CESTAT, New Delhi Bench
Hira Packaging Vs. Commissioner of Central Excise, Raipur
Period 8-3-2010 to 30-8-2010
Justice Dr. Satish Chandra, President And B. Ravichandran, Technical Member
Final Order Nos. 55548-55550/2017
Excise Appeal Nos. 914 & 565 of 2012 and 51142 of 2014
July 27, 2017
Notification No. 8/2003-CE, dated 1-3-2003, Notification No. 10/2010-CE (NT), dated 27-2-2010, Notification No. 16/2010-CE, dated 27-2-2010
B. Ravichandran, Technical Member – These three appeals are dealing with interconnected issues regarding Central Excise duty liability of the appellant and are accordingly taken up together for disposal. Appeal No. E/565/2012 is against classification of the product as Chewing Tobacco and eligibility of the appellant for concession under Notification 8/2003-CE, dated 01/03/2003. Appeal No. E/914/2012 is against confirmation of duty demand in terms of Section 3A of Central Excise Act, 1944 for Chewing Tobacco manufactured and cleared by the appellant during the period 08/03/2010 to 30/08/2010. Appeal No. E/51142/2014 is against duty demand for the period prior to 07/03/2010, i.e. before introduction of compounded levy scheme to branded Chewing Tobacco.
2. The brief facts of the case are that the Central Excise officers conducted certain search and verification in the premises of the appellant in August 2010. On completion of the enquiry, proceedings were initiated against the appellant for classification of the products manufactured by them and to determine the duty liability on the goods manufactured and cleared by them for the past periods. First proceedings were with reference to classification of the product and consequently, applicability of small scale exemption and compounded levy scheme during the relevant period. The Original Authority vide his order dated 17/03/2011 held the product manufactured and cleared by the appellant is branded Chewing Tobacco and merits classification under Central Excise Tariff Heading 24039910. He further held that the benefit of Notification 8/2003-CE is not available to the appellant. Further, it has been held that the products manufactured by the appellant are notified goods in terms of Notification 10/2010-CE (NT) dated 27/02/2010, effective from 08/03/2010. Accordingly, duty liability has to be arrived at in terms of Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010 issued under Notification 10/2010-CE (NT).
3. In the second proceedings, the appellant’s liability in terms of Notification 10/2010-CE (NT) under the Rules 2010 were decided by the Commissioner in his impugned order dated 27/12/2011. The Commissioner held that the appellants are liable to duty in terms of the said rules for compounded levy scheme in respect of branded Chewing Tobacco manufactured and cleared by the appellant. A duty demand of Rs. 1,64,56,452/- was confirmed alongwith penalty of equivalent amount on the appellant. The seized goods valued at Rs. 85,170/- during the course of investigation was ordered to be confiscated with option to redeem on payment of fine of Rs. 15,000/-. These findings are contested in Appeal No. E/914/2012.
4. In another proceedings for duty demand of Rs. 9,003/- for the period 01/03/2008 to 18/09/2008, the Original Authority confirmed the said duty demand and imposed equivalent amount of penalty in terms of Section 11AC of the Central Excise Act, 1944. Appeal No. E/51142/2014 is dealing with this issue.
5. The learned Counsel appearing for the appellant submitted mainly on the following grounds :—
(i) all the three proceedings are as a result of search and verification conducted in the premises of the appellant in August 2010. Separate proceedings were initiated and the notices were decided by different authorities. When the first notice was issued on 08/12/2010, subsequent notices are hit by principles of res judicata. Since, all the three show cause notices were on the same issue, they should have been adjudicated by the senior most Adjudicating Authority, namely Commissioner of Central Excise, Raipur. The adjudication orders passed by the Assistant Commissioner with reference to show cause notices dated 08/12/2012 and 19/03/2012 were without jurisdiction ;
(ii) the scope of term “Chewing Tobacco” is not defined in the Central Excise Act Rules or tariff. Hence, it should be decided based on common parlance test. The Department neither conducted any enquiry nor subjected the product into any chemical test. No expert opinion was taken before arriving at the classification. The product manufactured and cleared by the appellant is not Chewing Tobacco but may fall under residuary heading 24039990. The appellants are not covered by compounded levy scheme under Section 3A effective from 08/03/2010 ;
(iii) the machines which were intended to be used in the manufacture of goods in terms of declaration dated 18/12/2007 were sealed by the Department and were never put to use. The appellants procured new machines and informed the Department also. Hence, it is prayed that the declaration given on 18/12/2007, lost its relevance.
The product manufactured by the appellant was “lime mix tobacco” and not Chewing Tobacco. Reliance was placed on various case laws in this regard ;
(iv) for the period prior to 08/03/2010, the product manufactured by the appellant could not be considered as branded goods. The packings simply indicated the name and address of the manufacturer. This is as per the legal requirement and also as mandated by the Circular dated 18/04/1990 of the Board ;
(v) duty is payable on Chewing Tobacco as per the tariff rate of the 1st Schedule to the Central Excise Tariff Act, 1985. Duty under Notification 16/2010-CE dated 27/02/2010 prescribed by the Ministry by delegated legislation cannot prevail over the schedule of the tariff.
