TMI Blog2022 (8) TMI 1050X X X X Extracts X X X X X X X X Extracts X X X X ..... the department while demanding higher rate of duty from the appellant, is without any basis. There is also no indication in the test report as to what is the definition of jarda scented tobacco and chewing tobacco and under which parameter test of sample conducted. The show cause notice is mainly based upon the test reports, opinion of Chemical Examiners, CRCL and also of the statements which uses the words compound . Whereas the learned commissioner while changing the classification substantially relied upon the statements of Director/Production Manager/Manager and came to the conclusion that since the appellants uses scent in their product therefore it can only be classified as zarda scented tobacco, which is totally contrary to the description by Indian Standard issued by BIS - In the instant matter neither in the show cause notice nor before the adjudicating authority or before us it is the case that the appellant have used jarda scent in their product. Even the statements relied upon by the department nowhere mention that jarda scent has been used by the appellant in their product. The learned commissioner mistook the pleasant odour as mentioned in CRCL test report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jarda Scented Tobacco classifiable under heading 24039930 as claimed by the revenue? 3. The facts of the appeals in brief are as follows. The Appellant i.e. M/s. Som Flavour Malasa Pvt. Ltd. started manufacturing chewing tobacco (without lime tube) w.e.f. 23.7.2015 under various names and filed necessary declarations with the department i.e. Form-1 and continued to declare during the period August, 2015 to January, 2016. On perusal of the declarations filed in Form-I and Form-II in terms of Rule 6 of Chewing Tobacco Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010 as amended for the relevant period, it was observed that single track FFS pouch packing machine were to be installed/un-installed in the factory and were to be put into use for production/packing of the chewing tobacco without lime tubes in terms of Notification No.11/2010-CE(NT) dated 27.2.2010 as amended vide Notification No.04/2015-CE(NT) dated 1.3.2015. According to department, the appellants themselves declared that the maximum speed of all the pouch packing machines of chewing tobacco pouches are about 700 pouch per minute. In order to verity the correct classi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her the party has correctly classified their product or the product is appropriately classified under CETSH 24039930 (Jarda Scented Tobacco). Ms.Purnima Mishra, Chemical Examiner Gr.-II, CRCL vide her 12 different test reports all dated 14.12.2015 opined that the sample has the characteristics of Jarda Scented Tobacco . One thing was common in the all the 12 reports that the report only mentioned about the content of calcium which varied between 0.18% to 0.21% in all the test report. Content of slacked lime was not detected in any of the samples as per the test reports. 6. On the basis of the earlier test report of the samples drawn on 24.7.2015, the department issued two capacity determination orders both dated 4.12.2015, one for the months of July-September, 2015 and another from October-December, 2015. Since both the capacity determination orders were based on the test report dated 26.8.2015 of CRCL (of sample taken on 24.7.2015) the appellants after getting the test report on 1.12.2015 requested for re-testing of the aforesaid samples vide letter dated 11.12.2015. Although the samples were sent for re-testing to CRCL by the department but without waiting for the re-tes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereafter to decide the matter afresh in accordance with law. 8. Somewhere in the month of April, 2021 re-test report issued by Jt.Director, CRCL was supplied to the appellants whereas the same was forwarded to the department much earlier vide communication dated 9.12.2016. The said re-test report dated 9.12.2016 reads as under:- REPORT : The sample is in the form of brownish, dried cut pieces of leaves having characterstic pleasant odour in unit packing. It is composed of Cut bits of tobacco leaves and flavourant. It does not contain added lime. It is a preparation containing Chewing Tobacco. It is other than Jarda Scented Tobacco . (emphasis supplied) After getting the re-test report, the appellants filed their final reply on 7.7.20201 to the show cause notice. After supply of copy of re-testing report, the adjudicating authority vide impugned Order-in-Original dated 14.7.2021 once again confirmed the demand of Central Excise duty alongwith interest and equal penalty on M/s. Som Flavour Masala Pvt. Ltd. and also imposed penalty of Rs.1 crore on Shri Indra Dev Tripathi, Director and of Rs. 25 lakhs on Shri Ashok Nahata, Manager. 