Case Details Commr. of Cen. Exc. Ahmedabad vs M/s Urmin Products P. Ltd. and Others

35 lesser amount of duty, as the value determined under Section 4A after 50 percent abatement was much lesser compared to transactional value under Section 4 of CE Act. It is for this precise reason the assessee changed the classification from ‘zarda/jarda scented tobacco’ to ‘chewing tobacco’. ‘Zarda/jarda scented tobacco’ was brought into the ambit of Section 4A of the CE Act (MRP-based assessment), by virtue of amendment to Notification No.2 of 2006 vide Notification No.16 of 2006 dated 11.07.2006. In other words, ‘zarda/jarda scented tobacco’ was not specified for assessment under Section 4A of CE Act for the period 01.03.2006 to 10.07.2006. In the light of the same, the Revenue was correct and justified in issuing the show cause notice. Though one of the contentions raised by the assessee was that they had filed a letter on 30.03.2006 to the Department clearly showing the change in the classification by the assessee, however, the letter dated 30.03.2006 had been cleverly drafted and it does not mention in detail the product which they were manufacturing at that material time namely ‘zarda/jarda scented tobacco’. It is this hiding of the fact and not specifying the details in their letter that led to the issuance of the show cause notice and invocation of Section 11A and Section 11 AC of the CE Act, by the Department. It cannot be ignored that till filing of the letter dated 30.03.2006, the assessee itself was classifying the product as ‘zarda/jarda scented tobacco’ falling under CET SH 2403 9930 and being a large-scale manufacturer and paying large sums of amount as duty, to contend that it was unaware of the difference between these two products, or to contend that it had classified the product as ‘zarda/jarda scented tobacco’ by ignorance, is not a plausible justification on part of the assessee. However, on the issuance of Notification No.2 of 2006 dated 01.03.2006 under which ‘zarda/jarda scented tobacco’ was excluded or in other words not included in the said notification, the assessee changed the description of its product from ‘zarda/jarda scented tobacco’ to ‘chewing tobacco’. The date of communication of the letter dated 30.03.2006 by the assessee also acquires significance in as much as the Notification No.2 of 2006 dated 01.03.2006 were to take effect from 01.04.2006, just two days later. The intention was to evade payment of duty payable under Section 4 of CE Act; despite knowing the fact that its product was not covered under relevant notification which provides for valuation under Section 4A, yet the assessee did so, only to pay duty on lower value as per Section 4A of CE Act, by claiming the product manufactured by it as ‘chewing tobacco’ rather than ‘zarda/jarda scented tobacco’ to avail benefit of MRP-based assessment which was lower than the value as prescribed under Section 4 of the CE Act. The Adjudicating Authority was of the clear view that there has been a deliberate intention to avoid payment of duty by the assessee by misclassification and willful misstatement of its product and hence it was justified in invoking the extended period as provided in the proviso to Section 11A(1) of CE Act, 1944. [Paras 40, 41, 42 and 43] Central Excise Tax, 1944 – ss. 4 and 4A - Classification – Two competing entries – ‘chewing tobacco’ and ‘zarda/jarda scented tobacco’- Product manufactured and cleared by the assessee for the period 01.03.2006 to 10.07.2006 to be classified under the Central Excise Tariff Sub-Heading( CET SH) 2403 9910 as ‘chewing tobacco’ or under CET SH 2403 9930 as ‘zarda/jarda scented tobacco.

Held: The principle of admission is the best proof that can be applied to conclude that the assessee itself had classified the product as ‘zarda/jarda scented tobacco’ based on the declaration in ER-I returns for April 2006 and onwards – The assessee itself right from the beginning has been consistently declaring the product manufactured by it as ‘chewing tobacco’ till the 8-digit regime in 2005 (w.e.f. 24.02.2005) sub-classified the entries as ‘chewing tobacco’ and ‘zarda/jarda scented tobacco’ – In the ER-I returns filed from March 2005 till April 2006 i.e., after the sub-classification, the assessee mentioned the description of the product as ‘zarda scented tobacco’ and from April 2006 reclassified it as ‘chewing tobacco’ –Notification No.

2 of 2006 dated 01.03.2006 was issued in supersession of Notification 13 of 2002 dated 01.03.2002 specifying the goods covered under Section 4A of the CE Act, for MRP based assessment – The said notification did not specify the goods falling under CET SH 2403 9930, i.e., ‘zarda/jarda scented tobacco’, but it covers the goods falling under CET SH 2403 9910 i.e., ‘chewing tobacco’ – Thus ‘zarda/jarda scented tobacco’ not having been specified under MRPbased assessment u/s. 4A of the CE Act, the goods had to be necessarily assessed u/s. 4 of the CE Act – The assessee being aware that there being no change in the nature of the products, its ingredients and also the manufacturing process had changed and misclassified the product as ‘chewing tobacco’ from ‘zarda/jarda scented’ tobacco – Had the assessee continued its classification as ‘zarda/jarda scented tobacco’, the duty payable as per transaction value u/s. 4 of the CE Act would have been much more than the determination u/s. 4A of CE Act after 50 % abatement – It is for this precise reason for avoiding and evading payment of the higher duty, the classification was deliberately changed from ‘zarda/jarda scented tobacco’ to ‘chewing tobacco’. [Paras 44, 46 and 47]

