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The Commissioner Of Income ... vs M/S. Narang Dairy ... on 28 February, 1996
Commissioner Of Income Tax, ... vs U.P. Cooperative Federation Ltd on 10 February, 1989
M/S J.K. Synthetics Ltd vs Collector Of Central Excise on 28 August, 1996

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Customs, Excise and Gold Tribunal - Delhi
Pepsi Foods Ltd. vs Commr. Of Cus. And C. Ex. on 26 September, 2002
Equivalent citations: 2003 (87) ECC 108, 2003 (151) ELT 180 Tri Del
Bench: S T G.R., P Bajaj

ORDER

P.S. Bajaj, Member (J)

1. The above captioned appeals have been directed against the common Order-in-Appeal dated 28-9-2001 of the Commissioner (Appeals) vide which he has affirmed the Order-in-Original of the Deputy Commissioner of Central Excise dated 5-3-2001 who confirmed the duty demand and imposed penalty as detailed therein, for the period November, 1999 to March, 2000 on the appellants.

2. The appellants are engaged in the manufacture of various items viz. potato chips, masala balls, cheetos wheels and lehar kurkure. The dispute relates to classification of the items namely cheetos wheels and lehar kurkure. The appellants filed declaration wherein they declared these items classifiable under Heading 2108 of the CETA as namkeen and claimed exemption under Notification 5/99 from payment of duty. But the Revenue did not accept that classification and issued show cause notice to the appellants alleging that these items were classifiable under sub-heading 1904.10 of the CETA attracting duty @ 16% ad valorem. In that show cause notice, the duty demand for the period November, 1999 to March, 2000 was raised and penalty was also proposed to be imposed. The Deputy Commissioner through order-in-original did not accept the classification suggested by the appellants and held that the items in question were classifiable under sub-heading 1904.10 and confirmed the duty demand along with penalty as detailed in his

order-in-original. The Commissioner (Appeals) has affirmed that order through the impugned order.

3. We have heard both the sides.

4. The issue in the present appeals relates to classification of items viz. cheetos wheels and lehar kurkure. According to the appellants, these items are classifiable only under sub-heading 2108.99, whereas the stand taken by the Revenue is that these items fell under sub-heading 1904.10 of the CETA. If the version of the Revenue is accepted, in that event, the appellants are liable to pay duty. But if the items are held to be classifiable under subheading 2108.99 of the CETA, in that event, the appellants are entitled to the benefit of exemption Notification No. 5/99.

5. In order to appreciate the controversy involved in the present appeals, it would be beneficial and convenient to reproduce Heading 19.04 of the CETA. Heading 19.04 reads as under : "Prepared foods obtained by the swelling or roasting of cereals or cereal products (for example, corn flakes), cereal [other than maize (corn)] in grain form or in the form of flakes or other worked grains (except flour and meal), precooked or otherwise prepared, not elsewhere specified or included."

The Pleading, as is evident from its bare perusal, consists of two parts. The basic requirements for the application of the first part, are that the products must be (i) prepared foods, (ii) such food must be obtained by swelling or roasting and (iii) it should be obtained by swelling or roasting of cereals or cereal products.

The second part of this Heading 19.04, specifies exclusion. It excludes the products prepared from corn, flour and meal.

The contention raised by the learned SDR is that the products in question fall within the ambit of Heading 19.04. But if we examine the ingredients of these products in question which had been disclosed by the appellants, they do not satisfy the requirements of either of the two parts of this Heading 19.04 of the CETA.

6. The item cheetos wheels namkeen is prepared from raw pallets made of wheat flour, tapioca starch, common salt, sodium bicarbonate and wheat fibre and they are loaded into a feed hopper. These raw pallets are then dried and fried in edible oil and thereafter applied with seasoning and the product is packed in unit packs.

