1994 (2) TMI 157 - AT - Central Excise

Goods classified under sub-heading 2404.60 as tobacco preparation containing snuff upheld on appeal

The Tribunal held that the goods manufactured by the appellants are classifiable under sub-heading 2404.60 as a preparation containing snuff of tobacco. ... Manufacture Issues Involved:1. Classification of goods manufactured by the appellants under sub-heading 2404.50 or 2404.60 of the Central Excise Tariff Act, 1985.2. Validity of the demand for duty based on the reclassification.3. Power of Assistant Collector to review and modify approved classification lists retrospectively.Issue 1: Classification of GoodsThe primary issue is whether the product manufactured by the appellants should be classified under sub-heading 2404.50 (snuff of tobacco) or under sub-heading 2404.60 (preparations containing snuff of tobacco). The appellants argued that their product, which undergoes various processes including curing, sieving, and the addition of flavouring substances and menthol, should be classified under sub-heading 2404.60. They contended that the final product is different from the starting material (snuff of tobacco) and has a distinct brand name, making it a preparation containing snuff of tobacco.The Assistant Collector, however, classified the product under sub-heading 2404.50, arguing that the product remains 100% snuff of tobacco despite the processes it undergoes. The Collector (Appeals) upheld this classification, leading to the present appeals.Issue 2: Validity of Demand for DutyThe appellants contended that the Show Cause Notice issued by the Assistant Collector did not provide reasons for changing the classification from 2404.60 to 2404.50. They argued that the Assistant Collector's reliance on conclusions from the Collectors' Conference, which were not mentioned in the Show Cause Notice, was bad in law. The Assistant Collector's order was challenged on the grounds that it confirmed the demand for duty based on reasons not contained in the Show Cause Notice.Issue 3: Power of Assistant Collector to Review and Modify Approved Classification Lists RetrospectivelyThe appellants argued that an approved classification list could only be modified prospectively, relying on case law such as Chandra's Chemical Industries v. Collector of Central Excise. The Assistant Collector, however, modified the classification list retrospectively, leading to a demand for duty for the back period of six months under Section 11A of the Central Excises & Salt Act.Detailed Analysis:Classification of Goods:The Tribunal had differing opinions on this issue. One Member (Technical) held that the product remains snuff of tobacco under sub-heading 2404.50, as the essential character of the product does not change despite the addition of flavouring agents and menthol. The Member (Judicial), however, opined that the product should be classified under sub-heading 2404.60, as the processes it undergoes result in a commercially different product known to the trade as a preparation containing snuff of tobacco.The Vice President, acting as the third Member, agreed with the Member (Judicial), emphasizing that the processing and addition of flavours convert raw snuff into a new product marketed as a preparation of snuff. The Vice President noted that the introduction of sub-heading 2404.60 in the Tariff recognizes the difference between snuff of tobacco and preparations containing snuff of tobacco.Validity of Demand for Duty:The Tribunal found that the Assistant Collector's order was within the scope of the Show Cause Notice, which proposed changing the classification of the goods. The reference to conclusions from the Collectors' Conference was considered supportive reasoning rather than the sole basis for the decision. The Tribunal upheld the demand for duty for the back period of six months under Section 11A of the Central Excises & Salt Act, citing case law that allows for such modification and demand.Power of Assistant Collector to Review and Modify Approved Classification Lists Retrospectively:The Tribunal referred to several case laws that established the authority of the Assistant Collector to modify approved classification lists retrospectively and demand duty for the back period of six months. The Tribunal found no reason to interfere with the lower authorities' orders on this issue.Conclusion:In view of the majority opinion, the Tribunal held that the goods manufactured by the appellants are classifiable under sub-heading 2404.60 as a preparation containing snuff of tobacco. The appeal was allowed, and the classification under sub-heading 2404.60 was upheld.