9. Aggrieved the appellants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed order and prayed for dismissal of appeals filed by the appellants. According to learned Authorised Representative it is wrong to imply that the opinion of Chemical Examiner in the test reports of samples is based on the presence/absence of lime as both the chemical examiners have stated in their respective cross-examination that the test for lime is conducted as a routine manner for such commodity. He further submits that chewing tobacco is a broader term used which includes various forms of tobacco namely, surti, zarda, quiwam, dokta and sukla and that depending upon the contents in the tobacco, the product would be classified. Learned Authorised representative further submits that the appellants are comparing two alien things and that nicotine percentage was not there in any of the test reports. According to learned Authorised Representative in the decisions relied upon by the appellants it has been observed that zarda in common parlance is nothing but tobacco flakes without any other ingredient. It has also been submitted that zarda without scent would come out of the purview of 24039930, similarly chewing tobacco with scent would also come out of the ambit of 24039910 and wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e product in issue as per the test/re-test reports of CRCL:- Contents as prescribed by BIS S. No. Criteria Minced Type Chewing Tobacco Flake Type Chewing Tobacco (Zarda) 1. Moisture content by mass Max 27 15 2. Nicotine (on dry basis) percent by mass, Max 8 4 3. Total Ash (on dry basis) percent by mass, Max 25 28 4. Acid Insoluble ash (on dry basis), percent by mass 5 4 The summary of the test reports of samples taken on 24.7.2015 and 2.12.2015 issued by CRCL are as under:- 1. Date of sample drawn its description Test report of sample drawn on 24.7.2015 of DB Royal Chewing tobacco Test report of 12 samples drawn on 2.12.2015 of all brands of chewing tobacco and loose samples 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tigrade 19.9% 7. Ash content (on dry basis) 10.4% 8. Opinion It is a preparation of chewing tobacco. It is other than Jarda Scented Tobacco. 9. Report issued by Dr.T.A. Sreenivasa Rao, Jt. Director, CRCL Dr.T.A. Sreenivasa Rao, Jt. Director, CRCL 11. Although lime is not an essential ingredient of chewing tobacco but still the samples in issue have been tested for it. As per BIS, chewing tobacco is a broad term which includes preparations of tobacco chewed as such and also the tobacco preparations taken with betel leaf (paan). Surti and Zarda are preparations of tobacco taken with betel leaf whereas other preparations of chewing tobacco are for chewing directly as such by putting the chewing tobacco in the mouth and to chew it in order to get its juices. Preparations of chewing tobacco may contain various ingredients like spices, quiwam, flavourants, lime glycerine and other substances whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 Flavourants The oboriferous substances that are added to tobacco products. In our opinion if any odoriferous substance is added to chewing tobacco it cannot change the classification form chewing tobacco to zarda scented tobacco. 13. Now we are examining the test reports in the light of BIS standards. As per the table of Contents as prescribed by BIS (supra) Moisture content and Nicotine Content are the two factors out of four, which are widely different in Chewing Tobacco and in Zarda and Total ash and Acid Insoluble ash are more or less same in both. The maximum moisture content in zarda is 15% whereas the maximum Nicotin is 4% in zarda. In Chewing Tobacco it is 27% and 8% respectively. Because flake type chewing tobacco (zarda) is made from tobacco flakes, it has lesser moisture whereas minced type chewing tobacco is made from various methods in which other substances like water, glycerine, quiwam, lime can be added which convert it into a higher moisture content. It means that if the moisture content in any product is more than 15% but less than 27% then as per BIS standard it will be Chewing tobacco and similarly if the Nicotine in any product is more than 4% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied upon by the revenue for changing the classification is not as per the BIS specification and therefore the reliance placed on it by revenue as well as by the adjudicating authority for changing the classification is totally misplaced. 14. The learned Commissioner in the impugned order has denied that the show cause notice was issued only on the basis of CRCL report and recorded a finding that it is based upon investigations of the department including statements of the persons associated with the appellants, CRCL reports etc. Whereas the show cause notice states otherwise and relevant extract of para of the show cause notice is reproduced hereunder for better understanding:- 7.2 ....The test report of the samples of the products drawn from the factory premises of the party under panchnama dated 24.7.2015 (RUD-supra) and Panchnama dated 03.12.2015 (RUD supra) being declared by the party as chewing tobacco without lime tube were reported by the Chemical Examiner, CRCL, New Delhi as being Jarda Scented Tobacco. Therefore, in view of the above, it appears that the party had deliberately and fraudulently mis-declared the products being manufactured and packed by them as chewi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Scent. He drew our attention to the price list of M/s. Gupta Co. (P) Ltd. submitted by them in their appeal paper book from where it can be seen that zarda scent as such is available in the market and therefore the product zarda scented tobacco would mean that the zarda scent has been used in the manufacture of the same. Since the appellants have never used the zarda scent, the product cannot be classified as zarda scented tobacco. 