2022 (2) TMI 357 - AT - Central Excise

Classification of goods - branded chewing tobacco - to be classifiable under Central Excise Tariff Heading 24039910 or as Jarda Scented Tobacco classifiable under 24039930 - basis of capacity of production as per Section 3A of Central Excise Act read with Chewing Tobacco and Unmanufactured Tobacco packing Machines (Capacity Determination and Collection of Duty) Rules, 2010 - HELD THAT - It is evident from the test report dated 14.07.2015, that there is no presence of any odiferous substance. Accordingly, we find that the product is branded chewing tobacco , there is no scope for Revenue for drawing any other conclusion. The findings is also fortified by the Larger Bench ruling of this Tribunal in the case of M/S. FLAKES-N-FLAVOURZ VERSUS COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH 2014 (9) TMI 664 - CESTAT NEW DELHI (LB) , wherein it has been held that the products jarda scented tobacco and flavoured chewing tobacco are different. It is further found that the Court below have erred in obtaining opinion of the chemical examiner subsequently in the year, 2019 behind the back of the appellant assessee, and have relied on the same in a mechanical manner without application of mind and without giving proper opportunity to the appellant. The appellant have manufactured branded chewing tobacco classifiable under heading 24039910 w.e.f. 01.06.2015. Further, the duty shall be payable accordingly with respect to number of packing machines operated from time to time, for which there is no dispute - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Classification of the product manufactured by the appellant.
2. Determination of production capacity and duty liability based on classification.
3. Validity and interpretation of test reports.
4. Procedural fairness in obtaining and relying on subsequent opinions.

Issue-wise Detailed Analysis:

1. Classification of the Product:
The primary issue is whether the appellant's product during the period 01.06.2015 to 31.03.2016 should be classified under Central Excise Tariff Heading (CETH) 24039910 as "branded chewing tobacco" or under CETH 24039930 as "jarda scented tobacco." Initially, the product was classified as "branded chewing tobacco" under CETH 24039910, and the appellant declared a shift to manufacturing "jarda scented tobacco" under CETH 24039930 from 01.04.2015. However, from 01.06.2015, the appellant reverted to producing "branded chewing tobacco." The classification dispute arose due to differing test reports and subsequent opinions on the nature of the product.

2. Determination of Production Capacity and Duty Liability:
The production capacity was determined based on the type of tobacco being manufactured, with the annual capacity for three machines calculated as 25,15,96,800 pouches for "jarda scented tobacco" with an MRP of ?1.00 per pouch for the financial year 2015-16. The appellant executed the required bond and security deposit. Upon reverting to "branded chewing tobacco," the appellant filed a fresh declaration and requested the sealing of three out of five machines. The Assistant Commissioner initially classified the product as "jarda scented tobacco" for the entire period, affecting the duty liability.

3. Validity and Interpretation of Test Reports:
Two key test reports were involved:
- The first report dated 04.06.2015 (sample drawn on 01.04.2015) indicated the presence of "pleasant odour" and classified the product as "jarda scented tobacco."
- The second report dated 14.07.2015 (sample drawn on 09.06.2015) described the product as "branded chewing tobacco" with no mention of "pleasant odour."

The Assistant Commissioner relied on a subsequent opinion from CRCL obtained in 2019, which concluded that both samples were similar and classified both as "jarda scented tobacco." This opinion was contested by the appellant as it was obtained without their knowledge and contradicted the earlier test report.

4. Procedural Fairness in Obtaining and Relying on Subsequent Opinions:
The appellant argued that the subsequent opinion of the chemical examiner was obtained behind their back and should not have been relied upon. The Tribunal noted that the classification should be based on the test report dated 14.07.2015, which clearly indicated the absence of any odiferous substance, thus supporting the classification as "branded chewing tobacco."

Conclusion:
The Tribunal found that the test report dated 14.07.2015 did not indicate the presence of any odiferous substance, supporting the classification of the product as "branded chewing tobacco" under CETH 24039910 from 01.06.2015. The Tribunal also criticized the lower authorities for relying on the subsequent opinion obtained without the appellant's knowledge. Consequently, the Tribunal set aside the impugned order and allowed the appeal, directing that the duty be payable based on the classification of "branded chewing tobacco" with consequential benefits to the appellant.