Tobacco classification and limitation: repacking alone does not move unmanufactured tobacco out of Heading 2401, and no extended period without suppression.

Mere repacking of dried cut tobacco leaves into retail pouches, without addition of foreign ingredients or conversion into manufactured tobacco, does not change classification from Heading 2401 to Heading 2403; the goods remain unmanufactured tobacco. The notes emphasise that breaking, sieving, labelling or repacking for retail sale is insufficient to shift the product out of Heading 2401 when its essential character remains unchanged. On limitation, where the unit is registered, returns are regularly filed, and the activity is within departmental knowledge through audits and checks, suppression, fraud or wilful misstatement is not established and the extended period cannot be invoked.

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Issues: (i) Whether the tobacco product repacked in retail pouches was classifiable under Chapter Heading 2401 as unmanufactured tobacco or under Chapter Heading 2403 as chewing tobacco; (ii) Whether the demand was barred by limitation and the extended period could be invoked.

Issue (i): Whether the tobacco product repacked in retail pouches was classifiable under Chapter Heading 2401 as unmanufactured tobacco or under Chapter Heading 2403 as chewing tobacco.

Analysis: The product consisted of dried cut tobacco leaves received in bulk and repacked into small retail pouches without any foreign ingredient being added. The nature of the goods remained the same before and after repacking, and laboratory reports supported that the raw material and finished product were essentially the same except for packing. Chapter 24 and its explanatory notes were read to mean that unmanufactured tobacco in the form of cut leaves continues to fall under Heading 2401 unless it is converted into manufactured tobacco. Chapter Note 3 did not alter the basic classification in the facts of the case. The cited circulars and earlier decisions supported the view that mere breaking, sieving, labelling, or repacking of unmanufactured tobacco for retail sale does not take it out of Heading 2401.

Conclusion: The product was correctly classifiable under Chapter Heading 2401 as unmanufactured tobacco, and not under Chapter Heading 2403.

Issue (ii): Whether the demand was barred by limitation and the extended period could be invoked.

Analysis: The assessee was a registered unit, had been regularly filing returns, and the activity of repacking and the declared classification were within the department's knowledge through audits and periodic checks. On these facts, no suppression, fraud, or wilful misstatement was established. Since the classification issue was openly reflected in the assessee's records and departmental supervision had already covered the activity, the ingredients required for invoking the extended period were absent.

Conclusion: The extended period of limitation was not invocable, and the demand was time-barred to that extent.

Final Conclusion: The impugned order could not be sustained either on merits or on limitation, and the demand of duty with consequential relief stood set aside in full.

Ratio Decidendi: Mere repacking of unmanufactured tobacco into retail pouches, without addition of foreign ingredients or conversion into a manufactured product, does not change its classification from Heading 2401; and where the department is already aware of the activity and returns are duly filed, the extended period cannot be invoked absent suppression or wilful misstatement.

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