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TMI Blog2025 (1) TMI 200X X X X Extracts X X X X X X X X Extracts X X X X ..... the Court has held that the expression in respect of the goods in rule 5 (1) (i) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939, means on the goods , and therefore only the excise duty paid on the goods sold by the dealer is deductible. The petitioner continued to file returns and did not surrender the GST registration. It appears that on 12.11.2018, the petitioner has stated that, the petitioner has also supplied chewing tobacco by classifying the product under heading 2403 99 10 by paying GST compensation cess at 160 % in terms of Serial No.26 of Notification No. 1/2017 Compensation Cess (Rate), dated 28.06.2017 even during the period of Jan 2018 to May 2018 and that from 1st June 2018 to September 2018, paid cess at 72 % by classifying the same product under Tariff Heading 24 03 99 20 - It is the elementary principle that insofar as the classification of products are concerned an assessee cannot change the classification merely to take advantage or benefit of any rate/concession. Classification can also not be altered because the product will attract higher rate of duty/tax. In this case, admittedly, the respective petitioners have classified their produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,60,362/- 12626 of 2020 31.03.2020 03/2020- GST -do- Rs. 9,35,616 /- 12689 of 2020 31.03.2020 05/2020- GST -do- Rs. 2,56,642/- 12724 of 2020 31.03.2020 06/2020- GST -do- Rs. 5,61,498 /- 12835 of 2020 31.03.2020 02/2020- GST -do- Rs. 36,04,199/- 15533 of 2020 31.03.2020 04/2020- GST -do- Rs. 79,19,845 /- 5414 of 2021 31.03.2020 08/2020- GST -do- Rs. 1,94,730/- 13023 of 2020 30.03.2020 1/2020-GST -do- Rs. 2,90,61,088/- 12813 of 2021 30.04.2020 02/2020- GST -do- Rs. 5,52,90,163/- 3. By these Orders, Demand and Levy of Compensation Cess under Notification No.1/2017 Compensation Cess (Rate), dated 28.06.2017 issued under Sub-Section (2) to Section 8 of the Goods and Service Tax (Compensation to States) Act, 2017 has been confirmed. 4. In W.P.(MD)No.204 of 2021, Shri. Arumugam, Proprietor of M/s. Kavi Cut Tobacco, Thanjavur, the petitioner is before this Court wherein he has challenged the Order dated 29.09.2020 passed by the Appellate Authority for Advance Ruling. 5. By the aforesaid Order dated 29.09.2020, the Appellate Authority for Advance Ruling has upheld Order dated 20.04.2020 of the Authority for Advance Ruling. 6. Earlier, by an Order dated 20.04.2020, the Authority for Advance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the product under 2403 99 10 of the Customs Tariff Act, 1975. 13. Mr. R.Sivaraman, the learned counsel for the petitioners in W.P. (MD) Nos.12689, 10565, 12626, 12724, 12813, 12835, 13023 15533 of 2020 and 5414 of 2021 who have challenged respective Order-in-Originals, submitted that these petitioners had adopted classification of the product under the Heading ''2403 99 90'', whereas, the Department has wrongly classified the product under the Heading ''2403 99 10'' in view of the harassment in the hands of the officer enforcing the provisions of the Food Safety Standards Act, 2006. 14. It is the common submissions of the learned counsels for these petitioners that certain tobacco products came to be banned by the Government of Tamil Nadu under the provisions of the Food Safety and Standards Act, 2006. 15. It is submitted that from 2013 onwards, such manufactured tobacco products have been banned in the State of Tamil Nadu and the said Notification was renewed from time to time. 16. It is submitted that during the period in dispute, Notification dated 23.05.2017 was issued by the Government of Tamil Nadu which was gazetted in Tamil Nadu Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction (2) of section 30 of the Food Safety and Standards Act, 2006 (Central Act 34 of 2006), the Commissioner of Food Safety of the State of Tamil Nadu, in the interest of public health, hereby prohibits the manufacture, storage, transport, distribution or sale of Gutkha, Panmasala, Chewing Tobacco and any other food products containing tobacco or nicotine as ingredients, by whatsoever name it is available in the market, in the whole of the State of Tamil Nadu for a further period of one year with effect from 23rd May 2017 .'' 