Classification of processed prawns under Chapter 3 upheld; Chapter 16 duty demand and penalties failed.

Processed peeled and deveined prawns that were only subjected to peeling, deveining, salting or brining, blanching and freezing remained within Chapter 3 of the Central Excise Tariff because those steps did not amount to cooking or other preparation beyond the chapter's coverage. Applying the HSN notes and supporting fisheries opinions, the classification under Chapter 16 was rejected, so the duty demand based on that classification could not survive. The denial of retest and cross-examination was also treated as contrary to natural justice, and the penalties were unsustainable once the classification issue failed.

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Issues: Whether the processed peeled and deveined prawns were classifiable under Chapter 3 of the Central Excise Tariff Act, 1985 or under Chapter 16, and whether the duty demand, interest and penalties could survive.

Analysis: The product consisted of prawns subjected to peeling, deveining, salting or brining with sodium chloride and STPP, blanching and freezing before packing. Chapter 3 covers fish and crustaceans in the stated forms, including chilled, frozen, salted, dried or smoked goods not otherwise prepared, while Chapter 16 applies only where the goods have been cooked or otherwise prepared or preserved by processes not provided for in Chapter 3. The HSN notes were applied to distinguish between goods remaining within Chapter 3 and goods falling in Chapter 16. The expert opinions from fisheries authorities supported the view that blanching is a pre-freezing processing step, that STPP and salt are used in salting, chilling and freezing, and that the product was not ready-to-eat or partially cooked. On that basis, the processing was held not to amount to preparation beyond Chapter 3. Since the goods remained classifiable under Chapter 3, the demand based on Chapter 16 could not stand. The denial of retest and cross-examination was also treated as contrary to natural justice, and penalties were held unsustainable once the classification failed.

Conclusion: The goods were held classifiable under Chapter 3 and not under Chapter 16, with the result that the duty demand, interest and penalties were set aside in favour of the assessee.

Ratio Decidendi: Crustaceans that undergo only salting, blanching and freezing, without being cooked or otherwise prepared or preserved by a process outside Chapter 3, remain classifiable under Chapter 3 and do not fall in Chapter 16.

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