ORDER
Gowri Shankar, Member (T)
1. Application is for waiver of deposit of duty of Rs. 9.07 crores, demanded on the ground that the bases or concentrates manufactured by the applicant, which are used to beverages, classifiable under Heading 2108.10 and not under Heading 3302.10 as claimed by the assessee.
2. Advocate for the applicant says that notice issued to the applicant was primarily on the footing that the goods were not mixtures of odoriferous substances but they are a compounded preparation, and nothing other than edible preparations specially prepared for production of aerated waters. He says that the Commissioner dropped the proceedings, holding that the goods are nothing other than mixtures. On appeal from this order by the department the Commissioner has held these to be unique compounded formulations or preparations which could not be covered by the words of Heading 3302.10. He contends that in reply to the notice and two letters dated 1-3-1996 and 29-2-19-96 which the department relies on, the assessee made it very clear that the process of making these goods is not involved creation of compound, i.e. substance which properties other than those on the elements going into this making and processes not only mixing. Heading 3302.10 specifically refers to mixtures and not for substances and also refers to the amendment carried out in November, 1987 to the Explanatory Notes to the Harmonized System of Nomenclature which precisely described the goods manufactured by the applicant to be classifiable under Heading 33.02. He also refers to the notes under Heading 21.06 particularly at page 171 from which it is clear that the goods are classifiable under Chapter 21. He says that subsequent to the Commissioner’s order the assessee paid duty at the higher rate under protest and that three notices issued for clearances between the date of the Assistant Commissioner’s order in the assessee’s favour and the Commissioner (Appeals’) order are pending adjudication. Since the entire quantity of the bases manufactured by the applicant is used (except for wastages) in the manufacture of beverages, the product is revenue neutral as the manufacturer of the beverages would be entitled to take Modvat credit of the duty paid on these goods. In these circumstances he requests an early hearing of the appeal without insisting on pre-deposit.
3. The Departmental Representative contends that the definition of the term “odoriferous substances” as explained in the Harmonized System of Nomenclature (HSN for short) explanatory notes includes many of the substances that form the bases for the beverages which are contained in the books manufactured by the applicant. He invites our attention to Note 2.2 to Chapter 33 of the Customs Tariff, which is the reproduction of Note 2 to Chapter 33 of the HSN. He says that these beverages which are made do not have a basis of these odoriferous substances. This point had been made clear in the notice, and in the appeal to the Commissioner (Appeals).
4. The clearance on which duty demand was made between 1-8-1995 and 6-3-1996 Note 7 to Chapter 33, which reproduced in essence the contents of Note 2 to Chapter 33 of the Customs Tariff was incorporated in the Central Excise Tariff only in 1997. Whether omission of this note during the period prior to that date was deliberate, signifying the intention not to be restrict scope of the term “odoriferous substances” or whether even in the absence of this note, their scope would be defined by the HSN is arguable. Prima facie, however, it appears that the basis for classification of goods under Chapter 21 is that they are not mixtures and hence not classifiable under Heading 33.02. The major thrust of the notice appears to indicate, thus, although in the appeal to the Commissioner (Appeals) the point was specifically made that the goods form part of the product as are not odoriferous substances defined in note to Chapter 33. The Commissioner (Appeals), however, does not appear to have gone by this, but has, it appears, based his conclusion only on the ground, that the goods uniquely compounded formulation, i.e. not mixtures under Heading 33.02.
5. The applicant thus has a good case prima facie. Further, whatever duty is paid could be taken as credit. We list the appeal itself for hearing on 17th May, 1999 in view of the recurring effect. Status quo is to be maintained in the meantime.