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TMI Blog2020 (10) TMI 814X X X X Extracts X X X X X X X X Extracts X X X X ..... on of rates of goods as per Notification No. 01/2017-C.T.(Rate) do not define what is Manufactured tobacco and Unmanufactured tobacco and hence we need to look into the interpretations of judiciary. Any process on the raw material resulting in emergence of a new product with a distinct name, character and use is defined as manufacture under GST. The appellant has stated to have purchased Raw dried tobacco leaves from wholesale dealers/farmers and then undertakes the process of grading, drying, dipping in jaggery water, stalking, semi-drying, mincing, subjecting to natural/agricultural preservatives, weighing and packing for supply. Thus, the raw material which is Raw dried tobacco leaves undergoes the above process and the end product Chewing Tobacco with distinct character and use emerges. This is established by the test reports furnished by the appellants before the lower authority. Thus, it is evident that the raw material undergoes a set of processes and emerges as a distinct product which makes it marketable/consumable for the chewing needs. Therefore, the product supplied by the appellant is Manufactured Tobacco product for Chewing . Once it is held that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Service Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act. The subject appeal has been filed under Section 100(1) of the Tamilnadu Goods Services Tax Act 2017/Central Goods 86 Services Tax Act 2017 by Shri. Arumugam(Prop: Kavicut Tobacco) (hereinafter referred to as Appellant). The appellant is registered under GST vide GSTIN 33AABPA9979P3Z2. The appeal is filed against the Order No.16/AAR/2020 dated 20.04.2020 = 2020 (7) TMI 108 - AUTHORITY FOR ADVANCE RULING, TAMILNADU passed by the Tamilnadu State Authority for Advance ruling on the application for advance ruling filed by the appellant. 2. The Appellant is the supplier of the product which is stated to undergo the below process in the brand name Kavi cut tobacco. Process followed: Raw dried tobacco leaves are purchased from wholesale dealers /farmers.; Stems and dust particles are removed.; The First step is liquoring i.e. the dried tobacco leaves are cured using jaggery water for the purpose of preventing it from mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring of chewing tobacco. The Lower Authority has wrongly proceeded to discuss whether the product is chewing tobacco or not and has not focused on the core issue of whether the process relating to the product leads to manufactured tobacco (2403) or unmanufactured tobacco (2401). The Lower Authority failed to notice the Chapter Notes to Chapter sub heading 2401, which reads as follows: The term unmanufactured tobacco includes many forms. It could be tobacco supplied as whole plants or leaves in the natural state, or as cured or fermented leaves. It also includes tobacco which has been stemmed/ stripped, trimmed or untrimmed, broken or cut, including pieces cut to shape. Tobacco leaves which have been blended, stemmed/ stripped and cased ( sauced or liquored ) with a liquid of appropriate composition, mainly in order to prevent mould and drying and also to preserve the flavour, are also covered in this heading. However, it doesn t include tobacco which is ready for smoking. Rule 2(a) of the general principles for the interpretation of the tariff states that the articles are to be classified on the basis of their essential character. The Lower Authority o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cut to piece to facilitate packing. PERSONAL HEARING: 5.1 Due to the prevailing PANDEMIC situation and in order not to delay the proceedings, the appellant was addressed through the Email Address mentioned in the application to seek their willingness to participate in a virtual Personal Hearing in Digital media vide e-mail dated 17th July 2020. The appellant provided their consent to be heard through digital means. Accordingly, the hearing was held virtually on 21st August 2020. Shri. Sathiyanarayanan Srinivasan-Advocate and authorised representative of the appellant appeared for the hearing. The representative explained the process undertaken resulting in the end product which is ready to be consumed by the consumers. He further, relying on the CESTAT decision in the case of Ravindra Company [2000 (120) E.L.T. 699 (T)] = 2000 (6) TMI 70 - CEGAT, COURT NO. IV, NEW DELHI and clarification of CBEC in F.No. 81/5/87-CX.3 dated 23.06.1987, stated that the product merits classification under CTH 2401 and not under CTH 2403. 