2015 (10) TMI 156 - AT - Central Excise

Classification of goods - Classification under sub-heading 1704.90 or under sub-heading 1704.10 - Held that - On the identical facts the Department had initiated proceedings against Chennai Unit and the Commissioner vide Order in original No.8/09 dated 31.03.2009 have confirmed duty demand of ₹ 5,47,94,432/-against Chennai Unit in respect of clearances of mentos mint, and six other products of similar nature during the period from March, 2003 to February, 2005. However, the Tribunal in respect of appeal filed against this order, has set aside the Commissioner s order vide final order dated 03.05.2013 on the grounds of limitation, Since the proceedings against the Gurgaon Unit are based on proceedings against the Chennai Unit, and since in this case also the show cause notice for demand of duty for the period from April 2003 to February, 2005 has been issued by 30th April 2008, primafacie the same would also be time barred. Goods covered under sub-heading 1704.10 would be those where it is the gum which gives them essential character and in-fact in terms of the Provisions of Food Adulteration Rules 1955 (para A/25.02.01) the bubblegums and chewing gums must contain not less than 12.5% to 14% of gums. The product, in question, contains contains 97% of sugar and glucose, about 2% fats and colours and flavours and about 1% or less of gum arabic which is used as stabilizer and emulsifier, and its function is to prevent the crystallization of sugar and maintain uniform distribution of the fat and this it is sugar which provides the essential character to the product not the gum arabic whose function is only as stabilizer and emulsifier. Thus, even on merit the appellants have strong primafacie case in their favour. - requirement of pre-deposit of the duty demand, interest and penalty for compliance with the provisions of section 35F would cause undue hardship to the appellant - Stay granted.

Summary

Issues:
Classification of sugar confectionary product - "Mentos Mint" as "Chewing Gums" under sub-heading 1704.10 or "other sugar confectionary" under sub-heading 1704.90 of the Central Excise Tariff.

Detailed Analysis:

1. Classification Dispute:
The case involves a dispute over the classification of the product "Mentos Mint" manufactured by the appellant company. The Chennai Unit manufactures sugar confectionary in bulk, which is then cleared to the Gurgaon Unit for re-packing. The Gurgaon Unit re-packs each piece individually and packages them for retail sale. The appellant argues that the product should be classified as "other sugar confectionary" under sub-heading 1704.90, while the Department contends it should be classified as "Chewing Gums" under sub-heading 1704.10. The presence of less than 1% of Gum Arabic in the product is a key point of contention in determining the classification.

2. Legal Proceedings:
The legal proceedings involve the Commissioner (Appeals) upholding the duty demand of &8377; 26,25,516/- for the period from April 2003 to February 2005. The appellant challenges this decision, citing the composition of the product and arguing that the product's essential character is derived from sugar, not the minimal amount of Gum Arabic present. The appellant also highlights a previous case involving the Chennai Unit, where a duty demand was set aside on grounds of limitation, suggesting a similar outcome for the Gurgaon Unit.

3. Tribunal's Analysis:
The Tribunal considers the facts of the case, noting that proceedings against the Gurgaon Unit are based on those against the Chennai Unit. Given the time frame of the show cause notice, the Tribunal finds that the demand for duty for the period in question may be time-barred. Additionally, the Tribunal agrees with the appellant's argument that the product's essential character is derived from sugar, not Gum Arabic. The product's composition, with 97% sugar and glucose, 2% fat, and less than 1% Gum Arabic, supports the classification as "other sugar confectionary" rather than "Chewing Gums" as contended by the Department.

4. Decision and Ruling:
Based on the analysis, the Tribunal finds merit in the appellant's case both on the grounds of limitation and merit. The Tribunal waives the requirement of pre-deposit of duty demand, interest, and penalty for the appeal, citing undue hardship to the appellant. The stay application is allowed, and the recovery of duty demand is stayed pending the appeal hearing.

In conclusion, the Tribunal rules in favor of the appellant, classifying the product "Mentos Mint" as "other sugar confectionary" under sub-heading 1704.90, and waiving the pre-deposit requirement for the appeal process.