2007 (9) TMI 486 - AT - Central Excise

Summary

Issues:
Challenge to Commissioner (Appeals) decision regarding classification of broken noodles as waste and duty payment under Rule 6 of Cenvat Credit Rules, 2002.

Analysis:
The case involves a challenge by the appellants against the decision of the Commissioner (Appeals) regarding the classification of broken noodles as waste and the duty payment under Rule 6 of the Cenvat Credit Rules, 2002. The appellants, a company manufacturing Maggi Two Minutes Noodles, faced a dispute with the Department over the treatment of broken noodles that arose during the manufacturing process. The Department alleged that the appellants had misdeclared the broken noodles as waste in their invoices to avoid paying duty on them. The Department relied on Rule 6 of the Cenvat Credit Rules, 2002, which required payment of a percentage of the value of exempted goods. The appellants argued that the broken noodles should not be considered a final product and provided documents indicating that the broken noodles were unfit for human consumption and classified as scrap material. However, the appellants failed to provide evidence or certificates from authorities confirming that the broken noodles were indeed waste or unfit for human consumption.

The Tribunal noted that the appellants were primarily marketing the unbroken noodles and not the broken ones. The broken noodles were not sold in unit containers or in loose condition, indicating a different treatment from the unbroken noodles. The Tribunal examined the nature of the broken noodles during the manufacturing process and referred to the Explanatory Notes of the Harmonised Commodity Description & Coding System, which highlighted that dried noodles are brittle. The Tribunal concluded that being brittle did not change the nature of the product from noodles to waste. The Department did not treat the broken noodles as prime quality noodles but invoked Rule 6 for duty payment on exempted goods.

As a result, the Tribunal directed the appellants to pre-deposit the entire amount of duty demanded within four weeks, failing which the appeals would stand dismissed. Upon depositing the duty amount, the penalty imposed under the impugned order would be waived for all the appellants. The compliance deadline was set for a specific date to ensure timely action. The applications were disposed of accordingly, with the order being dictated in open court.