Godrej Foods vs Central Excise

Godrej Foods vs Central Excise
KRISHAN MAHAJAN

OCT 14: Frooti, Maza or Lipton Tree Top are not fruit juices. They are simply non-alcoholic beverages. This is so because these drinks are some fruit juice, lots of water with or without some chemical add-ons. The Delhi CEGAT bench has declared this in the case of Godrej Foods Ltd vs Commissioner of Central Excise. Accordingly as non-alcoholic beverages all these drinks must attract a higher rate of excise duty. The middle class consumer who latches on to these drinks in place of fruit or neat fruit juice must pay a higher price for putting into himself watery and for chemicalised fruit juice.

The issue arose before the bench about the classification of the Lipton Tree Top drink manufactured by Godrej Foods Ltd, formerly known as Noble Soya Hoiuse Ltd. The fruit drink comes in different flavours - mango, apple, guava and orange. According to Godrej, all these drinks have 70 per cent water added to the respective fruit pulp or concentrate. The fruit pulp or concentrate is only 15.18 per cent for mango drink, 19.32 per cent for apple drink, 15 per cent of guava drink and 15.6 per cent for orange drink. Sugar to the extent of 13.44 per cent is added in the apple and orange drinks. The sugar added to the mango and guava drink is to be extent of 14.7 per cent.

Apparently for quite some time Godrej was paying lesser excise duty by having Lipton Tree Top drinks classified as fruit juices. On a reclassification the Assistant Collector Excise, Bhopal held that this drink was not fruit juice but a preparation resulting in a ready to serve beverage. The starting point for manufacture was the orange juice concentrate, apple juice concentrate, guava pulp and mango pulp or mango concentrate. While the pulp and pulp concentrate were subjected to grinding and homogenisation, the juice concentrate was subjected to reconstitution. This was then blended with sugar, additive and preservatives. The Collector of Central Excise (Appeals) rejected the prayer of Godrej for setting aside the order of the Assistant Collector.

In its appeal before the Central Excise Tribunal, Godrej contended that its drinks should continue to be classified under Central Excise Tariff heading 20.01, that it is preparations of fruit, fruit juices, whether or not containing added sugar or other sweetening matter put up in unit containers for sale. It could not be classified under Central Excise Tariff heading 22.02 -- other non-alcoholic beverages not including fruit juices of heading 20.01.

But the technical member Lajja Ram and the judicial member P S Bajaj of the CEGAT bench rejected this by an examination of the Central Food Technological Research Institute Laboratory report, the Prevention of Food Aduleration Act, the Fruit Products Order and the Harmonised System of Nomenclature (HSN). The bench held that the 1995 Supreme Court decision in Collector of Central Excise vs Wood Craft Products had clearly laid down that any dispute relating to tariff classification must as far as possible be resolved with reference to the nomenclature indicated by HSN. The HSN classification should be followed unless an express different intention is expressed by the Central Excise Tariff Act, 1985. The HSN Explanatory Notes specifically started that fruit juices are juices generally obtained by pressing fresh, healthy ripe fruits. Juice reconstituted from frozen or non-frozen concentrate should not contain a quantity of water exceeding that in non-concentrated juice of normal composition. If it does then it isno longer fruit juice but a diluted beverage. Under the Prevention of Food Adulteration Act, fruit juice means unfermented and unconcentrated liquid extracted from sound ripe fresh fruit. Under the Fruit Products Order fruit juice is unconcentrated liquid product from fresh fruit. Hence Lipton Tree Top drinks were beverages and not fruit juice.

The decision seems to put a question mark on what is being marketed in the name of orange and apple juice by adding water to imported juice concentrates and calling it natural juice. Are multinationals and Indian companies marketing such juices taking the middle-class uneducated consumer for a ride?