TaxTMI 
TaxTMI 
2024 (5) TMI 1147
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....co classified under HSN 2401 and Chapter Heading 24.01 of the Central Excise Tariff Act, 1985, the Appellants cleared them on payment of GST at the rate of 28% under Sr. No. 13 of Schedule IV of Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 and compensation cess @ 71% under Sr. No. 5 of Notification No. 01/2017-Compensation Cess (Rate) dated 28.06.2017. The present appeal does not pertain to these levies. With the introduction of GST regime from 01.07.2017, Basic Excise Duty (BED) on all tobacco products of Chapter 24 was exempted vide Sr. No. 1 of Notification No. 11/2017-CE dated 30.06.2017. Subsequently, relevant entry in Notification No. 11/2017-CE dated 30.06.2017 was omitted vide Notification No. 02/2019-CE dated 06.07.2019 and a fresh Notification No. 03/2019-CE dated 06.07.2019 was issued, prescribing different rates of BED for tobacco products of Chapter 24 from 06.07.2019 onwards. Relevant entries of this notification is reproduced below: Sl. No. Chapter or heading or sub-heading or tariff item Description of goods Rate (1) (2) (3) (4) 1. 2401 All Goods Nil .. ... .. ... ....
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....llants have the characteristics of cut leaves of tobacco. 1.2 As an outcome of the above investigation, the DGGI officers concluded that the Appellants are misclassifying the tobacco products cleared under the brand name 'Suresh Tamakhu', as 'Unmanufactured Tobacco' under CTH 2401. Whereas the correct classification of the aforesaid product is under CTH 2403 as 'Chewing Tobacco'. The present SCN dated 04.10.2022 was issued to the Appellants by invoking extended period of limitation wherein it was proposed to recover Basic Excise Duty ('BED') amounting to Rs.5,81,848/- for the period July 2019 to March 2022 and National Calamity Contingent Duty ('NCCD') amounting to Rs.3,11,60,125/- for the period between September 2017 to March 2022, along with applicable interest and penalty on the ground that the Appellants have mis-classified their product and consequently not discharged the applicable BED and NCCD. 1.3 It is alleged therein that the product in question is being used for chewing purposes and the same is also corroborated by the warning mentioned on the retail pack. It was also alleged that the process of procurement of raw material i.e. tobacco and then the process of pack....
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....ingredient, did not amount to manufacture and will be classified under 2401.00 of Central Tariff Act as unmanufactured tobacco. • VH Patel Tobacco Pvt. Ltd. v. CCE, Aurangabad, -1998 (2) TMI 359 • CCE v. Ravindra & Co.,-2000 (120) ELT 699 • CCE v. Ranchhoddar Zinabhai & Sons-1998 (104) E.L.T. 509 (T) • T.P.N.S. Chettiar Parvathi Vilas Tobacco & Cigars Co. v. CCE,-1989 (41) E.L.T. 79 • Ishwar Grinding Mills v. CCE Calcutta-I,-2000 (117) E.L.T. 743 (T) • Shrikant Prasad v. CCE Calcutta, -2000 (117) E.L.T. 345 • Borsad Tobacco Co. Pvt. Ltd. v. CCE, Ahmedabad, -2020 (372) ELT 156 • Collector of Central Excise, Pune v. Jaikisan Tobacco Co.,-1986 (23) ELT 184 • SB Sugar Mills v. Union of India,-1978 ELT (J336) • In re; India Tobacco Co. Ltd., -1981 (8) ELT 847 • CCE, Salem v. Muthuvelappa Gounder & Sons, -2010 (256) ELT 320 • Prakash Tobacco Limited v. Commissioner of Central Excise, Kanpur, -1999 (107) ELT 104 2.3 He submits that as per the undisputed process of packing, it is clear that the unmanufactured tobacco in cut form is r....
