2017 (9) TMI 346 - AT - Central Excise

Tribunal upholds classification of branded Chewing Tobacco and levy scheme, dismissing appeals.

M/s Hira Packaging Versus CCE, Raipur

The Tribunal dismissed the appeals, upholding the classification of the product as branded Chewing Tobacco and confirming the applicability of the ... Classification of goods - Chewing Tobacco - N/N. 8/2003-CE dated 01/03/2003 - compounded levy scheme - whether the product would be classified under CTH 24039910 or otherwise? - Held that: - Admittedly, the scope of the term “Chewing Tobacco” has not been statutorily defined in the Central Excise provisions. The claim of the appellant is that the product manufactured by them is lime mix tobacco and not Chewing Tobacco. The Original Authority relied on the appellant’s declaration made to the Department on 18/12/2007. A reference had also been made to a letter dated 29/11/2010 of the appellant explaining the process of manufacture. Tobacco powder/dust/refuse and the lime combined with water in pre-determined proportion are fed into power operating mixing machine to obtain tobacco mix with lime, which is their final product. We note that relying on the explanatory notes under Chapter 24 of HSN, the Original Authority correctly rejected the contention of the appellant that the product, in question, should be considered as “homogenized” or “reconstituted” tobacco. It is clear that the product manufactured by the appellant cannot fall under that category which are classified under Central Excise Tariff Heading 24039100. Compounded Levy scheme - the appellants contested that the rate of duty as determined by the 1st Schedule to Central Excise Tariff Act readwith notification for SSI Notification No.8/2003-CE should apply to them. In fact, they contested that Chewing Tobacco cannot be brought under the 2010 rules for compounded levy - Held that: - The compounded levy scheme is framed in terms of the statutory powers provided under Section 3A of the Central Excise Act, 1944. The said section clearly stipulates that notwithstanding anything contained in Section 3, the Central Government can notify in respect of specific goods that the duty shall be levied and collected in accordance with the provision of Section 3A. The Original Authority has correctly examined the applicability of compounded levy scheme w.e.f. 08/03/2010, to the products manufactured and cleared by the appellant and confirmed the duty liability accordingly. Use of brand name in the product - It is claimed by the appellant that the name appearing in the pouches is only to show the manufacturer and there is no branding of the product - Held that: - On perusal of the sample packages, we are satisfied that there is an identifiable distinct branding of these products which have the effect of linking the product to a particular person, among the consuming public. As such, we find no merit in the claim of the appellant that these are not branded Chewing Tobacco. It also noted that the packages clearly carried a warning that Chewing Tobacco is injurious to health. Such endorsement clearly discounts the argument of the appellant that their product cannot come under the general category of Chewing Tobacco. Regarding the claim of the appellant for exemption under N/N. 8/2003-CE available to small scale units we note Chewing Tobacco bearing a brand name is excluded from the products listed in annexure of notification for such exemption. Appeal dismissed - decided against Appellant. Issues Involved:1. Classification of the product as Chewing Tobacco.2. Eligibility for concession under Notification 8/2003-CE.3. Confirmation of duty demand under Section 3A of the Central Excise Act, 1944.4. Applicability of compounded levy scheme to branded Chewing Tobacco.5. Jurisdiction of the adjudicating authorities.Issue-Wise Detailed Analysis:1. Classification of the Product as Chewing Tobacco:The primary issue is whether the product manufactured by the appellant is classified as Chewing Tobacco under Central Excise Tariff Heading 24039910. The Original Authority held that the product is branded Chewing Tobacco based on the appellant’s declaration and the manufacturing process described by the appellant. The appellant contended that their product is 'lime mix tobacco' and not Chewing Tobacco, arguing for classification under different headings. The Tribunal found no reason to interfere with the Original Authority's conclusion, noting that the product cannot be considered as 'homogenized' or 'reconstituted' tobacco and fits the description of Chewing Tobacco.2. Eligibility for Concession under Notification 8/2003-CE:The appellant claimed eligibility for small scale exemption under Notification 8/2003-CE, arguing that their product is not branded. The Tribunal examined the packaging and found distinct branding elements such as the manufacturer's name, a photograph, and unique marks. It concluded that the product is branded Chewing Tobacco, which is excluded from the small scale exemption.3. Confirmation of Duty Demand under Section 3A of the Central Excise Act, 1944:The Commissioner confirmed a duty demand of Rs. 1,64,56,452/- along with an equivalent penalty, based on the compounded levy scheme under Section 3A of the Act. The appellant argued that duty should be payable as per the tariff rate and not under the compounded levy scheme. The Tribunal upheld the duty demand, stating that the compounded levy scheme is framed under statutory powers provided by Section 3A, which overrides the general provisions of Section 3.4. Applicability of Compounded Levy Scheme to Branded Chewing Tobacco:The Tribunal examined whether the compounded levy scheme applies to the appellant's product. The Original Authority had found that the product falls under the scheme as per Notification 10/2010-CE (NT) and the Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010. The Tribunal agreed with this finding, noting that the compounded levy scheme is applicable to branded Chewing Tobacco manufactured and cleared by the appellant.5. Jurisdiction of the Adjudicating Authorities:The appellant argued that separate proceedings by different authorities violated the principles of res judicata and that all proceedings should have been adjudicated by the senior-most authority. The Tribunal found no legal support for this assertion, noting that the Jurisdictional Assistant Commissioner is competent to decide the classification, and the Commissioner is competent to decide the duty demand under the compounded levy scheme. The Tribunal found no duplication or re-determination of issues and upheld the proceedings as legally valid.Conclusion:The Tribunal dismissed the appeals, finding no merit in the appellant's contentions. The classification of the product as branded Chewing Tobacco was upheld, and the applicability of the compounded levy scheme and duty demands were confirmed. The Tribunal also found that the adjudicating authorities acted within their jurisdiction and there was no legal infirmity in the proceedings.