2004 (12) TMI 203 - AT - Central Excise

Demands - Classification of 'Primosa' and 'Simrose' as Fixed Vegetable Oil - Whether the item has satisfied the description of the items falling under Chapter 21 and particularly satisfies the Explanatory Notes of HSN - The process of vegetable oil encapsulating or putting it in tablet constitutes a process of manufacture? - HELD THAT - In the present case also, the vegetable oils did not change its identity by putting it in tablet form and mere fact of appellant having marketed it as a food supplement by itself will not be a ground to classify it as a food supplement when it is not food supplement in terms of the HSN Explanatory Note. Furthermore, Chapter 21 is attracted only when the requirements of HSN Note, as extracted supra, is satisfied. The impugned items do not fall in any of the various sub-headings under Chapter 21, as extracted supra. For the purpose of bringing the item under Chapter Heading 21, it has to be preparation for use either directly or after processing (such as cooking, dissolving or boiling in water, milk or other liquids) for human consumption. It has to be Preparations consisting wholly or partly of foodstuffs used in the making of beverages or foods preparations for human consumption or those of preparations consisting of mixtures of chemicals organic acids, calcium salts, etc. with foodstuffs (flour, sugar, milk powder, etc.). As discussed, even going by para 16 of HSN Explanatory Notes at pg. 276, which has also been extracted, we do not find the item satisfying the criteria laid down in Chapter 21. There is no mixing of vitamin or iron as the item continues to be the same as vegetable oil under Chapter 15. The ingredients are not added in the impugned items and resultant product does not come under CH 2108.99 as 'Edible preparations not elsewhere specified or included'. Hence, the classification adopted by the Commissioner in the present case to hold the 'Primosa' and 'Simrose' oil, which are encapsulated to fall under CSH 2108.99 is required to be set aside by allowing the appeals. The appeals are allowed with consequential relief, if any.

Summary

Issues Involved:
1. Classification of "Primosa" and "Simrose" under CSH 2108.99 vs. CSH 1503.00.
2. Whether encapsulation constitutes a process of manufacture.
3. Applicability of HSN Explanatory Notes for classification.

Summary:

1. Classification of "Primosa" and "Simrose" under CSH 2108.99 vs. CSH 1503.00:
The appeal arises from an order confirming demands by classifying "Primosa" and "Simrose" as 'Dietary Food Supplements' under Chapter sub-heading 2108.99 of the CETA, 1985. The appellants contended that the items should be classified under Chapter Heading 1503.00 as "Fixed Vegetable Oil". The Department argued that encapsulation for retail consumption made the items 'Dietary Food Supplements' under CSH 2108.99. The Tribunal found that the Commissioner did not provide detailed reasoning for classifying the items under CSH 2108.99 and that the items did not satisfy the criteria of Chapter 21.

2. Whether encapsulation constitutes a process of manufacture:
The appellants argued that encapsulation did not result in a new product or goods. The Tribunal referred to the case of Reckitt & Coleman of India Ltd. v. CCE, Bangalore, where converting enzyme blend powder into tablets was not considered a process of manufacture. Similarly, encapsulating vegetable oils into capsule form did not change the identity, use, or character of the product. The Tribunal concluded that encapsulation did not constitute a process of manufacture.

3. Applicability of HSN Explanatory Notes for classification:
The Tribunal examined whether the items satisfied the description of Chapter 21 and the HSN Explanatory Notes. It found that the items did not fall under any sub-headings of Chapter 21, which include preparations for use in beverages or food preparations for human consumption. The Tribunal noted that the items did not contain added vitamins or iron compounds as required by Para 16 of the HSN Explanatory Notes. Therefore, the items did not meet the criteria for classification under Chapter 21.

Conclusion:
The Tribunal allowed the appeals, setting aside the classification of "Primosa" and "Simrose" under CSH 2108.99. The items were to be classified under Chapter Heading 1503.00, with consequential relief to the appellants.