Custom, Excise & Service Tax Tribunal
M/S.Riddhi Siddhi Gluco Biols Ltd vs Cce, Belgaum on 18 February, 2015
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST BLOCK NO.II, R.K. PURAM, NEW DELHI-110066.
DIVISION BENCH
Court No.3
Appeal No.E/989/2005-Ex
(Arising out of OIO No.04/2005 dated 31.1.2005 passed by CCE, Meerut-I)
Date of Hearing: 03.09.2013
Date of Pronouncement: 18.02.2015
For approval and signature:
Honble Mrs.Archana Wadhwa, Member (Judicial)
Honble Mr.Manmohan Singh, Member (Technical)
1
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
N0
2
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
Yes
3
Whether Their Lordships wish to see the fair copy of the Order?
seen
4
Whether Order is to be circulated to the Departmental authorities?
Yes
M/s.Riddhi Siddhi Gluco Biols Ltd. Appellant
Vs
CCE, Belgaum Respondent
Present for the Appellant: Shri K.K.Anand, Advocate, Present for the Respondent: Shri V.K.Srivastava, DR Coram: Honble Mrs.Archana Wadhwa, Member (Judicial) Honble Mr.Manmohan Singh, Member (Technical) INTERIM ORDER NO.182/2014 FINAL ORDER NO.50425/2015 PER: ARCHANA WADHWA A short issue involved in the present appeal is as to whether the product i.e. Maize Starch Powder is classifiable under heading 11.03 as Maize Starch Powder, as contended by the assessee or the same is classifiable under heading 35.05, as held by the Revenge.
2. The Commissioner in his impugned order as also referred to the earlier order in original No.14/2004 dated 6.9.2004, wherein said product was held to be classifiable under 35.05. We find that the said order in original was appealed against, and their own appeal stands disposed of by the Tribunal as reported in 2011 (270) 291 (Tri.). Vide said decision, the Tribunal disposed of a number of appeals filed by the appellant wherein demand related to various periods were dropped. The period involved in the present appeal is falling in between period of dispute which was the subject matter of the Tribunals decision. It stands held that the appellants product is properly classifiable under chapter 11.
3. Ld.DR fairly agrees that the issue stands decided by the Tribunals decision though the said decision stand appealed against by the Revenue but there is no stay of operation of the same.
4. In view of the above, following the decision of the Tribunal in their own case of the appellant referred supra, we set aside the impugned order and allow the appeal with consequential relief to the appellant.
(Pronounced in the open court)
(MANMOHAN SINGH) (ARCHANA WADHWA)
MEMBER (TECHNICAL) MEMBER (JUDICIAL)
mk
Appeal No. E/989/2005-EX
M/s Riddhi Siddhi Gluco Biols Ltd.
5. I have gone through the order of my Ld. Sister, in which she has proposed to give benefit to the appellant on the issue of classification of Maize Starch Powder under Central Excise Tariff Act, 1985, Tariff Head No. 1103.00 as other starches as against TH 3505.20 as claimed by the Department, treating the product as Modified Starch. While arriving at the conclusion, she has been persuaded to follow earlier decision of the same appellant as reported in 2011 (270) E. L. T. 291 (Tri. Bang.). I find that the decision in that matter was given as the classification was arrived at without the product having been tested by the Chemical Examiner and without even the manufacturing process having been made available to him. In this context the following extracts of the case law cited supra are relevant to consider as to why the facts and material brought out by the D. G. C. E. I. during investigation as the also detailed statements recorded by the D. G. C. E. I. Officials which clearly bring out that product in question is nothing but Modified Starch, have made the material difference in the instant case. The relevant portion of the order is extracted below:
Though the results of tests conducted by the Chemical Examiner could be preferred over results of such tests conducted by private agencies, personal opinion of the Chemical Examiner without studying the process of manufacture followed or carrying out chemical test as prescribed ( emphasis supplied) cannot form safe and reliable basis for deciding classification. In the circumstances, we find that the Commissioners conclusions are not substantiated with evidence or proper reasoning. In these circumstances, we set aside the impugned orders and allow these appeals.
6. I find that in this case the manufacturing process was duly available with the Chemical Examiner and the Adjudicating Authority. Therefore, while taking the decision he not only analyzed the product in detail and its manufacturing process but also referred the statements recorded, various technical literature made available to him. Based on description in HSN as well as its Notes he has gone on to support his findings. The opinion of Chemical Examiner who clearly had the benefit of manufacturing process and product description being made available to him was also available and which has been relied upon. Therefore, simply because the product could not be tested in the Chemical Lab cannot be a constraint in arriving at the correct conclusion regarding classification, when other relevant materials including statements of production manager, authorized signatory of the appellants and various buyers of the finished products whose classification is under consideration as evidence about the nature of the product are available on record and were duly considered in detail by the Ld. Commissioner. However to have clear idea, I feel it necessary to refer imported extracts of the statement of Shri B.V. Joshi production manager and Shri Gururaj M. Ligade authorized signatory.
