Holding

The "puffs" prepared from cereals cannot be classified as "prasad/prasadam", and the Tribunal’s failure to determine the correct tariff heading warrants setting aside its decision.

Summary

Adhunick Food Products Ltd. manufactures cereal‑based "puffs" that it supplies to the Integrated Child Development Scheme (ICDS) and sells under the brand "Bonton". The Central Excise Department issued a show‑cause notice alleging mis‑declaration of the product as "prasad/prasadam" and demanded Rs 2.31 crore in duty, a demand affirmed by the Customs, Excise & Gold (Control) Appellate Tribunal. The Supreme Court was asked to decide whether the "puffs" fall under Chapter Heading 19.04 (preparations of cereals) or under Chapter Heading 21.07/21.08 (edible preparations) of the Central Excise Tariff Act, 1985, and whether they qualify for the nil‑duty exemption under General Exemption No. 83. The Court held that the "puffs" cannot be classified as "prasad/prasadam" and observed that the Tribunal had failed to make any finding on the crucial classification issues, including the effect of a brand name on the exemption. Consequently, the Tribunal’s judgment was set aside and the matter remanded to the adjudicating authority for fresh determination. The appeal was allowed.

Issues considered

Whether "puffs" obtained by swelling or roasting of cereals constitute preparations of cereals under Chapter Heading 19.04 of the Central Excise Tariff Act, 1985.
Whether such "puffs" fall under Chapter Heading 21.07 (later re‑remoulded as 21.08) and are therefore subject to the nil‑duty rate under General Exemption No. 83.
Whether the product can be classified as "prasad/prasadam" for tariff purposes.
Whether the presence or absence of a brand name on the packaging affects eligibility for the nil‑duty rate under entry 2108.91.

Legislation cited

Central Excises and Salt Act, 1944s. SA
Central Excise Tariff Act, 1985s. Chapter Heading 19.04, s. Chapter Heading 21.07, s. Chapter Heading 21.08

Subjects

central exciseclassificationtariff headingscereal puffsprasadgeneral exemptionbrand namemisdeclarationICDS

Judgment

MIS. ADHUNIK FOOD PRODUCTS (P) LTD., U.P. A
'J v.
COMMISSIONER OF CENTRAL EXCISE, MEERUT

APRIL 20, 2007

[S.H. KAPADIA AND B. SUDERSHANREDDY,JJ.] B

Central Excise Tarriff act, 1985-Chapter Heading 19.04 & 21.07
-/, (remoulded as Chapter Heading 21.08 during AY 1996-97)-Assessee making
'puffs ' by swelling/roasting ofcereals-Demand rait"ed on accessee on ground
of misdeclaration of product-Confirmed by authorities below as well as
c
Tribunal-Main question required to be decided was whether the 'puffe'
would fall under Chapter Heading 19.04 or under Chapter Heading 21.07
(remoulded as Chapter Heading 21.08 during AY 1996-97)-But Tribunal
gave no finding as to whether 'puffe' would fall under the Chapter Heading
19.04-lt did not consider various important issues questions-Matter D
remanded to adjudicating authority for fresh determination.

Assessee manufactures 'puffs' from cereals, namely wheat and soya
nuts. The product is packed in unit containers and supplied to Integrated Child
Development Scheme (ICDS) in Haryana. Department issued show cause notice
raising demand on the assessee for mis-declaration of the said products as E
'chabena/prasad'. It was further alleged that the products were sold in the
market under the brand name 'bonton' as breakfast cereals, high in protein
and low in cholesterol and also sold to five star hospitals and public schools.
In the circumstances, the assessee was asked to pay Rs.2.31 crores as duty.
The demand was confirmed by the authorities below as well as the Tribunal.
F
Hence the present appeal.

Allowing the appeal, the Court

HELD: 1.1. The 'puffs' prepared from cereals cannot fall within the item
'Prasad/prasadam'. To that extent the impugned order of adjudication is
G
acceptable. (Para 8) (394-E)

" 1.2. The main question required to be decided was whether 'puffs' made
from cereals would at all fall under Chapter Heading 19.04 or whether they
would fall under Chapter Heading 21.07 (remoulded as Chapter Heading 21.08
389 H
390 SUPREME COURT REPORTS [2007] 5S.C.R.

