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TMI Blog2018 (3) TMI 489X X X X Extracts X X X X X X X X Extracts X X X X ..... appreciate the said fundamental distinction between the Native and Modified Starches. Similarly, the conclusion in respect of use of Sulphur di-oxide solution is erroneous, inasmuch as, the same is for usage and proper extraction of milk from the tuber and the ISI Standard allowed 100 PPM of Sulphur di-oxide in Native Starch. Similarly the Revenue's reference to viscosity of Native Spirit being around 44-55 seconds only is not appropriate. The adjudicating authority is primarily going by the statement of the buyers, in the absence of any other evidence to reflect that the appellant was actually manufacturing and clearing the Modified Starch. The fact that the adjudicating authority has extended the benefit to the assessee on the finding that they were clearing Native Starch in some cases lead to the inevitable conclusion that the appellant was manufacturing Native Starch also, which was being sold by them to his various customers, who needed the said Native Starch. In such a scenario, based upon the statement of some of the buyers, no conclusions can be made as to the clearances of the Modified Starch in the guise of Native Starch. The material relied upon by the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h as, the clearances of the Modified Tapioca Spirit were below the exemption limit of clearances as provided in terms of small-scale exemption notifications, the same were also being cleared by appellant without payment of duty by availing such exemptions. The appellant's factory was visited by the Central Excise Preventive officers on 25.04.2007, who conducted various checks and verifications. As per the Revenue, certain records maintained by the said appellant, which were incriminating in nature, were seized under Mahazar, dated 25.04.2007. Revenue also conducted simultaneous searches in the premises of the appellant's two buyers M/s. Seshasayee Paper Board Ltd., and M/s. SKR Packaging, a manufacture of corrugated boxes. During the course of the visit of the officers in the appellant's factory statement of their Manager (General) Shri S. Balamurugan was recorded wherein he deposed that the appellant is engaged in the manufacture of various grades of Native Starch as also Modified Starch under various commercial names; that they are equipped with Plant and Machinery for the manufacture of Native as also Modified Starch; that they purchased various raw materials su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulphur-di-Oxide) was mixed in the process at the extraction stage and their website reveals at page No.1 that they are adding Sulphur-di-oxide solution at both the stages of extraction and refining in equal quantity as compared to quantity of Starch Milk. Such usage of chemicals appeared to confirm the modification done to the native starch. It was further observed by the Revenue that one of the important parameters that determines the nature of the starch as native or modified was its viscosity. Enquiries made with the producers of Native Starch indicated that the viscosity of native starch would be around 44 to 50 seconds only in Redwood No.1 method. Similarly, information gathered from the scientific community also confirmed that Native Starch, manufactured by any type of advanced technology will have a Viscosity parameter of around 44 to 50 seconds only. The appellant was maintaining two lists of finished products, one showing the various types of starch as Native Starch and second showing the goods as Modified Starch. The Revenue, on scrutiny of their records found that dispatch bill records register maintained by them show the batch nos. of the goods as relatable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cross-examination during the course of further adjudications, but the test reports of the samples which were drawn by the Revenue itself during the course of investigations, were not provided to the assessee. The Commissioner vide his impugned order, dropped a part of the demand proposed to be confirmed in the notice and confirmed the duty to the extent of ₹ 1,19,80,748/- [Rupees One Crore Nineteen Lakhs Eighty Thousands and Seven Hundred and Forty Eighty only] along with confirmation of interest and imposed penalty of identical amount under section 11 AC of the Central Excise Act. In addition, penalty of under Rule 26 of Central Excise Rules, 2002 was also imposed. The seized goods were also confiscated with the option to the appellant to redeem the same on payment of redemption fine. The said order of the Commissioner stands impugned before the Tribunal. Penalty of was imposed upon the second appellant Shri S. Shri S. Balamurugan, Manager (General). After hearing Shri S. Muthuvenkataraman, learned advocate appearing for the appellant as also learned departmental representative Shri K.P. Muralidharan, AC (AR) appearing for the Revenue, we find the fact that the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture of Modified Starch in wet process, the slurry with 40% solids is introduced into a well agitated tank. After the necessary adjustments of pH factor and temperature, the reagents are added, sometimes over a period of several hours and the reaction is allowed to proceed. A sample is analyzed to ensure that the correct properties have been attained after which the reaction is terminated, if necessary, by pH change or other means. The reacted starch is washed and concentrated _ in hydro cyclones or other systems after which it is dewatered and dried in the normal way. Some reactors require pH control using alkali. 3 Tests to classify native starch and modified starch: a) pH factor: Modified starch with the addition of acidic chemical could have lesser pH value. than even the native starch and therefore the lower pH level will not indicate whether they are native or modified. Even in Native starches, which are kept in prolonged storage in wet condition would lead to fermentation which would reduce the pH value. This is not a determining factor as addition of Acidic chemicals would reduce the pH level and addition alkali chemicals would increase the pH level. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in a continuous process as in the case of the noticee, the total process from tuber to tapioca starch powder takes only 28 minutes the viscosity level would be much higher. c) Test of Iodine: When tested with Iodine, the native starch turns blue whereas the modified starch turns violet. This test would determine whether the product in question is native or modified starch. The HSN(Page 90 of Vol.1) specifies that native starches when tested with iodine would turn dark blue. d) Degree of Substitution : By chemical analysis, in case of native starch, there is no degree of substitution since there is no chemical molecule present whereas in the case of modified starch, presence of chemical molecule like carboxyl group, nitrogen, carbonyl, acetyl, etc., can be found. e) NMR (Nuclear Magnetic Resonance) Spectro Photo Meter: By pressing this equipment into service, the molecular structure of the starch to find out the degree of substitution. In case Native starch the equipment would reveal the chain length of Amylase and amylopectin molecules. In case of modified starch, the chain length would be broken and substitution of chemicals