TaxTMI 
TaxTMI 
2026 (10) TMI 108
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....it distributed by the Input Service Distributor (ISD) amounting to Rs.3,21,722/-. 2. The facts of the case are that during the relevant period, i.e. March 2013 to December 2015, M/s. Ishan Snax Private Limited, Fulbari-Goshpukur By-Pass Road, Kantivitta, Phansidewa, Siliguri - 734 434 [hereinafter referred to as the "appellant"] was functioning as a Contract Manufacturing Unit (CMU) manufacturing various Namkeen products for and on behalf of its principal, M/s. Parle Biscuits Pvt. Ltd., Mumbai, in terms of the applicable provisions governing contract manufacturing. The products manufactured by the appellant included 'Moong Dal', 'Tasty Peanuts', 'Salted Peanuts', 'Aloo Bhujia', 'Bhujia Sev', 'Ratlami Sev', 'Khata Metha', 'Fulltoss' and 'Hot & Spicy'. The appellant was clearing the aforesaid products as "Namkeen" under Central Excise Tariff Sub-heading 2106 90 99 and was availing the benefit of exemption under Sl. No. 37 of Notification No. 12/2012-C.E. dated 17.03.2012. 2.1. The present proceedings are principally with regard to the classification of two products, namely, Salted Peanuts and Tasty Peanuts and the eligibility of the said products towards the benefit of the said....
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....impugned products were correctly classifiable under Central Excise Tariff Sub-Heading No. 2106 90 99, having regard, inter alia, to Chapter Note 6 to Chapter 21. Reliance was also placed upon various CBEC clarifications and trade notices in support of the classification adopted and the exemption claimed under Notification No. 12/2012-C.E. dated 17.03.2012. During the course of investigation, samples of the products were drawn and forwarded to the Central Revenue Control Laboratory, Kolkata. The test report dated 19.07.2016 reported, inter alia, the classification of Parle Namkeen Tasty Peanuts and Parle Namkeen Moong Dal under Chapter Heading 2106 90 99. 5. The investigation culminated in the issuance of Show Cause Notice dated 25.07.2016, wherein it was alleged, inter alia, that Salted and Tasty Peanuts had been incorrectly classified under Central Excise Tariff Sub-Heading No. 2106 90 99 instead of Central Excise Tariff Sub-Heading No. 2008 11 00 and that the appellant was not eligible for the benefit of Sl. No. 37 of Notification No. 12/2012-C.E. in respect of the said products; further, the exemption claimed under Sl. No. 37 of Notification No. 12/2012-C.E. in respect of cer....
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....it Rules, 2004 contemplated distribution of credit by an ISD to manufacturing units or output service units and did not expressly encompass outsourced manufacturing/job-working units. It was further observed that the amendment introduced vide Notification No. 13/2016-C.E. (N.T.) dated 01.03.2016, whereby outsourced manufacturing units were specifically brought within the ambit of ISD distribution, was prospective and effective from 01.04.2016; the contention of the appellant that the said amendment was clarificatory and therefore applicable retrospectively was consequently not accepted. 6. Aggrieved by the confirmation of the aforesaid demands, the appellant has preferred the instant appeal. 7. During the course of hearing, the Ld. Counsel appearing on behalf of the appellant inter alia advanced the following submissions: - (i) The Ld. Commissioner (Appeals) has fundamentally erred in science and process technology by equating the process of deep-frying and mixing with salt to the process of dry-roasting evaluated in the case of Amrit Agro Industries Ltd. Roasting is a superficial, dry-heat process that leaves the baseline chemical structures and properties of an ite....
