2009 (1) TMI 256 - AT - Central Excise

Chilli Vinegar Classification assessee classified under heading 20.01 (sub heading 2001.00) department contended that it is classifiable under heading 22.03 (sub heading 2203.00) held that - (a) aqueous acetic acid dilution is undisputedly a substitute for vinegar and (b) its essential character is not lost on account of adding one green chilli. - It is also found that the assessee themselves intended to market the product as vinegar. The HSN Explanatory Notes indicate that vinegar flavoured with spices would remain classified under heading 22.03. Moreover, the respondent has failed to show that their product which was marketed as chilli vinegar could be classified as a preparation of green chilli.

Summary

Issues: Classification of 'Chilli Vinegar' under Central Excise Tariff Act

In this judgment by the Appellate Tribunal CESTAT, Mumbai, the issues involved revolve around the correct classification of 'Chilli Vinegar' under the Central Excise Tariff Act. The Revenue alleged misclassification by the party, leading to a demand for differential duty, interest, and penalties. The original authority confirmed classification under a specific subheading, while the Commissioner (Appeals) accepted the party's claim for a different classification. The main contention was whether 'Chilli Vinegar' should be classified under heading 22.03 or sub heading 2001.00.

The learned SDR argued that the goods should be classified under heading 22.03 based on HSN Explanatory Notes and Interpretative Rule 3(b). The learned Consultant supported the lower appellate authority's reasoning for classification under sub heading 2001.00. The Tribunal considered the definitions and characteristics of the relevant headings to determine the correct classification of the product.

After careful consideration, the Tribunal found that products like 'Chilli Vinegar' fell under heading 20.01 and sub heading 2001.00, while 'Vinegar and substitutes for Vinegar obtained from acetic acid' were classified under heading 22.03 and sub heading 2203.00. The crucial point of contention was whether the addition of green chilli altered the essential character of the product. The Tribunal analyzed the nature of the product, the intention of the party in marketing it as vinegar, and relevant rules and explanatory notes to reach a decision.

Ultimately, the Tribunal agreed with the learned SDR's argument that the addition of green chilli did not change the essential character of vinegar and upheld the classification under heading 22.03. The Tribunal set aside the lower appellate authority's classification and held that 'Chilli Vinegar' should be classified under heading 20.01 as per the original authority's decision. The Revenue's appeal was allowed in part based on the prayer for relief in the classification dispute.

This judgment provides a detailed analysis of the classification dispute regarding 'Chilli Vinegar' under the Central Excise Tariff Act, emphasizing the importance of product characteristics, marketing intent, and interpretative rules in determining the correct classification for excise duty purposes.