Masala classification under the specific tariff entry prevailed, and the Gulabjamun Mix duty demand failed for lack of proof of manufacture.

Goods commonly known in trade as masala cannot be classified under the residuary Chapter 21.08 when a specific tariff entry covers masalas; Jaljeera, Dehati Buknoo, Milk Masala and similar products were therefore classifiable under Chapter 09.03 up to 01-03-2005 and under Chapter 09.10 thereafter. A duty demand on Gulabjamun Mix also failed because the notice did not substantiate that the assessee manufactured the product, while the record indicated only trading activity. The impugned orders were modified and the challenged duty, interest and equal penalties were set aside to that extent.

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Issues: (i) Whether Jaljeera, Dehati Buknoo (Hazmi), Milk Masala and similar products were classifiable under Chapter 09.03/09.10 or under Chapter 21.08 of the Central Excise Tariff Act, 1985; (ii) whether the demand of duty on Gulabjamun Mix could be sustained when the assessees asserted that they were only trading in the product and not manufacturing it.

Issue (i): Whether Jaljeera, Dehati Buknoo (Hazmi), Milk Masala and similar products were classifiable under Chapter 09.03/09.10 or under Chapter 21.08 of the Central Excise Tariff Act, 1985.

Analysis: The products were examined with reference to the Supreme Court's view that Jaljeera is a mixed masala packed in packets and, in commercial understanding, answers the description of masala rather than a residuary product. Chapter Note 3 to Chapter 9 was relied upon, which treats goods commonly known as masala as falling within Chapter 09.03 for the earlier tariff period and the corresponding classification under the later tariff structure. The demand had been confirmed by treating these goods as falling under Chapter 21.08, but the tariff entry specifically covering masalas was applicable.

Conclusion: The classification under Chapter 21.08 was not sustainable, and the goods were liable to be classified under Chapter 09.03 for the period up to 01-03-2005 and under Chapter 09.10 for the period thereafter, in favour of the assessee.

Issue (ii): Whether the demand of duty on Gulabjamun Mix could be sustained when the assessees asserted that they were only trading in the product and not manufacturing it.

Analysis: The show cause notice relied upon the assessee's communication and annexure indicating that the assessee was only trading in Gulabjamun Mix. The basis for disregarding that assertion was not reflected in the notice or in the earlier notices. In the absence of a sustainable foundation showing manufacture by the assessee, the duty demand and consequential penalties could not be maintained.

Conclusion: The duty demand on Gulabjamun Mix was not sustainable, in favour of the assessee.

Final Conclusion: The impugned orders were modified and the duty demands, interest and equal penalties were set aside to the extent challenged, with the assessees obtaining partial relief and consequential benefits in accordance with law.

Ratio Decidendi: Where goods are commonly known in trade as masala and are covered by a specific tariff entry, they cannot be assessed under a residuary entry; a demand based on alleged manufacture also fails when the notice does not substantiate the foundational allegation.

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