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2019 (3) TMI 782 - AT - Central ExciseClassification of goods - Scented Betel Nut 'Nizam Pakkku' - Whether classified under CETH 21069030 attracting rate of 16%, as contended by the department or under CETH 08029019 attracting Nil rate of duty, as contended by the assessee? - Held that - From the samples of the product at various stages submitted during the course of hearing, we find that the assessee will start with betel nut split as raw material, convert it and adding flavourings like cardamom etc. to arrive at the end product. Possibly, final product would only look as betel nut in crushed form. It is also interesting to note that the final product is marketed in pouches with the brand name / description Nizam Pakku (in Tamil) and Betel Nut (in English). It is therefore evident that the asssseee markets this product only as betel nut and not as supari. It therefore appears to reason that in the market, this product is only known as pakku or betel nut and not as supari. The classification of the product cannot be dragged into Chapter 21 of CETA and, in particular, sought to be classified under CETH 21069030 as betel nut product known as suprai. In consequence the product satisfying the requirements of Chapter Note 3 (b) of Chapter 8 will therefore necessarily fall under 08029019 as claimed by the assessee. The impugned order dt. 17.02.2012 upholding the classification of Scented Betel Nut under CETH 21069030 as against CETH 08029019 claimed by the assessee, cannot be sustained and is therefore set aside - appeal allowed - decided in favor of appellant.
Issues Involved:
1. Classification of "Nizam Pakku" under CETH 21069030 or CETH 08029019. 2. Applicability of duty rates based on classification. 3. Validity of demands raised by the Department. Detailed Analysis: 1. Classification of "Nizam Pakku": The primary issue was whether "Nizam Pakku," a scented betel nut product, should be classified under CETH 21069030, attracting a duty rate of 16%, or under CETH 08029019, attracting a 'Nil' rate of duty. The Department argued that the product should be classified under CETH 21069030, citing that the processes involved, such as adding sweetening agents, amounted to "manufacture" as per Note 6 to Chapter 21 of CETA. The assessee contended that the product retained the essential character of betel nut and should be classified under Chapter 8, supported by Note 3(b) of Chapter 8, which allows certain treatments like moderate heat and addition of vegetable oil without changing the classification. 2. Applicability of Duty Rates Based on Classification: The Department issued several Show Cause Notices (SCNs) demanding duty based on the classification under CETH 21069030. The assessee argued that the product should attract a 'Nil' rate of duty under CETH 08029019, as it retained the character of betel nut despite undergoing minor processes. The Tribunal examined the changes in tariff entries over the years and the definitions provided in Chapter 8 and Chapter 21, concluding that the product did not lose its essential character as betel nut and thus should be classified under CETH 08029019. 3. Validity of Demands Raised by the Department: The Department's demands were based on the classification of the product under CETH 21069030. However, the Tribunal found that the product should be classified under CETH 08029019, which attracts a 'Nil' rate of duty. Consequently, the demands raised by the Department were not sustainable. The Tribunal relied on the Supreme Court's judgment in Crane Betel Nut Powder Works, which held that the process employed did not change the nature of the end product, and thus, it retained its classification under Chapter 8. Conclusion: The Tribunal set aside the order upholding the classification of the product under CETH 21069030 and allowed the assessee's appeal, classifying the product under CETH 08029019. Consequently, the demands raised by the Department were dropped, and the Department's appeal was dismissed. The Tribunal emphasized that the product retained its essential character as betel nut and should be classified accordingly, following the Supreme Court's precedent in similar cases.
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