Custom, Excise & Service Tax Tribunal
M/S. Flakes-N-Flavourz vs Commissioner Of Central Excise on 8 August, 2014
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL, NEW DELHI
PRINCIPAL BENCH, COURT NO. III
Excise Appeal No. 1368 of 2008 - EX[DB]
[Arising out of Order-In-Appeal No. (24)15/CE/Adj/11/2008 dated 2.4.2008 passed by Commissioner of Central Excise, Chandigarh ]
For approval and signature:
Honble Ms. Archana Wadhwa, Member (Judicial)
Honble Mr. Manmohan Singh, Member (Technical)
1
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No
2
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
Yes
3
Whether Their Lordships wish to see the fair copy of the Order?
Seen
4
Whether Order is to be circulated to the Departmental authorities?
Yes
M/s. Flakes-N-Flavourz. Appellants
Vs.
Commissioner of Central Excise Respondent
Chandigarh
Appearance:
Shri Vivek Kohli, Advocate for the Appellants
Shri Pramod Kumar, Jt.CDR for the Respondent
CORAM:
Hon'ble Ms. Archana Wadhwa, Member (Judicial)
Hon'ble Mr. Manmohan Singh, Member (Technical)
Date of Hearing : 10.10.2013
Date of decision: 20.02.2014
Date of Pronounce : 08.08.2014
INTERIM ORDER NO. /151/2014-EX(BR)
FO 53229/2014
Per Archana Wadhwa (for the Bench):
The appellants are engaged in the manufacture of Gopal Zarda Pan chatani and scented supari and were availing area based exemption notification No. 50/03 CE dated 10.6.03 in respect of Pan chatani and Scented supari. However, they were paying duty of excise on the other goods falling under Chapter 24 of the first schedule to the Central Excise Tariff Act, 1985 inasmuch as they were specified in negative list under the said area based notification. The appellants were also availing Cenvat credit of duty paid on various inputs and input services. The goods manufactured at their factory located at Buramala were being transferred to their sales depots located in Delhi from where they were being sold through their wholesale dealers.
2. The dispute in the present appeal relates to the correct classification of the product manufactured by them as zarda scented tobacco and being cleared by them as chewing tobacco under classification heading 2403 99 10. Inasmuch as the said heading was specified under the provisions of Section 34A of the Central Excise Act, vide notification No. 2/2006-Ce (NT) dated 1.3.06, the duty on the said product was being discharged by the appellants on the basis of maximum retail price.
3. Prior to introduction of the 8 digit tariff code in the year 2005, the said product of the appellant was being classified under tariff heading 2404.41 and duty was also being paid under section 4A based upon MRP. However, with the introduction of 8 digit tariff heading, the new tariff entry 2043 99 30 was created describing the goods as zarda scented tobacco. The entry 2403 99 10 referred to the chewing tobacco and the preparations containing chewing tobacco. According to the Revenue, the appellants product fall under new entry 2403 99 30 as zarda scented tobacco and was required to discharge duty liability in terms of section 4 of the Central Excise Act instead of section 4A of the Act. Accordingly, the show cause notice dated 30.3.07 was issued to the appellants raising demand of duty of Rs.4 28,65,508 ( Rupees four crore twentyeight lakh sixtyfive thousand five hundred and eight only) for the period 1.3.06 to 10.7.06. The said show cause notice culminated into an order passed by the original adjudicating authority confirming demand and imposing penalty of Rs. One crore and ten lakhs.
Hence the present appeal.
4. We have heard both sides duly represented by Shri Vivek Kohli, learned advocate appearing for the appellant and Shri Pramod Kumar, learned Jt.CDR appearing for the Revenue.
5. The appellants have challenged the impugned order on merits as also on limitation.
6. After hearing both sides, we find that the dispute in the present appeal relates to correct classification of the appellants product Gopal Zarda. As per the appellants, the said product is nothing but flavoured chewing tobacco classifiable under heading 2403.99 10. On the other hand, the Commissioner has held the same to be falling under 2403 99 30 as zarda scented tobacco. For better appreciation of the contended entry which were introduced with effect from 28.8.05 the same are reproduced below:
2403 Other manufactured tobacco and manufactured tobacco substitutes; Homogenised or Reconsitituted tobacco; Tobacco extracts and essences.
