2022 (8) TMI 1050 - AT - Central Excise

Classification of goods - Zarda - to be 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 - If any odoriferous substance is added to chewing tobacco it cannot change the classification form chewing tobacco to zarda scented tobacco. Examination of test reports in the light of BIS standards - HELD THAT - The test for moisture content percentage and Nicotin percentage are very essential to arrive at the conclusion whether the sample is of chewing tobacco or of zarda, but none of these characteristics have been referred to or dealt with by the Chemical Examiner, CRCL in her report although she had referred to the characteristics given in the Table given in BIS specification in her statement - the conclusion arrived at by the Chemical Examiner, CRCL that sample has the characteristics of Jarda Scented Tobacco in the twelve reports of the 12 samples drawn on 3.12.2015 which have also been relied upon by the department while demanding higher rate of duty from the appellant, is without any basis. There is also 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. The show cause notice is mainly based upon the test reports, opinion of Chemical Examiners, CRCL and also of the statements which uses the words compound . Whereas the learned commissioner while changing the classification substantially relied upon the statements of Director/Production Manager/Manager and came to the conclusion that since the appellants uses scent in their product therefore it can only be classified as zarda scented tobacco, which is totally contrary to the description by Indian Standard issued by BIS - In the instant matter neither in the show cause notice nor before the adjudicating authority or before us 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 grossly erred in completely ignoring the opinion of Jt. Director, CRCL in re-test of the same samples whose earlier test reports were relied upon by the revenue in changing the classification - The Director, CRCL is the only appellate authority in respect of re-test of samples and as per records no appeal has been made to the Director, CRCL against the opinion given by the Jt. Director, CRCL and therefore the opinion of Jt. Director, CRCL is final and it cannot be brushed aside just because it is not in favour of the department. In our view, the opinion of Jt. Director, CRCL is in line with Indian Standard prescribed by BIS. He did not classify the goods but gave his technical opinion that the sample is of chewing tobacco. The Revenue has not produced any material evidence on record to support the change of classification by them from Chewing Tobacco under heading 24039910 to Jarda Scented Tobacco under heading 24039930 - the learned Commissioner has also not applied his independent mind in confirming the change in the classification and rather ignored the re-test report of the Jt. Director, CRCL which is in line with the parameters prescribed by BIS. Appeal allowed.

Summary

Issues Involved:
1. Classification of the product as Chewing Tobacco or Jarda Scented Tobacco.
2. Validity of the test reports and their interpretation.
3. Authority of the Chemical Examiner and the Joint Director, CRCL, in classifying the product.
4. Application of common parlance test.
5. Burden of proof and the role of BIS standards in classification.

Detailed Analysis:

1. Classification of the Product:
The primary issue was whether the product is classified as Chewing Tobacco under heading 24039910 or Jarda Scented Tobacco under heading 24039930. The appellants argued that their product is Chewing Tobacco, while the department classified it as Jarda Scented Tobacco based on test reports indicating the presence of flavorants and pleasant odor.

2. Validity of the Test Reports:
The department drew multiple samples and sent them for testing to CRCL. Initial reports indicated characteristics of Jarda Scented Tobacco, but a re-test by the Jt. Director, CRCL, concluded that the sample was Chewing Tobacco. The learned Commissioner relied on the initial reports and statements from the appellants' representatives, which mentioned the use of compounds, interpreted as scent. However, the re-test report, which was not initially provided to the appellants, stated that the sample did not contain added lime and was classified as Chewing Tobacco.

3. Authority of the Chemical Examiner and the Joint Director, CRCL:
The appellants questioned the authority of the Chemical Examiner, Gr.-II, CRCL, to classify the product, arguing that only the Jt. Director, CRCL, has the authority to give technical opinions. The Jt. Director's re-test report supported the appellants' classification of the product as Chewing Tobacco. The learned Commissioner's reliance on the Chemical Examiner's reports was deemed misplaced as the Jt. Director's opinion should be final and binding.

4. Application of Common Parlance Test:
The learned Commissioner did not apply the common parlance test, which is crucial in the absence of statutory definitions. The product was sold and known in the market as Chewing Tobacco. The Tribunal emphasized that classification should be based on how the product is understood in trade and by consumers, aligning with the Supreme Court's precedent that common parlance should guide classification in the absence of precise statutory definitions.

5. Burden of Proof and Role of BIS Standards:
The burden of proof lies with the department to justify the reclassification. The Tribunal noted that BIS standards prescribe specific parameters for Chewing Tobacco and Jarda Scented Tobacco, including moisture and nicotine content. The department's test reports did not consistently address these parameters. The Tribunal highlighted that the department failed to provide sufficient evidence to support the change in classification and did not follow the BIS standards adequately.

Conclusion:
The Tribunal set aside the impugned order, concluding that the product should be classified as Chewing Tobacco under heading 24039910. The re-test report by the Jt. Director, CRCL, which aligned with BIS standards, was deemed accurate and final. The learned Commissioner's reliance on the Chemical Examiner's reports and the interpretation of compounds as scent was found to be incorrect. The appeals were allowed with consequential relief as per law.