2018 (10) TMI 79 - AT - Central Excise

Classification of goods - chewing tobacco - Zarda - classified under Central Excise Tariff Sub-Heading as 24039910 and under Central Excise Tariff Heading 24039930 respectively or otherwise - the entire case of the Revenue is based upon the declaration of the assessee without making any efforts to find out as to what exactly was being manufactured by the appellant. If the Deputy Commissioner did not approve the declaration filed by the assessee, he was under obligation to make enquiries including physical verification in terms of Rule 6(2) of the Chewing Tobacco Rules, 2010. - whether the product being manufactured by the appellant was chewing tobacco or Jarda scented tobacco? Held that - Admittedly in the present case the appellants have marketed their product as chewing tobacco and not as Jarda scented tobacco - Revenue has neither disputed the manufacturing process undertaken by the appellant which shows non-use of any scent or perfume in the product nor have made any enquiries from the dealers, shopkeepers or the ultimate consumers of the product. No evidence of procurement of Perfume or Scent as raw material and then use in the product stands produced by the Revenue. No employee of the assessee was examined so as to establish that perfume being used for manufacture of their final product. As such the said factor of marketing of the goods as chewing tobacco leads us to inevitable conclusion apart from other reasons as discussed above, that the product in question is admittedly chewing tobacco and not Jarda scented tobacco. An identical issue was the subject matter of the Tribunal decision in the case of Urmin Products Pvt.Ltd. v. Commisioner of Central Excise, Ahmedabad 2010 (3) TMI 461 - CESTAT, AHMEDABAD , where it was held that both sides not clearly shown whether product Chewing Tobacco or Zarda Scented Tobacco. Label calls the product as Flavoured Chewing Tobacco, no Zarda Scent having been added and not sold as Zarda Scented Tobbaco, appellant s claim that the product is Flavoured is Chewing Tobbaco has to be accepted. The ratio of the said decision is fully applicable to the facts of the present case. We also note that the appellant s request for getting the sample drawn and tested by CRCL was not accepted by the Revenue and in the absence of any such test reports or expert s opinion, the Revenue s endeavour to hold that the goods being manufactured by the appellant are not chewing tobacco, but Jarda scented tobacco cannot be appreciated. No reason stands advanced by the Revenue for not accepting the appellant s request and get the samples tested for finding out the exact nature of the product. Appeal allowed.

Issues Involved:
1. Classification of the product as either "chewing tobacco" or "Jarda scented tobacco."
2. Validity of revised declarations filed by the appellant.
3. Determination of duty liability based on product classification.
4. Appropriateness of penalties and interest imposed on the appellant.

Detailed Analysis:

1. Classification of the Product:
The primary issue revolves around whether the product manufactured by the appellant should be classified under heading 24039910 as "chewing tobacco" or under heading 24039930 as "Jarda scented tobacco." The appellant initially classified their product under both headings but later clarified that their product is chewing tobacco, which does not include any scent, and thus should not be classified as Jarda scented tobacco. The Tribunal noted that "chewing tobacco" and "Jarda scented tobacco" are distinct products and that Zarda, in its unperfumed form, should be classified as chewing tobacco. The appellant's manufacturing process, which does not involve the use of any scent, supports this classification.

2. Validity of Revised Declarations:
The appellant filed revised declarations for the months of June to September 2015, classifying their product as chewing tobacco. The Assistant Commissioner, however, continued to treat the product as Jarda scented tobacco based on the initial declaration. The Tribunal found that the appellant's revised declarations should be accepted, especially since the initial misclassification was a mistake. The Tribunal emphasized that a mistake in classification should be rectifiable and that the appellant cannot be expected to be an excise expert.

3. Determination of Duty Liability:
The Assistant Commissioner determined the appellant's duty liability by treating the product as Jarda scented tobacco, resulting in a higher duty rate. The appellant paid the duty under protest. The Tribunal found that the Revenue did not make sufficient efforts to verify the actual nature of the product, such as conducting physical verification or testing samples. The Tribunal concluded that the appellant's product is indeed chewing tobacco, and thus, the differential duty imposed on the basis of it being Jarda scented tobacco is not justified.

4. Appropriateness of Penalties and Interest:
The Commissioner imposed a penalty of ?5,74,77,000 along with interest on the appellant. The Tribunal found that the penalties and interest were not warranted as the appellant had correctly classified their product as chewing tobacco and had paid the appropriate duty. The Tribunal set aside the penalties and interest, noting that the appellant's request for sample testing was not heeded by the Revenue, which further weakened the Revenue's case.

Conclusion:
The Tribunal allowed all five appeals, setting aside the orders of the Commissioner(Appeals) and the Commissioner. The Tribunal concluded that the appellant's product should be classified as chewing tobacco under heading 24039910, and the differential duty, interest, and penalties imposed on the basis of it being Jarda scented tobacco were unjustified. The Tribunal's decision was based on the appellant's manufacturing process, the lack of scent in the product, and the absence of any substantial evidence from the Revenue to prove otherwise.

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