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TMI Blog2011 (4) TMI 970X X X X Extracts X X X X X X X X Extracts X X X X ..... as not referred to or discussed any of these in his order- Held that:- it was necessary and appropriate that the Commissioner examined experts himself before deciding the classification based on the opinion of the Chemical Examiner. Though the results of tests conducted by the Chemical Examiner could be preferred over results of such tests conducted by private agencies, personal opinion of the Chemical Examiner without studying the process of manufacture followed or carrying out chemical test as prescribed cannot form safe and reliable basis for deciding classification, Commissioner’s conclusions are not substantiated with evidence or proper reasoning, orders set aside and appeals allowed - E/5943/2004, E/249/2006, E/647/2007, E/588/2008 & E/1106/2009 - 248-252/2011, - Dated:- 5-4-2011 - S/Shri M.V. Ravindran, P. Karthikeyan, JJ. Shri K.S. Ravi Shankar, Advocate, for the Appellant. Shri D.P. Nagendra Kumar, JCDR, for the Respondent. [Order per : P. Karthikeyan, Member (T)]. In the captioned appeals, orders passed by the Commissioner of Central Excise, Belgaum are impugned before us. Details of these orders are as follows : Sl. No. Appeal No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued following investigation. After due process, Order-in-Original No. 14/2004 was issued classifying the above products under CSH 3505.20 and demanding differential duty of Rs. 2,43,82,777/- along with applicable interest and imposing equal amount of penalty on the assessee under Section 11AC of the Central Excise Act, 1944 (the Act). The Commissioner found that Riddhi Siddhi had deliberately suppressed the information that it was engaged in the manufacture and clearance of the above varieties of starch from the department. In its various declarations, it had only indicated manufacture and clearance of native starch. Accordingly, he confirmed the demand invoking extended period under proviso to Section 11A(1) of the Act. In deciding the classification under CSH 3505.20, the Commissioner went by the opinion of the Chemical Examiner, Chennai, though the samples of the products were not tested by him, owing to lack of facility at the laboratory to ascertain the parameters. The Chemical Examiner had formed his opinion based on technical literature on the subject. The analytical reports had indicated that the impugned products emerged after acid/oxidizing treatment. The Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d was what was followed by the appellant. The production manager of the assessee- company had explained that wet milling process was followed at the assessee s factory. The Senior Vice-President of Riddhi Siddhi, Shri R. Kannan had explained the process of making MSP including removal of physical impurities by using a small amount of chemicals, that starches were manufactured as per BIS standard IS:1005 and that the process of making oxidized starches (Modified starch) involved facilities for cooling the starch suspension which did not exist at their unit in Gokak. He had also explained that the viscosity of the products conformed to BIS:1184, which was a standard for native starch and not modified starch. Shri Kannan had also explained that Riddhi Siddhi converted starch milk into starch sugar .by re-slurry . which would not be possible if the molecular structure of starch had been modified by the introduction of other chemical groups. The Commissioner had ignored the literature and the submissions by the assessee. There were no facilities at the assessee s factory to produce modified starch, which would have been obvious to the chemical examiner had he called at their factory. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... classification disputes under the Central Excise Tariff/Customs Tariff. In Manisha Pharma Plasto Pvt. Ltd. - 1999 (112) E.L.T. 22 (Del.), similar view was expressed by the Delhi High Court that the HSN represented the international practice of classification of different products. In support of invocation of extended period when an assessee had not disclosed the relevant facts, the learned JCDR relied on the following judicial authorities. (i) M/s. Jaishri Eng. Co Ltd. - 1989 (40) E.L.T. 214 (S.C.) (ii) Madras Petro-Chem Ltd. - 1999 (108) E.L.T. 611 (S.C.) (iii) Mett MacDonald Ltd. - 2006 (2) S.T.R. 524 (Tri.-Del.) = 2001 (134) E.L.T. 799 (Tribunal) (iv) Orient Paper Mills - 1998 (97) E.L.T. 80 (T) (v) Cipla Ltd. and Shri S. Radhakrishnan - 2006-TIOL-121-CESTAT-MUM 5.1 He submitted that as per the HSN explanatory notes to Chapter 3505, the said heading covered modified starches obtained by the transformation of starches through the action of heat; chemicals i.e., acids, alkalis or diastase and starch was modified, by oxidation, esterification or etherification. It is submitted that use of chemicals such as Potassium Permanganate, Sodium Metabisulphate, H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who had not visited the assessee s factory and had not tested the samples of the subject goods. The Chemical Examiner should have studied the process of manufacture followed at the assessee s factory before coming to any opinion. This need had been mentioned by the Chemical Examiner himself. The Chemical Examiner was not aware as to whether IS standards existed for native starch and modified starch as per his deposition during cross-examination. The Commissioner had not studied the literature submitted by the assessee and had ignored the opinions of the experts. The extended period was invoked without justification. The assessee had furnished relevant information periodically also in the context of its application for modvat benefit to the jurisdictional authorities. 