2403 99
--
Other ;
2403 99 10
--
Chewing tobacco 2403 99 20
--
Preparations containing Chewing Tobacco 2403 99 30
--
Zarda Scented Tobacco Though the said switchover from 6 digit tariff to 8 digit tariff was made with effect from 28.2.05, the corresponding change in notifications issued under Chapter 4A were not made till 1.3.06. The notification No. 2/06 CE (NT) dated 1.3.06 was enacted wherein the classification heading under the new tariff was introduced. Inasmuch as the said notification only specified tariff heading 2403 99 10 and 2403 99 20, and as tariff item 2403 99 30 was not mentioned, and was introduced vide amending notification No. 16/06 CE (NT) dated 11.7.06, the Revenues contention is that during the period 1.3.05, to 10.7.06, the appellants product, which according to Revenue is classifiable under tariff item 2403 9930, has to be assessed in terms of section 4 and not under Section 4A. As such, demand of duty stand raised and confirmed against the appellant for the above period.
7. The above stand of the Revenue that during the period from, 1.3.06 to 10.7.06, the tariff item 2403 99 30 was not a specified item under section 4A would be relevant only if the appellants product was fall under said tariff heading. As such, the first issue required to be examined is as to whether the said tariff heading covers the appellants product or not.
8. The manufacturing process stand given by the appellants, and reproduced in the impugned order. The same is as under:
Raw tobacco received from the market is sieved and mixed with Additive Mixture and Glyceerin. The Addittive Mixture is of a great significance, which is manufactured by mixing perfumery compounds, received from the Noticees Delhi unit, to form perfumery mix, as per their formula. To this perfumery mix they further add sada-kiwam, spices and aromatic chemicals, in a mixer to form in-house kiwam. To this in-house kiwam they further add some perfumeries, spices, etc. based on the additive mixture to be made for making various types of tobacco to be manufactured. In deluxe varieties silver leaves are mixed. After mixing, the manufactured product is packed in various sizes of packing in pouches / tin/ jars.
9. As per the appellants, they only add flavour to the chewing tobacco, which is different from scent. Inasmuch as tariff entry 2403 9930 takes into ambit scented zarda, their product cannot be held to be falling under said entry. Elaborating on the difference between the flavoured and scented they have referred to following definitions.
Further the definition of zarda in the Draft Indian Standard Glossary of terms for tobacco and tobacco products circulated by the Bureau of Indian Standards is as follows:
Zarda : It is a coarse variety of surti chewing tobacco. The definition of flavour according to the Compact Oxford Dictionary is a distinctive taste of a food or drink. Adding to this definition, the Encarta and Farlex Dictionary puts is as A distinctive yet intangible quality felt to be a characteristic of a given thing.
The definition of scented according to Oxford Dictionary means to give or fill with a pleasant smell or odour
10. It is seen that there is no dispute on the manufacturing process. Goods in question is admittedly a preparation of chewing tobacco which after sieving is mixed with perfumary compound. By taking note of the definition as reproduced above, we note that there is admittedly a difference between flavour and scent. Whereas the flavour has a distinct taste or intangible quality i.e. feel where the substance is eaten. On the other hand, scent or scented essentially means a pleasant smell or odour; while the flavoured substance appeals to taste buds, the other refers to our sense of smell.
11. As per the appellants, the product remains a chewing tobacco even after addition of flavoring substance, We have seen the product which bears the description of the goods as GOPAL 60 ZARDA Deluxe flavoured chewing tobacco. As such, it is seen that product is being marketed by the appellant as flavoured chewing tobacco. Inasmuch as the product is a flavoured chewing tobacco, we agree with the distinction made by the appellant between the flavoured and scented product. The Revenue has not produced any evidence on record to establish that the product has traveled from chewing tobacco falling under Chapter 2403 99 10 to zarda scented tobacco falling under heading 2403 99 30, on account of addition of any material which would make the product as scented tobacco.
