Tribunal Upholds Duty Demand for Misclassification of Bottled Water

The Tribunal upheld the duty demand for misclassification of bottled water under sub-heading 2201.90 of the Central Excise Tariff Act, 1985, due to the addition of mineral salts post-demineralization. The circulars issued by the Board clarified that adding minerals after purification classified water as mineral water. Despite the appellant's argument that no minerals were added, any addition of minerals, regardless of the source, constituted adding mineral salts. The confusion surrounding the classification led to the remittance of the penalty imposed on the appellant, with the duty demand being upheld.

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Issues: Classification of bottled water under Central Excise Tariff Act, 1985; applicability of circulars issued by the Board; interpretation of the term "mineral water"; imposition of duty and penalty.

Classification of Bottled Water: The appellant bottled water under the name "Parle Bailley Aqua" from 1994 onwards. Central Excise officers visited the factory in 1995 and found that the water contained dissolved mineral salts. A show cause notice was issued alleging misclassification under sub-heading 2201.90 of the Central Excise Tariff Act, 1985. The Commissioner held that adding minerals after demineralization constituted adding mineral salts, confirming the duty and imposing a penalty.

Applicability of Circulars: Various circulars issued by the Board provided guidance on the excisability of mineral water. Circular No. 84/84/94-CX stated that adding mineral salts after purification would classify water as mineral water. The appellant argued that the circulars were not circulated as trade notices, leading to confusion in interpreting the tariff.

Interpretation of "Mineral Water": The tariff entry changed in 1995 to include "natural or artificial mineral waters." The appellant claimed no minerals were added to the water, but the Commissioner held that any addition of minerals, regardless of the source, constituted adding mineral salts. The definition of mineral water from a technical dictionary supported the classification of the appellant's product as mineral water.

Imposition of Duty and Penalty: The Tribunal found that the demand for duty within the limitation period was valid due to the confusion surrounding the classification of mineral water. The penalty imposed on the appellant was remitted considering the prevailing uncertainty. The appeal was allowed in part, upholding the duty demand but relieving the appellant of the penalty.

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