Supreme Court of India
COMMISSIONER OF CENTRAL EXCISE, NEW DELHIversusM/S. CONNAUGHT PLAZA RESTAURANT (P) LTD., NEW DELHI
- Citation
- 2012 INSC 545
- Decided
- 27 November 2012
- Disposal
- Appeal(s) allowed
- Bench
- D K JAIN
Holding
"Soft‑serve" is to be classified as "ice‑cream" under heading 21.05 (sub‑heading 2105.00) of the Central Excise and Tariff Act, 1985.
Summary
The case concerned the classification of "soft‑serve" ice‑cream sold at McDonald's outlets. The revenue argued it fell under heading 21.05 (ice‑cream) of the Central Excise and Tariff Act, 1985, while the assessee contended it should be placed under heading 04.04 (other dairy produce) or the residuary 2108.91. The Supreme Court held that, in the absence of any statutory definition, tariff entries must be interpreted according to their common‑parlance meaning. Since consumers and trade understand soft‑serve as a type of ice‑cream, it is classified under heading 21.05 (sub‑heading 2105.00). The Court rejected reliance on the technical standards of the Prevention of Food Adulteration Act and on the Tribunal’s technical approach. The trade notice supporting the commercial understanding was noted but not binding. Consequently, the Tribunal’s order classifying soft‑serve under 2108.91 was set aside and the appeals were allowed.
Issues considered
- The proper tariff heading for "soft‑serve" sold at fast‑food outlets – whether it falls under heading 21.05 (ice‑cream), heading 04.04 (other dairy produce), or the residuary heading 2108.91.
- Whether the term "ice‑cream" in heading 21.05 should be given its scientific/technical meaning or its common‑parlance meaning.
- The relevance of the Prevention of Food Adulteration Act, 1955, and its standards for ice‑cream to the classification under the Excise Tariff.
- The applicability of Trade Notice No.45/2001 and Notification No.16/2003‑CE to the present period.
Legislation cited
- Central Excise Act, 1944s. 11A, s. 11C, s. 35L
- Central Excise and Tariff Act, 1985s. Chapter 21, s. Heading 04.04, s. Heading 21.05, s. Heading 2108.91, s. Sub‑heading 2105.00
- Prevention of Food Adulteration Act, 1955
Subjects
excise classificationcommon parlance testice‑creamsoft‑servetariff interpretationCentral Excise ActPrevention of Food Adulteration Actheading 21.05heading 04.04trade noticenotification
Judgment
[2012) 11 S.C.R. 365
COMMISSIONER OF CENTRAL EXCISE, NEW DELHI A
v.
MIS. CONNAUGHT PLAZA RESTAURANT (P) LTD., NEW
DELHI
(Civil Appeal Nos.5307-5308 of 2003)
B
NOVEMBER 27, 2012
[D.K. JAIN AND JAGDISH SINGH KHEHAR, JJ.]
Central Excise and Tariff Act, 1985 - Chapter 21,
Heading 21.05 - "Soft serve" - Classification - Term "ice- C
cream" under heading 21.05 - Common parlance test -
Applicability of- Whether 'soft serve' served at the restaurants/
outlets commonly and popularly known as McDonalds, is
classifiable under heading 21.05 (as claimed by the revenue)
or under heading 04.04 or 2108.91 (as claimed by the D
assesseeJ - Held: Headings 04.04 and 21.05 are couched
in non-technical terms - Neither 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 - In absence E
of any statutory definition or technical description, no reason
to deviate from application of the common parlance principle
in construing the term "ice-cream" under heading 21.05 - The
common parlance test operates on the standard of an
average reasonable person who is not expected to be aware F
of technical details relating to the goods - Such a person
would enter the "McDonalds" outlet with the intention of simply
having an "ice-cream" or a 'softy ice-cream', oblivious of its
technical composition - Mere semantics cannot change the
nature of a product in terms of how it is perceived by persons G
in the market, when the issue at hand is one of excise
classification - 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
365 H
366 SUPREME COURT REPORTS [2012] 11 S.C.R.
A of the gastronomical world - Plea of assessee that the
term"ice-cream" under heading 21.05 ought to be understood
in light of the standards provided in the PFA cannot be
accepted - The provisions of PFA are for ensuring quality
control and are not a standard for interpreting goods
B mentioned in the Tariff Act, the purpose and object of which
is completely different - Besides, trade Notice of Mumbai
Commissionerate a/so indicated the commercial
understanding of 'soft-serve' as 'softy ice-cream' - Tribunal,
thus, erred in classifying 'soft-serve' under tariff sub-heading
c 2108.91 - The 'soft serve' marketed by the assessee, during
the relevant period, is to be classified under tariff sub-heading
2105.00 as "ice-cream" - Interpretation of statutes - Taxing
statutes.
The question for consideration in the instant appeals,
D filed by the revenue, under Section 35L of the Central
Excise Act, 1944 was whether 'soft serve' served at the
restaurants/outlets commonly and popularly known as
McDonalds, is classifiable under heading 21.05 (as
claimed by the revenue) or under heading 04.04 or
E 2108.91 (as claimed by the assessee) of the Central
Excise and Tariff Act, 1985.
Whereas heading 21.05 refers to "ice-cream and
other edible ice", heading 04.04 is applicable to "other
F dairy produce; or edible products of animal origin which
are not specified or included elsewhere" and heading
2108.91 is a residuary entry applicable to "edible
preparations, not elsewhere specified or included" and
"not bearing a brand name".
G The case of the assessee is that "soft serve" is a
product distinct and separate from "ice-cream" since the
world over "ice-cream" is commonly understood to have
milk fat content above 8% whereas 'soft serve' does not
contain more than 5% of milk fat; it cannot be considered
H
COMMNR. OF CENTRAL EXCISE, NEW DELHI v. 367
CONNAUGHT PLAZA REST. (P) LTD., N.D.
as "ice-cream" by common parlance understanding A
since it is marketed by the assessee the world over as
'soft serve'; "ice-cream" should be understood in its
scientific and technical sense; and hence, for these
reasons, 'soft serve' is to be classified under heading
04.04 as "other dairy produce" and not under heading B
21.05.
On the other hand, the Revenue claims that "ice-
cream" has not been defined under heading 21.05 or in
any of the chapter notes of Chapter 21; that 'soft serve' C
is known as "ice-cream" in common parlance; and hence,
it must be classified in the category of "ice-cream" under
heading 21.05 of the Tariff Act.
Allowing the appeals, the Court
D
HELD: 1.1. 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 E
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
F
understanding of such goods. [Para 15] [384-B-C]
1.2. In order to find an appropriate entry for the
classification of 'soft serve', it would be necessary to first
construe the true scope of the relevant headings. None G
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, 'soft
serve' is not defined in any of the chapters aforesaid.
Under these circumstances, it becomes imperative to H
368 SUPREME COURT REPORTS (2012] 11 S.C.R.
A examine if the subject good could come under the
purview of any of the classification descriptions
employed in the Tariff Act. [Para 17] [385-G-H; 386-A]
Oswal Agro Mills Ltd. & Ors. v. Collector of Central Excise
B & Ors. 1993 Supp (3) sec 716: 1993 (3) SCR 378 - relied
on.
