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TMI Blog2005 (9) TMI 173X X X X Extracts X X X X X X X X Extracts X X X X ..... Group at Mumbai, on 18-2-2000. The J.M. Group was found to be incorporating manufacturing companies and are having their factories at Village Galonda/Silvassa. Therefore the searches were also immediately extended to cover up the factory premises of each company at Silvassa. 1.3 The investigations conducted relating to the activities of other group companies revealed as under:- (i) M/s. Yogesh Associate : It has been manufacturing 'scented tobacco' thereof since 1998-99 by claiming exemption under Notification No. 1/93-C.E. as amended. The unit remained Proprietary concern of Shri J.M. Joshi since its inception till 28-2-1999 the same has been reconstituted as Proprietary concern of Shri J.M. Joshi (HUF). (ii) M/s. J.M. Enterprises : Shri J.M. Joshi floated this unit as his sole Proprietary concern and operated at small level from Pune to manufacture scented tobacco till 1007-98 and thereafter suspended its activities. The unit did not register itself under C.Ex. Act during its operation period at Pune. (iii) M/s. J.M. Perfumery, Silvassa : Shri J.M. Joshi floated this firm as his sole proprietary concern in the year 1994-95. It has its factory at Silvassa to manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'Scented Tobacco' classified as held to be under 2404.40 clandestinely and without obtaining registration to various manufactures of Gutka/Pan Masala. 1.6 After hearing the ld. Sr. Counsel for Appellant and ld. DR and considering the issues involved, it is found that the core issue to be decided is whether the classification as arrived at of the entity Scented Tobacco as excisable under Heading 2404.04 is appropriate. The Revenue supports the classification and the Appellant strongly contest the same. Therefore, the classification issue is first resolved. 1.7 On perusal of the SCN issued and order impugned, (references to para numbers of order; SCN etc. taken as in E/2703/02 of M/s. Yogesh for ease since the process; product impugned is same in all respects) it is found - (a) the notice issued relies upon the values of the product in the case of M/s. Dhariwal Tobacco (herein after referred to as DTPL) and the impugned order also finds the entity under classification dispute to be analogues to the product in the DTPL case. Yet the ld. Adjudicator does not approve the product classification and excisability, as arrived at in the DTPL case by the Commissioner, subsequently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation. Therefore, the Apex Court ruling will not assist the ld. DR as the product to be classified is different. Process Flow Chart PROCESS REMARKS Raw Tobacco (Cut Size) Purchased From Jaisinghpur, Borsad. Receiving along with bill and transport receipt Issued By Sellers Sieving It Remove Dust Applying of quimam (2 gms per kg of tobacco) By hand process (purpose: smell of tobacco not to deteriorate and to ensure no formation of Fungus) Applying of perfume (28 gram per kg) By hand process Initial packing in poly bag To prevent exposure to dust Final packing in gunny bags For final despatch no identification/no brand Name. NOTE : (1) Quimam is extract of tobacco boiled in hot water and used after 15 days. (2) Products Described As 'Loose Unbranded Scented Tobacco In The Despatch Challan. The process as explained and the submissions made as regards the same are not under contest. 2.1 The notices issued termed the entity under dispute at places as "chewing tobacco" and at other "preparation for chewing tobacco". The ld. Adjudicator records in paragraph 95 of the impugned order a finding as : "95. The SCN proposes to seek recovery of duty on the product b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "chewing tobacco" has not been explicitly defined in the Tariff. However, it is well known fact the world over that, the raw tobacco as such is consumed by chewing without addition of any other material thereto. It is also common knowledge that, raw unpacked tobacco is purchased from vendors by the consumers and is consumed for chewing, at times in admixture with lime and other additives. The mixing of lime and tobacco is done by the individual consumer at the point of consumption and yet the raw tobacco unmixed with any additives qualifies to be a chewing tobacco. This raw chewing tobacco being a product without any additives would therefore, qualify to be an unmanufactured tobacco and is fully exempt from central excise duty as long as the same is not sold under a brand name. It is not the allegation that the product in question is sold under a brand name. Therefore, "Manufactured tobacco" alone is subjected to duty during the relevant time. In the manufactured section under Chapter 24 "Chewing Tobacco" and Preparation of chewing tobacco" are listed as being subjected to duty." The above finding accepts that raw tobacco is used as a chewing tobacco and consumed as such at the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the existing form, the mixture becomes too costly to be viably marketed as 'Chewing Tobacco', Taking note of these facts it was concluded in the said order-in-original that the product fails to meet the test of marketability of the product as "chewing tobacco". This finding of the adjudicator along with the finding as arrived in paragraphs 102, 104 and 105 of the order, that the production in question was marketed to several industrial consumers who use the same in the manufacture of gutka which is a pan masala containing chewing tobacco figuring at sub-heading No. 2404.49 of the tariff and in the said pan masala (gutka)"this preparation" alone could contribute the component 'chewing tobacco' other ingredients being non-tobacco origin and thereafter relying and interpreting chapter note 2 under Chapter 24 in details as recorded in paragraph 99 and 100, it was concluded that the treatments brought about on the raw tobacco rendered the product marketable to an industrial consumer and therefore the process employed by the appellants would amount to manufacture by the application of said note 2 to Chapter 24. This finding of the Commissioner cannot be upheld, when the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant in this case, as pointed by the ld. Advocate, for the appellant. ".......In some cases, in addition to (or instead of) fermentation, flavoring or moistening substances are added (casing) in order to improve the aroma or keeping qualities......." And thereafter reliance on the scope of the coverage as per the HSN notes under the heading unmanufactured tobacco cannot be ignored, which reads as, "(1) Unmanufactured tobacco in the form of whole plants or leaves in the natural state or as cured or fermented leaves, whole or steamed/stripped, trimmed or untrimmed, broken or cut (including pieces cut to shape, but not tobacco ready for smoking). Tobacco leaves, 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." A reading of these mandatory provisions to be applied, for purpose of classification, which have been totally ignored by the ld. Adjudicator, induces us to conclude that the treatments and process conducted at the premises of the Appellants are nothing more than flavouring or moistening substances added to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment Raw of leaf of Tobacco by effecting various processes, e.g. sieving etc. would keep the tobacco as unmanufactured. See 1999 (113) E.L.T. 962; 2000 (117) E.L.T. 743; 2000 (120) E.L.T. 699; 1997 (96) E.L.T. 712; 2002 (147) E.L.T. 1184 and classification under heading 2401 cannot be disturbed and Board Circular 81/5/87-CX. 3, dt. 23-6-87 upholds the view. (f) The addition of various solutions e.g. of water jaggery mix on the harvested Tobacco has not been held to be manufactured (Sale Tax Case of A.V. Dachlapp Challure and Sons - 1962 STC (3) page 202 (para 28). In absence of manufactured tobacco definition and non applicability of Chapter Note 2 of CETA 1985 as found, the classification under 2404 cannot be upheld. The Tribunal in the case of CCE v. Virat Crane Inds - 2003 (159) E.L.T. 709 (Tri.-Bang.) did not uphold the Revenue plea of classification of similar products under 2404.40 (see also Dariwal Tobacco Products [2002 (139) E.L.T. 356]. (g) Therefore, classification under 2404.40 cannot be upheld. The apex Court in case of Dharampal Satyapal - 2005 (183) E.L.T. 241 (S.C.) also was of the view that for unbranded Chewing Tobacco Preparations the classification has to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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