12. Apart from the above, we also find that the appellants product was being classified as chewing tobacco in the earlier tariff heading and even after the introduction of 8 digit classification, the same continued to be classified by their jurisdictional Central Excise authorities as Chewing Tobacco falling under heading 2403 9910. The expression chewing tobacco or zarda scented tobacco are not defined anywhere in the texting statute and as such, and 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. Admittedly, the appellants product is classifiable as chewing tobacco right from the beginning and Revenue was admitting said classification when the product has discharged duty under section 4A of the Central Excise Act, on the basis of MRP. Even after the introduction of 8 digit tariff classification, the product continued to be classified under heading 2430 99 10 as chewing tobacco. He also referred to Tribunals decision in the case of Prabhat Zarda Factory [2004 (163) ELT 485 (Del)] wherein it was held that the preparation of chewing tobacco enumerated in the definition are combination of tobacco leaves flavoring substance/smell as also colouring material . The additive include exotic substances, saffron, musk etc. In fact, certain preparations were having percentage of tobacco less than 40%. The product was held to be chewing tobacco product. Though the Commissioner has discarded the said decision of the Tribunal by observing that same is not relevant in the context of new tariff items for chewing tobacco introduced from 2005, but we find that the same may be relevant for understanding the type of product. If the product remains chewing tobacco, inasmuch as there is clear entry for chewing tobacco, even in the new tariff, the product cannot be shifted from chewing tobacco to zarda scented tobacco.
In the case of Gopal Zarda Udyog vs. Commissioner of Central Excise. New Delhi [ 2005 (188) ELT 251 (SC)] and Dharampal Satyapal vs. Commissioner [2005 (183) ELT 241 (SC)], even the intermediate product likes additive mixture Kimam, parathion menthol, were held to be chewing tobacco falling under erstwhile chapter heading 2404.49. The manufacturing process of the product in those cases was also more or less identical to the manufacturing process in the present case. The entire idea of this reference is that these product being manufactured by the appellant admittedly being a chewing tobacco and their being admittedly entry relatable to chewing tobacco, the product would definitely be classifiable as chewing tobacco only. We really fail to understand when the Revenue itself for the years together has treated the product as chewing tobacco, how the same product would become all of a sudden zarda scented tobacco.
13. At this stage, we may also take note of the Supreme Court decision in the case of CCE Nagpur vs. Shree Baidyanath Ayurved Bhawan Ltd. [ 2009 (237) ELT 225 (SC)] laying down that resort should be had to popular meaning and understanding attached to such products by those people using the product and not to the scientific and technical meaning and expression. It was further observed that earlier decisions on the issue inter parties is a cogent factor in the determination of the same issue and there is no justification for changing the classification without the change in nature or the change in use of the product. Merely because there is some difference in tariff entry, the product will not change its character.
14. When we apply the above principle laid down by the Honble Supreme Court to the facts of the present case, we note that there is admittedly no change in the manufacturing process of the product or in common marketing description of the product. The goods were being marketed earlier as flavoured chewing tobacco and even after the introduction of new tariff, they continue to be named as flavoured chewing tobacco. Hence, they have to be held as flavoured chewing tobacco. Inasmuch as there is specific entry in the tariff of chewing tobacco and by applying the Rules of interpretation, the entry relatable to chewing tobacco is the proper and correct entry for the correct classification of the product.
15. At this stage, we also take note of Tribunals decision in the case of Urmin Products P. Ltd. vs. CCE, Ahmedabad [2010 (256) ELT 597 (Tri-Ahmd) while dealing with the identical issue involved in the present case, Tribunal observed that inasmuch as the product involved in that case, i.e. Baghban chewing tobacco is carrying a description of the product on the label as flavoured chewing tobacco, the product has to be held as chewing tobacco. The Tribunal observed that zarda scented tobacco mentioned against the entry 2403 99 30 is different from the term zarda being used by the assessee. For better appreciation we reproduce para 21 of the said order as under:
21.?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. Further, it was also brought to our notice that during the period from 19-1-05 to 20-8-05, the appellants had described the product in the classification list as Chewing Tobacco and from 1-3-05, to 31-3-06, it was classified as Zarda Scented Tobacco and from 1-4-06 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 1-4-06, 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, 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. In view of our foregoing discussions and in view of the Tribunals, decision in the case of Urmins products involving the same dispute of the identical product, we hold that appellants product is properly classified under 2403 99 10 as chewing tobacco only and as such, liable to Central Excise duty under Section 4A of the Central Excise Act. In view of the above, we set aside confirmation of demand of duty and imposition of penalty upon the appellants.
17. As regards the penalty, some further observations may be made. The appellants before the adjudicating authority contested the demand on the point of limitation. While dealing with the same, Commissioner observed that he has no reservation in accepting the argument of the noticee that there was no willful suppression with intent to evade payment of duty as the entire clearances were being made with the knowledge of Revenue. But he has further observed that inasmuch as the show cause notice is issued within the period, and extended period has not been invoked, there is no question of dealing with the said plea of the appellant on the point of limitation. If that be so, there can also be no question of imposition of any penalty upon the appellant, inasmuch as no malafide intent or suppression stand attributed to them.
