Customs, Excise and Gold Tribunal - Delhi
M.G. Mohite And Sons vs Collector Of Central Excise on 16 July, 1992
Equivalent citations: 1992(62)ELT810(TRI-DEL)
ORDER K.S. Venkataramani, Member (T)
1. This appeal is directed against the order dated Nil April, 1985 passed by the Additional Collector of Central Excise and Customs, Pune by which he has demanded duty of Rs. 23,821.38 on chewing tobacco cleared by the appellants during the period 1-7-1982 to 8-11-1983 under Rule 9(2) of the Central Excise Rules, 1944 read with Section 11A and also imposed personal penalty of Rs. 1000/- on the appellants under Rule 210 of the Central Excise Rules, 1944. The facts in brief are that the cross-checking of records of the appellants who are wholesale dealers in tobacco, the Departmental Officer found that they had manufactured unbranded chewing tobacco during the period 1-7-1982 to 8-11-1983 and had cleared the same without payment of duty and without accounting for the goods in the statutory record RG 12 Register. It was found that during the relevant period, they were holding Central Excise Licence for manufacture of branded chewing jarda. As per the Notification No. 34/79-C.E., unbranded chewing tobacco manufactured by a manufacturer by whom or on whose behalf chewing tobacco is also sold under a brand name, is not eligible for exemption. The officers found that the appellants were holding Central Excise Licence during the period 1976 to 8-11-1983 for manufacturing chewing tobacco. They were making branded chewing tobacco with the brand name of Mohite Jarda. They got their licence cancelled on 8-11-1983. They are also selling two brands of manufacture Jarda tobacco Mohite Jarda No. 1 and Mohite Jarda No. 2. The Department held that Mohite Jarda No. 1 and 2 would fall under Tariff Item 4II(5) of Central Excise Tariff as chewing tobacco. Proceedings were initiated against the appellants by issuing show cause notice for having failed to account for quantity of 6995.655 Kg. of unbranded chewing tobacco falling under Item 411(5) during the period 1-7-1982 to 8-11-1983 and for having cleared it without payment of duty though they were not eligible for exemption to unbranded chewing tobacco under Notification No. 34/79-C.E. The Additional Collector considered the reply to the show cause notice and heard appellants in the matter. He also inspected samples of the product during the hearing and found that the tobacco is in the form of broken leaf and was of the view that the process of beating i.e. conversion of whole leaf tobacco into broken leaf is a process of manufacture. He also found that the samples of Mohite Jarda No. 1 and 2 were in broken leaf form unmanufactured tobacco cut into pieces by beating was held to be a processed tobacco. He also noted that it was used for chewing purposes. He also gave finding that from the prices of branded chewing Jarda and the prices of Mohite Jarda No.l and 2, the latter was sold at much higher prices and from this concluded that it cannot be believed that what was sold was not treated with foreign materials. The demand for duty was confirmed and penalty imposed in the ultimate adjudication that is passed by the Additional Collector which is now under appeal before the Tribunal.
2. When the appeal was called none was present for the appellants who have by a letter dated 5-9-1991 stated that their financial condition is not good for them to be present for the hearing with their Consultant and that the case may be decided on merits. In their appeal Memorandum, they have submitted that unmanufactured Jarda Tobacco which in the form of flakes and used for chewing purposes remains unmanufactured tobacco and that unmanufactured chewing tobacco will fall under Tariff Item 4I(6) which is exempted from duty since 1-3-1979. They have also drawn'attention to a Trade Notice 139/1981 issued by the Central Excise Collectorate but say that Mohite Jarda No. 1 and 2 are purchased from the market and sold in the same conditions without subjecting it to any other process of manufacture and without treating it with any additional ingredient. It has also been submitted that their case is covered by decisions of the Collector of Central Excise (Appeals), Bombay in identical cases wherein the authority had held branded unmanufactured tobacco sold in packets is not manufactured tobacco under Tariff Item 411(5) in the case of M/s. Jaikisan Tobacco Co., Pune. Smt. J.M.S. Sundaram, the learned Senior Departmental Representative appearing for the Collector reiterated the reasoning given in the Additional Collector's order and urged that since the appellants were selling branded and unbranded chewing tobacco, they were not eligible for Notification No. 34/79 and duty should have been paid by them under Tariff Item 411(5). The learned Senior Departmental Representative pointed out that the Additional Collector has found that whole leaf tobacco was subjected to beating to form broken leaf which process amounted to a process of manufacture bringing the goods under Tariff Item 411(5) since they are used for chewing purposes. The price difference which is noted by the Additional Collector is also a clear pointer to the fact that the tobacco is processed tobacco. The learned Senior Departmental Representative further contended that the appellants have relied upon the decision of the Tribunal in the case of Collector of Central Excise, Pune v. Jaikisan Tobacco Co., Pune, reported in 1986 (23) E.L.T. 184 (Tribunal) which is not factually parallel to the present case because in the present case the process of beating whole leaf tobacco into broken leaf has been carried oh by the appellants.
3. The submissions made by both the parties have been carefully considered. The Department has held that the tobacco Mohite Jarda No. 1 and 2 sold by the appellants is manufactured chewing tobacco classifiable under 411(5) Central Excise Tariff and thereby the appellants are ineligible for Notification No. 34/79. The appellants have, on the other hand, contended that the tobacco remains unmanufactured tobacco and that only manufactured tobacco can be brought under Item 411(5) Central Excise Tariff and in support of which they have cited the Tribunal decision in the case of Collector of Central Excise, Pune v. Jaikisan Tobacco Co., Pune (supra). In that decision the Tribunal had upheld the contention of the respondents therein which has been set out in para-5 of the decision which is as follows :-
"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."
The Tribunal found that the respondents therein were right in saying that the scheme 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. Further in this case it is found that this is a confirmation of decision of the Collector (Appeals) which was cited and relied upon by the appellants before the adjudicating authority. The Additional Collector has also in his order not shown by evidence that the tobacco at the.hands of the appellants has been treated with additional ingredients. The Trade Notice 139/81 of the Pune Collectorate has given a list of ingredients for the manufacture of chewing tobacco products for the purpose of accountal inRG-12 Register. In the absence of such evidence the conclusion regarding calssification of the tobacco under Item 411(5) Central Excise Tariff cannot be sustained specially in the light of the Tribunal's decision in the case of Jaikisan Tobacco Co., Pune (supra). In the result, it is found that there is a lot of substance in the contention put forth by the appellants herein. The impugned order is accordingly set aside and appeal allowed.