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TMI Blog2024 (5) TMI 1147X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 .. ... .. ... 19. 2403 99 10 Chewing tobacco 0.5% In view of Sr. No. 1 above, after the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 packing of tobacco into small retail packs to make the product marketable amounts to manufacture in terms of Note 3 to Chapter 24 of the First Schedul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... * 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 repacked as such without carried out any process for retail sale without adding any other ingredient therefore, same remain as unmanufactured tobacco. He submits that even the test report of Central Excise and Custom Laboratory also support in the case of the appellant that there is no difference between the tobacco procured by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se 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 CTH 2401. 2.8 In view of above submission the appellant submits that the subject product does not merit classification under Chapter heading 2403 and the Learned Commissioner has grossly erred in classifying subject product as 'Chewing Tobacco' under chapter heading 2403. He further submits that the extended period of limitation cannot be invoked in the facts of the present case for the following reason :- (i) The department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dar 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 CESTAT-All 4. We have carefully considered the submission made by both the sides and perused the records. In the present case the issue to be decided by us is that whether the appellant's product i.e. 'Tobacco' supplied in retails pack is classifiable under CTH 2401 as claimed by the appellant or 2403 as claimed by the Revenue. It is necessary to first analyze the entire process right from procurement of raw material up to the sale of goods in retails pack, which is described as under:- 1. During the course of their business, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arison 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 remain under CTH 2401 only, even though the manufacturing in terms of Central Excise is carried out. The contention of the Revenue that chewing tobacco has a specific entry under Chapter heading 2403 and the product of the appellant is chewing tobacco, the correct classification is 2403. 4.3 We find that even though the chewing tobacco has a specific entry under 2403 but before arriving at this entry the test of chapter heading has to be satisfied. The description of chapter heading is as under :- 2403- "Other manufactured tobacco and manufactured tobacco substitutes; " Homo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 normally understood 'Zarda' preparation which come in the category of chewing tobacco as manufactured tobacco product would not be entitled to classification under Heading No. 2401 since these are squarely covered by the description appearing in sub-heading No. 2404.41 or 2404.49. 5. The Board has accepted the above views of the conference. Accordingly, it is clarified that unmanufactured tobacco merely broken by beating and then seived and packed in retail packets with or without brand name for consumption as chewing tobacco, which may be commonly known in the market as 'zarda', would be appropriately classifiable under he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion 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 would clearly show it did not answer the description of manufactured tobacco since there were no tracing of any Ingredients added to it. In such a context the Board's clarification dated 23-6-1987 would be clearly attracted. The Supreme Court decision in the case of Ranadey Micronutrients (supra) has laid down that the Central Board of Excise & Customs which is by statue entrusted with the task of classifying excisable goods uniformly. The objective of the circular is to adopt a uniform practice and to inform the trade as to how a particular product will be treated for the purposes of excise duty. The Supreme Court observed the it does not lie in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 unmanufactured chewing tobacco falling under CTH 2401 (in the reported judgment wrongly mentioned as 2501) of Central Excise Tariff Act, 1985 not dutiable. Since, duty liability on branded unmanufactured tobacco brought into force w.e.f. 16.03.1995 by amendment to Note 2 of Chapter 24 ibid which has no application to the matters pertaining to the period to 16.03.1995. This judgment is not directly on the fact of the present case but have it's persuasive value. D) In the case of T.P.N.S. Chettiar Parvathi Vilas Tobacco & Cigars Company (Supra) the special bench of this Tribunal held that cutting unmanufactured tobacco leaf into small pieces, labeling with string and packing in co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 filed by the appellants under the aforesaid rules the jurisdiction officers used to visit the factory of the appellants on regular intervals for verification of subject products, number of machines involved and other records for assessment of the duty required to be discharged by the appellant. The jurisdictional officers in their orders of assessments from time to time have duly taken the note of and considered the fact that the appellant are engaged in manufacturing product branded unmanufactured tobacco falling under Heading 2401 of Central Excise Tariff Act, 1984. We find force in this submission of the appellant that the entire activity of re-packings of cut leaves tobacco from bulk to retail pack ..... X X X X Extracts X X X X X X X X Extracts X X X X
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