18. In view of the above, the impugned order is set aside and appeal is allowed with consequential relief to the appellant.
(Pronounced in the open court on )
( Archana Wadhwa ) Member(Judicial)
(Manmohan Singh) Member(Technical)
ss
Appeal No. E/1368/2008-EX
M/s Flakes-N-Flavourz Vs. C.C.E. Chandigarh
Per Manmohan Singh
19. I have gone through draft order recorded by Honble Member (Judicia) holding Gopal Zarda Tobacco claimed to containing flavoured tobacco will be classifiable under normal chewing Tobacco classifiable under 24039910 and it will not be classifiable under 24039930 as Zarda Scented Tobbacco and will not be assessed under for Section 4 and will continued to be assessed under Section 4A. However I do not agree with the findings and propose to record may separate order. Facts mentioned in draft order are also referred.
20. To appreciate the issue, it is necessary to go through findings of the Commissioner as contained in adjudication order as contained para 4.1, 4.2, 4.3, 4.4 and 4.5. These are referred for reference:-
4.1 The issue involved in the show cause notice is whether the product manufactured by the noticee is classifiable as Zarda scented tobacco falling under tariff item No. 24039930 of the Central Excise Tariff Act, 1985. This will determine whether such products should be assessed to Central Excise duty in terms of Section 4 or Section 4A of the Central Excise Act, 1944 for the relevant period 1.3.2006 to 10.7.2006. The product in question undoubtedly falls in generic category of chewing tobacco. There is no dispute about this aspect. Prior to 28.2.2005, there was no dispute that the product in question was classified under tariff heading No. 2404.41.
4.2 As regards its assessment, it was being done in terms of Section 4A of the Central Excise Act, 1944. While normally goods which are liable to advalorem duty are assessed under Section 4 of the Central Excise Act. There is, however, an exception provided in terms of Section 4A of the Central Excise Act. In terms of Section 4A(1), the Central Government may specify the goods in respect of which assessment will be done not in terms of Section 4, but in terms of Section 4A. Section 4A provides for determination of assessable value based on retail sale price (RSP), which is required to be printed o the packaged commodities in terms of the provisions of Standard of Weight and Measure Act, 1976 or the rules made thereunder or any other law. In terms of notification No. 13/2002-CE(NT), all goods covered by subheading No. 2404.41 were notified to be assessable under Section 4A of the Central Excise Act, 1944. Accordingly, excise duty on chewing tobacco of all types had to be paid in terms of (RSP) alongwith abatement prescribed, at the relevant point of time.
4.3 The Central Excise Tariff Act, 1985 was amended vide Central Excise Tariff (Amendment) Act, 2004 so as to change over to 8 digit tariff lines. This came into force w.e.f. 28.2.2005. This amendment, inter-alia, changed the tariff line for chewing tobacco. The earlier tariff entry for chewing tobacco of heading No. 2404.41 was expanded as follows:-
2403 Other manufactured tobacco and manufactured tobacco substitutes; Homogenised or Reconstituted tobacco; Tobacco extracts and essences.
240399 Other;
240399 10 Chewing Tobacco 240399 20 Preparations Containing Chewing Tobacco 240399 30 Zarda Scented Tobacco
----------------------------------------------.
