TaxTMI 
TaxTMI 
2025 (3) TMI 1606
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....e. 1.2 Excise Appeal No. E/40329/2020 has been filed by the Appellants which is directed against the Order-in-Appeal No. CMB-CEX-000-APP-10/2020 dated 23.03.2020 passed by the Commissioner of GST & Central Excise (Appeals), Coimbatore. 1.3 All the above appeals are being taken up together for disposal by a common order as the issues involved in all these Appeals are identical and connected. 2. Brief facts of these appeals are stated below:- 2.1 The Appellants are receiving purified fish oil from M/s. Arbee Biomarine Extracts Pvt. Ltd. and are engaged in further purifying and concentrating the Omega 3 content and supplying the same as Fish Oil - Ethyl Ester (EE for short) with variable Omega-3 content, classifying their final products under Heading 1504 of the Central Excise Tariff Act, 1985 (CETA). Though the Appellants have been registered with the Central Excise Department since 2006 for their other final products, they started paying Central Excise duty of 1% or 2% as per Notification No. 1/2011-CE dated 01.03.2011 and Notification No. 16/2012-CE dated 17.03.2012, for the impugned goods from 2011 till June 2017, till the introduction of GST. 2.2 The Deputy Commiss....
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....CFO are primarily Triglycerides (TG) which are bonded with glycerol's and with a meagre amount of Free Fatty Acids (FFA). The CFO is the basic raw material for their suppliers, who process CFO to produce Purified Fish Oil (PFO) at their factory. ii. At the hands of their supplier, the CFO would be initially filtered with activated carbon to remove certain impurities and odour and charged inside the process tanks. In the process tanks the CFO which are long carbon chained TG, which are bonded with are treated with a mix of ethanol and potassium hydroxide (KOH). In this process, the KOH, which is a catalyst, helps the glycerol to get de-bonded from the long carbon chained TG and the ethyl molecule gets bonded in place of glycerol, thus forming Ethyl Esters. Free Fatty Acids (FFA) would then get converted into Ethyl Esters by subsequently charging with a stronger catalyst, viz, Sulphuric Acid (H₂SO₄), thus resulting in PFO. The de-bonded glycerol as well as catalytic elements viz, Potassium(K) & Sulphur(S) would thereafter be separated as effluents and the resultant PFO would be supplied to them in tankers. iii. Upon receipt of the above mentioned PFO for....
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....egality. 3.3.2 Reliance was placed on the decision of the Supreme Court in the case of Delhi Cloth & General Mills Co. Ltd. [1962 (10) TMI SC], wherein, the Hon'ble Apex Court has laid down the ratio with respect to the essential ingredients to constitute a manufacture and consequential change in tariff classification, the three cardinal tests to constitute a manufacture are, change in name, use and character. In the instant case, the process undertaken by them is only further purification and concentration of EPA/DHA, which would not answer the above tests as laid down by the Supreme Court to constitute a "manufacture", at the first place. 3.4.1 With respect to the allegation that the "FFA" are excluded by Chapter Note 1(e) of Chapter 15 of CETA, the Ld. Advocates would submit that, what has been excluded vide the said Chapter Note 1(e) are Fatty Acids falling under Section VI of CETA but the product in question are not "Fatty Acids" per se, but a Fish Oil (EE) containing Fatty Acids. It is further submitted that as per Chapter Note 1(a) of Chapter 29, only "separate chemically defined organic compounds, whether or not containing impurities" are classified under Chapter ....
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....the findings of the Ld. Adjudicating Authority placing reliance on Circular No. 81/2002 Cus. dated 03.12.2002 as completely erroneous and questioned the observation "The said Heading 3823 is now Chapter Heading 3824 of CETA, 1985." 3.6 The Ld. Counsels would also argue intensely against the invocation of larger period of limitation in the current proceedings. In this connection they would submit the following: - i. The Appellants have been manufacturing the impugned goods, viz, EE since 2003, a fact duly taken cognizance of, during the entire proceedings. It is also a fact on record that the Appellants have registered itself with the Department since 2006, for various other goods manufactured and cleared by them which are under the Central Excise umbrella. It is also a fact that the said goods, viz, EE has been reported in all the statutory records and returns, which would demonstrate that there is no intention to evade any statutory levies, which would not render them liable for invocation for larger period and its consequential penalty. ii. Reference is drawn to Test Memo No. 01/2004-2005 dated 03.09.2004, whereby, way back in 2004, samples of the impugned go....