18. It is submitted by the learned counsel for the petitioners that to avoid litigations and closure of their Units, in view of the above Notification, which was first issued in the year 2013 which was extended periodically, the dealers started adopting different classification, as a result of which, divergent classification have been adopted for the same product. 19. Mr. R.Sivaraman, learned counsel for the petitioners submitted that the products dealt by these petitioners merit classification under the heading ''2403 99 90'', Customs Tariff Act, 1975 as Others where as, the Department has classified the same under the heading '&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Standards Act, 2006 was subject matter of a challenge before this Court in W.P.(MD)No.18115 of 2021 etc. batch [E.S.Mydeen and Co., Rep. by its Managing Partner E.S.M.P.Kaleel, Kumbakonam vs. The Designated Officer (Thanjavur District), Tamil Nadu Food Safety and Drug Administration, Thanjavur and another]. 24. It is submitted that this Court allowed the said Writ Petitions vide order dated 18.07.2022 and clarified that above Circular would not apply to unmanufactured chewing tobacco products. A reference was made to the following passages from the above said order. ''5. I carefully considered the rival contentions and went through the materials on record. 6. The first objection raised by the learned Additional Advocate General that the petitioners have subjected the raw tobacco leaves to manufacturing process need not detain me in view of the authoritative decision of the Hon'ble Division Bench of the Madras High Court reported in (1963) 2 MLJ 71 (Pachiappa Chettiar V. State of Madras). The Hon'ble Division Bench had held that the sprinkling of jaggery water, drying tobacco in the shade and subjecting it to the process of bulking would not convert raw tobacco i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs have used tobacco or Nicotine as an ingredient in any food product, certainly Regulation 2.3.4 of the Regulations would directly come into play. But in this case, the tobacco leaf itself is a food product. 9. I went through the test reports of the respondents. A mere look at the same would reveal that on account of the sprinkling of jaggery water, there has been no change in the Nicotine content. Jaggery water is sprayed only to ensure that the leaf does not turn brittle. In other words, the Nicotine content in the tobacco remains the same before and after the liquoring process. Nicotine is inherent in the product itself. It is not as if the petitioners have added Nicotine as an ingredient in the food product. The State has not prohibited the cultivation of tobacco as it has done in the case of Ganja. There is even Central Tobacco Research Institute located in Vedasandur, Dindigul which trains the tobacco farmers regarding tobacco cultivation. Applying the ratio laid down by the Hon- ble Division Bench in Pachiappa Chettiar case, I hold that the petitioners are dealing only with unmanufactured tobacco and that they have not been mixing the same in any food product. 10. At this s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.06.2017, the classification ''Tariff item'', ''sub-heading'', ''heading'' and ''chapter'' shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 has to be adopted. 28. As per Explanation IV to the above Notification, the rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be, apply to the interpretation of the said Notification. 29. There is no differentiation in the rates, for the purpose of levy of respective GST on products either under Tariff Heading 2401 or Tariff Heading 2403 in terms of Notification No.1/2017 Central Tax (Rate), dated 28.06.2017. 30. For the purpose of Compensation Cess under Schedule to GST (compensation to State) Act, 2017, these products are subject to different rate as mentioned in table below:- Table-4 Classification W.P.(MD) No. 204 of 2021 Other than the petitioner in W.P.(MD) No.204 of 2021 Classification adapted by the Department Classificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout lime All goods, other than Pan Masala containing tobacco 'gutkha', bearing a brand name Chewing tobacco without lime Rate under the Notification No.1/2017 Compensation Cess(rate) dated 28.06.2017 @71% at Sl.No.5 96% at Sl.No.37 160% at Sl.No. 26 * Rate under the Notification No.1/2017 Compensation Cess(rate) dated 28.06.2017. 34. Thus, it is evident that the petitioners in W.P.No.204 of 2021 has adopted Tariff Heading 2403 99 10 from inception but changed the same to 2403 99 20 from June 2018-Oct 2018 as Preparations containing Chewing Tobacco . 