Statement of Shri V. B. Joshi, the Production Manager of M/s Riddhi Siddhi vide his statement dated 27.11.2001, explained the manufacturing process as under:
Mize is cleaned and steeped in in Sulphur Dioxide water for about 60 hours at 50 degree Celsius. The steeped maize is ground by wet milling and byproducts are separated at different stages of processing. At this stage Starch slurry is produced. This slurry is centrifuged to remove water, dried and packed. This is MSP Regular grade. For MSP Regular Food, before centrifuging, the slurry is treated with potassium permanganate, sodium meta bisulphite for 30 Min. and then it is dried and packed. The MSP Regular Pharm before centrifuging, the slurry is treated with Potassium permanganate, Sodium Meta Bisulphite and Sodium Hypochlorite for 30 min and then it is dried and packed. For MSP Regular Textiles, before centrifuging, the slurry is treated with Sodium Meta Bisulphate and Borax for 30 Minutes and then it is dried and packed. For MSP TBS, before centrifuging, Hydrochloric Acid is added and kept for 1 hour. Afterwards, it is neutralized with Soda Ash. Then it is centrifuged and dried. For MSP VTBS, the process is same as that of MSP TBS, excepting that it is treated with Hydrochloric Acid for 3 hours instead of one hour. To a specific question as to identification of each of the above MSPs, he stated that those could not be identified by looking at the bags; that they refer to the Batch No. and analytical report for the same. Further to a specific question as to where did each grade of MSP mentioned by him find its application and what was the difference between each grade, he stated that their clients included manufacturers of food preparations such as bakers, ice cream makers, textile industries who used starch for sizing, etc. paper industries, etc.; that they manufactured different grade of MSPs as per the specification given to them by their clients; that the difference basically lies in the difference in viscosity and moisture content of the final product. Further to a question as to how the viscosity of the starch was reduced and the process undertaken for doing so, he stated that the viscosity of starch was reduced by treating the same with hydrochloric acid and neutralizing it with soda ash. Chemically its process was termed as Thin Boiling. That with the process the gelatinizing capacity o MSP got reduced; that through the process the sizing of yarn would be smooth, as the viscosity was low.
9.2 In his further statement dated 21.05.2002 given before the Senior Intelligence Officer, DGCEI, Bangalore, in response to a question as to the different stages of manufacture and percentage of the ingredients used in the manufacture of different grades of Maize Starch Powder (MSP) he stated that Maize procured was cleaned and taken to steeping in the Vats; that the steeping was done at 50 deg. C with water having Sulphur Dioxide concentration of 0.2% in the water and for the period of 60 Hrs.; that the soluble protein and minerals in maize got absorbed in steeping water, which was further evaporated to get Corn Steep Liquor (CSL) and the CSL was sold to fermentation industries; that the steeped maize having moisture around 40% was wet milled/grinded in three stages; that in the first two stages Germ was separated and it was dried and packed and supplied to Oil Extraction Industries; that further the steeped maize was milled with third stage and further processed for fibre separation, by washing DSM screens, to separate fibre; that the resultant slurry contained Gluten and starch which was fed to Mero Centrifuge, called Primary Separator; that the overflow of the primary separator contained Gluten of 7 to 8 Grams per litre which was further processed in Merco Centrifuging called Gluten Thickner to get Gluten concentration of order of 100 to 120 Gms per Litre, which was further filtered to get Gluten Cake and the Cake was dried and packed and supplied to poultry and cattle feed industries; that from the Primary Merco Centrifuge, they got Starch slurry, which still contain some percentage of Gluten; that it was again processed in Hydrocyclone Wash System 9 stages to remove the remaining Gluten; that the product obtained was called Starch Slurry; that it was stored in Tank No. 68A, 68B and 68C; that the Starch Slurry Stored in Tank No. 68A and 68B was used for manufacture off derivative produces namely Dextrose Monohydrate (DMH), Malto Dextine (MD) and Liquid Glucose (LG) and manufacture of Regular Maize Starch Powder; that the Regular MSP was manufactured by way of centrifuging the Starch Slurry to remove water and drying that to get powder and packed in 50Kg. bags; that the Starch Slurry stored in the tank 68C was used for manufacture of Maize Starch Powder MSP (Special) and different grades of MSP (Special namely MSP REGULAR FOOD, MSPREGULAR PHARMA, MSP REGULAR TEXTILES, MSP THIN BOILED STARCH (TBS) AND MSP VERY THIN BOILED STARCH (VTBS). A specific query relating to manufacture of different MSPs, he stated that they had the following grades of MSPs manufactured in their unit:
