Tariff classification of flavoured beverages and nut-based drinks: penalty set aside where ingredients were disclosed and classification was claimed.

Products made from badam and similar ingredients were treated as preparations of nuts rather than sharbat, so Thandai Bahar and Badam Bahar were classified under heading 2001.10. Orange Crush was classified under heading 2108.20 because its fruit juice content crossed the relevant Chapter 21 threshold, and Khus and Rose Bahar were also treated as flavoured beverages covered by that note as sharbat. Penalty was not justified where the assessee had disclosed the ingredients and claimed a specific tariff classification, so the penalty was set aside and duty was to be re-quantified accordingly.

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Issues: (i) Whether Thandai Bahar and Badam Bahar were classifiable under heading 2001.10 of the Central Excise Tariff Act, 1985 as claimed by the assessee or under heading 2108.20 as sharbat; and (ii) whether Orange Crush, Khus and Rose Bahar were classifiable under heading 2108.20 and whether penalty was leviable.

Issue (i): Whether Thandai Bahar and Badam Bahar were classifiable under heading 2001.10 of the Central Excise Tariff Act, 1985 as claimed by the assessee or under heading 2108.20 as sharbat.

Analysis: The products were found to be badam-based and to have ingredients substantially similar to those considered in the earlier tribunal decision relating to Thandai and Badam Summer Sip. On the declared composition, the dominant character of the products was preparation of nuts rather than a sharbat falling within Note 6 to Chapter 21.

Conclusion: Thandai Bahar and Badam Bahar were held classifiable under heading 2001.10 in favour of the assessee.

Issue (ii): Whether Orange Crush, Khus and Rose Bahar were classifiable under heading 2108.20 and whether penalty was leviable.

Analysis: Orange Crush contained fruit juice beyond the threshold indicated in Note 6 to Chapter 21, while Khus and Rose Bahar were flavoured beverages of the kind specifically covered by that note as sharbat. However, penalty was not justified because the assessee had disclosed the ingredients to the department and had claimed a specific classification.

Conclusion: Orange Crush, Khus and Rose Bahar were held classifiable under heading 2108.20, and the penalty was set aside.

Final Conclusion: The duty demand was to be re-quantified on the basis of the above classification, with relief granted on the classification of Thandai Bahar and Badam Bahar and on the penalty.

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