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2022 (8) TMI 826 - AT - Central ExciseClassification of the goods manufactured by the appellants - chewing tobacco - classifiable under heading 24039910 as claimed by the appellants or its jarda scented tobacco classifiable under heading 24039930 as claimed by the revenue? - HELD THAT - There is no indication in the test report as to what is the definition of jarda scented tobacco and chewing tobacco and under which parameter test of sample conducted viz. Moisture content, Nicotine, Ash etc. as provided in the BIS specification - the conclusion arrived at by the Chemical Examiner, CRCL that sample has the characteristics of Jarda Scented Tobacco in the test reports (supra) is without any basis and since the CRCL report which has been relied upon by the revenue for changing the classification is not as per the BIS specification, the reliance placed on it by revenue as well as by the adjudicating authority for changing the classification is totally misplaced. The chemical examiner has failed to provide the parameters set out for jarda scented tobacco during her cross-examination. Apart from the test report, the revenue has not adduced any evidence to support its proposal to classify the impugned product as jarda scented tobacco and not chewing tobacco. In the present case neither in the show cause notice nor before the adjudicating authority, it is the case that the appellant have used jarda scent in their product. Even the statements relied upon by the department nowhere mention that jarda scent has been used by the appellant in their product. The learned commissioner mistook the pleasant odour as mentioned in CRCL test report as scent which is totally different from jarda scent , an essential ingredient for manufacturing jarda scented tobacco - the learned commissioner has erred in not resorting to the Trade Parlance Test in the facts of the present case by erroneously observing that as the product can be classified as per the contents, there is no need to resort to the parlance test. In Trade parlance i.e. from packaging and presentation, sales and distribution and till its consumption by the ultimate consumer the product in issue is known as chewing tobacco only. The learned commissioner has also overlooked that the contents of the product in dispute have been prescribed under the Tariff and therefore the classification cannot be based on contents. Admittedly the pouches of the products in including presentation, sales, distribution and usage issue described the product as chewing tobacco and in Trade Parlance it is known as Chewing Tobacco only. The manufacturer, distributor and the consumer, everyone understands and consume the product as chewing tobacco only. The Tribunal in the matter of M/S. FLAKES-N-FLAVOURZ VERSUS COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH 2014 (9) TMI 664 - CESTAT NEW DELHI (LB) has held that in the absence of anything to the contrary, the product in question has to be treated as per the description given by the manufacturer on outer cover of pouch, common parlance and established practice as the chewing tobacco or zarda scented tobacco have not been defined in the tariff. In view of the facts of this case the classification given by the appellant is proper and hence the impugned order is set aside - Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Classification of the goods manufactured by the appellants. 2. Determination of Central Excise duty, interest, and penalty. 3. Validity of test reports and their compliance with BIS specifications. 4. Correctness of the department's reliance on CRCL reports for classification. 5. Application of Trade Parlance Test. 6. Calculation of Central Excise duty based on machine operation. Detailed Analysis: 1. Classification of the Goods Manufactured by the Appellants: The primary issue was whether the product should be classified as "chewing tobacco" under heading 24039910 or "jarda scented tobacco" under heading 24039930. The appellants initially classified their product as jarda scented tobacco but changed it to chewing tobacco based on the department's instructions and subsequent CRCL test reports. The department later insisted on reclassifying the product as jarda scented tobacco based on new test reports. 2. Determination of Central Excise Duty, Interest, and Penalty: The department issued a show cause notice demanding Rs. 4,47,72,842/- as Central Excise duty, interest, and penalty, invoking the extended period of five years under Section 11A of the Central Excise Act, 1944. The Adjudicating Authority confirmed the demand and imposed penalties on the appellants. 3. Validity of Test Reports and Their Compliance with BIS Specifications: The CRCL test reports were central to the department's case. However, the reports only mentioned the calcium content and pleasant odor, without addressing the four mandatory characteristics of jarda tobacco as per BIS specifications (Moisture Content, Nicotine, Total Ash, Acid Insoluble Ash). The Chemical Examiner's cross-examination revealed that the tests did not follow the BIS standards, making the CRCL reports unreliable for classification purposes. 4. Correctness of the Department's Reliance on CRCL Reports for Classification: The department's reliance on CRCL reports was found to be misplaced. The CRCL itself stated that it should not be asked to classify goods. The department's repeated attempts to get a favorable classification from CRCL cast doubt on the integrity of the process. The Tribunal held that the CRCL reports did not provide a valid basis for reclassification. 5. Application of Trade Parlance Test: The Tribunal emphasized the importance of the Trade Parlance Test, which determines the classification based on how the product is understood in the trade by dealers and consumers. The product was consistently described and known as "chewing tobacco" in the market. The Tribunal cited Supreme Court rulings that support using the common understanding of a product for classification in fiscal statutes. 6. Calculation of Central Excise Duty Based on Machine Operation: The appellants disputed the calculation of duty, arguing that the department assumed full-month operation of packing machines, while the machines were often sealed and de-sealed. The department's calculation method was challenged, but the Tribunal did not provide a detailed ruling on this specific issue in the summary. Conclusion: The Tribunal concluded that the department failed to prove its case for reclassification as jarda scented tobacco. The CRCL reports did not comply with BIS specifications, and the department did not provide sufficient evidence beyond the reports. The product was known as chewing tobacco in trade parlance, supporting the appellants' classification. The impugned order was set aside, and the appeal was allowed with consequential relief as per law.
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