7. The second item, lehar kurkure is prepared from raw materials such as rice meal, corn meal and gram meal after blending in mixture. Water is added to the aforesaid material to bring up the moisture content. The mixture is then passed through an extruder, wherein the mixture of corn meal, rice meal is heated and partially cooked and collette is formed. During the cooking, starch geletinisation takes place and thereafter, the process of compression also takes place and collettes are formed and which are then fried in edible oil and a certain level of moisture content is maintained. Thereafter seasoning is applied and the product is packed in unit packing.

8. Keeping in view the above-referred ingredients of both these products, their classification under Heading 19.04 (sub-heading 1904.10) as held by the lower authorities is not legally justifiable. None of these items is

prepared or obtained by swelling or roasting of cereals or cereal products (for example, corn flakes), cereals other than maize (corn) in grain form, exclusively so as to fall under this Heading 19.04 of the CETA. Both the items in question, are fried products and not obtained by swelling or roasting.

9. Even from the Explanatory Notes to Heading 19.04, of the HSN it is quite evident that this Heading does not cover prepared foods/cereal products obtained by the process other than swelling and roasting. This very view has also been taken by the Tribunal in T.T.K. Pharma Ltd. v. Collector of Central Excise 1993 (63) E.L.T. 446 and CCE, Lucknow v. Nektar Food Products [1996 (88) E.L.T. 421 (T) = 1996 (17) RLT 155]. In the latter decision, it has been made clear by the Tribunal that where several processes are involved and the prepared food is not obtained by swelling or roasting, it will go out of Heading 19.04 of the CETA and would be covered by Heading 2109.91 (corresponding to Heading 2108.99 of the present Tariff).

10. The Revenue has no doubt placed reliance on Board's Circular No. 4/91-CX.l, dated 20-2-91 to seek classification of the items in question under Heading 19.04 of the CETA. But the said Circular pertains to classification of product 'cheetos' which is obtained by swelling or roasting of the corn pastes, as is evident from paras 2 and 3 of the Circular. It is for that reason that the Board directed classification of the said product under Heading 19.04 of the CETA. But in the present case, none of the items/products in question satisfy the ingredients of this Heading of the CETA. Therefore, the Board's Circular is of no help to the Revenue in the present case.

11. Coming to Heading 21.08 of the CETA under which the products/items in question have been sought to be classified by the appellants, it is an omnibus Heading covering all kinds of edible preparations, not elsewhere specified or included. Note 9 to Chapter 21 provides an inclusive definition of this Heading and covers preparations for use either directly or after processing, for human consumption. The products mentioned in Note 9 are illustrative only and do not restrict the scope of this heading in any manner. The items/products in dispute in the present case squarely fall under Heading 21.08 (sub-heading 2108.99), keeping in view the material used and mode applied for their manufacture, referred to above. That being so, in view of specific Note 10 to this Chapter 21, the products in question are to be termed as namkeen and eligible for exemption from duty under SI. No. 5 of Notification 5/99.

12. In CCE, Lucknow v. Tiemac Snack Food P. Ltd. [2002 (143) E.L.T. 325 (T) = 2002 (50) RLT 28], the classification of almost similar items/products (Monginis namkeen snack foods, peppy namkeen foods, rompa chompa golmol namkeen, hello namkeen snack foods) was sought by the Revenue under Heading 19.04 of the CETA, while the assessees wanted classification under Heading 21.08. The Tribunal after referring to both these Headings and the ingredients involved in the manufacture of the products, observed that the products were not classifiable under Heading 19.04 of the CETA, but under Heading 21.08. The ratio of the law laid down in that case squarely covers the items/products of the appellants for classification under Heading 21.08 of the CETA. Even the learned SDR has not disputed this position.

13. In view of the discussion made above the impugned order of the

Commissioner (Appeals) cannot be legally sustainable and is set aside. The products/items in question are held to be classifiable under Heading 21.08 (sub-heading 2108.99) and eligible for exemption from duty under SI. No. 5 of Notification 5/99. The appeals of the appellants stand allowed accordingly with consequential relief, permissible under the law.