4.4 Though these new entries came into force w.e.f. 28.2.2005, the corresponding notification specifying the goods which are to be assessed under Section 4A were not changed. However, the benefit under earlier tariff continued in view of issue of general notifications. Relevant portions for circular No. 802/35/2004-CX read as under:-
General Notification No. 1/2005-CE, 2/2005-CE, 5/2005-CE (NT) 7 to 10/2005-CE(NT) all dated 24.2.2005 have been issued so as to substitute any reference to the Chapter, heading or sub-heading of the first schedule or the Second Schedule to the C. Ex. Tariff Act, 1985 (5 of 1986), as the case may be, relating to any goods or Class of goods, wherever occurring in the existing notifications / rules / ad-hoc exemption orders, by corresponding reference to the Chapter, heading or sub-heading or tariff item, of the first schedule or the second schedule to the C. Ex. Tariff Act, 1985 (5 of 1986), as amended by the C. Ex. Tariff (Amendment) Act, 2004 (5 of 2005). These Notification, intend to take care of the technical changes adopted in the numbering scheme for C. Ex. Classification through the C. Ex. Tariff (Amendment) Act, 2004 (5 of 2005). 4.5 Thus all chewing tobacco, even under the new tariff items, continued to be assessed under Section 4A in view of these general notifications continuing the existing notifications incorporating he previous 6 digit tariff lines. However, the situation changed on 01.3.2006. From 1.3.2006, the notification specifying the goods to be assessed under Section 4A was superseded so as to specify the goods under 8 digit tariff items. The notification specifying he goods to be assessed under Section 4A were issued on 01.3.2006 by superseding the earlier notification No. 13/2002-CE(NT), so as to incorporate the new 8 digit tariff items. This notification No. 2/2006-CE(NT) dated 1.3.2006 interalia, specified only the tariff items 24039910 and 24039920. The tariff item 24039930 was not notified. What it meant that w.e.f. 1.3.2006, Zarda scented tobacco falling under heading 24039930 was required to be assessed under Section 4 and not under Section 4A, as it was being done earlier. Subsequently, on a representation from manufacturers, the tariff item 24039930 was also notified vide amending notification No. 16/2006-CE(NT) dated 11.7.2006. Therefore, it is a matter of record that during the period 1.3.2006 to 10.7.2006,goods falling under tariff item 24039930 had to assessed in terms of Section 4 and not under Section 4A. During the above period in question, the noticee, on their product, namely, Zarda scented tobacco, paid excise duty in terms of Section 4 of the Central Excise Act, 1944 and the present show cause notice seeks to demand the differential duty payable in terms of Section 4A for this purpose.
21. Main issue for consideration is whether assessment of Gopal Zarda proclaiming flavoured tobacco will be under Section 4 or Section 4A.
22. First I will take up the main issue of correct classification of flavoured/scent tobacco. Payment of duty under Section 4 or Section 4A will be dependent according to the outcome of the classification. In the present case, the audit party had found that the appellants are manufacturing Zarda scented tobacco but clearing the same classifying it as chewing tobacco.
23. It is seen that upto 28.2.2005, Chapter 2404.41 comprised of six digits covered Chewing Tobacco and preparations containing Chewing Tobacco. From 1-3-2005, eight-digit tariff was introduced and as a result Chewing Tobacco and preparations containing Chewing Tobacco were separately put under different category. A separate entry under 2403 9930 for Zarda scented tobacco was introduced 2403 99 - Other 2403 99 10 - Chewing tobacco 2403 99 20 - Preparations containing Chewing Tobacco 2403 99 30 - Zarda Scented Tobacco
24. The appellants have at no stage challenged the vires of Central Excise Tariff (Amendment) Act, 2004 by which eight-digit tariff classification was introduced in place of old 6-digit classification. Under six-digit classification, specific entry in respect of the product manufactured by the appellants was : Chapter heading 2404.41. But after amendment, the products were bifurcated into three sub-heads, viz., plain chewing tobacco, preparations which contained it and scented products were separately classified.
25. The notification number 2/2006-CE(NT) dated 1.3.2006 specified that goods falling under chapter heading 24039910 and 24039920 were to be assessed under Section 4A. It superseded the earlier notification number 13/2002-CE(NT) with a view to incorporate changes which had been brought about by introduction of new 8-degit tariff entries. The net result was that Zarda scented tobacco falling under chapter heading 24039930 was left out of the purview of valuation under Section 4A.
26. Zarda scented tobacco falling under chapter heading 24039930 was specifically brought under the net of provisions of Section 4A w.e.f. 11.7.2006 by notification no. 16/2006-CE(NT).
27. Thus it is clear that during the period 1.3.2006 to 10.7.2006, Zarda Scented tobacco had to be assessed in terms of Section 4 only. But in view of notification number 16/2006-CE(NT), the same was to be covered under the provisions of Section 4A w.e.f. 11.7.2006 only.
28. I have gone through the adjudication order passed by the Commissioner and agree with the findings as referred above. Para 4.8 of the order is very relevant which is extracted below:-
The noticee has referred to a large number (in fact a very large number) of judicial decisions most of which do not appear to be relevant. Anyway I will deal with the thrust of all these decisions as I move on.
