Unmanufactured tobacco classification confirmed for crushed tobacco powder used in gudakhu manufacture; duty demand failed.

Crushing tobacco leaves, stems, stalks and butts into powder for captive use in gudakhu manufacture did not change its character as unmanufactured tobacco. The Tribunal applied its earlier rulings and held that the product remained classifiable under Heading 2401.00, attracting nil rate of duty. It also clarified that the mere issuance of Notification No. 445/86-C.E. did not alter the tariff classification already determined. On that basis, the duty demand was not sustainable.

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Issues: Whether tobacco powder obtained by crushing tobacco leaves, stems, stalks and butts and used captively in the manufacture of gudakhu was classifiable as unmanufactured tobacco under Heading 2401.00 and therefore liable to nil rate of duty, and whether the issuance of an exemption notification altered that classification.

Analysis: The Tribunal followed its earlier decisions holding that the process of crushing tobacco leaves, stems, stalks and butts to make tobacco powder did not take the product out of the category of unmanufactured tobacco. On that reasoning, the product continued to fall under Heading 2401.00, which carried nil rate of duty. It was also held that the mere issuance of Notification No. 445/86-C.E. did not change the tariff classification already determined by the Tribunal.

Conclusion: The tobacco powder was correctly treated as unmanufactured tobacco classifiable under Heading 2401.00 and not subject to duty, so the demand was not sustainable.

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