Interpretation of Statutes – Entry in Fiscal Statute – Specific entry vis-a-vis General entry:

Held: It is trite law that when specific entry is found in a fiscal statute, the same would prevail over any general entry – If there are two or more subheadings, the heading which provides the most specific description will have to be preferred to a heading providing a more general description. [Para 49] Tax/ Taxation – Central Excise – Chargeability – Classification - Burden/Onus of Proof- For change in classification of the product – Lies on whom:

Held: It is settled law that the onus/burden of proof for change in classification of the product lies on the Department, particularly when it wishes to challenge a long-accepted classification – Classification is a question relating to “chargeability” –Insofar as chargeability is concerned, the burden of proof lies on the Revenue and not on the assessee. [Paras 68 and 70]

Central Excise – ‘Chewing Tobacco’ and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010 (CTPM Rules) – r.6 – Purpose of declaration filed under Rule 6 of CTPM Rules – Parameters to be examined, determined, and adjudicated under Rule 6 – Such declaration, if having any nexus to classification of the product – Whether on account of classification by such declaration, would preclude the Department from issuing a Notice under Section 11A or 11AC of Central Excise Act, 1944. Held: (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. [Para 109]

Central Excise – Classification – Common parlance test continues to be one of the determinative tests for the classification of a product. [Para 120]

Words and Phrases – ‘suppression’- Meaning of – Discussed . [Para 42]

LIST OF CITATIONS AND OTHER REFERENCES

CCE v. Cotspun (1999) 7 SCC 633 : [1999] 3 Suppl. SCR 184; Continental Foundation Jt. Venture v. Commissioner of Central Excise (2007) 10 SCC 337 : [2007] 9 SCR 554; Westinghouse Saxby Farmer Ltd. v. Commissioner of Central Excise, Calcutta, (2021) 5 SCC 586 : [2021]

3 SCR 622; A. Nagaraju Bros. v. State of A.P., (1994) 3 Supp SCC 122: [1994] 1 Suppl. SCR 784; HPL Chemicals Limited v. CCE, Chandigarh: (2006) 5 SCC 208 : [2006] 1 Suppl. SCR 125; CCE v. Damnet Chemicals Private Ltd. (2007) 7 SCC 490 : [2007] 9 SCR 813; CCE v. Srivallabh Glass Works Ltd. (2003) 11 SCC 341; Commissioner of Central Excise v. Shri Baidyanath Ayurved chewing tobacco (2009) 12 SCC 419 : [2009] 5 SCR 879; W.P.I.L. v. CCE Meerut 2005 (181) ELT 359; HPL Chemicals Limited v. CCE Chandigarh. 2006 (197) ELT 324 (SC); Mauri Yeast India Private Limited v. State of UP. 2008 (225) ELT 321 (SC); CCE, Nagpur v. Shree Baidyanath Ayurved Bhawan Ayurved chewing tobacco. 2009 (237) ELT

225 (SC); ITC Ltd. v. Commissioner (2019) 17 SCC 46; HPL Chemicals Ltd. v. CCE, Chandigarh 2006 (197) ELT 324 [SC]; Mauri Yeast India Pvt. Ltd. v. State of U.P. 2008 (225) ELT 321 [SC]; Vivek Narayan Sharma v. Union of India (2023) 3 SCC 1; Hindustan Poles Corpn. v. CCE (2006) 4 SCC

85 : [2006] 3 SCR 461; Swiss Ribbons Pvt. Ltd. v. Union of India (2019)

4 SCC 17 : [2019] 3 SCR 535; CCE Nagpur v. Shree Baidyanath Ayurved Bhawan 2009 (237) ELT 225 [SC]; Mathuram v. State of M.P. (1999) 8 SCC

667 : [1999] 4 Suppl. SCR 195; CC v. Dilip Kumar and Company (2018) 9 SCC 1 : [2018] 7 SCR 1191; Indo International Industries v. CGST (1981)

2 SCC 528 : [1981] 3 SCR 294; Damodar J. Malpani v. CCE (2004) 12 SCC 70; Yogesh Associates v. CCE, Surat-II (2005)(188) ELT 251 (SC); Gopal Zarda Udyog v. CCE, New Delhi 2005 (188) ELT 251; Dharam Pal Satyapal v. CCE New Delhi [2005] (183) ELT 241 (SC); Union of India vs. Delhi Cloth and General Mills [1963] Supp. 1 SCR 586; Collector of Central Excise, Kanpur vs. Krishna Carbon Paper Co. (1989) 1 SCC 150: [1988] 3 Suppl. SCR 12; Coastal Paper Ltd. vs. Commissioner of Central Excise, Vishakhapatnam (2015) 10 SCC 664 : [2015] 8 SCR 486 and Parle Agro Pvt. Ltd. vs Commissioner of Commercial Tax, Trivandrum (2017) 7 SCC 540 : [2017] 5 SCR 30 - referred to.

Prabhat Zarda Factory v. Commr. Of Central Excise [2004 (163) ELT

485 (Tri-Delhi) – referred to.

Mishra Zarda Traders v. State of Orissa 1987 SCC Online 363referred to. OTHER CASE DETAILS INCLUDING IMPUGNED

ORDER AND APPEARANCES