2016 (2) TMI 784 - AT - Central Excise

Classification - whether or not the appellants are liable to pay SED on Aerated Water, Beverages in Bag (BIB) as a compound preparation intended for use in the automatic vending machine - whether preparations for lemonades and other beverages intended for use in the manufacture of aerated water are classifiable under Tariff item 2106 90 50 of the 1st Schedule and under Tariff item 2106 90 19 in the 2nd Schedule to the Central Excise Tariff Act 1985 w.e.f. 28/02/2005 - The case of the appellant is that their product is a compound preparation for making non-alcoholic beverages and this automatically does not imply soft drink concentrate - Held that - We find Notes 1 and 2 of the 2nd Schedule, extracted (supra) will make it clear that the Chapter Notes and Supplementary Notes of the 1st Schedule shall apply to the interpretation of the 2nd Schedule. As such, we find that valid and admitted classification of BIB under 2106 90 50 in terms of Supplementary Notes 4 of Chapter 21 of 1st Schedule cannot be included under Tariff item 2106 90 19 of 2nd Schedule. We find that impugned order simply quoted the Boards above-mentioned clarification without any analysis of its application. Provisions of General Clauses Act were quoted by lower Authority. We find no possible application for the same in the present case. The impugned order has not analyzed the appellant s contention with reference to the Chapter Notes of Chapter 21, Notes 1, 2 and 3 of 2nd Schedule to arrive at the proper finding. We find the impugned order as unsustainable in view of the above discussion. Decided in favour of assessee

Summary

Issues:
Classification of BIB for Central Excise duty and Special Excise Duty (SED) liability.

Analysis:
The appeal in this case challenged the rejection of a refund claim for Special Excise Duty paid on Bag in Box (BIB) used in manufacturing aerated water for automatic vending machines. The dispute revolved around the classification of BIB under the Central Excise Tariff Act post-amendment. The appellant argued that BIB falls under Tariff entry 2106 90 50 and is not liable to SED as per the 2nd Schedule. They contended that BIB is a soft drink concentrate suitable for aerated water production. The appellant emphasized that the 8-digit classification should remain consistent across schedules, citing Notes 1 and 2 of the 2nd Schedule.

The appellant further argued that the Board's clarification, which the lower authorities relied upon, should not be applied retrospectively to their case. They highlighted that BIB is specifically covered under Tariff Heading 2106 90 50, as per Supplementary Notes 4 of Chapter 21 in the 1st Schedule, and not under Tariff item 2106 90 19 in the 2nd Schedule. The appellant contended that their product is a compound preparation for non-alcoholic beverages, distinct from soft drink concentrates, and should not be classified under the 2nd Schedule, as per Note 3.

Upon examination, the Tribunal found that the lower authorities failed to analyze the classification of BIB in light of Chapter Notes and Supplementary Notes. The Tribunal noted that the Board's clarification regarding the classification of lemonades and other beverages under 2106 90 19 in the 2nd Schedule did not apply to BIB, classified under 2106 90 50 in the 1st Schedule. The Tribunal emphasized the application of Notes 1 and 2 of the 2nd Schedule, which dictate that Chapter Notes of the 1st Schedule should guide interpretation. Consequently, the Tribunal allowed the appeal, declaring the impugned order unsustainable and granting relief to the appellant.

In conclusion, the judgment clarified the proper classification of BIB for Central Excise duty, emphasizing consistency in classification across schedules and the importance of Chapter and Supplementary Notes in interpretation. The Tribunal's decision provided a detailed analysis of the statutory provisions and notes to support the appellant's contention, ultimately allowing the appeal and providing consequential relief.