TaxTMI 
TaxTMI 
2020 (7) TMI 108
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....red under GST Act with Registration No. 33AABPA9979P3Z2. The applicant has sought advance ruling on the "Classification of the product intended for manufacture and applicable rate of Compensation Cess." The applicant has submitted the copy of application in Form GST ARA - 01 and also submitted copy of Challan evidencing payment of application fees of Rs. 5,000/- each under sub-rule (1) of Rule 104 of CGST rules 2017 and TNSGST Rules 2017. 2.1 The applicant has stated that after introduction of compensation cess which varies for different products, it had become imperative to go into the nuances of the actual nature of the product before determining the correct classification; during the pre GST period the tax structure on chewing tobacco that was packed manually did not pose much problem in the marketing side as the tariff description was simply chewing tobacco and the variation in the tax structure was solely on the basis of machine packed chewing tobacco with or without lime tube. However in the GST Period after introduction of compensation cess department has gone to the conclusion that even manually packed chewing tobacco without lime tube is classifiable only under chapter....
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.... different varieties of the same product. The term "Chewing tobacco" has not been explicitly defined in the Tariff. Chapter notes to Chapter 2403 states that it covers chewing tobacco usually highly fermented and liquored. Raw tobacco as such is also consumed by chewing without addition of any other material thereto. Raw unpacked tobacco is purchased from vendors by the consumers and is consumed for chewing without any additives and at times in admixture with lime and other additives. The mixing of lime and tobacco is done by the individual consumer at the point of consumption and yet the raw tobacco un-mixed with any additives qualifies to be a chewing tobacco. Their product which is raw chewing tobacco without any additives catering to the demands of such consumers would therefore, qualify to be unmanufactured tobacco. * Considering the technical details of the processes referred to in the chapter notes, the activities fermentation and liquoring finds a place in both headings 2401 as well as in 2403. The only difference noted is that of the usage of the phrase "Highly". The conclusion to be arrived at is whether the liquoring activity of adding jaggery water in their product is....
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....egime, they were manufacturing tobacco products with application of flavoring agents for chewing tobacco in the trade name of "Kulavi Tobacco Industries". * As the product of chewing tobacco is under the regulation of FSSA and COPTA, the State Government of Tamil Nadu issue periodical yearly notification enforcing manufacture and sale of tobacco products. * Accordingly, the Govt. had issued notification on 23rd May 2017, banning the product of chewing tobacco with scented flavors along with the product of pan masala and gutkha. As a result of which the manufacturers and traders in Tamil Nadu had to restrict their trade of tobacco products by completely eliminating the chewing tobacco with flavoring contents. * As the result of chewing tobacco notification by TN FSSA and coupled with GST compensation cess notification No. 1/2017(bifurcating the chewing tobacco products under the umbrella of two categories such as "tobacco with lime tube and tobacco without lime tube") in the GST regime, the GST compensation cess for the product of scented chewing tobacco (HSN 2403) is , comparatively high than that of unmanufactured chewing tobacco (I-ISN 2401), they were forced to close down ....
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....and Cottage industries). The central Excise duty for manual pack of tobacco products were levied comparatively lesser rate under Section 3 of Central Excise Act than that of machine pack of tobacco products levied under section 3A of Central Excise Act. * The GST Act being comprising of various Indirect tax Acts and the Central Excise Act one among it, the provisions of the C.E. Tariff are being copied in fixing the GST rate. Further in the 14th GST Council Meeting, it is being categorically mentioned by the GST officials that the existing central excise tariff are being followed in fixing up the GST Compensation cess rate for tobacco products * In GST there is no difference between the rate of duty for all forms of tobacco products either being Unmanufactured or Manufactured (all are subjected to 28% GST) and it is only at the levy of compensation cess, it has been differentiated * Since their product being Plain Unmanufactured tobacco (Wet form of nattu tobacco) and the concept of application of lime tube along with tobacco packets for manufacture and sale is not in usage as per the customs of trade and trade parlances, GST council has not determined any GST compensation ce....
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....Y FOR ADVANCE RULING - DELHI. 4.1 The applicant is under the administrative jurisdiction of Central Tax Authorities. The Commissioner of GST & Central Excise, Tiruchirapalli, the jurisdictional authority furnished the following: * In respect shri. Arumugam (M/s Kavi Cut Tobacco), correspondences have been made calling for particulars. However, as they claimed that effective from January 2018, they have changed their final products from chewing tobacco to 'preparations containing chewing tobacco' classifiable under heading 24039920, which contains various other ingredients like, lime, chilly, kasikatti, arisithippili, clove oil and menthol etc. the facts are being verified at this office. Now, as reported by the applicant, w.e.f. from November 2018, they have started manufacturing and clearing the preparation as mentioned in the AR application classifying the same under 24012090. * It is also informed that (i) the taxpayer vide letter dated Nil received on 12.11.2018, stated that they had supplied branded chewing tobacco classifying it under Chapter sub-heading 24039910 paying GST Compensation Cess @ 160% in terms of Notification No.1/2017-Compensatin Cess (Rate) New Delhi da....
