2004 (1) TMI 159 - AT - Central Excise

Summary

Issues:
Classification of pan masala containing tobacco under Heading 21.06 or Heading 2404 of the Schedule to the Central Excise Tariff Act.

Analysis:
The two appeals filed by M/s. Gahoi Foods Pvt. Ltd. revolve around the classification of pan masala containing tobacco under the Central Excise Tariff Act. The appellants initially classified the product under Heading 21.06 but later sought to reclassify it under Heading 2404 based on a Supreme Court judgment regarding gutkha as a tobacco product. The Assistant Commissioner and the Commissioner (Appeals) upheld the original classification under Heading 21.06. The key argument presented by the appellants was that the Supreme Court's decision and subsequent changes in the tariff classification supported their claim for classification under Heading 2404.

The appellant's representative highlighted the Supreme Court's ruling in Kothari Products Ltd. case, which established gutkha as a tobacco product falling under a specific entry in the Additional Duties of Excise Act. They emphasized the importance of judicial discipline in following higher court orders and pointed out the Parliament's amendment to the tariff classification in the 2001-2002 Budget. This argument aimed to demonstrate that pan masala containing tobacco should be classified under Heading 24.04 rather than Heading 21.06.

On the contrary, the Revenue argued that the Supreme Court's decision in the Kothari Products Ltd. case pertained to the Sales Tax Act and did not directly impact the classification under the Central Excise Tariff Act. They maintained that at the relevant time, pan masala containing tobacco was correctly classified under Heading 2106, as per the Central Excise Tariff Act.

Upon considering both parties' submissions, the Tribunal examined the relevant provisions of the Central Excise Tariff Act. It was noted that before the Budget of 2001, pan masala containing tobacco fell under Heading 2106. However, post the Budget presentation, this product was covered under Heading 24.04. The Tribunal acknowledged the Supreme Court's authoritative interpretation in the Kothari Products Ltd. case, which established gutkha as a tobacco product subject to specific excise duties. Under Article 141 of the Constitution, the law declared by the Supreme Court holds precedence. Therefore, the Tribunal concluded that pan masala containing tobacco, commonly known as gutkha, should be classified under Chapter 24 of the Central Excise Tariff, aligning with the Supreme Court's ruling. Consequently, both appeals were allowed in favor of the appellants.