(1) MSP REGULAR, (2) MSP REGULAR FOOD, (3) MSP REGULAR PHARMA, (4) SP REGULAR TEXTILES (5) MSP THIN BOILED STARCH (TBS) AND (6) MSP VERY THIN BOILED STARCH(VTBS) 9.3 Further he stated that MSP Regular was manufactured by centrifuging the Starch Slurry and drying and the resultant MSP was packed in 50 Kg. bags, without any further process as already mentioned y him; that for manufacture of MSP REGULAR FOOD, to the Starch Slurry, they add 200 Gms of Potassium Permanganate and 2 Kgs of Sodium Meta Bi-sulphite per 15 M3 of Starch Slurry for the period of 30 minutes, which yielded 5MTs of MSP; that for manufacture of MSP Regular Pharma, to the Starch Slurry, they added 200 Gms of Potassium Permanganate and 2 Kgs of Sodium Meta Bi-sulphite, 500 ml of Sodium Hipochlorite per 15 M3 of starch slurry, for 30 minutes, which yielded 5MTs of MSP; that for the manufacture of MSP Regular Textiles, to the Starch Slurry, they added 1Kg of Borex and 2Kgs. of sodium Metabisulphite per 15 M3 of starch slurry for 30 minutes which yielded 5MTs of MSP; that for the manufacture of MSP THIN BOILED STARCH (TBS) to 15 M3 of Starch Slurry they added 120 Litres of Hydrochloric Acid and retained for 60 Minutes and thereafter 60 Kgs. of Soda Ash was dissolved in water of 500 Litres and was added to neutralize the slurry; which yielded 5MT of MSP; that for manufacture of MSP VERY THIN BOILED STARCH (VTBS) to per 15 M3 of Starch Slurry they added 120 Litrs of Hydrochloric Acid and retained for 180 Minutes; that thereafter 60 Kgs. of Soda Ash was dissolved in the water of 500 Litre and was added to neutralize the Slurry, which yielded 5 MTs of MSP. Further he stated that y adding Hydrochloric Acid, they were reducing the viscosity of MSP (Special) as compared to that of Native Starch; that they used Tank No. 68C for manufacture of MSP viz. MSP REGULAR FOOD, MSP REGULAR PHARMA, MSP REGULAR TEXTILES, MSP THIN BOILED STARCH (TBS) AND MSP VERY THIN BOILED STARCH (VTBS). Further to a specific question as to why they were adding other ingredients such as Potassium Potassium Permanganate, Sodium Metabisulphite, Sodium Hypochlorite, Borax, Hydrochloric Acid he stated that the Chemicals, viz. Potassium Permanganate, Sodium Metabisulphite, Sodium Hypochlorite, Borax was added to reduce the viscosity of the MSP slightly to suit the viscosity requirements of the particular customer; that Soda Ash was added to neutralize the acid content in the starch slurry.
He further stated that as per the technical specifications of their company, different grades of MSP would have different fixed parameters ; that the above tests conducted to monitor and achieve the required specifications; that they had an equipped quality control laboratory where these parameters were tested; that their lab had maintained a register showing similar details in respect of the products tested (seized by the DGCEI officers vide Sl. No. 1 of Annexure to the Mahazar dated 27.11.2001 at their factory); that the results of the tests were tabulated in the said register; that they have also maintained Laboratory Analytical Report which gave the details of product, grade, batch No., Qty., Date of Manufacture, date of analysis, name of the customer and the various parameters tested; that from the above register, tabulations were made in Laboratory Analytical Report and copy of analytical report would also be sent to the respective customer, depending upon the customers requirement (seized by the DGCEI officers vide Sl. No. 7 of Annexure to Mahazar dated 27.11.2001 at their factory). Further, from the product specification sheets (seized by the DGCEI Officers vide Sl. No. 9 of Annexure to Mahazar dated 27.11.2001 at their factory) he showed as to how the different grades of MSPs differed from each other, stating that for MSP (Food Grade), permissible moisture was up to 12% only, whereas for MSP (Pharma Grade), the permissible moisture was up to 11% and should pass microbial limit test as shown in the specification sheet, which was not at all required for Regular and TBS; that in case of TBS and VTBS, even though the moisture was same as Regular Grade, the Viscosity differed; that for regular the Viscosity should be 34 to 36 seconds whereas, for TBS it should be 30 to 32 seconds and for VTBs Viscosity should be 28 to 30 Seconds; that the results obtained and tabulated in their register were against the parameters mentioned in the said product specification sheet.
