2017 (2) TMI 669 - AT - Central Excise

Benefit of N/N. 6/2002-CE dated 1.3.2002 - paneer darbari - basmati rice and dal tadka - basmati rice and rajma masala - classified under heading 2108.99 of CETA, 1985 or not? - denial of exemption on the ground that products are not similar to the products viz., Mithais, Misthans, Namkeens, Bhujia, Mixture, etc., for which the exemption was made available under the said Notification - Held that - Since paneer darbari is a product of different materials and predominantly of vegetables (58.69%), the same is liable to be classifiable under CSH 2001.10 of Central Excise Tariff Act, 1985, in terms of Rule 2(b) read with Rule 3(b) of the Interpretation Rules of the Tariff - paneer darbari will be eligible for the benefit of exemption at Sl. No.9 of the N/N. 6/2002-CE dated 1.3.2002. Basmati rice and dal tadka - Basmati rice and rajma masala - Held that - These products are cleared in the form of combo packs which consists of two separately packed products, which are in turn packed and sold in a single packet, for which a single MRP is affixed - In terms of Rule 3(b) of the Interpretative Rules, classification of set has to be made in accordance with that attribute which, the components taken together, can be regarded as conferring the set as a whole its essential character. We note that basmati rice is packed either with dal tadka or rajma masala with an intention of consuming the two together as a meal. Since the essential character of the meal arises out of basmati rice (the subji is eaten along with the rice), we are of the view that the combo pack has to be classified under Heading 21.08 (2106 90 99 for subsequent period) - such products will not be eligible for the benefit of exemption under N/N. 6/2002 dated 1.3.2002 (Sl. No.14) - these combo packs will be liable to duty during the relevant period. The goods should be assessed to duty under Section 4A on the basis of the MRP of the combo pack. Decided partly in favor of assessee - matter on remand for the purpose of quantification of demand - penalty set aside.

Summary

Issues:
Classification of Ready to Eat Food Products under Notification No.6/2002-CE, Central Excise duty demand, Education Cess recovery, Penalty imposition, Classification of various edible preparations, Valuation for charging duty based on MRP, Applicability of Notification No.6/2002-CE on combo packs, Classification of paneer darbari, Classification of basmati rice and dal tadka/rajma masala combo packs.

Classification of Ready to Eat Food Products under Notification No.6/2002-CE:
The appellants, manufacturers of excisable goods, classified their products under CSH 2108.99 of CETA, 1985, claiming Nil rate of duty under Notification No.6/2002-CE. The Commissioner alleged that the products were not similar to those specified under the said Notification, leading to a show-cause notice. The Hon'ble CESTAT remanded the case for reconsideration, emphasizing reclassification possibilities and the duty treatment. Subsequently, the Commissioner re-adjudicated the matter, classifying edible preparations differently under various subheadings and exemption clauses.

Classification of various edible preparations:
The dispute involved the classification of products like paneer darbari, basmati rice, dal tadka, and rajma masala. The appellant argued for classification based on the predominant composition of vegetables in paneer darbari under 2001.10, making it eligible for exemption. Combo packs of basmati rice with dal tadka/rajma masala were considered under Heading 21.08, not entitled to the exemption under Notification No.6/2002. The Tribunal upheld the classification decisions based on the essential character of the products and their intended use as combo packs.

Valuation for charging duty based on MRP:
Regarding the valuation for charging duty based on MRP within combo packs, the appellant suggested splitting the MRP between the products. However, the Tribunal disagreed, stating that the combo pack should be assessed as a whole based on its total MRP. The Tribunal also clarified that the cited decision on splitting MRP was not applicable to the present case due to differing circumstances.

Applicability of Notification No.6/2002-CE on combo packs:
The Tribunal concluded that the combo packs of basmati rice with dal tadka/rajma masala were rightly classified under Heading 21.08, not eligible for the exemption under Notification No.6/2002. Duty was to be paid based on the MRP of the combo pack as a unit, without splitting the MRP between the individual products within the pack.

Final Decision:
The Tribunal classified paneer darbari under 2001.10, making it eligible for exemption under Notification No.6/2002. Combo packs of basmati rice with dal tadka/rajma masala were classified under Heading 21.08, not entitled to the exemption. The duty was to be paid based on the total MRP of the combo pack. No penalty was imposed due to the nature of the dispute being a classification issue. The original adjudicating authority was directed to re-quantify the demand in line with the Tribunal's decision.