The noticee has laid great stress in pointing out that the product manufactured by them is flavoured chewing tobacco and not scented. They concede that the chewing tobacco in question contains added flavour. From this, they vehemently oppose the stand of the department equating flavoured tobacco with scented tobacco. But there is no allegation in the show cause notice that scent is equivalent to flavour. The show cause notice does not allege that because the product is flavoured, it should be treated as scented tobacco. It is nowhere presumed in the show cause notice that merely because the chewing tobacco is flavoured, it tantamounts to being scented. I therefore, do not have to address this line of argument of the noticee. A product can be both scented as well as flavoured. Just because it is flavoured does not mean that it cannot be scented also. The noticee claims that they sell the product as flavoured tobacco. But that does not necessarily imply that it is not scented, even though they do not advertise this. How one declares a product need not be necessarily relevant for determining the classification, which has to be done strictly according to the provision of Central Excise Tariff Act. For the purpose of proper classification, it has to be seen as to under which tariff item the product actually falls irrespective of the declaration by the assessee.
Now, it is nowhere controverted by the noticee that their product does not contain scent. The noticee is only arguing that they sell their product as flavoured tobacco, and therefore, it cannot be considered as scented. But the facts are different. In fact, it is their own submission that the product is scented.
29. I also agree with the adjudicating authority that there is clear demarcation in the tariff entries 24039910 and 24039930. Whereas former covers plain chewing tobacco without having been added any flavour/scent to it, the later product is restricted to scented items.
30. Rules 3 of the Rules for the implementation of the schedule to the Central Excise Tariff Act reads as under:-
3. When by application of rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows:
(a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed pr composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even, if one of them gives a more complete or precise description of the goods.
31. Rule of harmonious construction: Zarda scented tobacco has to be classified as Zarda scented tobacco only because there is a specific entry in the tariff. Chewing tobacco is genus while scented product constitutes its species.
32. I do not agree with the findings of learned Member (J) on the issue of Gopal Zarda Chewing Tobacco being flavoured and not scented chewing Tobacco. Discussion and reference to the dictionary does not help to resolve the controversy. It has to be seen with reference to actual contents, trade parlances and statements of concerned persons about nature of scent/flavour in the chewing tobbaco At the relevant time when eight digit tariff code came into operation, a separate classification under heading 2403 99 30 of Zarda Scented Tobacco was brought in the tariff. While going through the process of manufacture as indicated in learned Member (J)s draft order, it clearly comes out that the product was manufactured with addition of mixture of perfumery compounds making as per their formula. It is well known in the public, trade as well as admitted by the appellants that manufactured chewing tobacco contains perfumery compounds in addition to sada-kimam species and aromatic chemicals. From the manufacturing process, it clearly comes out that chewing tobacco which is referred as flavoured chewing tobacco in their pouches also contained perfumery mixture which give exclusive smell to the product which could be also be called scented chewing tobacco. I also do not agree with the contention of the appellant that there is difference between flavoured and scented. Actually the same product which is classified under six tariff digit have continued classification under eight tariff digit classification. This does not rule out that the product which was classified under chewing tobacco category was not scented/flavoured.
33. It is also on record that sada chewing tobacco under new classification became effective from 1.3.2006. No notification was issued covering this product under the provision of section 4A. It was only on 11.7.2006 with the issue Notification No.16/2006-CE (NT) Zarda secented tobacco under heading 2403 99 30 was specifically brought under section 4A.
34. Reference to judgment of Apex Court in the case of Gopal Zarda Udyog vs. CCE, New Delhi-2005 (188) ELT 251 (SC) and Dharampal Satyapal vs. CCE-2005 (183) ELT 241 (SC) by the appellant are not relevant as these are for the chewing tobacco as it was prior to 1.3.2006.
35. I would like to refer para 4.9 of adjudication order where appellants have submitted that it is matter of common knowledge that all varieties of chewing tobacco being sold in the market are flavoured/secented, as the very purpose of a person taking this product is to enjoy a pleasant flavor/scent/ taste. Appellant also contended that in view of presence of flavoured/scented in all the chewing tobacco will result in chewing tobacco being classified zarda scented tobacco and will result in redundancy or superfluous of the entry of chewing tobacco. However, Commissioner observed that even if the contention of the appellant was accepted, it did not preclude chewing tobacco. He observed that just because nobody was manufacturing chewing tobacco without scented/flavoured, it would not imply that chewing tobacco could not be manufactured without adding scent/flavor. Reference was also made to the statement of Shri Manoj Gupta, partner of the appellant detailing manufacturing process wherein it was stated that perfumery compounds and aromatic chemicals import scent to the product. The appellant confirmed that the products manufactured by them contained both scent as well as flavour.