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....nder heading 2403. 2.6 He submits that in order to understand the scope of the term 'manufacture' used in relation to tobacco products, reference needs to be made to the decision in the case Shree Biswa Vijaya Industries v. CCE, Bhubaneshwar - 1997 (4) TMI 204. This judgment has been upheld by the Hon'ble Supreme Court reported at 1998 (104) ELT A136 (SC). He also placed reliance on the decision of this Tribunal in the case of Yogesh Associates Vs. CCE Surat-II- 2005 (9) TMI 173. 2.7 He further submits that the understating of the Learned Commissioner that since Note 3 to Chapter 24 provides that process of re-packing raw material of tobacco leaves from bulk packs to retails packs amounts to manufacture, the instant product involving preparation of a small retail pack, becomes manufactured tobacco classifiable under CTH 2403, is also devoid of logic and common sense. He submits that Chapter Note 3 creates a fiction only to charge Excise Duty pertain such case the product remained same except the process of labeling or re-packing from bulk to retail. Even in that case as per the deemed manufacturing since the product is unmanufactured tobacco the classification remain under CT....
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....ng classification of goods. Reliance is placed on following cases: : • Narmada Bio Chem Pvt. Ltd. Vs. C.C.E. & S.T. - Vadodara-I - 2019 (7) TMI 459 - CESTAT AHMEDABAD • CCE, Chandigarh Vs. Raja Forgings & Gears Ltd. - 2009 (233) ELT 404 (Tri. - Del.) Affirmed by Hon'ble Supreme Court in order reported at 2016 (337) ELT A42 (SC) • M/s. Novel Digital Electronics v. the Commissioner of Customs (Imports), Customs House, 2015 (4) TMI 347 - MADRAS HIGH COURT • Damodar J. Malpani Vs. Collector of Central Excise- 2002(146) ELT 483 (S.C.) 3. Shri Rajesh Nathan, Learned Assistant Commissioner (AR) appearing on behalf of the Revenue reiterates the findings of the impugned order. He submits that since, the product is nothing but chewing tobacco and the same clearly finds place in the Tariff entry under chapter CTH 2403, the correct classification is 2403 instead of 2401. Therefore, the demand was rightly confirmed. He placed reliance on the following judgments:- • Commissioner of C. Ex., Delhi Vs. Parveen Tobacco Co. (P) LTD.- 2013 (288) ELT 433 (Tri.-Del.) • Dharampal Premchand Ltd Vs. CCE Noida - 2019 TIOL 3490 ....
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....ame are packed as such in the retail packing for further distribution in the retail market. Therefore, the appellant has not under taken any activity on the unmanufactured tobacco. Moreover, not a single foreign ingredient is added to the dried tobacco leaves which is not under dispute as there is no such allegation in the show cause notice or in the impugned order. 4.1 It is also observed that the raw material as well as final product of the appellant were tested by Central Excise and Custom laboratory of Vadodara, the test reports are scanned below:- 4.2 From the comparison of test report in respect of raw material as well as the final product of the appellant, the nature of product remain exactly same except the packing in as much as the packing of raw material is in bulk and packing of final product is in retail pack. Therefore, the nature of raw material i.e. unmanufactured tobacco in cut leaves form remained as such even after repacking into retail pack. Consequently, the Chapter Heading of the product remained under 2401 which is also in respect of raw material in bulk form. Even if the chapter Note 3 of Chapter 24 is applied, after re-packing of the product it will re....
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....larly due to the reason that there is chapter Note 3 of chapter 24, the matter was examined by Central Board of Excise and Customs wherein vide circular No. 81/5/87-CX.3 dated 03.06.1997 the following clarification was issued :- "3. The Conference, after discussion, came around to the view that the only argument which could possibly be adduced in favour of classification of such products as 'Zarda' under the category of manufactured chewing tobacco would be that such products are found to have been marketed as 'Zarda', may not be enough to bring the product in the category of manufactured tobacco under Heading No. 248. The HSN description of unmanufactured tobacco under corresponding Heading No. 2401 is stated to cover unmanufactured tobacco in the form of whole plants or leaves in the natural state or as cured or fermented leaves, whole or stemmed or trimmed or untrimmed, broken or cut (including prices cut to shape) but not tobacco ready for smoking. 4. The Conference was, therefore, inclined to support the classification of the product in question under Heading No. 2401 in the category of unmanufactured tobacco. It was, however, noted by the Conference that nor....