5.2 The authorised representative, furnished a written submission through e-mail dated 21.08.2020, wherein, inter-alia stated as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emergence of a new product having a distinct name, character and use and the term manufacturer shall be construed accordingly. It is submitted that by the process adopted by them, the tobacco does not undergo any change which would constitute it as a manufacture. Therefore, the product is classifiable under Chapter sub-heading 2401 (Unmanufactured tobacco). Chapter Notes to Chapter sub heading 2401 reads as follows: The term unmanufactured tobacco in the form of whole plants or leaves in the natural state, or as cured or fermented leaves, whole or stemmed / stripped, trimmed or untrimmed, broken or cut (including pieces cut to shape but not tobacco not ready for smoking. Tobacco leaves which have been blended, stemmed/stripped and cased ( sauced or liquored ) with a liquid of appropriate composition, mainly in order to prevent mould and drying and also to preserve the flavour, are also covered in this heading. The Lower Authority (AAR) failed to note that there is indeed an entry under Chapter sub heading 2403 viz. Chewing Tobacco. The Explanatory notes to 2403 makes it amply clear that this Chewing Tobacco is highly fermented and liquored so as to merit its c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot amount to manufacture, and would be classifiable under sub-heading 2401.00 of CETA as unmanufactured tobacco. In this context, reference may be made to CCE Surat v. Ranchhoddar Zinabhai Sons, 1998 (104) E.L.T. 509 (T) = 1998 (9) TMI 162 - CEGAT, NEW DELHI and T.P.N.S. Chettiar Parvathi Vilas Tobacco Cigars Co. v. CCE, 1989 (41) E.L.T. 79 = 1987 (7) TMI 381 - CEGAT, NEW DELHI wherein this view has been taken by the Tribunal. Similarly, in Ishwar Grinding Mills v. CCE Calcutta , 2000 (117) E.L.T. 743 (T) = 1999 (8) TMI 387 - CEGAT, CALCUTTA and Shrikant Prasad v. CCE Calcutta, 2000 (117) E.L.T. 345 = 1999 (8) TMI 378 - CEGAT, CALCUTTA the Tribunal has consistently ruled that the crushing/powdering of tobacco leaves first manually and then with power aided crushing/grinding machine, to form tobacco flakes/powder, did not amount to manufacture. The unmanufactured tobacco was classifiable under Heading 24.01 of the CETA attracting nil rate of duty. To the same effect, the ratio of the law had been laid down earlier to that, by the different Benches of the Tribunal in ALNOORI Tobacco Products v. CCE, Calcutta-II, 1994 (70) E.L.T. 131 (T) = 1993 (3) TMI 233 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad) = 1961 (9) TMI 48 - MADRAS HIGH COURT , Damodar J. Malpani and Ors Vs. Collector of Central Excise = 2002 (9) TMI 114 - SUPREME COURT and Bell Mark Tobacco Vs. Government of Madras = 1960 (7) TMI 60 - MADRAS HIGH COURT . 8.1 We take up the contentions placed before us. We see that the lower authority has dealt with the claim of the appellant that their product is unmanufactured Tobacco and classifiable under CTH 240120 with reference to the Customs Tariff/HSN and relying on the literature on Tobacco available at the Website of ICAR-CTRI in Para 6.4 of the order, which is reproduced below: 6.4. The Customs Tariff Classification in respect of chapter 2401 are reproduced below for reference Explanatory Notes to HSN 2401 is given as under: .. From the above, it is evident that CTH 2401 covers unmanufactured tobacco. CTH 240110 covers Tobacco, not stemmed or stripped and CTH 240120 covers Tobacco, partly or wholly stemmed or stripped . The product is stated to be wet form of tobacco and the applicant have stated in their submissions that the same is different from dry form of tobacco (with or without lime tube content) use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority had failed to notice the decisions relied upon by them we find that the lower authority has indeed taken note of the said decisions in Para 6.6 of their order and has observed that the questions raised in the said cases do not have relevance to the case at hand in the decisions of A.V. Pachiappa Chettiar Another Vs. The State of Madras reported in 1962 (13) STC 202 (Mad) = 1961 (9) TMI 48 - MADRAS HIGH COURT and State of Madras Vs. Bell Mark Tobacco company = 1966 (10) TMI 106 - SUPREME COURT , while the Decision of Apex Court in the case of Damodar J. Malpani and Ors Vs. Collector of Central Excise = 2002 (9) TMI 114 - SUPREME COURT has been observed as a remand and not a final decision. 9.1 We now take up the core contention of the appellant that chewing tobacco supplied by them is unmanufactured tobacco and rightly classifiable under CTH 2401. The appellant has relied on the CBEC circular F. No. 81/5/87-CX.3, dated 23-6-1987 and the decision of CESTAT in the case of Ravindra Company reported in 2000 (120) E.L.T. 699 (Tribunal) = 2000 (6) TMI 70 - CEGAT, COURT NO. IV, NEW DELHI; Hon ble Madras High Court in A.V. Pachiappa Chettiar Another Vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as Zarda would be appropriately classifiable under Heading No. 24.01 of the Schedule to the Central Excise and Tariff Act, 1985 un-manufactured tobacco. 9.3 We find that in the case of Jaikisan Tobacco the decision of which was also considered for issuing the above clarification, the facts are that the respondent has purchased the raw tobacco in bulk and broken the same into pieces and made small packets. No process was undertaken. The CEGAT, while giving the decision, has ruled as under: 6. We have carefully considered the matter. We observe that the tariff entry has two clear sub-divisions-unmanufactured tobacco and manufactured tobacco. The entry chewing tobacco occurs under the second sub-division II-Manufactured Tobacco . The first question to determine, therefore, is whether the product cleared by the respondents is manufactured tobacco or unmanufactured tobacco. 