A during the Assessment Year 1996-97). In the entire discussion in the ~'
impugned judgment there is no finding given by the Tribunal as to whether
'puffs' prepared from cereals would fall under the Chapter Heading 19.04.
As far as 'puffs' prepared from soya nuts are concerned there is no finding
as to the quantity of puffed soya nuts sold by the assessee during the requisite
period of ICDS, Haryana and the quantity of the said product sold by the
B assessee during the same period to public schools and five star hospitals.
There is also no finding as to whether 'puffed soya nuts' were supplied to
ICDS, Haryana under the brand name 'bonton' or whether they were supplied
without any brand name being affixed to the unit containers. These questions ~
are important since the entry 2108.91 refers to nil rate of duty for "Other
c Edible Preparations" as long as the product is supplied without a brand name.
These questions are also important to be decided particularly since the General
Exemption No.83 states that the benefit of exemption shall be given only if the
product is a soya based food preparation for infant use. According to the
assessee puffed soya nuts is a soya based food preparation under item No.25
of the Notification No.2of1994 (General Exemption No.83). According to the
D assesee puffed soya nuts were supplied to the schools under ICDS programme.
None of the questions have been decided. [Para 9 and 11) (394-E, F; 396-B-E)
/.. -
2. In the circumstances, the judgment of the Tribunal is set aside and
the matter is remanded to the adjudicating authority for fresh determination
in accordance with law. (Para 12) (396-E, F)
E
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 654 of2002.

From the Judgment and Order No. 215/2001-D dated 09.11.2001 of the
Customs, Excise & Gold (Control) Appellate Tribunal, New Delhi in Appeal
No. E-251/1998-D.
F
A.R. Madhav Rao, Alok Yadav and M.P. Devnath for the Appellant.

V. Shekhar, C.K. Sucharita and B.K. Prasad for the Respondent.

The Judgment of the Court was delivered by
G
KAPADIA, J. l. A short point which arises for determination in this civil A
appeal is : whether 'puffs' obtained by the swelling or roasting of cereals
constitute preparations of cereals under Chapter Heading 19.04. According
to the appellant 'puffs' from cereals fall under Chapter Heading 21.07 (Edible
preparations).
H
ADIRJNIK FOOD PRODUCTS (P) LID.. U.P. • COMMNR. OP CENlRAL EXCISE. MEEkUT [KAPADIA, J.] 39}
2. The assessee manufactures 'puffs' from cereals namely wheat and A
soya nuts. The said product is packed in unit containers and supplied to
Integrated Child Development Scheme (for short 'ICDS') in Haryana.

3. On 21.3.1997 a show-cause notice was issued by the Department
raising a demand on the assessee for mis-declaration of the said products as
'chabena/prasad'. In the said show cause notice it was further alleged that B
the products were sold under the brand name 'bonton'. Under the said show
cause notice it was also alleged that the said 'puffs' were sold in the market
as breakfast cereals, high in protein and low in cholesterol. It was further
alleged that the said products were sold to five star hospitals and public
schools. In the circumstances the assessee was called upon to pay to the C
Department Rs.2.31 crores as duty for the aforesaid period. This demand has
been confirmed by the authorities below as well as by the Tribunal. Hence
this civil appeal.

4. In this case we are concerned with two sets of the same entry since
the show cause notice covers the period of 5 years between 1992-93 to 1996- D
97.
- '
5. For the period 1994-95 we quote hereinbelow Chapter Heading 19.04

"CHAPTER 19
E
PREPARATIONS OF CEREALS, FLOUR, STARCH OR MILK; PASTRY
COOKS' PRODUCTS

Notes:

I. xxx xxx xxx
F
2. Heading No.19.04 does not cover preparations containing more
than 8% by weight of cocoa powder or coated with chocolate or other
food preparations containing cocoa of Chapter 18.
Heading Sub- Description of goods Rate of
No. heading duty G
No.
(!) (2) (3) (4)
19.04 Prepared foods obtained by the swelling
or roasting of cereals or cereal products
(for example, com flakes); cereals, other H
392 SUPREME COURT REPORTS [2007] 5 S.C.R.