35. Tariff Entry under the Custom Tariff Act, 1975 which are relevant for the above rates are reproduced below:- Tobacco and manufactured tobacco substitutes; products, whether or not containing nicotine, intended for inhalation without combustion; other nicotine containing products intended for the intake of nicotine into the human body Table-7 Description of goods Tariff Item UNMANUFACTURED TOBACCO; TOBACCO REFUSE 2410 ---Other 2410 10 90 OTHER MANUFACTURED TOBACCO AND MANUFACTURED TOBACCO SUBSTITUTES; -HOMOGENISED? OR -RECONSTITUTED? TOBACCO; TOBACCO EXTRACTS AND ESSENCES 2403 Tobacco, partly or wholly stemmed or stripped : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority. 43. By the statutory design under these enactments, the orders passed by the Authority for Advance Ruling or the Appellate Authority for Advance Ruling, as the case may be, are binding not only on the Applicant who seeks for clarification but also on the concerned Jurisdictional Officer, under whom such an Applicant is assessed to tax. This is also clear from the mandate of Section 103(1) (2) of the respective GST enactments of 2017. Under the Customs Act, 1962, the appellate remedy is vested with the High Court under Section 28KA of the Customs Act, 1962. 44. Section 103 of the respective GST enactments is similar to Section 28 J of the Customs Act, 1962 and Section 23 E of Central Excise Act, 1944 save that appeal is not before the High Court under the Customs Act, 1962. These provisions are reproduced below :- Table-3 Section 28(j) of the Customs Act, 1962 Section 23 E of Central Excise Act, 1944 Section 103 of the respective GST enactments 28J. Applicability of advance ruling . (1) The advance ruling pronounced by the Authority under section 28-I shall be binding only- (a) on the applicant who had sought it; (b) in respect of any matter referred to in sub-section (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch rulings. 48. In case, the Authority fails to accept the same, an aggrieved applicant could question the same only before the Appellate Authority. Once the Appellate Authority decides the case, there is no further scope for any appeal or judicial review. 49. In fact, it is not for the Applicant to take a particular view and that the Authority for Advance Ruling or the Appellate Authority for Advance Ruling have to accept the same as is/was suggested by the Applicant before such Authority. This is the statutory mechanism prescribed under the Act and cannot be ignored. 50. Therefore, writ petition cannot be ordinarily entertained to challenge an order of the Appellate Authority for Advance Ruling as a matter of right, unless the decision/ruling suffers from any vices which are amenable to challenge under Article 226 of the Constitution. 51. Only under limited circumstances, judicial review of such orders can be made by the Courts which are recognized under Article 226 of Constitution. 52. In Tata Cellular v. Union of India, (1994) 6 SCC 651, the Hon ble Supreme Court pointed out that there are certain inherent limitations to the power of judicial review of the said administrative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the product was a manufactured tobacco under Heading 2403 of the Customs Tariff Act, 1975. The Appellate Authority for Advance Ruling, however reversed the decision of the Authority for Advance Ruling and accepted the contention of the Applicant namely Pandey Traders that un-manufactured tobacco dust which was a result of screening of raw tobacco, through which tender and better parts were separated and used for being sold as chewing tobacco and remaining parts in raw form and the dust which was sold for human consumption which did not result in any irreversible change and therefore, what was supplied by the said appellant was nothing but an un- manufactured tobacco dust and could not be equated with manufactured tobacco of chapter Heading 2403 of the Custom Tariff Act, 1975 60. The product under consideration in these cases fall under Chapter 24 of the Custom Tariff Act, 1975. The classification under the Custom Tariff Act, 1975 is adopted for the purpose of classification and determination of Rates under the respective GST enactments and Goods and Services (Compensation to States) Act, 2017. 61. As far as the petitioner in W.P.