1998 (6) TMI 382 - AT - Central Excise

Summary

Issues:
Classification of the product under the Central Excise Tariff Act, 1985 as fungicide or organic chemical; Proper application of Chapter Note 1(a)(2) under Chapter 38; Relevance of end-use in classification; Validity of the show-cause notice for duty recovery and penalty imposition; Justification for seizing the goods and imposing penalties.

Classification of the Product:
The case involved determining the classification of Calcium Propionate under the Central Excise Tariff Act. The Revenue contended that the product should be classified as an organic chemical under Heading 2915.50, attracting a duty of 15% ad valorem. On the other hand, the Respondent argued that Calcium Propionate should be classified as a fungicide under Heading 3808.10, which is exempt from duty. The Respondent provided substantial evidence to support the classification of Calcium Propionate as a fungicide due to its use as an antifungal agent in food products.

Application of Chapter Note 1(a)(2) and End-Use Relevance:
The Respondent relied on Chapter Note 1(a)(2) under Chapter 38 of the Central Excise Tariff Act, which indicates that fungicides are classifiable under Chapter 38, even if they are chemically defined compounds. The Respondent also argued that the end-use of the product as a mold inhibitor in bread and other food products should be considered in its classification. The Tribunal agreed with the Respondent's arguments, emphasizing that the product's function of inhibiting mold makes it appropriate to describe it as a fungicide.

Validity of Show-Cause Notice and Penalties:
The Revenue issued a show-cause notice for duty recovery and penalty imposition based on the alleged mis-description of the product by the Respondent to evade duty payment. However, the Tribunal found that the Respondent's declaration of Calcium Propionate as a fungicide was bona fide, supported by its use as a mold inhibitor in food products. The Tribunal concluded that the show-cause notice was barred by time for the bulk of the period, and there was no justification for confiscating the seized goods or imposing penalties.

Conclusion:
In the final judgment, the Tribunal dismissed the Revenue's appeal, upholding the classification of Calcium Propionate as a fungicide under Heading 3808.10 of the Central Excise Tariff Act, 1985. The Tribunal emphasized the relevance of the product's end-use and the application of Chapter Note 1(a)(2) in determining its classification. Additionally, the Tribunal found no grounds for the validity of the show-cause notice, seizure of goods, or imposition of penalties, ultimately ruling in favor of the Respondent.