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Issues: (i) Whether the demand of central excise duty was barred by limitation under Section 11A of the Central Excise Act; (ii) whether the tobacco pouches marketed by the assessee were classifiable under tariff entry 24039910 or 24012090.
Issue (i): Whether the demand of central excise duty was barred by limitation under Section 11A of the Central Excise Act.
Analysis: The assessee had disclosed the raw materials, the manufacturing process and the proposed packing activity to the department when seeking amendment of the registration certificate. The record showed that the department was informed that loose unmanufactured tobacco was being packed into small pouches with lime tube. On these facts, there was no suppression, concealment or misstatement justifying invocation of the extended period.
Conclusion: The demand was held to be time barred and the assessee succeeded on limitation.
Issue (ii): Whether the tobacco pouches marketed by the assessee were classifiable under tariff entry 24039910 or 24012090.
Analysis: Chapter Note 3 of Chapter 24 treats repacking from bulk packs to retail packs, or any treatment rendering the product marketable, as manufacture. Since the assessee purchased bulk tobacco and repacked it into small pouches for sale, the activity amounted to deemed manufacture. Once manufacture was established, the product fell under the heading relating to other manufactured tobacco, namely entry 24039910.
Conclusion: The classification under entry 24039910 was upheld and the assessee failed on classification.
Final Conclusion: The department's appeal did not survive on limitation, while the assessee's challenge to classification was rejected, resulting in dismissal of both proceedings.
Ratio Decidendi: Full disclosure of the manufacturing process and raw materials negatives suppression for limitation purposes, and repacking of bulk tobacco into retail pouches constitutes manufacture under Chapter Note 3 of Chapter 24, attracting classification under the manufactured tobacco entry.
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