2019 (4) TMI 320 - AT - Central Excise

Tribunal allows appeal on duty recovery for 3D choco filled snacks under Central Excise Act, 1944

The tribunal set aside the impugned order and allowed the appeal, emphasizing adherence to the law on duty recovery and refraining from deciding on ... Classification under First Schedule to the Central Excise Tariff - Specific description versus residual entry in tariff heading - Communion wafer as a specific product description - Prohibition on appellate substitution of unpleaded classification - Recovery of differential duty under section 11A and interest under section 11ABClassification under First Schedule to the Central Excise Tariff - Specific description versus residual entry in tariff heading - Communion wafer as a specific product description - Appropriateness of classifying the product '3D's choco filled snacks' under the sub heading for 'communion wafers coated with chocolate or containing chocolate' (heading no. 1905 32 11) instead of the residual heading claimed by the appellant. - HELD THAT: - The Tribunal analysed the nature and description of the impugned product and observed that the sub heading invoked by Revenue bears a specific description - 'communion wafers' - which imports a particular connotation linked to a religious rite. The product before the Tribunal had a solid core of chocolate surrounded by a crust of whole wheat and oats, and thus did not conform to the ordinary sense of a 'wafer' (a thin baked/dried product). Although the possibility of chocolate covered or chocolate filled communion wafers was not excluded, Revenue's classification overlooked the dimensional and descriptive intent of the tariff sub heading and proceeded solely on the presence of chocolate. Having regard to the specificity of the sub heading, the Tribunal found the proposed classification under the 'communion wafers' entry to be inappropriate on the material before it.Proposed classification under heading no. 1905 32 11 ('communion wafers') is inappropriate on the record; the impugned order on that basis is set aside.Prohibition on appellate substitution of unpleaded classification - Whether the Tribunal in appellate capacity may itself decide upon and substitute an alternative classification not pleaded before it. - HELD THAT: - Relying on the principle that an appellate forum should not assume the role of the original taxing authority by inventing or imposing a fresh classification that was not pleaded before it, the Tribunal held that it cannot decide on a classification which the parties have not advanced. The Tribunal referred to the consequence recognised in precedent that, where a different classification is to be imposed, the proper course is to permit the Revenue to issue a fresh show cause notice rather than permitting the appellate forum to substitute an unpleaded head and thereby obliterate earlier proceedings. Accordingly, in the absence of a pleaded and argued alternative classification acceptable on the record, the Tribunal refused to substitute a new classification.Tribunal will not substitute an unpleaded classification; Revenue may initiate fresh proceedings (show cause) if it wishes to press an alternative classification.Recovery of differential duty under section 11A and interest under section 11AB - Whether the Tribunal may circumvent the statutory mandate for recovery of duties by displacing the proceedings leading to the impugned order. - HELD THAT: - The Tribunal emphasised that the statutory regime for recovery of duties, interest and penalties must be followed in letter and spirit. It refused to 'obliterate' the proceedings which would amount to enabling invocation of section 11A by judicial fiat in appellate proceedings. While setting aside the impugned order on classification grounds, the Tribunal made clear that it was not excusing recovery procedures and that the Revenue retains its statutory rights to pursue recovery in accordance with law.Proceedings for recovery under section 11A/11AB and penalty provisions cannot be circumvented; statutory recovery mechanisms remain available to Revenue.Final Conclusion: The impugned order assessing differential duty on the goods under the 'communion wafers' sub heading is set aside and the appeal is allowed; the Tribunal will not itself impose an unpleaded alternative classification and Revenue remains free to initiate fresh proceedings to seek recovery of any duty, interest or penalty in accordance with the statutory scheme. Issues:Classification of goods under Central Excise Tariff Act, 1985.Analysis:The dispute in the appeal pertains to the classification of '3D choco filled snacks' by M/s Pepsico Holdings Pvt Ltd under the Central Excise Act, 1944. The appellant classified the goods under heading no. 1905 90 90 with a nil rate of duty, while the central excise authorities proposed classification under heading no. 1905 32 11 for 'communion wafers coated with chocolate or containing chocolate'.The appellant argued that the goods produced were not 'communion wafers' as they had a core of chocolate surrounded by a crust of whole wheat and oats. The tribunal noted the distinction between 'waffles and wafers', emphasizing that the product in question was not a thin wafer but a solid product containing chocolate.The tribunal observed that 'communion wafers' are specifically produced for religious purposes, as evident from the term 'communion' associated with the ritual of 'mass' in churches. The tribunal did not discount the possibility of chocolate-covered or chocolate-filled 'communion wafers' being used in the ritual.The authorized representative contended that 'communion wafers' do not normally contain chocolates, but no material was presented to support this claim. The tribunal referred to a Supreme Court decision to highlight that a fresh show cause notice could be issued for alternative classification if the declared heading was found inappropriate.In conclusion, the tribunal set aside the impugned order and allowed the appeal. The tribunal emphasized following the mandate of the law regarding the recovery of duties not paid or short-paid, and refrained from deciding on a classification that was not pleaded before them.This detailed analysis of the judgment highlights the key arguments presented by the parties, the tribunal's interpretation of the relevant legal provisions, and the ultimate decision reached by the tribunal regarding the classification of the goods under the Central Excise Tariff Act, 1985.