2001 (10) TMI 1081 - AT - Central Excise

Maltodextrin and Maltodex forming part of the instant food preparations and made on hydrolysis of starch

Issues Involved:
1. Classification of maltodextrin and maltodex.
2. Alleged suppression of facts and misclassification.
3. Limitation and computation of differential duty.
4. Valuation under Rule 6(b)(i) vs. Rule 6(b)(ii) of the Central Excise Valuation Rules, 1975.
5. Availability of Modvat credit.
6. Excisability and marketability of maltodex.

Detailed Analysis:

1. Classification of Maltodextrin and Maltodex:
The primary issue in this appeal is the classification of two products, maltodextrin and maltodex, both derived from the hydrolysis of starch. Maltodex contains Vitamin D-3, while maltodextrin does not. The appellant initially classified maltodextrin under various tariff items over the years, eventually settling on Chapter 29 based on a certificate from the Drug Controller. The Commissioner, however, classified maltodextrin under sub-heading 1702.29, stating it did not qualify as a chemically defined organic compound. For maltodex, the Commissioner relied on a test report classifying it under sub-heading 1702.29, despite the appellant's claim that the products were different due to the addition of Vitamin D-3.

2. Alleged Suppression of Facts and Misclassification:
The show cause notice alleged that both products were commercial glucose, classifiable under sub-heading 1705.19, and that the appellant had suppressed this fact to gain undue benefits from certain notifications. The Commissioner upheld this view for maltodextrin but not for maltodex, which he treated as a different product based on the test report.

3. Limitation and Computation of Differential Duty:
The Commissioner held that the appellant's description of maltodextrin as "Maltodextrin-BPC" constituted suppression, confirming differential duty from March 1986 onwards. However, it was found that the certificate from the Drug Controller did mention "BPC," thus the Commissioner's belief of mis-declaration was unfounded. Consequently, the demand for differential duty from March 1986 to March 1988 was set aside on both limitation and merit grounds.

4. Valuation under Rule 6(b)(i) vs. Rule 6(b)(ii) of the Central Excise Valuation Rules, 1975:
The appellant argued that similar products were available, warranting valuation under Rule 6(b)(i) instead of Rule 6(b)(ii). The Commissioner did not address this point adequately, necessitating a re-evaluation.

5. Availability of Modvat Credit:
The Commissioner denied Modvat credit on the confirmed duty, stating that the duty was not paid. This issue was also not properly considered and requires further examination.

6. Excisability and Marketability of Maltodex:
The appellant raised a new argument during the appeal that maltodex was not a stable or marketable product, and thus not excisable. This point, being a legal argument, was allowed to be raised at the appellate stage and requires consideration in the de novo proceedings.

Conclusion:
The appellate tribunal set aside the duty demand on maltodextrin and remanded the classification and confirmation of short levy for maltodex to the jurisdictional Commissioner for fresh adjudication. The Commissioner is directed to provide the appellant an opportunity to contest the findings, including the excisability of maltodex, the valuation method, and the availability of Modvat credit. The appeal succeeded in part, with specific directions for de novo proceedings.

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