Per Shri T.P. Nambiar :

This appeal is filed by the appellants against the order passed by the CCE, Bangalore in order No. 57/91 dated 20.10.91. The facts of the case are that the Preventive Officers of the Central Excise, Bangalore got information that the appellants were manufacturing branded goods i.e. honeyrex and cleared the same without following the Central Excise procedure, without payment of duty. The officers visited the factory and took statement from Ajaypal Singh, Manager who stated that their product Honeyrex is not an excisable commodity. Show cause notice was issued to the appellants requiring them to show cause as to why central excise duty of Rs. 6,68,033 should not be demanded from them for the clearances of the goods during the period 86-87 to 90-91. The appellants in their reply stated that honeyrex is nothing but honey added with sucrose and glucose and then addictives are added for preserving the honey. Therefore, no new product emerged and the characteristics of the product manufactured by them is also that of honey and longer period of limitation cannot be invoked in their case and that the demand is barred by limitation. The learned adjudicating authority held that a new product has emerged and therefore the department classified the honeyrex manufactured by the appellants under sub-heading 1702.30 but the appellants sought classification of the product under heading 2107.91. Since the demand was confirmed, this appeal has been filed.

2. Shri Srinivasa Raghavan, learned Counsel appearing for the appellants contended before us that there is no manufacturing involved in this case. It is stated that there is only mixing of natural honey with sucrose and glucose. It was therefore, contended that mixing of honey with sugar and glucose does not result in a new product and it is only honey before and after the mixing and it has the same characteristics and end-use. It was therefore, stated that addition of sucrose and glucose are only for stabilising and preserving the form of honey. It was further pointed out that if any one were to ask for honey in the retail shop what is made available is honeyrex and chemical report will also show the same as honey. It was further stated that there is no suppression of material fact. He further pointed out that even if the appellant's case is not accepted, it will not be possible for them to recover the duty demanded in the order and the same should be treated as cum duty price and as per Section 4 of CEA 1944, the value has to be re-determined based on the normal cum duty price as under :

He has pleaded that the Collector merely brushed aside this contention holding that CEGAT decision in this regard is not produced. He pointed out that even if CEGAT decision is not produced, the Collector should have given a reasoned finding in this regard.

3. Shri S. Murugandi, the learned DR on the other hand contended before us that mixing of honey with sucrose and glucose resulted in a new product and the new product cannot be said to be natural honey. He, therefore, pointed out that honey is specified under heading 1702.30. He pointed that as per rule 3A for the interpretation of schedule of heading which provides that the next specified description shall be preferred. So far as the suppression aspect is concerned, no classification list was filed by the appellant. So also no declaration has been filed and no excise officials visited their factory during the relevant time. The appellants without intimating the department has cleared the goods with an intent to evade payment of duty and the extended period of limitation is invokable in this case. He also contended that re-working of the value is not permissible in the facts and circumstances of this case.

4. We have considered the submissions made by both the sides. The first point to be determined in this case is whether any new product has emerged and whether the process undertaken by the appe