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TMI Blog2019 (7) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... . The appellant's submission is that the tobacco content in gudakhu manufactured by them is about 20% while molasses accounts for about 50-60%. Gudakhu is commercially available in a paste form as well as in a granular form. While the Gudakhu in paste form is used orally as toothpaste, the substance in a granular form is used for smoking as hookah. The appellant in the instant case is engaged in the manufacture of gudakhu in paste form only. 2.1. The appellant used to pay Central Excise Duty, the applicable additional duties and state VAT at the prevalent rates in the pre-GST regime. The appellant also used to pay NCCD (National Calamities Contingency Duty) in addition to Central Excise and VAT during the pre-GST era classifying their product under tariff heading '2403 99 90'. 2.2. In the GST regime 'compensation cess' is payable for the product manufactured by the appellant in addition to the GST. The appellant contended that he is made to pay compensation cess at a higher rate due to wrong classification and therefore approached the Odisha Authority for Advance Rulings to properly classify the said product in the GST era. 3. Accordingly, the Appellant sought Advance Ruling bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aini, gutkha and zarda etc.; it also includes cut tobacco, tobacco extracts and snuffs which do not belong to the family of chewing tobacco. The sub-heading which reads as '2403 99 - other' bears the essential character of a residual entry so as to classify all other forms of tobacco not specified in the preceding sub-headings under tariff heading 2403. No doubt it classifies certain known chewing tobacco products under the sub-heading but, it also includes cut tobacco, tobacco extracts, snuff and other which are not chewing tobacco. The entry 'other' appearing against 2403 99 90 is intended to cover all other tobacco products not specified under the preceding subheadings under chapter 24 and also not specified under the tariff items specified under the sub-heading 2403 99. Thus, the contention of the appellant that a tariff item can be classified under the sub-heading 2403 99 only if the said item belongs to the family of chewing tobacco like 'gutkha', zarda or khaini is totally misplaced in as much as the said sub-heading also specifies other tobacco products such as cut tobacco, tobacco extracts and snuff etc. Gudakhu as manufactured by the appellant is certainly not classifiabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Department and to avoid litigations paid the duty on 2403 99 90. iii. That, upon introduction of GST, the appellant further came to understand that he is required to pay a higher Compensation Cess by classifying his product under CETH 2403 99 90 while the product 'gudakhu' squarely fell under the code 2403 11 10. His stand is substantiated by opinions from legal experts and even an opinion from a leading GST Journal which clarified that the impugned product falls under the code 2403 11 10 and not under 2403 99 90. b. Vide Para no.4.4 of the order of the Hon'ble AAR, the authority has opined that the product covered under CETH 2403 1 1 10 is tobacco intended for smoking in a water pipe only. In this regard the appellant submitted as follows:- i. That, the Ld. AAR had failed to appreciate the point raised by the appellant that the Gudakhu in granular form which is meant for smoking is no different than the Gudakhu manufactured by the appellant in a paste form which is used to apply on the teeth, but not chewing. The appellant had even furnished a case law of the Hon'ble High Court of Odisha in the case of 'State of Orissa vs. Samsuddin Akbar Khan & Co' reported in 35 STC 17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s merely used as a toothpaste. 6.0. During the course of hearing on 03.06.2019, Shri Bhagban Panda, Advocate on behalf of the Appellant reiterated the points as stated in its Grounds of Appeal. They have also stated that case law of Hon'ble High Court of Orissa in the Samsuddin Akbar Khan & Co. as relied upon by them has neither been taken into consideration nor distinguished by the Authority for the Advance Ruling. 7.0. We have given careful consideration to the submissions of the appellants. We find that the issue involves classification of 'Gudakhu' manufactured by the appellant. Before proceeding further, we deem it fit to discuss the relevant provisions of classification under GST. 7.1. Rate of tax for goods under GST has been notified in 6 separate schedules contained in Notification No. 1/2017-C.T. (Rate) and another Schedule for Nil Rated Goods in Notification No. 2/2017-C.T. (Rate). Similarly, rates of Compensation Cess for specified goods has been notified vide Notification No. 1/2017 -Compensation Cess (Rate), dated 28-06-2017. All the above notifications issued by the Government contain an explanation to the following effect. "(i) In this schedule, "tariff item", " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Preparations containing snuff 2403 99 60 --- Tobacco extracts and essence 2403 99 70 --- Cut-tobacco 2403 99 90 --- Other 7.3.1. We also deem it proper to re-produce the relevant sub-heading note of Chapter 24, which is as follows. "Sub-heading Note: For the purposes of sub-heading 2403 11, the expression "water pipe tobacco" means tobacco intended for smoking in a water pipe and which consists of a mixture of tobacco and glycerol, whether or not containing aromatic oils and extracts, molasses or sugar, and whether or not flavoured with fruit. However, tobacco free products intended for smoking in a water pipe are excluded from this sub-heading." 7.3.2. In the Customs Tariff, goods of the same class have been grouped together. Also, the residuary items have been provided separately for each class of goods under each chapter. The Notes to the Tariff, giving explanation to the scope and ambit of the respective chapter have statutory backing. In the appeal petition, the appellant has stated that "Gudakhu" manufactured by them is intended to be used as a tooth paste. No-where, the appellant contends that the "Gudakhu" being dealt by them are intended for smoking, which i ..... 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