2002 (10) TMI 144 - AT - Central Excise

Tribunal rules 'Rice & Spice' subject to excise duty, rejects milling industry classification

The tribunal classified the product 'Rice & Spice' as a distinct edible preparation under Heading 21.08, subject to excise duty. The appellant's ... Manufacture - Demand - Limitation - Suppression of facts - Valuation (Central Excise) - Penalty Issues involved: Whether the product 'Rice & Spice' by M/s. Satnam Overseas Ltd. is eligible for excise duty.Analysis:1. Nature of the Product:The appellant claimed that 'Rice & Spice' is not a distinct preparation but merely a mixture of raw rice, de-hydrated vegetables, and spices. They argued that the product remains rice and should be classified under Heading 11.01 as a product of the milling industry. The appellant contended that the product did not undergo processes like boiling or baking, which are essential for classification as a preparation under Chapter 21 of the Tariff. They also argued that the demand for excise duty is time-barred due to their belief that similar products were exempt, and all ingredients used were duty-exempt.2. Manufacturing Process:The respondent argued that the appellant's process of mixing raw rice, dehydrated vegetables, and spices to create 'Rice & Spice' results in a new product distinct from rice. They contended that the product is marketed as a new commodity with its own characteristics. The respondent claimed that the appellant's process amounts to manufacturing, as confirmed by the statement provided by the appellant's General Manager detailing the production process. The respondent also argued that the extended period for demanding duty is justified due to the suppression of facts regarding manufacture and clearance of excisable goods by the appellant.3. Classification and Duty Calculation:The tribunal held that the appellant's product qualifies as a distinct edible preparation under Heading 21.08, not falling under Chapter 11 for milling industry products. The tribunal agreed with the need to calculate the price as cum-duty price and determine the assessable value by deducting the duty element. The tribunal also found the penalty under Section 11AC of the Central Excise Act inapplicable for clearances made before its insertion, imposing a penalty of Rs. 50,000 instead.4. Judicial Precedents and Final Decision:The tribunal referred to various judicial precedents to support its decision, including the Supreme Court rulings on 'manufacture' and extended period for demanding duty. Ultimately, the tribunal upheld the classification of the product under Heading 21.08, deemed the manufacturing process as liable for excise duty, and imposed a penalty of Rs. 50,000 on the appellant. The appeal was disposed of in favor of the respondent, affirming the liability of the appellant to pay the recalculated duty amount.