COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN PRODUCTS P. LTD. AND OTHERS

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this Court in Anand Nishikawa Co. Ltd. v. CCE [(2005) 7 SCC 749 : (2005) 188 ELT 149] wherein this Court held : (SCC p. 759, para 27) “27. … we find that ‘suppression of facts’ can have only one meaning that the correct information was not disclosed deliberately to evade payment of duty. When facts were known to both the parties, the omission by one to do what he might have done and not that he must have done, would not render it suppression. It is settled law that mere failure to declare does not amount to wilful suppression. There must be some positive act from the side of the assessee to find wilful suppression.” (emphasis supplied)

27. It is clear from the material available on record that the Excise Authorities had inspected the manufacture process, collected the necessary information and details from the respondent assessee and even collected the samples and sent for chemical analysis. The authorities were aware of the tests and analysis reports of the products manufactured by the respondent assessee. The relevant facts were very much within the knowledge of the Department authorities. The Department did not make any attempt to lead any evidence that there was any wilful misstatement or suppression of facts with intent to evade payment of duty.”

70Copy pinpoint70. Classification is a question relating to “chargeability”. It is well settled law that insofar as chargeability is concerned, the burden of proof lies on the Revenue and not on the assessee. In the facts obtained in the present case, no evidence of whatsoever nature has been placed by the Revenue to raise any presumption. In fact, the entire proceedings are based upon “audit objection” and the Revenue attempts to rely upon the additives to the ‘chewing tobacco’ as the basis for arriving at a conclusion, that assessee had cleared the ‘jarda/zarda scented tobacco’ which is not even supported by the samples drawn or inquiry made from the traders or consumers or stockist, suppliers and buyers. In the absence of iota of material, the finding of the tribunal cannot be displaced. It would be of benefit to extract the finding recorded by the third member of the tribunal, who upheld the finding of the judicial member and it reads:

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 619 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

“9 In the tariff the expression xxxx practice. In the present case, as 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.”

71Copy pinpoint71. Upon anxious consideration of the aforestated facts, coupled with lack of cogent evidence for the purpose of determination of the classification entry with respect to the product manufactured by the assessee, we deem it necessary to not interfere with the findings of the tribunal in light of the settled judicial findings of this Court which directly have a bearing on the facts of the present case.

72Copy pinpoint72. At the cost of repetition, we would further like to reiterate that the observations and findings recorded in this group are exclusive to the peculiar facts of this case only. III. COMMISSIONER OF CENTRAL GOODS AND SERVICE TAX EXCISE AND CUSTOMS BHOPAL V. KAIPAN MASALA PVT. LTD. DIARY NO. 44912/2019 AND 6888/2020

73Copy pinpoint73. Two Appeals i.e., Diary No. 44912 of 2019 and Diary No. 6888 of 2020 are the subject matter of this group whereunder the Revenue is in appeal challenging the order of the jurisdictional CESTAT dated 14.11.2018 passed in Excise Appeal Nos. 50468, 50469, 50470, 50471, 57472, 51319 and 51978 of 2018. BRIEF FACTS

74Copy pinpoint74. Before adverting to the facts of the present group it may be noticed that with effect from 01.03.2015, the capacity of production per packing machine per month and rate of duty for ‘chewing tobacco’ and ‘Zarda/ jarda Scented Tobacco’ was amended vide Notification No. 4/2015 and Notification No. 5/2015-C.E. (N.T.), respectively and the duty for ‘chewing tobacco’ was prescribed differently as compared to ‘Zarda/Jarda scented tobacco’ as already noticed herein above. The respondent-assessee vide their communication letter dated 18.03.2015 intimated to the jurisdictional competent authority that the product manufactured by them is only ‘scented

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zarda/jarda tobacco’ which is different from ‘chewing tobacco.’ They also informed that the nomenclature of ‘chewing tobacco’ is being used as there was no difference in the capacity of production as well as the rate of duty before the budget of 2015-16. In response to the said letter of the assessee, the Range Superintendent vide his letter dated 19.03.2015 requested the assessee to submit the manufacturing process of their product. Hence, the assessee vide its communication dated 24.03.2015 informed that ‘chewing tobacco’ and ‘scented zarda/jarda tobacco’, both contain the same ingredients.

75Copy pinpoint75. A Notification No. 25/2015-CE dated 30.04.2015 was brought with effect from 01.05.2015 whereby the rate of Central Excise Duty of ‘zarda/jarda scented tobacco’ came to be amended again but there was no change in the rate of duty on ‘Chewing Tobacco’ as compared to ‘zarda/ jarda scented tobacco’.

76Copy pinpoint76. The assesee vide communication dated 28.05.2015 intimated to the department that with effect from 01.06.2015, they would be manufacturing ‘chewing tobacco’ falling under CET SH 2403 9910 instead of ‘scented zarda/jarda tobacco’ falling under CET SH 2403 9930 and accordingly submitted a revised form to the competent officer. In the background of frequent changes made in the classification by the assessee and in order to ascertain the proper classification of goods, the officers of the department drew the samples of the products under panchnama dated 01.06.2015 and forwarded the same to the chemical examiner, CRCL, New Delhi and received the test report on 03.06.2015. It was found that the ‘chewing tobacco’ contains identical ingredients that are contained in ‘scented zarda/jarda tobacco.’ It was also noticed by the department that assessee through communication and declaration form filed prior to 28.05.2015 had mentioned their product as Pan masala and “scented zarda/jarda tobacco”. Thus, having found that the product manufactured by the assessee namely, contains the same ingredients as ‘chewing tobacco’ and ‘scented zarda/ jarda tobacco’ and involves the same manufacturing process which was confirmed by the CRCL Report vide dated 03.06.2015 and the assessee had attempted to change their stand by filing convenient declarations, the claim of the assessee was not accepted. It appeared that the assessee deliberately and intentionally mis-declared and misclassified their products with an intention to evade central excise duty. Hence an order dated 28.08.2015

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 621 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

came to be passed which covered the period of June 2015 to August 2015. In continuation of the same, four more orders for the period November 2015; December 2015; January 2016, and February 2016 came to be passed vide order dated 30.10.2015; 27.11.2015; 31.12.2015, and 29.01.2016 respectively demanding the amounts indicated therein. Being aggrieved by the said orders, the assessee preferred appeal Nos. 338 of 2015, 53 of 2016, 52 of 2016, 209 of 2016 and 210 of 2016 before the Commissioner (Appeals), which came to be disposed of by order dated 23.10.2017 on the ground that a notice under Section 11A of the CE Act, has already been issued for determination and confirmation of the duty payable, the assessee has liberty to raise all grounds before the authority adjudicating in the proceedings initiated vide the show cause notice issued on 02.02.2016 and accordingly, the appeals came to be disposed of vide order dated 23.10.2017.

77Copy pinpoint77. The show cause notice dated 02.02.2016 came to be adjudicated vide order dated 16.07.2018 whereunder demand of duty amount of Rs.7,47,66,000/- along with interest and penalty came to be passed. Being aggrieved by the said order, the assessee has filed an Appeal No. E/53421/2018-EX(DB) before CESTAT, New Delhi which is pending; however, the assessee has simultaneously proceeded to challenge the order dated 23.10.2017 passed by the Commissioner (Appeals) before the tribunal in Appeal No. E/50468, 50469, 50470, 50471, and 50472 of 2018 which came to be allowed vide order 14.11.2018. Hence, the Revenue is in appeal in Civil Appeal Diary No. 6888 of 2020 against the said order the order dated 14.11.2018 passed by the CESTAT.

78Copy pinpoint78. Similarly, the Revenue has also come in appeal in Civil Appeal Diary No. 44912 of 2019 against the order dated 14.11.2018 passed in Excise Appeal 51978 of 2018 and Excise Appeal No. 51319 of 2018 against the respondent-assessee wherein the Show Cause Notice dated 01.03.2017 was issued for the payment of differential duty of Rs. 16,95,33,000 by the Directorate General of Central Excise Intelligence Bhopal for the period of June 2015 to February 2016 which culminated in order-in-original dated 20.12.2017. The said order held that the assessee has misclassified the product as ‘chewing tobacco’ instead of ‘zarda/jarda scented tobacco’ and the differential duty claimed in Show Cause Notice was affirmed. The said order became the subject of appeal No.51978 of 2018 and No.51319 of

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2018 before the CESTAT which vide the common order dated 14.11.2018 set aside the OIO. SUBMISSIONS OF PARTIES

79Copy pinpoint79. Ms. Nisha Bagchi learned counsel appearing for Revenue, would contend, that tribunal committed a serious error in holding the product in question as ‘chewing tobacco’ though it was to be classified as ‘zarda/jarda scented tobacco’. She would contend that tribunal failed to appreciate the test report dated 4.11.2015, suggested that the product did not contain added lime and yet on the ground test reports not having been drawn a finding has been recorded by the tribunal to the effect that adjudicating authority was not in a position to correlate the test report in the absence of test memo. She would also contend that tribunal failed to notice that assessee itself had requested for retest of the sample on the ground that the test report is not very specific and the various parameters on which it was opined that the sample contained the characteristics of ZST have been clearly spelt out and that the retest has been allowed by the adjudicating authority is factually not correct. The prayer for retest not being in consonance with CBEC’s manual. Hence, she would contend that tribunal ought to have remanded the matter. She would further contend that the tribunal ignored the statement dated 27.10.2015 of Shri Ram Gopal Agnihotri, Director of assessee company whereunder the distinction between CT and ZST has been admitted as also the ingredients of the product manufactured by the assessee was set out. She would submit that the finding of CRCL on the test reports has been ignored by the tribunal, which clearly disclosed the final product manufactured by the assessee was ZST. Hence, she prays for the appeal to be allowed.

