Customs, Excise and Gold Tribunal - Delhi
Collector Of Central Excise vs Jaikisan Tobacco Co. on 29 October, 1985
Equivalent citations: 1986(7)ECC1, 1986(6)ECR42(TRI.-DELHI), 1986(23)ELT184(TRI-DEL)
ORDER K.L. Rekhi, Member (T)
1. The point of dispute involved in all these six appeals is common. Though they arise out of two separate orders-in-appeal, the second order in fact followed the ratio of the first. The appeals were argued together before us. We are, therefore, making this combined order for all the six appeals.
2. The facts, in brief, which are not disputed, are that the respondents purchase raw tobacco, crushed in the form of flakes and packed in bulk packs, from the market. They do not add any ingredient to the tobacco, nor process it in any manner. They just re-pack the flakes into small paper/polythene packets, label the packets with their brand name and the description "Jarda" or "Bhugi" (Choora) and sell them. In retail, the 10 gms. packets sell at about 30 paise each. These are generally purchased by poor people who use the tobacco contained therein for chewing with or without the admixture of small quantities of slaked lime (such mixing is done usually on the palm of the user).
3. The point at issue is whether the tobacco Jarda or Bhugi packets prepared by the respondents are liable to duty as "Chewing tobacco" under Entry 4-II (5) of the Central Excise Tariff. In order to facilitate the discussion, we reproduce below the relevant portions of the tariff entry and Section 2(f) of the Central Excises and Salt Act, 1944 :-
Extracts of the tariff entry
"4. Tobacco.
I-UN TOBACCO
(i) 1 to * * * (8) II- TOBACCO * * *
5. Chewing tabacco.
* * * Extracts from Section 2.
"2. Definitions.-In this Act, unless there is anything repugnant in the subject or context-
(f) 'manufacture' includes any process incidental or ancillary to the completion of a manufactured product; and
(i) in relation to tobacco, includes the preparation of cigarettes, cigars, cheroots, biris, cigarettes or pipe or hookah tobacco, chewing tobacco or snuff;
(ia) In relation to manufactured tobacco, includes the labelling Dire-labelling of containers and repacking from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer.
* * *
4. The rival contentions were put forth before us with the help of extracts from the Report of the Tobacco Excise Tariff Committee, statutory definitions of "manufacture" in Section 2(f) aforesaid, Board's Tariff Advices and judicial authorities. In substance, the department's case is that description of the goods as "Jarda" etc. and their intended and actual use for chewing squarely bring them under the entry which is specific for chewing tobacco, that the fact of "manufacture" is to be presumed in the circumstances, that repacking and labelling operations undertaken by the respondents amounted to "preparation of...chewing tobacco..." within the statutory definition of "manufacture" in Clause (i) of Section 2(f) and that, in any case, these operations, being intended to render the product marketable to the consumer, came within the ambit of Clause (ia) of the said section as well.
5. On the other hand, the case of the respondents is that only manufactured chewing tobacco (that is, the processed variety which has added ingredients like perfume, menthol, lime, katha, cardamom, spices, silver foil etc. and which because of such processing and admixture of ingredients sells at a very high price) comes within the scope of the tariff entry, that their tobacco, though known as Jarda, is unmanufactured and is purchased as such from others, that unmanufactured tobacco is exempt from duty since 1-3-1979, that they do no processing on the bulk Jarda purchased by them nor add anything to it and that their activity of just repacking and labelling cannot convert the unmanufactured tobacco into manufactured tobacco.
6. We have carefully considered the matter. We observe that the tariff entry has two clear sub-divisions-unmanufactured tobacco and manufactured tobacco. The entry "chewing tobacco" occurs under the second sub-division "II-Manufactured Tobacco". The first question to determine, therefore, is whether the product cleared by the respondents is manufactured tobacco or unmanufactured tobacco.
7. We find that it is not the respondents but others who have crushed tobacco leaves into flakes or Jarda. No duty was reportedly charged from those crushers because the department evidently considered the flakes as unmanufactured tobacco which is exempt from duty. The respondents have purchased such flake tobacco in bulk packs and have merely repacked it into smaller packs on which they have affixed their labels. If tobacco flakes in gunny bags were really unmanufactured tobacco, we are at a loss to understand how the repacking and labelling operations alone can convert them into manufactured tobacco. On the other hand, if the flakes in gunny bags were manufactured tobacco, then the duty liability under the tariff entry "chewing tobacco" should have to be fastened on to those who rendered it into the Jarda or flake form and not on the repackers. Mere repacking and labelling at the respondents' end cannot amount to "preparation of...chewing tobacco..." within the meaning of Section 2 (f) (i). Though Section 2(f) (ia) makes repacking and labelling as manufacturing operations; it does so "in relation to manufactured tobacco". It is not applicable to unmanufactured tobacco.
8. We find from the Taxation Enquiry Committee's Report that in India chewing tobacco is consumed both in manufactured or processed form as well as in unmanufactured or raw form. To quote from the Report :
"The main areas of consumption of chewing tobacco are in South India where it is mostly used in the raw form without any process of manufacture. Uttar Pradesh and Delhi and to a smaller extent Hyderabad are areas where there is manufacture of chewing tobacco called 'Zarda'."
The respondents are, therefore, right in saying that the scheme of the Central Excise Tariff taxes only the manufactured variety of chewing tobacco and not raw tobacco though the latter may also be used for chewing only.
9. None of the judicial authorities cited before us by both sides relate to classification of raw chewing tobacco in the context of the Central Excise Tariff Entry. We, therefore, do not consider it necessary to go into them.
10. However, it is necessary to mention here that the impugned order-in-appeal in the case of M/s. R.M. Jain (the respondent in appeals Nos. 3 to 6) allows consequential refund to them "if otherwise admissible". The respondents stated that the Collector (Appeals) perhaps had in mind the time-bar aspect which he himself had no occasion to go into. They added that the Bench need not concern itself with it, as it had yet to be gone into by the lower authority (the Assistant Collector). They maintained that they had paid the duty under protest.
11. In the light of our above discussion, we are in agreement with the conclusion reached by the Collector (Appeals) that the product cleared by the respondents is not taxable under the Central Excise Tariff Entry 4-11(5). Accordingly, we confirm the impugned orders and reject all the appeals.