2007 (2) TMI 108 - AT - Central Excise

Classification - Department contended that appellant product (Indian Noni) classifiable CSH 2108.99 (upto27-02-05) and CSH 2106 099 (From 28-02-05) and accordingly demand were made along with interest and penalty - Held that department contention was not correct and allowed assessee appeal

Summary

Issues Involved
1. Classification of the product "Indian Noni."
2. Determination of duty and cess payable.
3. Imposition of penalty and recovery of interest.
4. Eligibility for Cenvat credit.
5. Invocation of extended period for duty demand.
6. Confiscation of seized goods.

Detailed Analysis

1. Classification of the Product "Indian Noni":
The primary issue was whether "Indian Noni" should be classified under Chapter Heading 2009 as "fruit juices" or under Chapter Heading 2106 as "food preparations not elsewhere specified or included." The Commissioner classified the product under CSH 2108.99 (upto 27-2-2005) and CSH 21069099 (from 28-2-2005), determining it to be a food preparation. The assessee argued that the product, made from fruits of morinda citrifolia, garcinia cambogia, and leaves of stevia, should be classified under Chapter 20 as fruit juices (CSH 20099000). The Tribunal concluded that the product is a mixture of juices falling under Chapter Heading 2009, based on HSN Explanatory Notes and the essential character given by the fruits and vegetables used.

2. Determination of Duty and Cess Payable:
The Commissioner demanded Rs. 4,93,87,230/- as duty and cess for the years 2004-05, 2005-06, and 2006-07, asserting that the product was cleared without payment of duty. The Tribunal's reclassification of the product under Chapter Heading 2009, which was exempt from duty during the relevant period, negated this demand.

3. Imposition of Penalty and Recovery of Interest:
A penalty equal to the duty amount was imposed under Section 11AC, and interest of Rs. 27,02,035/- was directed to be recovered under Section 11AB. Since the Tribunal reclassified the product under an exempt heading, the penalty and interest imposed were rendered unsustainable.

4. Eligibility for Cenvat Credit:
The Commissioner acknowledged the eligibility for Cenvat credit on inputs. However, this point became moot following the Tribunal's decision on the product's classification and the resulting exemption from duty.

5. Invocation of Extended Period for Duty Demand:
The Commissioner invoked the extended period under Section 11A, citing deliberate suppression of facts by the assessee. The Tribunal's reclassification and the bona fide belief of the assessee that the product was exempt negated the need for invoking the extended period.

6. Confiscation of Seized Goods:
The Commissioner ordered the confiscation of goods seized and provisionally released earlier, valued at Rs. 15 lakhs. This order was based on the classification under Chapter Heading 2106. The Tribunal's decision to classify the product under Chapter Heading 2009, which was exempt, nullified the confiscation order.

Conclusion
The Tribunal allowed the appeal, reclassifying "Indian Noni" under Chapter Heading 2009 (upto 27-2-2005) and under Heading 20099000 for the remaining period, thereby exempting it from duty. Consequently, the demands for duty, penalties, interest, and confiscation were set aside. The appeal succeeded on the basis of classification, and other issues were not considered.