2007 (8) TMI 707 - HC - Central Excise

Constitutional validity of the Central Government Notification - Classification of goods - Flavoured milk of animal origin - classifiable under Chapter 0402 - Exemption from duty - HELD THAT - In view of the Notification, the authority which has issued the show-cause notice on 16-4-2007 would simply proceed on the basis of the said classification code given by the Central Government in the Notification dated 15-6-2007 to which the petitioners have already given reply on 10-7-2007. We are of the view that looking to the subject matter of the controversy raised in the petition, this appears to be an eminently fit case where the petitioners should make a representation to the Central Government. Accordingly, if the petitioners make such a representation within one week from today, it is expected that the Central Government will decide the same as expeditiously as possible and preferably within one month from the date of receipt of the representation. As regards pendency of the proceedings arising from the show-cause notice, it will be open to the petitioners to make a request before the Commissioner of Central Excise to adjourn the hearing suitably so as to await the decision of the Central Government on the representation. We are sure that such a request will be considered by the Commissioner in the proper perspective when the matter comes up for hearing before the Commissioner on 16-8-2007. The petition stands disposed of in the above terms.

Summary

Issues:
Challenge to constitutional validity of Central Government Notification No. 28/2007-Central Excise regarding exemption for flavoured milk of animal origin under code 2202 90 30.

Analysis:
1. Classification Dispute:
The petitioners challenge the classification of their flavoured milk product under Tariff Item No. 2202 90 30 as "Beverages containing milk." They argue that their product, branded as Amul Kool/Amul Kool Cafe, should be classified under Chapter 4 as dairy produce, specifically under Tariff Item No. 0402 99 90. The petitioners emphasize that their product consists only of skimmed milk, sugar, and flavor, falling within the definition of milk as per Chapter 4.

2. Legal Basis of Challenge:
The petitioners contest the authority of the Central Government to determine the classification of excisable goods through a notification under Section 5A of the Central Excise Act. They argue that while the government can grant exemptions, it cannot unilaterally decide the classification of goods. By specifying Tariff Item No. 2202 90 30 in the notification, the government is deemed to have classified the product as "Beverages containing milk," which the petitioners assert is beyond the scope of the government's powers under Section 5A.

3. Impact on Exemption Claim:
The petitioners highlight that had the notification not mentioned Tariff Item No. 2202 90 30, they could have argued for exemption under Tariff Item No. 0402 99 90, which carries a nil rate of duty. However, with the government's classification in the notification, their ability to establish the product as falling under Chapter 4 and claiming exemption is compromised. This classification affects their excise duty liability and challenges their right to determine the appropriate classification for their product.

4. Court's Decision and Recommendations:
The court suggests that the petitioners should make a representation to the Central Government regarding the classification issue within a week. It expects the government to decide on the representation promptly, preferably within a month. The court also allows the petitioners to request an adjournment of proceedings before the Commissioner of Central Excise to await the government's decision. The judgment provides the petitioners with an opportunity to address the classification dispute through representation and administrative channels.

In conclusion, the judgment addresses the classification dispute concerning the petitioners' flavoured milk product, emphasizing the legal basis of challenging the government's classification through a notification under the Central Excise Act. It outlines the impact of the classification on the petitioners' exemption claim and provides recommendations for resolving the issue through representation to the Central Government and procedural steps in the pending proceedings.