Custom, Excise & Service Tax Tribunal
Som Pan Products Pvt Ltd vs Noida on 25 September, 2018
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL,
REGIONAL BENCH : ALLAHABAD
1-5) Appeal Nos.E/70345/2016-EX[DB], E/70346/2016-
EX[DB], E/70344/2016-EX[DB], E/70347/2016-EX[DB],
E/70368/2017-EX[DB]
Sl.No.1,2,3,4) (Arising out of Order-in-Appeal No.NOI-EXCUS-001-APP-0247
to 0250-15-16 dated 12.01.2016 passed by Commissioner(Appeals),
Customs, Central Excise & Service Tax, Meerut-II, Noida.)
Sl.No.5) (Arising out of Order-in-Original No.52/Pr.Comm./Noida-I/2016-17
dated 16.03.2017 passed by Commissioner Central Excise & Service Tax,
Noida.)
M/s. Som Products Pvt.Ltd.
...APPELLANT(S)
VERSUS
Commissioner of Central Excise & Service Tax, Noida
RESPONDENT (S)
APPEARANCE Ms.Seema Jain (Advocate) & Shir Abhishek Srivastava (Advocate) for the Appellant (s) Shri Gyanendra Kumar Tripathi (AC)(A.R.) & Shri Pawan Kumar Singh (Supdt.) (A.R.) for the Revenue CORAM:
MRS. ARCHANA WADHWA, HON‟BLE MEMBER(JUDICIAL) SHRI ANIL G. SHAKKARWAR, HON‟BLE MEMBER(TECHNICAL) DATE OF HEARING : 31.07.2018 DATE OF DECISION : 25.09.2018 FINAL ORDER NOs-72313-72317/2018 Per Mrs.Archana Wadhwa :
All the five appeals, four arising out of the same impugned order of Commissioner(Appeals) and one arising out of the order of
2 E/70345/2016-EX[DB], E/70346/2016-EX[DB], E/70344/2016-EX[DB], E/70347/2016-EX[DB], E/70368/2017-EX[DB] Commissioner are being disposed of by a common order as they arise out of the same set of facts and circumstances.
2. As per facts on record the appellants are engaged in the manufacture of chewing tobacco and Zarda. They filed an application for Central Excise registration declaring the goods intended to be manufactured by them as chewing tobacco/Zarda with the classification of chewing tobacco under Central Excise Tariff Sub-Heading as 24039910 and Zarda falling under Central Excise Tariff Heading 24039930. They were granted registration as on 31.03.2015.
3. Subsequently Assistant Commissioner vide his letter dated 06.04.2015 asked the appellants that as they have classified their product chewing tobacco under heading 24039910 and Zarda under heading 24039930 they are required to clarify as to why both the products which are identical has been classified under two different headings. The said letter was replied to by the appellant vide their letter dated 12.05.2015 clarifying that they were manufacturing chewing tobacco which is also called Zarda and both the products are classifiable under heading 24039910 and known in the market as chewing tobacco/Zarda/Bhugi etc.. They also detailed the process of manufacture undertaken by them wherein they submitted that the product intended to be manufacture by them is type of chewing tobacco containing tobacco, Quiwan, Glycerene and flavours. Since no scent is being added by them, their product cannot be considered to be Zarda scented tobacco falling under heading 24039930. The reference to the 3 E/70345/2016-EX[DB], E/70346/2016-EX[DB], E/70344/2016-EX[DB], E/70347/2016-EX[DB], E/70368/2017-EX[DB] said heading was an inadvertant mistake on their part. They further clarified that in terms of the Board‟s Circular No.81/5/87-CX.3 dated 23.06.1987 the raw tobacco crushed in the form of flakes is Zarda only and the difference between Zarda scented tobacco and the goods manufactured by them can be seen from the terms of tobacco and tobacco products defined by IS 10335.2007 (re-affirmed 2012) which defines tobacco products. They also submitted that various types of chewing product tobacco are prepared by adding different ingredients which gives the chewing tobacco its test and essence and the tobacco manufactured by the appellant gets its taste and essence from Glycerine and the Quiwan added to the tobacco. As such they contended that their product falls under sub-heading 240399.10 and the same is manufactured tobacco product and the same would not fall under heading 240399.30. They also made a request that their product be sent to Central Revenue Laboratory for testing the same for further clarification. They accepted that there was a mistake of wrong classification on their part inasmuch as unknowingly they showed their product to be classifiable under heading 240399.30 in respect of heading 240399.10. Accordingly they submitted that they intend to pay the correct Central Excise duty under heading 2403910.