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....s fatty acids or other goods covered under Section VI of the Central Excise Tariff Act and as the product been obtained after trans-esterification process, the product's classification under CETH 1504 is excluded and is more appropriately classifiable under CETH 3824. He has submitted that ethyl ester fish oil supplements with high concentration of EPA & DHA are different from triglycerides fish oil supplements / typical natural form with low concentration of EPA/DHA. The product is only fatty acid ethyl ester with higher concentration of EPA & DHA after undergoing the processes like esterification / transesterification / enrichment / distillation / blending / oxidation, etc. He has put forth that there is no merit in Appellants' argument that the Department has been accepting the classification for over eleven years and has now taken a somersault and that too without submission of legally valid reasons like Advance Ruling / Approved Classification lists, etc. On the issue of cross examination of the Officials, the Ld. Authorised Representative has placed his reliance on Malaram Bishnoi Vs. Commissioner of Customs, Chennai [2024 (11) TMI 1354-CESTAT Chennai] in support of the stand....
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....excise duty at the hands of the Appellants, an independent assessment has to be done with respect to classification also at their end. Though, prima facie, the arguments of the Appellants may buy reason, a proper appreciation of the classification becomes pertinent. 9. Further, it is not in dispute that the raw materials received by the Appellants are already esterified at the supplier's end. On receipt of such esterified fish oil, the Appellants engage in a process which increases the concentration of Omega-3 content by vacuum distillation, to obtain the same esterified fish oil but with variable and desired concentrations. Further the Appellants also add some anti-oxidants to avoid the product getting oxidised till its further consumption. Though the activity undertaken by the Appellants may not constitute a characteristic "manufacture", resulting in a new name, character and use as contemplated under the Delhi Cloth & General Mills Co. Ltd. supra, it appears that, under Chapter 15, any activity undertaken would constitute a deemed manufacture, thus making the impugned goods liable for excise duty on account of the process undertaken by them at their end. Hence, we are of ....
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.... Animal or vegetable fats and oils and their cleavage products; prepared edible fats; animal or vegetable waxes NOTES: 1. This Chapter does not cover: (a) pig fat or poultry fat of heading 0209; (b) cocoa butter, fat or oil (heading 1804); (c) edible preparations containing by weight more than 15% of the products of heading 0405 (generally Chapter 21); (d) greaves (heading 2301) or residues of headings 2304 to 2306; (e) fatty acids, prepared waxes, medicaments, paints, varnishes, soap, perfumery, cosmetic or toilet preparations, sulphonated oils or other goods of Section VI; or (f) factice derived from oils (heading 4002). 1504 FATS AND OILS AND THEIR FRACTIONS, OF FISH OR MARINE MAMMALS, WHETHER OR NOT REFINED, BUT NOT CHEMICALLY MODIFIED 1516 ANIMAL OR VEGETABLE FATS AND OILS AND THEIR FRACTIONS, PARTLY OR WHOLLY HYDROGENATED, INTER-ESTERIFIED, REESTERIFIED OR ELAIDINISED, WHETHER OR NOT REFINED, BUT NOT FURTHER PREPARED 15.04-Fats and oils and their fractions, of fish or marine mammals, whether or not refined, but not chemically modified. 1504 10 - Fish-liver oils ....
