2010 (11) TMI 203 - AT - Central Excise

Pizza - Classification of pizzas with chicken topping sold as take away or for home delivery - Pizzas cannot be brought under heading 160110 for the reason that pizza has a topping of chicken along with other ingredients - The paper carton bearing the logo of Pizza Hut is used mainly for packing and transportation of the pizzas from the outlet to the place where the pizza is consumed - Find that the unit container appearing in the tariff entry 160110 connotes packages of a predetermined quantity which is indicated on the container - The expression does not cover packages of relatively short life used to pack goods of any particular description and measure at the choice of the server or the customer for its transport from the restaurant to the residence of the customer - Therefore find that the pizzas involved were not covered under the entry 160110 during the period prior to 1-3-2005 and were covered by Notification No. 3/05-C.E., dated 24-2-2005 post 1-3-05. Chicken wings - Classification - The chicken wings are sold like pizza for consumption at the outlet - The prepared dish is standard and contains four wings of the bird - These are also sold as take away or delivered at the customer s residence on order - As regards the packing of these chicken wings also, we find that our finding on unit container applies - Therefore they were not covered by CSH 160110 prior to 1-3-2005 and were eligible for exemption under Notification No. 3/05-C.E., dated 24-2-2005 from 1-3-2005 - Hence, the impugned demand and penalties on DCPL cannot be sustained.

Issues Involved:
1. Classification of non-vegetable pizzas and chicken wings.
2. Liability to pay Central Excise duty.
3. Determination of 'unit container'.
4. Applicability of Chapter Notes and HSN Explanatory Notes.
5. Eligibility for SSI exemption.
6. Correctness of duty demand, interest, and penalties.

Detailed Analysis:

1. Classification of Non-Vegetable Pizzas and Chicken Wings:

The primary issue was whether non-vegetable pizzas and chicken wings should be classified under Chapter Heading 1601.10 as "Preparations of meat, of fish or of crustaceans, mollusks or other aquatic invertebrates, including sausages and similar products, extracts and juices, prepared or preserved fish and caviar and caviar substitutes" or under Chapter Heading 1905, which covers "bread, pastry, cakes, biscuits and other baker's wares."

The Tribunal found that pizzas, consisting of a bread dough base with various toppings, including chicken, could not be classified as preparations of meat. The decision relied on the Tribunal's earlier ruling in the case of Venky's Fast Food, which held that products like chicken kabab and chicken koftha were preparations of meat. The Tribunal concluded that pizzas with chicken toppings do not fit this classification as they start with a wheat flour base, not meat. Thus, non-vegetable pizzas were classified under Chapter Heading 1905.

2. Liability to Pay Central Excise Duty:

The Commissioner had confirmed a demand of Central Excise duty amounting to Rs. 55,51,491/- on DCPL for the period August 2002 to February 2006. The Tribunal, however, found that the pizzas and chicken wings did not fall under Chapter Heading 1601.10 and thus were not liable for the duty under this heading. Consequently, the demand for Central Excise duty was vacated.

3. Determination of 'Unit Container':

The Tribunal examined whether the paper cartons used for packing pizzas and chicken wings constituted 'unit containers' as per tariff entry 1601.10. It was determined that these cartons, used for transportation and not pre-determined in quantity or content, did not meet the definition of 'unit containers.' The Tribunal relied on the case of Shalimar Super Foods, which held that non-sealed plastic bags not containing pre-printed quantities could not be treated as unit containers.

4. Applicability of Chapter Notes and HSN Explanatory Notes:

The Tribunal noted that the Chapter Notes and HSN Explanatory Notes should be used for understanding the scope of different entries. For the period prior to 1-3-2005, the classification had to be based on General Rules of Interpretation as the Chapter Notes were not present. For the period post-1-3-2005, the Chapter Note 2 to Chapter 16 required more than 20% by weight of meat in the preparation at the time it is presented. The Tribunal found that the department had wrongly adopted the weight of meat before preparation, ignoring the reduction in weight due to cooking.

5. Eligibility for SSI Exemption:

DCPL argued that the aggregate value of clearances of excisable goods was below the threshold for SSI exemption each financial year. The Tribunal found that since the pizzas and chicken wings were not classifiable under Chapter Heading 1601.10, they were eligible for exemption under Notification No. 3/05-C.E., dated 24-2-2005.

6. Correctness of Duty Demand, Interest, and Penalties:

The Tribunal vacated the demand for duty and penalties imposed on DCPL and Shri Pravin Nabar, Sr. Vice President, DCPL. The penalties were found unsustainable as the classification under Chapter Heading 1601.10 was incorrect. The Tribunal allowed both appeals, setting aside the duty demand, interest, and penalties.

Conclusion:

The Tribunal concluded that non-vegetable pizzas and chicken wings sold by DCPL were not classifiable under Chapter Heading 1601.10 but under Chapter Heading 1905. Consequently, the demand for Central Excise duty, interest, and penalties was vacated, and the appeals were allowed.

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