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2006 (3) TMI 523 - AT - Central ExciseClassification of goods - milk shake mix (MSM) and soft serve mix (SSM) - Classification under Chapter sub-Heading 0404.90 or under Chapter sub-Heading 1901.19 - HELD THAT - In the present case except the stabilizers which are added in the milk is sugar which is stabilizing agent and dextrose which is also sugar. There are only addition of stabilizers. The dispute of the department is that stabilizers are emulsifiers and these are changing the characteristics of the products and its body and texture and gives smoothness to the products. This finding of the Commissioner is based on reply to question No. 9 of the statement dated 26-7-2000 of Shri Mr. P. Sree Sree. The Revenue has strongly relied upon this statement in support of their contention. In addition to that, the Revenue has argued that ageing process is also being done which is for packed ice cream mix. We find that the appellants claim is that the stabilizers are added for keeping the products stabilize during its storage and transport and its shelf life. The product stabilizers are emulsifier and maintains consistency of the products. They are not adding additional quality to the products. We find that this is squarely decided in case of Nestle India Limited v. CCE, 2001 (3) TMI 157 - CEGAT, COURT NO. IV, NEW DELHI by this Tribunal. In the said decision, it is made clear that the milk product will go to the Heading 19.01 only if it contains other ingredients not permitted by Heading 04.01 to 04.04. We find that in the present case no other ingredients except permissible stabilizers have been added. Addition of stabilizers is essential to maintain the consistency and shelf life of the products. HSN Explanatory Note also qualifies the addition of stabilizers without changing its classification from Chapter 4 to 19. The ratio of the decisions relied upon by the Revenue has no relevance to the present dispute. We, therefore, classify the products SSM and MSM under sub-heading 0404.90 of the Central Excise Tariff. The other two products i.e. coffee creamer and cream packed are also classified under sub-heading 0404.904. There is no reason given in the impugned order for classifying the product under Chapter 19. This is not disputed by the Revenue. We, therefore, set aside the order of the Commissioner and classify the products under sub-heading 0404.90. The appeal is accordingly allowed with consequential relief, if any, to the appellants.
Issues Involved:
1. Classification of products manufactured by M/s. Amrit Foods. 2. Imposition of duty and penalties under various Central Excise Rules. 3. Validity of the addition of stabilizers and its impact on product classification. Detailed Analysis: 1. Classification of Products: The primary issue revolved around the classification of four products: Milk Shake Mix (MSM), Soft Serve Mix (SSM), Coffee Creamer, and Cream Packed. The Commissioner had classified these products under sub-heading 1901.19, which was contested by M/s. Amrit Foods, arguing they should fall under Heading 04.04. The Tribunal noted that the Commissioner did not provide detailed findings on the classification of Coffee Creamer and Cream Packed. The appellant argued these products fell under sub-heading 0404.90, a position not disputed by the Revenue during the arguments. Thus, the focus remained on MSM and SSM. 2. Imposition of Duty and Penalties: The Commissioner demanded a duty of Rs. 32,81,260/- for the period from November 1999 to August 2000 and imposed a penalty of Rs. 15 lakhs under Rule 173Q of the Central Excise Rules, 1944. The Tribunal's earlier decision had set aside the penalty but upheld the duty demand and classification, leading to the Supreme Court remanding the classification issue back for reconsideration. 3. Validity of the Addition of Stabilizers: The appellant argued that the addition of stabilizers did not change the essential character of the products, which should still be classified under Heading 04.04. They cited Chapter Note 4 of Chapter 4, which allows products consisting of natural milk constituents with added sugar or sweetening matter or flavored or containing added fruit or cocoa. The Commissioner had initially classified MSM and SSM under sub-heading 1901.19, reasoning that the use of stabilizers changed the characteristics of the products, making them preparations intended for use as "Frozen Desserts" or ice cream. However, the appellant contested this, stating that stabilizers were used to maintain consistency and did not alter the fundamental nature of the products. The Tribunal reviewed the arguments and found that the addition of stabilizers is permitted under the Prevention of Food Adulteration Rules and HSN Explanatory Notes. They concluded that the stabilizers were used to maintain consistency and shelf life, not to change the product's characteristics. The Tribunal referenced a previous decision in the case of Nestle India Limited v. CCE, New Delhi, which supported the appellant's position that products with permitted stabilizers should still fall under Heading 04.04. Conclusion: The Tribunal concluded that MSM and SSM should be classified under sub-heading 0404.90, along with Coffee Creamer and Cream Packed. They set aside the Commissioner's order classifying the products under Chapter 19 and allowed the appeal with consequential relief to the appellants. Final Order: The appeal was allowed, and the products were classified under sub-heading 0404.90. This decision also disposed of the Miscellaneous Application. The order was dictated and pronounced in the open Court on 29-3-2006.
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