Tariff classification and SSI exemption turned on whether roasting, cutting and bag markings amounted to manufacture or branding.

Roasted and cut supari was treated as betel nut under Tariff Item 0802 90 12 because roasting and cutting were not regarded as manufacture under Chapter Note 6 of Chapter 21, so it attracted nil duty. The tobacco bags' markings were viewed as mixing ratios for production, not a brand name used in trade, and the tobacco did not meet the conditions for Tariff Item 24039990 because it lacked lime and kattha; at highest, it fell under Tariff Item 24039910. As turnover was within the prescribed limit, SSI exemption under Notification No. 8/2003-CE was available, and confiscation or penalty was not warranted.

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Issues: Whether cut roasted supari was correctly classifiable under Tariff Item 0802 90 12 of the Central Excise Tariff Act, 1985 and whether the seized manufactured tobacco was branded goods liable to duty, confiscation and penalty, or was entitled to small scale exemption under Notification No. 8/2003-CE dated 01.03.2003.

Analysis: The roasted and cut supari was held to remain betel nut and the process of roasting and cutting was not treated as manufacture under Chapter Note 6 of Chapter 21 of the Central Excise Tariff Act, 1985. It was therefore classified under Tariff Item 0802 90 12 of the Central Excise Tariff Act, 1985 and treated as attracting nil rate of duty. As regards the tobacco, the marks found on the bags were taken to indicate only mixing ratios for use in production and not a brand name used in the course of trade. The tobacco also did not satisfy the conditions for classification under Tariff Item 24039990 of the Central Excise Tariff Act, 1985 since it did not contain lime and kattha, and at the highest it fell under Tariff Item 24039910 of the Central Excise Tariff Act, 1985. Since the turnover was within the prescribed limit, the goods were held entitled to SSI exemption under Notification No. 8/2003-CE dated 01.03.2003, and confiscation and penalty were not warranted.

Conclusion: The seized supari and tobacco were not liable to the proposed duty demand, confiscation or penalty, and the assessee was entitled to exemption.

Final Conclusion: The departmental challenge failed because the impugned order correctly treated the goods as non-dutiable or exempt and no interference was called for.

Ratio Decidendi: Where roasting and cutting do not amount to manufacture and the marks on tobacco bags do not constitute a brand name in trade, the goods are to be classified according to their true tariff entries and may qualify for SSI exemption if the exemption conditions are satisfied.

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