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TMI Blog2024 (5) TMI 1147X X X X Extracts X X X X X X X X Extracts X X X X ..... since the tobacco has not been converted into manufactured tobacco, taking the same into CTH 2403 is without authority of law. Consequently, the unmanufactured tobacco even though it is consumed as a chewing tobacco since same remained as unmanufactured tobacco cannot be classified under 2403 9910. Even by application of Note 3 of Chapter 24 the activity amount to manufacture, the impugned good falls under Chapter heading 2401. Therefore, by virtue of chapter Note, the activity though amount to manufacture as per the Central Excise. Hence, the appellant have rightly paid the duty as manufacture goods but since the goods is correctly classified under CTH 2401, the demand of basic Excise duty and NCCD is not sustainable as the same is correctly classified under 2401 and not under 2403 as contemplated by the Revenue. Therefore, on merit itself the demand is not sustainable. Extended period of limitation - HELD THAT:- The entire activity of re-packings of cut leaves tobacco from bulk to retail pack and classification thereof under Heading 2401 of Central Excise Tariff Act, 1985, was very much in the knowledge of the department. Therefore, there is absolutely no suppression of fact, fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he tobacco products of Chapter Heading 2401 continued to remain exempt from BED. Thus, from 01.07.2017 onwards, all tobacco products of Chapter Heading 2401, including unmanufactured tobacco sold under a brand name without lime tube, continued to remain exempt from BED. However, in view of Sr. No. 19 above, chewing tobacco classified under Chapter Heading 2403, became taxable at the rate of 0.5% from 06.07.2019 onwards. 1.1 Based on an intelligence that Appellants are misclassifying the tobacco product cleared by them under the brand name Suresh Tamakhu , as Unmanufactured Tobacco under CTH 2401 instead of CTH 2403 as Chewing Tobacco with an intention to evade payment of tax, investigation was conducted by the DGGI. The applicable rates of GST, GST Compensation Cess, Basic Excise Duty ( BED ) and National Calamity Contingent Duty ( NCCD ) as applicable on goods classifiable under CTH 2401 and CTH 2403 are as detailed below: LEVY UNMANUFACTURED TOBACCO UNDER CTH 2401 CHEWING TOBACCO UNDER CTH 2403 Goods and Services Tax 28% S. No. 13 (Schedule-IV) of Notification No. 01/2017-CT (Rate) 28% S. No. 15 (Schedule-IV) of Notification No. 01/2017-CT (Rate) Compensation Cess 71% S. No. 5 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retail pouches is manufactured tobacco. Detailed oral and written submissions were made by the Appellants. The Ld. Commissioner has adjudicated the aforesaid SCN dated 04.10.2022 vide the Impugned Order-in-Original No. VAD-EXCUS-001-COM-19-22-23 dated 21.02.2024, confirming the entire demand of duty along with applicable interest and penalty. 1.4 Being aggrieved by the findings of the Ld. Commissioner in the Impugned Order dated 21.02.2024, the Appellants have filed the present appeal. 2. Shri Anand Nainawati Learned Counsel appearing on behalf of the appellant submits that they are correctly classifying their product under Chapter Heading 2401, specifically under Tariff Item No. 2401 20 90 as Other unmanufactured tobacco, partly or wholly stemmed inasmuch as the subject product solely comprises of dried and crushed tobacco leaves. 2.1 Appellant submits that as per HSN Explanatory Notes of Chapter Heading 2401, the heading covers unmanufactured Tobacco as well as tobacco leaves used. It is clear that in various form unmanufactured tobacco from whole plants and leaves and natural state are considered as unmanufactured tobacco. He submits that the Central Board of Excise and Customs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... category of unmanufactured tobacco under Chapter 2401. 2.4 He also submits by drawing a reference to following advance rulings wherein it has been ruled that unmanufactured tobacco merely broken by beating and then seived and packed in retail packets with or without brand name is appropriately classifiable under CTH 2401 even it is meant for consumption as chewing tobacco:- Shailesh Kumar Singh, reported at 2018 (13) G.S.T.L. 373 (A.A.R. - GST). Pragathi Enterprises, reported at 2018 (19) G.S.T.L. 327 (A.A.R. - GST) M/s Gyankeer Products Private Limited - 2022 (7) TMI 967 JCP Agro Process P Ltd. (A.A.R. - GST - Guj.) 2023 (3) TMI 786 M.L. Agro Products Pvt. Ltd. - 2020 (32) G.S.T.L. 438 (A.A.R. - GST - A.P.) Deccan Tobacco Company - 2020 (39) G.S.T.L. 168 (A.A.R. - GST - A.P.) Maddi Lakshmaiah and Company Pvt. Ltd. - 2020 (32) G.S.T.L. 277 (A.A.R. - GST - A.P.) M.L. Tobacco Developers Pvt. Ltd. - 2020 (32) G.S.T.L. 311 (A.A.R. - GST - A.P.) In view of his above submission, he submits that the subject product is rightly classifiable as unmanufactured tobacco under CTH 2401, on which no BED or NCCD is required to be discharged by the appellant. 