TaxTMI 
TaxTMI 
2026 (9) TMI 4
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....: The Applicant being a resident firm falls within the class of persons specified by the Central Government under sub-clause (iii) of clause (c) of Section 23A of the Central Excise Act, 1944 vide Notification No. 11/2015-Central Excise (N.T.), dated 01.03.2015. The said notification expressly includes a Limited Liability Partnership within the meaning of 'firm'. The applicant has also declared that no proceedings involving the same issue are pending before any Central Excise authority, the Appellate Tribunal or any Court of Law. Accordingly, the Applicant falls within the definition of "applicant" under Section 23A(c) of the Central Excise Act, 1944 and is eligible to seek an advance ruling under Section 23C of the Central Excise Act, 1944. Further, in terms of Section 23A(e) of the Central Excise Act, 1944, the Authority for Advance Rulings constituted under Section 28E of the Customs Act, 1962, is the designated Authority for pronouncing advance rulings in respect of matters arising under the Central Excise Act, 1944. Accordingly, the present application is maintainable before the Customs Authority for Advance Rulings. 3. Submission by Applicant- 3.1 Statemen....
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.... the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer .... Section 3(1): There shall be levied and collected in such manner as may be prescribed a duty of excise to be called the Central Value Added Tax (CENVAT) on all excisable goods (excluding goods produced or manufactured in special economic zones) which are produced or manufactured in India as, and at the rates, set forth in the First Schedule of the Central Excise Tariff Act, 1985. Chapter 24 Chapter Note 3: In relation to products of heading 2401 or 2402 or 2403, labelling or relabelling of containers or repacking from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer, shall amount to "manufacture". 3.2.2 Position between 1st July 2017 to 31st January 2026 No change except First Schedule of the Central Excise Tariff Act, 1985 was substituted with Fourth Schedule. 3.2.3 ....
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....ipped tobacco leaves are categorised as 'unmanufactured tobacco' and classified under Chapter heading 2401, both at the time of purchase as well as sale. Process undertaken by the Applicant does not result in a new and identifiable product having a distinctive name, character and use and therefore, the Applicant is of the opinion that such activities does not amount to manufacture. In the case of Commissioner of Central Excise, Kanpur vs Ravindra & Co [2000 (120) E.L.T. 699 (Tribunal)], the Tribunal has held that cutting of unmanufactured tobacco leaves into small pieces, cleaning and packing in containers without adding any foreign ingredient did not amount to manufacture. 3.5.2 Deemed manufacture In as much as deemed manufacture under Chapter note 2 of the Chapter 24 of the 4th Schedule is concerned, deemed manufacture shall construed where the Applicant undertakes the process of- a) labelling or relabelling of containers or repacking from bulk packs to retail packs; or b) adoption of any other treatment to render the product marketable to the consumer. 3.5.3 It is submitted that the Applicant does not label or re-label container. Further, the A....
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....ed that the Applicant is engaged in the activities of threshing, sieving, cleaning and sizing of raw tobacco leaves and packing the same in bulk. It was submitted that these activities do not amount to "manufacture" or "deemed manufacture" and therefore, the Applicant is not liable to pay Central Excise duty in terms of Notification No. 04/2026-Central Excise, dated 01.02.2026. It was further submitted that the activities undertaken by the Applicant do not fall within the scope of the definition of "manufacture" under Section 2(f)(1) of the Central Excise Act, 1944. The Authorised Representatives also produced photographs depicting the various stages of the activity undertaken by the Applicant, including collection of broken tobacco leaves, cleaning, threshing, sieving, the resultant final product and packing thereof in non-branded bulk packages. The Applicant relied upon the following judicial decisions: They rely upon the following case laws: - i. 1989 (41) E.L.T. 79 (Tri-Del); ii. 2000 (120) E.L.T. 699 (Tri-Del); iii. 1997 (96) E.L.T. (Tri-Cal), which was upheld by Hon'ble Supreme Court, as reported in 1998 (104) E.L.T. A136 (S.C.). Dur....
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....ods. 6.2 Before examining the processes undertaken by the Applicant, it is necessary to consider the statutory scheme governing levy of Central Excise duty. Section 3 of the Central Excise Act, 1944 is the charging provision and provides for levy and collection of duty of excise on excisable goods which are produced or manufactured in India. The relevant provision is as follow: "Section 3. Duties specified in First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 to be levied. - (1) There shall be levied and collected in such manner as may be prescribed a duty of excise to be called the Central Value Added Tax (CENVAT) on all excisable goods (excluding goods produced or manufactured in special economic zones) which are produced or manufactured in India as, and at the rates, set forth in the Fourth Schedule:" Therefore, for levy of Central Excise duty, it is necessary that the goods in question are excisable goods and that such goods are produced or manufactured in India. 6.3 The expression "manufacture" is defined in Section 2(f) of the Act. The definition includes processes which are incidental or ancillary to the completion of a m....
