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TMI Blog2008 (7) TMI 396X X X X Extracts X X X X X X X X Extracts X X X X ..... tarch or modified starch - E/381-382/2007 - A/1461-1462/2008-WZB/AHD - Dated:- 29-7-2008 - Ms. Archana Wadhwa, Member (J) and Shri B.S.V. Murthy, Member (T) REPRESENTED BY : Smt. A. Vasudev, Jt. CDR, for the Appellant. Shri P.M. Dave, Advocate, for the Respondent. [Order per : B.S.V. Murthy, Member (T)]. - The Commissioner has dropped further proceedings in respect of two show cause notices issued to M/s. Anil Products Ltd and Shri Mahesh R. Acharya, Vice President (F A) requiring them to show cause as to why duty amount Rs. 14,70,02,563/- for the period from August 1999 to June, 2004 and Rs. 5,67,15,963/- for the period from March, 2005 to December, 2005 should not be recovered from them and penalty not imposed on them and the Revenue has filed appeals against order of the Commissioner - who dropped further proceedings. 2. The issue involved in both the show cause notices is whether the following products classified by the respondents under heading 1101.12 of Central Excise Tariff Act, 1985 (hereinafter referred to as CETA, 1985) as "Plain Starch" or to be classified under heading 3505 of CETA, 1985 as "Modified Starch". Sl. No. Trade Name of star ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne of Basket Type, where the slurry was processed by spinning and pressing to dewatering for cake formation. The mass which was produced was having a moisture percentage of 35 which was subjected to further process with the aid of a Flash Dryer at a temperature of 125 degree C to get the resultant dried product. The product is again subjected to sieving process with the aid of sifter machine to get a uniformed particle size. The resultant finished product is having 12% moisture and called Anilo Starch Powder and is packed normally in 50 Kgs. packings before removal. 3.3 The Adjudicating Authority after completion of the process of adjudication while deciding the issue observed that :- (a) Merely by using Flash Dryer, there is no transformation in native starch and starch so obtained after flash drying cannot be considered as a modified starch. Reliance was placed on Ullman's Encyclopedia of Industrial Chemistry Vol. A.25 wherein the detailed process, as mentioned at para 34.2 of the impugned order, was described. (b) It has been mentioned in Ch. 5 of the book titled "Technology of Corn Wet Milling and Associated Processes" by Paul Harwood Blanchard Vol. 4 that for the manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant headings under HSN. Explanatory notes under heading 3505 describe modified starches as products obtained by the transformation of starches through the action of heating, chemicals or diastase, oxidation, esterification or etherification. The explanatory notes also state that in general modified starches of the heading 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 gel or to crystallize, water binding capacity, freeze thaw stability, gelatinization, temperature or peak viscosity. Whether modification has taken place or not can be understood by identifying the changes in properties of plain starch. (b) According to the technical literature published by the International Starch Institute, modification of starch has been explained as "most starches are used for industrial purposes. Starch is tailor made to meet the requirements of the end user giving rise to a range of specialty products. Many and sophisticated techniques are applied. A most versatile principle comprises a three step wet modification. By applying different reaction condition - temperature, pH, additive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty in para 35 of the order-in-original. The respondents themselves had admitted that the viscosity of their product started from 8 and went up to 50. The fact that the modification of starch has taken place is also supported by the evidence of Shri Narendra Kumar, Chemical Examiner. The use of Sulphur has an impact on the characters of the starch powder is amply established by the literature available in "Starch and its derivatives" by J.A. Radley at page 47. It has been stated therein as below :- "The acid tends to modify the starch by a hydrolytic action, which is first noted by a significant loss in potential paste viscosity of the starch." (g) Another fact to support the conclusion that starch was modified is the steeping of corn done by the respondents at 50 to 52 degree C. for 50 to 55 hours as against 48 to 50 deg. C. for 30 to 40 hours in counter current water containing 0.1% Sulphur Dioxide. The use of Sulphur Dioxide and the length of steeping has a definite impact on the specification of the starch i.e. manufacture. (h) The Adjudicating Authority has merely concentrated on the use of Flash Dryer and has not considered the above factors at all. She also submitted a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... process resulting in any manufacturing or challenge in the product and its characteristics. In this case, there was no change in the-manufacturing process. (c) The very fact that they were paying duty on several products classifying them as modified starch supports their contention that the disputed item is only a plain starch. (d) It is incorrect to suggest that the proposal to classify starch products as modified starch under CETH 3505 was not on the basis of use of Flash Dryer. Therefore the ground raised in the appeal of the Revenue that the notice had not been issued merely due to use of Flash Dryer is invalid and incorrect. (e) The suggestion made in grounds of appeal by the Revenue that use of chemicals was also one of the evidences relied upon in the show cause notice is incorrect and unjustified. (f) Chemical Examiner has clarified that use of a Flash Dryer did not result in modification of starch. (g) There is no suppression of facts and therefore extended period cannot be invoked. (h) They relied upon opinions of experts like Dr. Rabari, Sh. Navinchandra G. Parikh and other literature submitted by them in support of their contention that what was manufactured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also pointed out that the average time for steeping of corn was about 30 to 40 hours at 48 to 50 deg. C whereas in the case of respondents the steeping was done at 50 to 52 deg. C for 50 to 55 hours. Therefore according to her the use of Sulphur Dioxide for steeping, maintenance of higher temperature and longer duration of steeping showed that the respondents were not manufacturing plain starch. Thus, we have the Commissioner on the one hand relying on opinion of experts and literature and the Department also is relying on the technical literature. But as can be seen, the Commissioner has not examined the implication of longer duration of application of heat that too at higher temperature on the starch even though it was available before him and the effect of Sulphur Dioxide. 7.3 Secondly, the respondents have argued that the Commissioner was required to examine only the effect of heat on the manufacturing process and nothing else. But unfortunately, it was the respondents who wanted the examination of samples to be conducted and in fact they have serious objection that in the review order the committee has said that the chemical reports should not be considered. Further once th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose of ascertaining it as native starch." As per IS 1184, the minimum viscosity is 40 seconds and not 30 seconds. Further knowing fully well that the chemical test was required to be done by using Redwood Viscometer No. I, the Chemical Examiner has used Redwood Viscometer No. II. The deposition is based on incorrect knowledge of the standard and the test has been conducted by using non-standard and non-prescribed equipment. The ld. Jt. CDR also pointed out that when the conversion is done by applying the ratios given by Dr.Sharma for comparison between two viscometers, the result would be that the viscosity in respect of the three samples would come to less than 40. Further this is also supported by the test reports of the laboratory of the respondents themselves, which show that all the varieties of starches under dispute have viscosity of less than 40. Therefore on the viscosity test alone, the products manufactured by the respondents based on the chemical reports after tests conducted by the respondents in their own laboratory appear to answer the requirements of modified starch rather than plain starch. (d) Further the decision of Commissioner of Central Excise, Panchkula i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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