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

JUDGMENT / ORDER OF THE SUPREME COURT

JUDGMENT ARAVIND KUMAR, J.

1Copy pinpoint1. Delay condoned on 23.08.2023.

2Copy pinpoint2. These appeals are divided into seven (7) groups for convenience, and facts of each group are enumerated under the respective groups whereunder questions or points for determination have been formulated and analysed thereunder. For the purpose of convenience, the details of the judgment with reference to each group and details thereof are enumerated hereinbelow in the following table no. 1: TABLE 1

GROUP CONTENT – DETAILS PAGE NUMBER NUMBER. FROM TO

1. Commissioner Of Central Excise Ahmedabad v. M/S Urmin Products and Ors. [ C. A. No. 10159 – 10161 of 2010] i. Brief Facts 17 20 ii. Submissions of Parties 20 29 iii. Discussion and Finding 29 49

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2. Commissioner Of Central Excise, Chandigarh v. M/S. Flakes-N-Flavourz [ C. A. 5146 of 2015] i. Brief Facts 50 51 ii. Submissions of Parties 51 55 iii. Discussion and Findings 56 72

3Copy pinpoint3. Commissioner Of Central Goods and Service Tax Excise and Customs Bhopal v. Kaipan Masala Pvt. Ltd. [ Diary No. 44912 of 2019; Diary No. 6888 of 2020] i. Brief Facts 73 78 ii. Submissions of Parties 78 81 iii. Discussion and Findings 81 86

4Copy pinpoint4. M/S Dharampal Premchand Ltd. V. Commissioner of Central Excise [ C.A. No. 2469 of 2020 along with Diary No. (s) 3492, 3487, 2810, 3484, 3513, 3536, 3544, 3545, 3547 of 2020.] i. Brief Facts 86 90 ii. Submissions of Parties 90 94 iii. Discussion and Findings 95 116

5Copy pinpoint5. Commissioner of Central Goods and Service Tax v. M/S Tej Ram Dharam Paul [C.A. No. 3596 of 2023] i. Brief Facts 116 119 ii. Submissions of Parties 119 121 iii. Discussion and Findings 121 125

6Copy pinpoint6. Commissioner Of Central Excise and Service Tax Meerut V. M/S Som Pan Products Pvt. Ltd. [D.No.14581 of 2019] i. Brief Facts 126 127 ii. Submissions of Parties 127 129 iii. Discussion and Findings 129 130

7Copy pinpoint7. Commissioner of Central Excise & ST Alwar v. Tara Chand Naresh Chand [C.A. No.959 of 2019] i. Brief Facts 131 133 ii. Submissions of Parties 133 137 iii. Discuss and Findings 137 142 ORDER Page 143-144

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 581 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

3. On behalf of the Revenue in the various groups of matters before this Court, we have heard: - (1) Mr. N. Venkataraman, learned Additional Solicitor General of India, (2) Ms. Nisha Bagchi, learned standing counsel.

4. On behalf of the assessee, we have heard: - (1) Mr. S.K. Bagaria and Mr. Vivek Kohli, learned Senior Counsel, (2) Mr. A.R. Madhav Rao, Mr. Rupesh Kumar and Ms. Seema Jain, learned counsel.

5. The Appellants in Group No. (s) 1,2,3,5,6 and 7, and the Respondents in Group No.4, namely the ‘Commissioner of Central Excise’ are hereinafter referred to as “Revenue”. The Appellants in Group No.4 and the respective respondents in Group No. (s) 1,2,3,5,6 and 7, are hereinafter referred to as “Assessee” for the sake of convenience and brevity.

6. For ease of reference, the following table no. 2 of nomenclatures/ abbreviations is made available below. TABLE 2 Sr. No. Nomenclature/ Particulars / Meaning Abbreviation

1. “BIS” Bureau of Indian Standards

2. “CBIC” Central Board of Indirect Taxes and Customs

3. “CETA” Central Excise Tariff Act, 1985

4. “CE ACT’ Central Excise Act, 1944

5. “CET SH” Central Excise Tariff Sub-Heading

6. “CESTAT” Customs, Excise and Service Tax Appellate Tribunal

7. “CTPM” Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010

8Copy pinpoint8. “CRCL” Central Revenue Control Laboratory

9Copy pinpoint9. “OIA” Order-In-Appeal

10Copy pinpoint10. “OIO” Order-In-Original

11Copy pinpoint11. “CT” Chewing Tobacco

12Copy pinpoint12. “ZST” Zarda/Jarda Scented Tobacco

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7. The learned advocates appearing for the parties have placed reliance and referred to various statutory provisions, relevant chapters of CE Act, CETA, CE Rules, CTPM Rules, and various relevant notifications/circulars issued from time to time by the respective departments/ministry. For clarity and ease of reference we have catalogued the same herein in table no.3 below: TABLE 3 I. TARIFF AND NOTIFICATIONS RELATING TO THE PERIOD 2005-2006 ISSUED UNDER CE ACT

1. Chapter 24 of the Central Excise Tariff in 2004-05 (6 Digit Code).

2. Notification No. 13/2002 – CE (NT) dated 01.03.2002 under Section 4A prescribing abatement from MRP for arriving at assessable value.