80Copy pinpoint80. Whereas the learned Counsel appearing for the respondent would contend that the order passed by the Tribunal does not suffer from any infirmity and it is contended that assessee, admittedly, had followed the due procedure in law by following the statutory declarations under the CTPM Rules, declaring that they intend to operate different number of machines in each of the months under dispute. It is contended that had there been any malafide intentions to wrongly claim the benefit reduced rate of duty on CT, the assess would have either increased its production by increasing the number of operating machines or at least would have maintained the very same number of operating machines. However, every month the assessee

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 623 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

was consistently reducing the operating machines as per the demand of its product in the market. The decision to manufacture ZST prior to the period of dispute, and to manufacture CT during the period of dispute as well as using different number of packing machines every month was purely a commercial decision taken by the assessee based on several factors. By supporting the order of the tribunal, it is contended that CT and ZST are different product and known as such in the market and as such there cannot be a flip flop by selling same product in two different names. It is also canvassed that no enquiry was conducted by the department to ascertain the classification of the product namely no market enquiry was conducted to ascertain the common parlance understanding of the product. The product sold by the assessee had been described on the package as ‘chewing tobacco premium’ and as per the Legal metrology (packaged commodities) rules 2011, the labelling/description contained on the packaging is determinative of the goods contained in the package, until proved to the contrary. Hence, the assessee has prayed for dismissal of the appeal. DISCUSSION & FINDINGS

81Copy pinpoint81. It is pertinent to note at the outset that show cause notice dated 02.02.2016 for the classification of the product is the subject matter of the appeal before the CESTAT in Appeal No. E/53421 of 2018 where under the order dated 16.07.2018 is impugned before it. The said order dated 16.07.2018 has been passed by the Commissioner pertains to the period of June 2015 to August 2015 where the Commissioner has adjudicated and passed an order regarding mis-classification.

82Copy pinpoint82. The orders dated 30.10.2015, 27.11.2015, 31.12.2015 and 29.01.2016 which were impugned before the Commissioner (Appeals) were disposed of on 23.10.2017 in the background of the show cause notice dated 02.02.2016.

83Copy pinpoint83. The assessee who has two units namely, at Bhopal and Bilaspur by communication dated 18.03.2015 intimated the Jurisdictional Divisional officer that the product manufactured by them is ‘zarda/jarda scented tobacco’ which is entirely different from ‘chewing tobacco’. It was also intimated that the nomenclature ‘chewing tobacco’ is being used as there was no difference in capacity of production as well as rate of duty before budget 2015-16, since the government fixed different rates of duty for these

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products, they shall be discharging central excise duty as per the Notification No. 05/2015 dated 01.03.2015. However, the assessee vide its letter dated 08.06.2015 addressed to the jurisdictional Range officer informed that the manufacturing process of ‘chewing tobacco’ and the ingredients used for manufacturing are same for both the products. It is also admitted by the assessee that ‘zarda/jarda scented tobacco’ would contain additional ingredients of gulab jal, glycerine and perfume and as such panchnama dated 01.06.2015 was drawn. The report chemical examiner disclosed that the samples obtained from the factory of the assessee where the assessee claimed to manufacture only ‘chewing tobacco’ also contained the same ingredients that are used in the manufacturing of ‘scented zarda/jarda tobacco’. It is for this precise reason, the proceedings for misdeclaration and misclassification came to be initiated and OIO dated 28.08.2015 came to be passed which was affirmed in appeal on 23.10.2017. The adjudicating officer after having taken note of the chemical examiner’s report dated 03.08.2015, whereunder it was found that the ‘chewing tobacco’ manufactured by the assessee contains identical ingredients that are contained in ‘zarda/jarda scented tobacco’ had arrived at a conclusion that the assessee has mis declared and misclassified its goods as ‘chewing tobacco’ instead of ‘scented zarda/jarda tobacco’.

84Copy pinpoint84. When the assessee itself vide a letter dated 18.03.2015 (refer to in para 6.4 at page 95 of order in original dated 16.07.2018) has intimated that the product manufactured by it was ‘zarda/jarda scented tobacco’. The stand or change of the nomenclature by the assessee contending that it is only ‘chewing tobacco’ is completely misplaced for three reasons namely: (1) there was no change in the manufacturing process of both the items and the product was claimed to be ‘chewing tobacco’ containing the same ingredients as that of ‘zarda/jarda scented tobacco’; (2) The declaration was filed by assessee as ‘scented zarda/jarda tobacco’ up till 27.04.2015; (3) The duty payable had been determined on the basis of the deemed capacity of production under Rule 6(2) of the CTPM Rules.

85Copy pinpoint85. On omission of Compounded Levy Scheme vide Act No. 14 of 2001 Section 3A of the CE Act, was again inserted by Act 18 of 2008, hence ‘chewing tobacco’ was notified under Section 3A by Notification No. 10 of 2010 dated 27.02.2010. From time to time, several Notifications were issued increasing rate of duty for ‘chewing tobacco’, unmanufactured

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 625 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

tobacco. Notification No. 4 of 2015 dated 01.03.2015 was issued notifying the deemed capacity of production per packing machine per month, on the same day on which Notification No. 5/2015 was issued. Subsequently, by Notification No. 25/2015 dated 30.04.2015 came to be issued under which the rate of duty per packing machine per month was notified which was based on packing speed. The differential duty between ‘chewing tobacco’ and ‘zarda/jarda scented tobacco’ was not only vast but also huge. The following table is the mirror to this fact:

Period ‘Chewing ‘Zarda/ Relevant Tobacco’ Jarda Scented Notification Tobacco’ P r i o r t o Same Same 01.03.2015 w.e.f. 01.03.2015 38.64 lakhs per 27.05 lakhs per N o t i f i c a t i o n packing machine packing machine N o . 0 4 / 2 0 1 5 - per month per month C E (N . T. ) d t . 01.03.2015 w.e.f. 30.04.2015 38.64 lakhs per 82.11 lakhs per Notification No. packing machine packing machine 25/2015 CE dated per month per month 30.04.2015

86Copy pinpoint86. Hence, the assessee who had taken a stand by its communication dated 18.03.2015 was manufacturing ‘zarda/jarda scented tobacco’ changed its version and started contending the product manufactured by it is ‘chewing tobacco’. The assessee was changing the classification of its product, as the central excise duty on ‘zarda/jarda scented tobacco’ and ‘chewing tobacco’ was changing. The view taken by adjudicating authority is based on factual evaluation which derives its support from the CRCL Report which confirmed that the samples drawn has the same ingredients as that of ‘zarda/jarda scented tobacco’ and thereby rightly confirmed the duty demanded under the Show Cause Notice. The findings recorded by us in Group No. 1 in matter of M/s Urmin Products with regard to classification would squarely be applicable to the facts on hand and as such both these appeals deserved to be allowed by setting aside the impugned order of the tribunal.

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IV. M/S DHARAMPAL PREMCHAND LTD. V. COMMISSIONER OF CENTRAL EXCISE - CA NO.2469 OF 2020, DIARY NO.3492, 3487, 2810, 3484, 3513, 3536, 3544, 3545 AND 3547 OF 2020 BRIEF FACTS

87Copy pinpoint87. The assessee is in appeal before this Court assailing the common impugned Final Order dated 06.01.2019 passed by CESTAT, Allahabad. At the outset, we would like to state that the findings recorded and observations made under the present group of appeals are confined to this group only. The period of dispute involved in these appeals relates to May 2015 to January 2016.

88Copy pinpoint88. The declarations filed by the assessee classifying their product as ‘Chewing Tobacco’ were approved by orders passed by the Deputy Commissioner upto 23.09.2015 though a higher rate had been prescribed for ‘zarda/jarda scented tobacco’ vide Notification No.25/2015 dated 30.04.2015. The Deputy Commissioner thereafter vide Order dated 13.01.2016 amended assessee’s declaration dated 08.01.2016, wherein assessee classified the product as CET SH 24039910 i.e., ‘chewing tobacco’, and Deputy Commissioner reclassified it to CET SH 2403 9930 i.e., ‘zarda/ jarda scented tobacco’, w.e.f. 16.01.2016. The Deputy Commissioner in his Order dated 13.01.2016 justified the reclassification on account of discovery of the fact that similar manufacturer i.e, M/s Dharampal Satyapal was manufacturing the same product with identical manufacturing process and classifying the product as ‘zarda/jarda scented tobacco’. Subsequent order came to be passed on 17.02.2016 correcting the next declaration dated 11.02.2016 w.e.f. 18.02.2016, after affording a personal hearing.

89Copy pinpoint89. The Revenue had also issued two show cause notices pertaining to the goods manufactured at two different factories of the assessee. Show cause dated 04.05.2016 was issued for the factory located at 1D, A-34/35, Sector 60, NOIDA (hereinafter referred to as “1D factory”) and show cause notice of same date was also issued for the factory located at 6A, A-34/35, Sector 60, NOIDA (hereinafter referred to as “6A factory”). An Addendum dated 09.02.2016 was made to the show cause notices wherein reliance on CRCL reports were placed regarding the characteristics of the product. Under both the show cause notices, differential duty for the period May 2015 to January 2016 which was short paid on the ground of misdeclaration

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 627 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

was demanded along with interest, and penalty. The reclassification and the demand proposed in the Notices were confirmed by the Commissioner by OIO on 28.11.2017 and 29.11.2017 respectively. These orders were challenged before the High Court of Allahabad in Writ Tax No. 232/2018 and Writ Tax No. 234/2018, which came to be dismissed on the ground that the petitioner has alternate remedy. The SLP No. 7369/2018 challenging the order dated 26.02.2018 passed in Writ Tax No. 232/2018 also came to be dismissed. Hence the assessee preferred Appeal No. 70437/2018 and 70438/2018 before CESTAT, which came to be rejected by Final Order No. A/71893-94/2019-EX (DB) dated 06.11.2019.

