Starch-based food preparation classification under Heading 1901 supports captive-use exemption for infant food manufacture

A starch-based product made from maize or tapioca starch, solubilised, partially hydrolysed, and fortified with vitamins and minerals was treated as a food preparation based on starch under Heading 1901, rather than a preparation of other sugars under Heading 1702. The chemical examiner's finding that the sample was essentially starch with dextrin, vitamins and minerals supported that classification. On that basis, captive consumption of the product in infant food manufacturing also attracted exemption under Notification No. 67/95-C.E., and the contrary departmental analogy with a different maltodextrose product was not accepted.

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Issues: (i) Whether the product "New Maltodex" was classifiable under Heading 1702 as preparation of other sugars or under Heading 1901 as food preparation based on starch. (ii) Whether the product, when captively consumed in the manufacture of infant food, was entitled to exemption under Notification No. 67/95-C.E.

Issue (i): Whether the product "New Maltodex" was classifiable under Heading 1702 as preparation of other sugars or under Heading 1901 as food preparation based on starch.

Analysis: The product was manufactured from maize or tapioca starch, which was solubilised and partially hydrolysed, and vitamins and minerals were then added before spray drying. The chemical examiner's report stated that the sample was essentially composed of starch with dextrin, vitamins and minerals and could be considered a food preparation based on starch. The departmental reliance on the earlier maltodextrose decision was found inapplicable because that case concerned a different product composition and did not consider Chapter 19.

Conclusion: The product was correctly classifiable under Heading 1901 and not under Heading 1702.

Issue (ii): Whether the product, when captively consumed in the manufacture of infant food, was entitled to exemption under Notification No. 67/95-C.E.

Analysis: The lower appellate authority had extended the exemption on the footing that the product was captively consumed in the manufacture of infant food and no input credit had been availed, with no option exercised under Rule 57AD of the Central Excise Rules. That approach was not shown to be erroneous once the product was held classifiable under Heading 1901.

Conclusion: The exemption under Notification No. 67/95-C.E. was available.

Final Conclusion: The departmental appeal failed, and the order classifying the product under Heading 1901 with consequential exemption relief was sustained.

Ratio Decidendi: Where the product's composition and expert chemical evidence show that it is essentially a starch-based preparation with added nutrients, classification must follow Heading 1901 rather than the sugar heading, and the departmental view cannot prevail merely by analogy with a different product.

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