Common Parlance Test :
2.1. Time and again, the principle of common
c parlance as the stan'dard 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
0 interpretation of statutes for deciphering the mind of the
law maker. [Para 18] [386-D-E]
2.2. In the absence of a statutory definition in precise
terms; words, entries and items in taxing statutes must be
construed in terms of their commercial or trade
E understanding, or according to their popular meaning. In
other words they have to be constructed in the sense that
the people conversant with the subject-matter of the
statute, would attribute to it. Resort to rigid interpretation
in terms of scientific and technical meanings should be
F avoided in such circumstances. This, however, is by no
means an absolute rule. When the legislature has
expressed a contrary intention, such as by providing a
statutory definition of the particular entry, word or item in
specific, scientific or technical terms, then, interpretation
G ought to be in accordance with the scientific and technical
meaning and not according to common parlance
understanding. [Para 31] [392-H; 393-A-C]
Oswal Agro Mills Ltd. & Ors. v. Collector of Central Excise
H & Ors. 1993 Supp (3) SCC 716: 1993 (3) SCR 378;
COMMNR. OF CENTRAL EXCISE, NEW DELHI v. 369
CONNAUGHT PLAZA REST. (P) LTD., N.D.
Ramavatar Budhaiprasad Etc. v. Assistant Sa/es Tax Officer A
Ako/a (1962) 1 SCR 279; Commissioner of Sa/es Tax,
Madhya Pradesh v. Jaswant Singh Charah Singh (1967) 2
SCR 720; Dunlop India Ltd. v. Union of India & Ors. (1976)
2 SCC 241: 1976 (2) SCR 98; Shri Bharuch Coconut Trading
Co. and Ors. v. Municipal Corporation of the City of B
Ahmadabad & Ors. 1992 Suppl.(1) SCC 298: 1990 (3)
Suppl. SCR 392; Indian Aluminium Cables Ltd. v. Union of
India & Ors. (1985) 3 SCC 284: 1985 (1) Suppl. SCR 731;
Collector of Central Excise, Kanpur v. Krishna Carbon Paper
Co.(1989) 1 SCC 150: 1988 (3) Suppl. SCR 12; Reliance C
Cellulose Products Ltd., Hyderabad v. Collector of Central
Excise, Hyderabad-I Division, Hyderabad (1997) 6 SCC 464:
1997 (1) Suppl. SCR 485; Shree Baidyanath Ayurved
Bhavan Ltd. v. Collector of Central Excise, Nagpur (1996) 9
SCC 402; Natura/le Health Products (P) Ltd. v. Collector of D
Central Excise, Hyderabad (2004) 9 SCC 136: 2003 (5)
Suppl. SCR 433; B.P.L. Pharmaceuticals Ltd. v. Collector of
Central Excise, Vadodara (1995) Suppl. 3 SCC 1: 1995 (3)
SCR 1235 - relied on.
The King v. Planter Nut and Chocolate Company Ltd. E
(1951) C.L.R. (Ex. Court) 122 - referred to.
Classification of 'Soft-Serve'
3.1. The Tribunal had held that in view of the
technical literature and stringent provisions of the F
Prevention of Food Adulteration Act, 1955 (PFA), 'soft
serve' cannot be classified as "ice-cream" under Entry
21.05 of the Tariff Act. In the absence of a technical or
scientific meaning or definition of the term "ice-cream" or
'soft serve', the Tribunal should have examined the issue G
at hand on the touchstone of the common parlance test.
[Para 32] [393-D-E]
3.2. The headings 04.04 and 21.05 have been
couched in non-technical terms. Heading 04.04 reads H
370 SUPREME COURT REPORTS [2012] 11 S.C.R.
A "other dairy produce; edible products of animal origin,
not elsewhere specified or included" whereas heading
21.05 reads "ice-cream and other edible ice". Neither the
headings nor the chapter notes/section notes explicitly
define the entries in a scientific or technical sense.
B Further, there is no mention of any specifications in
respect of either of the entries. Hence, it cannot be said
that since 'soft serve' is distinct from "ice-cream" due to
a difference in its milk fat content, the same must be
construed in the scientific sense for the purpose of
C 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, there is no
reason to deviate from the application of the common
D parlance principle in construing whether the term "ice-
cream" under heading 21.05 is broad enough to include
'soft serve' within its import. [Para 33) [393-F-H; 394-A-B]
3.3. There is no merit in the averment made by the
assessee that 'soft serve' cannot be reg~rded as "ice-
E cream" since the former is marketed and sold around the
world as 'soft serve'. 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
F way in which the consumer perceives the product at the
end of the day notwithstanding marketing strategies. 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
G unlikely that such a person who walks into a
"McDonalds" outlet with the intention of enjoying an "ice-
cream", 'softy' or 'soft serve', if 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
H fat content, milk non-solid fats, stabilisers, emulsifiers or
COMMNR. OF CENTRAL EXCISE, NEW DELHI v. 371
CONNAUGHT PLAZA REST. (P) LTD., N.D.
the manufacturing process, much less its technical A
distinction from "ice-cream". On the contrary, such a
person would enter the outlet with the intention of simply
having an "ice-cream" or a 'softy ice-cream', oblivious of
its technical composition. The true character of a product
cannot be veiled behind a charade of terminology which B
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.
[Para 34] [394-C-G] c
4. The assessee quoted some culinary authorities for
the submission that ice cream must necessarily contain
more than 10% milk fat content and be served only in a
frozen to hard stage for it to qualify as "ice cream". It argued
that classifying 'soft serve', containing 5% milk fat content, D
as "ice cream", would make their product stand foul of
requirements of the PFA which demands that an "ice-
cream" must have at least 10% milk fat content. However,
in the view of this Court, such a hard and fast definition of a
culinary product like "ice-cream" that has seen constant E
evolution and transformation is untenable. Food experts
suggest that the earliest form of ice cream may have been
frozen syrup. Maguelonne Toussaint-Samat in her work
History of Food charters the evolution of "ice cream" in the
landmark work from its primitive syrupy form to its F
contemporary status with more than hundred different
forms, and categorizes 'soft serve' as one such form. While
some authorities are strict in their classification of products
as "ice cream" and base it on milk fat content, others are
more liberal and identify it by other characteristics. There G
is, thus, no clear or unanimous view regarding the true
technical meaning of "ice cream". In fact, there are different
forms of "ice cream" in different parts of the world that have
varying characteristics. [Paras 35, 36, 37] [394-H; 395-A-D;
396-C-D] H
372 SUPREME COURT REPORTS [2012] 11 S.C.R.
A History of Food by Mague/onne Toussaint-Samat and
The Science of Food by C. Clarke - referred to.
5. On the basis of the authorities cited on behalf of
the assessee, it cannot be said that "ice cream" ought to
contain more than 10% milk fat content and must be
8
served only frozen and hard. Besides, even if it is
assumed for the sake of argument that there is one
standard scientific definition of "ice cream" that
distinguishes it from other products like 'soft serve', there
is no reason why such a definition must be resorted to
C 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
D developments of contemporary times rather than being
held entirely inapplicable. It is for precisely this reason
that this Court has repeatedly applied the "common
parlance test" every time parties have attempted to
differentiate their products on the basis of subtle and finer
E characteristics; it has tried understanding a good in the
way in which it is understood in common parlance. [Para
38) [396-E-G]
Akbar Badrudin Giwani v. Collector of Customs, Bombay
F (1990) 2 SCC 203: 1990 (1) SCR 369 - held inapplicable.
