Chewing tobacco classification prevails for processed retail tobacco, with compensation cess applied at the chewing tobacco rate.

A processed tobacco product sold as Kavi cut tobacco was treated as chewing tobacco under heading 2403 rather than unmanufactured tobacco under heading 2401 because the product was soaked, cut, dried and packed for direct retail chewing, taking it beyond mere curing or preservation. The specific tariff entry for chewing tobacco was held to prevail over the broader heading for unmanufactured tobacco. On that basis, the applicable compensation cess was aligned with the rate prescribed for chewing tobacco, including the rate applicable to chewing tobacco without a lime tube under the relevant notification.

---

---

Issues: (i) Whether the product manufactured and sold as Kavi cut tobacco was classifiable as unmanufactured tobacco under heading 2401 or as chewing tobacco under heading 2403; (ii) whether the applicable compensation cess was the rate prescribed for chewing tobacco.

Issue (i): Whether the product manufactured and sold as Kavi cut tobacco was classifiable as unmanufactured tobacco under heading 2401 or as chewing tobacco under heading 2403.

Analysis: The classification had to be determined under the Customs Tariff, as adopted for GST, with the HSN explanatory notes and tariff entries governing the interpretation. The product was procured as dried tobacco leaves, subjected to soaking in jaggery water, cut into small pieces, dried, and packed in retail pouches for direct chewing. The relevant notes to heading 2401 cover tobacco in natural state or as cured or fermented leaves, including tobacco cased with liquid mainly to prevent mould and drying, but not tobacco ready for smoking. The authority found that the applicant's process went beyond mere curing or preservation, and that the product was marketed and consumed as chewing tobacco. Heading 2403 contains a specific entry for chewing tobacco, and a specific entry must prevail over a residual or broader description.

Conclusion: The product was held to be classifiable under heading 2403 9910 as chewing tobacco, and not under heading 2401 as unmanufactured tobacco.

Issue (ii): Whether the applicable compensation cess was the rate prescribed for chewing tobacco.

Analysis: Once the product was classified as chewing tobacco under heading 2403 9910, the rate of compensation cess had to be taken from the notification prescribing the cess for chewing tobacco. The rate specified for chewing tobacco without lime tube under the relevant compensation cess notification was applied.

Conclusion: The applicable compensation cess was held to be 160%.

Final Conclusion: The ruling settled the classification dispute against the applicant and fixed the cess liability on the basis of chewing tobacco under the tariff entry specifically meant for that product.

Ratio Decidendi: Where a tobacco product is processed, packed for direct retail consumption, and answers the tariff description of chewing tobacco, it is to be classified under the specific chewing tobacco entry rather than as unmanufactured tobacco under heading 2401.

---