2015 (11) TMI 364 - AT - Central Excise

Classification of goods - Classification under CSH 1701.31 or 1701.39 - Clearance of sugar as levy sugar - Held that - Clearance of free sale sugar by the respondent sugar factories are as per the direction and order of the State or the Central Government, which is covered under the tariff heading number 1701.31 and the Central Excise duty is payable as per the tariff entry. This conclusion of ours is after considering the order issued by the competent authority, in exercise of the powers delegated under Section 3 of Essential Commodities Act. It is nobody s case that the said Act is not Central act. The tariff heading 1701.31 is applicable in the cases in hand. We find that the first appellate authority has correctly set out the reasonings for setting aside the orders in original. - issue is covered by the judgement and order of the Tribunal in the case of Perambulur Sugar Mills (2009 (11) TMI 767 - CESTAT CHENNAI) - impugned orders are correct and legal and there is no infirmity in them. - Decided in favour of assessee.

Summary

Issues:
- Classification of sugar as levy sugar or free sale sugar for Central Excise duty purposes

Analysis:
1. The appeals involved a common issue of whether sugar factories, controlled by the Essential Commodities Act and the Levy Sugar Supply (Control) Order, 1979, correctly classified sugar clearances as levy sugar or free sale sugar for Central Excise duty purposes. The respondent assessees were required to clear a specific percentage of sugar as levy sugar and the remaining as free sale sugar, subject to different duty rates.

2. The Revenue contended that excess clearance of sugar as levy sugar beyond the allotted quantity should be treated as free sale sugar, attracting a higher duty rate. The adjudicating authority upheld the demands with penalties, but the first appellate authority set aside the orders, leading to the appeals.

3. The Departmental Representative argued that orders under the Essential Commodities Act cannot justify lower Central Excise duty rates and that the release orders under the Levy Sugar Supply Order do not equate to levy sugar procurement by the Central government, thus challenging the classification of free sale sugar as levy sugar.

4. The respondent assessees, citing the Tribunal's precedent in Perambalur Sugar Mills Ltd, contended that excess clearance of free sale sugar as levy sugar, based on government directions, should not result in higher duty liability. They emphasized compliance with government orders and the specific classification under the Essential Commodities Act.

5. The Tribunal, after considering both parties' submissions, upheld the first appellate authority's decision. It reasoned that the excess clearance of sugar as levy sugar, as directed by the government, falls under the Essential Commodities Act's provisions and the applicable tariff heading. The Tribunal highlighted the correct classification under the Central Excise Tariff Act and the government's directives regarding sugar clearances.

6. Additionally, the Tribunal referred to another judgment involving a similar issue, where the appellant sugar mill's diversion of sugar quantities between free sale and levy sugar quotas was compensated without any duty discrepancies. The Tribunal found no evidence of duty underpayment or government compensation, supporting the respondent assessees' position.

7. Ultimately, the Tribunal concluded that the impugned orders were legally sound, considering the government directives, the Essential Commodities Act, and the correct classification under the Central Excise Tariff Act. The judgments in favor of the respondent assessees were upheld, rejecting the Revenue's appeals.