2013 (8) TMI 681 - AT - Central Excise

Nature of Product - Whether cassia meal (husk and germ) of Cassia seeds can be considered as excisable at all The cassia gum is exported. - Held that - the appellants themselves treated this item as a cattle feed supplement/cattle feed and did not consider it as a waste. - The classification of the product was also held to be under the heading 2302 and the goods were excisable. Whether cassia meal can be considered as a waste at all - Held that - cassia meal was not a waste at all and was excisable, the obvious conclusion that emerges was that appellant was not eligible for exemption under notification No.23/03 which under sl.no.21 exempts waste from food industries arising from purchasing of indigenous raw material. Whether the product is foodstuff - Held that - the definition of hydrocolloids and use of their product, cassia gum product is basically used as a texturising agent, gelling agent to provide suspension and stabilisation of the end product and to improve end product appearance. Therefore it only improves the quality of food and can by no means by called as food itself. Product Indigenous or Not - Whether the product can be considered to have been manufactured wholly of indigenous raw materials or not - Held that - The manufacturing process explained and from the records what emerges is that the cassia meal gets segregated and separated and taken out of the product before further processing starts by using imported raw materials - it cannot be said that importer raw materials have been used in the manufacture of waste - The word goods was to be considered as waste from food industry which was what was exempted from payment of duty if the condition was fulfilled - it appears that what was intended was that for manufacture of waste, indigenous raw materials only should have been used. Alternative claim for exemption under notification No.23/03 as waste of oil seeds - Held that - There was no merit in the alternative claim made by the assesses - assesses own production literature and the details available on their website show that they had described cassia as a new hydrocolloids supplying to the group of galacto mannans like guar, thara and locoest bee gum (LBG) and they had never described it as an oil seed - the chemical examiner also had given a clear opinion that cassia meal was other than waste of oil seeds and during the cross examination of chemical examiner no question was raised on this issue with the chemical examiner. Extended Period - Whether the extended period had been rightly invoked - Held that - Extended period cannot be invoked it would be appropriate that no penalty to be imposable on the appellants and therefore penalty imposed was set aside - Subsequent to audit report and investigation, from the records it emerges that appellants did make efforts to prove that their product was waste by getting technical opinion and getting a letter from the Development Commissioner - Relying upon NIRMA CHEMICAL WORKS Versus COLLECTOR OF CENTRAL EXCISE 1992 (9) TMI 196 - CEGAT, NEW DELHI - It had to be observed that many technical experts had given them the opinion that the product was a waste - All the facts and circumstances would show that this would not be a fit case for invoking extended period. Benefit of Cum Duty Price Reduced Duty Demand Interest - Confiscation of Goods - Held that - There was nothing wrong with the view taken by the Commissioner - Demand duty was reduced and since goods were not available the same cannot be confiscated - relying upon COMMISSIONER OF CENTRAL EXCISE, DELHI Versus MARUTI UDYOG LTD. 2002 (2) TMI 101 - Supreme Court - cum duty benefit cannot be allowed and in that case duty had been demanded on clandestine clearances by the EOU without payment of duty and without issue of invoices - goods were cleared by EOU without payment of duty under parallel invoices and clearances were made by fraudulently availing exemption - None of the circumstances exist in this case - Interest on the duty demanded within the normal period had to be upheld - the demand for duty was upheld to the extent of duty demanded within the normal period of limitation with interest as applicable - Decided against Revenue.

Summary

Issues Involved:
(i) Whether cassia meal is a waste.
(ii) Whether cassia meal can be considered a product of the food industry.
(iii) Whether cassia meal is manufactured wholly from indigenous raw materials.
(iv) Whether the alternative claim of exemption as waste and oil seeds is justifiable.
(v) Whether the demand is barred by limitation.
(vi) Whether the demand can be made by invoking the bond executed by the appellant if the demand is held as barred by limitation.

Detailed Analysis:

Issue (i): Whether cassia meal is a waste:
The appellants argued that cassia meal is a waste generated during the manufacture of cassia gum powder. They relied on various technical opinions and legal precedents to support their claim. However, the judgment noted that the appellants themselves sold cassia meal as cattle feed supplement and did not consider it as waste. Technical opinions provided by the appellants were rejected as they lacked knowledge of the end use of the product. The Commissioner found that cassia meal is a by-product and not waste, supported by the fact that the appellants installed machinery for its separation and collection, and sold it under different grades. Thus, cassia meal was held to be excisable and not a waste.

Issue (ii): Whether cassia meal can be considered a product of the food industry:
The appellants claimed cassia meal as a waste of the food industry to avail exemption under Notification 23/2003-CE. The judgment analyzed the definition of food under the Food Safety Standards Act, 2006, and concluded that cassia gum, used as a food additive, does not qualify as food itself. The Commissioner observed that cassia gum improves the texture and appearance of food but is not consumed as food. Therefore, cassia meal cannot be considered a product of the food industry.

Issue (iii): Whether cassia meal is manufactured wholly from indigenous raw materials:
The appellants argued that the waste should be considered exempt if indigenous raw materials were used up to the stage when the waste arose. The Commissioner concluded that cassia meal is separated before further processing with imported raw materials, thus it is manufactured wholly from indigenous raw materials. Hence, the Commissioner's view that imported raw materials were used in the manufacture of waste was not sustained.

Issue (iv): Whether the alternative claim of exemption as waste and oil seeds is justifiable:
The appellants' alternative claim for exemption under Notification 23/2003-CE as waste of oil seeds was rejected. Technical opinions and the appellants' own literature did not support cassia seeds as oil seeds. The chemical examiner confirmed that cassia meal is not waste of oil seeds. Therefore, the alternative claim was found to lack merit.

Issue (v): Whether the demand is barred by limitation:
The appellants contended that the demand is barred by limitation as they had disclosed all facts to the department. The judgment highlighted that the appellants informed the department about the manufacture and sale of cassia meal, and their belief that it was exempt. Despite discrepancies in the returns, the appellants' consistent communication with the department indicated no suppression of facts. Therefore, the extended period of limitation could not be invoked, and the demand beyond the normal period was set aside.

Issue (vi): Whether the demand can be made by invoking the bond executed by the appellant if the demand is held as barred by limitation:
The judgment clarified that the bond executed by the appellants for the proper use of imported/indigenous raw materials cannot be invoked for recovering duty on waste. Since the raw materials were used for producing cassia gum powder, which was exported, the bond could not be used for this purpose.

Other Considerations:
- Cum Duty Price: The Commissioner's decision to allow the benefit of cum duty price was upheld, as the circumstances in the cited case of Eon Farmers Ltd. were not applicable here.
- Confiscation: The judgment noted that since the extended period could not be invoked, the goods could not be confiscated.
- Interest: Interest on the duty demanded within the normal period was upheld.
- Penalty: The penalty imposed on the appellants was set aside.

Conclusion:
The demand for duty was upheld to the extent of duty demanded within the normal period of limitation with interest as applicable. The penalty imposed was set aside, and the appeal filed by the Revenue was rejected.