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Excise - Urgent

CA Manish K Dhoot (CA, B. Com, NCFM, CPCM) (5015 Points)

03 April 2010

Whether excise duty is leviable or not on Unbranded Namkeen and bhujia manufactured ?

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3 Replies

CA Ayush Agarwal (Kolkata-Pune-Mumbai) (27191 Points)
Replied 03 April 2010

as per mu knowledge.yes its applicable......

other view are solicited

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Ratan Deep Saxena (Asstt Manager (Accounts & Finance)) (2998 Points)
Replied 03 April 2010

CASE NO.: Appeal (civil) 8595-8596 of 2001

PETITIONER: M/s Amrit Agro Industries Ltd. & Anr

RESPONDENT: Commissioner of Central Excise, Ghaziabad

DATE OF JUDGMENT: 19/03/2007

BENCH: S. H. Kapadia & B. Sudershan Reddy

JUDGMENT: J U D G M E N T

With Civil Appeal Nos. 1459-60/2002

KAPADIA, J.

Civil Appeal Nos. 8595-8596/2001:

These civil appeals are filed by the assessee under section 35L of the Central Excise Act, 1944 against decision dated 10.9.2001 passed by CEGAT. The short question which arises for determination is the classification of 'roasted peanuts' and 'moongfali masala mazedar' under the Schedule to the Central Excise Tariff Act and consequential demand for duty of excise. The Appellant-assessee manufactures namkeens like aloo bhujia, chholey masala, roasted peanuts and moongfali masala mazedar. Appellant claims that all the four items fall under Heading 21.08 as Namkeen. The Appellant claims that accordingly all the four items are exempted vide Notification No. 4/97-C.E. dated 1.3.1997. In that declaration/classification with effect from 1.3.1997, they declared all the above items as namkeens. They relied upon Heading 21.08 which refers to namkeens such as bhujia and chabena. The Appellant started production of two out of four items abovementioned, namely, roasted peanuts and moongfali masala mazedar only in July and September, 1997 respectively. Prior to the above dates, they were in the business of manufacturing chholey masala and aloo bhujia. At this stage, we may clarify that the Department has accepted the claim of the appellant that chholey masala and aloo bhujia fell under Heading 'namkeen' under 21.08. The appellant has been given exemption benefit accordingly. Therefore, in the present civil appeals there is no dispute regarding chholey masala and aloo bhujia. It is the case of the Department that roasted peanuts and moongfali masala mazedar are the two items which do not fall under Heading 21.08. It is the case of the Department that Chapter 21 deals with Miscellaneous Edible Preparations. It is the case of the Department that chholey masala and aloo bhujia fall under Chapter 21, but not roasted peanuts and moongfali masala mazedar. According to the Department, roasted peanuts and moongfali masala mazedar are the two items which will fall under Heading 20.01 in Chapter 20. According to the Department, Chapter 20.01 deals with Preparations of Vegetables, Fruit, Nuts and Other Edible Parts of Plants. According to the Department, in the case of roasted peanuts, the character of a nut remains intact. According to the Department, in the present case, the assessee applies salt on the peanuts, thereafter, the assessee roasts peanuts which are then put in a container. Therefore, according to the Department, in the process of roasting the character of a nut remains intact. According to the Department, a roasted peanut is a preparation from the peanut. Accordingly, the Department sought to classify roasted peanuts under Heading No. 20.01. As regards moongfali masala mazedar, the same test is sought to be applied by the Department saying that an essential character of moongfali is not lost even when it is salted and fried, therefore, according to the Department, roasted peanuts and moongfali masala mazedar are the items classifiable under Heading 20.01. Having gone through the records and having examined the process undertaken by the assessee, we are in agreement with the view expressed by the Tribunal ("CEGAT") regarding classification of roasted peanuts under Heading 20.01. The Tribunal had adopted a correct test when it says that the essential structure of the peanut is not changed by the process of roasting. The assessee merely applies salt to roasted peanuts which does not obliterate the essential character. Moreover, roasting is a process. That process has