90Copy pinpoint90. Hence, the present appeals came to be filed by assessee before the Tribunal in respect of: a. The adjudication orders in the show cause notices dated 04.05.2016. b. The appellate orders confirming the amendments made to the declarations on and after 08.01.2016 from ‘chewing tobacco’ to ‘zarda/ jarda scented tobacco’. c. A refund claim made in respect of duty paid in February 2016 under protest after the declaration was modified. d. Abatement/ refund granted but appropriated towards payment of duty.

91Copy pinpoint91. The dispute in all these appeals revolved around the classification of the impugned product. The tribunal by common order dated 06.11.2019 dismissed the appeals and upheld the orders impugned before it.

92Copy pinpoint92. Being aggrieved by the order of the tribunal dated 06.11.2019 these appeals have been filed. SUBMISSIONS OF THE PARTIES

93Copy pinpoint93. The thrust of the arguments canvassed by Mr. S.K Bagaria, learned Senior Counsel appearing for the appellant/assessee is: the original authority had acted beyond the jurisdiction and travelled beyond the powers vested under Rule 6 of the CTPM Rules, 2010. He would also contend that the issue of classification of a product cannot be the subject matter of adjudication in an order passed under Rule 6(2) of CTPM Rules. He would contend that

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when the issue of classification of a product arises, the initial burden is on the Department/Revenue, and it can be contested by the assessee and thereafter the dispute is to be adjudicated by following the principles of natural justice. He has submitted that these aspects though urged before the tribunal, had been completely ignored and as such impugned orders are required to be set aside by this Court.

94Copy pinpoint94. He would elaborate his submissions by contending that the issue of classification is an independent issue in itself and no decision on the classification can be taken in a matter concerning the approval of declaration under Rule 6 of the CTPM Rules. He would also contend that the description of a product as declared under the declaration filed under Rule 6 cannot be changed by the Revenue when the product has been sold and marketed under a particular heading. He would contend that under the CETA, there is no definition of ‘chewing tobacco’ and ‘zarda/jarda scented tobacco’ and therefore the test lies in the market understanding of the product and the same would prevail. He would further contend that under Rule 6 of CTPM Rules, the authority would only consider the number of machines installed in the factory and production capacity of the same and it was not open to him to examine the correct classification of the product. In support of his submissions, he has relied upon the following judgments: (i) ITC Ltd. v. Commissioner (2019) 17 SCC 46. (ii) HPL Chemicals Ltd. v. CCE, Chandigarh 2006 (197) ELT 324 [SC] (iii) Mauri Yeast India Pvt. Ltd. v. State of U.P. 2008 (225) ELT 321 [SC] (iv) CCE Nagpur v. Shree Baidyanath Ayurved Bhawan 2009 (237) ELT 225 [SC] (v) W.P.I.L. Ltd. v. CCE 2005 (181) ELT 359 [SC] (vi) Mathuram v. State of M.P. (1999) 8 SCC 667 (vii) CC v. Dilip Kumar and Company (2018) 9 SCC 1 (viii) Indo International Industries v. CGST (1981) 2 SCC (ix) UOI v. Delhi Cloth and General Mills Co. Ltd. 1963 Supply (1) SCR 586

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 629 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

95Copy pinpoint95. M/s. Nisha Bagchi, learned counsel for the Revenue would contend that the declaration filed by the assessee classifying their product as 2403 9910 was approved and orders were passed by the Deputy Commissioner upto 23.09.2015 though a higher rate had been prescribed for ‘zarda/ jarda scented tobacco’ by Notification No.25 of 2015 dated 30.04.2015 which product was manufactured by the assessee. She would contend that ‘zarda/jarda scented tobacco’ was notified under Section 3A of CE Act, vide Notification No.17 of 2010 dated 13.04.2010 and by Notification No.18 of 2010 dated 13.04.2010, the CTPM Rules were amended to cover ‘zarda/jarda scented tobacco’. She would contend that the declarations filed by the assessee were determined and/ or adjudicated after affording a personal hearing and by relying upon the admission/statement made by the General Manager of the assessee during the personal hearing, the Deputy Commissioner has modified all subsequent declarations which came to be confirmed by the appellate authority. She would also place reliance upon the CRCL report to contend that the samples drawn from one of the units had a pleasant odour/fragrance. She would draw the attention of the Court to the findings recorded by the tribunal which is to the effect that the use of saffron and scented flavour in the manufacture of the product had been admitted by the General Manager; and, one unit of the same group was manufacturing an identical product which was being classified as ‘zarda/ jarda scented tobacco’ and both these products had the same brand name and was entering the market as the same product. She would also contend that the appellant had not contested that manufacturing process which was identical and both products were marketed under the same brand name. She would also submit that the classification of the product ought to have been under CET SH 2403 9930 and there cannot be estoppel in taxation matters for rectifying the past erroneous classification/ declaration which was approved pursuant to intentional misdeclaration and wilful suppression. To conclude her arguments, she would submit that the adjudicating authority and the tribunal have considered the factual matrix and arrived at a well- reasoned conclusion based on the characteristics of the product, the test reports applying the commercial parlance, admission of the assessee, and the definitions found in IS glossary and existing precedents. Hence, by relying upon the following Judgments she has sought for dismissal of the appeals:

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(i) CCE v. Cotspun (1999) 7 SCC 633 (Para 14, 15) (ii) Vivek Narayan Sharma v. Union of India 2023 (3) SCC1 (iii) Hindustan Poles Corpn. v. CCE (2006) 4 SCC 85 (iv) Mishra Zarda Traders v. State of Orissa 1987 SCC Online 363 (v) Swiss Ribbons Pvt. Ltd. v. Union of India (2019) 4 SCC17 ISSUES FOR CONSIDERATION

96Copy pinpoint96. Having heard the learned advocates appearing for the parties and after bestowing our anxious consideration to the rival contentions raised at the bar the following points/questions would arise for our consideration: (1) What is the purpose of the declaration filed under Rule 6 of CTPM Rules? (2) What are the parameters which are required to be examined, determined, and adjudicated under Rule 6 by the Prescribed Authority? (3) Whether the Prescribed Authority have the power and jurisdiction to determine the classification or specific entry within which the declared product is to be classified? OR Whether the issue of classification of a product can be the subject matter of adjudication/decision under Rule 6(2) of CTPM Rules? (4) Whether a declaration made under Rule 6 has any nexus to the classification of the product and on account of the classification of such declaration, would preclude the Department from issuing a Notice under Section 11A or 11AC of CE Act, 1944? DISCUSSION AND FINDINGS

97Copy pinpoint97. While adjudicating the above questions/points, the answer to one is likely to overlap with the other and as such we propose to adjudicate these questions together and we propose to answer them accordingly and record conclusion question or point-wise.

98Copy pinpoint98. For undertaking the aforesaid exercise, it would be necessary to examine the applicable rules in question i.e., ‘Chewing Tobacco’ and

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 631 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010. The aforesaid rules came to be notified by Notification No.11 of 2010 dated 27.02.2010 which came into force from 08.03.2010. The aforesaid rules were made applicable to the goods specified and notified as per Section 3A. ‘Chewing tobacco’ was notified under Section 3A by Notification No.10 of 2010 dated 27.02.2010 and ‘zarda/jarda scented tobacco’ was specified as notified goods under Section 3A of CE Act, 1944 by Notification No.17 of 2010 dated 13.04.2010 on the same day i.e. 13.04.2010 Notification No.18 of 2010 came to be issued amending the CTPM Rules, 2010 to cover zarda/jarda scented tobacco.

99Copy pinpoint99. The aforesaid rules to the extent it require adjudication of the points/questions formulated hereinabove would necessarily be required to be extracted and Rule 6 which would have direct bearing on the points formulated hereinabove is extracted herein below for immediate reference and it reads: “Rule 6. Declaration to be filed by the manufacturer. - (1) A manufacturer of notified goods shall, immediately on coming into force of these rules, and not later than 8th March, 2010, declare in Form 1 annexed to these rules, (i) the number of single-track packing machines available in his factory; (ii) the number of packing machines out of (i), which are installed in his factory; (iii) the number of packing machines out of (i), which he intends to operate in his factory for production of pouches of notified goods with lime tube and without lime tube, respectively, with effect from the 8th day of March, 2010; (iv) the number of multiple track or multiple line packing machine available in his factory; (v) the number of multiple track or multiple line packing machines out of (iv), which are installed in his factory; (vi) the number of multiple track or multiple line packing machines out of (iv), which he intends to operate in his factory for production of pouches of notified goods without lime tube and with lime tube, respectively, with effect from the 8th day of March, 2010;

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(vii) the name of the manufacturer of each of the packing machine, its identification number, date of its purchase and the maximum packing speed at which they can be operated for packing of pouches of notified goods, with lime tube and without lime tube, of various retail sale prices; (viii) description of goods to be manufactured including whether unmanufactured tobacco or chewing tobacco or both, their brand names, whether pouches shall contain lime tube or not; (ix) denomination of retail sale prices of the pouches to be manufactured during the financial year; (x) the plan and details of the part or section of the factory premises intended to be used by him for the manufacture of notified goods of different denomination of retail sale prices and the number of machines intended to be used by him in each such part or section, to the jurisdictional Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, with a copy to the jurisdictional Superintendent of Central Excise : Provided that a new manufacturer shall file such declaration at least seven days prior to the commencement of commercial production of notified goods in his factory. (2) On receipt of the declaration referred to in sub-rule (1), the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, shall, after making such inquiry as may be necessary including physical verification, approve the declaration and determine and pass order concerning the annual capacity of production of the factory within three working days in accordance with the provisions of these rules. Provided that the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, may direct for modifications in the plan or details of the part or section of the factory premises intended to be used by the manufacturer for manufacture of notified goods of different retail sale prices, as he thinks proper, for effective segregation of the parts or sections of the premises and the machines to be used in such parts or sections before granting the approval :

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 633 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

Provided further that if the manufacturer does not receive the approval in respect of his declaration within the said period of three working days, the approval shall be deemed to have been granted subject to the modifications, if any, which the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, may communicate later on but not later than thirty days of filing of the declaration.”

