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TMI Blog2024 (10) TMI 779X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;ble Court that cumulative effect of various processes to which Tobacco was subjected, before it was sold, amount to the manufacturing process. In the instant case that mixing lime and other ingredients with the tobacco leaves would result into emergence of a new product with distinct name and character. 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 to be supplied by the applicant is manufactured tobacco product for chewing'. Once, it is decided that the product is 'manufactured chewing tobacco', the classification of the product merit under CTH 2403 99 10 which specifies 'chewing tobacco' under the head 2403-0ther manufactured tobacco and manufactured tobacco substitutes. Thus, the product to be supplied by the applicant is manufactured tobacco classifiable under 24039910. Since it has been concluded that the product to be supplied by the applicant is classifiable under HSN 24039910 (Chewing Tobacco without Lime Tube), the applicable rate of GST Compensation Cess in term of Serial No.26 of [Notification No. 1/2017-Compe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufactured as above is tobacco which is mixed with lime. Further, little aroma and mentha oil / peppermint is used for freshness and to avoid bad smell without which plain tobacco cannot be consumed. It is similar to the use of tobacco since ancient times by villagers and farmers where dried and cut leaves of tobacco are rubbed on palm with small quantity of lime and such rubbed tobacco mixed with lime is used by consumer. In this regard, they submit that the manufacturing process was already given in Para 3 of their application. Same is given here below in the form of flowchart: Raw cut tobacco is procured from outside Lime paste is mixed in raw cut tobacco The tobacco mixed with lime paste is dried to evaporate the water content Segregation of uneven leaves and dust Resultant semi-finished product is stored in Silos/Sacks Semi-finished product is processed in mixture to add aroma, menthol and moisturizing Final product 'tobacco pre-mixed with lime' Packing in pouches then in mono carton etc. Dispatch The approximate ratio of ingredients is given here below: S. No. Content Approximate ratio 1. Tobacco leaves 56% 2. Moisture 24% 3. Lime 20% S. No. Content Approximate ratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bacco leaves are never chewed/ used directly but same are mixed with lime and then only consumed. Either consumer mixes lime while consuming the tobacco or it is supplied to consumer pre-mixed with lime, there is no material change in the product, quality, price bracket and category of end user because product principally remains same i.e. 'unmanufactured tobacco' which falls under Heading 2401. Our product is principally the same i.e. tobacco leaves and instead of subsequent mixing of lime by consumer it is already mixed with lime. Further, a little aroma and mentha oil / peppermint is used for freshness and to avoid bad smell. Despite this, the nature of the product is not altered and the consumer base remains the same i.e. farmer/ labour class. This tobacco is never used with Pan Masala and is never put in Pan. 2. On the other hand, there is another tobacco product in the market which is known and called as 'Zarda scented tobacco' which is a product used in Pan or Pan-Masala. Such tobacco product is classified under Heading 2403. Normally it contains less than half gram of tobacco and priced around Rs. 10/- per pouch which means a cost in the range of Rs. 18,000/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from that of the chewing tobacco or the Zarda scented tobacco. Since, chewing tobacco is a costly product it is consumed by rich and elite class of people and therefore this product, as per classification, end use and class of consumer is totally different from that of our product 'tobacco pre-mixed with lime'. 7. It is submitted that presently 'tobacco pre-mixed with lime' does not fall under any of the specified categories in the schedule of levy of GST and Compensation Cess. It is further relevant to mention that there is no product like Chewing Tobacco (with lime tube or without lime tube). It is only unmanufactured tobacco, which is sold either as such or sold with additional lime tube or sold pre-mixed with lime. This aspect is missing in present Classification and therefore, our product most specifically falls under the category of unmanufactured tobacco without lime tube bearing a brand. 8g. Considering the above facts and submissions, applicant submits that as per their understanding, the product 'Tobacco pre-mixed with lime' is classifiable under Heading 2401 along with Unmanufactured Tobacco. C. QUESTIONS ON WHICH THE ADVANCE RULING IS SOUGHT: - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uches and dispatch. (B) Comments (i) The applicant has not started manufacturing of 'tobacco pre-mixed with lime' as his declared business premises. So the comments on classification of goods are based on facts/ details made available by the applicant in application filed in form GST ARA-01 before the Authority for Advance Ruling. (ii) Described manufacturing process includes raw cut tobacco in bulk quantity, mixing of lime paste, drying to evaporate the water contents, segregation of uneven leaves, adding of menthol and aroma and moisturizing. In this process mixing of lime in tobacco leaves does not alter the nature of product. Little amount of Aroma and Menthol is used for freshness and to avoid bad smell. (iii) According to applicant quality of tobacco leaves used in unmanufactured tobacco product is totally different from tobacco leaves used in Chewing Tobacco/ Zarda Scented Tobacco. The zarda scented tobacco usually costs in the range of Rs. 18000 to 20000 per kg on the basis of MRP whereas unmanufactured tobacco costs in the range of Rs. 800 to 1200 per kg on MRP basis. 