The Supreme Court will not decide as to which of two entries in the Central Excise Tariff Act covers the product manufactured by an assessee. When such a problem arises it will simply adopt the view of the Tribunal in favour of the excise authorities. This is the clear message sent out by the Supreme Court's decision in Dalmia Dairy Industries Ltd. v/s Collector. The judgement is by a bench presided over by Justice S P Bharucha. Hence, unlike the legal position in other revenue laws, under the excise law the benefit of doubt will not be in favour of the assessee when the apex court concludes that `either of the two entries could be applied to the product in question.' One entry attracts nil excise duty and the other 20 per cent.Dalmia Dairy was manufacturing a product called Active-25. Its composition was: 53.5 pc skimmed milk, 17 pc milk fat, 10 pc sugar, 7 pc cocoa, 10 pc malt and 2.5 pc vitamin, minerals and moisture. The manufacture was done by receiving the fresh milk in their factory from milk collection centres and bulk vendors. It was tested for fat and other contents. Then the milk was put in a cream separator to separate the cream from the milk and standardise the fat in the milk to 17 pc. After pasteurisation, boiled syrup of sugar with malt extract is added so that each constitutes ten per cent of the weight of the final product. Finally, cocoa powder is added to the extent of 7 pc and the product homogenised to make it digestible.There were two rival entries under the Tariff Act which could cover Active-25. One under chapter-4 was `Flavoured milk whether sweetened or not,' or, `other dairy produce not elsewhere specified or included.' Under the latter entry under the heading `Milk and cream concentrated or containing added sugar or other sweetening matter', the rate of excise duty was nil. The competing entry under Chapter-19 was under the head `Malt extract, food preparations of malt extract, containing cocoa powder in a proportion by weight of less than fifty per cent not elsewhere specified or included; food preparations of milk and cream, containing cocoa powder in a proportion by weight of less than ten per cent, not elsewhere specified or included.' The rate of excise duty under this head was twenty per cent.The two competing entries raised the issue before the Tribunal as to whether Active 25 was a milk product or a food preparation of milk and cream. The Tribunal held that the first entry could not cover the product in question as it could not fall under Chapter 4 relating to `milk and cream, concentrated or containing sugar other sweetening agents.' This was so because milk had been defined in Note (1) to Chapter 4 as `full cream or partially or completely skimmed milk.' The product was not in the essential nature of either milk or skimmed milk powder. It was a product based on skimmed milk powder. Regarding the other entry under this Chapter, `dairy product not elsewhere specified,' the Tribunal agreed that as per Note 4 to this Chapter it covered products consisting of natural milk containing sugar, flavour and cocoa. However it ruled out coverage under this entry of Chapter 4 on the ground that the Harmonised Commodity Description and Coding System (Explanatory Note to Chapter 4) excludes food productsbased on dairy products and in particular those falling under Chapter 19. The issue raised by this was whether Active-25 was a food product. However the Tribunal did not examine this.The Tribunal mentioned that it had specifically raised a query as to whether malt was a flavouring agent. In response technical literature showing it to be flavouring agent was produced from the Central Food Technological Research Institute. However, looking into another book produced by the revenue authorities on `Nutritive Value of Indian Foods' the Tribunal concluded that the product Active-25 was only a balanced food. But no reasoning was given by the Tribunal for choosing the finding of one technical literature than the other and coming to this conclusion. The rival literature again raised the issue of whether Active-25 was a food, which issue unfortunately the Tribunal left unexamined.The questions that arose from this judgement in the appeal before the apex court were crucial to the entire industry producing products by using milk as a base. The search for an answer required probing into the meaning and sense of words like dairy produce and food products, the effect of combinations for purposes of marketing and the principles of classifying such combinations.Instead it seems that the apex court simply abandoned the judicial function of deciding between two admittedly equally applicable entries with financial consequences ranging from nil to 20 per cent duty. No reasons were given for upholding the view of the Tribunal. Instead the apex court in the concluding portion of its short order simply stated `we see no reason to interfere with the order of the Tribunal.' Can the rule of law, which is based on reason, be `no reason', when ultimately it is the consumer who will get a costlier product?
