2011 (4) TMI 970 - AT - Central Excise

Tribunal overturns classification decision for Maize Starch Powder due to lack of empirical testing

RIDDHI SIDDHI GLUCO BIOLS LTD. Versus COMMR. OF C. EX., BELGAUM

RIDDHI SIDDHI GLUCO BIOLS LTD. Versus COMMR. OF C. EX., BELGAUM - 2011 (270) E.L.T. 291 (Tri. - Bang.) Issues Involved:1. Classification of Maize Starch Powder (MSP) and other products.2. Allegation of suppression of facts and invocation of extended period for demand.3. Validity of penalties imposed under Section 11AC and Rule 25.Detailed Analysis:1. Classification of Maize Starch Powder (MSP) and Other Products:The primary issue revolves around the classification of various forms of MSP, including Regular Textiles, Thin Boiled Starch, Very Thin Boiled Starch, Regular Food, Regular Pharma, and Paper Grade. The appellant classified these products under Chapter Sub-Heading (CSH) 11.03.11 of the Central Excise Tariff, claiming exemption applicable to native starch. However, the authorities, based on analytical reports and statements, concluded that these products were modified starches, correctly classifiable under CSH 3505.20. The Commissioner relied on the Chemical Examiner's opinion, although no samples were tested due to a lack of facilities. The Commissioner rejected the expert opinions furnished by the assessee, concluding that the starches in question were modified starches.2. Allegation of Suppression of Facts and Invocation of Extended Period for Demand:The appellant argued that the department was kept informed of all relevant facts, including the usage of raw materials and manufacturing processes, thus the charge of suppression was invalid. They contended that similar demands against other companies were dropped by respective Commissioners. The Commissioner, however, found that the appellant had deliberately suppressed information, justifying the invocation of the extended period under Section 11A(1) of the Central Excise Act, 1944.3. Validity of Penalties Imposed Under Section 11AC and Rule 25:Penalties equal to the duty demanded were imposed under Section 11AC for certain periods and under Rule 25 for others. The appellant argued that the penalties were unjustified, as there was no suppression of facts. The Commissioner, however, upheld the penalties, citing the deliberate suppression of information by the appellant.Conclusion:The Tribunal found that the Commissioner had not properly considered the expert opinions and technical literature submitted by the appellant. The Chemical Examiner's opinion, which was relied upon, was not based on empirical tests. The Tribunal noted that modified starches and native starches have different physical and chemical properties, which were not adequately tested. Consequently, the Tribunal set aside the impugned orders, concluding that the classification decision was not substantiated with proper evidence or reasoning. The appeals were allowed, and the penalties and demands were set aside.