2018 (3) TMI 765 - AT - Central Excise

Exemption under N/N. 12/12-CE(Sl.No.134), as amended by the N/N. 12/13-CE dated 1.3.2013 - manufacture of Henna Powder and Henna Paste - Revenue entertained a view that they are not eligible for exemption for the said products as these are either not Henna Powder or Henna Paste not mixed with any other ingredients - Held that - we are constrained by the lack of clarity in the proceedings initiated by the Revenue. First of all, when the nature of product is in dispute, it is necessary to have it tested by the competent laboratory to get a clear view. Such tests were done by the Chemical Examiner. Unfortunately, the methodology adopted is apparently not proper. The Standard specified for testing the Henna Powder cannot be applied to paste. We are constrained that the basic facts of the case have not been found in chromatography test so that the Tribunal will be able to pass an order on legality of the claim of the appellant. Matter remanded to the Original Authority for a due process to be followed including re-testing of the product manufactured and cleared by the appellant - appeal allowed by way of remand.

Summary

Issues:
Eligibility for claiming exemption under Notification No.12/12-CE(Sl.No.134) as amended by Notification No.12/13-CE dated 1.3.2013.

Detailed Analysis:

1. Nature of Products and Exemption Eligibility:
The dispute in all appeals revolved around the eligibility of the assessee/appellant for claiming exemption under the specified notifications for the manufacture of Henna Powder and Henna Paste. The Revenue contended that the products did not qualify for exemption as they did not meet the criteria specified in the notifications. The lower authorities held that the products were not eligible for exemption based on test reports indicating the presence of other ingredients besides Henna Powder or Henna Paste.

2. Arguments by Appellant's Counsels:
The counsels representing the appellant argued that the products manufactured were pure Henna powder and paste made from it, with the addition of clove oil for preservation and marketing purposes. They highlighted that the addition of a liquid material like clove oil to convert the powder into paste did not disqualify them from the exemption. They also criticized the Revenue for not conducting proper tests and for not following correct analysis methods, leading to incorrect conclusions.

3. Technical Expert's Testimony and Revenue's Contestation:
A technical expert explained that the chromatography test should be conducted using standard samples from the same identifiable source to ensure accurate comparisons. The expert emphasized that the addition of clove oil was for preservation and did not play an active role when used by customers. The Revenue contested these arguments, stating that extraneous items were found in the samples, disqualifying the appellant from the claimed exemption.

4. Judgment and Remand Decision:
After considering both sides, the Tribunal noted the lack of clarity in the Revenue's proceedings and the improper methodology used in testing the products. The Tribunal emphasized the need for proper testing methods and comparisons with standard plant sources. As re-testing with proper samples favored the appellant's claim, the Tribunal set aside the impugned orders and remanded the matter to the Original Authority for a due process, including re-testing of the products. The Tribunal highlighted the importance of conducting essential tests by the correct method before deciding on the appellant's claim.

In conclusion, the Tribunal allowed all appeals by way of remand, emphasizing the necessity of proper testing procedures and comparisons with standard samples to determine the eligibility for exemption under the relevant notifications.