Tobacco powder not manufacturing process under Tariff Heading 24.04. Revenue burden to prove levy duty.

The Tribunal held that crushing unmanufactured tobacco into powder does not constitute a manufacturing process under Tariff Heading 24.04. As the process did not involve specified manufacturing processes and the powder was not known in the market as manufactured tobacco, the burden of proof to levy duty under Tariff Heading 24.04 lay with the Revenue. Relying on precedent, the Tribunal ruled in favor of the appellant, classifying the tobacco powder under Tariff Heading 2401.00 with a nil duty rate. The appeal was allowed in favor of the appellant, granting appropriate relief.

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Issues involved: Determination of the liability to duty under Chapter 24 of the Central Excise Tariff Act, 1985 for tobacco powder obtained through crushing of tobacco leaves, stems, stalks, and butts.

Summary:

Issue 1: Classification of Tobacco Powder
The question at hand was whether the tobacco powder obtained from crushing tobacco falls under Tariff Heading 2401.00 as unmanufactured tobacco with nil duty rate or under Tariff Heading 2404.90 as manufactured tobacco with a 15% duty rate. The appellant argued for the former classification, while the lower authorities contended for the latter.

Issue 2: Interpretation of "Manufacture"
The appellant claimed that the process of producing tobacco powder does not amount to a new manufacture but is merely a change in form from one unmanufactured tobacco form to another. On the contrary, the lower authorities argued that the process transforms the tobacco into a new product suitable for use in the industry, thus constituting a new manufacture under Tariff Heading 2404.90.

Judgment:
The Tribunal analyzed the definitions of "manufacture" under the Central Excise Act, 1944 and specific to tobacco. It was held that the mere crushing/grinding of unmanufactured tobacco into powder does not qualify as a manufacturing process under Tariff Heading 24.04. Since none of the specified manufacturing processes for tobacco were involved, and there was no evidence that the tobacco powder was known in the market as a manufactured tobacco, the burden of proof lay with the Revenue to levy duty under Tariff Heading 24.04. Referring to a relevant precedent, the Tribunal ruled in favor of the appellant, concluding that the tobacco powder fell under Tariff Heading 2401.00 as manufactured tobacco with a nil duty rate. Consequently, the appeal was allowed in favor of the appellant with appropriate relief granted.

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