6. The assessee had submitted that the common
parlance understanding of "ice-cream" can be inferred by
its definition as appearing under the PFA; that according
to Rule A 11.20.08 fhe milk fat content of "ice-cream" and
G "softy ice-cream" shall not be less than 8% by weight and
hence, the term "ice-cream" under heading 21.05 had to
be understood in light of the standards provided in the
PFA, more so when selling "Ice-cream" with fat content
of less than 10% would attract criminal action. The said
H
COMMNR. OF CENTRAL EXCISE, NEW DELHI v. 373
CONNAUGHT PLAZA REST. (P) LTD., N.D.
submission cannot be accepted. It is a settled principle A
in excise classification that the definition of one statute
having a different object, purpose and scheme cannot be
applied mechanically to another statute. The object of the
Excise Act is to raise revenue for which various goods
are differently classified in the Act. The conditions or B
restrictions contemplated by one statute having a
different object and purpose should not be lightly and
mechanically imported and applied to a fiscal statute for
non-levy of excise duty, thereby causing a loss of
revenue. The provisions of PFA, dedicated to food c
adulteration, would require a technical and scientific
understanding of "Ice-cream" and thus, may require
different standards for a good to be marketed as "ice-
cream". These provisions are for ensuring quality control
and have nothing to do with the class of goods which are D
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 completely different.
[Paras 42, 43] [398-F-H; 399-A·E]
E
Medley Pharmaceuticals Limited v., Commissioner of
Central Excise and Customs, Daman (2011) 2 SCC 601:
2011 (1) SCR 741; Commissioner of Central Excise, Nagpur
v. Shree Baidyanath Ayurved Bhavan Limited (2009) 12 SCC
419: 2009 (5) SCR 879 - relied on. F
State of Maharashtra v. Baburao Ravaji Mharulkar & Ors.
(1984) 4 sec 540: 1985 (1) SCR 1053 - referred to.
7. There is no merit in the further contention of the
assessee based on Rule 3(a) of the General Rules of G
Interpretation (which states that a specific entry shall
prevail over a general entry) that 'soft serve' will fall
under heading 04.04 since it is a specific entry. The
assessee had himself contended that "ice-cream" was a
H
374 SUPREME COURT REPORTS [2012] 11 S.C.R.
A dairy product and would have been classified under
heading 04.04 if heading 21.05 had not been inserted into
the Tariff Act. In the presence of heading 21.05, "ice-
cream" cannot be classified as a dairy product under
heading 04.04. Hence, in relation to heading 04.04,
B heading 21.05 is clearly a specific entry. Therefore, one
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
c of heading 21.05. In conclusion, the view taken by the
Tribunal is rejected and it is held that 'soft serve' is to be
classified as "ice-cream" under heading 21.05 of the Act.
[Para 44] [399-F-G; 400-A-B]
8. Further, according to Trade Notice No. 45/2001
D dated 11th June, 2001 of Mumbai Commissionerate IV,
"softy ice-cream/soft serve" dispensed by vending
machines, sold and consumed as "ice-cream": is
classifiable under Entry 21.05 of the Tariff Act While it is
true that the trade notice is not binding upon this Court,
E it does indicate the commercial understanding of 'soft-
serve' as 'softy ice- cream'. Further, as this trade notice
is in no way contrary to the statutory provisions of the
Act, there is no reason to diverge from what is mentioned
therein. [Para 45] [400-C-D; 401-E]
F
9. It is thus clear that the Tribunal erred in law in
classifying 'soft-serve' under tariff sub-heading 2108.91,
as "Edible preparations not elsewhere specified or
included", "not bearing a brand name". The 'soft serve'
G marketed by the assessee, during the relevant period, is
to be classified under tariff sub-heading 2105.00 as "ice-
cream". [Para 46] [401-F-G]
10. The last argument of the assessee that in the
event 'soft serve' was classifiable under heading 21.05,
H the assessee was entitled to the benefit under
COMMNR. OF CENTRAL EXCISE, NEW DELHI v. 375
CONNAUGHT PLAZA REST. (P) LTD., N.D.
Notification No. 16/2003-CE (NT) dated 12th March 2003 A
cannot be taken 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 wRich was never argued before the B
Tribunal. Nonetheless, for the sake of argument, even if
it is assumed that this ground had been urged before the
Tribunal, the reliance 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 c
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, three show cause notices had been issued to the D
assessee alleging that 'soft serve' was 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 E
duty was payable by the assessee and was being levied
by the revenue. Therefore, the assessee's case does not
fall within the ambit of the said notification and is not
eligible for the exemption granted to "softy ice-cream",
dispensed through a vending machine for the relevant
period. [Para 47, 48] [401-G-H; 402-G-H; 403-A-E] F
Case Law Reference:
1985 (1) SCR 1053 referred to Para 9, 42
1990 (1) SCR 369 held inapplicable Paras 9, 39, G
40,41
1993 (3) SCR 378 relied on Paras 16, 18
(1951) C.L.R. (Ex. Court) 122 referred to Para 19
H
376 SUPREME COURT REPORTS [2012] 11 S.C.R.
A (1962) 1 SCR 279 relied on Para 20
(1967) 2 SCR 720 relied on Para 21
1976 (2) SCR 98 relied on Para 22
1990 (3) Suppl. SCR 392 relied on Para 23
B
1985 (1) Suppl. SCR 731 relied on Para 24
1988 (3) Suppl. SCR 12 relied on Para 25
1997 (1) Suppl. SCR 485 relied on Para 26
c (1996) 9 sec 402 relied on Para 28
2003 (5) Suppl. SCR 433 relied on Para 29
1995 (3) SCR 1235 relied on Para 30
D 2011 (1) SCR 741 relied on Para 43
2009 (5) SCR 879 relied on Para 43
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
5307-5038 of 2003.
E
From the Judgment & Order dated 29.1.2003 of the
Custom, Excise and Gold (Control) Appellate Tribunal, New
Delhi in Appeal No. E/5/2002-D and E/1939/2001-D]
WITH
F
C.A. No. 8097 of 2004.
R.P. Bhatt, Arijit Prasad, Shalini Kumar, Yatinder
Chaudhary, AK. Sharma for the Appellant.
G
N. Venkataraman, V. Lakshmi Kumaran, Alok Yadav,
Rajesh Kumar, R. Salish Kumar, Parivesh Singh, Anjail
Chauhan, V.N. Raghupathy for the Respndent.
The Judgment of the Court was delivered by
H
COMMNR. OF CENTRAL EXCISE, NEW DELHI v. 377
. CONNAUGHT PLAZA REST. (P) LTD., N.D.
D.K. JAIN, J. 1. The short question of law for consideration A
in these appeals, filed by the revenue, under Section 35L of
the Central Excise Act, 1944 (for short "the Act") is whether 'soft
serve' served at the restaurants/outlets commonly and popularly
known as McDonalds, is classifiable under heading 21.05 (as
claimed by the revenue) or under heading 04.04 or 2108.91 B
(as claimed by the assessee) of the Central Excise and Tariff
Act, 1985 (for short "the Tariff Act").
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, C
named above. In so far as the manufacture and service of 'soft
serve' is 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 D
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 E
temperature control, where the liquid mix was pumped into a
'Taylor-make' vending machine; further cooled along with the
infusion of air, and finally, the end product, 'soft serve', was
drawn through the nozzle into a wafer cone or in a plastic cup
and served to the customers at the outlet. F
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 'soft serve' ice-cream was classifiable under
Chapter 21, relating to "Miscellaneous Edible Preparations· of G
the Tariff Act, attracting 16% duty under heading 21.05, sub-
heading 2105.00 -"Ice-cream and other edible ice, whether or
not containing cocoa". Invoking 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
H
378 SUPREME COURT REPORTS [2012] 11 S.C.R.
A 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
: 'soft serve' was classifiable under heading 04.04. Describing
the goods as "other dairy produce; edible products of animal
B origin, not elsewhere specified or included", it 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
C authority concluded that: soft serve was classifiable under
heading 21.05; the process undertaken by the assessee for
conversion of soft serve mix to 'soft serve' amounted to
manufacture and that the assessee was not entitled to small
scale exemption because of use of the brand name
D "McDonalds". While adjudicating on the third show cause
notice, the adjudicating authority reiterated that : 'soft serve'
was classifiable under heading 21.05; the process undertaken
by the assessee for conversion of soft serve mix to 'soft serve'
amounted to manufacture and small scale exemption was not
E available to the assessee because of use of the brand name
"McDonalds". In an appeal filed by the assessee, the
Commissioner of Central Excise (Appeals) reversed the above
finding and classified 'soft serve' under the sub-heading
2108.91.