to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Native Starch as also the Modified Starch. He has categorized the statements of the buyers into four different categories and has extended the benefit to the appellant by observing as under:- 19.01. The evidence in the form of market identity consists of statements recorded from various representative buyers some of whom have been relied upon and some not. relied. The buyers consisted of both end-users and traders Upon examination of these statements, I notice that all the statements can be broadly ategorized into three viz., (a) statements which have identified some grades as modified starch without any contradiction (b) statements some of which categorized the grades as modified starch and some stating that they do not know whether the grades are modified starch or native starch ; (c) statements in which some buyers identify the grades as native starch and some as modified starch and (d) statements which identified certain grades as native starch. It is felt that it would be fair to conclude that grades identified in the manner as described at (a) (b) above by the buyers as modified starch would have to be treated as modified starch. It has to be concluded with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be held as 'white dextrin' and PPC CG which are modified starches and not 'A' Grade) (as mentioned in the corresponding invoices. Therefore, the demand with regard to 'A grade has to be ignored except for these three cases.A.-In the second case of Swan grade (SI.No.11) while the market statements refer to it as modified starch, the despatch register makes no mention. However, the evidence of market can be relied upon in the absence of any contradiction in judging this grade as modified starch. Thus, in 18 of the 20 Grades both the statements and record tally or there is no contradiction between them, However, in the case of ALN and D Grades (SI.No.9 10) (unlike the other two cases) there is direct contradiction between the statements from the market (of M/s.Aditya Starch Products and Aditya Specialities in the case of ALN and M/s.Dixons Enterprises in the case of D Grade) and the entries in the despatch register which described them as modified starch. As is seen from above, the adjudicating authority is primarily going by the statement of the buyers, in the absence of any other evidence to reflect that the appellant was actually manufacturing and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ured, viscosity is in lesser side. If it is matured tuber, it is in higher side and also depends on process conditions. Native starch is white coloured free flowing amorphous powder and consists of amylase and amylo pectin molecules and it turns blue colour with iodine solution. It forms hydrogels with water while heating. Modified starch is manufactured by treating native starch using chemical by heating or without heating. Some chemical groups are introduced during modification or depolymerisation takes place. For the basis for distinguishing native and modified starches, PH is one of the factor and it is not the deciding factor. Viscosity is one of the factor and it is also not the deciding matter. Test of Iodine - native starch turns blue with iodine solution but modified starch turns purple with iodine solution. Degree of substitution: for native starch, there is no degree of substitution, there is no chemical molecules present in native starch whereas, modified starch consists of chemical molecules like carboxyl groups, nitrogen, carboxyl etc. None of their clients has given statement to the effect that they have carried out these tes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting so as to determine as to whether the same was Native or Modified Starch. He again, in the said cross-examination asked for the test reports of the product. It is also seen that some of the buyers of the appellant whose statements were recorded were also cross-examined, wherein it was clarified that they were captively using Native as also Modified Starch. Some of the buyers of the paper manufacturing industries or the corrugated boxes manufacturing industries deposed that both the types of starches can be used by them for manufacture of their final product and they do not conduct any test on the starch purchased by them. Some of them, in fact, deposed that they do not note a difference between Native or Modified Starch and use the starch sold by the assessee without testing the same. As such, it becomes clear from the above material on record that there is no strict observance by the buyers for the use of either the Native Starch or the Modified Starch. It is also seen that no samples of starch purchased by the said buyers has been drawn by the Revenue and decided by them so as to establish that the starch purchased by the buyers were nothing but Modified Starch. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e industries and Grade C , G H is for corrugated box manufacturers. Similarly, they have explained the other grades. However, it is appreciated that the said grades given by the appellants to the various types of Native Starches produced by them is their business tactics and has no relevance to the fact that such grading would convert them into Modified Starches. The fact that what was cleared can be decided only by way of testing the same and not based upon the assumptions and presumptions. Similarly, concluding that the clearances were of Modified Starches based upon the details given in the dispatch register cannot be upheld. It already stands explained by Shri S. Balamurugan through his cross-examination that the said record is maintained for marketing purposes to show the prospective buyers about the sale of a particular variety of starch. As such, the register is for the purpose of seeking appraisal and cannot be adopted to conclude that clearances were of Modified Starches. It is to be kept in mind that it is not the Revenue is case, that they were clearing excess starch products than what was being reflected in their records. The allegation is that Modified Starches ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Collector of Central Excise, Hyderabad reported in 1997 (93) E.L.T. 646 (S.C.) has observed that the opinion of the Chemical Examiner and Chief Chemist of the Government has to be given the status of an expert opinion. In terms of Rule 56 of the Central Excise Rules, the Central Excise officer is empowered to take samples for the purpose of testing and he has to communicate the result of such tests to the manufacturer. Further, in the case of Commissioner of Central Excise, Customs Service Tax, Be/gaum Vs M/s. Murdheswar reported in 2016 (37) 384 (Tri. -Bang.) , the opinion of the Chemical Examiner examining was adopted for classification purposes. In view of our foregoing discussions, we find that there u virtually no evidence worth upholding, produced by the Revenue so as to conclude that what was cleared by the appellants during the period in question was not Native Starch but was Modified Starch. On the other hand, as already observed, the test results of various samples drawn by the Revenue from the product available during their visit in the assessee's factory has established it beyond doubt that what was being cleared by the assessee was Native Starch and not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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