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2020 (7) TMI 108 - AAR - GSTClassification of goods - Chewing Tobacco - product intended for manufacture - applicable rate of Compensation Cess - HELD THAT - The cutting process prescribed in this note is along with the remarks but not tobacco ready for smoking . This explanation of HSN clearly brings out the classification in the Customs tariff at 240120, which covers tobacco products for further manufacture and not for consumption as such as in the case of the applicant. From the explanation given by ICAR-CTRI Central Tobacco Research Institute and Explanatory General notes to chapter 24, it is seen that only tobacco which is cured at farm level for before supply to market would fall under this classification as Unmanufactured tobacco . The fermentation that the applicant claims is by adding jaggery water does not get covered under this. As seen in the the Explanatory General notes to chapter 24, only natural fermentation is covered. Therefor, the product of the applicant doesnot fall under CTH 2401. The product in question is a processed one in as much as the same is cured in jaggery water, undergoes the process of stalking and semi-drying, then cut into small pieces in minced form which is stored in a separate area for a few hours/days on which some natural/agricultural preservatives for maintaining the product in wet form is applied, packed in pouches/pottlams for supply. Also, the test reports of the chewing tobacco- before processing and after processing furnished by the applicant shows that the chemical parameters Moisture, total ash and acid insoluble ash are different in % content, indicating the product has been subjected to processing. Therefore, the product of the applicant does not merit classification as unmanufactured tobacco under CTH 2401 but rightly classifiable under CTH 2403 9910 as Chewing tobacco . Rate of Compensation cess applicable to the Product - HELD THAT - The rate of Compensation cess is provided vide Notification no. 01/2017-Compensation Cess/rate) dated 28.06.2017 and Sl.No. 26 provides the Compensation Cess Rate as 160% for the product chewing tobacco which is supplied without lime tube .
Issues Involved:
1. Classification of the product intended for manufacture. 2. Applicable rate of Compensation Cess. Detailed Analysis: Classification of the Product Intended for Manufacture Applicant's Argument: The applicant argued that their product, which involves purchasing raw dried tobacco leaves, removing stems and dust particles, curing with jaggery water, cutting into small pieces, and packing in pouches, should be classified under Chapter sub-heading 24012090 as "Unmanufactured tobacco partly or wholly stemmed or stripped - Others". They emphasized that the product does not undergo any change in its essential character and remains in its original nature, thus fitting the definition of unmanufactured tobacco. They contended that the term "chewing tobacco" is not explicitly defined in the tariff and their product, being raw chewing tobacco without any additives, should be classified under Chapter 2401. Authority's Analysis: The Authority examined the manufacturing process and noted that the applicant's product involves curing with jaggery water, cutting, and packing, which are processes that alter the essential character of the tobacco leaves. The Authority referred to the HSN Explanatory Notes and the ICAR-CTRI Central Tobacco Research Institute's information on tobacco curing, which indicated that curing and treatment processes are typically carried out at the farm level before being sold in the market. The Authority concluded that the applicant's product, having undergone additional processing, does not qualify as unmanufactured tobacco under Chapter 2401. Conclusion: The product intended to be manufactured by the applicant is classified under CTH 2403 9910 as "Chewing Tobacco". The Authority determined that the product is universally known as chewing tobacco, given its curing, cutting, and packing processes, and is intended for direct consumption. Applicable Rate of Compensation Cess Applicant's Argument: The applicant argued that their product should attract a lower rate of Compensation Cess applicable to unmanufactured tobacco. They cited various case laws and previous Advance Rulings to support their classification under Chapter 2401. Authority's Analysis: The Authority referred to Notification No. 01/2017-Compensation Cess (Rate) dated 28.06.2017, which specifies the rates of Compensation Cess. According to the notification, the rate of Compensation Cess for chewing tobacco supplied without a lime tube is 160%. Conclusion: The applicable rate of Compensation Cess for the product intended to be manufactured by the applicant, classified under CTH 2403 9910 as "Chewing Tobacco", is 160% as per Sl. No. 26 of Notification No. 01/2017-Compensation Cess (Rate) dated 28.06.2017. Ruling: 1. The product intended to be manufactured by the applicant and supplied as 'Chewing tobacco' with the brand name 'Kavi cut tobacco' is classifiable under CTH 2403 9910- Chewing Tobacco. 2. The applicable rate of Compensation Cess is 160% as per Notification No. 01/2017-Compensation Cess (Rate) dated 28.06.2017.
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