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....lowed in the search of the appellants premises when jarda tobacco was seized. The department at the time of seizure had also drawn sample and sample was to be tested to ascertain whether chewing tobacco is manufactured tobacco Le processed containing lime and catechu or whether it is unmanufactured tobacco. The Chemical Examiner has reported on testing of the sample that the sample is in the form of bits of tobacco leaves packed in a paper pouch with printed label bearing brand name and no added ingredient could be detected. Another sample was in the form of bits of tobacco leaves with no added ingredients. The Chemical Examiner himself has drawn attention to the Board's circular dated 23-6-1987 referred to supra wherein the Board has clarified that jarda unmanufactured tobacco merely broken by beating and then served and packed in retail packets for consumption as chewing tobacco, which may be commonly known in the market as jarda would be appropriately classifiable under Heading No. 24.01 of CETA as un-manufactured tobacco. The test report as noted above made clear that the tobacco in question was containing only bits of tobacco without any ingredients and the test report wou....
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....ng 24.01 of CETA. 5. In the result, it is held that the tobacco in this case was correctly classifiable under Heading 24.01 as unmanufactured tobacco and in this view of the matter the impugned order is set aside and the appeal is allowed." B) In the case of Commissioner of Central Excise Kanpur Vs. Ravindra and company (supra) the Tribunal in the fact that Tobacco leaves even by processing of beating, crushing and seived and packing and sold under brand name "Hari Chhap", "Bandar Dholak Chhap" has been classified under CTH 2401 as unmanufactured tobacco and not under sub heading 2404.41. The case of the appellant is on much better footing on the ground that the appellant have procured the cut pieces of the tobacco and the same was re-packed as such for retail sale. Therefore, the appellant even have not carried out the process such as beating, crushing and seived of the tobacco leaves. Accordingly, the judgment of Ravindra and company (supra) directly support the case of the appellant. C) Similar issue has been considered in the case of Ranchhoddar Zinabhai and Sons (supra) by this Tribunal wherein it was held that labelling and re-labelling of unmanufac....
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....ime bar as part of the demand is under extended period. In this regard, we find that it is not the case that the appellant have not paid the duty at all. The appellant have already considered the activity as manufacture in terms of Central Excise Act and were paying duty. They were under bonafide belief that since their activity is only re-packing of unmanufactured tobacco, the goods is classifiable under CTH 2401. Since, appellant is registered unit paying excise duty and under going very stringent audit and periodical check from the department. Entire activity of the appellant were in the knowledge of the department. It is also undisputed that the appellant have been regularly filing their ER-1 return, wherein the classification of the product was declared under Chapter heading 2401. 4.9 It is the submission of the appellant that in the earlier period very same product was notified under Section 3A Central Excise Act, 1944 and accordingly was required to be assessed for duty of Excise on the basis of the provisions of chewing tobacco and unmanufactured tobacco packing machines (capacity Determination and collection of duty) Rules, 2010. In order to verify the declarations file....
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....facture under Central Excise in view of Chapter Note 3 of Chapter 24, however since in the present case the unmanufactured tobacco was repacked without any further process or without adding anything unlike lime added in the case of Parveen Tobacco Co. (P) LTD the fact of the present case is different from the fact of the Parveen Tobacco Co. (P) LTD. Accordingly, the decision of Parveen Tobacco Co. (P) LTD is clearly distinguished. 6. As per our above discussion and finding, the impugned order is not sustainable. Hence, the same is set aside. Appeal is allowed. (Pronounced in the open court on 15.05.2024) ============= Document 1 21 03/2021-22 dated 007 031-Loose raw material packed Detalls of the sample drain from the prese of M/s Bush Tabacco Co. 60% 1.1 Banelada House. Mene hand Crossing Berved. Anagdudarat 288540 Tes: Meino no. & Date Remarks Description of the product Panch 11 "Thrust in plastic sealed long Plastic led bage (04 act Panch 2: 119/21 Samples draw All+/2021 Manish Chandra Sinhal Senior Intelligence Offer, DOG, Vadodara Regional Unit Jatinkumar Patel Authorized Signatory, M/s Suresh toba....