9.7 Extract of Statement of Shri Gururaj M. Ligade authorized signatory of M/s Ridhi Sidhi is given below which is self explanatory relating to manufacture of various grades of starch. To a specific query, as to whether they had brought to the notice of the Central Excise Department about the different grades of MSP and the manufacturing activity thereof, Shri Gururaj M. Ligade stated that even though the Maize Starch Powder manufactured by them were of different grades, for their purpose all of them were nothing but Maize Starch Powder only: that since they felt that all grades were Maize Starch Powder only, they had not made any declaration, separately in respect of each grade of MSP and accordingly, did not declare the manufacturing activity involved in the manufacture of different grades of MSP, nor the different varieties of MSP were declared to the Central Excise Department. Further, he stated that as per the provisions of Self Assessment Scheme, they had not filed copies of Invoices to the Central Excise Department, November, 1996 onwards.
7. It is, thus, clear that in the instant case, since the findings have been arrived at after due consideration of manufacturing process, therefore, the deficiency pointed out in the previous case of the same appellant has been sufficiently made up. Therefore, it can easily be concluded that product of the appellant is nothing but Modified Starch. In arriving at this finding, I am fortified in my view by the following detailed findings given while dealing with the issue by the Ld. Commissioner.
33. In deciding this case, firstly, I have studied the manufacturing process of the different grades of MSP as narrated in the show cause notice and also as explained by Shri V.V. Joshi, Production Manager of Riddhi Siddhi in his written statement dt. 27.11.2001 given before Sr. Intelligence Officer of DGCEI. I observe that the basic raw material for all the varieties/grades is Maize, which is cleaned and/steeped in Sulphur Dioxide water for about 60 hours at 50 degree Celsius. The steeped maize is ground wet milling and by products are separated. At this stage Starch Slurry is produced. This slurry is centrifuged to remove water, dried and packed. This is MSP Regular grade and Riddhi Siddhi classifies the same under heading 11.03 and there is no dispute regarding the classification of this particular item as the investigators also agree that it is a native starch classifiable under beading 11.03. As regards the other grades of MSP, which are the subject matter of the dispute, I observe that all the impugned grades of MSP are obtained by further processing the starch slurry. In other words the manufacturing process for all grades is common upto the process of getting Starch Slurry. Since the manufacturing process of the impugned items of MSP is already described in the show cause notice and is not disputed by Riddhi Siddhi, I deem it un-necessary to mention the same again in detail. In this regard I would merely like to mention that the impugned items of MSP are obtained by adding certain chemicals and additives to the starch slurry in definite quantities and further treating the same. The different chemicals added to starch slurry for obtaining different grades of MSP are as under:
1) MSP Regular Food ::::::::: Potassium Permanganate
2) MSP Regular Pharma:::::: Potassium Permanganate, Sodium Metabisulphate, Hipochlorite
3) MSP VTBS:::::::::::::::::::;;:: Hydrochloric Acid, Soda Ash
4) MSP TBS:;::::::::::::::::::::: Hydrochloric Acid, Soda Ash
5) MSP Regular Textiles;::;::; Sodium Metabisulphate, Borax
34. I observe that the above grades of MSP are manufactured in separate batches according to the specific requirements of the various customers belonging to various industries like Food, Textile, Pharma, Paper etc. As per the version of the investigators, starch slurry is added with chemicals, Acids and oxidizing agents and further treated so as to obtain the desired grades of MSP which suits specific requirement of certain industry/use and that by this activity the starch is said to be converted into a modified starch and merits classification under Heading 35.02. As against this version of the investigators. Riddhi Siddhi contend that notwithstanding the addition of the chemicals and acids to the starch slurry, the items still remain as native starch and are not said to be modified so as to be classifiable under heading 35.02; that the items still merit classification under heading 112.03; that the adding of the chemicals is only to remove impurities and improve the quality of the product. The investigators are heavily relying on the chemical examiners opinion in contending that the impugned items are modified starches. Reliance is also seen to be placed by the investigators on the texts of certain books and the end use of the items. Riddhi Siddhi on their part argue that the Chemical Examiners opinion is only a provisional opinion and not final as he has merely stated in his letter dt. 3O.04.2002 that the samples of all the 5 items sent to him answer the test of starch. They have also referred to the answers given by the Chemical Examiner during the cross examination wherein he has stated that; the laboratory at Chennai did not have facility to test whether the samples under reference were modified starches; that he has based his opinion on technical literature of the products sent to him and by referring to some books of the subject. In this aspect I have referred to the records of cross examination of the chemical examiner and I find that the chemical examiner had given a categorical opinion stating that the samples of the impugned items sent to him are all modified starches. Although the chemical examiner had accepted that no test was conducted to analyze the samples for the reason that the laboratory at Chennai had no facility to determine the parameters, nevertheless his opinion is based on study of technical literature of the products sent to him and authoritative books of the subject viz; (1.) Analysis of Starch Derivates (Chapter 7) and (2.) Starch Production Technology. In particular the answers given by the chemical examiner to following questions are worth mentioning:
Q:- Since you have considered some of the items as modified starches can you tell me the basis on which you have come to the conclusion?
