TaxTMI 
TaxTMI 
2020 (7) TMI 108
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....am, Thanjavur, 613007, are registered 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....
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....s chewing tobacco, when the end use is applicable equally to two 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....
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....bacco" for manufacture and sale of both manufactured and unmanufactured chewing tobacco products. Before the GST regime, 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 s....
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....ry form of tobacco products and packed through mechanized operations. The intention of the Govt. is being the levy of differential rate of duty for varieties of tobacco manufacturers; Machine (SME sectors) vs Manual (Village 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 Unmanufa....
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....M/s. Sringeri Yogis Pai = 2019 (10) TMI 1015 - AUTHORITY FOR ADVANCE RULING, KARNATAKA; Kerala Authority for Advance Ruling in the case of M/s. Govind Traders = 2019 (4) TMI 74 - AUTHORITY FOR ADVANCE RULINGS, KERALA and Delhi Authority for Advance Ruling in the case of Shri. Shalesh Kumar Singh = 2018 (5) TMI 529 - AUTHORITY 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 cla....
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....ect verification. 5. We have carefully examined the submissions of the applicant, the comments furnished by the Jurisdictional Officer and the related statutory provisions. The issue raised by the applicant is the classification of the product manufactured by them and the applicable Rate of Compensation cess. 6.1 The applicant is a proprietary concern engaged in the manufacture and supply of tobacco products 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 applic....
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....The size and shape of the leaves differ from one variety to another. The harvesting method and curing process depend on the variety (type) of tobacco. The plant may be cut whole, at average maturity (stalk cutting), or the leaves may be picked separately. according to their state of maturity (priming). Thus, tobacco may be cured either as whole plants (on the stalk) or as separate leaves. The various methods of curing are sun curing (in the open air), air curing (in closed 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 loos....
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....leaves are bulked for 3-4 weeks and than given salt water/jaggery treatment prior to sale. It is seen from the above that chewing tobacco is the tobacco which has been cured by smoking, stored and given jaggery water / salt water treatment. This is similar to the process described by the applicant in his production process. The product is universally known as Chewing Tobacco as acknowledged by the ICAR-CTRI Central Tobacco Research Institute. The final product sold by the applicant are in retail packets of 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 whol....
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....The applicant's argument for classifying the product under CTH 2401 is based on the HSN Chapter Notes for Heading 2401. The applicants are of the view their process involves two activities that are referred to in the above notes, namely, (i) liquoring (soaking in jaggery water); and (ii) cutting (mincing into fine pieces) and therefore covered under this heading. On a 2403 OTHER MANUFACTURED TOBACCO AND MANUFACTURED TOBACCO SUBSTITUTES; "HOMOGENISED" OR "RECONSTITUTED" TOBACCO; TOBACCO EXTRACTS AND ESSENCES - Smoking tobacco, whether or not containing tobacco substitutes in any proportion : 240311 -- Water pipe tobacco specified in Sub-heading Note to this 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 ....
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.... 2403.99 - - Other This heading covers (3) Smoking tobacco, whether or not containing tobacco substitutes in any proportion, for example, manufactured tobacco for use in pipes or for making cigarettes. (2) Chewing tobacco, usually highly fermented and liquored. As per the Explanatory notes, 'Chewing tobacco' falls under CTH 2403. It is seen from the information available on ICAR- CTRL Central Tobacco Research Institute website above that chewing tobacco is the tobacco which has been cured by smoking, stored and given jaggery water / salt water treatment. This is similar to the process described by the applicant in his production process. The product is universally known as Chewing Tobacco as acknowledged by the applicant. The final product sold by the applicant are in retail packets 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....
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....ised is classification of chewing tobacco, the Hon'ble Supreme Court has remanded the case and the final classification is not spelt out and therefore has no application. 6.7 Further, the decision of the Madras High Court (Madurai Bench) said to squarely cover the issue at hand and relied upon by the applicant was perused. In the said case, the core issue involved whether purchasing minced tobacco in bulk quantity and re-packing the same with added flavour in small packs involve manufacturing process or not and the Hon'ble Court has held that there is no manufacturing process involved in the activities of the petitioners, in that case. As discussed in para supra, the product in hand has undergone processing other than that specified for the one to be classified under CTH 2401 and are also not used for further manufacture to merit classification under CTH 2401; is marketed as 'Chewing Tobacco' for the chewing needs of the customers; chewing tobacco finds a specific entry in the customs Tariff and specific entry is to be preferred; therefore we hold that the ratio of the judgment of the Hon'ble High Court of Madras(Madurai Bench) relied upon by the applicant do not find applic....