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TMI Blog2023 (8) TMI 1428X X X X Extracts X X X X X X X X Extracts X X X X ..... the classification of Makai Poha which was corn grains boiled and flattened between rollers, but not roasted. The assessee was of the view that as the product cannot be eaten as prepared food by itself or after soaking cannot be classified under 1904 and has to be classified under 1104. The Larger Bench held that the Heading 1904 covers prepared food obtained by swelling or roasting of cereals. If the flakes are processed beyond the extent covered under Heading 1104 so as to be ready for consumption it would fall under 1904 - The decision in the case of Miki Food Products Vs CCE Ahamedabad [ 2008 (3) TMI 588 - CESTAT, AHMEDABAD] was another case in which the issue was with regard to the classification of Maize Pauva . The Department had classified the said item under 1904 whereas the assessee had claimed classification under 1101 contending that the product is not ready to eat product. The Tribunal relying upon the decision in the case of Mahavir Food Products [ 2007 (3) TMI 9 - CESTAT, AHMEDABAD ] held that the goods are classifiable under 1101. The product Savoury Oats / Silk Oats merit classification under CETH 1104 12 00 and not under 1904 20 00 as determined by the aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e process of manufacture the department was of the view that Savoury Oats and Silk Oats are classifiable under CETH 1904 20 00 attracting @ 12% duty and that Museli is also classifiable under CETH 1904 20 00 attracting @ 12% duty. 2. Show cause notices for the different periods were issued to the appellants and to the Proprietor Shri I. R. Narayan, inter alia, proposing to demand duty on Savoury Oats, Silk Oats and Muesli along with interest and for imposing penalties. After due process of law, the authorities below confirmed the demand along with interest and imposed penalty, besides imposing separate penalty on the Proprietor Sri R. Narayan under Rule 26 of Central Excise Rules, 2002. Aggrieved, the appellants are now before the Tribunal. 3. The details of the appeals, the period involved and the products impugned are given in the table below : Unit No. Appeal No s. Period Products I E/41851/2016 July 2011 to January 2015 Savoury Oats IV E/41852/2016 April 2014 to Februa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lain oats and dehydrated vegetables in a mixer, which is operated for 60 seconds, and thereafter the entire quantity of mixture is unloaded in a hopper through a conveyor belt and then fed into the packing machine, where the mixture is packed along with seasoning. The final product so produced is marketed as Savoury Oats or Masala Oats which is then cleared to Marico as per the advice received from them. 5.4 The Savoury Oats so processed by the Appellant is essentially a pre-mix comprising of Oat Flakes (68%-76%), dehydrated vegetables (1.5%-3.5%) and seasoning products (23%-25%). Plain Oats which is the main input in this premix is imported by Marico Ltd., and Customs classify the same under tariff heading 1104 12 00 as Rolled or Flaked Grains of Oats attracting Nil rate of duty. Plain Oats are obtained by flattening oats which have been steamed and rolled. They are also called as quick oats. The process adopted by the Appellant is essentially one of mixing various ingredients in the specified proportion and then placing such a pre-mix into the plastic pouch and cardboard boxes. No element of either pre-heating or pre-cooking whatsoever is involved in the entire process. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ats by the Appellant. However, as per the impugned order, in the instant case, the main raw material i.e. quick oats are mixed with dried vegetables and savoury seasonings and after a detailed process of manufacture, a new distinct product viz. savoury oats emerges, which is a prepared food obtained from unroasted cereal flakes and not plain rolled oats or oats flakes, to merit classification under Chapter 11 or Tariff Item 1104 12 00 as product of milling industry (para 30.4; pg. no.72 [internal page No.36] of impugned order in Appeal No.E/41851/2016. 5.9 Further, in support of the finding as to why the savoury oats merit classification under TI 1904 20 00, the impugned order holds that the preparation requires cooking the contents of the packet with water for 3 minutes and the same becomes ready to serve and eat. Further, as per the impugned order, rolled or flaked oats alone fall under TI 1104 12 00, and when it is processed beyond the extent prescribed under Chapter 11, the resultant product viz. savoury oats moves to the next appropriate heading in the CETA, and accordingly, the end product viz. savoury oats , a prepared food obtained from unroasted cereal flakes me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes to Chapter Heading 11.04, the breakfast foods like corn flakes that are cooked preparations ready for consumption fall under heading 19.04. The savoury oats and silk oats are not cooked preparations ready for consumption like corn flakes (i.e. to prepare corn flakes, corn grits are rolled out into flakes, and then cooked, dried and roasted). Savoury oats cannot be consumed by opening the packet and by mixing with milk, in the manner in which corn flakes is consumed. Savoury oats/Silk oats are not cooked preparations but are to be cooked by the consumer at his place and they take the same amount of time (i.e. at least 3 minutes), which is taken by plain rolled oats to cook. A consumer can independently buy plain oats, mix it with vegetables and seasoning, and prepare savoury oats at his end. So what the Appellant has done is for the sake of convenience, mixed all three ingredients and sold it as savoury oats. Therefore, in the absence of savoury oats/silk oats being cooked preparation ready to be consumed (like corn flakes), they are rightly classifiable under Chapter Heading 11.04. 