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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 ..... he Orders-in- Originals, dated 30.03.2020 and 30.04.2020, respectively. 2. The dispute in these cases arise primarily relate to the classification of "chewing tobacco" marketed by the respective petitioners. The respective petitioners have challenged the following Orders-in- Originals:- Table-1 W.P.(MD)Nos. Date Order-in- Original No. Period Amount 10565 of 2020 31.03.2020 01/2020- GST July 2017-March 2019 Rs. 1,05,60,362/- 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner the correct Compensation Cess to be paid by the respective petitioners is 71% at Serial No.5 for the products falling under the heading ''2401''. 12. On the other hand, rest of the petitioners, who have challenged the respective Order-in-Originals would submit that the product dealt by these petitioners are "manufactured products" and are however liable to be classified under Heading 2403 99 90 of the Customs Tariff Act, 1975. The Department on the other hand had classified 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 petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... product is supposed to be used by keeping it inside the mouth and chewing it. The act of chewing ensures that chemicals go in to the saliva and becomes part of the human digest system, the said food article if consumed will endanger human health and well-being and whereas if consumption of these food articles is allowed with out prohibition the well-being of current and future generations will be compromised and hence it is to be prohibited. NOW, THEREFORE, in exercise of the powers conferred by clause (a) of sub-section (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 abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , midribs, trimmings, dust, etc.)." 22. It is submitted that the tobacco leaves are procured from farmers and are poured into a slurry of jaggery water, cured and packed. Therefore, it is submitted, that simple activity carried out by these respective petitioners do not amount to manufacture to merit classification under Head 2403 of Custom Tariff Act, 1975 in the hands of these petitioners. 23. It is further submitted that the Circular/Notification, dated 23.05.2017, issued by the Commissioner of Food Safety under the provisions of the Food Safety 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion that arises for consideration is whether conjoint reading of the aforesaid provisions as applied to the factual matrix can trigger the jurisdiction of the respondent authorities under the aforesaid Act. I am more than satisfied that the products dealt with by the petitioners herein would fall within the definition of the term 'food' under Section 3(1)(j) of the Act. Even a chewing gum is also included within the concept of the said definition. Therefore, the applicability of Section 3(1) (j) of the Act to the item on hand is not in doubt. If the petitioners 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 produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns. 12. In this view of the matter, the impugned orders and notices are quashed. The writ petitions are allowed. No costs. Consequently, connected miscellaneous petitions are closed.'' 25. I have considered the submissions made by the learned counsel for both sides. 26. The dispute in these cases relate to payment 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 Services Tax (Compensation to States) Act, 2017. 27. Under Notification No.1/2017 - Central Tax (Rate), dated 28.06.2017, 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 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption - All goods, other than Pan Masala containing tobacco 'gutkha', bearing a brand name 2403 99 10 Chewing tobacco without lime 3. Classification from Jan 2018 to May 2018 under GST 2403 99 10 @160% at Sl.No. 26* 2403 99 10 @ 160% at Sl.No.26 Description Chewing tobacco without lime 4. Classification from June 2018- Oct 2018 2403 99 20 @72% at Sl.No. 25* 2403 99 10 @ 160% at Sl.No.26 Description Preparations containing chewing Tobacco 5. Classification Adopted from Nov 2018- Sought for Advance Ruling Adopted form July 2017 Determined by Department Classification under Heading 2401 20 90 2403 99 90 2403 99 10 Description Unmanufactured chewing tobacco without 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the such Authorities are binding on the applicant and the concerned officer or the jurisdictional officer in charge of the office within whose jurisdiction the applicant is assessed to tax. 40. The decision of the Advance Ruling Authority or the Appellate Authority for Advance Ruling as the case may be is a decision in personam and the decision/opinion of such Authority is binding on the parties to the aforesaid proceedings. 41. An applicant is expected to approach an Authority for Advance Ruling for an Advance Ruling without any pre conceived notion regarding any aspect including the classification issues. The bargain under the Act is that decision is binding on the applicant. 42. That apart, an Applicant approaching the Authority for Advance Ruling, is expected to have an implicit faith in the orders to be passed by the said Authority. 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n appellate mechanism against the orders of the Authority for Advance Ruling before the Appellate Authority for Advance Ruling. 46. If the ruling or the decision of the Authority for Advance Ruling is confirmed or modified by an Appellate Authority for Advance Ruling or any Appellate Authority specified under therein. The decision is binding not only on the Applicant but also on the Jurisdictional Officer under whom such Applicant is assessed to tax. 47. There is no further remedy provided under the statute to an applicant to challenge the ruling of the Appellate Authority for Advance Ruling. Once the Appellate Authority for Advance Ruling affirms the ruling of the Authority for Advance Ruling, the issue can be said to have attained finality between an Applicant and the Jurisdictional Officer. The applicant as also the Jurisdictional Officer are bound by such 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufactured raw tobacco dust which is a result of Screening of raw tobacco through which tobacco leafs, its stem, and other tender parts are separated through the process of drying, winnowing, crushing and separating through sieving, and the better parts are used for chewing tobacco and remaining part in raw form, i.e. stems, hard veins and leaves of tobacco plant were then crushed in to dust form and sold as such for human consumption. Raw tobacco dust were mixed with scent and/treated with a touch of perfume. 