4. It is seen that vide Notification No.25/2015-CE(NT) dated 30.04.2015 the rate of duty in respect of Zarda scented tobacco was based upon the speed of the machine. Accordingly the matter was taken up by the adjudicating authority for fixing annual production 4 E/70345/2016-EX[DB], E/70346/2016-EX[DB], E/70344/2016-EX[DB], E/70347/2016-EX[DB], E/70368/2017-EX[DB] capacity of the appellant‟s products in terms of Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010 and by treating the appellant‟s product as "Jarda scented tobacco" falling under sub-heading 24039930 and by applying the Notification No.25/2015-CE(NT) dated 30.04.2015 their capacity was determined. In terms of the said order of the Assistant Commissioner dated 05.05.2015, the appellant deposited the duty of Rs.5,74,77,500/- under protest with interest. Out of the said duty an amount of Rs.2,70,48,000/- was deposited towards duty liability on chewing tobacco and Rs.3,04,29,000/- was deposited towards the differential duty as payable on Zarda scented tobacco. The said differential duty was carried out as opening and closing balance in all the ER-1 returns filed for the subsequent months of June,2015, July 2015, August 2015 and September 2015.
5. It is seen that subsequently the appellant filed revised declarations for the months of June to September 2015 declaring their product as chewing tobacco falling under heading 24039910 and paid duty on chewing tobacco only, but the Assistant Commissioner vide his different orders arrived at the appellant‟s duty liability by treating the product as Jarda scented tobacco and fixed the annual capacities accordingly. All the four different capacity determination orders passed by the original adjudicating authority were appealed against by the appellant before Commissioner(Appeals) who vide common Order-in- Appeal upheld the same on the ground that once the appellant has filed 5 E/70345/2016-EX[DB], E/70346/2016-EX[DB], E/70344/2016-EX[DB], E/70347/2016-EX[DB], E/70368/2017-EX[DB] the declaration in respect of the goods manufactured by them classifiable under heading 24039930, and there being no change either in the manufacturing process or in the raw materials, the appellants cannot be permitted to file revised declaration. The said Order-in- Appeal is impugned in four appeals.
6. In the above background proceedings were also initiated against the appellant by way of show cause notice dated 04.05.2016 for demand of duty of Rs.5,74,77,500/- along with interest for late payment of duty which was deposited by the appellant under protest in May 2015 itself. The notice proposed appropriation of the said amount and also proposed confirmation of interest. The said show cause notice culminated into an order passed by the Commissioner being order dated 16/20.03.2017 confirming the demand of duty of Rs.5,74,77,000 with interest of Rs.56,12,275/- and penalty of Rs.5,74,77,000 on the appellant. The said order stands impugned in Appeal No.E/70368/2017.
7. We have heard Ms.Seema Jain & Shri Abhishek Srivastava, ld.Advocates for the appellant and Shri Gyanendra Kumar Tripathi and Shri Pawan Kumar Singh, ld.A.R.s for the Revenue.
8. The dispute in all the appeals relates to the fact as to whether the product being manufactured by the appellant was chewing tobacco or Jarda scented tobacco. For better appreciation of the two contended classification entries, we reproduce the same :-
2403 99 10 --- Chewing tobacco........................................... Kg. 70% 2403 99 30 --- Jarda scented tobacco .............................. Kg. 70% 6 E/70345/2016-EX[DB], E/70346/2016-EX[DB], E/70344/2016-EX[DB], E/70347/2016-EX[DB], E/70368/2017-EX[DB] As is seen from above chewing tobacco is classifiable under heading 2403 99 10 whereas Jarda scented tobacco falls under heading 2403 99 30. Admittedly the appellant in their first declaration has described the goods as chewing tobacco and Zarda and have classified the same separately under two different headings. However, the letter of the appellant‟s jurisdictional Central Excise authorities seeking clarification from the appellant is to the effect that chewing tobacco as also Zarda falls under same heading and what is the reason for classifying two separately. This fact leads to the observation that even the appellant‟s jurisdictional Central Excise authorities considered chewing tobacco as also Zarda as one and the same product. Otherwise also from the two entries reproduced above we note that chewing tobacco falls under heading 2403 99 10 whereas the description of the goods under heading 2403 99 30 is Jarda scented tobacco.
The issue to be is as to whether Zarda (simplicitor) would be classified is chewing tobacco or Jarda scented tobacco. If the Zarda is classifiable under heading 2403 99 10 as Jarda scented tobacco, the same would attract higher rate of duty and if the Zarda falls under heading 2403 99 10 as chewing tobacco, there would be no duty liability on the appellants as they have already discharged their duty liability on the chewing tobacco.