36. From the above discussion, it clearly comes out that Gopal Zarda which is claimed as only flavoured, is actually flavoured and scented.
37. Now there are only three tariff items for chewing tobacco namely, 24039910, 24039920 and 24039930 and it is general law of interpretation that a specific entry will override the general entry. By reference to Rule 3 of interpretation rules, it is clearly observed that heading 24039930 is most specific entry and chewing tobacco containing scent/flavor manufactured by the appellant would be correctly classifiable under heading 24039930. I agree with the interpretation taken by the adjudicating authority. Difference emerges with the conclusion drawn by learned Member (J) in her draft order.
38. From the above it is concluded that Gopal Zarda Flavoured/Scented Tobacco will be classifiable under heading 24039930 for the period 01.3.2006 to 10.7.2006 and will be rightly assessed under provisions of Section 4 during the relevant period. Of course, it will be assessable under Section 4A from 11.7.2006 when specific notification no. 16/2006 (N.T) came into operation.
39. Order-in-Original No.123/CE/CHD/2008 dated 31.3.2008 passed by the adjudicating authority is upheld.
Ordered accordingly.
(MAMMOHAN SINGH) MEMBER (TECHNICAL) Difference of Opinion Whether Gopal Zarda claimed as flavoured one would be classifiable under T.H. 24039910 as chewing tobacco and it would not be considered as scented chewing tobacco and thus will not eligible for assessment under Section 4 as held by Member (Judicial).
OR Gopal Zarda claimed as flavoured one but found to be scented will be classifiable under T.H. 24039930 and to be classified as scented chewing tobacco and to be assessed under Section 4A during the relevant period as held by Member (Technical).
(MANMOHAN SINGH) (ARCHANA WADHWA) MEMBER (TECHNICAL) MEMBER (JUDICIAL) K.Gupta Appeal No. E/1368/2008-EX (DB) Flakes-N-Flavourz Appellant (Represented by Mr. Vivek Kohli, Adv) Vs CCE, Chandigarh Respondent (Rep. by Mr. Pramod Kumar JDR) Date of Heading : 15.4.2014 Date of decision: __ 07.2014 Per: S.S. Kang Following difference of opinion have been referred to me for decision:
(i) Whether Gopal Zarda claimed as flavoured one would be classifiable under T.H. 24039910 as chewing tobacco and it would not be considered as scented chewing tobacco and thus will not eligible for assessment under Section 4 as held by Member (Judicial);
OR
(ii) Gopal Zarda claimed as flavoured one but found to be scented will be classifiable under T.H. 24039930 and to be classified as scented chewing tobacco and to be assessed under Section 4 during the relevant period as held by Member (Technical).
2. Brief facts of the case are that the appellants are engaged in manufacture of flavoured chewing tobacco i.e. Gopal Zarda and classified the same under Tariff Heading 24039910 of the Central Excise Tariff during the period 1.3.2006 to 10.7.2006 and paying duty as per the provisions of Section 4A of the Central Excise Act, 1944 in view of Notification No. 2/2006-CE (NT) dated 1.3.2006. In view of the provisions of the above Notification, the duty on the product in question was being discharged by the appellant on the basis of Maximum Retain Price.
3. The proceedings were initiated by issuing Show Cause Notice dated 30.302007 by classifying the product in question under Tariff Heading 24039930 of the Central Excise Tariff on the ground that the goods in question are Zarda Scented Tobacco and the same is not notified under Section 4A of the Central Excise Act, 1944 to discharge duty on the basis of maximum retain price. The Revenue confirmed the demand with interest on the ground that during the period in dispute i.e. 1.3.2006 to 10.7.2006 the appellants are liable to pay duty as per the provisions of Section 4 of the Central Excise Act, 1944 and not under Section 4A on MRP basis.
