2015 (1) TMI 376 - AT - Central Excise

Classification of Goods: Maize Starch vs. Modified Maize Starch; Importance of Chemical vs. Physical Properties

The judgment concluded that the impugned goods were classified as maize starch under Tariff heading 11.03, exempt from duty, rather than modified maize ... Classification of goods - Whether the impugned goods are maize starch classifiable under Tariff heading 11.03 or it is modified maize starch classifiable under Tariff heading 35.05 - Held that:- Adjudicating authority’s observation that any physical change like change in brightness/whiteness will result in ‘modified starch’ covered under Ch. Heading 35.05 is devoid of any basis. Further mere conjecture (on the part of the adjudicating authority) ‘that potassium permanganate may have resulted in the oxidation of starch’ cannot be the basis of concluding that such oxidation actually happened specially when there is no evidence thereof and the appellants have convincingly contended that no such oxidation was allowed to happen nor it actually happened. It is also clear from the explanatory notes to chapter heading 35.05 that whether product would qualify for coverage under heading 35.05 can be determined on the basis of changes in properties of the product. Thus, as a corollary, unless the product is tested to ascertain if such changes actually happened, it is not possible to infer whether the product is modified starch warranting classification under 35.05 - Further, following the CESTAT judgment in the case of Ridhi Sidhi Gluco Boile (2011 (4) TMI 970 - CESTAT, BANGALORE), CESTAT in case of CCE Ahmadabad Vs. Gujrat Ambuja Exports [2013 (11) TMI 779 - CESTAT AHMEDABAD] and in the case of CCE Ahmadabad Vs. Maize Products [2013 (11) TMI 783 - CESTAT AHMEDABAD] upheld the classification of such goods under ch. 11 of Central Excise Tariff. - It is evident from the foregoing discussion that there is no basis whatsoever to conclude that the impugned product was ‘modified starch classifiable’ under chapter 35 of Central Excise Tariff. Consequently, we do not find the impugned order sustainable and set aside the same. - Decided in favour of assesse. Issues Involved:1. Classification of the impugned goods under Tariff heading 11.03 or 35.05.2. Validity of the adjudicating authority's conclusion based on the addition of chemicals.3. Reliance on test reports and the necessity of cross-examination.4. Applicability of HSN explanatory notes for classification.5. Precedent cases and their relevance to the current case.Detailed Analysis:1. Classification of the Impugned Goods:The primary issue in this case is whether the impugned goods should be classified as maize starch under Tariff heading 11.03, which was exempt from duty during the relevant period, or as modified maize starch under Tariff heading 35.05, which was not exempt. The adjudicating authority concluded that the goods were modified starch, thus falling under heading 35.05, based on the addition of chemicals like potassium permanganate and sodium meta bisulphite.2. Validity of the Adjudicating Authority's Conclusion:The adjudicating authority opined that the addition of any chemical resulting in a change, whether physical or chemical, would shift the product from plain starch to modified starch. The authority noted that increasing the brightness of starch through bleaching constitutes a deliberate change for specific commercial requirements, thus classifying it under chapter 35. However, the appellants argued that the small quantity of potassium permanganate used was only for enhancing brightness and did not result in a chemically modified starch.3. Reliance on Test Reports and Necessity of Cross-Examination:The adjudicating authority admitted that there were no reliable test reports for the impugned product, as the available reports did not pertain to the relevant period. Moreover, the CESTAT's remand order required the examination or cross-examination of the chemical examiner, which did not occur. This lack of cross-examination was deemed a significant procedural lapse, although the adjudicating authority's disregard for the test reports meant that this did not prejudice the assessee.4. Applicability of HSN Explanatory Notes for Classification:The HSN explanatory notes are considered an authentic guide in classification matters. The HSN note for chapter 11.08 describes starches as white, odorless powders used in various industries. The note for chapter 35.05 indicates that modified starches can be distinguished from unmodified starches based on changes in properties such as solution clarity, water binding capacity, and gelation temperature. The adjudicating authority's assertion that any physical change, like increased brightness, would classify starch under chapter 35 was found to lack basis, as the explanatory notes emphasize changes in specific properties.5. Precedent Cases and Their Relevance:The case of Riddhi Siddhi Gluco Boils Ltd. v. CCE, Belgaum, established that different physical and chemical properties distinguish modified starches from native starches, requiring tests to ascertain classification. The Supreme Court upheld this CESTAT judgment. Similarly, in CCE Ahmedabad v. Gujarat Ambuja Exports and CCE Ahmedabad v. Maize Products, the CESTAT upheld the classification of such goods under chapter 11. These precedents supported the appellants' stance that the impugned goods were not modified starch.Conclusion:The judgment concluded that there was no basis to classify the impugned product as modified starch under chapter 35. The process undertaken by the appellants was for purification, not modification. Consequently, the impugned order was set aside, and the goods were classified under chapter 11, exempting them from duty.