2007 (5) TMI 373 - AT - Central Excise

Manufacture - Shigekai powder - Classification of goods - whether the crushing of Shigekai pods and rita mixed in the proportion of 10 1 and marketing in retail packs would amount to process of manufacture and liable to be classified under sub-heading 33 05.99 for purpose of levy of excise duty? - Held that - reliance placed in the case of State of Maharashtra v. Mahalaxmi Stores 2002 (11) TMI 112 - SUPREME COURT OF INDIA supports the contention that mere powdering of shigekai nuts and rita will not bring into existence new product as the product continues to retain it s original character though in a modified form. The demands raised are required to be set aside by holding that the process of crushing the shigekai nuts and rita into powder form does not bring into existence new product - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Whether the crushing of Shigekai pods and rita mixed in the proportion of 10:1 and marketing in retail packs amounts to a process of manufacture liable to excise duty.
2. Classification of Shigekai powder under the relevant sub-heading for excise duty purposes.
3. Applicability of the Karnataka High Court's judgment prior to January 1999.
4. Validity of the demands raised based on the Karnataka High Court's judgment.
5. Entitlement to refund of duties paid under protest.

Issue-wise Detailed Analysis:

1. Whether the crushing of Shigekai pods and rita mixed in the proportion of 10:1 and marketing in retail packs amounts to a process of manufacture liable to excise duty:
The core issue in these appeals is whether the process of crushing Shigekai pods and rita into powder constitutes a manufacturing process that results in an excisable product. The appellants contended that the mere powdering of these natural products does not create a new product for excisability purposes. They argued that the resultant Shigekai powder retains its original character and should not be classified as a new product. This view was supported by the Madras High Court judgment in Mayil Mark Nilayam v. Superintendent Central Excise, which held that Shigekai powder does not fall under the ambit of excisable commodities.

2. Classification of Shigekai powder under the relevant sub-heading for excise duty purposes:
The appellants argued that Shigekai powder, being a natural product, should not be classified under sub-heading 33.05.99, which pertains to cosmetic or toilet preparations. Instead, they asserted that it should be classified under Chapter Heading 1404.90.21 as a vegetable product carrying nil rate of duty. The Tribunal accepted this contention, referencing the HSN Explanatory Notes, which exclude preparations applied to hair and parts of the human body other than the scalp from Chapter Heading 33.05. The Tribunal also noted that the department had previously classified Shigekai powder under Chapter Heading 1404.90.21, supporting the appellants' argument.

3. Applicability of the Karnataka High Court's judgment prior to January 1999:
The Supreme Court set aside the Karnataka High Court's judgment for the period subsequent to January 1999 but maintained its applicability for the period prior to January 1999. Consequently, the appellants in Shri Ramakrishna Soap Nut Works withdrew their appeals for the period before January 1999, acknowledging that the Karnataka High Court's judgment would apply to them for that period.

4. Validity of the demands raised based on the Karnataka High Court's judgment:
The demands raised by the department were based on the Karnataka High Court's judgment, which had been set aside by the Supreme Court for the period after January 1999. The Tribunal concluded that the demands were no longer sustainable, given the Supreme Court's decision and the merits of the case. The Tribunal referenced the Madras High Court's judgment, which held that the process of making Shigekai powder does not result in an excisable product.

5. Entitlement to refund of duties paid under protest:
The appellants argued that they had paid duties under protest and were entitled to a refund. The Tribunal agreed, stating that the duties paid under protest should be refunded with interest as a consequential relief. This decision was based on the conclusion that the process of crushing Shigekai pods and rita into powder does not create a new excisable product, and therefore, the demands for duty were invalid.

Conclusion:
The Tribunal allowed the appeals for the period after January 1999, setting aside the demands for excise duty on Shigekai powder. The appeals for the period before January 1999 were dismissed as withdrawn, in line with the Supreme Court's decision. The Tribunal ordered the refund of duties paid under protest, with interest, as a consequential relief. The Tribunal's decision was based on the interpretation that the process of making Shigekai powder does not constitute manufacturing a new product, supported by the Madras High Court's judgment and the HSN Explanatory Notes.

← Previous Next →