By TIOL News Service

CHENNAI, OCT 19, 2014: THE brief facts of the case are -

(i) The appellants are registered 100% Export Oriented Unit (EOU), engaged in manufacturing and exporting of Processed Frozen Whole Chicken Meat classifiable under Heading No.02.01 of the schedule to the Central Excise Tariff Act, 1985 (CETA).

(ii) During the process of manufacture of Frozen Whole Chicken Meat, various waste materials arise like intestine, feathers, heads, legs, blood and other offals.

(iii) The appellants are processing Waste materials viz. cooked in high temperature, mashed, dried and powdered. Such processed materials are known as High Protein Poultry Mash (HPPM).

(iv) The appellants cleared HPPM, classifying under heading No.23.01 of the CETA, without payment of duty to Domestic Tariff Area (DTA), claiming the exemption under Notification No.23/2003-CE dated 31.03.2003 (Sl.No.21).

(v) Three show cause notices were issued proposing to classify HPPM under Heading No.23.02 of CETA, similar to heading 2309.90 of Customs Tariff Act, 1975 (CTA). It has also proposed to demand duty along with interest and penalty for the period from February, 2003 to December, 2003 .

(vi) The adjudicating authority confirmed the classification under Heading No.2302.00 of CETA corresponding to heading No.2309.90 of CTA. It has also confirmed the demand of duty along with interest.

(vii) By the impugned order, the Commissioner (Appeals) modified the adjudication order in so far as to re-quantify the demand, after taking into account of the overlapping of the transaction for the month of September, 2003 and cum-duty benefit was extended.

(viii) The appellants filed these appeals to the extent of challenging the classification of HPPM under Heading No.2302.00 of CETA and 2309.90 of CTA.

After hearing the lengthy submissions made by both sides sprinkled with case laws, the Bench observed –

++ In the present case, we find that various waste materials such as, intestine, feathers, heads, legs, blood and other offal etc. arise during the process of manufacture of Processed Chicken Meat. The appellant did not clear the said waste materials as such from their premises. The said waste materials were processed by the appellant as mentioned above. On perusal of processing of waste material as stated above, we find that various waste materials such as intestine, feathers, heads, legs etc. lost the essential characteristics of the original material and a new product emerged in powder form, used in animal feeding and known as HPPM in the market. So, we do not have any hesitation to hold that as per Chapter note 23 of CETA, the product HPPM as manufactured by the appellant would come under heading No.23.02 of CETA.

++ Sub Heading 2301.00 of CETA covers all residues and waste from food industries which includes bagasse and other waste of sugar manufacture and oil cakes. From the very nature of the description provided under sub-heading 2301.00 of CETA, it is abundantly clear that the goods classifiable under this heading are only residues and wastes arising from food industries. Whereas heading 2302.00 of CETA covers preparations of a kind used in animal feeding including Dog & Cat food. In the instant case, it is evident that the product cleared by the appellant is neither a Residue nor a waste from food industry. As seen from the series of process as explained above, the resultant product emerged is distinct from the mere poultry waste. The very fact that the appellants themselves described in their own invoices as High Protein Poultry Mash confirms the view. Added to that the appellants described the HPPM in the invoice documents as Poultry feed supplement and cleared to DTA. The appellants who are fully aware of the new product and its usage and on their own have given a specific name and description as HPPM as poultry feed supplement. It is a distinct product obtained from poultry wastes and it has lost the essential characteristics of poultry wastes such as intestine, heads, legs, feather, blood etc. The appellants described the product as HPPM itself suggest that it is a High Protein Product used as Poultry feed supplement. Further, we find that this HPPM is not elsewhere classifiable in any other chapters of CETA. Therefore, the product HPPM fully satisfies the description given under chapter note of heading 23 of CTA and chapter note of chapter 23 of CETA. Therefore, the product cannot be classifiable under Ch. 2301 of CETA, as a waste as claimed by the appellants. The product of a kind used in animal feeding cannot be covered under Ch. 2301 of CETA. By virtue of chapter note of chapter 23 of CETA read with Explanatory Note to sub-heading 2309 of HSN, we are of the considered view that the product HPPM is rightly classifiable under Ch. 2302 of CETA and Ch. 2309 of CTA.

The appeals were rejected.

(See 2014-TIOL-2034-CESTAT-MAD)