100Copy pinpoint100. A perusal of the above rule would indicate that the manufacturer of notified goods should immediately on coming into force of the Rules (08.03.2010) file a declaration in Form No.1 declaring the details of notified goods as prescribed or specified under sub-rule (i) to (x) and on receipt of such declaration the jurisdictional Deputy Commissioner or the Assistant Commissioner of Central Excise, namely, the Competent Authority, would approve the declaration and determine and pass orders concerning the annual capacity within three working days after making such inquiry as may be necessary including physical verification. The first proviso to Rule 6 of CTPM mandates that the authorised officer may direct modifications of the details as prescribed thereunder. The perusal of the second proviso would indicate that if the manufacturer does not receive the approval in respect of his declaration within the said period of 3 working days, the approval shall be deemed to have been granted subject to the modifications, if any, which the authorised officer as the case may communicate not later than 30 days of the filing of such declaration.

101Copy pinpoint101. Learned counsel appearing for the assessee has raised a contention that since the classification of the product being disputed by the Revenue, the burden lies upon the Department and it is beyond the scope of Rule 6(2) and suggested change of classification whilst adjudicating a declaration made under Rule 6 can only be by the issuance of a Notice or otherwise, it would be foul of natural justice. The said argument howsoever attractive cannot be accepted for the simple reason that sub-rule (2) of Rule 6 would clearly indicate that on receipt of a declaration referred to in sub-rule (1), the Competent Authority would be required to make such inquiry as may be necessary including physical verification by determining the correctness or otherwise of such declaration concerning the annual capacity of production

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of the factory. The nomenclature of the Rule would itself indicate that the said Rule is called as “Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity, determination and collection of duty) Rules, 2010”. A combined reading of clause (i) to (x) of sub-rule (1) of Rule 6 would indicate during the inquiry contemplated under sub-rule (2), the adjudicating authority would be determining the annual capacity production of the factory and the Competent Authority would be required to take into consideration the details of the track packing machines installed in the factory, the number of packing machines which are available and the assessee intending to operate in his factory, number of multiple tracks or multiple line packing machines available and to be used or operated with and without lime tube. The maximum packing speed of such machines, various retail sale prices, description of goods to be manufactured including whether ‘unmanufactured tobacco’ or ‘chewing tobacco’ or both, and whether pouches contain lime tube or not, details of said products, are to be determined. In the process of undertaking such an exercise, the Competent Authority would be required to necessarily examine as to whether the product in question would fall within the classification of notified goods, inasmuch as the product has to necessarily fall within the notified goods as notified under sub-section (1) of Section 3A and for the relevant period.

102Copy pinpoint102. The Form of declaration that has been prescribed under Rule 6 is Form No. 1 and such declaration ought to contain the details specified thereunder. For the purposes of clarity and brevity we deem it appropriate to extract the Form No.1 as prescribed under Rule 6 herein below: “FORM - 1 [See rule 6] (1) Name of the manufacturer : (2) Address of the manufacturing premise : (3) ECC No: (4) Address of other premises manufacturing the same products : (5) Number of single track packing machines available in the factory : (6) Number of packing machines out of (5), which are installed in the factory :

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 635 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

(7) Number of packing machines out of (5), which the manufacturer intends to operate in his factory for production of pouches of notified goods with lime tube and without lime tube, respectively : (8) Number of multiple track or multiple line packing machine available in the factory : (9) Number of multiple track or multiple line packing machines out of (8), which are installed in the factory : (10) Number of multiple track or multiple line packing machines out of (8), which the manufacturer intends to operate in his factory for production of pouches of notified goods with lime tube and without lime tube, respectively : (11) Name of the manufacturer of each of the packing machine, its identification number, date of its purchase and the maximum packing speed at which the machines can be operated for packing of notified goods, with lime tube and without lime tube, of various retail sale prices : (12) Description of goods to be manufactured including whether unmanufactured tobacco or chewing tobacco or both, their brand names, whether pouches shall contain lime tube or not, and other concerned details : (13) Denomination of retail sale prices of the pouches to be manufactured during the financial year : (14) The ground plan and details of the part or section of the factory premises intended to be used by him for manufacture of notified goods of different denomination of retail sale prices and the number of machines intended to be used by him in each of such part or section : (15) Declaration (a) I/We further declare that the particulars furnished above are true and correct in all respects. In case any particulars are found to be untrue/ incorrect, I/We undertake to pay any additional amount of excise duty on notified goods manufactured by me/us as per provisions of the Central Excise Act, 1944 (1 of 1944) or the rules made or notifications issued thereunder.

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(b) I/We further undertake that any addition or removal of the packing machine would be done under the physical supervision of the Central Excise Officer as per the procedure provided in the Chewing Tobacco and unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010. (c) I/We hereby agree to abide by the provisions and conditions of the Chewing Tobacco and unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010. Place: Date: Name, residential address and signature of manufacturer/authorised agent”

103Copy pinpoint103. ‘Chewing tobacco’ and preparations containing ‘chewing tobacco’ was found in Entry CETH 2404.41 by virtue of Notification No.13 of 2006 dated 01.03.2002 and it was covered under MRP-based assessment under Section 4A of CE Act. On the advent of 8 (eight) digit tariff regime ‘zarda/ jarda scented tobacco’ was introduced under a separate head under ‘CET SH 2403 9930’ and ‘chewing tobacco’ under the head ‘CET SH 2403 9910’ with effect from 28.02.2005. However, Notification No.2 of 2006 which was issued in supersession of Notification No.13 of 2002 ‘zarda/jarda scented tobacco’ was deleted or, in other words, such Entry was omitted.

104Copy pinpoint104. In the light of the two products having been notified under Section 3A as ‘notified goods’ which is contemplated under Rule 2(c), it cannot be gainsaid by the assessee that while adjudicating the declaration filed, the issue of classification would not fall within the domain of the adjudicating authority under Rule 6(2). In the event, that there has been improper classification of the notified goods the adjudicating authority would be empowered to rectify the misclassification, all the more, in a situation where it has been misclassified with an intention to evade a higher rate of duty. It is in the teeth of the same, that the expression “inquire, determine and pass order” will acquire great significance under Rule 2(c). The declaration which is required to be filed under Rule 6(1) by a manufacturer is of “notified goods”. The said notified goods means as defined under Rule 2(c) which reads as under:

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 637 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

“(c) “notified goods” means unmanufactured tobacco, bearing a brand name, and chewing tobacco notified under sub-section (1) of section 3A of the Act by the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 10/2010-Central Excise (N.T.), dated the 27th February, 2010;”

105Copy pinpoint105. From time to time, the notified goods came to be included or excluded, which power vested with the rule-making authority and there cannot be any quarrel on this proposition. The product zarda/jarda scented tobacco, as noticed herein (supra) came to be notified under Section 3A (1) of CE Act, 1994, with effect from 13.04.2010 and correspondingly the CTPM Rules also came to be amended to cover zarda/jarda scented tobacco. As such the assessee contended that the adjudicating authority would not be within his powers to determine the classification.

106Copy pinpoint106. A holistic reading of Rule 6 would indicate that the details prescribed thereunder alone would be the subject matter of determination concerning the annual capacity of production of the factory. The second proviso to Rule 6 would clearly indicate that the Prescribed Authority is empowered to modify the declaration on the facts obtained from such declaration. While undertaking such exercise of determination and passing orders concerning the annual capacity of production of the factory as contemplated under sub-rule (2) of Rule 6, the Prescribed Authority would have to take into consideration the issue relating to the classification of the product. We say so for reasons more than one, firstly, the details required to be furnished as prescribed under clause (i) to (x) of sub-rule (1) of Rule 6 would indicate that apart from details mentioned therein, the declarant will have to specify the description of goods to be manufactured without specifying the classification entry to the Central Excise Tarif Act. On the basis of such declaration filed by the assessee, the duty for a particular month has to be calculated by application of the appropriate rate of duty specified in the notification as indicated under Rule 7. Necessarily to ascertain the duty payable, the issue of classification will have to be gone into in an inquiry held under sub-rule (2) of Rule 6, as otherwise the inquiry contemplated would become redundant or meaningless. Secondly, to calculate the duty of the product, the condition precedent is the capacity of the production. Thus, it becomes important to ascertain the capacity of

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production first, which can only be done when the concerned authority is acquainted with the product as described which would ultimately assist the Competent Authority to classify the product under the appropriate tariff head as provided under CETA. Thirdly, the rationale behind Rule 6(2) is that, unless there is proper classification of the product, the Competent Authority would not be in a position to ascertain the correct classification under the tariff head and consequently would not be able to determine the annual capacity of the production of the notified goods, which may lead to improper calculation. This is more so, for every notified product may not possess similar ingredients as that of the other product. It is trite law that changes in the ingredient of a product can bring about change in the production capacity, namely, affect the manufacturing process. Thus, in the event of mis-description, wrong description or erroneous description or intentional improper classification of the product manufactured would not tie the hands of the Competent Authority from piercing the corporate veil to ascertain the true nature of the product and reclassify the same, necessarily after affording an opportunity of hearing which would be in compliance of the doctrine of natural justice. The object sought to be achieved by this Rule is to empower the Department to determine the annual capacity based on the declaration of the assessee and such declaration would not be required to be accepted in the event of there being an improper description of the goods or product in the declaration so filed. In fact, declaration Form No.1 itself would indicate that in column No.15A, the declarant has agreed to bind itself to pay any additional amount of excise duty on notified goods manufactured by it by such declaration, if found to be untrue or incorrect. This undertaking would reinforce the fact that even in case of acceptance of such declaration by the Competent Authority, it does not preclude them thereafter to demand the differential duty on account of short demand to recover such duty, and necessarily complying with the principles of natural justice.

