2015 (9) TMI 1206 - AT - Central Excise

Classification of the product Niacin (feed grade) - animal feed - Chapter Heading 29.36 or Tariff Item 23099090 - Held that - Tariff Item 29362920 specifically covers Nicotinic acid (nicotinamide). Following cannons of interpretation of the Central Excise Tariff, a more specific heading is to be preferred in terms of Rule 3(a) of the Rules for Interpretation of the Tariff Act. Even according to the HSN Notes of Chapter 23 (our tariff being based on HSN System of Nomenclature) under heading 23.09 it is specifically mention in exclusion clause (e) that vitamins are excluded from heading 23.09. In the present case the goods are not a preparation for animal feed. The goods are Niacin itself. It is not used as animal feed directly. As held in the case of Sonam International (supra) a vitamin is added in a miniscule proportion in animal feed. That the appellant mixed Niacin with Atta before clearance makes no difference because we are concerned with the classification of the product manufactured by them i.e. Niacin. Therefore we hold that the product Niacin Feed Grade has been correctly classified under Tariff Item 29362920 and duty is payable accordingly. Extended period of limitation - Held that - The appellant had clearly declared the description of the product as Niacin Feed Grade in all their E.R. 1s. Therefore there being no misstatement, duty is payable only for the normal period of time limitation. For the same reason that extended time period is not applicable, confiscation, fine and penalty are also not sustainable. However, interest would be payable under Section 11AB corresponding to the amount of duty upheld. Duty demand is upheld only for normal period of limitation under Section 11A - decided partly in favor of assessee.

Summary

Issues:
Classification of Niacin (Feed Grade) under Central Excise Tariff Act, 1985

Detailed Analysis:
The main issue in this appeal revolves around the classification of the product Niacin (feed grade) manufactured by the appellant. The appellant manufactures bulk products like Niacin falling under Chapter Heading 29.36 of the Central Excise Tariff Act, 1985. However, they also produce Niacin (Feed Grade) used in animal feed and classify it under Tariff Item 23099090, clearing it at nil rate of duty. The Commissioner classified Niacin Feed Grade under Tariff Item 29362920, imposing a duty demand of Rs. 65,43,700 and a penalty under Section 11AC of the Act. The appellant argued that the product should be classified under Chapter 23 as a preparation used in animal feeding, citing relevant case law and Board Circulars.

The appellant contended that the product in question does not meet the specifications of the Indian Pharmacopoeia and should be classified under Chapter 23 as a kind used in animal feeding, with a nil tariff rate. They also argued that Niacin (Feed Grade) should not be equated with Niacin (Vitamins) due to differences in purity and preparation. Additionally, they claimed entitlement to Cenvat Credit benefits and cum-duty price benefits. The appellant further argued against the invokation of the extended time period for duty demand, citing their proper declaration of the product in their returns.

The Ld. AR argued that the product should be classified under Tariff Item 29362920 as it specifically covers Nicotinic acid, which the product contains. They emphasized that the product is not a preparation for animal feed but Niacin itself, supporting their argument with relevant case law. The Tribunal analyzed the manufacturing process, materials used, and labeling of the product to determine its classification. They found that the product is essentially Niacin with a 95% purity, differing from the 99% pure Niacin, and should be classified under Tariff Item 29362920. The Tribunal rejected the appellant's plea for cum-duty price benefits and upheld the duty demand for the normal period of limitation under Section 11A of the Central Excise Act.

In conclusion, the Tribunal dismissed the appeal, upholding the classification of Niacin (Feed Grade) under Tariff Item 29362920 and the duty demand for the normal period of limitation. They ruled out the applicability of the extended time period, confiscation, fine, and penalty, while ordering the payment of interest corresponding to the upheld duty amount.