2011 (4) TMI 970 - AT - Central Excise

Classification - assessee had classified the different varieties of MSP under Chapter Sub-Heading (CSH) 11.03.11 of the Central Excise Tariff and availed exemption applicable to such goods - Order-in-Original issued classifying the above products under CSH 3505.20 and demanding differential duty along with applicable interest and imposing equal amount of penalty on the assessee under Section 11AC of the Central Excise Act, 1944 - Commissioner found that assessee deliberately suppressed the information that it was engaged in the manufacture and clearance of the above varieties of starch from the department, he confirmed the demand invoking extended period under proviso to Section 11A(1) of the Act. In deciding the classification under CSH 3505.20, the Commissioner went by the opinion of the Chemical Examiner, though the samples of the products were not tested by him, owing to lack of facility at the laboratory to ascertain the parameters - assessee had relied on various technical authorities to canvass its case, the Adjudicating Authority has not referred to or discussed any of these in his order- Held that - it was necessary and appropriate that the Commissioner examined experts himself before deciding the classification based on the opinion of the Chemical Examiner. Though the results of tests conducted by the Chemical Examiner could be preferred over results of such tests conducted by private agencies, personal opinion of the Chemical Examiner without studying the process of manufacture followed or carrying out chemical test as prescribed cannot form safe and reliable basis for deciding classification, Commissioner s conclusions are not substantiated with evidence or proper reasoning, orders set aside and appeals allowed

Summary

Issues Involved:
1. Classification of Maize Starch Powder (MSP) and other products.
2. Allegation of suppression of facts and invocation of extended period for demand.
3. Validity of penalties imposed under Section 11AC and Rule 25.

Detailed Analysis:

1. Classification of Maize Starch Powder (MSP) and Other Products:
The primary issue revolves around the classification of various forms of MSP, including Regular Textiles, Thin Boiled Starch, Very Thin Boiled Starch, Regular Food, Regular Pharma, and Paper Grade. The appellant classified these products under Chapter Sub-Heading (CSH) 11.03.11 of the Central Excise Tariff, claiming exemption applicable to native starch. However, the authorities, based on analytical reports and statements, concluded that these products were modified starches, correctly classifiable under CSH 3505.20. The Commissioner relied on the Chemical Examiner's opinion, although no samples were tested due to a lack of facilities. The Commissioner rejected the expert opinions furnished by the assessee, concluding that the starches in question were modified starches.

2. Allegation of Suppression of Facts and Invocation of Extended Period for Demand:
The appellant argued that the department was kept informed of all relevant facts, including the usage of raw materials and manufacturing processes, thus the charge of suppression was invalid. They contended that similar demands against other companies were dropped by respective Commissioners. The Commissioner, however, found that the appellant had deliberately suppressed information, justifying the invocation of the extended period under Section 11A(1) of the Central Excise Act, 1944.

3. Validity of Penalties Imposed Under Section 11AC and Rule 25:
Penalties equal to the duty demanded were imposed under Section 11AC for certain periods and under Rule 25 for others. The appellant argued that the penalties were unjustified, as there was no suppression of facts. The Commissioner, however, upheld the penalties, citing the deliberate suppression of information by the appellant.

Conclusion:
The Tribunal found that the Commissioner had not properly considered the expert opinions and technical literature submitted by the appellant. The Chemical Examiner's opinion, which was relied upon, was not based on empirical tests. The Tribunal noted that modified starches and native starches have different physical and chemical properties, which were not adequately tested. Consequently, the Tribunal set aside the impugned orders, concluding that the classification decision was not substantiated with proper evidence or reasoning. The appeals were allowed, and the penalties and demands were set aside.