2024 (11) TMI 664 - AT - Central Excise

Processed dry dates retain classification as dry dates under 08041030 despite washing, deseeding, cutting, and packaging operations

M/s Ishita Bakers Pvt. Ltd. Versus Commissioner of Central Excise & CGST, Noida

CESTAT Allahabad ruled that processed dry dates (washed, deseeded, cut, oven-dried, sieved and packed) remain classifiable as dry dates under sub-heading ... Classification of goods - end product emerging after certain processing undertaken on dry dates - classifiable under sub-heading No.080410300 or 20089999 of the Central Excise Tariff - processes undertaken on dry dates amount to 'manufacture' under the Central Excise Act - process of washing, pressing, deseeding, cutting, drying in oven, sieving and packing resulted in the production of new product in respect of dry dates or not - denial of SSI exemption Notification No.08/2003-CE dated 01.03.2023 - imposition of penalty under Section 11AC of the Central Excise Act, 1944. Whether the end product emerging after certain processing undertaken on dry dates is classifiable under sub-heading No.080410300 or 20089999 of the Central Excise Tariff? - HELD THAT:- It is found that the said product was sold as “dry dates cut” or “dry dates chura” in the packing of 25 Kg or 50 Kg as shown on invoices issued by the Appellant. The Appellant has contented that the product emerging after the above processes is again dry dates and as such classifiable under Sub-heading 08041030 as dry dates while the Department has viewed that the end product is processed dry dates different from dry dates and is classifiable under Sub-heading 20089999 of the Central Excise Tariff as prepared fruit. The classification of an item in the Central Excise Tariff is regulated in accordance with the principles enunciated in General Rules for Interpretation (GIR). Rule 1 of GIR provides that classification shall be determined according to the terms of the headings and any relative Sections or Chapter Notes. If the goods to be classified are covered by the words in a heading and the Section and Chapter Notes do not exclude classification in that heading, the heading applies - As per GIR if goods are ambiguous and two or more headings appear to be applicable, then Rule 3 should be applied which provides that specific heading should be preferred to general heading. Rule 3 of GIR provides, “when by application of sub-rule (b) of rule 2 or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as given in rule 3(a), 3(b) or 3(c)”. The heading which provides most specific description shall be preferred to heading providing a general description as held in CCE Vs. Maharshi Ayurveda Corp Ltd. [2005 (12) TMI 93 - SUPREME COURT], where it has been held that as per Rule 3(a) of GIR, the heading which provides specific description should be preferred to heading which provides general description. It may further be seen that HSN 2008 covers only those fruits, nuts and edible parts of plants which are not specified elsewhere. For dry dates, there is specific entry under SH 0804 of the Central Excise Tariff. Hence, dates without seeds and dried in oven are again dates. So, it would be classifiable under SH 0804 of the Central Excise Tariff. The product emerging subsequent to the processes undertaken by the Appellant can be consumed as such. Going by the entry of Chapter-08, we are of the considered view that the product can rightly be classified as dry date. When the product is covered under Chapter -08, the need to go to the Chapter-20 which is residuary in nature does not arise. Therefore, the contention of the Appellant to classify the processed dry dates under Chapter-08 attracting nil rate of duty, fully agreed upon. Whether the process of washing, pressing, deseeding, cutting, drying in oven, sieving and packing resulted in the production of new product in respect of dry dates? - HELD THAT:- The Appellant carried out washing with water for dust removal from dry dates, breaking dry dates for removal of seeds, removing seeds from dry dates, cutting deseeded dry dates into small piece, such small pieces of deseeded dry dates are subjected to oven drying for removal of moisture which occurred during washing, for getting requisite size sieving of moisture free dates is undertaken and thereafter packing in 25 Kgs and 50 Kgs bags for sale - according to Chapter Note 7 of Chapter 20, the processes undertaken by the Appellant amounts to manufacture under deemed concept even if the said processes do not amount to manufacture under general concept. This view is incorrect inasmuch as that after subjecting the above processes, the end product remains the same in regard to characteristics, name and quality. Sub heading 2008 of the Central Excise Tariff covers only those fruits which are not classifiable elsewhere. As dry dates in all forms find