2008 (8) TMI 106 - AT - Central Excise

Classification - Rice Flakes - paddy is soaked in water then afterwards roasting it pressing it between rollers and removal of the husk - it cannot be said that the Rice Flakes have been pre-cooked or otherwise prepared - held that if the processes undertaken are not what is beyond mentioned in Chapter 11 then the item cannot come under Chapter 19 - item would be correctly classifiable u/ch 11.06 not under 19.04 as edible and eatable

Summary

Issues involved: Correct classification of Rice Flakes (Matta) and Rice Flakes (White) under Chapter 19.04, denial of SSI Exemption Notification, duty demand, interest demand, penalty under Section 11AC.

Analysis:

1. Correct Classification of Rice Flakes: The appeal challenged the classification of Rice Flakes (Matta) and Rice Flakes (White) under Chapter 19.04 by the Adjudicating Authority. The process of manufacturing these products involves roasting soaked paddy, pressing it, winnowing to remove husk, and segregating the flakes. The Commissioner classified the products under CET 1904.10.90 based on their edibility and common consumption as food. However, the Tribunal found that the Commissioner's reasoning lacked proper justification. Referring to a previous case, the Tribunal established that the process of manufacturing Rice Flakes did not involve pre-cooking or extensive preparation, thus not warranting classification under Chapter 19. The Tribunal set aside the Commissioner's order and reclassified the product under Chapter 11.06, allowing the appeal.

2. Denial of SSI Exemption Notification: The denial of the SSI Exemption Notification was based on the inclusion of the value of non-excisable products in computing the aggregate value of clearances. This denial was linked to the classification issue. Since the Tribunal reclassified Rice Flakes under Chapter 11.06, the denial of the SSI Exemption Notification was also overturned, providing consequential relief to the appellant.

3. Duty Demand, Interest Demand, and Penalty under Section 11AC: The duty demand, interest demand, and penalty under Section 11AC were consequences of the original classification under Chapter 19.04. With the reclassification of Rice Flakes under Chapter 11.06, these demands and penalties were no longer applicable. The Tribunal's decision to allow the appeal with consequential relief encompassed the reversal of these financial obligations imposed on the appellant.

In conclusion, the Appellate Tribunal CESTAT Bangalore, through a detailed analysis of the manufacturing process and legal precedents, rectified the incorrect classification of Rice Flakes (Matta) and Rice Flakes (White) under Chapter 19.04. By reclassifying the products under Chapter 11.06, the Tribunal addressed the issues of SSI Exemption Notification denial, duty demand, interest demand, and penalty under Section 11AC. The decision provided the appellant with the necessary relief and clarified the correct classification of the products in question.