5.14 The judgement of the Hon ble Supreme Court in the case of Satnam Overseas Ltd. v. Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner has arrived at a conclusion that savoury oats and silk oats are classifiable under TI 1904 20 00 as prepared foods obtained from unroasted cereal flakes or from mixtures of unroasted cereal flakes and roasted cereal flakes or swelled cereals . As per the Ld. Commissioner, savoury oats and silk oats are classifiable under Chapter Heading 19.04 since rolled plain oats are processed beyond the extent prescribed under Chapter 11.04. 5.18 Chapter Heading 19.04 covers prepared foods obtained either by swelling or roasting of cereals like cornflakes (i.e. breakfast food) or puffed rice (murmure/churmuri); or prepared foods obtained from unroasted cereals flakes or from mixtures of unroasted cereal flakes and roasted cereal flakes or swelled cereals such as muesli, which again is consumed as breakfast food. 5.19 The examples of prepared foods under Chapter 19 covers those food products that are already in a prepared state and can be readily consumed. For example, corn flakes, muesli, puffed rice, bulgur wheat are prepared foods. Corn flakes is a prepared food where corn grits are rolled out into flakes, and then cooked, dried and roasted. It can be seen that plain rolled fl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unting to manufacture. Plain oats remain as plain oats even after it is mixed with the aforementioned ingredients. Therefore, the savoury oats and silk oats are correctly classified by the Appellant under Chapter Heading 11.04, as they are not prepared food falling under Chapter Heading 19.04. 5.23 Reliance is also placed on the following judgements of the Hon ble Court/Tribunal in the above frame of reference a) Bhagyalakshmi Poha Industries vs. Commissioner, 2008 (231) ELT 627 (T); b) KKR Floor Mills vs. Commissioner, 2008 (232) ELT 270 (T); c) Amar Food Products vs. Commissioner, 2011 (269) ELT 381 (T); d) Miki Food Products vs. Commissioner, 2008 (231) ELT 631 (T) e) ARS Co. vs. CCE, 2015 (324) E.L.T. 30 (S.C.); f) Commissioner vs. Laljee Godhoo Co. 2015 (324) E.L.T. 30 (S.C.); General Rules of Interpretation : 5.24 The classification of goods falling under First Schedule to the Central Excise Tariff is governed by the principles laid down under General Rules for the Interpretation. Rule 2 and 3 of the said Rules which are relevant as below :- 2 (b) Any reference in a heading to a material or substance shall be taken to inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding 11.04, which specifically covers Rolled or Flaked Grains of Oats , and not under Chapter Heading 19.04, which is a general description covering prepared foods obtained from unroasted cereal flakes or from mixtures of unroasted cereal flakes and roasted cereal flakes or swelled cereals. 5.27 Without prejudice to the above, it is submitted that assuming that both Chapter Heading 11.04 and 19.04 are equally specific with reference to savoury oats, then the classification shall be as per Rule 3(b) which provides that mixtures and composite foods consisting of different materials will be classified as if they consisted of the material or component which gives them their essential character. In the Appellant s case, it is not in dispute that plain oats comprise 68% - 76% of the entire product i.e. savoury oats/silk oats, and which gives the essential character to the product. Therefore, applying the principles of Rule 3(b) of the General Rules, the product i.e. savoury oats/silk oats are classifiable under Chapter Heading 11.04 of the central Excise Tariff as rolled or flaked grains of oat . Muesli 5.28 The Appellant has classified Muesli under Tariff Item 1904 10 90 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oasted cereal flakes and roasted cereal flakes or swelled cereals attracting 12% duty, since the main ingredient in Muesli is whole rolled oats, which is unroasted. 5.31 The Appellant submits that the whole rolled oats that are imported and used in the manufacture of muesli are roasted in a dry kiln. The reason for using whole rolled oats that are roasted is because it gives the Muesli a crunchy texture while consuming. Further, since roasted whole rolled oats are used, the final product does not get soggy upon addition of liquid medium like milk. It may be seen that the oat meal prepared out of savoury oats and silk oats have a gooey texture (i.e. like porridge), as quick cooking oats that is unroasted is used as a raw material, as against whole rolled oats that are roasted in dry kiln used in the manufacture of muesli. 