Case Law Details
M/s Bharat Hotel Limited Vs CCE (CESTAT Delhi)
On the main issue regarding the excisability of various food preparations made in the kitchen of the appellant and served to the customers, we have examined the various tariff entries from Chapter 16 to Chapter 20. The method of preparation of various food items now under consideration is of common knowledge. As correctly contended by the learned AR, it is nobody case that prepared fish or chicken curry ready to serve is can be equated to a raw fish or a chicken curry + some spices. The starting point with various ingredients and the ending point with combination of these ingredients involving different duration of preparation requiring heating, boiling and various other processes will certainly result in the new identifiable and marketable prepared food. The test laid down by the Hon’ble Supreme Court in Delhi Cloth and General Mills Co. Ltd. (supra) case is fully satisfied in such situation. The duration of shelf life by itself will not decide the marketability or excisability. This has been a well settled principle by the Apex court. What is needed is to see whether a new, commercially identifiable product emerged after processes undertaken on the raw materials which are distinct from the finished product. We have no hesitation to hold that the finished products, in the present case are different types of food preparations and are new marketable products and are liable to excise duty subject to due classification as available in the Central Excise Tariff.
FULL TEXT OF THE CESTAT JUDGMENT:-
The appellant is aggrieved by the order dated 16/08/2017 of Commissioner (Appeals), Central Excise, New Delhi. The appellant is managing hotels and restaurants. They were providing rooms for rent and also various food items, cakes, pastries, cookies, confectionary to the customers in their restaurants. The dispute in the present case is with reference to non-payment of Central excise duty on pastry, cakes, biscuits, cookies, chocolates etc. cleared by the appellant during the financial year 2003-2004 to 2005-2006. The Revenue held a view that since the appellants were engaged in preparing variety of food items using meat, vegetables, pulses etc. and these items being exempted from payment of Central excise duty, while calculating the aggregate value of clearances for SSI exemption under Notification 8/2003 dated 01/03/2003, the gross value of all products is to be considered. In other words, the appellants were held to be liable to pay Central excise duty on the dutiable pastry, cakes, biscuits, cookies etc. as their gross turnover (dutiable + exempted goods) exceeded 300 lakhs in the previous base year. The lower authorities confirmed Central excise duty liability of Rs. 6,41,711/- and imposed equal amount of penalty under Section 11AC of the Central Excise Act, 1944.
2. The learned Counsel appearing for the appellant submitted that for levy of excise duty an article must be ‘goods’ and such goods must be excisable under heading listed in the Central Excise Tariff Act. The lower authorities erred in holding that cooked food is covered under Chapter 16 to 20 of the Tariff without providing specific tariff heading under which food cooked in the kitchen is liable for duty. The learned Counsel submitted that the lower authority made their general observation regarding the products prepared in the kitchen of the appellant as excisable under various headings falling under chapter 16 to 20 of the Tariff. No detailed finding regarding the actual nature of goods classifiable under specific tariff heading and the process of such preparation satisfying the concept of “manufacture” under Central Excise law was recorded. The learned Counsel contended that food prepared in the hotel kitchen cannot be considered as manufactured item as they do not have shelf life and are not marketed as commonly understood. The chapter heading which were relied on by the lower authorities were mainly meant for preserved and packed food that were sold from the shelf having considerable shelf life. The food cooked by the appellant in the kitchen is on specific orders. These cannot be sold to anybody. These food items prepared without any preservative cannot be sold in the open market over the counter. Hence, the test of marketability to determine the excisability will not be satisfied in the present case.
3. The learned Counsel also contested the demand on limitation as well as for imposition of penalty. Reliance was placed on large number of decided cases.
4. The learned AR supported the findings of the lower authorities. He submitted that the food items prepared in the kitchen of the appellant are actually undergoing process of manufacture. The item which emerges after cooking or preparation is specifically identifiable and is known in the market. The claim of the appellant that cereals, pulses, chicken, fish and vegetable do not undergo any change to become a new edible food product is factually incorrect. It is nobody case that the chicken/meat is similar to the cooked chicken curry. These are not inter-changeable items and are not emerging on reversible process. Upon cooking or preparation by adding various ingredients in required proportion and undergoing specified preparation process the end product is certainly a distinct product having distinct name, use and character. The test as laid down by the Apex court in Union of India vs. Delhi Cloth and General Mills Co. Ltd. – (1977) 1 E.L.T. (J199) S.C.. He satisfied in the process of making prepared edible food in the restaurant. Regarding marketability it is clear that these food items are known and most of them are disclosed in the printed menu of the appellant. The short shelf life of the prepared food by itself will not make it a non-marketable product. The fact that listed menu items and various specific food preparations were made and were given to another person who consumes the same clearly shows that there is a market and there is a duration of existence of shelf life for the said product. Accordingly, the learned AR supported the findings of the lower authorities.
5. We have heard both the sides and perused the appeal record. On the main issue regarding the excisability of various food preparations made in the kitchen of the appellant and served to the customers, we have examined the various tariff entries from Chapter 16 to Chapter 20. The method of preparation of various food items now under consideration is of common knowledge. As correctly contended by the learned AR, it is nobody case that prepared fish or chicken curry ready to serve is can be equated to a raw fish or a chicken curry + some spices. The starting point with various ingredients and the ending point with combination of these ingredients involving different duration of preparation requiring heating, boiling and various other processes will certainly result in the new identifiable and marketable prepared food. The test laid down by the Hon’ble Supreme Court in Delhi Cloth and General Mills Co. Ltd. (supra) case is fully satisfied in such situation. The duration of shelf life by itself will not decide the marketability or excisability. This has been a well settled principle by the Apex court. What is needed is to see whether a new, commercially identifiable product emerged after processes undertaken on the raw materials which are distinct from the finished product. We have no hesitation to hold that the finished products, in the present case are different types of food preparations and are new marketable products and are liable to excise duty subject to due classification as available in the Central Excise Tariff.
6. We note that though on merit, in principle, we have held that various food preparations prepared and sold by the appellant in their restaurants or liable to the considered as excisable products, the identity of various such products as per the tariff entries have not been made by the lower authorities. Before actually proceeding with the quantification of the turnover which include the value of these items, it is necessary to identify the various tariff items under which these food preparation will fall. A summary conclusion that the various food preparations made and sold by the appellants in their kitchen/restaurants are generally covered by the Chapters 16 to 20 will not meet the legal requirement of applying the provisions of Notification 8/2003. The gross turnover to arrive at the exemption limit for the base year has to be reckoned considering value of each one of the manufactured and cleared items which are subjected to excise levy. Such products actually may be liable to duty or may be exempted fully from duty. Identification of all excisable goods manufactured and cleared by the appellant alongwith applicable value is a basic requirement before applying the provision of Notification 8/2003 and to arrive at duty liability of non-exempted goods cleared by the appellant. We note that this aspect requires re-examination by the Original Authority.
7. In view of the above discussion and analysis, we note that the matter has to go back to the Original Authority for a clear finding keeping in view the observations, as above. The appeal is allowed by way of remand.
(Order pronounced in open court on 13/02/2018.)
