2017 (10) TMI 6 - AT - Central Excise

Classification of goods - chewing tobacco and preparation containing chewing tobacco (kamam) - whether classified under 24039960 as tobacco extracts and essence or is to be classified under 24039920? - Held that - the impugned goods are classifiable under sub heading 240399.20 as held by the lower authorities. - Hon ble Supreme Court in the case of Dharampal Satyapal Vs. CCE New Delhi 2005 (4) TMI 66 - SUPREME COURT OF INDIA classified the item under tobacco and preparation of chewing tobacco under sub heading 2404.49/2404.40, the case does not apply in the facts of present case as it was delivered in the context of the Central Excise Tariff which was different at the relevant time. Extended period of limitation - Suppression of facts - Held that - The Commissioner (Appeals) held them guilty of suppression for not taking initiative and not consulting the department if they had any doubt while the appellants never stated that they had any doubt. In fact they have claimed that they were clearly of the view that their goods were classifiable where they classified them. The Commissioner (Appeals) has not mentioned anywhere as to what they suppressed which was required to be disclosed as per law. Not taking suo moto initiative has never been a valid ground for sustaining charge of suppression - The very fact that they have been paying duty as per Section 4 also goes to show that prima facie they had no intention of hoodwinking the department - demand restricted to normal period - The adjudicating authority is directed to re-quantify the demands accordingly. Penalty - Held that - There is no justification to impose any penalty, this being a classification dispute. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
Classification of the product "Kimam" under the Central Excise Act, 1944 based on the eight-digit tariff system.

Analysis:
The appellants were manufacturing Kimam and paying duty under Section 4 of the Central Excise Act. They initially classified the product under heading 2404.41 during the six-digit tariff regime. However, with the introduction of the eight-digit tariff system, they started classifying it under 24039960 as "tobacco extracts and essence." The department contended that the product should be classified under 24039920, which is assessed under Section 4A, leading to the impugned demand and penalties.

The appellants argued that post the eight-digit tariff introduction, their product was more specifically classifiable under 24039960 as a tobacco extract. They emphasized that Kimam is not a preparation containing chewing tobacco, as it cannot be consumed, supported by a Supreme Court judgment. They maintained that there was no suppression, as they consistently filed returns showing the classification and paid duty under Section 4.

The Tribunal analyzed the manufacturing process of Kimam and noted that it contains tobacco and is used in making pan, even though it may not be consumed as is. The dispute centered on the classification post the eight-digit tariff regime change. Referring to a Supreme Court judgment, the Tribunal held that Kimam falls under "preparation containing chewing tobacco," classifiable under 24039920. Therefore, the demand under Section 4A was deemed sustainable.

The Commissioner (Appeals) accused the appellants of suppression for not consulting the department on classification doubts. However, the Tribunal found no evidence of suppression and directed the demands to be restricted to the normal time limit. The imposition of penalties was deemed unjustified due to the classification dispute. Consequently, the appeals were partly allowed, with the decision pronounced on 07.08.2017.