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2015 (6) TMI 1014 - CESTAT CHENNAI

2015 (6) TMI 1014 - CESTAT CHENNAI - 2016 (340) E.L.T. 325 (Tri. - Chennai) - Classification - spice powders and mixed spices which are commonly called as masalas - classified under Chapter 0910 9100 of CETA OR Chapter 2103 9040 - Held that:- By respectfully following the judgments of in the case P.C. Duraisamy Vs. CCE (2001 (9) TMI 106 - HIGH COURT OF JUDICATURE AT MADRAS ) and the Tribunalís decision in the case of Narendra Kumar & Co., (2008 (7) TMI 224 - CESTAT MUMBAI ), we hold the products .....

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Counsel.,(for Eastern Condiments), Shri Harish Bindhumadhavan, Shri N. Viswanathan, Adv., (for Aachi Masala and Nazareth), Shri M.S. Srinivasa, Adv., (for Maami Foods) And Ms. Sridevi, Adv. For the Respondent : Shri M. Rammohan Rao, DC (AR) Appeal Nos. E/337/2008, E/40288/2014, E/Misc./42302/2013 & E/227/2008 & E/336/2008, E/40297 to 40301/20014, E/353 & 354/2010 and E/40380 & 40381/2014, E/638/2009 and E/299 & 300/2011, E/42108/2013 & E/40992/2104 ORDER PER R. PERIASAMI .....

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ng 2103 9040 as mixed condiments and mixed seasonings under Chapter 21 of CETA, 1985. The adjudicating authorities, after following the principles of natural justice, classified these products under Chapter 2103 9040 and confirmed the demands and also imposed equivalent penalty. The details of description, duty and penalty imposed on each appellants are listed as under:- I. M/s. Eastern Condiments P. Ltd. They are manufacturer of 13 items viz., Meat masala, sambar masala, Biriyani masala, rasam .....

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aram masala powder, fish fry masala, biryani masala, mutton masala, fish curry masala, rice bath powder, Leman bath powder, tomato bath powder and sukkumalli powder etc. M/s. Aachi Masala Foods P. Ltd. Appeal No. Demand Penalty Imposed Personal Penalty On Naveen E/226 & 227/2008 Rs.90,12,680/- Rs.83,68,681/- Rs.1,00,000/- E/336 & 337/2008 Rs.76,72,223/- Rs.3,00,000/- Rs.1,00,000/- E/40288/2014 Rs.46,61,509 Rs.46,61,509 Rs.2,00,000/- E/40297/2014 Rs.38,63,248/- Rs.38,63,248/- E/40298/2014 .....

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9/- Rs.53,98,404/- Rs.5,00,000/- E/40380 & 40381/2014354/2011 Rs.20,49,657/- + ₹ 31,94,830/- Rs.10,00,000/- IV. M/s. Avitaa Food Products They are the manufacturers of Turmeric powder, chilly powder, coriander powder, pepper powder, jeera powder, sambar powder, rasam powder, idly chilly powder, garam masala, biryani masala, puliyodharai powder, pav bhaji masala, vathal kulambu powder, lemon rice powder etc., M/s. Avitaa Food Products Appeal No. Demand Penalty Imposed Personal Penalty E .....

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roducts Appeal No. Demand Penalty Imposed Personal Penalty E/42108/2013 Rs.1,67,506/- Rs.1,67,506/- E/40992/2014 Rs.2,15,483 Rs.2,15,483 3. All these batch of appeals were extensively heard on 21.1.2015, 5.6.2015 and 10.6.2015 and the Ld. Counsel of each appellant submitted their arguments on the above dates. 5. Shri N. Venkataraman, Sr. Counsel appearing on behalf of M/s. Eastern Condiments Pvt. Ltd. (Appeal No. E/709/2009) led the arguments first and also submitted written synopsis. He submits .....

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Vs. CCE reported as 2008 (232) ELT 866 has discussed the issue at length what is spices classifiable under Chapter 9 and what is mixed condiments classifiable under Chapter 2103. He submits that the products prepared by the appellants are not ready mix (instant) products but they are mixture of combination of spices which will aid in the preparation of food. He relied on Chapter Note 1 of chapter 9 and the Supplementary Note of Chapter 9. He drew the attention of the Bench to pages 75 to 77 of t .....

