2008 (7) TMI 396 - AT - Central Excise

Classification - held that - the chemical tests have not been conducted as per the standard; the Chemical Examiner was not aware of the correct standards; - the laboratory tests conducted by the respondents in their own laboratory has not been taken into account; the addition of Sulphur Dioxide and its impact has not been considered; duration of heat and temperature and their impact has not been taken into account and other parameters of modified starch have not been considered or discussed, it is felt that the matter has to be remanded back to the original Adjudicating Authority to examine the issue thoroughly once again - if the manufacturing process has not changed and remains the same by conducting fresh chemical examination of the samples. - It is also necessary to examine all the relevant, parameters of plain starch and the modified starch and compare the products manufactured by the respondents with the specifications for plain and modified starch and arrive at a conclusion whether the product manufactured by the respondents is plain starch or modified starch

Issues Involved:
1. Classification of products under Central Excise Tariff Act, 1985.
2. Determination of whether the products are "Plain Starch" or "Modified Starch."
3. Consideration of the manufacturing process and its impact on product classification.
4. Validity of chemical tests and expert opinions.
5. Applicability of extended period for duty recovery.

Detailed Analysis:

1. Classification of Products:
The primary issue revolves around whether the products listed (e.g., Anilostarch, Anilostarch-A, etc.) should be classified under heading 1101.12 as "Plain Starch" or under heading 3505 as "Modified Starch" of the Central Excise Tariff Act, 1985 (CETA, 1985).

2. Determination of "Plain Starch" vs. "Modified Starch":
The Commissioner initially classified the products as "Plain Starch" based on several factors:
- Flash Dryer Usage: The Commissioner observed that using a Flash Dryer does not transform native starch into modified starch. This was supported by technical literature and expert opinions.
- Expert Opinions: Opinions from experts like Dr. Rabari and Dr. G.P. Sharma indicated that the manufacturing process did not result in modified starch.
- Chemical Examiner's Report: The Chemical Examiner reported that the sample was plain starch.

However, the Revenue argued that:
- HSN Explanatory Notes: Modified starches can be distinguished by changes in properties such as solution clarity, water binding capacity, and viscosity.
- Technical Literature: Published by the International Starch Institute, indicating that starches modified by heating and chemicals should be classified under heading 3505.
- Viscosity Tests: The viscosity readings from the respondents' own laboratory indicated that the starch might be modified.

3. Manufacturing Process:
The manufacturing process involved steeping maize in SO2 (Sulphur) water, de-germination, fine grinding, and drying using a Flash Dryer at 125^0C. The Commissioner did not consider the impact of longer steeping duration and higher temperature on the starch, which the Revenue argued could result in modification.

4. Validity of Chemical Tests and Expert Opinions:
- Chemical Tests: The tests conducted by the Chemical Examiner were not as per the standard (Redwood Viscometer No. II was used instead of No. I). The correct standard (IS 1184) requires a minimum viscosity of 40 seconds.
- Expert Opinions: The opinions of experts like Shri Narendra Kumar, who suggested that the use of Sulphur Dioxide and extended steeping time could result in modified starch, were not adequately considered by the Commissioner.

5. Applicability of Extended Period for Duty Recovery:
The Commissioner noted that the respondents had submitted classification declarations and RT-12 returns, which were assessed, and thus, the extended period for duty recovery could not be invoked.

Conclusion:
The Tribunal found that the Commissioner did not fully consider the impact of the manufacturing process, including the use of Sulphur Dioxide and extended steeping time. The chemical tests were not conducted as per the correct standards, and the expert opinions were not adequately weighed. Therefore, the matter was remanded back to the original Adjudicating Authority for a thorough re-examination, including fresh chemical tests and consideration of all relevant parameters to determine whether the products are plain starch or modified starch.

(Pronounced in Court on 29-7-2008)

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