5.32 The Appellant before Ld. Commissioner had submitted the certificates dated 13s.04.2015 issued by the supplier viz. UniGrain Pty Ltd, which clearly explains the process involved in the manufacture of Whole Rolled Oats and Quick Cooking Oats. In the certificate, the supplier has explained with a diagram the process of manufacturing of Whole Rolled Oats, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Saffola falling under Chapter Heading 1104 1200 attracting nil rate of duty. Along with the letter, the appellant had enclosed a list of ingredients used in the manufacture of the products and had described the entire manufacturing process in the form of a flow chart. The product labels were enclosed. In spite of this the department has issued the SCN invoking the extended period alleging wilful suppression of facts with intention to evade payment of duty. The letter issued to the department was brushed aside stating that there was no statutory obligation to file such letter. The department has not established any positive act of suppression on the part of appellant. Further, the issue is purely of classification and interpretation of tariff and the law. Hence the demand raised invoking the extended period cannot sustain. It is also submitted that the separate penalty imposed on the proprietor under Rule 26 of CER, 2002 is against principles of law, when penalty has already been imposed on the firm. The Ld. Counsel prayed that the appeal may be allowed. 6. The Ld. A.R Sri Ambe appeared and argued for the department. Para 29.1 of the Order-in-Original dt. 29.06.2016 was adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of Savoury Oats and Silk Oats . The appellant is a job worker and has entered into an agreement with principal manufacturer M/s.Marico Ltd. in relation to manufacture of [ curry and pepper oats and masala and coriander oats ] Savoury Oats. As per the said agreement, the principal manufacturer viz. M/s.Marico Ltd. would supply the raw material, packing material and equipment necessary for processing the oats as specified in the agreement. The appellant is also given the detailed process required to be undertaken by them to produce the final product as specified in the agreement. 10. The process of Savoury Oats, according to the appellant, involves mixing of plain oats and dehydrated vegetables in a mixer, which is operated for 60 seconds, and thereafter the entire quantity of mixture is unloaded in a hopper through a conveyor belt and then fed into the packing machine, where the mixture is packed along with seasoning. The final product so manufactured is marketed as Savoury Oats or Masala Oats which is then cleared to their principal manufacturer (Marico Ltd.). According to the appellant, this product viz. Savoury Oats is nothing but a premix comprising of Oat Flakes (68%- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) (4) 1104 Cereal grains otherwise worked (for example, hulled, rolled, flaked, pearled, sliced, or kibbled), except rice of heading 1006; germ of cereals, whole, rolled, flaked or ground -Rolled or flaked grains: 1104 12 00 --Of Oats Kg. Nil 1104 19 00 --Of other cereals Kg. Nil -Other worked grains (for example, hulled, pearled, sliced or kibbled) 1104 22 00 --Of oats Kg. Nil 1104 23 00 --Of maize (corn) Kg. Nil 1104 29 00 -Of other cereals Kg. Nil 1104 30 00 -Germ of cereals, whole, rolled, flaked or ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore merits classification under CETH 1904 20 00. On perusal of the impugned order, the adjudicating authority has mainly relied upon information from Wikipedia to hold that Oats is a ready to eat breakfast food and therefore cannot fall under CTH 1104. However, there is no discussion in the order or evidence as to what is the alleged process undertaken by appellant to which makes it a prepared or cooked food. 14. Ld. Counsel has adverted to the packets of the Masala Oats and pointed out that the contents of the packet has to be cooked at least for 3 minutes so as to make it ready for eating. Savoury Oats thus cannot be directly consumed by opening the packet and has to be cooked. In other words, Savoury oats / Silk Oats are not cooked preparations but are to be cooked by the consumer. The cooking instructions are given on the packet. It says that the content of the packet along with 1 cups of water has to be cooked for 3 minutes over medium flame or microwaved for 3 minutes on full power. It cannot therefore be said that the raw material (oats) has been processed beyond the extent provided in Chapter 11 so as to make it a prepared food. Further, the ingredients of the pack ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l position that prevails on this subject is stated with elaboration. 