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of contents are spices. As per Chapter 9, mere addition of other ingredient does not take away the essential character of spices. He further submits that Chapter 21 covers only miscellaneous edible preparations not elsewhere specified in the Tariff. He submits that Chapter Heading 2103 covers only such edible preparations which are ready to eat and do not require any preparations. He further submits that the above decisions of the jurisdictional Honble High Court of Madras have attained finalit .....

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uced various other RTI replies that is from Central Excise, Coimbatore, Erode confirming the classification of the products under Chapter 9. 6. Learned Senior Counsel further submits that in the physical laws there should be uniformity and consistency in the classification of products. He relied on the Boards Circular No. 205/1996 dated 30.4.1996. He relied on the following decisions:- (a) CCE, Mumbai Vs. Narendrakumar & Co. - 2008 (232) ELT 866 (b) P.C. Duraisamy Vs. Assistant Commissioner .....

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representing M/s. Nazareth Foods Pvt. Ltd. and M/s. Aachi Masala Foods Pvt. Ltd. largely adapted the submissions of Shri N. Venkataraman, learned senior counsel. He submits that M/s. Nazareth Foods Pvt. Ltd. is a manufacturing firm and M/s. Aachi Masala Foods Pvt. Ltd. is a trading firm. He further submits that in the show-cause notice the Department has already allowed all the curry powders and masala powders classified under Chapter 9. The dispute in these appeals is with regard to only 4 pro .....

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the spices no longer retain the essential character so as to fall under Chapter 9 and the onus is on the Department. Whereas, only vague allegations have been made on Chapter Note 1 and Supplementary Note 2 of Chapter 9 are relevant. He further submits that the Department has drawn the samples and also prepared the test memo but same were not tested and relied (page 25). That Commissioner in his order at para 8.1.3 at page 47 held that since these are mixture of spices, testing is not required. .....

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ven if chukku malli is admitted as a drink they are exempted under Notification No. 3/2006 dated 1.3.2006 (Sl. No. 29). He relied on the decisions relied by the learned senior counsel. He also relied on denovo Order-in-Original dated 08.08.2000 passed by the Commissioner of Central Excise, Bangalore and the Tribunal in the case of MTR Distributors Pvt. Ltd. Vs. CCE, Bangalore 1999 (113) ELT 708, wherein he classified the goods under Chapter 9 as mixed spices. He also pleaded that since there is .....

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and submits that the allegations are contrary to Chapter Note 1 of Chapter 9. He submits that the only allegation of the department is that after mixing up the spices they lose their identity and the essential characteristics. Except this allegation no other material evidence put forth by Revenue. No samples were drawn nor any test carried out. Therefore, the burden of proof lies on the Department to establish that the products have lost their essential characteristics of spices. He also adopted .....

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hapter 9 and dropped the proceedings. Therefore, he submits that classification under 9 has been accepted in Bangalore Commissionerate. He submits that there is no suppression of facts and extended time limit will not apply as they were under bonafide belief that spices are covered under Chapter 9. 10. The learned counsel Shri S. Murugappan representing for Avitaa Foods Products Ltd. and submits that there are four more appeals pending and they are not listed today. He adopts the submission disc .....

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apter 9 even the product having the mixtures of a heading falling under other chapters are classified under Chapter 9 as long as it retains the essential characteristics. He further submitted that there are two criteria applicable for classifying under Chapter 21. Firstly, addition of seasoning material which does not fall under Chapter 9 and secondly, after such addition, the product should lose its essential characteristics. Whereas, in the present case, there is no addition of any other seaso .....

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s that the decision of the Honble Supreme Court in the case of AP Products Vs. State of Andhra Pradesh 2007 (214) ELT 485 (SC) relied by the Department will not apply to the facts of the present appeals. He also relied on the Boards Circular dated 30.4.1996. He pleads that the demand is hit by time bar and the extended period is not invocable as there is no suppression of facts. He relied on the following decisions:- (a) Coastal Energy Pvt. Ltd. Vs. CCE, Guntur - 2014 (310) ELT 97 (b) Padmini Pr .....

