Revenue that they had filed the classification declaration along with the process of manufacture fro their Bhiwani unit. If they had filed the process of manufacture for one of their unit, it cannot be alleged that in not filing the process of manufacture in Viramgam unit they had suppressed the fact with an intent to evade payment of duty. The learned Advocate has relied upon the judgment in Cadila Laboratories Pvt. Ltd. vs. CCE, : 2003 (152) ELT 262 (S.C) wherein the extended period was held to be not invokable by the Supreme Court as "no duty was sought to be levied on the same products manufactured by the sister concern" and therefore it could not be said that the belief of the Appellants was not bona fide." The Appeal is thus allowed.