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.... product is a Namkeen explicitly specified and provided a home under Tariff Item 2106 90 99, it is legally "elsewhere included," which completely disqualifies Heading 2008 from absorbing it. (iv) The Commissioner Appeal's dismissal of the decision in CCE v. Frito Lay India [2009 (242) E.L.T. 3 (S.C.)] merely on the basis of physical shape or appearance of the product vs impugned product constitutes a manifest error of law. The Hon'ble Supreme Court in Frito Lay India recognised that products subjected to substantial processing involving frying, seasoning and incorporation of additional ingredients, resulting in a commercially distinct snack preparation, would not continue to remain within the parent cereal-based tariff entry merely because the originating raw material was cereal-based. The Court distinguished products obtained merely through swelling or roasting from products manufactured through additional processing giving rise to a distinct edible preparation. The Appellant's product squarely satisfies the aforesaid principle, since the process undertaken involves deep frying, salting and seasoning, culminating in emergence of a commercially distinct retail snack produc....
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..../s. Parle; hence credit passed on through ISD invoices is admissible. (viii) The said issue is no longer res integra and has been decided by the larger bench of this Tribunal in case of M/s. Krishna Food Products, M/s. Mariamma R. Iyer, M/s. Parle Biscuits Pvt Ltd. Versus The Additional Commissioner of CGST & C. Ex [2021 (5) TMI 906 CESTAT NEW DELHI] wherein the Tribunal held that Rule 7 of the CENVAT Rules allows distribution of credit to its manufacturing units. It does not use the words its own manufactures units. It can, therefore, safely be presumed that the term its manufacturing units should include a contract manufacturer, who manufactures in accordance with the provisions of the Registration Exemption Notification. As such the credit pertaining to the period prior to 1.04.2016 is also admissible. (ix) Reliance is also placed on the following judgements which are to the same effect: • Man Foods Pvt Ltd vs Commissioner of C.E. & S.T.-Daman, vide Final Order no 11492/2024 dated 03 July 2024 - CESTAT Ahmedabad. • M/s. Graintech Foods (India) Pvt. Ltd vs Commissioner of C.G.ST. & Central Excise, Bhopal vide Final Order no 55999/2024 d....
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....emption contemplated under Sl. No. 37 of Notification No. 12/2012-C.E. dated 17.03.2012; and (ii) Whether the CENVAT Credit availed by the appellant on the strength of invoices issued by the Input Service Distributor (ISD), namely, M/s. Parle Biscuit Pvt. Ltd., in its capacity as a Contract Manufacturing Unit (CMU), is irregular and liable to be recovered, or not. 10.1. We propose to examine the aforesaid issues seriatim. At the outset, we take up the first issue relating to the classification of 'Tasty Peanuts' and 'Salted Peanuts' manufactured by the appellant and the consequential claim of exemption thereon. Issue (i) Classification of 'Tasty Peanuts' and 'Salted Peanuts': 11. The facts which are not in dispute are that the products in question comprise two distinct preparations, namely, 'Tasty Peanuts' and 'Salted Peanuts', manufactured by the appellant during the relevant period. The ingredients employed and the respective processes undertaken in the preparation of these products, as brought out from the records, are set out hereinbelow: "Tasty Peanuts: Ingredients- PEANUTS (67.3%); EDIBLE VEGETABLE OIL, GRAM FLOUR, SPICES & CONDIMENTS, (CHI....
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....riving at the conclusion that the same is liable to be classified under Central Excise Tariff Sub-heading 2008 11 00 13.1. The question is not merely whether the peanut remains physically discernible in the finished preparation, but whether the same continues to retain the essential identity of the original agricultural product or has emerged as a distinct food preparation. In the present case, it is clear that extensive culinary processes, including coating with a batter of gram flour and deep frying, are undertaken, which leads us to the conclusion that the same cannot be equated, in the commercial or tariff sense, with the original 'peanut'. We are therefore unable to subscribe to the reasoning that the said process does not sufficiently alter the character of the product so as to warrant its classification under Chapter 21. 13.2. We have also considered the reliance placed by the Revenue upon the judgment of the Hon'ble Supreme Court in Amrit Agro Industries Ltd. v. CCE [2007 (210) E.L.T. 183 (S.C.)]. In our view, reliance upon the said decision, without appreciating the factual matrix in which the classification there was considered, does not advance the Revenue's ca....
