2006 (3) TMI 469 - AT - Central Excise

Issues Involved:
1. Classification and exemption eligibility of sauces.
2. Classification and exemption eligibility of soups/broths.
3. Payment status and pre-deposit waiver for spices.
4. Classification and exemption eligibility of beverage powders.

Detailed Analysis:

1. Classification and Exemption Eligibility of Sauces:
The applicants claimed classification of various sauce products under CET sub-heading 2103.10, which includes "Sauces, Ketchup and the like and preparations therefor; mixed condiments and mixed seasonings; mustard flour and meal and prepared mustard." This classification was accepted. However, the exemption under serial No. 10 of Notification 6/2002-C.E., dated 1-3-2002, was denied on the grounds that these products were considered "mixed condiments and mixed seasonings" rather than sauces or ketchup. The Tribunal found prima facie merit in the applicants' argument that the products' use as spreads, dips, or curry bases did not preclude them from being classified as sauces or ketchup. The Tribunal noted that the Commissioner misinterpreted the HSN Explanatory Notes to Heading 21.03, which list examples of sauces and preparations therefor, including tomato ketchup and other tomato sauces. The Tribunal referenced a previous stay order (No. S/346/WZB/06/C-II/EB, dated 6-3-2006) where a similar product was granted exemption as a sauce or ketchup.

2. Classification and Exemption Eligibility of Soups/Broths:
The Commissioner denied exemption for soups and broths by misapplying Note 2 to Chapter 21, which requires retail sale packaging only for "Homogenized composite food preparations" under Chapter Heading 21.04. The products in question, including Knorr Instant Tomato Soup Powder, Knorr Instant Sweet Corn Veg Soup Powder, Knorr Instant Chicken Soup Powder, and Knorr Chicken Broth Powder, were found to be ready-to-drink by dissolving in hot water. The Tribunal concluded that these products should be classified as soups or broths under CET sub-heading 2104.10 and eligible for exemption under serial No. 11 of Notification 6/2002.

3. Payment Status and Pre-Deposit Waiver for Spices:
The applicants had already paid over 50% of the duty demand on spices, amounting to Rs. 5,42,223.44. Given this substantial payment, the Tribunal decided not to require any further deposit towards the confirmed duty on this class of products.

4. Classification and Exemption Eligibility of Beverage Powders:
Two products, Kissan Fruit Kick Orange Fruit Beverages Powder and Kissan Mr. Fruit Orange Juicy Bits, were classified by the Commissioner under CET sub-heading 2108.99 as "Edible preparations not elsewhere specified or included." The applicants argued for classification under Chapter Heading 20.01, which covers "Preparations of vegetables, fruits, fruit juices and vegetable juices, whether or not containing added sugar or other sweetening matter." The Tribunal found prima facie merit in this classification, noting that Chapter 21 is a residuary heading. Consequently, the products were deemed eligible for exemption under serial No. 9 of Notification 6/2002, which covers goods falling under Heading 2001.10.

Conclusion:
The Tribunal held that prima facie, the first class of products are sauces under CET sub-heading 2103.10, the second class of products are soups under CET sub-heading 2104.10, and the fourth class of products are fruit juices under CET sub-heading 2001.10. All three classes are prima facie eligible for exemption under serial Nos. 10, 11, and 9 respectively of Notification 6/2002. Therefore, the Tribunal granted a waiver of pre-deposit of the duties and penalties confirmed on these three classes of products. Regarding the third class of products (spices), since more than 50% of the duty amount had already been paid, the Tribunal waived the requirement of pre-deposit of the balance duty and penalty, staying recovery thereof pending the appeals.

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