2006 (11) TMI 46 - AT - Central Excise

SSI Exemption - Pan Masala commonly known as Gutkha containing tobacco falling under Chapter Heading 2404.49 - Benefits of Notification No.8/2001C.E. is available - It doesn t include AED and NCCD

Summary

Issues Involved:
1. Eligibility of "Pan Masala containing Tobacco" for SSI exemption under Notification No. 8/2001-C.E.
2. Interpretation of the term "unbranded" in the context of the exemption notification.
3. Applicability of Additional Excise Duty (AED) and National Calamity Contingent Duty (NCCD) despite SSI exemption.

Detailed Analysis:

1. Eligibility of "Pan Masala containing Tobacco" for SSI Exemption:
The core issue was whether "Pan Masala containing Tobacco" (commonly known as "Gutkha") qualifies for the SSI exemption under Notification No. 8/2001-C.E., dated 1-3-2001. The relevant entry in the Annexure to the Notification states:
> "(iv) all goods falling under Chapter 24 of the First Schedule (other than unbranded chewing tobacco and preparations containing chewing tobacco, falling under Heading No. 24.04);"

The lower authorities concluded that "Pan Masala containing Tobacco" is a preparation containing chewing tobacco and falls under Heading No. 24.04, thereby qualifying for the exemption. The Revenue, however, argued that "Pan Masala containing Tobacco" and "Preparations containing Chewing Tobacco" are distinct categories and that the exemption applies only to the latter.

The Tribunal observed that according to Note 6 in Chapter 24, "Pan Masala containing Tobacco" can indeed be considered a preparation containing chewing tobacco. Additionally, the Tribunal emphasized that once it is established that the goods fall under the exemption notification, a liberal interpretation should be applied, as per the Supreme Court's guidelines in the Bombay Chemical Pvt. Ltd. case.

2. Interpretation of "Unbranded":
The Revenue contended that the adjective "unbranded" in the notification applies to both "chewing tobacco" and "preparations containing chewing tobacco," hence disqualifying branded products from the exemption. However, the Tribunal disagreed, stating that the adjective "unbranded" does not extend to "preparations containing chewing tobacco." This interpretation was supported by the historical evolution of similar notifications, which indicated a legislative intent to provide SSI exemption to preparations containing chewing tobacco, regardless of branding.

The Tribunal also noted that in subsequent notifications, the word "and" was replaced with a comma, further clarifying that the exemption applies to both categories separately.

3. Applicability of AED and NCCD:
The Revenue argued that the SSI Notification No. 8/2001-C.E. exempts only Basic and Special Excise Duty, not Additional Excise Duty (AED) or National Calamity Contingent Duty (NCCD). The Tribunal agreed with this contention, stating that while the product is entitled to SSI exemption, the duties not covered by the said exemption (AED and NCCD) must still be paid.

Conclusion:
The Tribunal dismissed Appeal No. E/533/2004, affirming that "Pan Masala containing Tobacco" is eligible for SSI exemption under Notification No. 8/2001-C.E. However, it allowed Appeal No. E/633/2004, holding that AED and NCCD are payable despite the SSI exemption. The case was remanded to the Original Authority for appropriate quantification of these duties.

(Pronounced in the open court on 9-11-2006)