2.5 As regard the claim of the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Appellants have been granted registration for manufacture of Branded Unmanufactured Tobacco classifiable under Chapter Heading 2401 00 . (iii) The Appellants have been subjected to regular statutory audits wherein the fact that the Appellants have been classifying their product under the category of Unmanufactured Tobacco Branded category was declared as well as recorded by the officers in the Audit Reports and no doubt was ever raised by the Audit Officers regarding classification of the product. (iv) The Appellants have regularly filed ER-1 returns declaring classification of the product under Chapter Heading 2401. (v) In the erstwhile regime, the subject product was notified under Section 3A of Central Excise Act, 1944 and accordingly was required to be assessed for duty of excise on the basis of the provisions of Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010. In order to verify the declarations filed by the Appellants under the aforesaid rule, the Jurisdictional Officers used to visit the factory of the Appellants on regular intervals for verification of the subject product, the number of machines invo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Appellants suppliers: 2. The suppliers of the Appellants purchase dried tobacco leaves from farmers. Such dried tobacco leaves are also known as cured tobacco leaves in the industry. The suppliers of the Appellants carry out activity of cutting the leaves into smaller pieces with a cutting segregator machine and the cut leaves of tobacco are segregated by size with the help of a perforated iron sheet (jali) fitted in the machine. Thereafter, the dried cut tobacco leaves of sizes 04 no./05 no. Farmas are sent through conveyer belt to the packing section, where they are packed in jute gunny bags. Activity carried out by the Appellants: 3. Once the above dried cut tobacco leaves are received by the Appellants, the only activities carried out by the Appellants are unpacking the dried cut tobacco leaves from the jute gunny bags and repacking the same into retail pouches containing less than 10 gm of the dried cut tobacco leaves with the help of manual packaging machines operated by labour. Each retail pouch weighs approximately 9 grams and carries the brand name Suresh Tamaku along with the description unmanufactured tobacco . 50 such large packets are packed into a corrugated box fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emmed/stripped, trimmed or untrimmed, broken or cut (including pieces cut to shape, but not tobacco ready for smoking). Tobacco leaves, 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. (2) Tobacco refuse, e.g., waste resulting from the manipulation of tobacco leaves, or from the manufacture of tobacco products (stalks, stems, midribs, trimmings, dust, etc.). 4.5 From the above explanatory note, it can be seen that the appellant s raw material as well as the finished goods are cut leaves from the natural leaves of tobacco. Therefore, the product of the appellant is unmanufactured tobacco. Now to take this product under CTH 2403 the tobacco has to undergo process of manufactured tobacco. Since the product of the appellant remained unmanufactured tobacco right from the raw material stage up to the finished stage it remains under Chapter heading 2401 and by any stretch of imagination cannot be called as manufactured tobacco. Therefore, since the tobacco has not been converted into manufactured tobacco, taking the same into CTH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o, which may be commonly known in the marked as Zarda would be appropriately classifiable under heading No. 2401 of the Schedule to the Central Excise Tariff Act, 1985 as unmanufactured tobacco . The appellant has placed reliance upon the clarification issued by Ministry of Finance vide Letter bearing F. No. 81/01/2015-CX.3 dated 01.04.2015 in response to a query raised by the Ld. Additional Chief Secretary to Government of Maharashtra. The same is scanned below:- From the above clarification, it can be seen that particularly dealing with impact of Note 3 of chapter 24, it was concluded that unmanufactured tobacco sold in small packets under brand name would be classified under Chapter Sub-heading 2401 of the Central Excise Tariff Act, 1985 and Chapter sub-heading 2403 pertains to other manufactured tobacco. 