TaxTMI 
TaxTMI 
2025 (1) TMI 200
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.....2020. The petitioners in W.P.(MD)No.13023 of 2020 and W.P.(MD)No.12813 of 2021 have challenged the Orders-in- Originals, dated 30.03.2020 and 30.04.2020, respectively. 2. The dispute in these cases arise primarily relate to the classification of "chewing tobacco" marketed by the respective petitioners. The respective petitioners have challenged the following Orders-in- Originals:- Table-1 W.P.(MD)Nos. Date Order-in- Original No. Period Amount 10565 of 2020 31.03.2020 01/2020- GST July 2017-March 2019 Rs. 1,05,60,362/- 12626 of 2020 31.03.2020 03/2020- GST -do- Rs. 9,35,616 /- 12689 of 2020 31.03.2020 05/2020- GST -do- Rs. 2,56,642/- 12724 of 2020 31.03.2020 06/2020- GST -do- Rs. 5,61,498 /- 12835 of 2020 31.03.2020 02/2020- GST -do- Rs. 36,04,199/- 15533 of 2020 31.03.2020 04/2020- GST -do- Rs. 79,19,845 /- 5414 of 2021 31.03.2020 08/2020- GST -do- Rs. 1,94,730/- 13023 of 2020 30.03.2020 1/2020-GST -do- Rs. 2,90,61,088/- 12813 of 2021 30.04.2020 02/2020- GST -do- Rs. 5,52,90,163/- 3. By these Orders, Demand and Levy of Compe....
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....is demanding higher compensation cess leviable under the Goods and Service Tax (Compensation to States) Act, 2017 at 160% at Serial No.26 to Notification No.1/2017 - Compensation Cess (Rate), dated 28.06.2017, whereas, according to the petitioner the correct Compensation Cess to be paid by the respective petitioners is 71% at Serial No.5 for the products falling under the heading ''2401''. 12. On the other hand, rest of the petitioners, who have challenged the respective Order-in-Originals would submit that the product dealt by these petitioners are "manufactured products" and are however liable to be classified under Heading 2403 99 90 of the Customs Tariff Act, 1975. The Department on the other hand had classified the product under 2403 99 10 of the Customs Tariff Act, 1975. 13. Mr. R.Sivaraman, the learned counsel for the petitioners in W.P. (MD) Nos.12689, 10565, 12626, 12724, 12813, 12835, 13023 & 15533 of 2020 and 5414 of 2021 who have challenged respective Order-in-Originals, submitted that these petitioners had adopted classification of the product under the Heading ''2403 99 90'', whereas, the Department has wrongly classified the prod....
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....AS, it is expedient to prohibit Gutkha and Panmasala in the State of Tamil Nadu, being food products in which tobacco and nicotine are widely used as ingredients; AND WHEREAS Chewing Tobacco is processed by the manufactures along with the eatables and the same is meant for chewing purpose and the said product is supposed to be used by keeping it inside the mouth and chewing it. The act of chewing ensures that chemicals go in to the saliva and becomes part of the human digest system, the said food article if consumed will endanger human health and well-being and whereas if consumption of these food articles is allowed with out prohibition the well-being of current and future generations will be compromised and hence it is to be prohibited. NOW, THEREFORE, in exercise of the powers conferred by clause (a) of sub-section (2) of section 30 of the Food Safety and Standards Act, 2006 (Central Act 34 of 2006), the Commissioner of Food Safety of the State of Tamil Nadu, in the interest of public health, hereby prohibits the manufacture, storage, transport, distribution or sale of Gutkha, Panmasala, Chewing Tobacco and any other food products containing tobacco or nicotine....
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...., 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 are also covered in this heading. Tobacco refuse, e.g., waste resulting from the manipulation of tobacco leaves, or from the manufacture of tobacco products (stalks, stems, midribs, trimmings, dust, etc.)." 22. It is submitted that the tobacco leaves are procured from farmers and are poured into a slurry of jaggery water, cured and packed. Therefore, it is submitted, that simple activity carried out by these respective petitioners do not amount to manufacture to merit classification under Head 2403 of Custom Tariff Act, 1975 in the hands of these petitioners. 23. It is further submitted that the Circular/Notification, dated 23.05.2017, issued by the Commissioner of Food Safety under the provisions of the Food Safety and Standards Act, 2006 was subject matter of a challenge before this Court in W.P.(MD)No.18115 of 2021 etc. batch [E.S.Mydeen and Co., Rep. by its Managing Partner E.S.M.P.Kaleel, Kumbakonam vs. The Designated Officer (Thanjavur District), Tamil Nadu Food Safety an....