3. Notification 10/2003 – CE (NT) dated 01.03.2003 under Section 4A prescribing abatement of 50% for all goods under 2404.41.

4. Chapter 24 of the Central Excise Tariff in 2005-06 (8 Digit Code)

5. Circular 808/05/2005- CX dated 25.02.2005 in regard to introduction of 8-digit tariff from 6-digit tariff in vogue earlier.

6. Notification 2/2006 – CE (NT) dated 01.03.2006 under Section 4A.

7. Notification 16/2006 – CE (NT) dated 11.07.2006 under Section 4A.

II. TARIFF AND NOTIFICATIONS BETWEEN THE YEARS 2010-2015 ISSUED UNDER THE CE ACT

1. Notification: 10/2010- C.E. (N.T.) dated 27-Feb-2010 notifying Unmanufactured Tobacco and Chewing Tobacco under Section 3A.

2. Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010 Notification: 11/2010-C.E. (N.T.) dated 27-Feb-2010

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 583 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

3. Notification: 16/2010 – CE. Dated 27.02.2010 prescribing rate for branded unmanufactured tobacco and chewing tobacco.

4. Notification: 16/2010 – CE. Dated 27.02.2010 prescribing rate for branded unmanufactured tobacco and chewing tobacco.

5. Notification: 17/2010 – CE (NT) dated 13.04.2010- Notifies Jarda scented tobacco under Section 3A.

6. Notification 18/2010 – CE (NT) dated 13.04.2010 – Prescribing the capacity deemed to have been produced for chewing tobacco (including Filter Khaini), Unmanufactured Tobacco and Jarda Scented Tobacco.

7. Notification: 19/2010- C.E. dated 13.04.2010 – prescribing the rate for Chewing Tobacco, Unmanufactured Tobacco and Filter Khaini.

8. Notification: 14/2012 – CE Dated 14.03.2012 prescribing the new rate for Chewing Tobacco, Unmanufactured Tobacco and Filter Khaini.

9. Notification: 2/2014 – C.E. dated 24.01.2014 – prescribing the new rate for Chewing Tobacco, Unmanufactured Tobacco and Filter Khaini.

10. Notification: 17/2014 – C.E. dated 11.07.2014 – Prescribing the new rate for chewing tobacco, unmanufactured tobacco and filter khaini.

8. It would be apt and appropriate to extract Section 11A as it stood in 1980, and as it stood after the amendment brought in 2000 and by Act 10 of 2000 (w.e.f. 17.11.1980) and subsequent substitution by Act 8 of 2011, as it would have a direct bearing on the various batch of appeals before us. They read as under:

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1980 2000 2011 Section 11A. Section 11A. 2 Section ' 11.

&erroneously refunded, whether or for any not such non-levy or reason, other than non-payment, short- the reason of fraud levy or short payment or collusion or any ! or erroneous refund, wilful misstatement or as the case may be, suppression of facts or was on the basis of any contravention of any approval, acceptance of the provisions of or assessment relating this Act or of the rules to the rate of duty made thereunder on or valuation of with intent to evade " ! excisable goods under payment of duty,- any other provisions (a) the Central Excise of this Act or the rules Officer shall, within # $ made thereunder], a [two years] from the % Central Excise Officer relevant date, serve may, within one year notice on the person from the relevant date, chargeable with the serve notice on the duty which has not been person chargeable with so levied or paid the

1 Substituted by Act 10 of 2000, sec. 97(a), for “erroneously refunded” (w.e.f. 17.11.1980) 2 Subs. By Act 8 of 2011

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 585 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

duty which has not been levied or paid or which has been short- lev- " ! ied or short- paid or to whom the refund has erroneously been made, # requiring him to show , cause why he should ' not pay the amount specified in the notice: Provided that where any duty of exercise ! has not been levied or paid or has been ( ) ) ** short-levied or short- + paid or erroneously + + # refunded by reason of + fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, by such person or his agent, the provisions of this sub-section shall have effect, as if for the words [one year], the words “five years” were substituted. Explanation. - Where the service of the notice is stayed by an order of a Court, the period of such stay

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shall be excluded in computing the aforesaid period of [one year] or five years, as the case may be. [(1A) When any duty of excise has not been levied or paid or has been short- levied or short paid or erroneously refunded, by reason of fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of this Act or the rules made thereunder with intent to evade payment of duty, by such person or his agent, to whom a notice is served under the proviso to sub-section (1) by the Central Excise Officer, may pay duty in full or in part as may be accepted by him, and the interest payable thereon under section 11AB and penalty equal to twenty-five per cent of the duty specified in the notice or the duty so accepted by such person within thirty days of the receipt of the notice.]

