Natural product classification keeps spray-dried Spirulina outside excise, defeating the duty demand and related penalty.

Spray-dried Spirulina powder was treated as a natural product rather than a manufactured excisable product, because processing such as drying, grinding or spray-drying did not alter its essential character. The earlier tribunal view on Spirulina, affirmed by the Supreme Court, was followed for the same classification issue. On that basis, the duty demand failed, and the related penalty and interest were also unsustainable.

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Issues: Whether Spirulina (Algae) powder is a natural product and therefore not excisable, and whether the duty demand and consequential penalty can be sustained.

Analysis: The product under consideration was powdered and spray-dried Spirulina, identical in substance to the product previously examined in an earlier tribunal decision. That earlier decision had held Spirulina to be a natural product and not a manufactured product, and had further ruled that drying, grinding, or even mixing with binder would not alter its character for excise purposes. The earlier ruling having been upheld by the Supreme Court, the same reasoning was applied to the present product classification dispute. Once the product was held to remain a natural product, it could not be treated as excisable goods, and the duty demand founded on such classification necessarily failed. As the demand itself was unsustainable, the associated penalty also could not survive.

Conclusion: The product was not excisable; the duty demand, penalty, and consequential interest were unsustainable and were set aside in favour of the assessee.

Ratio Decidendi: A product that remains a natural product despite processing such as drying, grinding, or spray-drying is not a manufactured product for excise purposes, and no duty demand or consequential penalty can be sustained on that basis.

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