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....od for the purposes of this Act having regards to its use, nature, substance or quality;'' Regulation 2.3.4 of Food Safety and Standards (Prohibition and Restrictions on Sales) Regulations 2011 is as follows:- ''2.3.4 : PRODUCT NOT TO CONTAIN ANY SUBSTANCE WHICH MAY BE INJURIOUS TO HEALTH Tobacco and nicotine shall not be used as ingredients in any food products.'' 8. The only question that arises for consideration is whether conjoint reading of the aforesaid provisions as applied to the factual matrix can trigger the jurisdiction of the respondent authorities under the aforesaid Act. I am more than satisfied that the products dealt with by the petitioners herein would fall within the definition of the term 'food' under Section 3(1)(j) of the Act. Even a chewing gum is also included within the concept of the said definition. Therefore, the applicability of Section 3(1) (j) of the Act to the item on hand is not in doubt. If the petitioners have used tobacco or Nicotine as an ingredient in any food product, certainly Regulation 2.3.4 of the Regulations would directly come into play. But in this case, the tobacco leaf....
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....uoting the scripture or pot calling the kettle black. I am not rejecting this contention on the ground of whataboutery. Nicotine is inherent in tobacco and its content in the tobacco leaf has not gone up on account of spraying of jaggery water. Regulation 2.3.4 only mandates that tobacco and nicotine shall not be used as ingredients in any food products. Since the petitioners are dealing only with unmanufactured tobacco, they have not breached any of the statutory provisions. 12. In this view of the matter, the impugned orders and notices are quashed. The writ petitions are allowed. No costs. Consequently, connected miscellaneous petitions are closed.'' 25. I have considered the submissions made by the learned counsel for both sides. 26. The dispute in these cases relate to payment of Compensation Cess under Notification No.1/2017- Compensation Cess (Rate), dated 28.06.2017 issued under sub-Section (2) to Section 8 of the Goods and Services Tax (Compensation to States) Act, 2017. 27. Under Notification No.1/2017 - Central Tax (Rate), dated 28.06.2017, the classification ''Tariff item'', ''sub-heading'', ''heading'....
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....titioners and the classification imposed by the Department for the purpose of payment of Compensation Cess are tabulated below:- Table-6 S.No. Classification W.P.(MD) No.204 of 2021 petitioners other than W.P.(MD) No.204 of 2021 Classification adapted by the Department 1. Classification Prior to GST- under CET Act, 1985 2403 99 10 2403 99 10 2403 99 10 Description Chewing tobacco Chewing tobacco 2. Classification from July 2017 Not available 2403 99 90 @ 96% at Sl.No.37 * 2403 99 10 @ 160% at Sl.No.26 Description - All goods, other than Pan Masala containing tobacco 'gutkha', bearing a brand name 2403 99 10 Chewing tobacco without lime 3. Classification from Jan 2018 to May 2018 under GST 2403 99 10 @160% at Sl.No. 26* 2403 99 10 @ 160% at Sl.No.26 Description Chewing tobacco without lime 4. Classification from June 2018- Oct 2018 2403 99 20 @72% at Sl.No. 25* 2403 99 10 @ 160% at Sl.No.26 Description Preparations containing chewing Tobacco 5. Classification Adopt....
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....mpensation Cess under Notification No.1/2017 Compensation Cess (Rate) 28.06.2017 issued under Section sub-Section (2) of Section 8 of the Goods and Services Tax (compensation to States) Act, 2017. 38. The petitioners other than the petitioner in W.P.(MD)No.204 of 2021 have an alternate remedy by way of an appeal before the Appellate Authority under Section 107 of the respective GST enactments. Despite the same, they are before this Court. 39. As far as the petitioner in W.P.No.204 of 2021 is concerned, it should be borne in mind that Section 103 of the respective GST enactments makes it clear that once an assessee approaches the "Authority for Advance Ruling" or the "Appellate Authority for Advance Ruling" as the case may be, the decision of the such Authorities are binding on the applicant and the concerned officer or the jurisdictional officer in charge of the office within whose jurisdiction the applicant is assessed to tax. 40. The decision of the Advance Ruling Authority or the Appellate Authority for Advance Ruling as the case may be is a decision in personam and the decision/opinion of such Authority is binding on the parties to the aforesaid proceedings. 41. An ....