15. In the instant matter neither in the show cause notice nor before the adjudicating authority or before us it is the case that the appellant have used jarda scent in their product. Even the statements relied upon by the department nowhere mention that jarda scent has been used by the appellant in their product. The learned commissioner mistook the pleasant odour as mentioned in CRCL test report as scent which is totally different from jarda scent , an essential ingredient for manufacturing jarda scented tobacco. 16. For the purpose of Central Excise Tariff, jarda scented tobacco and chewing tobacco are different products as they have been specifically covered under two separate sub-headings viz. 24039910 (chewing tobacco) and 24039930 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the Director, CRCL against the opinion given by the Jt. Director, CRCL and therefore the opinion of Jt. Director, CRCL is final and it cannot be brushed aside just because it is not in favour of the department. In our view, the opinion of Jt. Director, CRCL is in line with Indian Standard prescribed by BIS. He did not classify the goods but gave his technical opinion that the sample is of chewing tobacco. 18. The learned Commissioner has also erred in not resorting to common parlance test. In the facts of these appeals, since the Chemical Examiner Gr. II, CRCL although not empowered, but still gave their opinion against the classification adopted by the Appellants whereas the Jt. Commissioner, CRCL in the re-test of the same sample gave his opinion in favour of the Appellants, therefore the common parlance test would have been adopted. Hon ble Supreme Court in catena of decisions has laid down that classification of commodity cannot be made on its scientific and technical meaning and it is only the common parlance meaning of the term which should be taken into consideration for the purpose of determining the tax liability. In the absence of statutory definition in precise t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used under a particular entry, then that article cannot be taken away from that entry and placed under the residuary entry on the pretext that the article, even though it comes within the ambit of the technical term used in a particular entry, has acquired some other meaning in market parlance. However, in the present case, revenue has not brought on record any evidence in the form of market enquiries to support its case for classification under jarda scented tobacco . Since there are conflicting opinions given by CRCL regarding the same sample, therefore we are of the considered view that the learned Commissioner ought to have asked for the Trade Parlance Test. In Trade parlance i.e. from packaging and presentation, sales and distribution and till its consumption by the ultimate consumer the product in issue is known as chewing tobacco only. Admittedly the pouches of the products including presentation, sales, distribution and usage issue described the product as chewing tobacco and in Trade Parlance it is known as Chewing Tobacco only. The manufacturer, distributor and the consumer, everyone understands and consume the product as chewing tobacco only. The Tribunal in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as Flavoured Chewing Tobacco , the Tribunal agreed with the assessee that the same cannot be held to be a scented product. It has been further observed therein that the expression Chewing Tobacco or Jarda Scented Tobacco are not defined anywhere in the taxing statute and as such, in the absence of same, the product has to be classified based upon the description of the product given by the manufacturer on the outer cover of the pouch as also on the basis of common parlance and established practice. As such by taking into account the decisions in the matter of Prabhat Zarda Factory v. Commissioner [2004 (163) E.L.T. 485 (Tribunal)] as also the decisions of Hon ble Supreme Court decision in the matters of Gopal Zarda Udyog v.Commissioner;2005 (188) E.L.T.251(S.C.) and Dharampal Satyapal v. Commissioner; 2005(183) E.L.T. 241 (S.C.) even the intermediate products like admixture of Kiman, Paraphion, Menthol were held to be chewing tobacco . Further the Tribunal in the said case also referred to the decision of the Hon ble Supreme Court in the matter of CCE, Nagpur v. Shree Baidyanath Ayurved Bhawan Ltd.; 2009 (237) E.L.T. 225 (S.C.) laying down that resort should be had to popula ..... X X X X Extracts X X X X X X X X Extracts X X X X
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