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.... contained in the product. The necessary interaction and rearrangements of the esters is stimulated by the use of catalysts." 11. It is not in dispute that, the product in question is an Esterified Fish Oil / Ethyl Esters. As per the submissions of the appellants, esterification is a chemical modification by treating crude fish oil with Ethanol and Potassium Hydroxide resulting in esterified fish oil. So chemical modification takes place on account of esterification process. We note that such chemical modification happens at the supplier's end, which is also an undisputed fact. Chapter heading 1504 classifies fish oils and their fractions which are not chemically modified. That be so, the esterified fish oil supplied by their suppliers to the Appellants cannot merit classification under CETH 1504, at the first place. Thus, the classification adopted by the Appellants for the impugned products under Chapter Heading 1504 is held to be incorrect. 12. However, we find that the Appellants have referred to alternate classification under CETH 1516 1000, which needs to be looked into. A perusal of the Explanatory Notes of the HSN to CETH 1516 supra, would reveal that trans-esteri....
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.....04 GIRs 1 and 6 3. Powder of konjac tuber consisting of 87.5 % by weight of glucomannan, 8.9 % by weight of moisture, and 1.6 % by weight of ash 1212.99 12.12 and 13.02 GIRs 1 and 6 4. The product is refined and modified fish oil from anchovies, with vitamin E (tocopherol) added as an antioxidant. The oil is highly concentrated omega-3 fatty acids EPA (eicosapentaenoic acid) and DHA (docosahexaenoic) bound in the form of triglycerides (400 mg/g of product and 300 mg/g of product, respectively). The triglycerides constitute 90 % of the product, and the remaining 10 % of the ingredients consists mainly of mono- and diglycerides. The product is exported in barrels and will be used in the manufacture of food supplements. 1516.10 15.04, 15.16 and 21.06 GIRs 1 and 6 Copyright @ 2018 World Customs Organization. All rights reserved. Requests and inquiries concerning translation, reproduction and adaptation rights should be addressed to [email protected] 14. A perusal of the above would reveal that the impugned goods are brought out in Sl. No. 4 of the above Opinion where the fish oils, refined/modified and added with anti-oxidants 9 tocopher....
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....onclusion that the impugned products viz., Enriched Omega 3 Fatty Acid (Fish Oil - Ethyl Ester) and Enriched Omega 3 Fatty Acid-Powder (Fish Oil - Ethyl Ester Powder) are more appropriately classifiable under heading 3823 adopting the similar logic for classification of Palm Stearin which is incorrect and illogical. Chapter Heading No. 3823 covers industrial monocarboxylic fatty acids; Acid oils from refining and Industrial monocarboxylic fatty acids. This heading also covers stearic acid and oleic acid. HSN Explanatory Notes explains that Heading 3823 includes commercial stearic acid. The Circular clearly distinguished as to which type of palm stearin was classifiable under CETH 1511 and which other type is classifiable under CETH 3823. Chapter Heading 1511 is basically triglycerides (Esters) of fatty acids and stearin was classifiable under 3823 which is basically a free fatty acid. The triglycerides of fatty acids (Esters) are two different organic compounds and distinguished by determining the ester value. While triglycerides possess the ester values, free fatty acids do not possess the same. For ease of reference, Chapter Heading 3823 and 3824 are extracted below: - Chapter....
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.... - --- Ammoniacal gas liquors and spent oxide produced in coal gas purification, case hardening compound, heat transfer salts; mixture of diphenyl and diphenyl oxide as heat transfer medium, mixed polyethylene glycols; salts for curing or salting, surface tension reducing agents: .... .... 3824 90 17 --- Surface tension reducing agents --- Electroplating salts; water treatment chemicals; ion exchanger; correcting fluid; precipitated silica and silica gel; oil well chemical: 3824 90 26 ---- Oil well chemicals --- Mixture containing perhalogenated derivatives of acyclic hydrocarbons containing two or more different halogens other than chlorine and fluorine: ferrite powder; capacitor fluids - PCB type; dipping oil for treatment of grapes; Poly brominated biphenyls, polychlorinated biphenyls, Poly chlorinated terphenyls, crocidolite; goods of a kind known as "hazardous waste"; phosphogypsum : 3824 90 31 ---- Mixtures....