107Copy pinpoint107. As noticed hereinabove both the parties have relied upon the judgment of this Court in CCE V. Cotspun (supra) whereunder this Court has held that once there is the levy of excise duty on the basis of an approved classification list, until the correctness of the approval of the question by issuance of a show cause notice to the assessee, same cannot be disturbed. It has been further held that levy of excise duty on the basis of an approved

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 639 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

notification is not a short levy. It was also held that differential duty cannot be recovered on the basis that it is a short levy and revised assessment could be made effective prospectively from the date of the show cause notice and not with reference to earlier removals made under an approved classification list. In this background, it came to be held that as long as classification list subsists, the differential duty cannot be claimed on the same product.

108Copy pinpoint108. It has to be noticed that in Cotspun (supra) the assessee was manufacturing NES Yarn and the classification list was filed by the manufacturer as required under Rule 173-B of the Central Excise Rules, 1944 and same had been approved by the Competent Authority and it was accordingly classified under old Tariff Item No.19-I(2)(a) and (2)(e). Notice to reopen the assessment for the period February 1977 to May 1977 was issued on the ground that the NES Yarn ought to have been classified under old Tariff Item No.19-I(2)(f) and the differential duty was demanded. This was followed by a second show cause notice and subsequently amended by corrigendum. The adjudicating authority upheld the contention of the assessee by arriving at a conclusion that duty liability had been ascertained based on an approved classification list, and the question of short levy did not arise. However, the appellate authority allowed the appeal and confirmed the demand. On appeal, the tribunal held the revised assessment could be made effective only prospectively, namely, from the date of show cause notice, not earlier. This Court took note of the fact that the assessee was required to file before the appropriate Excise Officer, for approval, a list of the goods that he proposes to clear and the said list indicated that details to be found in such approval list filed before the Appropriate Authority which not only include the description of the goods produced or manufactured by the declarant but also provided the tariff entry under which the goods that the declarant intends to remove would fall and the rate of duty leviable thereon, apart from other particulars, as prescribed under sub-rule (2) of Rule 173-B. It is these details which had been furnished by the assessee in Cotspun’s case (supra) which had been accepted and while justifying its demand of reclassification, would operate retrospectively by relying upon Rule 10 of the Central Excise Rule, 1944, which is similar to the contention raised in the present case. However, this contention did not find favour by this Court on the ground that Rule 173-B dealt with the classification list and Proper Officer ought to have made inquiry and approve the list with such

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modifications as was considered necessary, after such inquiry, as he deems fit, unless otherwise directed by the Proper Officer, determine the duty payable on the goods intended to be removed in accordance with such list vide sub- rule (2) of Rule 173-B. Whereas the corresponding Rule 6 in the instant case does not indicate or remotely suggest declaration of such classification is required to be made. However, Rule 6(2) only prescribes the description of the goods to be specified by the declarant in his declaration. Hence, this would result in casting additional onerous responsibility on the Competent Authority to undertake the exercise of ascertaining as to the nature of the goods and its classification under CETA for proper determination of production capacity of the machine. It would also be apposite to note the judgment of this Court in CCE v. Srivallabh Glass Works Ltd. (2003) 11 SCC 341 whereunder the Cotspun’s case (supra) was distinguished on facts and held that Cotspun’s case (supra) only lays down that so far as classification list subsists, the differential duty cannot be claimed on the same product mentioned in the classification list, however, if the product being cleared is different from the one mentioned in the classification list, the principles enunciated in Cotspun’s case (supra) would not be applicable. In that view of the matter, we are of the considered view that the Revenue has the power and jurisdiction to determine the classification for specific Entry within which the product is to be declared or classified and the issue of classification can be the subject matter of adjudication/ decision under sub-rule (2). A declaration made under Rule 6 resulting in the determination and passing of the order under sub-rule (2) of Rule 6 would not preclude the Department or Revenue from issuing notice under Section 11A or Section 11AC of CE Act where there is wilful misstatement or suppression of fact leading to what levy or non-levy of the duty.

109Copy pinpoint109. In the instant case, the declaration confined to ‘chewing tobacco’ falling under CET SH 2403 9910. However, during the course of such inquiry, the Competent Authority would be competent to examine as to whether the product would fall within the notified goods. In the instant case, ‘zarda/jarda scented tobacco’ was specified as notified goods under Section 3A by Notification No.17 of 2010 dated 13.04.2010 and the CTPM Rules also correspondingly had been amended on the same day i.e., 13.04.2010 by Notification No.18 of 2010. Thus, taking into within its sweep the said ‘notified goods’ as defined under Rule 2(c) of CTPM Rules for the purposes

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 641 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

of classification and this exercise undertaken by the Competent Authority cannot be found fault with. Hence, we record our finding on the questions formulated hereinabove as under: (1) What is the purpose of the declaration filed under Rule 6 of CTPM Rules? ANSWER: To ascertain the details of the product to be manufactured and the nature of the product for purposes of fixing the packing capacity of the machine and determine the duty. (2) What are the parameters which are required to be examined, determined, and adjudicated under Rule 6 by the Prescribed Authority? ANSWER: To inquire and determine the correctness of the details furnished under the declaration, namely, Form No.1. (3) Whether the Competent Authority have the power and jurisdiction to determine the classification or specific entry within which the declared product is to be classified? OR Whether the issue of classification of a product can be the subject matter of adjudication/decision under Rule 6(2) of CTPM Rules? ANSWER: Yes. (4) Whether a declaration made under Rule 6 has any nexus to the classification of the product? ANSWER: Yes, for the purpose of determining the packing capacity and corresponding duty. (5) Whether on account of classification by such declaration, would preclude the Department from issuing a Notice under Section 11A or 11AC of CE Act, 1944? ANSWER: No, if there is improper or misdeclaration or improper declaration.

110Copy pinpoint110. In the light of the findings recorded herein above, we are of the considered view that the impugned orders of the tribunal would not be sustainable and the order of the adjudicating authority deserves to be

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upheld, consequently these appeals deserves to be allowed, except Civil Appeal arising out of Diary No. 3487 of 2020 which is directed against the order dated 06.11.2019 passed by the CESTAT in Excise Appeal No. 70242 of 2018., which stand on a different footing and hence the said appeal is taken up for consideration and disposed of by the following order.

111Copy pinpoint111. The appellant-assessee filed an abatement claim amounting to Rs. 1,99,41,935/- before the Deputy/Assistant Commissioner, Central Excise, Division-II, Noida under Rule 10 of CTPM Rules. The said claim was adjudicated and by order dated 30.3.2016 was allowed. However, under the very same order the said amount which was allowed to be distributed to the assessee by cash was ordered to be appropriated under Rule 9 of CTPM Rules read with Section 11 of CE Act.

112Copy pinpoint112. Being aggrieved by the aforesaid order, an appeal came to be filed before the Commissioner who by order dated 31.08.2017 upheld the order-in-original dated 30.03.2016 to the extent of appropriation of central excise duty of Rs.1,82,56,000/- and set aside to the extent of interest of Rs.18,59,042/ levied.

113Copy pinpoint113. Being aggrieved by the same, appeal was filed before the CESTAT in Excise Appeal No.70242 of 2018 contending before the tribunal that the order of the Deputy Commissioner dated 30.03.2016 is in violation of natural justice, namely, in the grounds of appeal before this Court it has been urged the impugned order passed by the tribunal it had failed to address the issue of abatement of Rs. 1,96,67,556/-. On perusal of the case papers and after hearing the learned advocates appearing for the parties, we notice that the tribunal has failed to examine this issue. Hence, on the short ground of tribunal having not examined this issue, the appeal deserves to be allowed. Accordingly, Civil Appeal arising out of Diary No. 3487 of 2020 is allowed and the matter is remitted to the tribunal for adjudication de novo on merits. We have not expressed any opinion on merits, and contentions of both the parties on the issue of abatement is kept open. V. COMMISSIONER OF CENTRAL GOODS AND SERVICE TAX V. M/S TEJ RAM DHARAM PAUL - CIVIL APPEAL NO. 3596 OF 2023

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 643 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

BRIEF FACTS

114Copy pinpoint114. The period of dispute in this group is May 2015 to December

2015. The assessee claims the product to be classified under CET SH 2403 9910 i.e., ‘chewing tobacco’, whereas the Revenue contends that the product ought to have been classified under CET SH 2403 9930 i.e., ‘zarda/jarda scented tobacco’. Coming to the facts of this appeal, the assessee submitted Form No.1 before the jurisdictional Central Excise Division declaring that they would manufacture ‘Mahapasand Zarda/Jarda Scented Tobacco’ and paid duty accordingly for the period from 10.03.2015 to 31.03.2015. Thereafter, Form No.2 was submitted by the assessee, and duty was paid on ‘Zarda/Jarda Scented Tobacco’. The Revenue drew samples of the product on 13.03.2015 and forwarded the same to the CRCL who by its report dated 23.03.2015 classified the product as ‘chewing tobacco’. Accordingly, the assessee was informed on 27.04.2015 that the product is to be classified as ‘chewing tobacco’.

