Customs, Excise and Gold Tribunal - Delhi
Wockhardt Ltd. vs Commissioner Of Central Excise on 31 December, 1998
Equivalent citations: 1999(105)ELT573(TRI-DEL)
ORDER Jyoti Balasundaram, Member (J)
1. The above appeal arises out of the order of the Additional Collector of Central Excise, Vadodara who has confirmed a duty demand of Rs. 77,535.77 P on the product 'Malto-dextrin' on the ground that it falls for classification under CET sub-heading 1702.19, illicitly manufactured and removed during the period from 1-4-1986 to 28-2-1987 and has also imposed a penalty of Rs. 10,000/- on the appellants herein under Rule 173Q(1) of the Central Excise Rules, 1944. The assessee's contention is that even though they had filed a classification list during the relevant period when they had classified the above mentioned product under CET sub-heading 1901.90, the item was not marketable due to its short shelf life and was hence not 'goods' liable to any duty; their further contention is that the demand is barred by limitation - the show cause notice was issued on 15-3-1990 and in the face of an approved classification list which was filed along with the process of production of Maltodextrin, suppression cannot be alleged so as to invoke the extended period of limitation.
2. We have heard Shri C.S. Lodha, learned Advocate and Shri K. Panchatcharam, learned DR. The issues for decision in this case are :
1. whether the duty demand is barred by limitation ?
2. whether Maltodextrin is excisable goods and if so, whether it falls for classification under CET sub-heading 1901.90 or 1702.19? Our findings are recorded hereunder.
Issue No 1 : The appellants had filed a classification list w.e.f. 28-2-1986 under CET sub-heading 1901.90 (page 21 of the paper book) and had declared in the body of the classification that Maltodextrin solution (as well as Maltodextrin powder) are used for production of cereals, flour starch or Milk Pastry Cooks Products (special infant food) mentioned at Sl. Nos. (a) and (b) of the classification lists and will not be sold outside the factory. Along with the classification list, they had submitted the process of manufacture of Maltodextrin. The classification list was apdepartment that the process of manufacture, as submitted by the appellants, was in any way different from what it actually was. In other words, the Department does not dispute the process of manufacture. Therefore, in the face of the approved classification list and in the absence of finding of suppression or deliberate misdeclaration about the nature of the product, the Department cannot seek to apply the extended period of limitation in this case. The claim of classification under a heading different from the heading applicable according to the Revenue, does not amount to suppression or mis-statement etc. with intent to evade payment of duty so as to invoke the extended period of limitation. We, therefore, hold that the demand raised on 15-3-1990 for the period from 1-4-1986 to 28-2-1987 is time barred and accordingly set it aside.
Issue No. 2 : The process or production of Maltodextrin as seen from the appellants Write Up is as under :
'Maize Starch Slurry is made in a mixer. It is transferred in a convertor where acidle-enzymatie hydrolysis take place. Then it is neutralized and filter, to remove precipitate and to get maltodextrin solution.
Precaution This Maltodextrin solution is then transferred to a Jackelleil vessel where this solution is stored at a temperature of 60-65°C and continuous check is kept on its PH and temperature to avoid any spoilage. If due to any break-down of machinery, we are unable to process this solution within 8 hours to 10 hours, we are forced to discard this Maltodextrin'.
The product was got tested on 18-12-1987 (the appellants had filed a fresh classification list w.e.f. 1-3-1987 in which they had claimed the benefit of Notification 30/87 which covers 'goods falling under subheading 1901.90 other than Malt extract and Food preparations containing malt extract or cocoa powder in any proportion' from the whole of duty of excise leviable thereon) and the report of the Chemical Examiner was that the "sample is in the form of clear colourless liquid. It is an acqueous solution containing reducing sugar (maltose) and a partially degraded starch. The percentage of reducing sugar (maltose) calculated as anhydrous dextrose, on dry substance is-20.0%. It is other than malt or malt extract and glucose". On this basis, the department formed an opinion that Maltodextrin would not be covered by description of goods under Heading 19.01 which covers 'malt extract, food preparations of flour, meal, starch or malt extract... etc' but under Heading 17.02 which covers 'other sugars including chemical powder lactose, maltose, glucose fructose ... etc' and hence issued a show cause notice proposing classification under CET sub-heading 1702.19. Along with the reply to the show cause notice in which the appellants emphatically claimed that maltodextrin was not an excisable commodity since it was unstable interim product which was not marketable since no preservative are added to it, they enclosed copies of certificates from the National Dairy Research Institute, Karnal, Central Food Technology Research Institute, Mysore and the Department of Chemical Technology, University of Bombay, all centifying that maltodextrin with 25% to 30% total solids is unsuitable and undergoes microbial spoilage within 24 hours if stored at room temperature. The Institute certified that spoilage is due to activity of several micro organisms which ferment part of the carbohydrates present in the maltodextrin. The Adjudicating authority has dealt with the marketability aspect as under :
"I further find that the existence of market for a particular product is a relative term and should be interpreted accordingly. In case where the use of a particular product can be for a limited area and in such a case the product may not be available in the market for the purpose of the purchase and sold. Same is the case with product maltodextrin manufactured by the assessee. I have also seen the zerox copies of the decisions passed by Judicial authorities in the cases of M/s. Maize Products and M/s. Ambalal Sarabhai Enterprises.
I have also seen the zerox copies of the certificate issued by Dr. B.N. Mathur of the Central Food Technological Research Institute, Mysore. I find that in both the certificates, the weightage was given on the stability of the product. However, it has not been stated whether by adding preservatives/additives to it, the same can become capable of being marketed or not; and the concept of marketability is to be understood in relation to the nature of the product."
3. He has not disputed the certificates submitted by the appellants; he has given no categorical finding that the preservatives, additives were added to the product.
4. That the product may be stabilised by addition of preservatives or additives is not relevant for deciding the issue of marketability of the product because what has to be determined is whether the product as it is, is capable of being marketed. Reliance by the appellants on the judgment of the Apex Court in the case of Ambalal Sarabhai Enterprises 1989 (43) E.L.T. 214 (S.C.) is well placed, the product in that case was hydrolysed starch. The assessees in that .case had led in evidence in the form of an affidavit to support their contention that hydrolysed starch was not marketable while the Department had not led any evidence to show that such product was capable of being marketed. In that context, the Supreme Court has held that the Revenue had not discharged its burden of establishing that by applying the process of hydrolysis to starch for production of starch hydrolystate, the respondents manufacture any excisable goods in the sense of being goods known in the market of being marketed or marketable. The ratio of the above decision applies on all fours to the present case where the product in dispute has been claimed to be hydrolysed starch (see page 39 of the paper book and internal page 5 of the reply on 22-6-1990 to the show cause notice) and not found to be otherwise. Hence following the ratio of the judgment in the Apex Court in the case of Ambalal Sarabhai Enterprises (supra), we hold that the product in dispute i.e. maltodextrin is not a excisable commodity and hence not liable to any duty. The penalty imposed on the appellants is also set aside having regard to our above findings. In the result we set aside the impugned order and allow the appeal.