'Tobacco pre-mixed with lime' cannot be used in Pan /Pan Masala like Chewing Tobacco/ Zard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We have also considered the issues involved, on which advance ruling is sought by the applicant, and relevant facts. 2) The Applicant wants to start supply of a product which they claim to be Unmanufactured Tobacco and therefore to be classified under HSN 24012090. 3) The question on which Advance Ruling has been sought by the Applicant is- Classification and applicable rate of GST and/ or Compensation Cess on their product named as 'Tobacco pre-mixed with lime'.? 4) The manufacturing process to be adopted by the Applicant for supply of aforesaid product is as under- Raw cut tobacco is procured from outside Lime paste is mixed in raw cut tobacco The tobacco mixed with lime paste is dried to evaporate the water content Segregation of uneven leaves and dust Resultant semi-finished product is stored in Silos/Sacks Semi-finished product is processed in mixture to add aroma, menthol and moisturizing Final product 'tobacco pre-mixed with lime' Packing in pouches then in mono carton etc. Dispatch 5) In the present case we have to decide the classification and applicable rate of GST and/ or Compensation Cess for the product to be manufactured as 'Tobacco premixed with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leaf, stalks and stems of the tobacco plant, but does not include any part of a tobacco plant while still attached to the earth. (2) cut-tobacco means the prepared or processed cut-to-size tobacco which is generally blended or moisturised to a desired extent for use in the manufacture of machine - rolled cigarettes. (3) smoking mixtures for pipes and cigarettes of sub-heading 2403 10 does not cover Gudaku 8) The Customs Tariff Classification in respect Of Chapter 2401 are reproduced below for reference: 2401 UNMANUFACTURED TOBACCO; TOBACCO REFUSE 2401 10 - Tobacco, not stemmed or stripped 2401 10 10 --- Flue cured virginia 2401 10 20 --- tobacco Sun cured country (natu) tobacco 2401 10 30 --- Sun cured virginia tobacco 2401 10 40 --- Burley tobacco 2401 10 50 --- Tobacco for manufacture of biris, not stemmed 2401 10 60 --- Tobacco for manufacture of chewing tobacco 2401 10 70 --- Tobacco for manufacture of cigar and cheroot 2401 10 80 --- Tobacco for manufacture of hookah tobacco 2401 10 90 --- Other 2401 20 - Tobacco, partly or wholly stemmed or stripped : 2401 20 10 --- Flue cured virginia tobacco 2401 20 20 --- Sun cured country (natu) tobacco 2401 20 30 --- Sun cured virginia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y be commonly known in the market as Zarda would be appropriately classifiable under Heading No. 2401 of the Schedule to the Central Excise and Tariff Act, 1985 unmanufactured tobacco. Whereas, in the instant case, the applicant would mix raw cut tobacco and lime and other ingredients such as aroma, menthol/peppermint and moisturizing in raw cut tobacco that involving a process and therefore resulting into a different product with different character and properties. 13) The definition of 'Manufacture' under the GST law is defined under Section 2 (72) as: 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. 14) We find that under Notification No. 01/2017-Central Tax (Rate) no definition of manufactured or unmanufactured tobacco has been provided and accordingly we have to mainly rely upon the decision of Hon'ble Court and the Tribunals decisions in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sample were sent to the CRCL New Delhi and in both the cases they have reported that product manufactured by them is preparations containing tobacco i.e. manufactured tobacco. 17) In view of the above, we hold that the product to be supplied by the applicant as mentioned above is manufactured tobacco classifiable under 24039910. 18) The rates of GST for the aforesaid product in term of Schedule IV (Sr.No.15) of [Notification No. 1/2017-CT(R) dated 28.06.2017] is as under- Schedule HSN Product Description Rate of GST Schedule IV Sl. No. 15 2403 Other manufactured tobacco and manufactured tobacco substitutes; -Homogenised or -reconstituted tobacco; tobacco extracts and essence [Including Biris] @ 28% (14% CGST+ 14% SGST) 19) The relevant rates of GST Compensation Cess in respect of Tobacco covered under the heads are as under [Notification No. 1/2017-Compensation Cess (R) dated 28.06.2017]: Sl.No. Chapter Heading / Sub-heading Tariff item Description of Goods Rate of Goods Service Tax Compensation Cess (1) (2) (3) (4) 5 2401 Unmanufactured Tobacco (without Lime tube)-bearing a brand name 71% 6 2401 Unmanufactured Tobacco (with Lime tube)-bearing a brand name 65% 7 240130 00 Tobacco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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