115Copy pinpoint115. Accordingly, the appellant-assessee submitted revised Form No.1 on 23.05.2015 and informed that they would manufacture ‘chewing tobacco’. Notification No.25 of 2015 which came into effect from 30.04.2015 under which the rate of duty for packing machine per month was notified on 1.03.2015. Hence, the Department drew fresh samples under Panchnama dated 29.05.2015 and forwarded the same to CRCL for obtaining the report. The CRCL forwarded the report on 20.07.2015 without classifying the product. On being asked to classify the tariff entry by the Revenue, the Chemical Examiner vide communication dated 27.07.2015 refused to do so stating “assessing officers at various levels should not ask the Deputy Chief Chemist/Chemical Examiner to give the tariff classification”, citing para 70 (B) and (C) of manual of the Revenue Laboratories. Thereafter, on 04.12.2015 Revenue visited the premises of the assessee again and took samples which came to be recorded in Panchnama and forwarded the same to CRCL for fresh reports. In the meanwhile, the Competent Authority passed the capacity determination order on 18.12.2015 under Rule 6(2) of CTPM Rules holding that the product manufactured by the appellant-assessee for the period from May 2015 to December 2015 is ‘zarda/jarda scented tobacco’. On 21.12.2015 assessee was called upon to deposit differential duty along with interest and same was deposited under protest.

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116Copy pinpoint116. On 01.07.2016 a show cause notice was issued demanding duty, interest, and penalty under Section 11A, 11AA, and 11AC read with relevant Rules which came to be adjudicated by OIO dated 18.03.2021 whereunder the demand made under the show cause notice was affirmed. In the interregnum, the assessee challenged the capacity determination order No.24 of 2015 dated 18.12.2015 before the Commissioner (Appeal-I) who dismissed the appeal on the ground that it was premature as the issue relating to the classification was pending since the show cause notice dated 01.07.2016 had already been issued and it was yet to be decided vide order dated 06.12.2016. Aggrieved by the same an appeal was filed before the tribunal and tribunal held that issue of classification was open and it was to be decided by the adjudicating authority. Subsequently, OIO came to be passed on 18.03.2021, confirming the duty demand and further ordered for appropriation of the amount specified thereunder, apart from imposing of penalty. Being aggrieved by the same, appeal was filed before the tribunal which came to be allowed and the order dated 18.03.2021 was set aside. Hence, this appeal by the Revenue. SUBMISSIONS OF THE PARTIES

117Copy pinpoint117. Ms. Nisha Bagchi, the learned counsel for the Revenue, criticized the tribunal’s decision, arguing that it did not examine the definitions in the IS glossary and ignored the CRCL report dated 14.12.2015. She argued that adding scent to Zarda would change the product’s character to ‘zarda/ jarda scented tobacco’. Ms. Bagchi also cited the assessee’s representative’s statements and the fact that the product was previously classified as ‘Mahapasand zarda/jarda scented tobaccot’ for March and April 2015 but was later changed to ‘Mahapasand chewing tobacco (without lime tube)’ for May 2015 to December 2015. Ms. Bagchi argued that the assessee’s dual stand at different times depending on the rate of duty the product attracted was evident in Notification No.25 of 2015, which fixed the duty per packing machine/per month. In reply, Mr. S.K. Bagaria, learned Senior Counsel appearing for the appellant-assessee has not only relied upon the communication dated 27.04.2015 (Annexure A-7) but also the CRCL Report dated 23.03.2015 which would indicate that the consistent stand of the Department itself was that the product manufactured by the assessee is ‘chewing tobacco’ and as such the impugned order of the tribunal would not warrant interference.

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 645 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

118Copy pinpoint118. The assessee argued that the Revenue’s assumption that adding certain flavours to ‘zarda scented tobacco’ is incorrect, as these additives only enhance the taste and assessment of the product as a ‘chewing tobacco’, and do not change the basic characteristics. It was also contended that ‘chewing tobacco’ and ‘zarda/jarda scented tobacco’ having not been defined under the statute, the principles of trade parlance must be resorted to, which is its popular meaning and understanding by those people using the product and not scientific and technical. The assessee also harped upon the contention that the last report dated 14.12.2015 of the CRCL is an ‘induced opinion’. It was further contended that the Revenue had failed to establish or demonstrate that the product is not ‘chewing tobacco’ and the cross-examination of the Chemical Examiner reflected that she had failed to substantiate her report as to the basis on which she opined that the product is ‘zarda/jarda scented tobacco’. Hence, relying upon the following judgments the assessee has sought for the appeal to be dismissed: ‘1. Prabhat Zarda Factory v. Commr. Of Central Excise [2004 (163) ELT 485 (Tri-Delhi)

2. Suresh Enterprises v. Commr. Of Central Excise, decided on 06.07.2006.

3. Yogesh Associates v. CCE, Surat-II (2005(188) ELT 251 (SC).

4. Gopal Zarda Udyog v. CCE, New Delhi 2005 (188) ELT 251

5. Dharam Pal Satyapal v. CCE New Delhi [2005 (183) ELT 241 (SC).’ DISCUSSION AND FINDINGS

119Copy pinpoint119. Heard the learned counsel appearing for the parties and on perusal of the record it would emerge therefrom that the Form No.1 dated 05.03.2015 submitted by the assessee before the jurisdictional Central Excises Division, Kundli, it had declared that they were manufacturing ‘Mahapasand zarda/jarda scented tobacco’. On 17.03.2015, Form No.2 was submitted by the assessee for the period 10.03.2015 to 31.03.2015, and duty was paid for the said period as per declaration in Form No.1. On 13.05.2015 the Department by Panchnama on the same date, drew samples of the product of the assessee’s product i.e., ‘Mahapasand zarda/jarda scented’

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manufactured and forwarded the same to CRCL who by the opinion dated 23.05.2015 opined as under: “TEST REPORT: “The sample is in form of brown coloured dried pieces of vegetable matter. It is a preparation containing tobacco, lime and flavouring agents. It is other than Jarda Scented Tobacco. It has the characteristic of Khaini”.

120Copy pinpoint120. Based on the said report the Department by communication dated 27.04.2015 informed the assessee, the product being manufactured by the assessee is classifiable under Chapter sub-heading 2403 9910 as ‘chewing tobacco (other than filter Khaini)’ and as such called upon the assessee- respondent to show cause as to why the Form No.1 dated 05.03.2015 should not be rejected as the product manufactured by the respondent-assessee fell in the category of ‘chewing tobacco (other than filter Khaini)’ and not under sub-heading 2403 9930 – ‘zarda/jarda scented tobacco’. Accordingly, the assessee started submitting Form No.1 declaring the product manufactured by it as ‘chewing tobacco’. This Court has consistently held the common parlance test continues to be one of the determinative tests for the classification of a product. In Commissioner of Central Excise v. Shri Baidyanath Ayurved chewing tobacco (2009) 12 SCC 419, this Court has held as under: “49. The primary object of the Excise Act is to raise revenue for which various products are differently classified in the new Tariff Act. Resort should, in the circumstances, be had to popular meaning and understanding attached to such products by those using the product and not to be had to the scientific and technical meaning of the terms and expressions used. The approach of the consumer or user towards the product, thus, assumes significance. What is important to be seen is how the consumer looks at a product and what is his perception in respect of such product. The user’s understanding is a strong factor in determination of classification of the products.

61. In the matters of classification of goods, the principles that have been followed by the courts—which we endorse—are that there may not be justification for changing the classification without a change

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 647 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

in the nature or a change in the use of the product; something more is required for changing the classification especially when the product remains the same. Earlier decision on an issue inter partes is a cogent factor in the determination of the same issue. The applicability of maxim res judicata pro veritate accipitur in the matters of classification of goods has to be seen in that perspective.”

121Copy pinpoint121. Even the report of the Chemical Examiner clearly reflects that it is ‘chewing tobacco’. In fact, it is the Revenue that has been taking consistently inconsistent stand. In the first instance when Form No.1 was filed by the assessee declaring the product ‘Mahapasand zarda scented tobacco’, the Department drew samples from the factory premises, obtained the CRCL Report, and called upon the assessee to reclassify its product as ‘chewing tobacco’ under CET SH 2403 9910 and accordingly the Form No.1 was filed by the assessee and duty paid in tune with the declaration filed. It is only after Notification No.25 of 2015 came to be issued revising the duty payable on ‘zarda scented tobacco’ that fresh samples were drawn, and the Revenue started singing a new tune, and thus called upon the assessee to declare the product manufactured by it as ‘zarda scented tobacco’. In the light of communication dated 27.04.2015 by the Revenue addressed to the assessee and calling upon the assessee to classify its product as ‘chewing tobacco’ and the same having been complied by the assessee it is too late in the day for the Department to take a contrary stand.