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 587 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

9. The detailed discussion of the relevant provisions, rules, notifications, and circulars and its applicability or otherwise, have been deliberated upon while analysing the facts under each of the group. A PRELUDE TO THE LIS

10. We deem it necessary to briefly state the history of classification of these two competing entries which have been the pivotal issue in all these groups of appeals before this Court, i.e., CET SH 2403 9910 (‘chewing tobacco’) and CET SH 2403 9930 (‘zarda/jarda scented tobacco’)

11. At the outset, it may be noticed that the expressions ‘chewing tobacco’ and ‘zarda/jarda scented tobacco’ are nowhere defined under the CE ACT or CETA. CETA initially covered ‘tobacco’ in item No.9 to the schedule. Entry 9(II) was country tobacco and sub-clause (2) thereof read “if intended for sale as chewing tobacco, whether manufactured or merely cured.” In 1983, ‘tobacco’ was covered under Item 4 of the Schedule of the CE Act. The relevant entry being Entry 4 II (5) which covered ‘chewing tobacco’. In 1985, the CETA was enacted and ‘Chewing tobacco’ was shown under Entry 4 II (4). The Finance Act,1987, inserted “CET SH 2404.39” with effect from 01.03.1987. The heading included the following: “Chewing tobacco including preparations commonly known as Khara Masala, Kiwam, Dokta, Zarda, Sukha and Surti”. Thus, for the first time ‘Zarda’ was recognized separately as preparation.

12. In 1996-97, CET SH 2404.40 was reformulated to read “chewing tobacco and preparations containing chewing tobacco”.

13Copy pinpoint13. In 2002, under Section 4A of the CE Act, Notification No. 13/2002 – CE (NT) dated 01.03.2002 was issued prescribing abatement as percentage of retail sale price. However, it is to be noticed that Notification No.13/2002 had not covered ‘Chewing Tobacco’ reflecting under the relevant Entry 2404.21, within its ambit of ‘notified goods’ for the purposes of availing benefits under Section 4A. However, subsequently by Notification No.10/2003 – CE (NT) dated 01.03.2003 was issued introducing Entry 24A in Notification 13/2002 dated 1.03.2002, thereby covering all goods under entry 2404.41 within the ambit of ‘notified goods’ for the purposes of Section 4A of the CE Act.

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14Copy pinpoint14. Prior to the introduction of the 8-digit tariff classification, ‘chewing tobacco’ was reflected under Chapter 24, under specific entry ‘2404.41’ of the six-digit Central Excise Tariff classification. Subsequently the new 8-digit Central Excise Tariff classification was introduced vide Circular 808/05/2005 -CX dated 25.02.2005, Chapter 24 of the Central Excise Tarriff came to be amended and heading ‘2403’ was introduced which reads: “2403 – Other manufactured tobacco and manufactured tobacco substitutes; ‘Homogenised’ or ‘Reconstituted’ tobacco; Tobacco extracts and essences”. The Central Excise Tariff Heading ‘2403’ included the following sub-headings: “2403 9910 chewing tobacco 2403 9920 preparations containing chewing tobacco. 2403 9930 zarda/jarda scented tobacco.”

15Copy pinpoint15. On 01.03.2006, Notification No.2/2006 was issued, vide which Notification No.13/2002 dated 01.03.2002 was superseded. Thus, the list of products, with their respective chapter headings/sub-headings, which were to be covered under the assessment in terms of Section 4A of the CE Act, were notified in terms of the eight-digit tariff classification. However, it is pertinent to note that said Notification No.2/2006 did not include ‘Jarda/ Zarda scented tobacco – CET SH 2403 9930’ within the scope of ‘notified goods’ under Section 4A of the CE Act, for availing the benefits of abatement as percentage of retail sale price.

16Copy pinpoint16. Subsequently, Notification No.16 of 2006 dated 11.07.2006 was issued, wherein CET SH 2403 9930 came to be included within Notification No.2/2006 dated 01.03.2006, thereby including ‘jarda/ zarda scented tobacco’ within the scope of ‘notified goods’ under Section 4A of CE Act.