9. The appellant‟s contention is that reference to heading 2403 99 30 which describes the goods Jarda scented tobacco was a mistake on their part inasmuch as they never manufactured the said product. In 7 E/70345/2016-EX[DB], E/70346/2016-EX[DB], E/70344/2016-EX[DB], E/70347/2016-EX[DB], E/70368/2017-EX[DB] their reply to the Assistant Commissioner‟s letter, they have given a detailed process of manufacture of Zarda by them which is nothing but chewing tobacco. They have also referred to the Board‟s Circular as also to ISI specification which refers to the various names including Zarda by which chewing tobacco is known in various parts of the country. They have also contended that no scent is being used by them in the manufacture of their product and as such their product cannot be considered to be Jarda scented tobacco. In the said communication they have also made a request to the Revenue to get their goods tested or to visit their factory, which request of the appellant has not been acceded to by the authorities.
10. It is seen that the entire case of the Revenue is based upon the said declaration of the assessee without making any efforts to find out as to what exactly was being manufactured by the appellant. If the Deputy Commissioner did not approve the declaration filed by the assessee, he was under obligation to make enquiries including physical verification in terms of Rule 6(2) of the Chewing Tobacco Rules, 2010. No such enquiry stands made by the officer. Further their factory was never visited by the officers and no samples were drawn in spite of requests made by the assessee. Further the appellant had disclosed the manufacturing process of their final product which does not stand rebutted by the Revenue. The appellant was using lime powder as one of the essential ingredients of chewing tobacco and had submitted the purchase bills of the same before the authorities. The various ER-1 8 E/70345/2016-EX[DB], E/70346/2016-EX[DB], E/70344/2016-EX[DB], E/70347/2016-EX[DB], E/70368/2017-EX[DB] returns filed by the appellant also show the manufacture and clearance of chewing tobacco. If there was any doubt, the officers could have made further enquiries instead of rejecting the assessee‟s claim on filmsy grounds. It is seen that the appellants have also produced invoices on record showing sale of chewing tobacco and not of Jarda scented tobacco. When there is evidence to show that the description of the goods in the invoices issued by the assessee refers to chewing tobacco and no enquiries stand made by the Revenue from the appellant‟s customers to establish that what was sold by them was Jarda scented tobacco and not chewing tobacco we find no merits in the Revenue‟s stand. The observations of Commissioner(Appeals) that invoices demonstrating the description of the goods sold are not relevant documents cannot be appreciated inasmuch as such invoices under which the goods were sold indicate the exact nature and description of the goods manufactured and sold by the assesses. The said invoices issued under Rule 11 of Central Excise Rules, 2002 requiring containing of description and classification of the goods are the relevant documents and cannot be sidelined simplicitor, without any reason or rhyme.
11. In any case and in any view of the matter, the Revenue‟s case is that the appellants have manufactured Zarda by showing the same as chewing tobacco. It may be observed here that as per the Revenue also, the appellants were not indulging in manufacture of Jarda scented tobacco, though the appellants have shown the classification of the 9 E/70345/2016-EX[DB], E/70346/2016-EX[DB], E/70344/2016-EX[DB], E/70347/2016-EX[DB], E/70368/2017-EX[DB] jarda scented tobacco against their description of Zarda made in the declaration.
12. Whether Zarda has to be treated as Jarda scented tobacco or a chewing tobacco was the subject matter of various precedent decisions. Tribunal in the case of V.H. Patel Tobacco Pvt.Ltd. v. Commissioner of C.Ex., Aurangabad [1999 (113) E.L.T. 962 (Tribunal)] has held that Zarda manufactured by beating leaves and without any other ingredients is an unmanufactured tobacco falling under heading 24.01 of Central Excise Tariff Act, 1985 and not under heading 24.04. Further in the case of Collector of Central Excise, Pune v. Jaikisan Tobacco Co. [1986 (23) E.L.T. 184 (Tribunal)] it was observed that re-packing of raw tobacco flakes into small polythene packs and label the packs with the description of Zarda or Bhugi will not convert the tobacco into manufactured tobacco classifiable as Jarda. Further in the case of M.G. Mohite & Sons v. Collector of Central Excise [1992 (62) E.L.T. 810 (Tribunal)], it was held that tobacco sold by assessee, though known as Zarda, is only un-manufactured tobacco inasmuch as the same is not treated with additional ingredients.