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fold. Firstly, all the appellants submitted that there is no uniformity in the classification of the products and the second allegation is that the Department has not proved with evidence for classifying the goods under 2103. 13. The learned AR submitted his arguments first on the applicability of Board circular and second on classification. He referred the Boards circular No. 205/96 dated 30.4.1996, and submits that the products can be classified either under Chapter 9 or under Chapter 2103. P .....

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nals decision in the case of Narendra Kumar (supra) has not correctly examined the manner conveyed by the Boards circular and the Tribunal has taken a view that Board has categorically ruled that these products are classifiable under Chapter 9 but it is not so. In the above case, the department relied on the test report which Tribunal did not appreciate. Therefore, the Tribunals decision is distinguishable. He relied on the decision of Honble Supreme Court in the case of Srikumar Agencies Vs. CC .....

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LT 71 and Orissa Cement Ltd. Vs. Superintendent, Customs and Central Excise - 1992 (61) ELT 256 (Ori). The decision of the Honble High Court of Madras relied by the appellants are purely masalas and there is no dispute on that. The Honble High Court has decided the issue based on the circular. 14. On the classification issue LD. AR submits that there is a thin line on what is spices and what is condiments. Spices are classifiable under Chapter 9, whereas, condiments and seasonings under chapter .....

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rials clearly makes it preparations and it attains a separate identity as sambar powder in the parlance. He further submits that the essentiality of the product is to be addressed in terms of the functionality, predominance use, test of substitution and a popular understanding of the product by the Trade/ consumer. Therefore, as per the popular usage, it is identified as sambar powder and not as spices. Once the spices are grounded and mixed with other items, the spices loss its originality. He .....

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7) ELT 337 (SC) (c) Deputy Commissioner of Sales Tax Vs. Rani Food Products - 1988 68 STC 446 (Ker.) (d) Commercial Tax Officer Vs. Jalani Enterprises - (2011) 4 SCC 386 (e) CCE Vs. Parle Exports (P) Ltd. - 1988 (38) ELT 741 (f) McGaw Ravindra laboratories (India) Ltd. Vs. Union of India - 1992 (60) ELT 71 (Guj.) (g) CCE, New Delhi Vs. Connaught Plaza Restaurant (P) Ltd. - 2012 (286) ELT 321 (SC) 15. He submits that extended period has been rightly invoked. Regarding the test, he submits that si .....

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at essentiality of the character means, even after the mixing of all spices together, it remains only as spices, it has not lost the essential character and it is not other way what the Department is trying to interpret. It is only a predominance of spices and it does not affect the essential characteristics of the mixture as a spice, whereas the Department chooses to interpret that each spices loses its essential character. Relied on the Supplementary Note 3 of Chapter 9, which was specifically .....

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have carefully examined the submissions made by both the sides and also perused the records. The issue to be decided in this case is whether the products namely Sambar powder, rasam powder, garam masala, chana masala and various other curry powders manufactured by the appellants are classifiable under chapter heading 0904 to 0910 as spices or under chapter heading 2103.9040. All the appellants are manufacturers of various masala powders only they have given in different names. (i) The first appe .....

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s. Maami Foods Pvt. Ltd. in appeal E/353 & 354/2010 and E/40380 & E/40381/2014, they are manufacturers of 22 items the items under dispute are viz., Meat masala, sambar masala, Biriyani masala, rasam powder, pickle masala, vegetable masala etc, and the period involved is January 2004 to July 2008. They are not contesting the classification of Bajji bonda and payasam mix (at sl.No. 24 & 27). (iv) The appellant M/s. Avitaa Food Products in appeals E/638, E/299 & 300/2011 are the ma .....

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904.9010 of chapter 9 of CETA and heavily relied on Boards Circular, test reports, expert opinions, HSN explanatory notes and various citations of High Courts and Tribunals decisions etc. On the other hand, the Revenue contended that these products are rightly classifiable under chapter 2103 as mixed condiments and mixed seasonings and heavily placed their submissions that classification should be based on the usage of the product and contended that once the spices are mixed, they loose their id .....

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various quantity. The appellants receive various spices viz., chilly, turmeric and other edible ingredients which are roasted, cooled, pulverized and blended and packed. These are marketed in different names either sambar powder, rasam powder, curry masala or rice bath powder etc. We also find that these masala powders do contain other edible items such as salt, rice powder, dal powder and preservatives etc. These are not ready to use item i.e. instant mix but it is to be added while preparing t .....

