1999 (7) TMI 203 - AT - Central Excise

Summary

Issues: Classification of goods for Central Excise duty determination under Notification No. 1/93

Comprehensive Analysis:

Issue 1: Classification of goods for Central Excise duty determination under Notification No. 1/93

The appeal was filed challenging the order of the ld. Collector (Appeals) regarding the classification of chocolates confectionery under Chapter sub-heading 1803.00 for Central Excise duty determination. The ld. Assistant Collector had directed that the value of clearances of certain items should be included in the value of goods under Chapter Heading 1803.00 based on a previous order-in-appeal. A show cause notice (SCN) was issued to the appellants questioning the inclusion of certain clearances in the value of chocolate confectionery. The appellants argued that the endorsement on the classification list was unjustified as no new product emerged from the conversion process, thus no duty should be chargeable. They relied on Explanation 2 under Notification No. 1/93, which excludes the value of clearances of exempted or non-chargeable goods for determining the exemption limit.

Issue 2: Interpretation of chargeable to Nil rate of duty under Notification No. 1/93

The core issue for determination was whether the aggregate value of clearances of chocolates should be excluded for determining the exemption limit under Notification No. 1/93. The Tribunal analyzed the meaning of "chargeable to Nil rate of duty" as per Explanation 2 of the Notification. It was established that goods must either be exempted or charged at a Nil rate of duty to be excluded. In this case, the goods were neither exempted nor had a Nil rate of duty in the tariff. The Revenue contended that the tariff rate of duty should be Nil for goods to be considered chargeable at Nil rate. However, the Tribunal clarified that Central Excise duty is chargeable under Section 3 of the Central Excise Act, 1944, on goods produced or manufactured in India. Since the process of converting chocolates did not result in a new product with distinct characteristics, no duty was chargeable as per Section 3 during the material period.

Conclusion:

The Tribunal held that as no new product emerged from the conversion process of chocolates, duty was not chargeable on the converted chocolates during the material period. Consequently, the aggregate value of clearances of these converted chocolates was not to be included in determining the exemption limit under Notification No. 1/93. Therefore, the impugned order was set aside, and the appeal was allowed in favor of the appellants.

This detailed analysis highlights the key legal arguments, interpretations, and conclusions drawn by the Tribunal in addressing the issues related to the classification of goods for Central Excise duty determination under Notification No. 1/93.