122Copy pinpoint122. The order of the tribunal has taken into account the aforestated aspects to arrive at a conclusion that the declaration filed by the assessee is just and proper, which does not suffer from any infirmity either on facts or on law calling for our interference. Hence, the appeal filed by the Department deserves to be rejected. VI. COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX MEERUT II V. M/S SOM PAN PRODUCTS PVT. LTD. [DIARY NO. 14581/19]

123Copy pinpoint123. In the present group, the Revenue is in appeal challenging the correctness and legality of order dated 25.09.2018 passed by CESTAT, Allahabad, whereby the order passed by the authorities below treating the product manufactured by the respondent as ‘zarda/jarda scented tobacco’

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falling under CET SH 2403 9930 and allowing the appeal as a consequence of the demands raised has been set aside. BRIEF FACTS

124Copy pinpoint124. The assessee after obtaining the registration under the CE Act declared the product manufactured by them as ‘Jarda’ falling under CET SH 2403 9930 and it was assessed to duty as ‘Jarda scented tobacco’. On 30.04.2015, the assessee filed a declaration effective from 01.05.2015, declaring the product as Jarda, and on the same day separate rates for ‘Jarda scented tobacco’ and ‘chewing tobacco’ were notified having a vast difference with respect to the duty leviable on ‘chewing tobacco’. The Assistant Commissioner confirmed the duty on ‘Jarda/Zarda scented tobacco’ and thereafter the assessee vide communication dated 12.05.2015 sought to correct its declaration and intended to shift the product to tariff heading CET SH 2403 9910 (chewing tobacco) instead of CET SH 2403 9930 i.e., ‘jarda/zarda scented tobacco’. The Assistant Commissioner by communication dated 18.05.2015 rejected the request and by communication dated 20.05.2015 called upon the assessee to furnish a complete list of all ingredients used for the manufacturing of the product with write-up and flow chart duly certified. The assessee paid the duty under protest for the month of May 2015 though he has filed a revised declaration. The Assistant Commissioner vide order dated 02.06.2015 rejected the proposed change in classification and raised the demand for the months of June 2015 to September 2015 and this order was confirmed by the appellate authority on 12.01.2016. A separate show cause notice dated 04.05.2016 was issued claiming differential duty on May 2015 which was confirmed vide order dated 16.03.2017 and the appellate tribunal set aside both the orders, namely, dated 12.01.2016 and 16.03.2017. The assessee’s attempt to contend that what was manufactured by it was ‘chewing tobacco’ by relying upon the sale invoices before the tribunal was successful and it was held that the product manufactured by the petitioner was ‘chewing tobacco’. Hence, the Revenue is in appeal. SUBMISSIONS OF PARTIES

125Copy pinpoint125. Ms. Nisha Bagchi, learned standing counsel for the Revenue, would contend that post facto declaration by the assessee would not be valid

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 649 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

in view of Rule 6,7,9 of CTPM Rules. She would contend that the assessee in its declaration had clearly declared the product in manufactured by it as, zarda scented tobacco, based on which the duty would be payable. The tribunal committed an error in proceeding on the basis that it is the case of the Revenue that assessee had manufactured Zarda by showing the same as CT though the assessee itself had declared manufacturing of zarda product. She would submit that the statutory provisions do not provide any definition of the two competing terms and the goods would be classified as per general commercial parlance. She would further contend that the assessee had failed to demonstrate cogent evidence, that it manufactured chewing tobacco during the relevant period. Hence, she prays for the appeal being allowed.

126Copy pinpoint126. The learning counsel appearing for the assessee would rely upon the registration form submitted to the department whereunder the list of ingredients used in the manufacture of the product had been specified and nowhere it is stated that scent was being used for the product and as such the department ought to have rebutted the ingredients furnished by the assessee. It is submitted that the assessee never declared the manufacture of ZST and even otherwise no testing of the product is carried out despite the request made by the assessee. It is submitted that the particulars furnished by the assessee classifying the product as ‘zarda’ under CET SH 2403 9930 would by itself not make the product as such and as has been contended by the revenue, it would be the product which was manufactured by the assessee which would matter for determination of duty. Hence, the assessee has prayed for dismissal of the appeal. DISCUSSION AND FINDINGS

127Copy pinpoint127. We have heard Smt. Nisha Bagchi, appearing for the appellant- Revenue, and Ms. Seema Jain appearing for the respondent-assessee.

128Copy pinpoint128. A valiant attempt was made by Ms. Nisha Bagchi to contend that the tribunal erred in appreciating the fact that the onus of establishing the change in classification was on the assessee and it ought not to have looked into the IS glossary to arrive at a conclusion that the product manufactured by the respondent-assessee was ‘chewing tobacco’. Hence, she has prayed for setting aside the order of the tribunal. Per contra, learned counsel for the assessee has supported the order of the tribunal.

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129Copy pinpoint129. Having heard learned advocates appearing for the parties we notice that the tribunal has assigned the following reason for accepting the plea of the assessee: - “Admittedly in the present case the appellants have marketed their product as chewing tobacco and not as Jarda scented tobacco. Revenue has neither disputed the manufacturing process undertaken by the appellant which shows non-use of any scent or perfume in the product nor have made any enquiries from the dealers, shopkeepers or the ultimate consumers of the product. No evidence of procurement of Perfume or Scent as raw material and then use in the product stands produced by the. Revenue. No employee of the assessee was examined so as to establish that perfume being used for manufacture of their final product. As such the said factor of marketing of the goods as chewing tobacco leads us to inevitable conclusion apart from other reasons as discussed above, that the product in question is admittedly chewing tobacco and not Jarda scented tobacco.”

130Copy pinpoint130. The aforesaid conclusion arrived at by the tribunal is just and proper based on appreciation of factual matrix which would not call for interference. Hence the appeal is dismissed. VII. COMMISSIONER OF CENTRAL EXCISE & ST ALWAR V. TARA CHAND NARESH CHAND [C.A NO.959 OF 2019] BRIEF FACTS

131Copy pinpoint131. In the last group, in this batch of appeals before this Court, the Revenue is calling in question the order dated 28.03.2018 passed by CESTAT in Excise Appeal No.51953 of 2017 whereunder the order dated 27.09.2017 passed by the Commissioner of Central Excise classifying the product manufactured by the respondent-assessee as ‘chewing tobacco’ falling under CET SH 2403 9910, as against the claim of the Revenue of the said product falling under CET SH 2403 9930.

132Copy pinpoint132. The respondent assessee had filed Form 1 declaring the product manufactured by it as ‘zarda/jarda scented tobacco’ which came to be adjudicated and accordingly an order came to be passed by the Deputy Commissioner, whereunder the product of the assessee was classified by him as ‘chewing tobacco’. The assessee filled another form on 28.04.2015

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 651 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

describing the product as “Jayanti zarda/jarda scented” classifying the product under CET SH 2403 9910, culminating in another determination order dated 05.05.2015, wherein the Deputy Commissioner classified the product as ‘chewing tobacco’ under CET SH 2403 9910.

133Copy pinpoint133. A search was conducted by the Director General of Central Excise in the factory of the petitioner after drawing the panchnama and recording the statement of Shri. Tara Chand Jain, partner of the assessee-firm. The samples were forwarded for chemical examination. The chemical examiner opined that the samples had a characteristic odour of odoriferous substances vide report dated 07.03.2016. Hence, a show cause notice dated 24.02.2017 came to be issued alleging that during the period March 2015 to February 2016, the assessee manufactured the product using the process in which tobacco was ground and mixed with lime, menthol, synthetic flavouring perfumes, compound, etc. and was labelled as “Jayanti Brand Zarda”. Hence, alleging central excise duty amounting to Rs.4.81 crores was short paid and the demand came to be raised. The said show cause notice came to be adjudicated and the demand was confirmed. However, no penalty was imposed. The tribunal by the impugned order has allowed the appeal on the ground that the department itself had declared the classification as ‘chewing tobacco’ though the assessee had declared the same as ‘jarda/ zarda scented tobacco’ and as such by relying upon its order rendered in Urmin products private Ltd allowed the appeal. Hence, the Revenue has filed the present appeal. SUBMISSIONS OF THE PARTIES

134Copy pinpoint134. We have heard the arguments of Nisha Bagchi, learned standing counsel appearing for the Revenue appellant and Mr. A.R. Madhav Rao, learned counsel appearing for the respondent assessee. It is the contention of the learned counsel appearing for the Revenue that the tribunal committed an error in arriving at a conclusion that the classification of the product is ‘chewing tobacco’ and not ‘zarda/jarda scented tobacco’. She would contend that the Commissioner had examined the process of manufacture and taken into consideration the test reports of CRCL in the light of tariff heading and the trade opinion, including the statement of two customers to conclude that the product is ‘zarda/jarda scented tobacco’. She would submit that the tribunal erroneously applied the principles laid down in

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Urmin products and Flakes N Flavours without applying its mind to the present case. She would contend that the tribunal has merely relied upon the communication of the superintendent of excise whereunder the assesses’s prayer to classify the product as ‘zarda/jarda scented tobacco’ had been rejected and classified the same as ‘chewing tobacco’ to set aside the order in original which classified the product manufactured by the assessee as ‘chewing tobacco’.

135Copy pinpoint135. She would submit that there can be no dispute to the proposition that there cannot be estoppel in taxation proceedings and Section 11A of the CE Act, which permits demand within a normal period of limitation. Hence, she seeks for the appeal to be allowed.