(MD) No.204 of 2021 is concerned, there are no re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 2018 to May, 2018 Cess has been paid at the rate of 160%. From June 2018 to September 2018 Cess has been paid at the rate of 72% and classified under Chapter Heading 24039920 as per their letter. Further, the tax payer vide letter dated 14.03.2019 has reiterated the classification as 24039920 (for June 2018 to Oct 18) and have paid Cess @ 72%; further the tax payer has stated that NCCD has been paid in terms of Section 4A of Central Excise Act @10% on 45% of MRP; further it has been stated that from Nov 2018 onwards, they had changed the product manufactured from 24039920 to 24012090, stated that they were not required to pay NCCD under Central Excise Act, and hence ER1 returns are not filed; that however, GST returns are continue to be filed; from the above, it clear that the assesse had intend to evade payment of duty. 65. Para 5 of the Counter filed in W.P.No.10565 of 2020, which is applicable to other writ petitioners also (other than the W.P.No.204 of 2021) also indicate that these petitioner had also adopted the classification under Tariff Heading 2403 99 10 when they were governed by the provision of the Central Excise Act, 1944 and the Central Excise Tariff Act, 1985. 66. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e gutkha and other forms of chewable tobacco intended for human consumption. 73. The Food Safety Act is a statute enacted after COTA. The definition of Food in Section 3(j) of the Food Safety Act is different from the definition of food in the Prevention of Food Adulteration Act, 1954, which was as follows: Section 2. Definitions: - In this Act unless the context otherwise requires,- .... (v) Food means any article used as food or drink for human consumption other than drugs and water and includes, (a) Any article, which ordinarily enters into, or is used in the composition or preparation of, human food, (b) Any flavouring matter or condiments, and (c) Any other article which the Central Government may, having regard to its use, nature, substance or quality declare, by notification in the official Gazette, as food for the purposes of this Act. 74. Under the Food Safety Act, food means any substance, whether processed, partially processed or unprocessed, which is intended for human consumption. It includes primary food to the extent defined in clause (zk), that is an article of food being a produce of agriculture or horticulture or animal husbandry and dairying or aquaculture in its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2015 [Manufacturer, M/s. Tejram Dharam Paul, Maurmandi, Bhatinda District, Punjab and another v. The Food Safety Inspector, Ambasamudram] dated 27.04.2015. 80. In Dhariwal Industries Limited and another v. State of Maharashtra and others, reported in (2013) 1 Mah LJ 461, a Single Bench of the Bombay High Court held: 19. While the definition in the 1954 Act excluded drugs and water, the definition in the Food Safety Act, 2006 excludes animal feed, live animals, plants prior to harvesting, drugs and medicinal products, cosmetic, narcotic and psychotropic substance. Obviously, gutka and pan masala do not fall in any of these excluded categories. The expression any substance which is intended for human consumption in FSS Act, 2006 is also wider than the expression any article used as food or drink for human consumption in PFA Act, 1954. It is also pertinent to note that the definition of food in the Act of 2006 specifically includes chewing-gum and any substance used into the food during its manufacture, preparation or treatment. Hence, even if gutka or pan masala were not to be ingested inside the digestive system, any substance which goes into the mouth for human consumption is suffi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obacco in contravention of the provisions of the 2011 Regulations and the various notifications, referred to above, and also to identify and take action against those carrying on, aiding, abetting or otherwise in connivance with the illegal manufacture, distribution and sale of gutkha and other forms of chewable tobacco. Though the Hon'ble First Bench employed a polite expression that it was unable to agree with the Single Bench decision, in effect, it means that all the earlier Single Bench decisions on the subject stood over ruled and no longer constitute good law. The order dated 23.04.2018 made in W.P.(MD)No.5924 of 2018 rests on these two decisions. Therefore, in view of the later judgment rendered by the Hon'ble First Bench on 26.04.2018, the foundational proposition, on which, the writ petition is anchored stands totally shaken and undermined. 