1983 (8) TMI 261 - AT - Central Excise

Summary

Issues: Classification of 'Milkafe' under Central Excise Tariff and applicability of exemption under Notification No. 17/70-C.E.

In this case, the main issue revolved around the classification of 'Milkafe' under the Central Excise Tariff and its eligibility for exemption under Notification No. 17/70-C.E. The dispute centered on whether 'Milkafe' constituted a prepared food falling under Item 1B of the Tariff and if it could be considered a "ready-to-serve beverage" as per the exemption notification.

The respondent company had initially declared 'Milkafe' under Item 1B and claimed exemption under the notification. The Asstt. Collector held that although the product fell under Item 1B, it was a ready-to-serve beverage and thus not exempt. However, the Appellate Collector disagreed, stating that 'Milkafe' was not a ready-to-serve beverage and thus qualified for the exemption. The Government of India challenged this decision and initiated review proceedings, which were transferred to the Tribunal for consideration.

The Department argued that 'Milkafe' was intended for use as a beverage, as indicated by the product label and the company's own description. They contended that the addition of water did not disqualify it as a ready-to-serve beverage, citing examples of similar products listed under the exemption notification. The Department also questioned the relevance of the Chemical Examiner's opinion on classification, asserting that it was beyond his jurisdiction.

Conversely, the respondent company argued that 'Milkafe' in its marketed form was not immediately drinkable and required the addition of water, milk, or sugar based on individual preferences. They claimed that the product's characteristics distinguished it from other items listed under the exemption notification and proposed an alternative classification under Item 68 for exemption under a different notification.

Upon careful consideration, the Tribunal determined that 'Milkafe' fell under Item 1B as a prepared food intended for sale in unit containers. However, the Tribunal ruled that 'Milkafe' did not qualify as a ready-to-serve beverage in the common understanding of the term, as it required additional steps before consumption. Therefore, the product was deemed exempt from duty under Tariff Item 1B, and the show cause notice for review issued by the Government of India was discharged.