A than maize (com), m gram form, pre-
cooked or otherwise prepared
1904.10 Put up in unit containers and 10"/o
ordinarily intended for sale
1904.90 Other Nil
B
For the same period we quote hereinbelow Chapter Heading 21.07:

"CHAPTER21

c MISCELLANEOUSEDIBLEPREPARATONS
•
Notes :

1 to 4. xxx xxx xxx

5. Heading No.21.07, inter alia, includes:
D
(a) protein concentrates and textured protein substances;

(b) preparations for use, either directly or after processing (such as
cooking; dissolving or boiling in water, milk or other liquids), for
human consumption;
E (c) preparations consisting wholly or partly of foodstuffs, used in the
making of beverages or food preparations for human consumption;

( d) powders for table creams, jellies, ice-creams and similar
preparations, whether or not sweetened;

F (e) flavouring powders for making beverages, whether or not
sweetened;

( f) peanut butter;

(g) preparations consisting of tea or coffee and milk powder, sugar
G and any other added ingredients;

(h) preparations (for example, tablets) consisting of saccharim and a
foodstuff, such as lactose, used for sweetening purposes;

(i) pre-cooked rise cooked either fully or partially and their dehydrates;
and
H
ADHUNIK FOOD PRODUCTS (P) LID.. U.P. '- COMMNR. OF CENTRAL EXCISE. MEERUT [KAPADIA, J.J 393

(j) preparations for lemonades or other beverages, consisting, for A
example, of flavoured or coloured syrups, syrup flavoured with an
added concentrated extract, syrup flavoured with fruit juices and
concentrated fruit juice with added ingredients. (emphasis
supplied)
Heading Sub- Description of goods Rate of B
No. heading duty
No.
(I) (2) (3) (4)
21.07 Edible preparations, not elsewhere
specified or included c
2107.10 Prasad or prasadam Nil
210720 Sterilised or pasteurized miltone Nil
Other:
2107.91 Put up in unit containers and D
ordinarily intended for sale 50%
2107.99 Other 50"/o
- ) 6. At this stage it may be noted that Chapter sub-heading 2107 .91
during the relevant period attracted 50% duty. However, the effective rate of
duty was nil in view of general exemption No.83 (item No.25) of the Notification E
No.2/1994 dated 1.3.1994. We quote hereinbelow item No.25 of General
Exemption No.84 vide Notification No.2/1994.

"GENERAL EXEMPTION NO. 83

Effective rate of duty for certain specified goods of Chapters 4 F
to 22

In exercise of the powers conferred by sub-section (I) of section
SA of the Central Excises and Salt Act, 1944 (I of 1944), the Central
Government, being satisfied that it is necessary in the public interest
so to do, hereby exempts goods specified in column (3) of the Table G
hereto annexed and falling under the Chapter or sub-heading No. of
the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), specified
in the corresponding entry in column· (2) of the said Table, frorn so
much of the duty of excise leviable thereon which is specified in the
said Schedule, as is in excess of the amount calculated at the rate
specified in the corresponding entry in column (4) thereof. H
394 SUPREME COURT REPORTS [2007] 5 S.C.R.

A Heading Sub- Description of goods Rate of
No. heading duty
No.
{I) (2) (3) (4)
25 2107.91 (i) Soya textured protein, Soya Nil
B yoghurt, soya tofu, soya based food
preparations for infant use, soya milk
powder, soya noodles, soya macaroni
and soya tempeh, whether or not
containing other food ingredients but ·-
not containing cocoa;
c (ii) Powders of fruitsand
vegetables;
(iii) Papad, idli-mix, vada- ...
mix, dosa-mix,jalebi-mix,
gulabjamun-mix or
D namkeens, such as bhujyia,
chabena.
7. Heard learned counsel on both sides.
;l_ -

8. In the present matter the show cause notice concentrated more on
the denial of exemption claimed by the assessee, than the classification. We
E may make it clear that the 'puffs' prepared from cereals cannot fall within the
item 'Prasad/prasadam'. To that extent we are in agreement with the impugned
order of adjudication.

