Scented tobacco classified under CETH 2403 99 10 not CETH 2403 99 30, departmental appeals dismissed

CESTAT Allahabad dismissed departmental appeals regarding classification of chewing tobacco products. The tribunal held that scented tobacco falls under CETH 2403 99 10 rather than CETH 2403 99 30, following established precedent from CESTAT New Delhi. The SC had previously upheld a similar tribunal decision in favor of the assessee, settling the classification issue. Since the matter was conclusively determined by the SC, the departmental appeals lacked merit and were dismissed.

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Issues Involved:
Classification of the product as 'Chewing Tobacco' or 'Jarda Scented Tobacco' under specific headings.

Detailed Analysis:

1. Background and Facts: The dispute revolves around the classification of the product declared as 'Chewing Tobacco' by the Respondent under CETH: 2403 99 10 and as 'Jarda Scented Tobacco' CETH: 2403 99 30 as claimed by the Appellant Revenue. The Respondent's product, branded as "GOPAL Chewing Tobacco," has been in production for several decades under different manufacturers and licensing agreements.

2. Manufacturing Units and Notifications: The Respondent established manufacturing units under the Compound Levy Scheme for duty payment. In 2015, the government amended the Capacity Determination Rules, introducing separate duty calculation tables for 'Chewing Tobacco' and 'Jarda Scented Tobacco.' The Respondent initially classified its product as 'Chewing Tobacco' based on the new rules.

3. Show Cause Notice and Adjudication: The Department issued a Show Cause Notice alleging that the product should be classified as 'Jarda Scented Tobacco.' The Commissioner adjudicated both notices, classifying the product as 'Chewing Tobacco' under CETH 2403 99 10. The Department appealed this decision before the Tribunal.

4. Basis of Classification: The Commissioner classified the product as 'Chewing Tobacco' considering various factors: the historical declaration of the product by the Respondent, the product's long-standing presence in the market, lack of conclusive evidence from CRCL Test Report, and a precedent where a similar product was classified as 'Chewing Tobacco' by a larger bench of the Tribunal.

5. Legal Arguments: The Department argued that the ongoing classification matter before the Supreme Court should prevent the dropping of the demand by the Adjudicating Authority. However, the Respondent highlighted that the Supreme Court had already dismissed a similar appeal by the Commissioner, upholding the Tribunal's decision regarding the classification of 'Chewing Tobacco.'

6. Tribunal Decision: After considering the arguments and reviewing the appeal records, the Tribunal found that the issue was no longer open to debate. Referring to a previous Tribunal order upheld by the Supreme Court, the Tribunal dismissed the Department's appeals, stating that the burden of proof for classification lies with the Revenue, and in this case, no evidence supported reclassification.

7. Final Verdict: The Tribunal, relying on the settled legal principles and the Supreme Court's decision in favor of the Respondent, dismissed the Department's appeals. The matter was pronounced in open court on 27.06.2024.

This detailed analysis outlines the key aspects of the judgment, including the factual background, legal arguments, basis of classification, and the final decision of the Tribunal in favor of the Respondent.

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