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....t. (2) The advance ruling referred to in sub-section (1) shall be binding as aforesaid unless there is a change in law or facts on the basis of which the advance ruling has been pronounced. Section 103 - Applicability of advance ruling. (1) The advance ruling pronounced by the Authority or the Appellate Authority under this Chapter shall be binding only- (a) on the applicant who had sought it in respect of any matter referred to in sub-section (2) of section 97 for advance ruling; (b) on the concerned officer or the jurisdictional officer in respect of the applicant. (2) The advance ruling referred to in sub- section (1) shall be binding unless the law, facts or circumstances supporting the original advance ruling have changed. 45. Thus, these enactments themselves recognizes an appellate mechanism against the orders of the Authority for Advance Ruling before the Appellate Authority for Advance Ruling. 46. If the ruling or the decision of the Authority for Advance Ruling is confirmed or modified by an Appellate Authority for Advance Ruling or any Appellate Authority specified under therein. The decision is binding not only on the Applicant but also on the Juris....
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.... with the decision impugned before it. Rather, the Court is merely concerned only with the decision making process. 54. As such there is no error or infirmity that is notice in the impugned order of the Appellate Authority in the decision making process. Thus, W.P.No(MD).204 of 2021 is liable to be dismissed on this ground alone. 55. Even otherwise, the petitioner in W.P.No(MD).204 of 2021 has no case on merits and as such W.P.No(MD).204 of 2021 is liable to be dismissed. I shall explain further. 56. It is noticed that the Appellate Authority for Advance Ruling of Uttar Pradesh vide order dated 09.08.2023 in Appeal Order No. 8/AAAR/09/08/2023, in the case of M/s Pandey Traders, while dealing with a somewhat similar product has given a Ruling. 57. There, the said Pandey Traders was engaged in the marketing of unbranded tobacco from un-manufactured raw tobacco dust which is a result of Screening of raw tobacco through which tobacco leafs, its stem, and other tender parts are separated through the process of drying, winnowing, crushing and separating through sieving, and the better parts are used for chewing tobacco and remaining part in raw form, i.e. stems, hard veins an....
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....al Excise Assessees under the provisions of the Central Excise Act, 1944. The classification adapted by these writ petitioners when they were under the purview of the Central Excise Act, 1944 and Central Excise Tariff Act, 1985 had adopted the classification under Tariff Heading 2403 99 10. 64. This is evident from the reading of the Counter in W.P.No.204 of 2021, the respondent also stated as follows in Para No.2:- 2. It is submitted that earlier tobacco manufacturers of this Range were engaged in the manufacture of chewing tobacco and they had declared and classified their product as branded chewing Tobacco" under chapter heading 24039910 and paid central excise duty and NCCD till May 2017. M/s R. Arumugham GSTIn33AABPA9979p3Z2, hereinafter referred to as the tax payer) who obtained registration on 26.12.2017, earlier paid compensation cess @ 160%. The assesse vide his letter dated 20.5.2018 has stated that due to stiff completion and financial crunch they had stopped production and business w.e.f 20-5-2018 and further informed that they would surrender the registration certificate after payment of taxes and returns for the month of May 2018. However, in contrast to w....
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.... the GST regime also. 67. Section 26 of the Food Safety and Standards Act, 2006 (Central Act 34 of 2006) provides that tobacco and nicotine shall not be used as ingredients in any food products, as they are injurious to health. Therefore, reference to the provisions of Food Safety and Standards Act, 2006 is irrelevant. 68. The Government of Tamil Nadu which banned such products under regulation 2.3.4 of the Food Safety and Standards (Prohibition and Restrictions on Sales) Regulations, 2011 is not relevant for the purpose of determination of classification. The ban was in force from 2013 and the ban has been extended every year for a period of one year periodically. 69. This was in the exercise of powers conferred under Regulation 2.3.4 of the Food Safety and Standards (Prohibition and Restrictions on Sales) Regulations, 2011 framed by the Food Safety and Standards Authority of India in the exercise of the powers conferred by Clause (1) of sub-section (2) of Section 92. 70. Earlier, the Hon'ble Division Bench of this Court in J.Anbazhagan Vs. Union of India (2018) (3) CTC 449, held as under:- "71. Food is defined in Section 3(j) of the Food Safety Act to mea....