4. The contention of the appellant is that the appellants are manufacturing flavoured chewing tobacco which is sold as Gopal Zarda. Prior to 28.2.2005 the products chewing tobacco and preparation containing tobacco are classifiable under Tariff Heading 2404.41 of the Tariff and the appellants were clearing the same under this Tariff Heading and paying duty accordingly. With effect from 28.2.2008 the Central Excise Tariff Act migrated from six digit to eight digit classification and a new Entry was added related to zarda scented tobacco. On 1.3.2006 Notification No.2/2006-CE (NT) was issued whereby chewing tobacco and preparation containing chewing tobacco were notified as items which are to be assessed under Section 4A of the Central Excise Act, 1944 on MRP basis. During this period the appellant continued to be classified the product under Heading 24039910 as chewing tobacco and paying duty under Notification No. 2/2006-CE(NT) dated 1.3.2006. Subsequently Notification No. 16/2006-CE(NT) dated 11.7.2006 is issued whereby Zarda Scented Tobacco classifiable under Heading 24039930 was also notified for assessment under Section 4A of the Central Excise Act, 1944 on MRP basis. The contention is that thereafter also the appellants were clearing their products under Heading 24039910 of the Tariff and Revenue was accepting the classification without any objection.
5. The appellants produced pouches of the product to show that the product is Gopal Zarda containing flavour chewing tobacco and as per the instructions the product is for chewing and to spit and not to swallow. The contention is that the product in question is marketed as chewing tobacco. Therefore the same is classifiable under Heading 24039910 of the Tariff and during the period in dispute the appellants were discharging duty on MRP basis as per the provisions of Notification No. 2/2006-CE(NT) dated 1.3.2006. Hence the demand is not sustainable.
6. Revenue relies upon the finding of the lower authority and submitted that as per the manufacturing process which is reproduced in the impugned order, the flavour is added to chewing tobacco. Therefore the product is scented flavoured tobacco. As the product in question is Zarda Scented Tobacco classifiable under Heading 24039930 and this product is not notified under Section 4A of the Central Excise Act, 1944. Hence the demand is rightly made in view of the provisions of Section 4 of the Act.
7. I find that the dispute is for the period 1.3.2006 to 10.7.2006. The appellant is claiming the classification of the product under Tariff Heading 24039910 whereas the Revenue is classifying the same under Heading 24039930 of the Tariff. The relevant entries are reproduced in para 23 of the order.
8. I find that prior to 28.2.2005 the appellants were clearing the product under Heading 2404.41 of the Tariff which covers chewing tobacco and preparations containing chewing tobacco. There is no dispute in this regard. As the Central Excise Tariff is migrated from six digit to eight digit classification from 28.2.2005 the appellants continued to clearing the goods under Heading 24039910 chewing tobacco. The products classifiable under Heading 24039910 are notified under Notification No. 2/2006-CE(NT) dated 1.3.2006 to discharge duty as per the provisions of Section 4A of the Central Excise Act, on MRP basis. The appellant continued to discharge duty as per the provisions of the Notification. The pouches of the product produced by the appellant show that the product is described as under: GOPAL 100 ZARDA Deluxe flavoured chewing tobacco. The instructions on the pouches are that the product is to be chewed and not to swallow but to spit.
9. In the Tariff the expression chewing tobacco and zarda scented tobacco are no defined as the product has to be classified based upon the description of the product given by the manufacturer on the pouch as well as on the basis of common parlance and established practice. In the present case, as the product in question as per the description of the product is flavour chewing tobacco and it is bought and sold in the market as chewing tobacco. Further the appellant from the beginning classifying the same as chewing tobacco and after the period in dispute also classified the same as chewing tobacco. Hence I find merit in the contention of the appellant that the product in question is chewing tobacco and classifiable under Heading 24039910 of the Tariff.
10. Further the Notification No. 2/2006-CE (NT) dated 1.3.2006 is further amended by Notification No. 16/2006-CE(NT) dated 11.7.2006 whereby the chewing scented tobacco classifiable under Heading 24039910 also notified as assessable under Section 4A of the Central Excise Act, 1944. Prior to the period in dispute 1.3.2006 to 10.7.006 the appellants were clearing the product as flavoured chewing tobacco and thereafter also clearing the same by classifying the product under Heading 24039910 of the Tariff and the product in question is marketed as Chewing Tobacco. In these circumstances I find merit in the contention of the appellant.
11. I therefore agree with the view taken by the learned Member (Judicial). The impugned order is set aside and the appeal is allowed with consequential relief, if any, in accordance with law.
(S.S. Kang) Vice President Majority Order The impugned order confirming demands and imposition penalties is set aside and appeal is allowed with consequential relief to the appellant.
(Archana Wadhwa) Member(Judicial)
(Manmohan Singh) Member(Technical)
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