2024-VIL-544-CESTAT-AHM-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise – Supply of unmanufactured tobacco – Classification – Appellants are engaged in business of supply of raw, unmanufactured and unprocessed tobacco – After investigation, DGGI officers concluded that Appellants are misclassifying the tobacco product cleared by them as Unmanufactured Tobacco under CTH 2401 instead of CTH 2403 as Chewing Tobacco with an intention to evade payment of duty – Department issued show cause notice to Appellants proposing recovery of Basic Excise Duty – Commissioner confirmed demand of duty along with applicable interest and penalty – Whether Appellant’s product is classifiable under CTH 2401 as claimed by Appellant or under CTH 2403 as claimed by Revenue – HELD – Appellant’s raw material as well as finished goods are cut leaves from natural leaves of tobacco – Raw material as well as final product of Appellant were tested by Central Excise and Custom laboratory – From comparison of test report in respect of raw material as well as final product of Appellant, nature of product remain exactly same – Under CTH 2403, tobacco has to undergo process of manufactured tobacco – Appellant has not undertaken any activity on unmanufactured tobacco – Not a single foreign ingredient is added to dried tobacco leaves – Merely by packing of cut leaves of tobacco does not change status of unmanufactured tobacco – Since product of Appellant remained unmanufactured tobacco right from raw material stage up to finished stage, it remains under Chapter heading 2401 and by any stretch of imagination cannot be called as manufactured tobacco – Unmanufactured tobacco cannot be classified under CTH 2403 9910 – Circular dated 3-6-1997 clarified that unmanufactured tobacco packed in retail packets would be appropriately classifiable under Chapter Heading 2401 of Schedule to the Act – Appellant’s product is classifiable under CTH 2401 as claimed by Appellant – Demand of Basic Excise duty is not sustainable – Impugned order passed by Commissioner set aside – Appeal allowed
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