Reconstituted fruit juice classification upheld under fruit juice tariff entry; limitation and penalty also failed.

Reconstituted fruit juice made by adding water to juice concentrate was held classifiable under Chapter 20.01, because the HSN note treats such products as fruit juice where dilution does not exceed the normal composition of similar non-concentrated juice and the product retains its character. The contrary classification under Chapter 22.02 was rejected. On limitation, the extended period could not be invoked because suppression was not proved on the facts. As the duty demand failed and was time-barred, the penalty also could not survive and was set aside.

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Issues: (i) Whether reconstituted fruit juices manufactured from juice concentrates were classifiable under Chapter 20.01 or under Chapter 22.02 of the Central Excise Tariff Act; (ii) whether the demand was barred by limitation; and (iii) whether the penalty could survive.

Issue (i): Whether reconstituted fruit juices manufactured from juice concentrates were classifiable under Chapter 20.01 or under Chapter 22.02 of the Central Excise Tariff Act.

Analysis: The product was manufactured by adding water to juice concentrate to bring it to normal composition. The relevant HSN note treated reconstituted juices as products obtained by adding to concentrated juice a quantity of water not exceeding that contained in similar non-concentrated juices of normal composition. The record showed no evidence that the dilution exceeded the Codex-prescribed standard or that the product lost its character as fruit juice. On that basis, the classification under the fruit juice entry was accepted and the contrary classification under the residual chapter entry was rejected.

Conclusion: The product was rightly classifiable under Chapter 20.01 and not under Chapter 22.02, in favour of the assessee.

Issue (ii): Whether the demand was barred by limitation.

Analysis: The allegation of suppression rested only on the assumption that excessive water had been added, but that factual basis was not proved. Since the finding on classification negated the allegation that the manufacturing process had been concealed in the manner alleged, the invocation of the extended period was unsustainable.

Conclusion: The demand was time-barred, in favour of the assessee.

Issue (iii): Whether the penalty could survive.

Analysis: Once the duty demand itself was set aside as unsustainable and time-barred, no independent basis remained for sustaining the penalty.

Conclusion: The penalty was liable to be set aside, in favour of the assessee.

Final Conclusion: The impugned order was wholly unsustainable, the duty demand and penalty were set aside, and the appeals succeeded.

Ratio Decidendi: Reconstituted juice retains classification as fruit juice when the added water does not exceed the normal composition of similar non-concentrated juice and no factual basis exists for alleging suppression to invoke the extended limitation period.

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