2024 (3) TMI 974 - AT - Central Excise

Principles of Estoppel against law - Classification of goods - handmade branded unmanufactured tobacco under the brand name of Rajhans - classifiable under CETH 24039910 or not - demand confirmed on the ground that appellant had agreed to classification of the said products as manufactured product - purchase of certain perfumeries etc. for mixing the same - HELD THAT - The finding of the Commissioner (Appeals) to the effect that appellant has admitted the product as manufactured tobacco cannot be the reason for holding against them. It is settled in law that there cannot be any estoppel against the law in the matter of classification. Reliance placed in the case of ELSON MACHINES PVT. LTD. VERSUS COLLECTOR OF CENTRAL EXCISE 1988 (11) TMI 107 - SUPREME COURT where it was held that Plainly there can be no estoppel against the law. The claim raised before us is a claim based on the legal effect of a provision of law and, therefore, this contention must be rejected. No evidence has been brought on record either in the impugned order or in the Order-in-Original to show that the goods cleared by the appellant were classifiable under CETH 2403. What operation was undertaken, what was the nature of the products has not been examined and recorded. Nothing is available on record as to what made the finished goods cleared by the appellant during this period different from what was being cleared by them in past and post the brief period of February 2012 to August 2012. The impugned order itself hold that the products produced and cleared by the appellant during the entire period of demand was unmanufactured tobacco. In the case of YOGESH ASSOCIATES VERSUS COMMISSIONER OF CENTRAL EXCISE, SURAT-II 2005 (9) TMI 173 - CESTAT, MUMBAI Bombay Bench has held The explanatory notes to HSN especially when pari materia are binding to arrive at the classification and the law on this issue is well settled. We, therefore have no reason to take out the product impugned in these appeals, from the Heading 2401.10 as arrived by us and place it elsewhere under Chapter 24. There are no merits in the impugned order to this extent - appeal allowed.

Summary

Issues Involved:
1. Classification of goods as unmanufactured or manufactured tobacco.
2. Demand of differential duty and imposition of penalty.

Summary:

Issue 1: Classification of Goods
The primary issue was whether the appellant's product, branded as 'Rajhans', should be classified as unmanufactured tobacco or manufactured tobacco under CETH 24039910. The appellant argued that their product was unmanufactured tobacco, only adding flavors from February 2012 to August 2012. The Commissioner (Appeals) upheld this classification for the specified period, citing purchase invoices, ledger accounts, and balance sheets as evidence. However, the Tribunal noted that no substantial evidence was provided to prove that the goods were classifiable under CETH 2403 for the entire period. The Tribunal emphasized that there cannot be any estoppel against the law in matters of classification, referencing several judgments including Elson Machines Pvt. Ltd. and Jayaswal Neco Ltd. The Tribunal concluded that the treatments and processes conducted by the appellant did not transform raw tobacco into manufactured tobacco, referencing the case of Yogesh Associates and the HSN General notes to Chapter 24.

Issue 2: Demand of Differential Duty and Imposition of Penalty
A show cause notice was issued to the appellant demanding differential Central Excise duty amounting to Rs. 13,74,832.00 and imposing a penalty under \u/s\ 11AC of the Central Excise Act, 1944 for willful misstatement and suppression of facts. The Commissioner (Appeals) upheld the demand and penalty only for the period from 09.02.2012 to 31.08.2012, as admitted by the appellant. The Tribunal, however, found no merit in the impugned order to sustain the demand and penalty for this period, as the department failed to provide positive evidence that flavors were used throughout the entire period in question. The Tribunal also highlighted that the addition of flavors or moistening substances did not necessarily classify the product as manufactured tobacco.

Conclusion:
The Tribunal allowed the appeal, setting aside the impugned order to the extent it upheld the demand and penalty for the period from 09.02.2012 to 31.08.2012. The Tribunal found that the appellant's product remained classified as unmanufactured tobacco, as the processes undertaken did not result in an irreversible change to the raw tobacco.