A:- I am hereby producing a copy of Chapter 7 of the Analysis of Starch Derivatives on the basis of which I have arrived at the conclusion.
Q:- Other than the literature mentioned above did you rely on any other literature?
AL- A copy of the literature on modified starches on the starch production technology [copy of which is supplied and taken on record] is relied upon for the opinion.
Q:- In the technical literature, it is indicated that only if there is a modification of the molecules by treating with acid, it becomes modified starch. Do you agree with this?
A:- On treating with the acid the starch becomes a modified starch as a treatment and simply adding will not suffice.
Q:- Since there is no addition of acid in respect of MSP, regular pharma and MSP regular food, how do you call them as modified starch?
A:- As oxidizing agents have been added and due to that procedure it is modified starch.
Q- I suggest that Sodium rnetabisulphate, potassium permanganate and Sodium hypo chlorite are only for purification and not for modification of starch. Do you agree with this or not?
A: I do not agree.
Q:- I put it to you that all the 4 samples which are mentioned in the reply to letter dated 05- 06-2002 did not undergo any process of acid treatment or oxidization. Kindly clarify?
A:- I do not agree.
Q. Do you agree that the three items mentioned above are used as preservatives?
A:- In this particular case along with potassium permanganate they are used as oxidising agents.
From the above answers of the chemical examiner it is clear that the impugned items have undergone the acid/oxidizing treatment and the chemicals used therein are not merely preservatives as contended by Riddhi Siddhi. Further, the results as per the analytical reports of Riddhi Siddhi testify that the properties have changed after treatment. It is based on these factors, the chemical examiner has given his opinion. The Chemical Examiners report as well as reliance placed on certain text books are corroborative in nature and would support the contention that the starches in question were, if fact, modified. Hence, I am inclined to accept the opinion of the Chemical Examiner in this regard. Though I am in agreement with contention of Riddhi Siddhi that end use of the items alone cannot be considered for deciding the classification of the products, in the instant case I observe that end use of the impugned items is only one of the factor that is taken into consideration as can be seen from the answer to the following question given by Shri S. A. Hariprakash, Senior intelligence Officer during his cross examination.
Q:- Have you come to the conclusion of the proposal of the classification of the products as modified starch only on the basis of the technical parameters or end use?
A:- Both.
35. As regards the claim of Riddhi Siddhi that their case is supported by opinion of various persons and institutions who ate said In be renowned institutions, I am not inclined to accept the same as proper defense as the persons rendering those opinions are not examined before me. Regarding the contention that the facility for manufacturing of modified starch is not available in the factory of Riddhi Siddhi, I observe that they have accepted the process of treatment of the starches with acids.
36. Further, I have also referred to the explanation in HSN and Tariff given under heading 35.05 wherefrom I can see that the explanation is identical as under:
DEXTRINS AND OTHER MODIFIED STARCHES FOR EXAMPLE;
PREGELATINISED OR ESTERIFIED STARCHES: GLUES BASED ON STARCHES. OR ON DEXTRINS OR OTHER MODIFIED STARCHES The explanation in the HSN further mention as under:
This heading covers:
[A] Dextrins and other modified, i.e. products obtained by the transformation of starches through the action of heat chemicals [e.g., alkalis] or diastase, and starch modified, e.g. by oxidation, esterification or etherification.
From the above explanations it is clear that the heading 35.05 is wide enough to include all sorts of modified starches and not merely dextrin and products obtained by the process of esterification and etherification as contended by Riddhi Siddhi. I observe that the analytical reports, trade parlance, nomenclature used by the assessee, and the description given in HSN for modified starches supported by the opinion of the chemical examiner and certain authoritative text books referred to in the show cause notice are adequate to conclude that the starches in question are modified starches only. As regards the contention that MSP Paper grade is not included/discussed in the Show Cause Notice and that no information regarding this was furnished to the Chemical Examiner for his opinion on the same, the investigators have stated that MSP Paper grade stock was not available in stock on the day of the search and as such the same was not sent to the chemical examiner. Nevertheless, the test reports/analysis register shows the various parameters of the said variety, which indicates that the same was treated with potassium permanganate/Sodium Metabisulphate/Sodium Hipochlorite /Borax Hydrochloric acid depending upon the requirement of modification/customers and its physico chemical properties, had changed. Accordingly, I observe that on this basis, there is a proposal for the demand and consequently the said variety has been included in the quantification proposed and I find no infirmity in this regard.