7. We find that it is not the respondents but others who have crushed tobacco leaves into flakes or Jarda. No duty was reportedly charged from those crushers because the department evidently considered the flakes as unmanufactured tobacco which is exempt from duty. The respondents have purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et without adding any foreign material therein. This process was also confirmed by the Range Superintendent in his report dated 11-10-1985 wherein he mentioned that the tobacco was prepared by the respondents by beating, crushing and sieving the tobacco leaves and packing in retail paper packets bearing the brand name. All these facts also find reference in para 12 of the impugned order dated 14-7-1998 of the Commissioner (Appeals). The correctness of these facts has not been questioned in the grounds of appeals by the Revenue. The Commissioner (Appeals) has also observed in that para that there was nothing on the record that either the Range staff or any other visiting Central Excise Officer even noticed the presence or mixing of any ingredient such as chuna, molasses, katha, perfume, spices etc. in the tobacco by the respondents. Therefore, keeping in view all these referred to above, the tobacco prepared by the respondents fall within the definition of unmanufactured tobacco as given under sub-heading 2401.00 in the HSN (reproduced above). Thus, the product discussed in the cited decision was prepared by beating, crushing and sieving the raw material purchased, the proces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obacco and stores it in his licensed warehouse till it is required for being made into packets for sale. At the stage when the assessee issues the tobacco from the warehouse for being subjected to the further process before it was packed, he pays the prescribed excise duty. The learned counsel for the petitioner contended that even at the stage of purchase what the assessee purchased was known to the trade as chewing tobacco. It was found that the maximum period during which the tobacco is stored in the warehouse of the assessee is about 40 days. The learned counsel for the petitioners, however contended that very often the tobacco is taken out from the warehouse much earlier. During the time the tobacco is bonded in the warehouse it has to be looked after, and one of the principal items of work to be done is known as bulking . That process consists of sprinkling leaves with a solution of jaggery water and turning over the leaves to keep them soft and pliable and to prevent driage. After the leaf is taken out of the warehouse, it is again soaked in jaggery water. Then flavouring essences are added. The leaf is then shredded. Shredded tobacco is taken packed and labelled. It shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufactured from the tobacco that the assessee had purchased. Soaking in jaggery water is not the only process to be considered. The addition of flavouring essences and shredding of the tobacco should establish that what the assessee sold was a product substantially different from what he had purchased. Once again, we have to point out that the fact that this assessee purchased the tobacco as chewing tobacco did not determine the question, whether the sale of the products manufactured by him from out of that tobacco falls within the scope of Section 5(vii) or not. 19. As what constitutes a manufacturing process has not been defined by the Sales Tax Act itself, that expression has to be construed as it is normally understood in the English language. Even then there can be no inflexible standard of universal application. What constitutes a manufactured product will have to be decided with reference to the circumstances of the case. See North Bengal Stores Ltd. v. Board of Revenue, Bengal [1946] 1 S.T.C. 157 = 1946 (6) TMI 8 - CALCUTTA HIGH COURT , Hiralal Jitmal v. Commissioner of Sales Tax [1957] 8 S.T.C. 325 = 1957 (1) TMI 28 - MADHYA PRADESH HIGH COURT . In our opin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defined under Section 2(72) as (72) manufacture means processing of raw material or inputs in any manner that results in emergence of a new product having a distinct name, character and use and the term manufacturer shall be construed accordingly; Thus, any process on the raw material resulting in emergence of a new product with a distinct name, character and use is defined as manufacture under GST. The appellant has stated to have purchased Raw dried tobacco leaves from wholesale dealers/farmers and then undertakes the process of grading, drying, dipping in jaggery water, stalking, semi-drying, mincing, subjecting to natural/agricultural preservatives, weighing and packing for supply. Thus, the raw material which is Raw dried tobacco leaves undergoes the above process and the end product Chewing Tobacco with distinct character and use emerges. This is established by the test reports furnished by the appellants before the lower authority which is discussed in Para 3.3 of the ruling of the lower authority. The said para is given below: 3.3 The applicant vide their letter received on 05.07.2019 furnished the test report of the raw material and the finished pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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