# 11 S.C.R. 365 COMMISSIONER OF CENTRAL EXCISE, NEW DELHI v. MIS. CONNAUGHT PLAZA RESTAURANT (P) LTD., NEW DELHI

- **Citation:** [2012] 11 S.C.R. 365
- **Court:** Supreme Court of India
- **Decided:** 2012-11-27
- **Case number:** Civil Appeal Nos.5307-5308 of 2003
- **Bench:** D.K. Jain, Jagdish Singh Khehar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/11-s-c-r-365-commissioner-of-central-excise-new-delhi-v-mis-connaught-plaza-28007
- **Pages:** 39

## Headnote

A
B
Central Excise and Tariff Act, 1985 -
Chapter 21,
Heading 21.05 - "Soft serve" - Classification - Term "iceC
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
H
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
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 "icecream" 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

## Text

_Characters 0–39,884 of 74,472. This is a partial read: ask again with offset=39884 for what follows._

[2012) 11 S.C.R. 365
COMMISSIONER OF CENTRAL EXCISE, NEW DELHI
v.
MIS. CONNAUGHT PLAZA RESTAURANT (P) LTD., NEW
DELHI
(Civil Appeal Nos.5307-5308 of 2003)
NOVEMBER 27, 2012
[D.K. JAIN AND JAGDISH SINGH KHEHAR, JJ.]
A
B
Central Excise and Tariff Act, 1985 -
Chapter 21,
Heading 21.05 - "Soft serve" - Classification - Term "iceC
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
H
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
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 "icecream" 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
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
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
understanding of such goods. [Para 15] [384-B-C]
D
E
F
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 "icecream" 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 "iceE 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 "icecream", '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 "icecream" 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
8 contain more than 10% milk fat content and must be
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 "icecream". 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]
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
E
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, "icecream" 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 'softserve' 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 "icecream". [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,
40,41
1993 (3) SCR 378
relied on
Paras 16, 18
(1951) C.L.R. (Ex. Court) 122 referred to Para 19
G
H
A
B
c
D
E
F
G
H
376
SUPREME COURT REPORTS
[2012] 11 S.C.R.
(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
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
(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
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.
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
C.A. No. 8097 of 2004.
R.P. Bhatt, Arijit Prasad, Shalini Kumar, Yatinder
Chaudhary, AK. Sharma for the Appellant.
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
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, subheading 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 subheading 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 "icecream", 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 "icecream". According to the learned counsel 'soft serve icecream', '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%.
H
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
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
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
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,
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
A
B
c
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 "ice1.
(1984) 4 sec 540.
. 2.
(1990) 2 sec 203.
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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.
D
E
F
G
H
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.
"Chapter 4
Dairy Produce, etc.
312
04.04
Other dairy produce;
Edible products of
animal origin, not
elsewhere specified
or included
-Ghee:
0404.11
-Put up in unit
Nil
containers and
bearing a brand
name
0404.19
--Other
Nil
0404.90
--Other
Nil
COMMNR. OF CENTRAL EXCISE, NEW DELHI v.
383
CONNAUGHT PLAZA REST. (P} LTD., N.D. [D.K. JAIN, J.)
Heading . Sub-.
Description of
Rate of duty
A
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".
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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.
D
E
F
G
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:
"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, subheading under which the identified goods/products would
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
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
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.]
***
***
***
... 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
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
A
8
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 "icecream" in heading 21.05 includes within its ambit the product
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[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.