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....oducts with the brand name "Kavi cut tobacco". From the submissions of the applicant, it is seen that the applicant during the financial year 2018-19, has commenced manufacture of chewing tobacco without application of flavoring agents namely "unmanufactured chewing tobacco" in order to comply with the Tamil Nadu State Food Safety Authorities. The manufacturing process of the applicant as elaborated in their application is that (i) they procure dried tobacco leaves; (ii) remove stems and dust particles; (iii) cure the same in jaggery water; (iv) the cured leaves are cut into small pieces in cutting machine; and (v) then the cut tobacco is packed in small pouches for the purpose of retail sale in the shops. 6.2 Under GST, the applicable rates of CGST are notified by Notification No. 01/2017-C.T.(Rate) dated 28.06.2017 and in terms of explanation (iii) and (iv) to the said Notification, (iii) "Tariff item", "sub-heading" "heading" and "Chapter" shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975). (iv) The rules for the interpretation of the First Schedule to the Cust....
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....losed sheds. with free circulation of air), flue curing (in hot air flues), or fire curing (with open fires) Before packing for shipment. the dried leaves are treated in order to ensure their preservation This may be done by controlled natural fermentation (Java, Sumatra. Havana, Brazil, Orient, etc.) or by artificial re-drying. This treatment, and the curing, affect the flavour and aroma of tobacco, which undergoes spontaneous ageing after packing. Tobacco so treated is packed in bundles, bales (of various shapes). in hogsheads or in crates. When so packed, the leaves are either aligned (Orient) or tied in hands (several leaves tied together with a band or with another tobacco leaf), or simply left as loose leaves. They are always tightly compressed in order to ensure preservation. in some cases, in addition to (or instead of) fermentation, flavouring or moistening substances are added (casing) in order to improve the aroma or keeping qualities. This Chapter covers not only unmanufactured and manufactured tobacco but also manufactured tobacco substitutes which do not contain tobacco. It is seen that curing is a process of drying of the harvested leaves through various methods....
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....up to 20 grins with brand name of the applicant. The purpose of the product is for the buyer to use it directly for chewing purpose. Therefore, it is seen that the product of the applicant is 'Chewing Tobacco' as universally understood and as it is being supplied. 6.4. The Customs Tariff Classification in respect of chapter 2401 are reproduced below for reference 24.01 - Unmanufactured tobacco; tobacco refuse. 2401.10 - Tobacco, not stemmed/stripped 2401.20 - Tobacco, partly or wholly stemmed/stripped 2401.30 - Tobacco refuse This heading covers : (1) Unmanufactured tobacco in the form of whole plants or leaves in the natural state or as cured or fermented leaves, whole or stemmed/stripped, trimmed or untrimmed, broken or cut (including pieces cut to shape, but not tobacco ready for smoking). Tobacco leaves, blended, stemmed/stripped and "cased" ("sauced" or "liquored") with a liquid of appropriate composition mainly in order to prevent mould and drying and also to preserve the flavour arc also covered in this heading. 2401 UNMANUFACTURED TOBACCO; TOBACCO REFUSE 240110 - Tobacco , not stemmed or stripped : 240110....
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....is Chapter: 24031110 --- Hookah or gudaku tobacco 24031190 --- Other 240319 -- Other: 24031910 --- Smoking mixtures for pipes and cigarettes --- Biris: 24031921 ---- Other than paper rolled bins, manufactured without the aid of machine 24031929 ---- Other 24031990 --- Other - Other: 24039100 -- "Homogenised" or "reconstituted " tobacco 240399 -- Other : 24039910 --- Chewing tobacco 24039920 --- Preparations containing chewing tobacco 24039930 --- Jarda scented tobacco 24039940 --- Snuff 24039950 --- Preparations containing snuff 24039960 --- Tobacco extracts and essence 24039970 --- Cut -tobacco 24039990 --- Other fine reading of the above, it is evident that the cutting process prescribed in this note is along with the remarks 'but not tobacco ready for smoking'. This explanation of HSN clearly brings out the classification in the Customs tariff at 240120, which covers tobacco products for further manufacture and not for consumption as such as in the case of the applicant. From the explanation given by ICAR-CTRI Central Tobacco Research Institute and Explanatory General notes to chapter 24, it is seen that o....
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....of up to 20 gms with brand name of the applicant. The purpose of the product is for the buyer to use it directly for chewing purpose. Hence, the product in question is 'Chewing tobacco'. The applicant relying on the Explanatory HSN, has stated that Chewing tobacco covered under 2403 is to highly fermented and liquored and theirs done only to a small extent. The notes above states that the heading covers 'Chewing tobacco, usually highly fermented and liquored'. It doesn't exclude the chewing tobacco which is not highly fermented and liquored. In other words, the degree of fermentation or liquoring is not the deciding factor to determine whether the product is "Chewing Tobacco" or not. Thus, going by the Explanation in HSN and the Customs Tariff Headings, it is evident that chewing tobacco supplied for consumption as 'chewing tobacco' merits to be classified under the specific heading under CTH 24039910. The product in question is a processed one in as much as the same is cured in jaggery water, undergoes the process of stalking and semi-drying, then cut into small pieces in minced form which is stored in a separate area for a few hours/days on which some natural/agricultural prese....