2000 (6) TMI 70 - AT - Central Excise

Tribunal Upholds Nil Duty Classification for Tobacco Products

COMMISSIONER OF CENTRAL EXCISE, KANPUR Versus RAVINDRA & COMPANY

COMMISSIONER OF CENTRAL EXCISE, KANPUR Versus RAVINDRA & COMPANY - 2000 (120) E.L.T. 699 (Tribunal) Issues Involved:1. Classification of tobacco products 'Hari Chhap and Bandar Dholak Chhap'.2. Validity of duty demands based on classification.3. Relevance of test reports for classification.Summary:Issue 1: Classification of Tobacco ProductsThe central issue in these appeals is whether the tobacco products branded as 'Hari Chhap and Bandar Dholak Chhap' should be classified under sub-heading 2401.00 (unmanufactured tobacco) or sub-heading 2404.41 (manufactured tobacco) of the Central Excise Tariff Act (CETA). The respondents classified their products under sub-heading 2401.00, which carried a nil rate of duty. The Assistant Commissioner initially accepted this classification but later reclassified the products under sub-heading 2404.41, which was contested by the respondents. The Commissioner (Appeals) reversed the Assistant Commissioner's orders, classifying the products under sub-heading 2401.00, which led to the Revenue filing these appeals.Issue 2: Validity of Duty DemandsThe Assistant Commissioner issued show cause notices and confirmed duty demands based on the classification under sub-heading 2404.41. However, the Commissioner (Appeals) reversed these orders, classifying the products under sub-heading 2401.00, which carried a nil rate of duty. The Tribunal upheld the Commissioner (Appeals)'s decision, stating that the process adopted by the respondents (beating, crushing, and sieving tobacco leaves without adding any foreign material) did not amount to manufacturing. Therefore, the products should be classified as unmanufactured tobacco under sub-heading 2401.00.Issue 3: Relevance of Test ReportsThe Revenue argued that the classification issue was already decided in their favor by an earlier order based on a test report from 1990, which indicated the presence of an odour other than tobacco. However, the Tribunal noted that this report was only relevant for the specific lots from which the samples were drawn. Subsequent test reports from samples taken during the period in question (1994) showed no foreign ingredients, supporting the classification under sub-heading 2401.00. The Tribunal emphasized that test reports are only operative until new samples are drawn, and the latest reports indicated the tobacco was unmanufactured.Conclusion:The Tribunal dismissed the Revenue's appeals, affirming the Commissioner (Appeals)'s orders classifying the tobacco products under sub-heading 2401.00 of the CETA as unmanufactured tobacco, which carried a nil rate of duty. The Tribunal found no merit in the Revenue's arguments and upheld the classification based on the latest test reports and consistent legal precedents.