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D. Murali

MARK Twain said, "It's not the size of the dog in the fight, it's the size of the fight in the dog." One can say that of litigation too. For, at times, the size of the fight in the case, rather than the size of the case in the fight, can take it all the way to the apex court.

And, that's what happened in the Commissioner of Central Excise, Pune vs Abhi Chemicals and Pharmaceuticals P Ltd, a case that was reported in the latest issue of Supreme Court Revenue Cases.

Abhi manufactures Dailymix, Briplex and Recovit. For the purpose of excise, it classified these products under chapter heading 23.02— "preparations of a kind used in animal feeding, including dog and cat food"— and cleared the products at `nil' rate of duty.

Excise officials studied the items and said that the first two were correctly classified, but not the third. Recovit, they said, should be put under 2936.00, a chapter heading that reads: "Provitamins and vitamins, natural or reproduced by synthesis (including natural concentrates), derivatives thereof used primarily as vitamins, and intermixtures of the foregoing, whether or not in any solvent". This suffered a duty of 15 per cent.

The judgment includes the "outline of manufacturing process" of Recovit, and makes it interesting reading.

"Step 1: Mix Vit A, Vit E, Vit D3, BHA and BHT in a vessel.

"Step 2: Warm Tween - 80 up to 40 degree Celsius and add to it mixture Number 1 in a thin stream. Stir well.

"Step 3: Add Glycerine in a thin stream with stirring in 2.

"Step 4: Take 60 litres of water (D'mineralised) add to it Sodium Ascorbate. Dissolve it completely adjust FH to 6.0 with Glacial Acetic Acid add this solution to main solution. Stir for 15 minutes. Filter, then add Vit B12 (prepare with small quantity of D.M. water and add to main solution). Product is kept overnight and ready for filling."

A sample was sent to the Deputy Chief Chemist of the Central Excise laboratory who on testing it reported that Recovit could be considered an organic chemical (intermixture of vitamins).

This became the peg for the Department's rejection of Abhi's stand. Though it is highly unlikely that cats and dogs would have found the feed less edible, whether the taxman called it organic chemical or whatever, to Abhi, however, it made a difference in terms of duty liability.

So, it approached the Commissioner (Appeals) with a wail, who opined that the company's classification was okay. But that made the Department go on appeal before the Tribunal.

The Tribunal found it unacceptable that Recovit can be called merely a mixture of vitamins. It said that a product containing "other things such as anti-oxidants, solvents, stabilisers and used as animal feed" should go under 23.02, as Abhi had classified. Aggrieved by the order of the Tribunal, the Revenue knocked the doors of the apex court. Arguing for the company, Makarand D. Adkar said that the product was used as animal feed only and was meant for consumption by animals; it was not fit for human consumption. "Once the powder is meant for use as an animal feed supplement, it should be classified under chapter sub-heading 2302," said Adkar.

But the Department's counsel R. Venkataramani brought up a trade notice issued by the Collector of Central Excise and Customs, Pune, in 1990, on the very subject of the current classification dispute.

The notice had stated: "Animal feed supplements which are just intermixture of vitamins only and that there are no other ingredients except solvents, stabilisers or anti-oxidants are specifically covered under, heading 29.36 of C.E.T. as intermixture of vitamins.

"Even though they are used as animal feed supplements, they can be classified under heading 23.02 as preparations of kind used in animal feeding, because this is a general heading. Intermixture of vitamins are specified in so many words in heading 29.36 and accordingly products of the type referred above are correctly classifiable under heading 29.36."

If you're a bit confused by the taxman's drafting skills, know that it's just normal and that you aren't alone. Take it easy, therefore, drawing solace from a `pet' quote of Robert A. Heinlein, "Women and cats will do as they please, and men and dogs should relax and get used to the idea."

Tracing the genealogy of the trade notice, you'd learn that it had a predecessor in the form of a circular from the Central Board of Excise and Customs, which had observed, "Animal feed supplements which are just intermixtures of vitamins only without other ingredients, except solvents, stabilisers or anti-oxidants, cannot be classified under heading 23.02 even though they are used as animal feed supplements."

The Board had, thus, observed that such intermixtures of vitamins are specifically covered under heading 29.36.

However, there were complaints from the trade that "animal feed supplements use vitamins, pro-vitamins, amino-acids, antibiotics, `coccidiostats' and so on in very small quantities (micro-quantities) and that the feed supplements contain other organic and inorganic feed ingredients as well".

Such micronutrients "do not have any independent identity as pure chemicals," argued the trade; also, "they cannot be easily separated into individual pure chemicals nor do they conform to standards laid down for medicaments."

To respond to these grievances, the Board came out with another circular in 1996, where it recognised that `premixes' are "a compound composition consisting of a number of substances — each type of these substances being present in the `premix' in varying propositions to serve a particular purpose."

And that premixes contain, not only active substances such as vitamins, amino-acids, stabilisers and so on, but also "certain organic or in-organic nutritive substances known as carriers which help in homogeneous dispersion and mixing of the active substances in the compound feeds".

These feeds fall under 23.02, said the circular, modifying the 1990 stand that stood in the way of companies such as Abhi.

Justices S. N. Variava, A. R. Lakshmanan and S. H. Kapadia of the Supreme Court cited an earlier decision in Collector of Central Excise, Bangalore vs Tetragon Chemie P Ltd, and ruled that the product of Abhi was animal feed supplement that deserved to be classified under 23.02, as done by the company.

"The cat will mew and dog will have his day," is a Hamlet quote that Abhi would have well remembered, though the decision would have made the taxman a "cat, with eyne of burning coal," that "now crouches fore the mouse's hole," as in Pericles, Prince of Tyre.

Tailpiece

"More than 20 States will switch over to VAT from April 1... "

"As for the rest, they say, it's going to be VAIT."

Detaxification@TheHindu.co.in

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