2019 (3) TMI 789 - AT - Central Excise

Classification of goods - Sweet meat Cereal Bars with brand name Rite Bite Nutrition Bars - benefit of N/N. 3/2006 dated 01.03.2006 as amended - Held that - Admittedly, the Department has not come out with any evidence to show that the goods are not mithai or Misthans . Mere packing of the sweet meat same would not remove the product from the heading of mithais / misthans to make it ready to eat packaged food - Sl. No. 29 of the Notification No. 3/2006 is a wide entry, which encompasses not only Sweet Meat known as mithais / misthans (or by any other name), namkeen, Bhujia, Mixture, Chabena, but also similar edible preparations in ready for consumption form, papad, jalgira. The word similar edible preparation is of wide compass. If the goods are known as Sweet Meat and are marked and consumed as sweet meat in general parlance, then even-if packed would not lose its identity as misthans - With the advancement of technology, the Sweet Meat such as Rasgulla, Peda, Sohanpappdi and various other Sweet Meat are being sold in market after packing. The intention of packing these mithais / misthans is to preserve their freshness and save them from any contamination. But, this does not mean that only if the Sweet Meats are sold openly in sweet shops would classify as Sweet Meat and if sold in packaged form would change their nature to ready to eat packaged food . The CBEC vide Circular No. 841/18/2006 CX dated 6.12.2006 has clarified that even if same items fall under two entries of the notification, the exemption of NIL rate of duty would be available to goods covered by Sl. No. 29 of Notification No. 3/2006-CE dated 1.3.2006 even when the said goods are also covered by Sr. No. 30. The products not containing cocoa are eligible for exemption as sweet meat . Coming to the classification of the products containing cocoa, the Chapter Note 6 to Chapter 21 clarifies that Sweet Meats, commonly known as only Misthans , irrespective of their ingredients, would be classified under Ch. 21 only - both types of cereal bars i.e those product not containing cocoa as well those containing cocoa would classification under 21069099 as Sweet Meat and are eligible for exemption under S.N.29 of Notification No. 3/2006 CE dated 1.3.2006 and subsequent analogous notifications. Time limitation - Held that - The appellant has adduced the copies of such correspondence with the appeal memo which clearly shows that there was no suppression of facts by the Appellant. In such case, the demands made against the appellant by invoking extended period of limitation are also time barred. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Classification of Sweet Meat Cereal Bars containing cocoa.
2. Classification of Sweet Meat Cereal Bars not containing cocoa.
3. Eligibility for exemption under Notification No. 3/2006-CE.
4. Applicability of extended period of limitation.
5. Imposition of penalty on the Director.

Detailed Analysis:

1. Classification of Sweet Meat Cereal Bars containing cocoa:
The Appellants argued that their products, even those containing cocoa, should be classified under Chapter 21069099 as "sweet meat" and not under Chapter 18069090 as "chocolate and other food preparations containing cocoa." The Tribunal agreed, noting that the products contain less than 1% cocoa and are marketed and sold as sweet meat. The Tribunal relied on Chapter Note 6 to Chapter 21, which states that sweet meats, irrespective of their ingredients, should be classified under Chapter 21. The Tribunal also referenced the Supreme Court judgment in Tetragon Chemie P. Ltd, which held that the mere presence of certain ingredients does not change the classification of the product.

2. Classification of Sweet Meat Cereal Bars not containing cocoa:
The Appellants classified these products under Chapter 21069099, which the adjudicating authority also accepted. However, the authority held that these products are "ready to eat packaged food" and thus liable for duty. The Tribunal disagreed, stating that the mere fact that the products are packaged does not change their classification as sweet meat. The Tribunal referenced the CBEC Circular No. 841/18/2006-CX, which clarified that even if products fall under two entries of a notification, the exemption of NIL rate of duty would be available.

3. Eligibility for exemption under Notification No. 3/2006-CE:
The Appellants claimed exemption under Sr. No. 29 of Notification No. 3/2006-CE, which covers sweet meats, mithai, and similar edible preparations. The Tribunal agreed, stating that the products are marketed and sold as sweet meat and thus fall under this exemption. The Tribunal referenced the judgments in Hindustan Lever Ltd and Globe Confectionery, which held that sweet meats, irrespective of their ingredients, are covered under the relevant tariff heading and eligible for exemption.

4. Applicability of extended period of limitation:
The Appellants argued that the demands were time-barred as they had been in correspondence with the Department since 2006-07, providing details of their manufacturing process and ingredients. The Tribunal agreed, noting that there was no suppression of facts by the Appellants. The Tribunal referenced several judgments, including COMM. Vs Adani Gas Pvt Ltd, which held that demands are time-barred when the Department is aware of the relevant facts.

5. Imposition of penalty on the Director:
Given that the Tribunal found in favor of the Appellants on both merits and limitation, it held that the imposition of penalty on the Director was not justified. The penalty on the Director was thus set aside.

Conclusion:
The Tribunal set aside the impugned orders and allowed the appeals with consequential reliefs, if any, to the Appellants. The products were classified under 21069099 and were eligible for exemption under Sr. No. 29 of Notification No. 3/2006-CE. The demands were also held to be time-barred, and the penalty on the Director was set aside.