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to in paragraphs (a) or (b) above) shall not affect their classification provided the resulting mixtures retain the essential character of the goods of those headings. Otherwise such mixtures are not classified in this Chapter; those constituting mixed condiments of mixed seasonings are classified in heading No. 21.03. Supplementary Note (3) reads as under. 3. The addition of other substances to spices shall not affect their inclusion in spices provided the resulting mixtures retain the essenti .....

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cts of headings Nos. 09.04 to 09.10 (or to the mixtures referred to in paragraphs (a) or (b) above) shall not affect their classification provided the resulting mixtures retain the essential character of the goods of those headings. Otherwise such mixtures are not classified in this Chapter; those constituting mixed condiments of mixed seasonings are classified in heading No. 21.03. These products may be whole or in crushed or powdered form General. As regards the classification of mixtures of p .....

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te measuring out of the spices and their distribution in the food preparation (cereal flour, ground rusk, dextrose, etc) (b) Food colourings (e.g. xantholpyll) (c) Products added to intensify or enhance the flavor of the spices (synergetics), such as sodium glutamate (d) Substances such as salt or chemical antioxidants added, usually in small quantity, to preserve the products and prolong their flavouring powers. From the above chapter notes and HSN explanatory notes it is evident that mixtures .....

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r of the goods falling in those headings. HSN explanatory note stipulates that the edible materials, dilutents, food colourings, salt or chemical antioxidants are only added in the mixtures as a base enhancing the colour or flavor or to preserve. 20. Further, we find the Chapter 21 of CET covers miscellaneous edible preparations and the chapter note one to chapter 21 excludes spices and other products of heading 0904 to 0910. Heading 2103 covers sauces and preparations therefor, mixed condiments .....

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wders, spice oil, oleoresins and other mixtures where spice content is predominant. A combined reading of chapter note one and supplementary note 3 read with HSN explanatory note it is evident that mixtures of various spices with or without addition of other items are classifiable under chapter 0904 to 0910 as it retains its essential character. On perusal of the ingredients and the test reports of various masalas, we find that the percentage of spices content is 95% to 96% and the remaining are .....

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the Honble Andhra Pradesh High Court decision in the case of AP products. The relevant portion of the Tribunal decision is reproduced as under:- 9. On careful perusal of the cartons of the products in question we find that these products are mixtures of spices along with other ingredients. The ingredients in the products in question are combination of the spices and some more ingredients. It is seen that in addition to spices, the ingredients include mainly asafoedita, rock salt, dry mango etc. .....

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he proceedings before the adjudicating authority, has always mentioned that the products in question had various different spices in powder form up to 96% of the total ingredients and other ingredients formed only 4% to 5% of the total ingredients. We find that the revenue has not disputed these contentions with any contrary evidence and hence the submissions of the learned Jt. CDR that the respondent has not submitted the percentages of the ingredients to arrive at the essential character of th .....

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t classification of compounded asafoedita, which contained 85% of other ingredients like wheat flour and edible gum, despite this, it was directed that compounded asafoedita will be asafoedita, as the essential character is of asafoedita and not wheat flour or edible gum. The analogy would apply in this case also as it is undisputed that 95% to 96% of the ingredients of the products in question are spices. Learned Jt. CDR placed heavy reliance on the decision of the Honble Supreme Court in the c .....

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would get covered under a specific entry of the schedule to the AP Sales Tax Act. It is also seen that Apex court was deciding the issue specifically as regards the inclusion in the schedule to the AP sales tax act. In our considered view the ratio laid down by the Honble Supreme Court was in respect of the facts and circumstances, of the case before them and may not be applicable in this case. 10. It is a settled law that in cases of classification chapter notes of HSN can be considered as guid .....

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ures referred to in paragraphs (a) or (b) above) shall not affect their classification provided the resulting mixtures retain the essential character of the goods of those headings. Otherwise such mixtures are not classified in this Chapter; those constituting mixed condiments of mixed seasonings are classified in heading No. 21.03. 2. This Chapter does not cover Cubed pepper (Piper cubeba) or other products of heading no. 12.11. It can be noticed that chapter note no. 3 of chapter 9 of CETA is .....