F 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 Tribunal"). The appeals arising from the
first two show cause notices were disposed of by the main
G 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,
H
COMMNR. OF CENTRAL EXCISE, NEW DELHI v. 379
CON NAUGHT PLAZA REST. (P) LTD., N.D. [D.K. JAIN, J.]
namely, conversion of soft serve mix to 'soft serve' amounted A
to manufacture and that 'soft serve' was classifiable under sub-
heading 2108.91, describing the goods as "Edible
preparations, not elsewhere specified or included" - "not
bearing a brand name", attracting nil rate of duty. The Tribunal
held thus :- B
"In view 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 C
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 D
Limited case is not applicable to the facts of the present
matter. The dispute in the said case was as to whether the
'Dant Manjan Lal' is Ayurvedic medicine or 'Tooth
Powder'. In that context, the Supreme Court observed that
resort should not be had to the scientific and technical E
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 F
under Heading 21.05 of the Central Excise Tariff."
6. It is manifest that the Tribunal based its conclusion on
the technical meaning and specifications of the product "ice-
cream", stipulated in the Prevention of Food Adulteration Act, G
1955 (for short "the PFA") and rejected the common parlance
test, viz. the consumers' understanding of the product. Being
aggrieved by the said approach, the revenue is before us in
these appeals.
7. Mr. Arijit Prasad, learned counsel appearing for the H
380 SUPREME COURT REPORTS [2012] 11 S.C.R.
A revenue, submitted that the enquiries conducted by the revenue
revealed that in common trade parlance, 'soft serve' is known
as "ice-cream"; all the ingredients used and the process of
manufacture adopted for preparation of 'soft serve' is essentially
the same as is adopted for manufacture of an "ice-cream"; and
B therefore, manufacture of 'soft serve' cannot be said to be
distinct from the manufacture of "ice-cream". It was urged that
the specifications for manufacture of "ice-cream" under the PFA
are irrelevant in so far as the question of classification of goods
under the Tariff Act is concerned. It was asserted that the
c identity of 'soft serve' is associated with how the public at large
identifies it, and not by the parameters or specifications
indicated in other statutes including the PFA in relation to "ice-
cream". According to the learned counsel 'soft serve ice-
cream', 'soft ice-cream' and 'Softies' are commonly taken as
D different kinds of "ice-cream". Finally, it was submitted that
since the product is sold from the outlets of "McDonalds", the
brand is in the customer's mind when he/she enters the outlet
and therefore, it cannot be covered under sub-heading
2108.91, as erroneously held by the Tribunal.
E 8. Mr. V. Lakshmi Kumaran, learned counsel appearing
for the assessee, on the other hand, asserted that but for
heading 21.05, "ice-cream" itself was a dairy product and would
have been classified under heading 04.04. Therefore, 'soft
serve' would also be classifiable under heading 04.04. It was
F argued that 'soft serve' cannot be referred to as "ice-cream"
even by applying the common parlance test, in as much as 'soft
serve' is sold throughout the world not as "ice-cream• but only
as 'soft serve'. "Ice-cream", the world over, is commonly
understood to have milk fat content around 10% whereas 'soft
G serve' does not contain milk fat of more .than 5%.
9. Referring to the technical meaning of "ice-cream", given
in Kirk-Othmer Encyclopedia of Chemical Technology, Third
Edition - Volume 15 and "Outlines of Dairy Technology" by
Sukumar De, learned counsel vehemently submitted that all
H
COMMNR. OF CENTRAL EXCISE, NEW DELHI v. 381
CONNAUGHT PLAZA REST. (P) LTD., N.D. [D.K. JAIN, J.]
these books describe "ice-cream" as a dessert, which is frozen A
to a hard stage, whereas, soft serve dispensed through the
Taylor machine is served in a semi-solid state, by processing
the pre-mix by blowing air into it. 'Soft serve' is not as hard as
an ice-cream is, and thus, cannot be called as "ice cream" even
if tested on the touchstone of the common parlance test. The B
main thrust of the submission of the learned counsel was that
if the assessee markets 'soft serve' as "ice-cream", they will
be liable to prosecution under the PFA, because the milk fat
content in 'soft serve' is less than 10%, a statutory requirement
for manufacture of "ice-cream". In support of the submission, c
learned counsel commended us to the decision of this Court
in State of Maharashtra Vs. Baburao Ravaji Mharulkar &
Ors. 1 , wherein it was held that a person selling ice-cream with
5% milk fat content instead of minimum 10% milk fat, was
selling adulterated ice-cream and was liable to prosecution. D
Reliance was also placed on the decision of this Court in Akbar
Badrudin Giwani Vs. Collector of Customs, Bombay2 , to
contend that in matters pertaining to classification of a
commodity, technical and scientific meaning of the product is
to prevail over the commercial parlance meaning.
E
10. Lastly, Mr. V. Lakshmi Kumaran urged that even if we
were to hold tha~ 'soft serve' is an "ice-cream", unde_r
notification No.16/2003-CE (NT) dated 12th March, 2003,
granting exemption to "softy ice-cream" dispensed through a
vending machine, issued under Section 11 C of the Act, the F
assessee will not be liable to pay any Excise duty in respect
of "softy ice-cream" during the relevant period.
11. In short, the case of the assessee is that "soft serve"
is a product distinct and separate from "ice-cream" since the G
world over "ice-cream" is commonly understood to have milk
fat content above 8% whereas 'soft serve' does not contain
more than 5% of milk fat; :t cannot be considered as "ice-
1. (1984) 4 sec 540.
. 2. (1990) 2 sec 203. H
382 SUPREME COURT REPORTS [2012] 11 S.C.R.
A cream" by common parlance understanding since it is marketed
by the assessee the world over as 'soft serve'; "ice-cream"
should be understood in its scientific and technical sense; and
hence, for these reasons, 'soft serve' is to be classified under
heading 04.04 as "other dairy produce" and not under heading
B 21.05. On the other hand, Revenue claims that "ice-cream" has
not been defined under heading 21.05 or in any of the chapter
notes of Chapter 21; upon conducting enquiries it was found
that 'soft serve' is known as "ice-cream" in common parlance;
and hence, it must be classified in the category of "ice-cream"
C under heading 21.05 of the Tariff Act.
12. Before we proceed to evaluate the rival stands, it would
be necessary to notice the length and breadth of the relevant
tariff entries that have been referred to by both the learned
counsel.
D
"Chapter 4 Dairy Produce, etc. 312
E 04.04 Other dairy produce;
Edible products of
animal origin, not
elsewhere specified
or included
F -Ghee:
0404.11 -Put up in unit Nil
containers and
bearing a brand
G name
0404.19 --Other Nil
0404.90 --Other Nil
H
COMMNR. OF CENTRAL EXCISE, NEW DELHI v. 383
CONNAUGHT PLAZA REST. (P} LTD., N.D. [D.K. JAIN, J.)
