2008 (6) TMI 621 - AT - Central Excise

Spice Classification Upheld, Market Perception Key

Commissioner of Central Excise, Mumbai-III Versus M/s. Narendrakumar And Co.

Commissioner of Central Excise, Mumbai-III Versus M/s. Narendrakumar And Co. - TMI Issues Involved:1. Classification of various spice products under the Central Excise Tariff Act.2. Determination of whether the products retain the essential character of spices.3. Application of common parlance test for classification.4. Reliance on chemical analysis and percentage of ingredients.5. Consideration of previous classifications and uniformity in taxation.Detailed Analysis:1. Classification of Various Spice Products:The primary issue is whether the products in question, such as Rasam Powder, Jiraloo, Tea Masala, and various other masalas, should be classified under Chapter 09 (spices) or Chapter 21 (mixed condiments and mixed seasonings) of the Central Excise Tariff Act, 1985. The adjudicating authority initially classified these products under Chapter 09.03, which covers spices, while the revenue sought classification under Chapter 21.03 and 21.08, which cover mixed condiments and seasonings.2. Determination of Essential Character of Spices:The tribunal examined whether the products retained the essential character of spices despite containing other ingredients. The chapter note 3 of Chapter 9 indicates that the addition of other substances to spices shall not affect their inclusion in this heading, provided the resulting mixtures retain the essential character of spices. The tribunal found that the products in question contained up to 96% spices and only 4% to 5% other ingredients, which did not alter their essential character as spices. This was supported by the CBEC circular No. 427/60/98, which stated that compounded asafoetida containing 85% other ingredients still retained its essential character.3. Application of Common Parlance Test:The tribunal emphasized the importance of the common parlance test, which determines the classification based on how products are understood in the market. The respondents provided evidence, including certificates from reputed consumers and the Institute of Hotel Management, indicating that the masalas were known and used as spices. The tribunal noted that the revenue did not provide any contrary evidence to dispute this market understanding.4. Reliance on Chemical Analysis and Percentage of Ingredients:The revenue's argument relied on the report of the Deputy Chief Chemist, which was deemed unclear. The tribunal found that the respondents consistently stated that the products were predominantly spices, and the revenue did not provide evidence to refute this. The tribunal also noted that the revenue failed to provide the percentage of ingredients necessary to determine the essential character of the products.5. Consideration of Previous Classifications and Uniformity in Taxation:The tribunal considered the importance of uniformity in classification across different Commissionerates. Evidence showed that identical products manufactured by competitors were classified under Chapter 09 or were considered non-excisable. The tribunal cited the Supreme Court's decision in Damodar J. Malpani v. CCE, which emphasized the need for uniform classification to avoid competitive disadvantages. The tribunal also referenced the case of Crane Betel Nut Powder Works, where the classification of mouth fresheners under Chapter 09 was upheld, reinforcing the need for consistency.Conclusion:The tribunal upheld the adjudicating authority's classification of the products under Chapter 09.03 as spices, except for Jiraloo, which was remanded for reconsideration. The tribunal emphasized the importance of retaining the essential character of spices, the common parlance test, and uniformity in classification across different jurisdictions. The appeals were disposed of accordingly.