7. We have carefully considered the records of the case and the rival submissions. The dispute involved is the correct classification of the following products manufactured by Riddhi Siddhi. (i) MSP - Regular Textiles (ii) MSP - Thin Boiled Starch (iii) MSP - Very Thin Boiled Starch (iv) MSP - Regular Food (v) MSP - Regular Pharma (vi) MSP - Paper Grade. 7.1 The process of manufacture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utes. Thereafter, 60 Kgs. of Soda Ash is dissolved in water of 500 litres and is added to neutralize the slurry, which yields 5 MTs. of MSP - VTBS grade. (v) MSP - Regular Pharma : The manufacturing process, up to the production of Starch Slurry is same as detailed above at Sl. No. 5.1. For manufacture of MSP REGULAR PHARMA, to the starch slurry, 200 grams of Potassium Permanganate and 2 Kg. of Sodium Metabisulphite, 500 ml of Sodium Hipochlorite are added to 15 M3 of starch slurry, for 30 minutes, which yield 5 MTs. of MSP - Pharma grade. (vi) MSP - Regular Food : The manufacturing process, up to the production of Starch Slurry is same as detailed above at Sl. No. 5.1. For manufacture of MSP Regular Food, to the Starch Slurry, 200 grams of Potassium Permanganate and 2 kg. of Sodium Metabisulphite is added per 15 M3 of starch slurry for a period of 30 minutes, which yields 5 MTs. of MSP - Food grade. 7.2 The rival entries canvassed by the parties for classifying the impugned goods are Chapter Sub-Heading 11.03.00 and Chapter Sub-Heading 35.05.20 of the Central Excise Tariff. (The sub-headings applicable for starch underwent change in numbering later on also on re-orga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... modified starch), commercially accomplished in a continuous process; (3) heating (roasting) dry starch with small amounts of acid (dextrinization) to produce dextrins (pyrodextrins, British gums, white dextrins, yellow dextrins) that often have a pale yellow to tan color; or (4) oxidizing starch in an aqueous suspension which results in the introduction of carboxyl and carboxyl groups and partial depolymerization of the starch. Each of these processes produces starch derivatives with the desired altered properties, for example, viscosity, paste clarity, or gel-forming ability, for different uses. Cross-linked starch derivatives are produced by treating an aqueous suspension of starch granule with cross-linking reagents. The resulting modified starches have improved cooking characteristics (higher gelatinization temperatures); increased stability to acid, heat or shear, with resulting control of viscosity during processing; and improved textural characteristics of starch pastes. Starch ethers or esters (substituted starches) are formed by treating an aqueous suspension of starch with appropriate reagents in the presence of an alkaline catalyst. These stabilized starch derivatives ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by etherification or esterification). Etherified starches include those containing hydroxyethyl, nydroxypropyl or carboxymethyl groups. Esterified starches include starch acetates used principally in the textile or paper industries, and starch nitrates (nitrostarch) used in the manufacture of explosives. 7.4 As per the explanatory notes, modified starches may be distinguished from unmodified starches of Chapter 11 on the basis of changes in their properties, for example, solution and gel clarity, tendency to cool or to crystallize, water binding capacity, freeze-thaw stability, gelatinization temperature or peak viscosity. We note that different physical and chemical properties distinguish modified starches of Chapter Heading 3505 from native starches of Chapter 11. We find that unless these parameters are ascertained on test, it cannot be conclusively found as to whether the impugned goods are correctly classifiable under Chapter 11 of the Tariff or Chapter Heading 3505 of the Tariff. 7.5 We find that though the assessee had relied on various technical authorities to canvass its case, the Adjudicating Authority has not referred to or discussed any of these in his order. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts Ltd. case (supra), the Tribunal found that in deciding the classification of similar products as involved in the instant case, the authorities had relied on the opinion of the Chemical Examiner who was not aware of the correct standards and had conducted the chemical test not as per the relevant standard and equipment. As the Commissioner had not considered or discussed various parameters of modified starches in the impugned order, the Tribunal remanded the matter for fresh adjudication after fresh chemical examination of the samples. 7.6 We find that native starch of Chapter Heading 11 and modified starch of Chapter Heading 3505 are different in its physical and chemical properties as reflected in the explanatory notes to HSN, the encyclopedia relied on and the expert opinions. As the Commissioner had relied on the opinion of the departmental expert, it was necessary that he also critically examined the expert opinions furnished by the assessee to support its case. It was open to the Commissioner to examine the experts before he arrived at a finding against the assessee and relying only on a similar opinion of the Chemical Examiner who also had not studied the actual process ..... X X X X Extracts X X X X X X X X Extracts X X X X
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