6. The learned AR reiterated the findings of the lower authorities. He submitted that the appellants themselves filed declaration classifying their product as Chewing Tobacco. Even in the statement given by the proprietor, it has been categorically admitted that the product is Chewing Tobacco. The classification of the product has been examined with the scope of the tariff and the nature of product as claimed by the appellant and the manufacturing process, by the Original Authority. There is nothing in the present appeal to controvert such factual finding by the Jurisdictional officer. Regarding the application of compounded levy scheme, it is submitted that when in terms of Section 3A, rules are framed and notification is issued, the rate of duty applicable to the products covered under the scheme should automatically apply. No SSI exemption is available based on turnover in case of compounded levy scheme.
7. Regarding the question of brand name, the learned AR submitted that it is clear that the goods bear a brand name which will be identifiable with a particular person satisfying the statutory condition. The learned AR submitted that there is no merit in these appeals and they are liable to be dismissed.
8. We have heard both the sides and perused the written submissions and case laws relied upon by the appellant. The first point for determination is whether the lower authorities are correct in deciding the classification and the duty demands separately when the investigation is common. The appellant claimed that once the notice for classification was issued there can be no other proceedings separately for duty demand. We find no legal support for such assertion. Admittedly, the Jurisdictional Assistant Commissioner is competent to decide the correct classification of the impugned goods. Accordingly by exercise of such powers proceedings were initiated by him and he decided on the classification of the impugned goods. Simultaneously, in a proceedings to demand duty in terms of compounded levy scheme prescribed under Rules of 2010, Commissioner initiated action and after due adjudication issued the impugned order. We find no legal infirmity in such proceedings. We also note that there is no duplication of proceedings or re-determination of an issue by one Adjudicating Authority which is subject matter of decision by another Adjudicating Authority. We note that the officers acted within their competence and there is no legal infirmity in such proceedings. We have perused the decision of Tribunal in Osaka Alloys & Steels (P.) Ltd. v. CCE 2005 (192) ELT 1197 (Tri-Delhi) relied upon by the appellant. We note in the said case, there were two show cause notices on the same issue involving duty demand for the same period. In the present case, as already noted, the Assistant Commissioner decided the classification and the Commissioner, in a separate proceedings, decided the application of compounded levy scheme in terms of 2010 rules issued under Section 3A of the Act. Similarly, the facts dealt with by the Hon’ble Bombay High Court in Metal Extruders India (P.) Ltd. v. Union of India 1987 taxmann.com 497 are not similar to the one dealt with in the present appeals. The Hon’ble High Court was dealing with a second proceedings involving the same issue when the earlier show cause notice was dropped by the very same Adjudicating Authority.
9. The main point of dispute in the present appeals is the correct classification of the product manufactured and cleared by the appellant. The application of various notifications and compounded levy scheme will be determined in terms of the classification of the product. The Revenue held the product to be classified as “Chewing Tobacco” under Central Excise Tariff Heading 24039910. The appellants did not make any specific claim of classification, but submitted their product as “lime mix tobacco” may be classifiable under Heading 240339100 or 24039920 or 24039900. They contested the classification as determined by the Jurisdictional Assistant Commissioner. Admittedly the scope of the term “Chewing Tobacco” has not been statutorily defined in the Central Excise provisions. The claim of the appellant is that the product manufactured by them is lime mix tobacco and not Chewing Tobacco. The Original Authority relied on the appellant’s declaration made to the department on 18/12/2007. A reference had also been made to a letter dated 29/11/2010 of the appellant explaining the process of manufacture. Tobacco powder/dust/refuse and the lime combined with water in pre-determined proportion are fed into power operating mixing machine to obtain tobacco mix with lime, which is their final product. We note that relying on the explanatory notes under Chapter 24 of HSN, the Original Authority correctly rejected the contention of the appellant that the product, in question, should be considered as “homogenized” or ‘”reconstituted” tobacco. It is clear that the product manufactured by the appellant cannot fall under that category which are classified under Central Excise Tariff Heading 24039100. On perusal of the examination of the facts as recorded in the impugned order and the defence submission made by the appellant, we find that there is no reason to interfere with the conclusion drawn by the Original Authority on the classification of the product.
10. The next point is the application of compounded levy scheme 2010 for the goods in question. The following are the findings of the Original Authority in this regard:—
“4.4 I find that the demand of Central Excise duty raised on the Noticee in terms of the duty rates stipulated under the compounded levy scheme in terms of Section 3A of the Central Excise Act, 1944 read with Notification No. 16/2010- CE dated 27/02/2010 effective 08/03/2010, is contested on the aspect of classification of the goods manufactured and cleared by them. While the demand has been made on the impugned goods under Chapter 24039910 of the Central Excise Tariff Act as Chewing Tobacco, the Noticee have made contradictory submissions on this score. On the one hand, the Noticee has stated that they were manufacturing Chewing Tobacco without a brand name and therefore availing SSI exemption under Notification No. 8/2003 dated 01/03/2003 as amended. It has also been pleaded by them that the goods in question should be classified under Chapter 24013000 of the Central Excise Tariff Act applicable to Tobacco refuse.