71. The Hon ble Supreme Court in E.Siva Kumar Vs. Union of India reported in (2018) 7 SCC 365, had declined to interfere with the decision of the Hon ble Division Bench in the above case. In the context dealing with the same, the learned single Judge of this Court in W.P.(MD) No.778 of 2019 (Jeetmal Ramesh Kumar Vs. The Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hewing gum is also defined as a food. One does not swallow a chewing gum. Therefore, there is no merit in the petitioner's contention that tobacco is only chewed and not digested and therefore, cannot be considered as food. 16. As rightly contended by the respondents, tobacco is kept in the mouth and chewed and it gets mixed with saliva and goes into the body. Therefore, a conjoint reading of Section 3(j) of the Food Safety and Standards Act, 2006, regulation 2.3.4 of FSSA, 2011 and Notification No. 1418/2013/S8/FSSA, dated 23.05.2018 in the light of the decision of the Hon'ble First Bench in Anbalagan Case leads one to the irresistible inference that chewing /chewable tobacco is a banned substance and that, it falls under the purview of the Food Safety and Standards Act, 2006. Therefore, I find no merit in the contention of the writ petitioner that the impugned report of the analyst is without jurisdiction. The writ petition stands dismissed. However, it is made clear that the dismissal of this writ petition will not come in the way of the petitioner establishing his innocence that he has nothing to do with the contraband in question. All the other defences of the writ pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt further observed that chewing gum was also included as Food and therefore, the product in hand, namely the Chewing Tobacco , were food within the meaning of 3(1)(j) of the Act. 78. The Court has concluded that if the petitioner used tobacco or nicotine as an ingredient in any food product, Regulation 2.3.4 of the Regulations will get triggered. However, the restrictions in Regulation 2.3.4 of the aforesaid Regulation will not apply to the tobacco leaf as the tobacco leaf itself is food product. 79. In para 9, the Court has observed as under: 9. I went through the test reports of the respondents. A mere look at the same would reveal that on account of the sprinkling of jaggery water, there has been no change in the Nicotine content. Jaggery water is sprayed only to ensure that the leaf does not turn brittle. In other words, the Nicotine content in the tobacco remains the same before and after the liquoring process. Nicotine is inherent in the product itself. It is not as if the petitioners have added Nicotine as an ingredient in the food product. The State has not prohibited the cultivation of tobacco as it has done in the case of Ganja. There is even Central Tobacco Research I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw tobacco used in the manufacture of those goods. The contentions raised by counsel must be rejected, and following the judgment of this Court in Swasthik Tobacco Factory's case [1966] 17 S.T.C. 316., the appeals filed by the State must be allowed. There will be no order as to costs in these appeals. 83. Further, the Court has observed as under: ...Stalks of tobacco are broken and removed, and sand and dust are removed. After payment of excise duty the bundles of tobacco are brought to the premises of the factory, where chewing tobacco is prepared. Jaggery juice is sprinkled on tobacco, and it is then cut into thin strips by shearing machines. The resulting tobacco is called nice tobacco. This nice tobacco is allowed to dry for some days. Then flavouring essences are sprinkled on it and it is then packed in special wrappers. The packets are known as chewing tobacco packets. A large number of workmen are employed to carry out these several processes. 84. There, the petitioners were facing imminent prosecution under the provisions of the Cigarettes and Other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production Supply and Distribution) A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of mineral oil is permitted in accordance with the standards laid down in these Regulations and Food Safety and Standards (Food Products Standards and Food Additives) regulations, 2011. 2.3.2: Restriction on sale of Carbia Callosa and Honey dew.:Carbia Callosa and Honey dew shall be sold only in sealed containers bearing Agmark seal. 2.3.3: Food resembling but not pure honey not be marketed as honey: No person shall use the word honey or any word, mark, illustration or device that suggests honey on the label or any package of, or in any advertisement for, any food that resembles honey but is not pure honey. 