2011 (3) TMI 254 - AT - Central Excise

Classification - Demand - In the absence of any change in the tariff description ofheading 2835 pertaining to Phosphinates Phosphonates and Phosphates Dicalcium phosphate (animal Feed Grade) cannot be brought under heading No.283500 as alleged in the notice - herefore the classification of Dicalcium phosphate (Animal Feed Grade) continues to be under chapter 23 attracting Nil rate of duty even after introduction of 8 digit Tariff effective from 28.2.2005 - In the absence of any evidence led by the revenue that the respondent-assessee had been doing the process of action of an acidulated calcium chloride solution for the manufacture of the final product in dispute - Accordingly appeal is rejected

Issues Involved:
1. Classification of Di-calcium Phosphate (Animal Feed Grade) under appropriate chapter heading.
2. Applicability of Central Excise Duty and Education Cess.
3. Validity of the Adjudicating Authority's decision to drop proceedings initiated by the show cause notice.

Detailed Analysis:

1. Classification of Di-calcium Phosphate (Animal Feed Grade):

The primary issue was whether the Di-calcium Phosphate (Animal Feed Grade) manufactured by the respondent-assessee should be classified under Chapter Heading 23099090 (attracting NIL duty) or under Chapter Heading 28352500 (attracting 16% duty and Education Cess). The revenue argued that post 1.3.2005, a specific entry was created under Chapter Heading 28352500 for Di-calcium Phosphate, and thus, the product should be classified there. The respondent-assessee contended that the classification should remain under Chapter Heading 2309, as the manufacturing process and trade nomenclature of the product had not changed.

The Tribunal noted that prior to 1.3.2005, the classification of the product was settled by the Hon'ble Supreme Court under Chapter Heading 2302, which later became 2309. The Adjudicating Authority had found no change in the manufacturing process or trade understanding of the product pre and post 1.3.2005. The Tribunal upheld that Di-calcium Phosphate (Animal Feed Grade) continues to merit classification under Chapter Heading 2309, as there was no change in the scope of Chapter 28 or Heading 2835 to warrant reclassification.

2. Applicability of Central Excise Duty and Education Cess:

The revenue's contention was that Di-calcium Phosphate should be treated as a product of Chemical or Allied Industries, meriting classification under CETH 28352500, thereby attracting CENVAT duty @ 16% and Education Cess. The Adjudicating Authority, however, concluded that the product should be classified under Chapter Heading 2309, attracting NIL duty. The Tribunal supported this conclusion, noting that Di-calcium Phosphate (Animal Feed Grade) should not be reclassified under Chapter Heading 28352500 merely due to the introduction of an 8-digit tariff.

3. Validity of the Adjudicating Authority's Decision:

The Tribunal evaluated the Adjudicating Authority's findings, which stated that the manufacturing process had not changed and that the product continued to be known as Di-calcium Phosphate (Animal Feed Grade) in trade parlance. The Tribunal noted that the revenue did not challenge these factual findings. The Tribunal also considered the Chapter Notes and HSN Notes, concluding that Di-calcium Phosphate obtained by crushing animal bone (as done by the respondent-assessee) should be classified under Chapter 23, not Chapter 28.

The Tribunal found strong support in the unchanged Chapter Note of Chapter 23 pre and post 1.3.2005, which includes products used in animal feeding obtained by processing animal materials. The Tribunal dismissed the revenue's appeal, affirming the Adjudicating Authority's decision to classify the product under Chapter Heading 2309 and uphold the NIL duty classification.

Conclusion:

The Tribunal concluded that the impugned order was correct and legal, rejecting the revenue's appeal. The classification of Di-calcium Phosphate (Animal Feed Grade) under Chapter Heading 2309 was upheld, and the decision to drop proceedings initiated by the show cause notice was validated. The appeal was pronounced in open court on 15.03.2011.

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