2013 (9) TMI 19 - AT - Central Excise

Manufacture - Classification - tobacco products - entry No. 24039910 or 24012090 - Whether unmanufactured tobacco purchased in bulk and thereafter converted into small pouches by mixing it with a lime tube would amount to manufacture as defined under Section 2F of the Central Excise Act - Adjudicatory Authority was of the view that the tobacco pouches marketed by the assessee were covered by classification only No. 24039910 Section V Chapter 24 and the order of the adjudicating authority confirming the demand, interest and penalty on the ground that the demand raised by the department was barred by limitation was rejected - Held that - Once it was concluded that production of retail packs pouches amounts to manufacture the pouches produced and marketed by the respondent would fall under the sub-heading 2403 of Chapter 24, which relates to other manufactured tobacco, and particularly classification entry No. 24039910 - There was no infirmity in the order of Commissioner (Appeals) classifying the product in question under entry No. 24039910 - there was no merit in the appeal filed by the department. It was clear that repacking of raw tobacco from bulk packs to retail packs amounts to manufacture - the appellants were purchasing bulk tobacco from the market and repacking the same into small pouches along with lime tube - The process obviously amounted to deemed manufacture of retail pouches in view of chapter note 3 of Chapter 24 - Decided against Revenue.

Summary

Issues: Classification of goods under Chapter 24, Time-barred demand

Classification Issue:
The case involved a dispute regarding the correct classification of tobacco pouches marketed by the respondent under Chapter 24. The respondent argued that the goods should be classified under Entry No. 24012090, while the department contended that they fell under Entry No. 24039910. The Commissioner (Appeals) agreed with the department's classification, determining that the process of repacking raw tobacco into small pouches constituted manufacture under Chapter Note 3 of Chapter 24, leading to classification under Entry No. 24039910. The judgment upheld this classification based on the interpretation of relevant entries in Chapter 24 and the application of Chapter Note 3.

Time-barred Demand Issue:
The department's appeal also challenged the finding that the demand raised was time-barred. The department argued that the respondent had deceived them by misrepresenting facts in a letter seeking an addition to their central excise registration certificate. However, the Commissioner (Appeals) found that the respondent had honestly disclosed all relevant information, including raw materials and the manufacturing process, to the department. As a result, the Commissioner (Appeals) held that the demand was indeed time-barred under Section 11A of the Central Excise Act, as the show cause notice was issued after the one-year limitation period. The judgment dismissed the department's appeal on this issue, emphasizing the respondent's transparent disclosure and the absence of suppression or misrepresentation.

In conclusion, the judgment resolved the issues of classification and time-barred demand in favor of the respondent, upholding the Commissioner (Appeals) decision. The classification of the tobacco pouches under Entry No. 24039910 was deemed appropriate based on the manufacturing process, and the demand was considered time-barred due to the respondent's full disclosure of information to the department. Both the department's appeal and the respondent's cross-objection were dismissed, affirming the decisions made at the lower levels.