9. The main question which was required to be decided was whether
'puffs' made from cereals would at all fall under Chapter Heading 19.04 or
F whether they would fall under Chapter Heading 21.07 (remoulded as Chapter
Heading 21.08 during the Assessment Year 1996-97).

10. For the sake of clarity we also quote hereinbelow the remoulded
Chapter Heading 21.08.
G "CHAPTER21 If

~
MISCELLANEOUSEDIBLEPREPARATONS

Notes:
H I to 8. xxx xxx xxx
- ADHUNIK FOOD PRODUCTS (P) LTD., U.P. • COMMNR. OF CENTRAL EXCISE, MEERUT [KAPADIA.!.]

9. Heading No.21.08, inter alia, includes:
395

A
(a) protein concentrates and textured protein substances;

(b) preparations for use, either directly or after processing (such as
cooking; dissolving or boiling in water, milk or other liquids), for
human consumption; B
(c) preparations consisting wholly or partly of foodstuffs, used in the
making of beverages or food preparations for human consumption;\

(d) powders for table creams, jellies, ice-creams and similar
preparations, whether or not sweetened;
c
( e) flavouring powders for making beverages, whether or not
sweetened;

(f) peanut butter;

(g) preparations consisting of tea or coffee and milk powder, sugar D
and any other added ingredients;

-' (h) preparations (for example, tablets) consisting of saccharim and a
foodstuff, such as lactose, used for sweetening purposes;

(i) pre-cooked rise cooked either fully or partially and their dehydrates;
~ E
(j) preparations for lemonades or other beverages, consisting, for
example, of flavoured or coloured syrups, syrup flavoured with an
added concentrated extract, syrup flavoured with fruit juices and
concentrated fruit juice with added ingredients.
F
Heading Sub- Description of goods Rate of
No. heading duty
No.
(!) (2) (3) (4)

- .. 21.08

2108.10
Edible preparations, not elsewhere
specified or included
Preparations for lemonades or
G

other Beverages intended for use in
the manufacture of Aerated Water 40%
210820 Sharbat 20%
H
396 SUPREME COURT REPORTS (2007] 5 S.C.R.

A 210830 Prasad or Prasadam Nil
2108.40 Sterilised or pasteurized miltone Nil
Other:
2108.91 Not bearing a brand name Nil
2108.99 Other 20"/o
B
11. In the entire discussion in the impugned judgment there is no
finding given by the Tribunal as to whether 'puffs' prepared from cereals
would fall under the Chapter Heading 19.04. As far as 'puffs' prepared from '-

soya nuts are concerned there is no finding as to the quantity of puffed soya ~

c nuts sold by the assessee during the above period to ICDS, Haryana and the
quantity of the said product sold by the assessee during the said period to
public schools and five star hospitals. There is also no finding as to whether
'puffed soya nuts' were supplied to ICDS, Haryana under the brand name
'bonton' or whether they were supplied without any brand name being affixed
to the unit containers. These questions are important since the entry 2108.91
D refers to nil rate of duty for "Other Edible Preparations" as long as the
product is supplied without a brand name. These questions are also important
to be decided partic:ularly since the General Exempti0n No.83 states that the ~ -
benefit of exemption shall be given only if the product is a soya based food
preparation for .infant use. According to the assessee puffed soya nuts is
a soya based food preparation under item No.25 of the Notification No.2 of
E
1994 (General Exemption No.83). According to the assessee puffed soya nuts
were supplied to the schools under !CDS programme. None of the questiuns
have bi;:en decided.

12. In the circumstances, we set aside the impugned judgment of the
F tribunal and remand the matter to the adjudicating authority for fresh
determination in accordance with law. The appeal is accordingly allowed with
no order as to costs.

8.8.B. Appeal allowed.

....
••