Levy of duty of excise on processing activity of cashew nuts, peanuts, almonds etc. by dry roasting, oil roasting, salting, seasoning and packs "

A landmark ruling by the Apex Court

Background

The appellant was engaged in processing of cashew nuts, peanuts, almonds etc. by roasting, oil roasting, salting, seasoning and packs.

After due investigation, a show cause notice was issued by the Commissioner of Customs and Central Excise, Goa on 6.8.1999 to the respondent assessee demanding duty under Chapter 20(2001.10) on the goods cleared without payment of central excise duty and proposed penalty action.  The respondent assessee in its reply dated 4.10.1999 denied the allegations incorporated in the show cause notice and submitted that its products were correctly classifiable under Chapter Heading 0801.00 of the Central Excise Tariff Act, 1985 and chargeable to Nil rate of duty and hence there was no requirement to register with the Central Excise Authorities.  

The Tribunal vide its impugned order dated 24.10.2001 allowed the appeal of the respondent assessee and held that the goods cleared by the respondent assessee are not assessable to duty.

Department has appealed before the Apex Court.

Entries under chapter 8

No.	Sub-Heading No.	Description of Goods	Rate of Duty
1	2	3	4
08.01	0801.00	Edible fruit and nuts; peel of citrus fruit or melons	Nil

Entries under chapter 20

Heading No.	Sub-Heading No.	Description of Goods	Rate of Duty
1	2	3	4
20.01	2001.10	Preparations of vegetables, fruit, nuts or other parts of plants including jams, fruit jellies, marmalades, fruit or nut puree and fruit or nut pastes, fruit juices and vegetable juices, whether or not containing added sugar or other sweetening matter	16%
	2001.90	Put up in unit containers and bearing a brand name.
		Other	Nil

Observation and Decision of Apex Court

The Central Excise Tariff Act is broadly based on the system of classification from the International Convention called the Brussels' Convention on the Harmonised Commodity Description and Coding System (Harmonised System of Nomenclature) with necessary modifications.  HSN contains a list of all the possible goods that are traded (including animals, human hair etc.) and as such the mention of an item has got nothing to do whether it is manufactured and taxable or not.

The HSN explanatory notes to Chapter 20 also categorically state that its products are excluded from Chapter 8 as they fall in Chapter 20.  In this view of the matter, the classification of the products in question have to be made under Chapter 20.

As a result, the appeal of the appellant is allowed and the impugned judgment of the tribunal is accordingly set aside and the judgment of the Commissioner of Customs & Central Excise, Goa is restored. 

Demand confirmed.

***************

For full text of judgment - visit:  2008 -TMI - 2970 - Supreme Court of India

Classification under Chapter 20: processed nuts treated as preparations for tariff purposes, triggering excise duty treatment. The court applied Harmonised System explanatory notes and the Central Excise Tariff to determine that nuts processed by roasting, oil roasting, salting, seasoning and packing are classifiable under Chapter 20 as preparations of fruit or nuts and are excluded from the nil-rated edible-nut entries of Chapter 8, making Chapter 20 the governing tariff for excise treatment of those processed products.