TaxTMI 
TaxTMI 
2026 (6) TMI 1145
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.... ORDER (i) I order that the final product manufactured and cleared by M/s. R.Renganathan & Sons, No.68, Nagai Road, Tiruvarur 610001, during the period from April 2020 to March 2021 is rightly classifiable under chapter heading HSN 2403 99 10 of CGST Act, 2017 for the purpose of payment of Compensation Cess under Central Goods and Services (Compensation to States) Act. 2017; (ii) I confirm the demand of Rs.1,31,98,398/- (Rupees One Crore Thirty One Lakhs Ninety Eight Thousand Three Hundred and Ninety Eight only) being the short payment of Compensation Cess during the period from April, 2020 to March 2021 from M/s R.Renganathan & Sons, No.68, Nagai Road, Tiruvarur 610001 as per the provisions of Section 73 (9) of Central Goods and Services Act, 2017 read with Section 11 of the Central goods and Services (Compensation to States) Act, 2017, (iii) I order that M/s R.Renganathan & Sons, No.68, Nagai Road, Tiruvarur 610001, shall pay interest at appropriate rates on the amount of demand confirmed under Sl. No.(ii) above in terms of the provisions of Section 50 of the CGST Act, 2017 from the date on which such amount is payable till it is actually paid, ....
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....ld amount to a manufacturing process. The Hon'ble Division Bench held that mere sprinkling of jaggery water, drying tobacco in the shade and subjecting it to the process called "bulking" would not convert the raw tobacco into some other product. It was further held that the Bell Mark was an authority for the proposition that up to the stage of these processes, no manufacturing of the raw tobacco into some other product is involved. The argument of the department is that on account of the processes adopted by the assessee, the tobacco has become capable of being chewed. This argument was specifically rejected. It was observed that even without adopting the aforesaid processes, a tobacco could be chewed. Would it then become a chewing tobacco?. While the raw product may be capable of a particular use, "manufacture" involves some change in that article. Though basically the material might remain the same, it is being adopted to a particular use which in the original form it was not capable of. That is the essence of manufacture. The same view was taken in Deputy Commissioner v. C.Abdul Shahoor Sahib and Co., (1963) 2 MLJ 343. 14. One of us (GRSJ) followed Pachiappa Chettiar V....
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....tested on the touchstone of the Explanatory Notes to HSN. 16. If the appellant's product involved addition of flavors and fragrances, it would certainly qualify as a manufactured product. In fact, the appellants were originally engaged in making such products. Following the ban imposed by the Government, they restricted their activities up to the stage indicated in Pachiappa Chettiar and refrained from engaging themselves in any manufacturing tobacco. This is evident from the cover label of the appellant's product. Earlier, it was called as "Special Panneer Tobacco". Now, following the giving up of adding flavors and fragrances, the product is called as "unmanufactured tobacco". The shift in the activity of the appellant is reflected in the nomenclature of the product also. 17. We have answered the issue in the light of what was laid down by the Division Bench of this Court. We do not want to stop with this. We would also seek to reinforce our conclusion by referring to the principles laid down by the Hon'ble Supreme Court in UOI v. Delhi Cloth and General Mills Co., Ltd., (1962) 10 TMI 1-SC. It was held therein as follows : "Manufacture implies a change,....
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....pieces does not result in the manufacture of a new product as the end product continues to retain its original character though in a modified form. 32.In our view, the Commissioner of Customs and Central Excise (Appeals) has correctly analysed the factual as well as the legal situation in arriving at the conclusion that the process of cutting betel nuts into small pieces and addition of essential/non-essential oils, menthol, sweetening agent, etc. did not result in a new and distinct product having a different character and use." In the case on hand, the appellant has not gone up to that stage at all. The appellant's process falls far short of what was dealt with in Crane Betel Nuts case. Crane Betel Nuts case is holding the field till date. If even the process referred to in Crane Betel Nuts will not be a manufacturing activity, it is needless to mention that an activity that does not travel that far will also not be a manufacturing activity. 19. The department has nowhere claimed that the appellant is adding any other material apart from jaggery water to the dried tobacco leaf. The assessee had challenged the department to subject their product to testi....