4.7 As discussed above, we opine that the conversion from bulk to retail pack of unmanufactured tobacco remained as unmanufactured tobacco, hence the same cannot be classified under Chapter heading 2403. This issue has been considered in the various judgments as cited by the appellant, some of the judgments are reproduced below:- A) In the case of V H Patel Tobacco Pvt, Ltd (su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he circular which is not issued by invocation of the provisions of Section 37B was merely advisory in nature and not having a binding effect. As noted above, the department's submission did not find acceptance with the Supreme Court. Therefore, in the present case the classification of the tobacco in question being in the nature of unmanufactured jarda chewing tobacco will be fully covered by the Board's circular dated 23-6-1987 and the grounds on which the Commissioner chosen not to follow it are not sustainable in view of the Supreme Court judgment supra. The Commissioner could not therefore, take this stand as he has done in the impugned 35 order that the Ministry's instructions are for guidance and such instructions have no legal authority unless They are issued under provisions of Section 37B of the Act. This stand has clearly been now over-ruled. The appellants have also lead evidence to show that jarda tobacco could be both unmanufactured variety as well as processed manufactured tobacco and in this case the department has not shown that any ingredients had been added to the tobacco in question, in these circumstances, when once the goods are seen to be unmanufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cco flakes / powder does not amount to manufacture. Unmanufactured tobacco classifiable under Heading 24.01 of Central Excise Tariff Act, 1985 attracting nil rate of duty. F) In the case of Shrikant Prasad (supra) this Tribunal has viewed that tobacco powder obtained by crushing of tobacco leaves, stems and stalks fall under Heading 24.01 of Central Excise Tariff Act, 1985 as unmanufactured tobacco attracting nil rate of duty. In view of the above judgments, as well as the many more judgments cited by the Learned Counsel, the issue is no longer res-integra as merely by packing of cut leaves of tobacco does not change the status of unmanufactured tobacco. Therefore, even by application of Note 3 of Chapter 24 the activity amount to manufacture, the impugned good falls under Chapter heading 2401. Therefore, by virtue of chapter Note, the activity though amount to manufacture as per the Central Excise. Hence, the appellant have rightly paid the duty as manufacture goods but since the goods is correctly classified under CTH 2401, the demand of basic Excise duty and NCCD is not sustainable as the same is correctly classified under 2401 and not under 2403 as contemplated by the Revenue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le also on limitation. In this regard the following judgments cited by the appellant directly support their case : Narmada Bio Chem Pvt. Ltd. Vs. C.C.E. S.T. - Vadodara-I - 2019 (7) TMI 459 - CESTAT AHMEDABAD CCE, Chandigarh Vs. Raja Forgings Gears Ltd. - 2009 (233) ELT 404 (Tri. - Del.) Affirmed by Hon ble Supreme Court in order reported at 2016 (337) ELT A42 (SC) M/s. Novel Digital Electronics v. the Commissioner of Customs (Imports), Customs House, 2015 (4) TMI 347 MADRAS HIGH COURT 5. As regard the judgments relied upon by the Learned AR, ongoing through the same, we find that as regard decision of Dharampal Premchand Ltd, the same is not directly applicable, on the issue involved in the present case and the fact of the said case is altogether different from the fact of this case. 5.1 As regard the decision in the case of Parveen Tobacco Co. (P) LTD (supra), we find that in this case the fact is that unmanufactured tobacco purchased in bulk and thereafter converted in small pouch by mixing it with lime tube. Therefore, it was held that the process is deemed manufacture of retailing pouch in view of Chapter Note 3 of Chapter 24 of Central Excise Tariff Act, 1984. Moreover, in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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