13. Even as per ISI Glocery of terms of tobacco and tobacco products Zarda is nothing but chewing tobacco which is unmanufactured tobacco containing beaten tobacco leaves. Only when Zarda so obtained is perfumed, the same would become Jarda scented tobacco. Admittedly chewing tobacco and Jarda scented tobacco are different products mentioned separately in the Tariff. Zarda and Jarda scented tobacco 10 E/70345/2016-EX[DB], E/70346/2016-EX[DB], E/70344/2016-EX[DB], E/70347/2016-EX[DB], E/70368/2017-EX[DB] are not one and the same product. Whereas Zarda is admittedly chewing tobacco the same would be classifiable along with the classification of chewing tobacco and would not fall under the heading of Jarda scented tobacco.
Even though the appellant had originally classified Zarda under heading 2403 99 30, but it having been proved by various evidences that the appellant‟s manufactured product was chewing tobacco and Zarda, the mention of classification of heading 2403 49 30 against Zarda is an obvious mistake on the part of the appellant. In any case such mistake was rectified by the appellant by filing revised declaration, which was not stand accepted by the authorities below on the sole ground that the first declaration has to be accepted for all the subsequent months. The said reasoning of appellate authority cannot be appreciated as a mistake having been once committed, that too in respect of classification, cannot be held to be unrectifiable. Appellant cannot be expected to be an excise expert and description of the goods having been specified correctly, the wrong mentioning of heading cannot act deterrent to their interest.
14. Whether Zarda can be classified as Jarda scented tobacco has been considered by the Tribunal in the case of Flakes-N-Flavourz V. Commissioner of Central Excise, Chandigarh [2015 (327) E.L.T. 435 (Tri.-Del.)]. There was originally a difference of opinion between the Members of the Division Bench which was resolved by the Third Member. As per the majority decision Zarda was held to be a 11 E/70345/2016-EX[DB], E/70346/2016-EX[DB], E/70344/2016-EX[DB], E/70347/2016-EX[DB], E/70368/2017-EX[DB] preparation of chewing tobacco distinct and different from Jarda scented tobacco. It was observed that there was admittedly a difference between flavour and scent. Whereas the flavour has a distinct taste of intangible quality i.e. feel when the substance is eaten. On the other hand scent or scented essentially means a pleasant smell or ardour. While the flavour substance appeals to test buds, the other refers sense of smell. As such it was held in that case that assessee‟s product remains a chewing tobacco even after addition of flavouring substance. As the appellant in that case was marketing their product as "Flavoured Chewing Tobacco", the Tribunal agreed with the assessee that the same cannot be held to be a scented product. It was observed that Revenue has not produced any evidences on record to establish that the product has travelled from "Flavoured Chewing Tobacco" falling under chapter 2403 99 10 to "Jarda Scented Tobacco" falling under heading 2403 99 30, on account of addition of any material which would make the product as scented tobacco.
The Tribunal in the above referred case has further observed that the expression "Chewing Tobacco" or "Jarda Scented Tobacco" are not defined anywhere in the taxing statute and as such, in the absence of same, the product has to be classified based upon the description of the product given by the manufacturer on the outer cover of the pouch as also on the basis of common parlance and established practice. As such by taking into account the decisions in the case of Prabhat Zarda Factory v. Commissioner [2004 (163) E.L.T. 485 (Tribunal)] as also the 12 E/70345/2016-EX[DB], E/70346/2016-EX[DB], E/70344/2016-EX[DB], E/70347/2016-EX[DB], E/70368/2017-EX[DB] Hon‟ble Supreme Court‟s decision in the case of Gopal Zarda Udyog v. Commissioner [2005 (188) E.L.T. 251 (S.C.)] and Dharampal Satyapal v. Commissioner [2005 (183) E.L.T. 241 (S.C.)], even the intermediate products like admixture of Kiman, Paraphion, Menthol were held to be „chewing tobacco‟ falling under erstwhile Chapter heading 2404.49. Further the Tribunal in the said case also referred to the Hon‟ble Supreme Court‟s decision in the case of CCE, Nagpur v. Shree Baidyanath Ayurved Bhawan Ltd. [2009 (237) E.L.T. 225 (S.C.)] laying down that resort should be had to popular meaning and understanding attached to such product by those people using the product and not to scientific and technical meaning and expressions.
Admittedly in the present case the appellants have marketed their product as chewing tobacco and not as Jarda scented tobacco. Revenue has neither disputed the manufacturing process undertaken by the appellant which shows non-use of any scent or perfume in the product nor have made any enquiries from the dealers, shopkeepers or the ultimate consumers of the product. No evidence of procurement of Perfume or Scent as raw material and then use in the product stands produced by the Revenue. No employee of the assessee was examined so as to establish that perfume being used for manufacture of their final product. As such the said factor of marketing of the goods as chewing tobacco leads us to inevitable conclusion apart from other reasons as discussed above, that the product in question is admittedly chewing tobacco and not Jarda scented tobacco.
