Chapter 30 exclusion for dietary supplements upheld; misdeclared food supplements attracted duty, extended limitation and penalty.

Dietary supplements were held to fall outside Chapter 30 because Chapter Note 1(a) excludes food and food supplements, save for nutritional preparations for intravenous administration; they were therefore classifiable under CETH 21069099. The claimed benefit of Notification No. 49/2003-CE was unavailable because the goods were not covered by the tariff entry relied on. The declared treatment of the goods as pharmaceutical products, despite their true character as dietary supplements, supported invocation of the extended limitation period and sustained penalty under section 11AC on the basis of intent to evade duty. Duty, interest and penalty were upheld.

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Issues: (i) Whether dietary supplements manufactured by the appellant were classifiable under Chapter 30 or under CETH 21069099 and whether they were excluded by Chapter Note 1(a) to Chapter 30; (ii) Whether the appellant was entitled to the benefit of Notification No. 49/2003-CE dated 10.06.2003; (iii) Whether the extended period of limitation was rightly invoked and penalty under section 11AC of the Central Excise Act, 1944 was sustainable.

Issue (i): Whether dietary supplements manufactured by the appellant were classifiable under Chapter 30 or under CETH 21069099 and whether they were excluded by Chapter Note 1(a) to Chapter 30.

Analysis: Chapter Note 1(a) to Chapter 30 expressly excludes food or beverages, including food supplements, from Chapter 30 except nutritional preparation for intravenous administration. The appellant had cleared dietary supplements while describing them as pharmaceutical products under CETH 3003, but the goods were in substance food supplements and not medicaments. The note, read as a whole, left no scope to treat such goods as falling within Chapter 30.

Conclusion: The goods were correctly classified under CETH 21069099 and were excluded from Chapter 30.

Issue (ii): Whether the appellant was entitled to the benefit of Notification No. 49/2003-CE dated 10.06.2003.

Analysis: The exemption under Notification No. 49/2003-CE applied only to specified goods. Since the dietary supplements were not classifiable under the tariff entry claimed by the appellant and were not covered by the notification, the exemption could not be extended to them.

Conclusion: The appellant was not entitled to the benefit of Notification No. 49/2003-CE dated 10.06.2003.

Issue (iii): Whether the extended period of limitation was rightly invoked and penalty under section 11AC of the Central Excise Act, 1944 was sustainable.

Analysis: The appellant had claimed exemption by declaring pharmaceutical products while simultaneously manufacturing and clearing dietary supplements without duty payment. The conduct showed non-disclosure of the true nature of the goods and supported the inference of intent to evade. Penalty under section 11AC is attracted on the same grounds as invocation of the extended period.

Conclusion: The extended period was validly invoked and penalty under section 11AC was sustainable.

Final Conclusion: The duty demand with interest and the penalty were upheld, and the appeal failed in full.

Ratio Decidendi: Food supplements and dietary supplements are excluded from Chapter 30 by Chapter Note 1(a) and, when misdeclared to obtain exemption, the concealment of their true nature justifies both extended limitation and penalty.

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