11. The first judgment which we want to mention, which was cited by Ms. Charanya, is Crane Betel Nut Powder Works v. Commissioner of Customs, Central Excise, Tirupathi - 2007 (210) E.L.T. 171 (S.C.). In the said case the assessee was engaged in the business of marketing betel nuts in different sizes after processing them by adding essential/non-essential oils, menthol, sweetening agent, etc. Initially, the assessee cleared the goods under Chapter sub-heading 2107 of the Central Excise Tariff and was paying duty accordingly. However, the assessee filed a revised classification declaration under Rule 173B of the Central Excise Rules, 1944, with effect from 17th July, 1997, claiming classification of its product under Chapter sub-heading 0801.00 of the Central Excise Tariff. It was contended by the assessee that the crushing of betel nuts into smaller pieces with the help of machines and passing them through different sizes of sieves to obtain goods of different sizes/grades and sweetening the cut pieces did not amount to manufacture in view of the fact that mere crushing of betel nuts into smaller pieces did no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of Mahavir Food Products Vs CCE Vadadora (supra), the Larger Bench of the Tribunal had occasion to consider the classification of Makai Poha which was corn grains boiled and flattened between rollers, but not roasted. The assessee was of the view that as the product cannot be eaten as prepared food by itself or after soaking cannot be classified under 1904 and has to be classified under 1104. The Larger Bench held that the Heading 1904 covers prepared food obtained by swelling or roasting of cereals. If the flakes are processed beyond the extent covered under Heading 1104 so as to be ready for consumption it would fall under 1904. The relevant part of the order read as under : 5.2 It will be seen from the provisions of Chapter 11, sub-heading 11.04 and the corresponding Explanatory Notes that, flaked corn, which is steam-heated or rolled between heated rollers, but which has not reached the stage of a cooked preparation ready for consumption would be covered under sub-heading 11.04. 6. Chapter 19 of Schedule I to the Tariff Act deals with preparation of cereals, flour, starch or milk; pastry cooks products. Under Heading 19.04 prepared foods obtained by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay have been added during or after their manufacture. This group also includes similar foodstuffs obtained, by swelling or roasting, from flour or bran. Corn flakes are made from grains of maize by removing the pericarp and the germ, adding sugar, salt and malt extract, softening with steam and then rolling into flakes and roasting in a rotary oven. The same process may be applied to wheat or other cereal grains. Puffed rice and wheat also fall in this group. These products are prepared by subjecting the grains to pressure in a moist, heated chamber. Sudden removal of the pressure and ejection into a cold atmosphere causes the grain to expand to several times its original volume. This group further includes crisp savoury food products obtained by submitting moistened cereal grains (whole or in pieces) to a heating process which makes the grains swell, these being subsequently sprayed with a flavouring consisting of a mixture of vegetable oil, cheese, yeast extract, salt and monosodium glutamate. Similar products made from a dough and fried in vegetable oil are excluded (heading 19.05). 6.2 It will be noticed that under Heading 19.04 of the Schedule to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been stated that the Customs are accepting this as a particular form of rice only. In view of all these factors, we do not find any merit in the impugned orders. Moreover, the longer period has been invoked. In our view, the whole thing is the question of classification and matter of interpretation of the entries in the Customs Tariff. In such a case, there cannot be any allegation of suppression of facts or misrepresentation with an intend to evade duty. All the case laws cited by the learned advocates are applicable to the facts of the present case. The Favourite Food Products case has been distinguished. Moreover, the case on which the Adjudicating Authority and lower authorities have relied on has been overruled in the Larger Bench decision. In view of all the above observations, we do not find any merit in the impugned orders. Therefore, we set aside the impugned orders and allow the appeals with consequential relief. 18. In the case of Amar Food Products Vs CCE Ahmedabad (supra) the issue under consideration was the classification of the product Makai Poha and after relying upon the decision of the Larger Bench in Mahavir Food Products, the Tribunal held that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al manufacturer M/s.Marico Ltd., Mumbai. In the said letter, it is stated that there is a process of roasting involved during the course of manufacturing Whole Rolled Oats . 23. The above certificate and the flow chart has not been considered by the authorities below. The adjudicating authority has redetermined the classification under 1904 20 00 by holding that assessee has not furnished any evidence to show that whole rolled oats are dry kilned (roasted). From the flow chart above, it can be seen that whole rolled oats have undergone the process of roasting for use in the manufacture of Muesli. Therefore we find that the said product (Muesli) merit classification under Chapter Heading 1904 10 90 as adopted by the appellant. 24. The Ld. Counsel has put forward arguments on the ground of limitation also. The appellant had issued a letter to the department with regard to the manufacture of Savoury Oats. They had also informed the details of the process and the classification adopted by them. Further, the issue is purely interpretational in nature. For these reasons, we find that the invocation of extended period is not proper and valid. 25. From the discussions above, we h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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