4.5.1 I find that, the aspect relating to classification of the impugned goods, as also pointed by the Noticee, was disposed-off by the jurisdictional Assistant Commissioner vide his order-in-original No. 77/ADJ/AC/RD/CEX/2011 dated 17/03/2011 ordering, levy and recovery of duty on the goods in question under Section 3A of the Central Excise Act, 1944 from 08/03/2010 and on Noticee’s appeal the same stands upheld by the appellate authority through OIA No. 176/RPR-I/2011 dated 08/11/2011.
4.5.2 I find from the records of the proceedings that admittedly, the so called Lime mixed tobacco (Khaini) is the result of mixing of Tobacco and Lime in certain proportions in the mixing machines installed at the premises of the Noticee. This being so, the question of the resultant product being treated as Tobacco refuse described in the HSN as waste resulting from the manipulation of tobacco leaves, or from the manufacture of tobacco products (stalks, stems, midribs, trimmings, dust, etc.) is ruled out.
4.5.3 Further, I find that the Notification No. 16/2010-CE dated 27/02/2010 defines the term “Brand Name” as “a brand name, whether registered or not, that is to say, a name or a mark, such as a symbol, monogram, label, signature or invented words or any writing which is used in relation to a product, for the purpose of indicating, or so as to indicate, a connection in the course of trade between the product and a person using such name or mark with or without any identification of the identify of that person.”
Admittedly, the pouches used by the Noticee for packing their product contain their printed description to M/s. Hira Packaging, Raipur (Chhattisgarh) ostensibly indicating connection in the course of trade between the product using such name. Therefore, the Noticee’s contention that the impugned product should be treated as Chewing Tobacco without a brand name eligible to avail exemption under Notification No. 8/2003 dated 01/03/2003 as amended, is not acceptable.
4.6 Therefore, the Chewing Tobacco manufactured and cleared by the Noticee falls to be categorises as Branded Chewing Tobacco classified under Chapter 24039910 of the Central Excise Tariff Act which attracts the provisions of the ‘Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010 being notified under Section 3A of the Central Excise Act, 1944 vide Notification No. 10/2010-CE (NT) dated 27/02/2010. Therefore, the demand of duty raised on the Noticee is sustainable and contrary contention of the Noticee not tenable”.
11. Against the above finding, the appellants contested that the rate of duty as determined by the 1st Schedule to Central Excise Tariff Act read with notification for SSI Notification No. 8/2003-CE should apply to them. In fact, they contested that Chewing Tobacco cannot be brought under the 2010 Rules for compounded levy. We find no merit in the said submission by the appellant. The compounded levy scheme is framed in terms of the statutory powers provided under Section 3A of the Central Excise Act, 1944. The said section clearly stipulates that notwithstanding anything contained in Section 3, the Central Government can notify in respect of specific goods that the duty shall be levied and collected in accordance with the provision of Section 3A. The Original Authority has correctly examined the applicability of compounded levy scheme w.e.f. 08/03/2010, to the products manufactured and cleared by the appellant and confirmed the duty liability accordingly.
12. One of the points raised by the appellant is regarding the manufacture of product by them without any brand name. It is claimed by the appellant that the name appearing in the pouches is only to show the manufacturer and there is no branding of the product. It is further claimed that such mention of the name is in terms of Board Circular and statutory requirements. We have perused samples of pouches during the course of arguments, in the present appeals. It is clear that the pouches had not only carried the manufacturer’s name and details, but also the photograph of a person alongwith certain identifying marks like “Lalit Chhap” “HIRA 2002 Tobacco” “HIRA mix”. Some of the pouches, in fact, carried certain unique design of abbreviation of English letters apart from a warning to be beware of spurious products. On perusal of these sample packages, we are satisfied that there is an identifiable distinct branding of these products which have the effect of linking the product to a particular person, among the consuming public. As such, we find no merit in the claim of the appellant that these are not branded Chewing Tobacco. It also noted that the packages clearly carried a warning that Chewing Tobacco is injurious to health. Such endorsement clearly discounts the argument of the appellant that their product cannot come under the general category of Chewing Tobacco. Regarding the claim of the appellant for exemption under Notification 8/2003-CE available to small scale units we note Chewing Tobacco bearing a brand name is excluded from the products listed in annexure of notification for such exemption.
13. In view of the above discussion and analysis, we find no merit in the present appeals filed by the appellants. Accordingly, the same are dismissed.
[Citation : 2017-Taxcaselaw-64-CESTAT-New Delhi-GST]