entry in Chapter 8 of the Central Excise Tariff, it would not be classifiable under SH 2008. When the item does not fall under Chapter 20, there is no applicability of Chapter Note-7 of Chapter 20. SSI exemption - HELD THAT:- SSI exemption has been denied to the Appellant on the ground that value of clearances of cut dry dates and chura dry dates is required to be included for determination of aggregate value of clearances as the said goods were dutiable excise goods. Since said goods namely cut dry dates and chura dry dates were fully exempted from excise duty as processes undertaken thereon were not amounting to manufacture, the value of clearances of such cut dry dates/chura dry dates would not be includible for determination of aggregate value. Thus, denial of exemption granted under SSI exemption Notification is improper and not sustainable. Imposition of penalty under Section 11AC of the Central Excise Act, 1944 - HELD THAT:- It is found that the same is leviable proportionate to duty amount confirmed. If no duty is confirmed, no penalty would be imposable under Section 11AC of the Central Excise Act, 1944. In this context reference made to the decision of the Tribunal in the case of Deek Printers [2013 (9) TMI 278 - CESTAT AHMEDABAD] wherein it has been held that in case demand is not sustainable, penalty would not be imposable. Hence, in the present case, no penalty is imposable. The impugned order is set aside - appeal allowed. Issues Involved:1. Classification of the processed dry dates under the appropriate sub-heading of the Central Excise Tariff.2. Determination of whether the processes undertaken on dry dates amount to 'manufacture' under the Central Excise Act.3. Applicability of SSI exemption based on the classification and manufacturing status of the processed dry dates.4. Imposition of penalty under Section 11AC of the Central Excise Act, 1944.Issue-wise Detailed Analysis:1. Classification of Processed Dry Dates:The primary issue was whether the processed dry dates, after undergoing washing, pressing, deseeding, cutting, drying, sieving, and packing, should be classified under sub-heading 08041030 (as dry dates) or 20089999 (as prepared fruit) of the Central Excise Tariff. The appellant argued that the end product, 'dry dates cut' or 'dry dates chura,' retained the essential character of dry dates and should be classified under Chapter 8, which covers all types of dates, including those that are dried or dehydrated. The Department contended that the processing rendered the product marketable, thus classifying it under Chapter 20 as prepared fruit. The judgment emphasized that the classification should be based on the General Rules for Interpretation (GIR) and the specific wording of the headings. It concluded that the processed dry dates retained their essential character and should be classified under Chapter 8, specifically sub-heading 08041030, attracting a nil rate of duty.2. Determination of 'Manufacture':The second issue was whether the processes undertaken on dry dates amounted to 'manufacture' as defined under Section 2(f) of the Central Excise Act, 1944. The appellant argued that no new product emerged from the processes, as the end product was still dry dates, albeit without seeds. The judgment referred to the 'general concept' of manufacture, which requires the emergence of a new and distinct product with a different name, character, and use. It was determined that the processes did not result in a new product, as the characteristics, quality, and name of the product remained the same. Thus, the processes did not constitute 'manufacture' under the Act.3. Applicability of SSI Exemption:Since the processed dry dates were classified under Chapter 8 and the processes did not amount to manufacture, the appellant argued that the value of clearances of such goods should not be included in the aggregate value for availing SSI exemption. The judgment supported this view, stating that the denial of SSI exemption was improper, as the processed dry dates were not dutiable excise goods.4. Imposition of Penalty:The final issue involved the imposition of a penalty under Section 11AC of the Central Excise Act, 1944. The judgment noted that penalties are proportionate to the confirmed duty amount. Since no duty was confirmed due to the non-manufacturing status of the processes, no penalty was imposable. The decision of the Tribunal in a similar case was cited, reinforcing that penalties are not applicable if the demand is not sustainable.Conclusion:The appeal was allowed, and the impugned order was set aside, granting consequential relief to the appellant. The judgment concluded that the processed dry dates should be classified under Chapter 8, the processes did not amount to manufacture, and the denial of SSI exemption and imposition of penalties were not justified.