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rcular No. 205/39/96-CX, dt. 30-4-1996 were clearing doubts regarding the classification of Indian traditional convenience food mixes, masalas and condiments we may reproduced the same. Board has received representations from Indian Food Industries Association and others seeking clarification as regards the classification of various Indian traditional convenience food mixes, masalas, spices and condiments such as puliyougare powder, vangibath mix, instant sarnbar mix, vangibath powder, sambar po .....

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ied or included. In the latter case, Chapter Notes 9(b) & 9(c) of Chapter 21 are being relied upon for classifying these products under the subheading 2108.90. Trade interests have, however, argued that these products are merely additives for different food items and not readily consumable products through the simple processes of cooking, frying, boiling or adding with water, oil or milk. Hence it is claimed that the products in question cannot be classified under sub-heading 2108.90 of CET. .....

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ing description of these products. Spices Spices i.e. a group of vegatable products (including seeds etc.), rich in essential oils and aromatic principles and which because of their characteristic taste are mainly used as condiments. Spices (including mixed spices) containing added substances of other Chapters, but themselves having flavouring or seasoning properties, remain in this Chapter provided the added quantity does not affect the essential character of the mixture as a spice, (Vol.1 Page .....

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ixed seasonings on the other, the English Dictionary meanings and statutory, bodies dealing in quality specifications of spices, condiments and seasonings often use these words interchangeably. What is however emphasised in the literature on the subject is that the essential character of these substances is in their function, viz., to add flavour, aroma and pungency to various food preparations. 3.3 Chapter Notes 9(b) and 9(c) of Chapter 21 of CET no doubt give an indication of the type of prepa .....

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h are used as such or in the making of food preparations mainly for their aromatic, flavouring or seasoning properties would merit classification under the specific entry of spices in Chapter 9 or Heading 21.03 of CET. However, products which in addition to spices, flavouring and seasoning substances also contain, other foodstuffs in such quantity that the products as such or after processing are capable of being used as food preparations for human consumption in their own right will go out of C .....

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her hand, products like instant sambar mix, instant rasam mix, instant spiced bhath mix (Bisibelebath) or instant Kharabhath mix consisting of dal or rice flakes or sooji along with spices and other substances and which can be made up into food preparations by simply mixing and boiling/cooking in water would merit classification as miscellaneous edible preparations of Heading 2108 of Central Excise Tariff. 5. In view of the above, Board desires that classification of each product be decided on m .....

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l go out of Chapter 9 and merit classification in the residuary heading 21.089. It is to be noted that in the case before us, the products in question there is no evidence that, these products are capable of being used as food preparation for human consumption in their own right. It is well settled law that if Revenue wants to reclassify the products, then it has to lead evidence. Assessee cannot be asked to prove the negative. 12. We find that the Tribunal in the case of Commissioner of Central .....

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ive. He has analyzed every aspect of the matter and also in the light of the HSN Explanatory notes. The Revenue wants the product to be classified under Chapter Heading 21.03, which description deals only with sauces and ketchups. The item does not fit into the said items described in Chapter Heading 21. The learned JDR relied on the judgment rendered in the case of MTR Food Products v. CCE, Bangalore - 2000 (118) E.L.T. 392 (T), which deals with Sambhar mix/Rasam mix, which has been held to be .....

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d only as Spicesas held by the noted Boards Circular referred to by the Commissioner. 13. It is settled law that the classification of a product is decided on the question of market understanding of the product. The respondents herein had lead evidences before the lower authorities as regards the market understanding of the product. The respondent had produced before the lower authority, certificates given by reputed consumers of that products and of Institute of Hotel Management, Catering Techn .....

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ed with the classification of goods. Their Lordships held as under :- In our view, the conclusion reached by the High Court is fully in accord with the decisions of this Court and the same is justified in law. The burden of proof is on the taxing authorities to show that the particular case or item in question, is taxable in the manner claimed by them. Mere assertion in that regard is of no avail. It has been held by this Court that there should be material to enter appropriate finding in that r .....

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d, the evidence led in this case conclusively goes to show that Nylon Twine manufactured by the assessee has been treated as a kind of Nylon Yarn. Hence, it is to be classified under Item 18 of the Act. The Revenue has failed to establish the contrary. We would do well to remember the guidelines laid down by this Court in Dunlop India Ltd. v. Union of India [1983 (13) E.L.T. 1566 (S.C.) = (AIR 1977 SC 597 - at page 607], institution, wherein it was stated :- when an article has, by all standards .....