37. As regards the contention of Riddhi Siddhi that the process of manufacture was well within the knowledge of the department; that the same was furnished to the department at the time of filing the relevant classification list/ declarations that they cannot be accused of suppressing the facts, I observe that the crucial facts relevant to the classification, of the products in question were the test reports found in the factory and the different varieties of Starch which the assessee had manufactured keeping in mind the requirements of the different customers by suitably modifying the starch. Firstly, the assessee had misled the Department by classifying all grades of starch under one heading without disclosing the different varieties manufactured by them. Secondly, the crucial parameters which decide the issue whether starch is modified or not was totally kept out of the reach of the Department. It is only as a result of the search conducted by the D.G.C.E.I. officers, the test reports indicating the said parameters were found and the same were subsequently seized under mahazar. Thus declaring just the process of manufacture of maze starch powder without giving the details of manufacture of the different grades, Riddhi Siddhi cannot claim to have made a complete disclosure relating to the classification/process of manufacture of all the varieties of starch. The process as declared by them, is relevant only to the grade Starch MSP Regular manufactured by them which has been correctly classified under Chapter sub heading No.110.00 and the classification of the said grade is not disputed in the show cause notice also. As regards the other varieties which are proposed to be classified under Chapter subheading No. 3505.20 of the CETA, 1985 there is total suppression with regard to the process of manufacture and deliberate mis-declarations to the grades/varieties as compared to their own private records which were seized as incriminating by the Directorate officers.
38. Apart from the above, Riddhi Siddhi have also argued as a sequel to the above, it will become evident that merely not disclosing the so called different grades or the uses of the product i.e., the alleged MSPs viz MSP regular Textile, MSP Thin Boiled Starch [TBS], MSP Very Thin Boiled Starch [VTBS], MSP Regular Food and MSP Regular Pharma, specifically either in the classification declaration or not maintaining separate folios in the RG-I daily stock account register or for that matter even preparing analysis reports and other documents for the parameters analyzed, cannot become the basis or the reason for alleging suppression or intention to evade payment of duty, particularly when there is no statutory requirement of disclosing such end use or for that matter maintaining separate folios for each variety or seven the alleged grade of the said product.
8. In this connection, I observe that the period covered in the notice is the period from 01-4-1998 to 31-12-2002. There is invocation of extended period of limitation. During this period, Riddhi Siddhi was required to file the classification declarations giving the correct classification of the goods manufactured by them and clear the goods accordingly. There was no requirement of a formal approval of the classification declaration by the concerned Central Excise authorities. It was, therefore, incumbent on the part of the assessee to make a complete and true disclosure of the facts relating to the goods manufactured by them. If there is omission on the part of the assessee to declare certain facts, which are material to decide the classification of a given product, obviously, the same has to be viewed as suppression of facts with intent to mislead the department. In the instant case, the declarations made were only with reference to Starch MSP- Regular grade and these was no declaration at all with reference to the other grades, which are impugned in the show cause notice. This being the case, Riddhi Siddhis contention that there is no suppression of facts does not stand the test of law. Riddhi Siddhi have referred to certain case laws and Boards Circulars to support their claim that there was no suppression of facts in the case on hand. Most of the judgments place reliance on the fact that the extended period of limitation cannot be invoked for a change of opinion when the department was aware of the factual position. In the instant case, there is a clear distinction from all the case laws cited by the assessee. The factual position relating to the impugned grades of Starch were never disclosed by the assessee to the department. It is clearly manifested from statements referred above and analyzed in Commissioners Order. It called for a detailed investigation to know the full facts relating to the grades under dispute. What has been declared/disclosed by the assessee is only with reference to MSP Regular grade whose classification has not been questioned in the show cause notice As regards the other grades, which have been discussed in the show cause notice there is total nondisclosure/suppression of facts which I consider to be a deliberate attempt on the part of Riddhi Siddhi to suppress the relevant facts in showing a single description for all varieties of starch - Modified or Otherwise, in their various declarations made before the Central Excise authorities as discussed in the show cause notice. As the facts relating to the suppression are very clear in this case, the assessee cannot claim shelter any of the case law cited by them.
9. In view of the foregoing, I hold that the order passed by the Ld. Commissioner is liable to be upheld in its entirety.