136Copy pinpoint136. Per contra, Shri A.R. Madhav Rao, learned counsel appearing for the respondent-assessee would contend that there can be no short levy for the past period, particularly in the present case, since the declaration filed by the assessee was approved. He would further contend that no appeals had been filed against the approval of the classification and said orders had become final. He would also add that ISI’s specification and glossary are applicable to determine the classification in the absence of any definition of ‘chewing tobacco’ preparations for ‘chewing tobacco’ and ‘zarda/jarda scented tobaccot’ or any test prescribed by the CBIC. He would contend that the burden of classification or change of classification of a product is always on Revenue and the same has not been discharged. He would contend that there ought to be uniformity in classification. By relying upon the judgment of this Court in Damodar J. Malpani Vs. CCE reported in (2004) 12 SCC 70 in a case relating to ‘chewing tobacco’ itself, it was held that where the process adopted has been scrutinized and the Revenue in the case of one assessee has classified the product as ‘unmanufactured tobacco’ falling under heading 24.01 as it stood then, another assessee following the same process cannot be discriminated and there should be uniformity in classification. He would contend that verification contemplated under Rule 6(2) of CTPM rules 2010 is not confined to a verification of only the number of machines installed in the applicant’s premises and the description of the product and classification of the same is also verified and this is evident from the fact wherein physical verification of the respondent’s product apart from the verification of the machines had been done when it attempted to change the classification of

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 653 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

the product from ‘chewing tobacco’ to ‘zarda/jarda scented tobaccot’ and same was turned down. He would submit that notification under Section 3A for the period in question (i.e., March 2015 to February 2016) covered four different products each having a different deemed capacity of production and rate, which was a function of the speed of packing for some products. Therefore, the department would necessarily have to classify the appropriate tariff entry in order to pass orders determining the monthly deemed capacity and duty to be paid by the applicant. He would submit that even the monthly returns depict the product of the respondent-assessee as ‘chewing tobacco’ has been scrutinized and assessed to be correct for the relevant period. By referring to Rule 12 of Central Excise Rules 2002, he would contend that filing of the returns would be applicable to notified goods under Section 3A and said returns are required to be scrutinized and assessed by which process there would be verification of the product manufactured by the assessee and classification of the same. Hence, by relying upon the following judgments he prays for the dismissal of the appeal. a) Collector of Central Excise, Baroda vs. Cotspun Ltd. (1999) 7 SCC 633 b) Union of India vs. Delhi Cloth and General Mills 1963 Supp. 1 SCR 586. c) Collector of Central Excise, Kanpur vs. Krishna Carbon Paper Co. (1989) 1 SCC 150 d) Coastal Paper Ltd. Vs. Commissioner of Central Excise, Vishakhapatnam (2015) 10 SCC 664 e) Parle Agro Pvt. Ltd. vs Commissioner of Commercial Tax, Trivandrum (2017) 7 SCC 540 f) Damodar J. Malpani and anr v. Collector of Central Excise (2004) 12 SCC 70 DISCUSSION AND FINDINGS

137Copy pinpoint137. We have heard the learned advocates appearing for the parties and perused the records. At the outset, we would like to make it explicitly clear that the tribunal though has relied upon the judgment of Urmin and Flakes-n-flavourz, apart from assigning other reasons, in the facts and

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circumstances obtained in the present case, we have proceeded to examine the rival contentions, notwithstanding the findings recorded by the tribunal in Urmin Products and Flakes-n-flavourz which are the subject matter of Civil Appeal No.10159-161 of 2010 and Civil Appeal No.5146 of 2015, which has been adjudicated by us under this common order itself by assigning separate and independent reasons and the facts of the said case are distinguished from the facts of the present case. This view also gets fortified by the very fact that in the instant case, an inquiry was conducted in respect of assessee’s product and the superintendent in-charge of the respondent’s factory furnished the reports to the Deputy Commissioner on 04.03.2015 after visiting the factory of the assessee, inspected the machines and the product manufactured, since the assessee had declared in Form 1 to the effect that the product manufactured by it is ‘zarda/jarda scented tobacco’. In the said report the superintendent has opined as under: “As regards the assessee’s letter dated 02.03.2015 regarding amendment in their Registration by changing the CETSH of their final product form 24039910 (Chewing Tobacco) to 24039930 (Jarda Scented Tobacco), it is submitted that looking to the production process/ingredients the product is already correctly classified under CETSH 24039910 and does not merit classification under the CETSH 24039930, as claimed by the assessee.”

138Copy pinpoint138. Thus, it is clear that the stand of the assessee has been consistent to the effect that product manufactured by it is to be classified as ‘zarda/ jarda scented tobacco’ and at the insistence of the jurisdictional Deputy Commissioner the assessee was classifying the goods under CET SH 2403 9910 i.e., ‘chewing tobacco’, for which there was also an order of determination passed under Rule 6(2) of CTPM rules. Whereas in the other matters, namely Urmin and Flakes-n-Flavourz, the facts were entirely different. In Urmin Products the assessee had declared the product as ‘chewing tobacco’ and then changed the classification to ‘zarda/jarda scented tobacco’ and again came back to the original position of declaring it or classifying it as ‘chewing tobacco’. These classifications in Urmin Products were at the behest of the assessee himself. In Flakes-n-Flavourz, the assessee was alleged to be manufacturing ‘zarda/jarda scented tobacco’ and clearing it as ‘chewing tobacco’, and on facts it was found that there

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 655 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

were additives added to the tobacco. In the said case this Court on facts held that there was no wilful suppression attributable to the assesssee and the Revenue had failed to establish the product as ‘zarda scented tobaccot’.

139Copy pinpoint139. In the instant case the assessee had clearly declared his product as ‘zarda/jarda scented tobacco’ falling under sub-heading 2403 9930 in Form 1 filed and based on the said declaration, capacity determination order dated 04.03.2015 under rule 6(2) had been passed re-classifying the product as ‘chewing tobacco’. Accordingly, for the period April 2015 in Form-1 the assessee had described the product as ‘Jayanti Zarda Scented- 2403 9910’. However, in the capacity determination order dated 05.05.2015, the Deputy Commissioner classified the goods as ‘chewing tobacco’. As such, there was no misstatement or suppression of facts, collusion, or fraud in the instant case and hence on facts, the principles enunciated in Urmin’s case is distinguishable. It may be noted that this court in the case of CCE vs. Damnet Chemicals Private Ltd. (2007) 7 SCC 490 had held: “26. In the circumstances, we find it difficult to hold that there has been conscious or deliberate withholding of information by the assessee. There has been no wilful misstatement much less any deliberate and wilful suppression of facts. It is settled law that in order to invoke the proviso to Section 11-A(1) a mere misstatement could not be enough. The requirement in law is that such misstatement or suppression of facts must be wilful. We do not propose to burden this judgment with various authoritative pronouncements except to refer the judgment of this Court in Anand Nishikawa Co. Ltd. v. CCE [(2005) 7 SCC 749 : (2005) 188 ELT 149] wherein this Court held : (SCC p. 759, para 27) “27. … we find that ‘suppression of facts’ can have only one meaning that the correct information was not disclosed deliberately to evade payment of duty. When facts were known to both the parties, the omission by one to do what he might have done and not that he must have done, would not render it suppression. It is settled law that mere failure to declare does not amount to wilful suppression. There must be some positive act from the side of the assessee to find wilful suppression.” (emphasis supplied)

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27. It is clear from the material available on record that the Excise Authorities had inspected the manufacture process, collected the necessary information and details from the respondent assessee and even collected the samples and sent for chemical analysis. The authorities were aware of the tests and analysis reports of the products manufactured by the respondent assessee. The relevant facts were very much within the knowledge of the Department authorities. The Department did not make any attempt to lead any evidence that there was any wilful misstatement or suppression of facts with intent to evade payment of duty.”

140Copy pinpoint140. In the facts of the present case, there has been no penalty levied under Rule 26 on the ground that there has been no intent to evade duty. In fact, the commissioner in his order dated 27.09.2017 concludes at para 48.2 to the following effect: “..in view of the above there is no fraud or collusion or any wilful misstatement or separation of facts with intent to evade payment of duty to invoke the provisions of Section 11A (4) of Central Excise Act, 1944 in the present case.”

141Copy pinpoint141. It is also pertinent to note that on 04.03.2015 the respondent-assessee sought to make a change in the registration certificate and claimed that the product manufactured by it was zarda/jarda. However, the appellant-Revenue called upon the respondent to withdraw the application for registration as ‘zarda’ and to show it only as ‘chewing tobacco’ and thereafter application showing the product as ‘chewing tobacco’ came to be filed on 06.07.2015, and accordingly said application was allowed on 23.07.2015 vide annexure A-45 (volume II of the counter affidavit). Thus, the registration certificate itself reflects the product as ‘chewing tobacco’. This court in the case of CCE vs. Tata Tech Ltd (2008) 11 STR 449 (SC) has held; “there cannot be a demand against the classification under which the product is registered without undoing the classification of the product in the registration certificate”.

142Copy pinpoint142. For the reasons aforestated we are of the considered view that the findings of the tribunal warrant no interference by this Court and the appeal has to fail.

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 657 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

143Copy pinpoint143. We place on record our deep appreciation for the able assistance rendered by the learned counsel appearing for the parties, in not only making available compilation of statutory provisions, notifications, and circulars prevalent at the relevant time, but also their erudite elucidation of arguments which are noted hereinabove, which enabled this Court to arrive at the conclusions recorded hereinabove. Resultantly, we proceed to pass the following: ORDER (a) Civil Appeal Nos.10159-10161 of 2010, Civil Appeal No.…….. of 2023 arising out of Diary No.44912 of 2019 and Civil Appeal No……. of 2023 arising out of Dairy NO.6888 of 2020 are hereby allowed. (b) Civil Appeal No. 5146 of 2015, Civil Appeal No. 2469 of 2020 along with Civil Appeals arising out of Diary No.(s) 3492, 2810, 3484, 3513, 3536, 3544, 3545 and 3547 of 2020, Civil Appeal No. 3596 of 2023, Civil Appeal No. arising out of Diary No. 14581 of 2019 and Civil Appeal No. 959 of 2019 are hereby dismissed. (c) Civil Appeal No. ______ of 2023 arising out of Diary No. 3487 of 2020 stands remitted to the Tribunal for adjudication afresh in light of observations made in paragraph no. 110 and 113 of group number – 4 appeals (i.e., Dharampal Premchand group) (d) Costs made easy.

Headnotes prepared by: Appeals disposed of. Bibhuti Bhushan Bose Assisted by: Shubhanshu Das, LCRA