Heading . Sub-. Description of A
Rate of duty
No heading goods
No
(1) (2) (3) (4)
21.05 2105.00 Ice cream and other 16% B
edible ice, whether
or not containing
cocoa
21.08 Edible preparations,
not elsewhere c
specified or included
2108.91 -Not bearing a brand Nil"
name
13. Chapter 4 of the Tariff Act reads "dairy produce; edible
0
products of animal origin, not elsewhere specified or included."
Heading 04.04 is applicable to "other dairy produce; or edible
products of animal origin which are not specified or included
elsewhere." As is evident from Chapter note 4, the terms of
heading 04.04 have been couched in general terms with wide E
amplitude. Chapter note 4 reads:
"4. Heading No. 04.04 applies, inter alia, to butter-milk,
curdled milk; cream, yogurt, whey, curd, and products
consisting of natural milk constituents, whether or not
containing added sugar or other sweetening matter or F
flavoured or containing added fruit or cocoa and includes
fats and oils derived from milk (e.g. milkfat, butterfat and
butteroil), dehydrated butter and ghee."
14. On the other hand, Chapter 21 of the Act is applicable
to "Miscellaneous Edible Preparations". Heading 21.05 refers G
to "ice-cream and other edible ice". It is significant to note that
none of the terms have been defined in the chapter. Further
heading 2108.91 is a residuary entry of wide amplitude
applicable to "edible preparations, not elsewhere specified or
included" and "not bearing a brand name". H
384 SUPREME COURT REPORTS [2012] 11 S.C.R.
A 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
B 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
c 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. 3 ; as follows:
D "4. The 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, sub-
heading under which the identified goods/products would
E 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
F 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
G
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 ............ ..
H 3. 1993 Supp (3) sec 716 at page 720.
COMMNR. OF CENTRAL EXCISE, NEW DELHI v. 385
CONNAUGHT PLAZA REST. (P) LTD., N.D. [D.K. JAIN, J.]
*** *** *** A
... 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 8
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 C
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 D
held as follows:
"... The ordinary 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, E
such as, where a literal construction would reduce the
provision to absurdity or prevent manifest intention of the
legislature from being carried out."
17. Therefore, in order to find an appropriate entry for the
classification of 'soft serve', it would be necessary to first F
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, 'soft serve' is not
defined in any of the chapters aforesaid. Under these G
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 term "ice-
cream" in heading 21.05 includes within its ambit the product H
386 SUPREME COURT REPORTS [2012) 11 S.C.R.
A 'soft serve'. That leads us to the pivotal question, whether, in
the absence of a statutory definition, the term "ice-cream" under
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
B amplitude is wide enough to include 'soft serve' within its
purview.
Common Parlance Test :
18. Time and again, the principle of common parlance as
C 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
D of the law maker; "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." [(See :Oswal Agro
Mills Ltd (supra}].
E
19. A classic example on the concept of common parlance
is the decision of the Exchequer Court of Canada in The King
Vs. Planter Nut and Chocolate Company Ltd. 4 • The question
involved in the said decision was whether salted peanuts and
cashew nuts could be considered to be "fruit" or "vegetable"
F within the meaning of the Excise Tax Act. Cameron J., delivering
the judgment, posed the question as follows:
"... would a householder when asked to bring home fruit or
vegetables for the evening meal bring home salted
G peanuts, cashew or nuts of any sort? The answer is
obviously ·no'."
Applying the test, the Court held that the words "fruit" and
"vegetable" are not defined in the Act or any of the Acts in pari
H 4. (1951) C.L.R. (Ex. Court) 122.
COMMNR. OF CENTRAL EXCISE, NEW DELHI v. 387
CONNAUGHT PLAZA REST (P) LTD., N.D. [D.K. JAIN, J.]
materia. They are ordinary words in every-day use and are A
therefore, to be construed according to their popular sense.
20. In Ramavatar Budhaiprasad Etc. Vs. Assistant Sales
Tax Officer, Akola5 , the issue before this Court was whether
betel leaves could be considered as "vegetables" in the B
Schedule of the C.P. & Berar Sales Tax Act, 1947 for availing
the benefit of exemption. While construing the import of the word
"vegetables" and holding that betel leaves could not be held to
be "vegetables", the Court observed thus :
,
"... But this word must be construed not in any technical C
sense nor from the botanical point of view but as understood
in common parlance. It has not been defined in the Act and
being a word of every day use it must be construed in its
popular sense meaning "that sense which people conversant
with the subject matter with which the statute is dealing would D
attribute to it."
21. In Commissioner of Sa/es Tax, Madhya Pradesh Vs.
Jaswant Singh Charan Singh6 , the Court had to decide whether
"charcoal" could be classified as "coal" under Entry I of Part Ill
E
of Schedule II of the Madhya Pradesh General Sales Tax Act,
1958. Answering the question in the affirmative, it was observed
as follows:
"3. Now, there can be no dispute that while coal is
technically understood as a mineral product, charcoal is F
manufactured by human agency from products like wood
and other things. But it is now well-settled that while
interpreting items in statutes like the Sales Tax Acts, resort
should be had not to the scientific or the technical meaning
of such terms but to their popular meaning or the meaning G
attached to them by those dealing in them, that is to say,
to their commercial sense ...... "
5. (1962) 1 SCR 279.
6. (1967) 2 SCR 720. H
388 SUPREME COURT REPORTS [2012] 11 S.C.R.
A xxx xxx xxx xx xx
"5. The result emerging from these decisions is that while
construing the word 'coal' in Entry I of Part Ill of Schedule
II, the test that would be applied is what would be the
meaning which persons dealing with coal and consumers
B
purchasing it as fuel would give to that word. A sales tax
statute is being one levying a tax on goods must in the
absence of a technical term or a term of science or art,
be presumed to have used an ordinary term as coal
according to the meaning ascribed to it in common
c parlance. Viewed from that angle both a merchant dealing
in coal and a consumer wanting to purchase it would
regard coal not in its geological sense but in the sense as
ordinarily understood and would include 'charcoal' in the
term 'coal'. It is only when the question of the kind or variety
D of coal would arise that a distinction would be made
between coal and charcoal; otherwise, both of them would
in ordinary parlance as also in their commercial sense be
spoken as coal."
E 22. In Dunlop India Ltd. Vs. Union of India & Ors. 7 , at
page 251, while holding that VP Latex was to be classified as
"raw rubber" under Item 39 of the Indian Tariff Act, 1934, this
Court observed:
"29. It is well established that in interpreting the meaning
F of words in a taxing statute, the acceptation of a particular
word by the trade and its popular meaning should
commend itself to the authority."
"34. We are, however, unable to accept the submission.
G It is clear that meanings given to articles in a fiscal statute
must be as people in trade and commerce, conversant
with the subject, generally treat and understand them in the
usual course. But once an article is classified and put
H 7. (1976) 2 sec 241.