(MANMOHAN SINGH) MEMBER (TECHNICAL) K.Gup Difference of Opinion Whether Maize Starch Powder claimed by Revenue to be modified Starch is to be classified under heading 11.03 as Maize Starch Powder following Honble Tribunals earlier decision reported in 2011 (270) E.L.T. 291 (Tri-Bang.) as held by Member (Judicial) OR Whether modified Starch (claimed as Maize Starch Powder falling under chapter 11.03 by appellants) are to be classified under heading 3505.20 Member (Technical) after analysis of evidence on record after distinguishing the facts of Honble Tribunals judgement as held by Member (Technical) and extended period is invokable.
(MANMOHAN SINGH) (ARCHANA WADHWA) MEMBER (TECHNICAL) MEMBER (JUDICIAL) K. Gupta Appeal No.E/989/2005 D.O.Hearing:21.11.2014 M/s.Ridhi Sidhi Gloco Biols Ltd. Per Rakesh Kumar:
10. The appellant in their unit at Gokak Falls Road, Gokak, manufacture Maize Starch Powder and also other excisable products like liquid glucose, dextrose mono hydrate, Malto Dextrine, Hydrol, Corn Steep Liquid, etc., chargeable to central excise duty. The dispute in the present case is about classification of the Maize Starch Powder. While according to the department, this product is classifiable under sub-heading no.3505.20 as other modified starches, according to the appellant, this product is classifiable under sub-heading no.1103.00 as Maize Starch Powder. The period of dispute in the present case is from 1.1.2003 to 30.09.2003 and from 1.10.2003 to 31.03.2004. For this period, the Commissioner by the impugned order no.4/05-COMMR/311/05 adjudicated the two show cause notices and had confirmed the total differential duty demand of Rs.1,47,64,798/- (Rs.74,67,356/-+ Rs.72,97,442/-) along with interest thereon under Section 11 AB by classifying the product, in question, as modified starch under sub-heading no.3505.20 and besides this, had imposed penalty of Rs.15 lakh on them under Section 11 AC. The Commissioner in the impugned order relied upon the opinion of the Chemical Examiner ,CRCL opining that the goods in question are modified starches. The appeal against this order was heard by the Division Bench on 3.9.2013. While the Honble Member (J) following the judgement of the Tribunal in the appellants own case for the previous period reported in 2011(270) ELT 291 (Tribunal-Bang.) set aside the impugned order and allowed the appeal, Honble Member (Technical) by a separate order dated 25.03.2014 held that the order of the Commissioner is to be upheld in it entirety and accordingly rejected the appeal. On account of difference of opinion between the Hon;ble Member (J) and Honble Member (T), the following points of difference has been referred to be the undersigned for decision:-
Whether Maize Starch Powder claimed by Revenue to be modified Starch is to be classified under heading 11.03 as Maize Starch Powder following Honble Tribunals earlier decision reported in 2011 (270) ELT 291 (Tribunal-Bang.) as held by Member (Judicial).
OR Whether modified Starch (claimed as Maize Starch Powder falling under Chapter 11.03 by appellant) are to be classified under heading 3505.20 after analysis of evidence on record after distinguishing the facts of Honble Tribunals judgment, as held by Member (Technical) and extended period is invokable.
11. Heard both the sides in respect of point of difference.
12. Shri K.K. Anand, Advocate, ld. Counsel for the appellant, pleaded that the present appeal is against the Commissioner Order-in-Original No.4/2005/COMMR dated 31.01.2005 by which the duty demand of Rs.1,47,64,798/- for the period from 1.1.2003 to 31.03.2004 has been confirmed, that this order of the Commissioner is based on his earlier order NO.14/04 dated 6.9.2004 against the same appellant where an identical issue was involved and the period of dispute was from 1.4.98 to 31.12.2002, that against the order dated 06.09.2004 of the Commissioner, the appellant had filed an appeal before the Bangalore Bench of the Tribunal and the Bangalore Bench vide Final Order dated 5.4.2011 reported in 2011 (270) ELT 291, after considering this issue in detail including the chemical examiners opinion and HSN Explanatory Notes, had set aside the Commissioners order, that the order recorded by the Honble Member (Technical) is mainly based on the findings of the Commissioner in his order no.14/04 dated 6.9.2014, which has already been set aside, that from the perusal of the Tribunals order dated 5.4.2011 and the Commissioners order dated 6.9.2014, which had been set aside, it is clear that a sample of the goods, in question had been sent to the Chemical Examiner, CRCL for testing and the chemical examiners opinion is not based on the actual testing of the sample as the laboratory did not have the equipment to test various properties of the modified starch, that taking this fact into consideration, the Tribunal in its judgment dated 5.4.2011 had set aside the Commissioners order dated 6.9.2004, that when the present case is based on the same set of facts and the same opinion of the Chemical Examiner, it is the Tribunals order dated 5.4.2011, which has to be followed, that the order recorded by the Honble Member (T) is mainly based on the findings of the Commissioner in his order dated 6.9.2004, which has already been set aside, that in this case, neither longer limitation period under provisions of Section 11A(1) is invokable nor penalty under Rule 25 of the Central Excise Rules, 2002 read with Section 11 AC of the Central Excise Act, 1944 would be attracted and that in view of the above submissions, it is the order recorded by the Honble Member (Judicial) which is correct.
