2018 (5) TMI 6 - AT - Central Excise

Classification of goods - Kimam - w.e.f. 1-4-2006 the goods manufactured by the appellant were also notified for assessment on MRP basis under Section 4A. The dispute is with reference to classification w.e.f. 1-4-2006 - Department was of the view that the goods are liable to be classified as preparation containing chewing tobacco under 2403 99 20 - whether the impugned product is classifiable under heading 2403 99 20 as claimed by the department or under 2403 99 60 as claimed by the appellants? Held that - it can be nobody s case that if the impugned goods were covered under the expression preparation containing chewing tobacco at the time when the Supreme Court said they did, they would not be excludible from the said expression merely because of the passage of time. It is seen that under the eight digit tariff regime, preparations containing chewing tobacco are covered under tariff sub-heading 2403 99 20 - the impugned goods are thus classifiable under sub-heading 2403 99 20. Once the impugned goods are held classifiable under sub-heading 2403 99 20, their assessment admittedly has to be in terms of Section 4A ibid and therefore, prima facie, the impugned demand is sustainable on merit. Extended period of limitation - Held that - since there is nothing on record to substantiate the fact that appellant had suppressed any fact from the Department, the demands will need to be restricted to normal time limit. Penalty - Held that - There is no justification to impose any penalty, this being a classification dispute. Appeal allowed in part.

Summary

Issues involved: Classification of the product "Kimam" under the Central Excise Act, 1944 based on the new eight-digit tariff system introduced in 2005-06 and the subsequent assessment under Section 4A of the Act. Allegations of suppression by the appellants and the imposition of penalties.

Classification Issue Analysis:
The appellants argued that post the introduction of the eight-digit tariff system, their product should be classified under 2403 99 60 as "tobacco extracts and essence," while the department contended it should be under 2403 99 20 as "preparation containing chewing tobacco." The manufacturing process of Kimam involves soaking tobacco leaves, creating an extract mixed with spices, flavors, and tobacco, packed in containers. The dispute arose due to the change in tariff classification post-2005-06. The Supreme Court's judgment in a similar case classified Kimam as "preparation containing chewing tobacco," supporting the department's classification under 2403 99 20. The appellants' argument that Kimam is not chewing tobacco was refuted based on the Supreme Court's classification, leading to the conclusion that the goods fall under 2403 99 20 and are assessable under Section 4A.

Suppression Allegations Analysis:
The appellants denied suppression, stating they consistently filed returns showing the goods' classification under 2403 99 60, with no clandestine activities. However, the Commissioner (Appeals) found them guilty of suppression for not consulting the department despite no doubts expressed by the appellants. The Commissioner's decision was challenged, emphasizing that paying duty under Section 4 indicated no intention to deceive. The Tribunal concurred that there was no evidence of suppression, restricting the demands to the normal time limit and negating the need for penalties due to the nature of the dispute.

Conclusion:
The Tribunal upheld the classification under 2403 99 20 as per the department's claim and the assessment under Section 4A. While acknowledging the absence of suppression, the demands were limited to the normal time frame, and no penalties were imposed due to the classification dispute nature. The appeals were partly allowed, providing clarity on the classification issue and the absence of suppression, ensuring fair treatment for the appellants in the judgment delivered on 7-8-2017.