COMMNR. OF CENTRAL EXCISE, NEW DELHI v. 389
CONNAUGHT PLAZA REST. (P) LTD .. N.D. [D.K. JAIN, J.)
under a distinct entry, the basis of the classification is not A
open to question. Technical and scientific tests offer
guidance only within limits. Once the articles are in
circulation and come to be described and known in
common parlance, we then see no difficulty for statutory
classification under a particular entry." B
23. In Shri Bharuch Coconut Trading Co. and Ors.
Vs. Municipal Corporation of the City of Ahmedabad & Ors. 8 ,
this Court applied the test as ''would a householder when asked
to bring some fresh fruits or some vegetable for the evening c
meal, bring coconut too as vegetable (sic)?" The Court held that
when a person goes to a commercial market to ask for
coconuts, "no one will consider brown coconut to be vegetable
or fresh fruit much less a green fruit. No householder would
purchase it as a fruit." Therefore, the meaning of the word D
'brown coconut', and whether it was a green fruit, had to be
"understood in its ordinary commercial parlance." Accordingly
it was held that brown coconut would not be considered as
green fruit.
24. In Indian Aluminium Cables Ltd. Vs. Union of India E
& Ors. 9 , this Court observed the following:
• ... This Court has consistently taken the view that, in
determining the meaning or connotation of words and
expressions describing an article in a tariff schedule, one F
principle which is fairly well-settled is that those words and
expressions should be construed in the sense in which they
are understood in the trade, by the dealer and the
consumer. The reason is that it is they who are concerned
with it and, it is the sense in which they understand it which G
constitutes the definitive index of the legislative intention".
25. In Collector of Central Excise, Kanpur Vs. Krishna
8. 1992 Suppl.(1) sec 298.
9. (1985) 3 sec 284. H
390 SUPREME COURT REPORTS [2012) 11 S.C.R.
A Carbon Paper Co. 10 , this Court has opined thus:
"12. It is a well settled principle of construction, as
mentioned before, that where the word has a scientific or
technical meaning and also an ordinary meaning
according to common parlance, it is in the latter sense that
B
in a taxing statute the word must be held to have been
used, unless contrary intention is clearly expressed by the
legislature .....
. .. But there is a word of caution that has to be borne in
c mind in this connection, the words must be understood in
popular sense, that is to say, these must be confined to
the words used in a particular statute and then if in respect
of that particular items, as artificial definition is given in the
sense that a special meaning is attached to particular
D words in the statute then the ordinary sense or dictionary
meaning would not be applicable but the meaning of that
type of goods dealt with by that type of goods in that type
of market, should be searched."
E 26. In Reliance Cellulose Products Ltd., Hyderabad Vs.
Collector of Central Excise, Hyderabad-/ Division,
Hyderabad11, it was observed:
"20. In other words, if the word used in a fiscal statute is
understood in common parlance or in the commercial
F world in a particular sense, it must be taken that the Excise
Act has used that word in the commonly understood
sense. That sense cannot be taken away by attributing a
technical meaning to the word. But if the legislature itself
has adopted a technical term, then that technical term has
G to be understood in the technical sense. In other words, if
in the fiscal statute, the article in question falls within the
ambit of a technical term used under a particular entry, then
that article cannot be taken away from that entry and placed
10. (1989) 1 sec 1so.
H 11. (1997) s sec 464.
COMMNR. OF CENTRAL EXCISE, NEW DELHI v. 391
CON NAUGHT PLAZA REST. (P) LTD., N.D. [D.K. JAIN, J.]
under the residuary entry on the pretext that the article, even A
though it comes within the ambit of the technical term used
in a particular entry, has acquired some other meaning in
market parlance. For example, if a type of explosive (ROX)
is known in the market as Kala Sabun by a section of the
people who uses these explosives, the manufacturer or B
importer of these explosives cannot claim that the
explosives must be classified as soap and not as
explosive."
27. There is a catena of decisions that has dealt with the
classification of Ayurvedic products between the categories of C
medicaments and cosmetics and in the process made
significant pronouncements on the common parlance test.
28. In Shree Baidyanath Ayurved Bhavan Ltd. Vs.
Collector of Central Excise, Nagpur' 2, at page 404 this Court D
while applying the common parlance test held that the
appeiiant's product "Dant Lal Manjan" could not qualify as a
medicament and held as follows:
"The Tribunal rightly points out that in interpreting statutes E
like the Excise Act the primary object of which is to raise
revenue and for which purpose various products are
differently classified, resort should not be had to the
scientific and technical meaning of the terms and
expressions used but to their popular meaning, that is to
say the meaning attached to them by those using the F
product. It is for this reason that the Tribunal came to the
conclusion that scientific and technical meanings would not
advance the case of the appellants if the same runs
counter to how the product is understood in popular
parlance." G
29. In Natura/le Health Products (P) Ltd. Vs. Collector of
Central Excise, Hyderabad' 3 , two appeals were under
12. (1996) g sec 402.
13. (2004) s sec 136. H
392 SUPREME COURT REPORTS [2012) 11 S.C.R.
A consideration. One was with respect to Vicks Vapo Rub and
Vicks Cough Drops while the other was with respect to Sloan's
Balm and Sloan's Rub. It was observed that when there is no
definition of any kind in the relevant taxing statute, the articles
enumerated in the tariff schedules must be construed as far as
B possible in their ordinary or popular sense, that is, how the
common man and persons dealing with it understand it. The
Court held that in both the cases the customers, the practitioners
in Ayurvedic medicine, the dealers and the licensing officials
treated the products in question as Ayurvedic medicines and
c not as Allopathic medicines, which gave an indication that they
were exclusively Ayurvedic medicines or that they were used
in the Ayurvedic system of medicine, though they were patented
medicines. Consequently, it was held that the said products
had to be classified under the Chapter dealing with
medicaments.
0
30. B.P.L. Pharmaceuticals Ltd. Vs. Collector of Central
Excise, Vadodara' 4 was a case in which product "Selsun
Shampoo" was under consideration for the purpose of
classification under the Tariff Act. According to the
E manufacturers this shampoo was a medicated shampoo meant
to treat dandruff which is a disease of the hair. This Court held
that having regard to the preparation, label, literature, character,
common and commercial parlance, the product was liable to
be classified as a medicament. It was not an ordinary shampoo
F which could be of common use by common people. The
shampoo was meant to cure a particular disease of hair and
after the cure it was not meant to be used in the ordinary
course.
31. Therefore, what flows from a reading of the afore-
G mentioned decisions is that in the absence of a statutory
definition in precise terms; words, entries and items in taxing
statutes must be construed in terms of their commercial or trade
understanding, or according to their popular meaning. In other
words they have to be constructed in the sense that the people
H 14. (1995) Suppl. 3 sec 1.
COMMNR. OF CENTRAL EXCISE, NEW DELHI v. 393
CONNAUGHT PLAZA REST. (P) LTD., N.D. [D.K. JAIN, J.]
conversant with the subject-matter of the statute, would attribute A
to it. Resort to rigid interpretation in terms of scientific and
technical meanings should be avoided in such circumstances.
This, however, is by no means an absolute rule. When the
legislature has expressed a contrary intention, such as by
providing a statutory definition of the particular entry, word or B
item in specific, scientific or technical terms, then, interpretation
ought to be in accordance with the scientific and technical
meaning and not according to common parlance understanding.
Classification of 'Soft-Serve'
c
32. In light of these principles, we may now advert to the
question at hand, viz. classification of 'soft serve' under the
appropriate heading. As aforesaid, the Tribunal has held that
in view of the technical literature and stringent provisions of the
PFA, 'soft serve' cannot be classified as "ice-cream" under D
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
term "ice-cream" or 'soft serve', the Tribunal should have
examined the issue at hand on the touchstone of the common
parlance test. E
33. As noted before, headings 04.04 and 21.05 have been
couched in non-technical terms. Heading 04.04 reads "other
dairy produce; edible products of animal origin, not elsewhere
specified or included" whereas heading 21.05 reads "ice-cream
and other edible ice". Neither the headings nor the chapter F
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 'soft serve' is distinct
from "ice-cream" due to a difference in its milk fat content, the G
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 H
394 SUPREME COURT REPORTS [2012] 11 S.C.R.
A application of the common parlance principle in construing
whether the term "ice-cream" under heading 21.05 is broad
enough to include 'soft serve' within its import.