14. Shri Govind Dixit, ld. Departmental Representative, supported the order recorded by the Honble Member (Technical) and pleaded that it is not disputed that the starch being manufactured by the appellant is treated with Sodium Meta bisulphite and Sodium Hypochlorite, that these chemicals are oxidizing agents, which change the character and the properties of the starch and the resultant product becomes modified starch, that even if the samples of the goods were not tested by the Chemical Examiner, the opinion of the Chemical Examiner that the goods, in question, are Modified Starch is correct, and that since the appellant had suppressed the relevant facts regarding the actual characteristics of the starch being manufactured by them, longer limitation period under proviso to Section 11 A(1) has been correctly invoked by the Commissioner and the penalty has been correctly imposed on the appellant under Rule 25(1) of the Central Excise Rules, 2002 read with Section 11 AC of the Central Excise Act, 1944. Shri Dixit, therefore, pleaded that it is the order recorded by the learned Member (Technical), which is correct.
14. I have considered the submissions from both the sides and perused the records.
15. There is no dispute that in case of the same appellant in respect of the period from 1.4.98 to 31.12.2002, the Commissioner vide order-in-original no.14/04 dated 6.9.2004 had held that the Maize Starch Powder, in question, is modified starch classifiable under sub-heading no.3505.20 of the Tariff and on this basis, had confirmed the differential duty demand of Rs.43,82,777/- against the appellant along with interest thereon under Section 11 AB and had imposed penalty of equal amount on them under Section 11 AC. This order is based merely on the opinion of the Chemical Examiner that Maize starch powder in question, is modified starch. However, in para-34 of this order, there is also clear finding that the Chemical Examiner in course of cross examination has stated that laboratory at Chennai, where the samples had been tested, did not have the facility to test whether it is modified starch and he has based his opinion on the technical literature of the product and by referring to some books on the subject. However, the Tribunal in its judgment dated 5.2.2005 has observed that as per the HSN Explanatory Notes of sub-heading no.3505, Modified Starch is distinguishable from unmodified starch of Chapter 11 on the basis of changes in their properties, for example, solution and gel clarity, tendency to cool or to crystallize, water binding capacity, freeze thaw, stability, gelatinization temperature, or peak viscosity and that it is the different physical and chemical property which distinguish the modified starch of heading no.3505 from the Native Starch of Chapter 11 and that unless these parameters are ascertained on testing, it cannot be concluded as to whether the impugned goods are Native Starch classifiable under Heading no.1103 or are Modified Starch classifiable under sub-heading no.3505.20. Since, admittedly, there was no chemical test done by the Chemical Examiner to test the physical and chemical properties, which distinguish the Native Starch of Heading No.1103 from the Modified Starch of Heading No.3505, the Tribunal concluded that the impugned goods cannot be classified as modified Starch of Heading No.3505. I find that the position is the same in the present case also pertaining to the same appellant though for a different period of dispute. In the present case also, there is no chemical test report on record, on the basis of which, it can be said that the goods, in question, are Modified Starch. Moreover, as observed by the Tribunal in para 7.5 of its judgment dated 5.4.2011, the appellant have produced the test reports in respect of the samples of Starch Powder tested by South India Textile Research Association and on the basis of the characteristics like moisture content, ash content, pH, free acidity, cold water solubility, viscosity and starch content, the goods, in question, have to be treated as Native Starch and not the Modified Starch. In view of this, I hold that the Honble Member (Judicial) has correctly followed the Tribunals judgment dated 5.4.2011 reported in 2011 (27) ELT 291 (T-Bang.) and therefore, it is the order recorded by the Honble Member (Judicial), which is correct. I, therefore, agree with the decision of the Honble Member (Judicial).
(Rakesh Kumar ) Member (Technical) Ckp.
FINAL ORDER No. Per:Archana Wadhwa:
In view of the Majority Order, the classification of the Maize Starch Powder is upheld under Chapter 11 of the Central Excise Tariff Act, as contended by the appellant and their appeal is allowed with consequential relief.
B.S.V.MURTHY ARCHANA WADHAWA
MEMBER TECHNICAL MEMBER JUDICIAL
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