2013 (1) TMI 251 - AT - Central Excise

Manufacture - Classification Department classify Prasad and Mishri as sugar confectionery under sub-heading 1704.90 Assessee contended that it s classifiable under sub-heading 2108.30 Held that - The new commercial commodity emerging by a process of manufacture must also have character and hence usages different from the original material from which the new commodity has been made. In this case, the character and usage of the goods - Prasad and Mishri remain the same as sugar from which the same have been made, as both the products have more than 90% sucrose and both the products are used for sweetening the foods and beverages, which is the same as the use of sugar from which the same are made. These are just a form of sugar. Mishri is nothing but a form of sugar with bigger crystals and Prasad in this case is an amorphous form of sugar. Just because by subjecting a material to some process, a product with a new name emerges, the process cannot be called manufacture - for manufacture to take place, the resulting product must have a new commercial identity and must have character and usages different from the character and usages of the material from which it has been made Therefore for making of Prasad and Mishri from sugar does not amount to manufacture and hence Prasad and Mishri can neither be charged to duty by classifying them neither under 1704.90 nor under any sub-heading of 1701.

Issues:
Classification of products 'Prasad' and 'Mishri' for excise duty under sub-heading 1704.90 or sub-heading 2108.30.

Analysis:
1. The dispute arose regarding the classification of 'Prasad' and 'Mishri' for excise duty during the period of 2000-2001 when the respondent was availing SSI exemption. The Department contended that these products are sugar confectionery classifiable under sub-heading 1704.90, while the respondent argued for classification under sub-heading 2108.30, which would make them chargeable to nil rate of duty and exclude their value from the SSI exemption calculation.

2. The Assistant Commissioner initially confirmed a duty demand against the appellant based on the classification under sub-heading 1704.90. However, on appeal, the CCE (Appeals) set aside this order, leading to the Revenue filing the current appeal.

3. The Revenue argued for classification under sub-heading 1704.90, citing the HSN Explanatory notes and previous Tribunal judgments. The respondent defended the classification under sub-heading 2108.30, referencing Supreme Court and High Court judgments, along with relevant Central Excise Tariff provisions and Tribunal decisions.

4. The CCE (Appeals) rejected both classifications and held that 'Prasad' and 'Mishri' should be classified under sub-heading 1701.10, where the duty rate is nil. This decision was challenged in the Revenue's appeal, focusing on the classification under sub-heading 1704.90.

5. The Tribunal analyzed the submissions and records, noting that 'Prasad' and 'Mishri' are made from sugar, with high sucrose content as per test reports. The key issue was whether the products should be classified as sugar confectionery under 1704.90 or under a different sub-heading.

6. The Tribunal emphasized that both products contain over 90% sucrose, aligning with Chapter Note 2 of Chapter 17, which defines sugar content criteria for various sub-headings. The Board's Circular also clarified the classification of similar products. However, during the dispute period, there was no specific sub-heading covering products like 'Prasad' and 'Mishri'.

7. Referring to various Supreme Court judgments, the Tribunal highlighted the criteria for a process to be considered 'manufacture,' emphasizing the emergence of a new commercial commodity with distinct characteristics. In this case, 'Prasad' and 'Mishri' did not undergo a transformative process leading to a new commercial identity beyond being forms of sugar.

8. Consequently, the Tribunal concluded that the process of making 'Prasad' and 'Mishri' from sugar did not amount to manufacture. Therefore, neither sub-heading 1704.90 nor any sub-heading of 1701 applied for duty classification. The Revenue's appeal was dismissed for lacking merit.

This comprehensive analysis of the judgment clarifies the classification dispute and the reasoning behind the Tribunal's decision regarding the excise duty classification of 'Prasad' and 'Mishri.'

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