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....ils and their cleavage products; prepared edible fats; animal or vegetable waxes". The products derived from fats or oils and residues resulting from the treatment of fatty substance or of animal or vegetable waxes merits classification under Chapter 15. Further, it is also specifically mentioned in the notes to Heading 1504 that the fats and oils derived from fish or marine mammals remain in this heading when refined, but are excluded if partly or wholly hydrogenated, inter-esterified, re-esterified or elaidinised which come under CETH 1516. This clearly indicates that when the fats and oils derived from fish oil undergoes the process of esterification, it merits classification under Heading 1516. 22. Heading 1516 deals with "Animal or vegetable fats and oils and their fractions, partly or wholly hydrogenated, inter-esterified, re-esterified or elaidinised, whether or not refined, but not further prepared." The impugned products i.e., Enriched Omega 3 Fatty Acid (Fish Oil - Ethyl Ester) and Enriched Omega 3 Fatty Acid-Powder (Fish Oil - Ethyl Ester-Powder) are products of the process of refining of fish oil which has undergone processes of trans-esterification and distillation ....
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.... the event it is not possible to do so, recourse to the residuary entry should be taken by way of last resort. We are also of the view that there is considerable force in the argument of the Appellants that Chapter Heading 3824 is primarily intended for industrial applications, whereas the impugned goods are for human consumption. Even, in terms of Rule 3 of General Rules for the Interpretation of the Tariff, the Heading which provides the most specific description shall be preferred to headings providing a more general description. In case of mixtures, composite goods consisting of different materials or different components, the goods are to be classified as if they consisted of the material or component which gave them their essential characteristics. Applying this Rule 3, the impugned goods are more appropriately classifiable under CETH 1516 1000 of CETA, 1985. 26. At this point, we like to refer to the decision of the Hon'ble Supreme Court in the case of M/s. H.P.L. Chemicals Ltd. Vs. Commissioner of Central Excise, Chandigarh [2006 (197) ELT 324 (SC)] which has held as follows, and the ratio of which is squarely applicable to the facts of the case on the issue of classific....
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.... assessee has been treated as a kind of Nylon Yarn by the people conversant with the trade. It is commonly considered as Nylon Yarn. Hence, it is to be classified under Item 18 of the Act. The Revenue has failed to establish the contrary. We would do well to remember the guidelines laid down by this Court in Dunlop India Ltd. v. Union of India. AIR 1977 SC 597 at Page 607. In such a situation, wherein it was stated (AIR P. 607 SCC P. 254, Para 35) :- "When an article has, by all standards, a reasonable claim to be classified under an enumerated item in the Tariff Schedule, it will be against the very principle of classification to deny it the parentage and consign it to an orphanage of the residuary clause." 31. Similarly, in Hindustan Ferodo Limited v. Collector of Central Excise, Bombay, 1997 (2) SCC 677, it is held in Para 4 as under :- "It is not in dispute before us, as it cannot be, that the onus of establishing that the said rings fell within Item 22-F lay upon the Revenue. The Revenue led no evidence. The onus was not discharged. Assuming therefore, that the Tribunal was right in rejecting the evidence that was produced on behalf of the appellants....
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....ific Heading 25.01 as has been claimed by the assessee/appellant in the classification list filed by it. 35. For the reasons stated above, these appeals are accepted and the impugned orders are set aside with consequential effects. Parties will bear their own costs." 27. In view of the forgoing, we conclude that the goods in question, shall merit classification under CETH 1516 1000 and not under CETH 3824 9090 as contended by the Revenue. 28. As now, it is a settled law that, where the classification proposed by the Department cannot be sustained, then irrespective of the fact as to whether or not the classification of the Assessee is proper, the same would prevail as held by the Hon'ble Apex Court in Warner Hindustan Ltd. Vs. CCE [1999 (113) ELT 24 (SC)] which was followed by the Tribunal in Pepsico Holdings Pvt. Ltd. Vs. CCE [2019 (25) GSTL 271 (Tri. Mum.)] wherein the Tribunal held that the classification proposed in the Bill of Entry will prevail when classification of the Revenue is found to be inappropriate. Further, the Hon'ble Supreme Court in CC Vs. Sunrise Traders [2022 (382) ELT 23 (SC)] affirmed the decision of the Tribunal in M/s. Sunrise Traders....