2008 (5) TMI 588 - AT - Central Excise

Summary

Issues involved: Classification of flavoured milk under Chapter Heading 2202 90 30 u/s Section 4A vs. Chapter Heading 0402 99 90 claimed by the appellant, financial hardship of the appellant.

Classification Issue: The department classified flavoured milk on MRP basis u/s Section 4A under Chapter Heading 2202 90 30, while the appellant sought classification under Chapter Heading 0402 99 90. The Commissioner (A) determined the item as a beverage falling under Chapter 22 due to essential flavouring agents added, not under Chapter 4 for milk products.

Financial Hardship Issue: The appellant, a Government of Kerala undertaking, faced severe financial hardship with accumulated losses exceeding Rs. 21 crore. The appellant requested a full waiver based on an audit certificate, while the SDR highlighted a turnover of Rs. 131 crore for 2005-06, suggesting terms for the appellant.

Judgment: The Tribunal found that the flavoured milk, with added flavours, should be classified as a beverage under Chapter 22, not as milk under Chapter 4. Considering the financial hardship, the Tribunal directed the appellant to pre-deposit Rs. 1,00,000 within two months, waiving the balance of duty and penalty with recovery stayed upon compliance, with no recovery even after 180 days. Compliance report was scheduled for 6th August, 2008.