13 E/70345/2016-EX[DB], E/70346/2016-EX[DB], E/70344/2016-EX[DB], E/70347/2016-EX[DB], E/70368/2017-EX[DB]
15. Further we note that an identical issue was the subject matter of the Tribunal decision in the case of Urmin Products Pvt.Ltd. v. Commisioner of Central Excise, Ahmedabad [2010 (256) E.L.T. 597 (Tri.-Ahmd.)], wherein it was observed as under:-
"On the other hand, department has not produced any evidence to show that the product is Tobacco Scented with Zarda. In fact, the learned SDR relied upon the process of manufacture in adjudication order. However, the process of manufacture given in the adjudication order in Para 2 is the manufacturing process as noticed by the officers when they visited the factory premises. This is a flowchart prepared by the officers after their visit. However, when we have a look at the statement of the Production Manager Shri Ramesh Narsinghbhai Patel in the flow chart, the Zarda Scented Tobacco in the process of manufacture is missing. Zarda Scented Tobacco figures in the manufacturing flow chart given by Shri Dipak Suryakant Shah only. Furthyer, it was also brought to our notice that during the period from 19-1-2005 to 20-8-2005, the appellants had described the product in the classification list as Chewing Tobacco and from 1-3-2005, to 31-3-2006, it was classified Zarda Scented Tobacco and from 1-4-2006 onwards, the classification description was Chewing Tobacco which continues till today. In the invoice/bills prepared by the appellant, the item was described as Zafrani Zarda and from 1-4-2006, it is being called as Baghban Flavoured Chewing Tobacco. It is not the case of the department or the party that there was change in the label or manufacturing process. From the description in the label, it is quite clear that the product is called Flavoured Chewing Tobacco. No expert opinion or information from the trade have been obtained and it is only the statement of factory manager that the product is usually eaten with Pan, Betel nut or Pan Masala etc. Department has come to the conclusion that the product is not Chewing Tobacco. Further, as submitted by the appellant, 14 E/70345/2016-EX[DB], E/70346/2016-EX[DB], E/70344/2016-EX[DB], E/70347/2016-EX[DB], E/70368/2017-EX[DB] nowhere in the statement of the employees, it has been stated that Zarda Scent was added. Under these circumstances, in view of the above discussion, neither side has been able to show whether the product is Chewing Tobacco or Zarda Scented Tobacco clearly. Both sides have some points in their favour and some against them. Under these circumstances, in view of the fact that the label calls the product as Flavoured Chewing Tobacco, no Zarda Scent has been used and the product has not been sold as Zarda Scented Tobacco by the appellant, we consider that the claim of the appellant that the product is Flavoured Chewing Tobacco has to be accepted. Thus, on merit the appellants succeed. Therefore, the demand for differential duty fails and naturally the penalties imposed under Section 11AC of Central Excise Act or rules of Central Excise Rules, 2002 also have to be set aside."
16. The ratio of the said decision is fully applicable to the facts of the present case. We also note that the appellant‟s request for getting the sample drawn and tested by CRCL was not accepted by the Revenue and in the absence of any such test reports or expert‟s opinion, the Revenue‟s endeavour to hold that the goods being manufactured by the appellant are not chewing tobacco, but Jarda scented tobacco cannot be appreciated. No reason stands advanced by the Revenue for not accepting the appellant‟s request and get the samples tested for finding out the exact nature of the product.
17. In view of the foregoing, we find no reasons to uphold the impugned orders passed by the Commissioner(Appeals) upholding the fixation of production capacity of the assessee by treating their product as falling under sub-heading 2403 99 30 or the order of the 15 E/70345/2016-EX[DB], E/70346/2016-EX[DB], E/70344/2016-EX[DB], E/70347/2016-EX[DB], E/70368/2017-EX[DB] Commissioner confirming the demands and imposing penalties. We also note that out of the total confirmed demand of Rs.5,74,7,500/-, the appellant was to admittedly pay the duty of Rs.2,70,48,000/- as duty towards chewing tobacco. As such the balance differential duty of Rs.3,04,29,000/-, which the appellants have deposited under protest is set aside along with setting aside of interest and penalty imposed upon the appellant.
All the five appeals are allowed in above terms.
(Pronounced in the open Court on-25/09/2018)
(ANIL G. SHAKKARWAR) (ARCHANA WADHWA)
MEMBER(TECHNICAL) MEMBER (JUDICIAL)
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