58. It was the case of the appellant therein that the process did not undergo any irreversible change and the product still remained as an un- manufactured raw tobacco and therefore merits classification under Chapter Heading 2401 of the Customs Tariff Act, 1975 as made applicable for classification under the GST. 59. The Authority for Advance Ruling there concluded that 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 wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assesse vide his letter dated 20.5.2018 has stated that due to stiff completion and financial crunch they had stopped production and business w.e.f 20-5-2018 and further informed that they would surrender the registration certificate after payment of taxes and returns for the month of May 2018. However, in contrast to what was mentioned they continued to file the returns and not surrendered the Registration Certificate. Further as seen from enclosure to HQrs letter C.No.IV/16/333/2018-GST Policy dated 19-06-2019 (Copy enclosed) regarding comments on the Advance Ruling Application filed by the assesse, the tax payer vide letter dated Nil received on 12.11.2018 stated that they had supplied branded chewing tobacco classifying it under Chapter sub- heading 24039910 paying GST Compensation Cess @ 160% in terms of Notification No.1/2017-Compensation Cess (Rate) New Delhi dated 28.06.2017; from Jan 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India in the exercise of the powers conferred by Clause (1) of sub-section (2) of Section 92. 70. Earlier, the Hon'ble Division Bench of this Court in J.Anbazhagan Vs. Union of India (2018) (3) CTC 449, held as under:- "71. Food is defined in Section 3(j) of the Food Safety Act to mean any substance, whether processed, partially processed or unprocessed, which is intended for human consumption and includes genetically modified or engineered food, but does not include animal feed, live animals, unless they are prepared or processed for placing in the market for human consumption, plants prior to harvesting, drugs and medicinal products, cosmetics, narcotic or psychotropic substances. 72. The definition of food which includes any substance whether processed, partially processed or unprocessed, which is intended for human consumption, and even includes chewing gum, is clearly wide enough to include 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of food in Section 2(v) of the Prevention of Food Adulteration Act. Further, the Food Safety Act as been enacted after the COTA. 77. The judgment of the Supreme Court in Godawat Pan Masala Products I.P. Ltd., supra, rendered in the context of the Prevention of Food Adulteration Act, 1954 will not have application in the facts and circumstances of the instant case. 78. It appears that in Jayavilas Tobacco Traders LLP v. The Designated Officer, The Food Safety and Drugs Control Department, (W.P.No.21 of 2017, dated 9.6.2017), Duraiswamy,J. referred to and followed the judgment of the Supreme Court in Godawat Pan Masala Products I.P. Ltd., supra. It is on that ground that the notifications impugned were held to be void. 79. With the greatest of respect, we are unable to agree with the Single Bench decision of Duraiswamy, J. in Jayavilas Tobacco Traders LLP, supra, and and the decision of the Madurai Bench in Crl.O.P.(MD) No.5505 of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remotely touch upon misbranding. 82. It is well settled that the endeavour of the Court should be to harmonize two Acts seemingly in conflict. Of course, in this case there does not appear to be any conflict between COTA and the Food Safety Act. COTA is in addition to and not in derogation of other laws relating to food http://www.judis.nic.in products. There is no non obstante clause in COTA which excludes the operation of other Acts. 83. Considering the harmful effects of consumption of chewable tobacco, such as gutkha, which leads to fatal ailments such as cancer, this court cannot shut its eyes to the malaise of illegal manufacture and sale of gutkha within the jurisdiction of this High Court, i.e., the State of Tamil Nadu and the Union Territory of Puducherry. 84. There can be no doubt that a high level, fair and impartial enquiry should be conducted to effectively stop illegal manufacture, distribution and sale of gutkha and other forms of chewable tobacco 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roval to the finding of the Hon'ble First Bench with regard to tobacco being a food product falling under Food Safety and Standards Act, 2006. But then, there cannot be any dispute about the fact that as on date, as far as the State of Tamil Nadu is concerned, the position is that chewing tobacco/pan masala containing tobacco/nicotine are food substances falling within the purview of the Food Safety and Standards Act, 2006." 72. Ultimately, this Court had further further observed as under: "11. I may incidentally add that the Food Safety and Standards Act, 2006 contains a overriding provision. Section 89 of the said Act reads as follows:- "Overriding effect of this Act over all other food related laws:- The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act." ........ 15. It is interesting to note that chewing 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, canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany, has thousands of retail outlets throughout the State. The argument of the State anchored on Article 47 is like devil quoting the scripture or pot calling the kettle black. I am not rejecting this contention on the ground of whataboutery. Nicotine is inherent in tobacco and its content in the tobacco leaf has not gone up on account of spraying of jaggery water. Regulation 2.3.4 only mandates that tobacco and nicotine shall not be used as ingredients in any food products. Since the petitioners are dealing only with unmanufactured tobacco, they have not breached any of the statutory provisions. 