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....artment aloo bhujia falls under heading 21.08. In the case of moongfali masala mazedar, the principle of predominance cannot be applied, particularly in absence of any Section Note or Chapter Note propounding the said principle. In this process the capacity to germinate is obliterated. Moongfali masala mazedar is the mixture of material other than the nuts. It is an oil preparation. It makes use of gram flour (besan). It undergoes the process of deep frying. When such a process is applied one cannot apply the principle of predominance. The only difference between aloo bhujia and moongfali masala mazedar is that in the former case the namkeen is essentially made of aloo whereas in the later case it is a namkeen essentially made from a pulse (dal). Pulse can be chana, malka, masoor, moong, urad etc.. All these products are only known as namkeens in the market. In the circumstances, we are of the view that moongfali masala mazedar falls under Chapter 21. It falls under Heading 21.01, sub-heading 2108.99 and, therefore, the assessee is entitled to exemption." 13.5. The aforesaid distinction, in our view, is determinative. The classification exercise cannot be undertaken by focusing ....
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....ated within the scope of the said Explanatory Note. The presence of vegetable oil and salt, by themselves, therefore cannot be regarded as sufficient to dislodge the product from the specific description under Heading 20.08. Ground nuts roasted in oil and sprinkled with salt are specifically covered under the Heading 20.08. The aforesaid position also finds authoritative support in the judgment of the Hon'ble Supreme Court in Amrit Agro Industries Ltd. (supra), wherein, while considering the classification of roasted peanuts to which salt had been applied, the Hon'ble Apex Court observed inter alia that the addition of salt does not obliterate its essential character, in the following manner: - "The assessee merely applies salt to roasted peanuts which does not obliterate the essential character. Moreover, roasting is a process. That process has not been excluded in Note 1 to Chapter 20. Therefore, roasted peanuts are covered by Chapter 20. Even according to the Explanatory notes of HSN under Heading 20.08 ground-nuts, almonds, peanuts etc. which are dry-roasted, fat-roasted whether or not containing vegetable oil are the items which all would stand covered by the said Hea....
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....h of the Tribunal has held that Rule 7 of the CENVAT Credit Rules, 2004 does not restrict distribution of credit to the principal manufacturer's own manufacturing units and that the expression "its manufacturing units" would encompass a contract manufacturing unit operating under the applicable Registration Exemption Notification. It was also laid down therein that the amended provisions of Rule 2(m) and Rule 7 of the CENVAT Credit Rules, merely seeking to rectify the lacuna in the amended rules, would have effect from the inception of the rules. The relevant portion of the said order reads as under: - "34. According to the Department Parle, which has its own manufacturing units and also operates through contract manufactures, can distribute credits to its own units but cannot distribute credits to contract manufacturers who manufacture the goods for and on behalf of Parle though they operate on identical basis as the units of Parle. The interpretation put by the Department clearly seeks to dilute the spirit behind the CENVAT Rules and the Registration Exemption Notification. The whole purpose of CENVAT credit is to capture all costs so as to evade the cascading effect of ....
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.... (Dilip Kumar) did not refer to the line of authority which made a distinction between exemption provisions generally and exemption provisions which have a beneficial purpose. We cannot agree with Shri Gupta's contention that sub-silentio the line of judgments qua beneficial exemptions has been done away with by this 5-Judge Bench. It is well settled that a decision is only an authority for what it decides and not what may logically follow from it (see Quinn v. Leathem [1901] AC 495 as followed in State of Orissa v. Sudhansu Sekhar Misra (1968) 2 SCR 154 at 162,163). 24. This being the case, it is obvious that the beneficial purpose of the exemption contained in Section 3(1)(b) must be given full effect to, the line of authority being applicable to the facts of these cases being the line of authority which deals with beneficial exemptions as opposed to exemptions generally in tax statutes. This being the case, a literal formalistic interpretation of the statute at hand is to be eschewed. We must first ask ourselves what is the object sought to be achieved by the provision, and construe the statute in accord with such object. And on the assumption that any ambiguity ari....