not been excluded in Note 1 to Chapter 20. Therefore, roasted peanuts are covered by Chapter 20. Even according to the Explanatory notes of HSN under Heading 20.08 ground-nuts, almonds, peanuts etc. which are dry-roasted, fat-roasted whether or not containing vegetable oil are the items which all would stand covered by the said Heading 20.08. According to the appellant-assessee, roasted peanuts would fall under Chapter 21:Miscellaneous Edible Preparations. In this connection, reliance is placed by the appellant on Heading 21.08 which refers to Edible preparations, not elsewhere specified or included. Learned counsel in particular also relies upon sub-heading 2108.99 : Other. According to the appellant, roasted peanut falls under Heading 21.01, hence they are entitled to exemption. Learned counsel for the appellants further submits that in the following year 1998-99 Chapter Note no. 10 was modified to include products commonly known as namkeens, mixtures, bhujia, chabena or by any other name. According to Chapter Note no. 10, such products shall remain classifiable under sub-heading 2108.99 and, therefore, the appellants were entitled to the benefit of exemption notification. We do not find any merit in this contention. Firstly, a roasted peanut is not a product commonly known as namkeen. It cannot be compared to bhujia. In the case of bhujia, e.g., not only salt but even masala, salt, gram flour are some of the ingredients which are used in the preparation of bhujia. Therefore, a roasted peanut cannot be compared to a bhujia. Similarly, a roasted peanut is not only known in the market as a bhujia or chabena. In the circumstances, there is no merit in the contentions raised on behalf of the appellant-assessee. As stated above, roasted peanut is also a preparation, however, it is a preparation of nuts like almonds, peanuts, ground-nuts etc.. They are products which are prepared or preserved by processes like roasting. As stated above, roasting is not chilling, it is not freezing. As stated above, roasting is not one of the enumerated processes in Chapter Note No. 1 to Chapter 20. Heading 20.01 specifically refers to preparations of vegetables fruit, nuts or plants. Sub-heading 2001.90 refers to the word 'Other'. In the circumstances, we are in agreement with the view expressed by the Tribunal that roasted peanut falls under Chapter 20 and not under Chapter 21. As regards moongfali masala mazedar, the Department has adopted the same test to say that even in the case of the said item the basic character of moongfali is not altered. This view is erroneous. We have examined the process. In the case of moongfali masala mazedar, the preparation is very similar to bhujia. As stated above, even according to the Department aloo bhujia falls under heading 21.08. In the case of moongfali masala mazedar, the principle of predominance cannot be applied, particularly in absence of any Section Note or Chapter Note propounding the said principle. In this process the capacity to germinate is obliterated. Moongfali masala mazedar is the mixture of material other than the nuts. It is an oil preparation. It makes use of gram flour (besan). It undergoes the process of deep frying. When such a process is applied one cannot apply the principle of predominance. The only difference between aloo bhujia and moongfali masala mazedar is that in the former case the namkeen is essentially made of aloo whereas in the later case it is a namkeen essentially made from a pulse (dal). Pulse can be chana, malka, masoor, moong, urad etc.. All these products are only known as namkeens in the market. In the circumstances, we are of the view that moongfali masala mazedar falls under Chapter 21. It falls under Heading 21.01, sub-heading 2108.99 and, therefore, the assessee is entitled to exemption. In the present matter, one of the points which arises for determination is whether the Department was entitled to invoke the extended period of limitation. Although, the courts below have examined the said question, they have lost sight of an important fact, namely, that at the instance of the Department, the assessee had filed a revised declaration on 19.11.1997, in the circumstances, the show cause notice dated 5.5.1998 is within six months, consequently, the question of extended period does not arise in the present case. Accordingly, the appeals are partly allowed with no order as to costs.

regards,

ratan