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....s manufacture, preparation or treatment. What is excluded is animal feed, live animals unless they are prepared or processed for placing on the market for human consumption, plants prior to harvesting, drugs and medicinal products, cosmetics, narcotic or psychotropic substances. 75. Significantly, in Godawat Pan Masala Products I.P. Ltd. and another v. Union of India and others, reported in (2004) 7 SCC 68, the Supreme Court observed: .. .... Thus, the Act 34 of 2003 being a special Act, and of later origin, overrides the provisions of Section 7(iv) of the Prevention of Food Adulteration Act, 1954 with regard to the power to prohibit the sale or manufacture of tobacco products which are listed in the Schedule to the Act 34 of 2003. 76. The Prevention of Food Adulteration Act, 1954 has been repealed and replaced by the Food Safety Act. The definition of food in Section 3(j) of the Food Safety Act is different from and far more expansive than the definition of food in Section 2(v) of the Prevention of Food Adulteration Act. Further, the Food Safety Act as been enacted after the COTA. 77. The judgment of the Supreme Court in Godawat Pan Masala Produ....
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....ch is in the widest possible terms. The definition of "food" under section 2(v) of the PFA Act was narrower than the definition of food under Food Safety Act, still the Supreme Court in Ghodawat case held that pan masala and gutka were "food" within the meaning of PFA Act. The very fact that the petitioners themselves had obtained licences under the PFA Act and have also obtained licences under the Food Safety Act, 2006 is sufficient to estop them from raising the contention that gutka and pan masala do not fall within the definition of "food" under the Food Safety Act, 2006." 81. We agree with the view of the learned Single Bench of the Bombay High Court that gutkha and pan masala are food within the meaning of the Food Safety Act. Gutkha also being a tobacco product might be governed by the provisions of the COTA. COTA deals with regulation of cigarettes or other tobacco products. The Food Safety Act is not in conflict with the provisions of COTA in any manner. COTA does not deal with adulteration, though it may remotely touch upon misbranding. 82. It is well settled that the endeavour of the Court should be to harmonize two Acts seemingly in conflict. Of course....
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....declined to interfere. Of-course, the order passed by the Hon'ble Supreme Court dismissing the SLP was more on the correctness of the order entrusting the investigation of the crime in question to C.B.I. But then, the petitioner before the Hon'ble Supreme Court namely, E.Siva Kumar who was named as an accused in the F.I.R, was on deputation as Food Safety Officer in the Food Safety and Drug Administration Department, Ministry of Health. The very first paragraph refers to the "illegal manufacture and sale of Gutkha and Pan Masala containing tobacco and Nicotine". The dismissal of the SLP was not by a non speaking order. It refers to the facts of the case and is a speaking order. Therefore this Court can proceed on the premise that the decision of the Hon'ble First Bench in Anbalagan case has been approved by the Hon'ble Supreme Court in E.Sivakumar case. In fact, the editorial note made in the web edition of SCC online also says so. Still there may be some controversy as to whether, the Hon'ble Supreme Court has given its seal of approval to the finding of the Hon'ble First Bench with regard to tobacco being a food product falling under Food Safety and Standa....
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....hich it was concerned with. Therefore, the decision cannot be universally applied. 74. In W.P.(MD)Nos.18115 of 2021 and batch (M/S. E.S.Mydeen and Co Vs. The Designated Officer (Thanjavur District) dated 18.07.2022, the challenge was to a "sale stop order" and a Seizure Memo dated 23.09.2021. There, the Court took note of the decision of the Hon'ble Division Bench of this Court in Pachiappa Chettiar Vs. State of Madras reported in (1963) 2 MLJ 71. 75. While referring to Regulation 2.3.4 of the Food Safety and Standards (Prohibition and Restrictions on Sales) Regulations, 2011, the Court took a lenient view by referring to Article 47 of the Constitution of India and allowed the writ petitions with the following observations: "11. The above contention of the State would have impressed me if the State has enforced Article 47 in its totality. Unfortunately, that is not the case. The State has monopolized the privilege of selling liquor. The government of Tamil Nadu is raising huge revenue through liquor sale. Tamil Nadu State Marketing Corporation (TASMAC), a wholly government owned company, has thousands of retail outlets throughout the State. The argument of the St....
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....with unmanufactured tobacco and that they have not been mixing the same in any food product." 80. The Hon'ble Supreme Court in State of Madras Vs. Bell Mark Tobacco Co. reported in 1966-VILL-08-SC:(1967) 19 STC 129 (SC), while dealing with the levy of sales tax under the provisions of Madras General Sales Tax Act, 1939 concluded that the chewing tobacco was the manufactured product following the decision in State of Madras Vs. Swasthik Tobacco Factory reported in (1966) 17 STC 316. There, the Court has held that the expression "in respect of the goods" in rule 5 (1) (i) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939, means "on the goods", and therefore only the excise duty paid on the goods sold by the dealer is deductible. 81. In Swasthik Tobacco Factory's case [1966] 17 S.T.C. 316., the dealer purchased raw tobacco and converted it by a manufacturing process into chewing tobacco and sold it in small packets. His claim in computing the taxable turnover for rebate in respect of excise duty paid on raw tobacco used in manufacturing "chewing tobacco" was disallowed. This decision is prima facie determinative of the only question which is raised in....