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soning. In the matter of taxability of the product under the Central Excise Tariff Act, the act being same all over India, uniformity in classification is a must. The departments understanding of the product in question is clearly borne out from Circular dt. 30-4-1996 (as reproduced at Paragraph 11 hereinabove) the understanding of the department in the current case also seems to be an identical as of the Board. Our attention was drawn by the ld. Counsel, to the classification of the product in .....

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e ingredients of the products in question are identical to the products which are manufactured by other assessee situated in different Commissionerates. The question of uniformity taxation is of prime importance. We find that the Honble Supreme Court in the case of Damodar J. Malpani v. Collector of Central Excise as reported at [2002 (146) E.L.T. 483 (S.C.)] 16. As regards the other products like Rasam Powder, Chaat Masala, Tea Masala, we find that the reasoning given by us in respect of all ot .....

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us the Rasam Powder is to be added to complete prepared Rasam. Hence we are of the considered view that the decision of the Tribunal in the case of MTR Products (supra) may not apply to the facts and circumstances of the case before us. Accordingly, we are of the considered opinion that the impugned order of the adjudicating authority is correct and does not suffer from any infirmity in respect of the classification of the products, except for jiralu. 17. The impugned order is upheld to the ext .....

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Revenue. 21. Further, we find that the jurisdictional Honble High Court of Madras in the case P.C. Duraisamy Vs. CCE (supra) and the Division Bench decision of the Honble High Court of Madras in the case of Sakthi Masala Pvt. Ltd. (supra) squashed the SCN issued to the appellants on the identical issue of classification of various masala powder. The relevant portion of the judgment of the Honble High Court in the case of P.C. Duraisamy Vs. CCE (supra) is reproduced as under:- 5. In the counter .....

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soning would appear to merit classification as spices under sub-heading No. 0903.00 attracting NIL rate of duty. On the other hand, products like instant Sambar Mix, Instant Rasam Mix, Instant spiced bhath Mix, (Bisibelebath) or Instant Kharabhath Mix consisting of Dal or Rice flakes or Sooji along with spices and other substances and which can be made up into preparations by simply mixing and boiling/cooking in water would merit classification as miscellaneous edible preparations under sub-head .....

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he writ petition the learned Counsels appearing for the respondents vehemently contended that the writ petition is pre-mature and should be dismissed. It is further contended that the petitioner instead of availing alternative remedies should not have approach this court. 7. It is true that where alternative remedies available, ordinarily the High Court should not entertain the matter under Article 226. Similarly even if the High Court has entertained the writ petition seeking to quash the show .....

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of the stand taken in the counter affidavit itself, the show cause notice so far as it relates to articles included in 0903.00 is quashed. It is however made clear that if there is any other item manufactured by the petitioner not coming within the aforesaid entry, it would be open to the opposite party to proceed in accordance with law. Subject to the aforesaid observation, the writ petition is disposed of without any order as to costs. The Division Bench of the Honble High Court of Madras in .....

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onda Powder Bajji Mix 19. In view of our above categorical finding that the decision of this Court in W. P. No. 7029 to 1996 , which reached its finality , is binding on both the parties, the present petitioner -appellant not being a different entity, the present show- cause notices issued in respect of the first three items above, which were the subject matter in the earlier round of litigation, are nothing but illegal Though, normally, Courts will not interfere at the stage of show cause notic .....

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ere is any other item manufactured by the petitioner, not coming within the aforesaid entry 20 . With regard to the other three products namely (1) Garlic Rice Powder, (20 ) Lemon Rice powder and (3) Bajji Bonda powder, we are able to see that they did not figure in the above said writ petition, but the petitioner appellant was issued with Registration Certificate and he filed Classifications under Rule 173B, wherein all the six products under dispute were classified under chapter 9 become final .....

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giving different interpretation to the same, which is highly condemnable. The ratios of the above both judgments of jurisdictional Hon ble High Court of Madras are squarely applicable to the present case. The products covered in the above High Court Order and the various items manufactured by the appellants in all these appeals are identical in nature except for change in names. The Hon ble jurisdictional High Court of Madras decisions are binding on the Revenue and the Tribunal. The Revenue re .....

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