34. The assessee has averred that 'soft serve' cannot be
regarded as "ice-cream" since the former is marketed and sold
8
around the world as 'soft serve'. We do 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
C 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 a "McDonalds" outlet
D with the intention of enjoying an "ice-cream", 'softy' or 'soft
serve', if 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, milk non-solid fats, stabilisers,
emulsifiers or the manufacturing process, much less its
E technical distinction from "ice-cream". On the contrary, such a
person would enter the outlet with the intention of simply having
an "ice-cream" or a 'softy ice-cream', oblivious of its technical
composition. The true character of a product cannot be veiled
behind a charade of terminology which is used to market a
F 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.
G 35. Besides, as noted above, learned senior counsel,
appearing for the assessee quoted some culinary authorities
for the submission that ice cream must necessarily contain more
than 10% milk fat content and be served only in a frozen to hard
stage for it to qualify as "ice cream". It was argued that
classifying 'soft serve', containing 5% milk fat content, as "ice
H cream", would make their product stand foul of requirements
COMMNR. OF CENTRAL EXCISE, NEW DELHI v. 395
CONNAUGHT PLAZA REST. (P) LTD., N.D. [D.K. JAIN, J.]
of the PFA which demands that an "ice-cream" must have at A
least 10% milk fat content.
36. Such a hard and fast definition of a culinary product
like "ice- cream" that has seen constant evolution and
transformation, in our view, is untenable. Food experts suggest
8
that the earliest form of ice cream may have been frozen syrup.
According to Maguelonne Toussaint-Samat in her History of
Food, "They poured a mixture of snow and saltpeter over the
exteriors of containers filled with syrup, for, in the same way as
salt raises the boiling-point of water, it lowers the freezing-point C
to below zero." The author charters the evolution of "ice cream"
in the landmark work from its primitive syrupy form to its
contemporary status with more than hundred different forms,
and categorizes 'soft serve' as one such form.
37. Noted author C. Clarke states the following in "The D
Science of Ice Cream":
"The legal definition of ice cream varies from country to
country. In the UK 'ice cream' is defined as a frozen food
product containing a minimum of 5% fat and 7.5% milk E
solids other than fat (i.e. protein, sugars and minerals),
which is obtained by heat-treating and subsequently
freezing an emulsion of fat, milk solids and sugar (or
sweetener), with or without other substances. 'Dairy ice
cream' must in addition contain no fat other than milk fat,
with the exception of fat that is present in another F
ingredient, for example egg, flavouring, or emulsifier.' In the
USA, ice cream must contain at least 10% milk fat and
20% total milk solids, and must weigh a minimum of 0.54
kg !-'.Until 1997, it was not permitted to call a product 'ice
cream' in the USA if it contained vegetable fat. G
Ice cream is often categorized as premium, standard or
economy. Premium ice cream is generally made from best
quality ingredients and has a relatively high amount of dairy
fat and a low amount of air (hence it is relatively H
396 SUPREME COURT REPORTS [2012] 11 S.C.R.
A expensive), whereas economy ice cream is made from
cheaper ingredients (e.g. vegetable fat) and contains more
air. However, these terms have no legal standing within the
UK market, and one manufacturer's economy ice cream
may be similar to a standard ice cream from another."
B
Therefore, while some authorities are strict in their
classification of products as "ice cream" and base it on
milk fat content, others are more liberal and identify it by
other characteristics. There is, thus, no clear or unanimous
view regarding the true technical meaning of "ice cream·.
c In fact, there are different forms of "ice cream" in different
parts of the world that have varying characteristics.
38. On the basis of the authorities cited on behalf of the
assessee, it cannot be said that "ice cream" ought to contain
D 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 of "ice
cream" that distinguishes it from other products like 'soft serve',
we do not see why such a definition must be resorted to in
E 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
F times rather than being held entirely inapplicable. It is for
precisely this reason that this Court has repeatedly applied the
"common parlance test" every 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
G which it is understood in common parlance.
39. Learned counsel for the assessee had strongly relied
on Akbar Badrudin Giwani (supra) to buttress his claim, that in
matters pertaining. to classification of commodity taxation,
technical and scientific meaning of the product will prevail rather
• H than the commercial parlance, and hence on this basis,
COMMNR. OF CENTRAL EXCISE, NEW DELHI v. 397
CONNAUGHT PLAZA REST. (P) LTD., N.D. (D.K. JAIN, J.]
headings 04.04 and 21.05 were to be harmoniously construed A
so that 'soft serve' would be classified under heading 04.04.
We are afraid, reliance on this judgment is misplaced and out
of context. It would be useful to draw a distinction between the
contexts of Akbar Badrudin Giwani (supra) and the present
factual matrix. B
40. In Akbar Badrudin Giwani (supra) the issue was
whether the slabs of calcareous stones (which were in
commercial parlance known as marble) being imported by the
Appellant were to be regarded as "marble" under Item No.
62 of the List of Restricted Items, Appendix 2, Part 8 of Import C
and Export Policy given that Item No. 25.15 (Appendix 1-B,
Schedule I to the Import (Control) Order, 1955 referred to
"marble, travertine, ecaussine and other calcareous
monumental or building stone of an apparent specific gravity
of 2.5 or more and Alabaster .. .". Hence, the controversy D
revolved around whether "marble" should be construed in its
scientific and technical meaning, or according to its commercial
understanding, in order to determine whether the appellant's
goods would come within the ambit of Entry No. 62 of List of.
Restricted Items. The Court examined both the entries and E
opined that Item No. 25.15 referred specifically not only to
marble but also to other calcareous stones having specific
gravity of 2.5, whereas, Entry No. 62 referred to the restricted
item "marble" only. The content cif Item No. 25.15 had been
couched in scientific and technical terms and therefore, F
"marble" had to be construed according to its scientific meaning
and not in the sense as commercially understood or meant in
trade parlance. Hence, in this context this Court held that the
general principle of interpretation of tariff entries is of a
commercial nomenclature but the said doctrine of commercial G
nomenclature or trade understanding should be departed from
in a case where the statutory content in which the tariff entry
appears, requires such a departure. In other words, a trade
understanding or commercial nomenclature can be given only
in cases where the word in the tariff entry has not been used in H
398 SUPREME COURT REPORTS [2012] 11 S.C.R.
A a scientific or technical sense and where there is no conflict
between the words used in the tariff entry and any other entry
in the Tariff Schedule. Thus, these observations of the Court
were made in a context where one of the tariff entries was
couched in a scientific and technical sense and had to be
B harmonized with the other entry. It would have run counter to the
statutory content of the legislation, to construe the term "marble"
in its commercial sense.
41. It is significant to note that the question of classification
of 'soft serve' is based on a different set of facts in a different
c context. Heading 21.05 which refers to "ice cream and other
edible ice" is not defined in a technical or scientific manner,
and hence, this does not occasion the need to construe the term
"ice-cream" other than in its commercial or trade understanding.
Since, the first condition itself has not been fulfilled; the question
D 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.
