Savoury Oats And Silk Oats Are Classified As ‘Cereal’, Does Not Attract Excise Duty: CESTAT

The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that savoury oats and silk oats are classified as ‘cereal’ and do not attract excise duty.

The bench of Sulekha Beevi C.S. (Judicial Member) and Vasa Seshagiri Rao (Technical Member) has observed that savoury oats and silk oats are classifiable under Chapter Heading 1104-1200.

The appellant/assessee is in the business of manufacturing and clearing excisable goods, viz., masala and coriander oats, curry and pepper oats (savoury oats), silk oats (sweet oats), and muesli. On intelligence gathered that the appellant, though engaged in the manufacture, was clearing the goods without payment of duty, the officers of the department visited the premises of manufacture to study the process undertaken and collected relevant documents. Statements were recorded.

The appellant furnished copies of two agreements entered into with M/s. Marco Limited. One agreement was for the packing of oats, and the other was for the manufacture of savoury oats. A copy of their service tax registration and details of their invoices were also furnished.

The appellant contended that savoury oats and silk oats are classifiable under CETH 1104–1200 and attract a nil rate of duty.

The appellant contended that the other product, muesli, was classifiable under CETH 190410 90 and attracts 6% duty. After scrutiny of the agreements and analysing the process of manufacture, the department was of the view that savoury oats and silk oats are classifiable under CETH 1904–2000, attracting 12% duty.

The Department urged that the savoury oats’ and ‘silk oats’ processed by the appellant merit classification under central excise tariff item 1904-2000 as "prepared foods obtained from unroasted cereal flakes or from mixtures of unroasted cereal flakes and roasted cereal flakes or swelled cereals".

The savoury oats so processed by the appellant are essentially a pre-mix comprising oat flakes (68%–76%), dehydrated vegetables (1.5%–3.5%), and seasoning products (23%–25%). Plain oats, which are the main input in this premix, are imported by Marico Ltd., and Customs classify the same under tariff heading 1104-1200 as "rolled or flaked grains of oats," attracting a nil rate of duty.

The tribunal held that the process undertaken by the appellant does not change the essential character of the raw material used. The raw material used is plain oats, and even after the processes undertaken at the hands of the appellant, the essential character of the final product remains oats. There is no emergence of a new, distinct product.

Case Title: M/s.Ameya Foods Versus The Commissioner of GST & Central Excise

Case No.: Excise Appeal No.41851 Of 2016

Date: 16.08.2023

Counsel For Appellant: Vipin Kumar Jain

Counsel For Respondent: M. Ambe

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