12. In this view of the matter, the impugned orders and notices are quashed. The writ petitions are allowed. No costs. Consequently, connected miscellaneous petitions are closed." 76. There, the Court came to a conclusion that the chewing tobacco dealt by the petitioners therein satisfied the definition of food within the meaning of Section 3(1)(j) of the Food Safety and Standards Act, 2006. 77. The Court 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ie determinative of the only question which is raised in these appeals by the State. 82. The Court ultimately concluded as follows: "Chewing tobacco" is, for reasons already set out, manufactured from raw tobacco. It is common ground that the respondents were charged to tax in respect of the first sale effected by them in the State of Madras and they are not exempt from taxation under section 3, sub-section (3). But it was urged that the expression "tax" in the proviso includes "excise duty". The Madras General Sales Tax Act deals with the levy sales tax and section 5 provides for the rates of sales tax and the point at which tax is to be levied. The proviso could obviously not refer to tax other than the sales tax with which the whole Act, and especially the provisions of section 5, deals. It is intended to provide by the proviso that in the computation of taxable turnover of a dealer in respect of any goods included in clause (vii) the dealer is entitled to the rebate to the extent of sales tax paid by him on the raw 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 F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ackaged drinking water, alcoholic drink, chewing gum, and any substance, including water used into the food during its manufacture, preparation or treatment but does not include any animal feed, live animals unless they are prepared or processed for placing on the market for human consumption, plants, prior to harvesting, drugs and medicinal products, cosmetics, narcotic or psychotropic substances" 87. The definition of ingredient reads as under: "ingredient? means any substance, including a food additive used in the manufacture or preparation of food and present in the final product, possibly in a modified form;" 88. 2.3. of the Food Safety and Standards (Prohibition and Restrictions on Sales) Regulations, 2011 reads as under: "2.3. Prohibition and Restriction on sale of certain products 2.3.1: Prohibition on sale of food articles coated with mineral oil: No person shall sell or offer or expose for sale or have in his premises for the purpose of sale under any description, food articles which have been coated with mineral oil, except where the addition of mineral oil is permitted in accordance with the standards laid down in these Regulations and Food Safety and Standards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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. 92. It further appears that vide letter dated 14.03.2019, the said petitioner in W.P(MD)No.204 of 2021 further stated that from Nov 2018 onwards they have changed the product manufactured from Tariff Heading 24 03 99 20 to Tariff Heading 2401 20 90, and thereafter attempted to obtain a ruling from the Appellate Authority for Advance Ruling under the provisions of the GST Act for classifying the same product under the Tariff Heading 2401 20. 93. 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 products under Heading 2403 99 10 of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed" or "Reconstituted" Tobacco, Tobacco Extracts Essences". 98. As far as the writ petitioner in WP.(MD).No.204 of 2021 is concerned, the petitioner was indeed not only paying GST applicable under Tariff heading 2403 99 10 but also paying GST compensation cess under Notification No.1/2017 - Central Tax (Rate) dated 28.06.2017 under heading 2403 99 10, from inception of GST and later stated that the petitioner wanted to close down the business due to stiff market conditions. Thereafter, the petitioner in WP.(MD).No.204 of 2021 has altered the classification from 2403 99 10 to 2403 99 20 for the period between June 2018 to September 2018 and now seeks classification under 2401 20 90. 99. The Supreme Court in The Commissioner of Central Excise Vs. Shree Baidyanath Ayurved Bhawan Limited [2009 237 (ELT) 225] observed as under:- "30. Merely because there is some difference in the tariff entries, the product will not change its character. Something more is required for changing the classification especially when the product remains the same. (BPL Pharmaceuticals Ltd.) 31. There cannot be justification enough for changing the classification without a change in the nature or a chang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble-1 of this order are concerned, they have also been in existence even before the GST was rolled out w.e.f 01.07.2017. They were Central Excise Assessees under the Central Excise Act, 1994 read with Central Excise Tariff Act, 1985. They had also classified the product under 2403 99 10 under the Central Excise Tariff Act, 1985. 102. Similarly, other than the petitioner in W.P.(MD).No.204 of 2021, who have challenged various Orders-in-Original as in Table-1, to this order have adopted the classification under Tariff Heading 2403 99 10 during the period prior to roll out of GST dated 01.07.2017. They have however, classified the products under Tariff Heading 2403 99 90 with a view to get away with the Government order referred supra. The facts remains that these products manufactured by both the petitioners would attract compensation cess by implementation of the GST enactments with effect from 01.07.2017 under the provisions of the Goods and Services Tax (Compensation to States) Act, 2017. 103. The change of classification with a view to take advantage to evade payment of tax is not permissible. 104. Thus, in the absence of these facts, reopening or revision would be bad in law. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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