2.3.4: Product not to contain any substance which may be injurious to health: Tobacco and nicotine shall not be used as ingredients in any food products. 2.3.5: Prohibition of use of carbide gas in ripening of fruits: No person shall sell or offer or expose for sale or have in his premises for the purpose of sale under any description, fruits which have been artificially ripened by use of acetylene gas, commonly known as carbide gas. 89. Although, elaborate submission have been made in the context of the banning of tobacco products under the provisions of the aforesaid regu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, admittedly, the respective petitioners have classified their products under Heading 2403 99 10 of the Central Excise Tariff Act, 1985 which is similar to Customs Tariff Act, 1975 which are based on HSN Classification. 94. Heading 2403 of the Customs Tarrif Act, 1975 which is relevant for the purpose of classification and adoption of rate, for the provisions of respective GST enactments and the Central Excise Act, 1944, which was applicable immediately prior to 01.07.2017 are divided in to two basic categories namely:- Table 8 2403 Other manufactured tobacco and manufactured tobacco substitutes; homogenised or reconstituted tobacco; tobacco extracts and essences A B Smoking tobacco, whether or not containing tobacco substitutes in any proportion. Other 2403 11---Water Pipe tobacco specified in Sub-Heading Note to this Chapter: 2403 91 00--- Homogenised or reconstituted tobacco 2403 19---Others 2403 99 --- Other 2403 99 10---Chewing Tobacco 2403 99 20---Preparations containing chewing tobacco 2403 99 30---Jarda scented tobacco 2403 99 40---Snuff 2403 99 50---Preparations containing snuff 2403 99 60---Tobacco extracts and essence 2403 99 70---Cut-tobacco 2403 90---Other 95. As far ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the use of the product. The exception being where Tariff Act itself provides for a statutory definition, obviously, the product has to be classified as per the definition. 45. Before we part with the case, we may address to the plea of res judicata raised by the learned Senior Counsel for the Department. Mr. K. Radhakrishnan pressed into service few legal maxims in this regard. It is true that maxim Nemo debet bis vexari pro una et eadem causa is founded on principle of private justice as it states that no man ought to be twice put to trouble if it appear to the court that it is for one and the same cause. The maxim Interest republicae sit finis litium concerns the State that law suits be not protracted. This maxim is based on public policy. In our opinion, these maxims cannot be applied as a rule of thumb in the taxation matters. In the matters of classification of goods, the principles that have been followed by the courts - which we endorse - are that there may not be justification for changing the classification without a change in the nature or a change in the use of the product; something more is required for changing the classification especially when the product remains the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstances cited by the respective petitioners to warrant a change in the classification for the purpose of paying lesser compensation cess under Chapter 24 -Tobacco and Manufactured Tobacco substitutes. 105. Therefore, the adoption of classification, contrary to the products by the respective petitioners with a view to pay lesser compensation cess under Notification No.1/2017 Central Tax (Rate), dated 28.06.2017 cannot be justified. Therefore, there is no merit in challenge to either the impugned Orders-in-Original as detailed in Table-1 of this order or to the impugned order dated 29.09.2020 of the Appellate Authority for Advance Ruling which affirms or upholds the order of Authority for Advance Ruling dated 20.04.2020. These writ petitions are dismissed. 106. It is however left open for the respective petitioners to alter their process to pay lesser compensation cess for the future period. No costs. 107. It is however open for the petitioners other than the petitioner in W.P.No.204 of 2021 to file a statutory appeal before the Appellate Commissioner under Section 107 of the respective GST enactments, within a period of 30 days from the date of receipt of a copy of this order. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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