E
42. Learned counsel for the assessee had vociferously
submitted that the common parlance understanding of "ice-
cream" can be inferred by its definition as appearing under the
PFA. According to Rule A 11.20.08 the milk fat content of "ice-
F cream" and "softy ice-cream" shall not be less than 8% by
weight. Hence, according, to the learned counsel, the term "ice-
cream" under heading 21.05 had to be understood in light of
the standards provided in the PFA, more so when selling "Ice-
cream" with fat content of less than 10% would attract criminal
G action, as held in Baburao Ravaji Mharulkar (supra).
43. 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
H another statute. As aforesaid, the object of the Excise Act is
COMMNR. OF CENTRAL EXCISE, NEW DELHI v. 399
CONNAUGHT PLAZA REST. (P) LTD., N.D. [D.K. JAIN, J.]
to raise revenue for which various goods are differently A
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 for non-levy of excise duty, thereby
causing a loss of revenue. [See: Medley Pharmaceuticals B
Limited Vs. Commissioner of Central Excise and Customs,
Oaman15 and Commissioner of Central Excise, Nagpur Vs.
Shree Baidyanath Ayurved Bhavan Limited1 6]. The provisions
of PFA, dedicated t°' food adulteration, would require a
technical and scientific understanding of "Ice-cream" and thus, C
may require different standards for a good to be marketed as
"ice-cream". These 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 D
goods mentioned in the Tariff Act, the purpose and object of
which is completely different.
44. Learned counsel for the assessee also contended that·
based on Rule 3(a) of the General Rules of Interpretation which
states that a specific entry shall prevail over a general entry, E
'soft serve' will fall under heading 04.04 since it is a specific
entry. We do not see any merit in this contention. The learned
counsel for the assessee had himself contended that "ice-
cream" was a dairy product and would have been classified
under heading 04.04 if heading 21.05 had not been inserted F
into the Tariff Act. However, in the presence of heading 21.05,
"ice-cream" cannot be classified as a 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 G
regarded as a specific entry under Rule 3(a) of the General
Rules of Interpretation, since such an interpretation would be
1s. c2011i 2 sec 601.
16. c2009) 12 sec 419. H
400 SUPREME COURT REPORTS (2012] 11 S.C.R.
A contrary to the statutory context of heading 21.05. In conclusion,
we reject the view taken by the Tribunal and hold that 'soft serve'
is to be classified as "ice-cream" under heading 21.05 of the
Act.
45. At this stage it may be relevant to refer to Trade Notice
8 No. 45/2001 dated 11th June, 2001 of Mumbai
Commissionerate IV which came to our notice. According to
the said notification, "softy ice-cream/soft serve" dispensed by
vending machines, sold and consumed as "ice-cream", is
classifiable under Entry 21.05 of the Act. The same is
C reproduced below:
"Classification of Softy Ice Cream being sold in
restaurant etc. dispensed by vending machine -
[Mumbai Commissionerate IV Trade Notice No.45/2001,
D
dt. 11.6.2001]
Ice Cream dispensed by vending machine falling
under chapter 21 has been made liable to nil rate of duty
vide SI. No.8 of Notification No.3/2001-CE dated 1.3.2001.
E
Doubts have been raised as regards to the
classification of softy ice cream/soft serve dispensed by
vending machine and soft serve mix used for its
manufacture prior to 1.3.2001. A manufacturer was
obtaining soft serve mix and processing it in his restaurant
F
for manufacture of softy ice cream. The process involved
lowering of temperature so that it changes its form from
liquid to semi-solid state and incorporation of air, which
results in production of overrun, in Tylor Vending Machine.
G The product that emerges after this process is a
completely different product and is ready to be consumed
immediately. It has all the ingredients of an ice cream. The
product is sold and consumed as ice cream.
H In the circumstances, it is clarified by the Board that
COMMNR. OF CENTRAL EXCISE, NEW DELHI v. 401
CON NAUGHT PLAZA REST (P) LTD., N.D. [D.K. JAIN, J.]
softy ice cream is correctly classifiable under heading A
21.05 of Central Excise Tariff. As per HSN Explanatory
Notes, heading 19.01 also cover mix bases (e.g. powders)
for making ice cream. It has been further clarified that soft
serve mix will be correctly classifiable under heading
19.01. B
All the trade associations are requested to bring the
contents of this trade notice to the attention of their
member manufacturers in particular, and trade in general.
Sd/- C
(Neelam Rattan Negi)
Commissioner
Central Excise, Mumbai-IV"
While it is true. that the trade notice is not binding upon this
Court, it does indicate the commercial understanding of 'soft- D
serve' as 'softy ice- cream'. Further, as this trade notice is in
no way contrary to the statutory provisions of the Act, we•see
no reason to diverge from what is mentioned therein.
46. In view of the aforegoing discussion, we are of the E
opinion that the Tribunal erred in law in classifying 'soft-serve'
under tariff sub-heading 2108.91, as "Edible preparations not
elsewhere specified or included", "not-bearing a brand name".
We hold that 'soft serve' marketed by the assessee, during the
relevant period, is to be classified under tariff sub-heading
2105.00 as "ice-cream".
F
47. Lastly, learned counsel for the assessee had also
contended that in the event 'soft serve' was classifiable under
heading 21.05, the assessee was entitled to the benefit under
Notification No. 16/2003-CE (NT) dated 12th March 2003. The G
notification reads:
"Notification: 16/2003-C.E. (N.T.) dated 12-Mar-2003
Softyicecream and non- alcoholic beverage
dispensed through vending machine H
402 SUPREME COURT REPORTS [2012) 11 S.C.R.
A .:xempted during period 1-3-1997 to 28-2-2001
Whereas the Central Government is satisfied that a
practice that was generally prevalent regarding levy of duty
of excise (including non-levy thereof) under section 3 of the
Central Excise Act, 1944 (1 of 1944) (hereinafter referred
B
to as the said Act), on softy ice cream and non-alcoholic
beverages dispensed through vending machines, falling
under Chapters 20, 21 or 22 of the First Schedule to the
Central Excise Tariff Act, 1985 (5 of 1986), and that such
softy ice cream and non-alcoholic beverages dispensed
c through vending machines were liable to duty of excise
which was not being levied according to the said practice
during the period commencing on and from the 1st day of
March, 1997 and ending with 28th February, 2001.
D Now, therefore, in exercise of the powers conferred
by section 11 C of the said Act, the Central Government
hereby directs that the whole of the duty of excise payable
on such softy ice cream and non alcoholic beverage
dispensed through vending machines, but for the said
E practice, shall not be required to be paid in respect of such
softy ice cream and non alcoholic beverages on which the
said duty of excise was not being levied during the
aforesaid period in accordance with the said practice."
48. We are afraid we are unable to take this argument into
F 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
G 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
H
COMMNR. OF CENTRAL EXCISE, NEW DELHI v. 403
CONNAUGHT PLAZA REST. (P) LTD., N.D. [D.K. JAIN, J.]
the sake of argument, even if we assume that this ground had A
been urged before the Tribunal, in our view, learned counsel's
reliance 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 B
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 'soft serve' was classifiable under
heading 21.05 and attracted duty@ 16%. The show cause c
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, the
assessee's case does not fall within the ambit of the said
0
notification and is not eligible for the exemption granted to "softy
ice-cream", dispensed through a vending machine for the
relevant period.
49. For the view we have taken, it is unnecessary to
examine the issue whether the product in question bears a E
brand name.
50. Resultantly, the appeals are allowed and the impugned
orders of the Tribunal are set aside, leaving the parties to bear
their own costs. F
B.B.B. Appeals allowed.
Search Indian case law
Ask in plain English, not just keywords. 25,000 AI words free, no card.
Try "excise classification"Sign in to search