2012 (12) TMI 298 - AT - Central Excise

Classification waste - peelings of potatoes manufacturing of potato chips - According to assessee, the waste which has been generated in the manufacturing process falls within the Entry No. 23080000 of Chapter 23 relating to vegetable materials and vegetable waste, vegetable residues and by-products and this item is not subject to excise duty. The stand of the department is that the aforesaid peelings of potatoes and waste in the shape of paste is nothing but starch, therefore, it falls within the entry under Chapter Heading No. 11081300, which is subject to excise duty at the rate of 40% of the sale price These appeals raise serious issue of classification i.e. whether the goods in question is starch classifiable under Tariff Entry 1108 13 00 or vegetable waste classifiable under Tariff Entry 2308 00 00. - good prima facie case - pre-deposit waived

Summary

Issues:
Appeal challenging order setting aside original order and confirming demand with penalty, classification of waste as starch or vegetable waste, waiver of pre-deposit of demand, interest, and penalty.

Classification Issue:
The case involved appeals by two companies challenging the order setting aside the original order and confirming a demand against one company for selling waste without excise duty payment. The department claimed the waste was starch falling under a specific tariff entry subject to duty, while the appellants argued it fell under a different entry not subject to duty. The Adjudicating Authority initially dropped the demand, but the Commissioner (Appeals) reversed this decision. The appellants contended that the waste generated in the manufacturing process was vegetable waste not subject to duty, while the department argued it was starch subject to duty. The Appellate Authority disagreed with the Adjudicating Authority, considering the process of waste generation and extraction, ultimately classifying the waste as starch subject to duty. The Tribunal found the appeals raised a serious issue of classification, granting a stay on pre-deposit of the confirmed amount due to the appellants making a prima facie case in their favor.

Waiver of Pre-deposit Issue:
Both appellants sought a waiver of the pre-deposit of the demand, interest, and penalty. The Tribunal, after considering the contentions and records, found that the appellants had made a strong prima facie case in their favor regarding the classification issue. Acknowledging the potential hardship on the appellants, the Tribunal allowed the stay applications, waiving the pre-deposit condition and staying the recovery until the appeals were disposed of.

Conclusion:
The judgment addressed the issues of classification of waste as starch or vegetable waste and the waiver of pre-deposit of demand, interest, and penalty. The Tribunal granted a stay on the recovery, considering the appellants' strong prima facie case in the classification issue and the potential hardship they would face if required to pre-deposit the confirmed amount. The decision highlighted the importance of the classification dispute and the need to prevent undue hardship on the appellants during the appeal process.