Modified starch classification turns on power use, with non-power manufacture exempt and duty confined to the power-made product.

Goods commercially described as gum were treated as modified starch because borax altered the starch's viscous properties, bringing the power-made L.N. brand within Tariff Item 15C. On the evidence, however, the HVS brand was manufactured without the aid of power and could not be classified under that power-based item; it therefore fell under Tariff Item 68 and qualified for exemption under Notification No. 179/77. Duty liability was confined to the power-driven product, the exact amount requiring fresh quantification on remand. Confiscation for contravention of the licensing requirement was upheld, while the penalty was reduced.

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Issues: (i) whether the products manufactured by the appellants were modified starch falling under Tariff Item 15C and whether the product manufactured without the aid of power could still be classifiable under that item; (ii) whether the clearances made without the aid of power were liable to duty, confiscation, and penalty, and whether the matter required remand for determination of duty.

Issue (i): whether the products manufactured by the appellants were modified starch falling under Tariff Item 15C and whether the product manufactured without the aid of power could still be classifiable under that item.

Analysis: The tariff entry covered starch, including dextrine and other forms of modified starch. The evidence showed that borax was used as a modifying agent, altering the viscous property of starch, so the goods commercially called gum were in substance modified starch. That description brought the goods within Tariff Item 15C. However, the contemporaneous seizure memo and the partner's statement showed that power was used only for one variety, namely L.N. brand pasting gum, and not for HVS brand gum. The finding that both products were made with the aid of power was therefore not sustained.

Conclusion: The products were modified starch covered by Tariff Item 15C only to the extent they were manufactured with the aid of power; the HVS brand manufactured without power was not covered by Item 15C.

Issue (ii): whether the clearances made without the aid of power were liable to duty, confiscation, and penalty, and whether the matter required remand for determination of duty.

Analysis: Goods manufactured without the aid of power fell under Tariff Item 68 and were exempt from duty under Notification No. 179/77. Duty liability therefore had to be confined to the L.N. brand manufactured with the aid of power, and the precise duty payable depended on the correct clearance figures. The seizure-based facts also showed that the appellants had contravened the licensing requirement in respect of the power-driven manufacture, warranting confiscation and a reduced penalty. The matter was remanded only for determining the exact duty liability, while confiscation and a nominal penalty were maintained.

Conclusion: The duty demand was restricted and remanded for fresh quantification, confiscation and fine were upheld, and the penalty was reduced to Rs. 1,000.

Final Conclusion: The appeal succeeded only in part: the non-power manufactured product was held exempt, the duty demand was remitted for recalculation on the power-based product alone, and the confiscation with reduced penalty was maintained.

Ratio Decidendi: Where the evidence shows that only one product is manufactured with the aid of power, duty and licensing consequences under the excise tariff must be confined to that product, while the product manufactured without power cannot be brought within the power-based tariff description and is entitled to the applicable exemption.

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