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2017 (6) TMI 699 - AT - Central ExciseClassification of goods - boora - mishri - batasha - makhana - N/N. 57/2008 CE dated 05.12.2008 - whether the goods fall under CTH 17019100 or otherwise? - Held that - CBEC has issued circular 879/17/2008-Ex.1 dated 05.12.2008, which clarifies that the process by which sugar is converted into boora, makhana, patasha, mishri, etc. is a manufacturing process under section 2(f) of Central Excise Act, 1944 and these items are to be classified under Central Excise Tariff heading 17019100. The N/N. 57/2008 also includes these items under Central Excise Tariff sub-heading 171019100 exempting them from duty of Central Excise w.e.f .05.12.2008. The process involved for conversion of sugar into subject goods is manufacture under section 2(f) of Central Excise Act, 1954 - When the process undertaken by the appellant amounts to manufacture, when the produce/goods are liable to be classified under Cental Excise Tariff Heading 17019100 and when there is no exemption Notification for such goods for the subject period, the goods are liable to duty for the period prior to 05.12.2008 - But the duty is payable for such goods only for the normal period as there were interpretation issues involved during the relevant period. The appellants, therefore, cannot be charged with suppression or misrepresentation of the facts with an intention to evade payment of duty of Central Excise - demand confirmed for normal period. Interest - section 11AB of CEA, 1944 - Held that - Tribunal s decision in case of Aarti Drugs Ltd Vs Commissioner, Central Excise Thane-II, 2015 (9) TMI 1206 - CESTAT MUMBAI , referred whereunder it held that where there is no mis-statement on the part of the assessee duty is payable only for normal period but interest is payable under section 11AB for the amount of duty upheld. For the purpose of quantification of demand, matter remanded to original adjudicating authority - appeal allowed by way of remand.
Issues Involved:
1. Classification of products (Boora, Batasha, Mishri, Makhana). 2. Determination of whether the process constitutes 'manufacture' under Section 2(f) of the Central Excise Act, 1944. 3. Applicability of Central Excise duty. 4. Eligibility for CENVAT credit. 5. Entitlement to cum-duty benefit. 6. Invocation of the extended period of limitation. 7. Imposition of penalties and interest. Detailed Analysis: 1. Classification of Products: The primary issue was the classification of Boora, Batasha, Mishri, and Makhana. The CBEC Circular No. 879/17/2008-Ex.1 dated 05.12.2008 clarified that these products, derived from sugar, should be classified under Central Excise Tariff heading 17019100, provided they contain more than 90% sucrose. This classification was based on the understanding that these items are commercially distinct from sugar, as supported by judicial pronouncements. 2. Determination of 'Manufacture': The core issue was whether the conversion of sugar into Boora, Batasha, Mishri, and Makhana constitutes 'manufacture' under Section 2(f) of the Central Excise Act, 1944. The Tribunal referred to the CBEC Circular and the Supreme Court's decision in Empire Industries Ltd Vs Union of India, which held that transforming a substance into a commercially different product with distinct character and use constitutes 'manufacture'. Therefore, the process of converting sugar into the aforementioned products was deemed a manufacturing process. 3. Applicability of Central Excise Duty: Given the classification and manufacturing determination, the products were liable for Central Excise duty under heading 17019100. However, the Tribunal noted that these items were exempt from duty post the issuance of Exemption Notification No. 57/2008 CE dated 05.12.2008. For the period prior to this notification, the products were subject to duty, but only for the normal period due to the interpretation issues involved. 4. Eligibility for CENVAT Credit: The Tribunal held that once the appellants paid the Central Excise duty on the manufactured goods, they were entitled to claim CENVAT credit for the duty paid on the input sugar. This benefit was to be assessed by the original adjudicating authority upon remand. 5. Entitlement to Cum-Duty Benefit: The appellants claimed cum-duty benefit, arguing that the sale price of goods should be considered inclusive of the duty component. The Tribunal agreed, referencing the Board Circular No. 749/65/2003-CX and the Explanation to Section 4(1) of the Central Excise Act, confirming that the appellants were entitled to cum-duty benefit for the goods already sold. 6. Invocation of the Extended Period of Limitation: The Tribunal concluded that the extended period of limitation was not applicable as there were interpretation issues during the relevant period. Therefore, the demand for duty was confirmed only for the normal period, and penalties could not be imposed on the appellants. 7. Imposition of Penalties and Interest: The Tribunal dropped all fines and penalties, noting the lack of clarity on the subject issues during the relevant period. However, interest was deemed payable as per Section 11AB of the Central Excise Act, 1944, consistent with the Tribunal's decision in Aarti Drugs Ltd Vs Commissioner, Central Excise Thane-II. Conclusion: The appeals were remanded to the original adjudicating authority to quantify the duty and interest liability for the normal period, with the appellants entitled to CENVAT credit and cum-duty benefit. The impugned orders were modified accordingly, and the appeals were allowed in these terms.
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