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.... stated by the Applicant, the tobacco leaves are generally sun-dried by the farmers after harvesting. The stalks and stems are removed, the leaves are cleaned and the dried tobacco is thereafter packed in bulk packs for sale. Thus, the tobacco received by the Applicant is already in dried and broken form and is capable of being bought and sold in the market. 6.7 After receipt of the tobacco, the Applicant first undertakes unpacking of the bulk packs and feeds the tobacco into a GLT machine for carrying out the processes of threshing, cleaning and sizing of broken raw tobacco leaves. The Applicant has explained that no new ingredient, material or substance is added to the tobacco during these processes. The entire process is carried out mechanically through the GLT machine, which consists of a thresher, blower, conveyor belt and wire mesh. The process of threshing is undertaken to loosen and break the tobacco material and to reduce and standardise the size of the broken tobacco leaves. The process of cleaning is undertaken through the mechanical arrangement of the machine, including the blower and conveyor system, to remove dust, stalks, stems and other unwanted or foreign materi....
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....cesses, considered individually as well as collectively, do not appear to bring into existence a new commodity having a distinct name, character and use. The end product continues to retain the essential identity of the tobacco purchased by the Applicant. I therefore find force in the Applicant's contention that the ordinary test of manufacture, namely emergence of a new and identifiable product having a distinct name, character and use, is not satisfied merely by undertaking the aforesaid mechanical processes. 6.10 The Applicant has relied upon the decision in case of Commissioner of Central Excise, Kanpur vs Ravindra & Co 2000 (120) E.L.T. 699 (Tri .- Del.), in support of its contention that mere mechanical processing of tobacco, without addition of any foreign ingredient, does not necessarily alter the character of the goods as "unmanufactured tobacco". In the said case the respondents prepared tobacco under the brand names "Bandar Dholak Chhap" and "Hari Chhap" by beating, crushing and sieving tobacco leaves purchased from the market, without adding any foreign material thereto, and thereafter packed the same in retail paper packets. The Tribunal, taking note of the undi....
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....manufactured tobacco substitutes contains a specific deeming provision in respect of products falling under heading 2401, 2402 or 2403. The said Chapter Note provides that labelling or relabelling of containers, repacking from bulk packs to retail packs, or adoption of any other treatment to render the product marketable to the consumer shall amount to "manufacture". Thus, under the said statutory deeming provision, a process could amount to manufacture even where such process did not, in the ordinary sense, result in the emergence of a new product. The relevant provision is reproduced below: "3. In relation to products of heading 2401or 2402 or 2403, labelling or relabelling of containers or repacking from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer, shall amount to 'manufacture'." 6.13 In the present case, the Applicant has submitted that no labelling or relabelling of the containers is undertaken. Further, the Applicant submits that the tobacco is received in bulk packs and after processing is again packed in bulk bags of approximately 25 kg to 40 kg. Therefore, there is no conversion of b....
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....mmercial use but for such process. Applying the said test the Hon'ble Supreme Court held that plain glass bottles were themselves commercial commodities capable of being sold and used as such and that printing names or logos thereon did not alter their basic character. The relevant observations contained in paragraph 16 of the judgment are reproduced below: "16. On an analysis of the aforesaid rulings, a two-old test emerges for deciding whether the process is that of "manufacture". First, whether by the said process a different commercial commodity comes into existence or whether the identity of the original commodity ceases to exist; secondly, whether the commodity which was already in existence will serve no purpose but for the said process. In other words whether the commodity already in existence will be of no commercial use but for the said process. In the present case, the plain bottles are themselves commercial commodities and can be sold and used as such. By the process of printing names or logos on the bottles, the basic character of the commodity does not change. They continue to be bottles. It cannot be said that but for the process of printing, the bottles....
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....No. 03/2025-Central Excise dated 31.12.2025. The said notification is relevant for determining the applicable rate of duty or exemption only after the goods are found to be liable to Central Excise duty. Therefore, the first issue to be determined is whether the processes undertaken by the Applicant amount to manufacture or deemed manufacture under Section 2(f) of the Act read with the relevant Chapter Note. 6.21 I further find that the fact that the Applicant packs the processed tobacco in bulk bags of 25 kg to 40 kg instead of retail packs, is relevant for examining the specific deeming provision. The Chapter Note specifically refers to repacking from bulk packs to retail packs. On the facts available on record, the Applicant receives tobacco in bulk packs and repacks it again in bulk packs. Such bulk-to-bulk packing cannot by itself be equated with repacking from bulk packs to retail packs. 6.22 As regards the judicial decisions relied upon by the Applicant during the personal hearing, the same have been considered. These decisions show that every process carried out on a product does not amount to "manufacture". Normally, a new and different product should emerge for a pr....