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....versally regarded as one of the major public health hazards and is responsible directly of indirectly for an estimated eight lakh deaths annually in the country. It has also been found that treatment of tobacco related diseases and the loss of productivity caused therein cost the country almost Rs. 13,500 crores annually, which more than offsets all the benefits accruing in the form of revenue and employment generated by tobacco industry. The need for a comprehensive legislation to prohibit advertising and regulation of production, supply and distribution of cigarettes and tobacco products was recommended by the Parliamentary Committee on Subordinate Legislation (Tenth Lok Sabha) and a number of points suggested by the Committee on Subordinate Legislation have been incorporated in the Bill." 86. The definition of Food in the Food Safety and Standards Act, 2006 reads as under: "(j) Food means any substance, whether processed, partially processed or unprocessed, which is intended for human consumption and includes primary food to the extent defined in clause (zk), genetically modified or engineered food or food containing such ingredients, infant food, packaged drinking w....
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....t they are of no significance and of any relevance as far as the present dispute is concerned as there is no dispute that the petitioner in W.P(MD)No.204 of 2021 had classified the same product under Tariff Heading "2403 99 10", at the inception of GST enactment with effect from 01.07.2017. Similarly others were adopting same classification prior to 01/07/2017. 90. A reading of the Counter filed by the respondent in W.P(MD).No.204 of 2021 also indicates that the petitioner had also earlier paid cess at 160 % in terms of the Serial No.26 of Notification No.1/2017 - Compensation Cess (Rate), dated 28.06.2017. It appears that, the petitioner vide his letter dated 20.05.2018 has stated that due to stiff completion and financial crunch they had stopped the business w.e.f. 20.05.2018 and opted to surrender the registration GST Certificate and had stated that that after payment of the tax and returns for the month of May 2018, the petitioner would surrender the registration Certificate. 91. However, the petitioner continued to file returns and did not surrender the GST registration. It appears that on 12.11.2018, the petitioner has stated that, the petitioner has also supplied chewi....
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.... and essence 2403 99 70---Cut-tobacco 2403 90---Other 95. As far as the petitioner in W.P.(MD)No.204 of 2021 is concerned, the petitioner had adopted the classification under Tariff Heading 2403 99 20 as "preparation containing between chewing tobacco" from June 2018- Oct 2018 and later opted to classification of the same product under Tariff Heading 2401 20 90 by describing the manufacturing process given by the petitioner to Authority for Advance Ruling. 96. As mentioned above, Tariff Heading 2403 99 20 pertains to "Preparations Containing Chewing Tobacco". Such preparations are clearly banned in terms of the Government orders issued by Government of Tamil Nadu under regulation 2.3.4 of the Food Safety and Standards (Prohibition and Restrictions on Sales) Regulations, 2011. The classification adopted by the said petitioner under 2403 99 20 would not have permitted the petitioner to manufacture and sell the products. 97. There is no difference between the Tariff classification under the Central Excise Tariff Act, 1985 under Tariff Heading 2403 99 10 and under Customs Tarrif Act, 1975. Under the respective Customs Tarrif Act, 1975, goods falling u....
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....nature or a change in the use of the product; something more is required for changing the classification especially when the product remains the same. Earlier decision on an issue inter parties is a cogent factor in the determination of the same issue. The applicability of maxim Res judicata pro veritate occipitur in the matters of classification of goods has to be seen in that perspective. The interpretation given by this Court in Baidyanath with regard to this product has been considered and applied by us after amendment because Chapter Sub-heading 3003.31 does not contain definition of Ayurvedic Medicine and the product DML in nature, character and uses remains the same as it was prior to amendment." 100. In J.K. Syntheitcs ltd. V. Union of India 1981(8) E.L.T.328 (Del.), it has been held that a change in classification can be justified only under the following circumstances:- a. If facts are different b. If fresh facts are brought on record c. The process of manufacture has changed d. If the relevant Tarrif entries have undergone a modification and e. If subsequent to the earlier decision, there has been a pronouncement of a High ....