17Copy pinpoint17. It is relevant to note at this juncture, the period between 1.03.2006 and 11.07.2006, during which the benefits of MRP-based assessment was not available to goods classified under CET SH 2403 9930 as ‘jarda/ zarda scented tobacco’ is the very same period of dispute which has to be adjudicated in the appeals in Group I (Urmin Products) and Group II (Flakes-n-flavourz).

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 589 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

18Copy pinpoint18. In light of the evolution of classification of ‘chewing tobacco’ and ‘jarda/zarda scented tobacco’ having been discussed hereinabove, we proceed to address the issues/questions formulated within the various appeals before us. At the outset, it must be mentioned that the findings and conclusions arrived at will pertain to the issues formulated and adjudicated in light of the facts relevant to those groups, and hence, the findings are mutually exclusive to the facts of each group. I. COMMISSIONER OF CENTRAL EXCISE AHMEDABAD V. M/S URMIN PRODUCTS AND ORS. [ C. A. NO. 10159 – 10161 OF 2010] BRIEF FACTS

19Copy pinpoint19. In these appeals, the Revenue has challenged the order dated 25.03.2010 passed by the jurisdictional CESTAT whereunder the classification given by the assessee was accepted as “flavoured chewing tobacco” falling under CET SH 2403 9910 and not as ‘zarda/jarda scented tobacco’ falling under CET SH 2403 9930 of CETA.

20Copy pinpoint20. The assessee came to be visited with a show cause notice dated 09.07.2007 stating thereunder that the assessee had been manufacturing and clearing the product manufactured by it as ‘zarda/jarda scented tobacco’ under the guise of ‘chewing tobacco.’ During the visit to the assessee’s factory by the Department’s officers, they noticed the process of manufacturing ‘zarda/jarda scented tobacco.’ The statement of the production manager and also the statement of the factory in charge came to be recorded, based on which the Department concluded that there was a deliberate intention to evade payment of duty by misclassification and wilful misstatement of their product to enable them to pay lesser duty. Accordingly, by invoking the extended period of limitation as provided under proviso to Section 11A(1) CE Act, the Department called upon the assessee to show cause as to why the product which had been classified as ‘chewing tobacco’ should not be classified as ‘zarda/jarda scented tobacco’ and why the said product should not be accordingly assessed to duty as per Section 4 of the CE Act, for the period 01.03.2006 to 10.07.2006. Further, the assessee was required to show cause as to why the penalty as a consequence of wilful misclassification should not be recovered. The said show cause notice came to be adjudicated and the show cause notice including the demand made

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thereunder, was upheld in OIO dated 28.01.2008. This OIO was challenged and an appeal came to be filed before the CESTAT which came to be allowed and the stand taken by the assessee was upheld by opining as under: “21. On the other hand, the department has not produced any evidence to show that the product is Tobacco Scented with Zarda. In fact, the learned SDR relied upon the process of manufacture in adjudication order. However, the process of manufacture given in the adjudication order in Para 2 is the manufacturing process as noticed by the officers when they visited the factory premises. This is a flowchart prepared by the officers after their visit. However, when we have a look at the statement of the Production Manager Shri Ramesh Narsinghbhai Patel in the flow chart, the Zarda Scented Tobacco in the process of manufacture is missing. Zarda Scented Tobacco figures in the manufacturing flow chart given by Shri Dipak Suryakant Shah only. Further, it was also brought to our notice that during the period from 19.01.05 to 20.08.05, the appellants had described the product in the classification list as Chewing Tobacco and from 1.3.05, to 31.3.06, it was classified as Zarda Scented Tobacco and from 1.4.06 onwards, the classification description was Chewing Tobacco which continues till today. In the invoice/bills prepared by the appellant, the item was described as Zafrani Zarda and from 1.4.06, it is being called as Baghban Flavoured Chewing Tobacco. It is not the case of the department or the party that there was change in the label or manufacturing process. From the description in the label, it is quite clear that the product is called Flavoured Chewing Tobacco. No expert opinion or information from the trade have been obtained and it is only the statement of factory manager that the product is usually eaten with Pan, Betel nut or Pan Masala etc. Department has come to the conclusion that the product is not Chewing Tobacco. Further, as submitted by the appellant, nowhere in the statement of the employees, it has been stated that Zarda Scent was added. Under these circumstances, in view of the above discussion, neither side has been able to show whether the product is Chewing Tobacco or Zarda Scented Tobacco clearly. Both sides have some points in their favour and some against them. Under these circumstances, in view of the fact that the label calls the product as Flavoured Chewing Tobacco,

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 591 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

no Zarda Scent has been used and the product has not been sold as Zarda Scented Tobacco by the appellant, we consider that the claim of the appellant that the product is Flavoured Chewing Tobacco has to be accepted. Thus, on merit, the appellants succeed. Therefore, the demand for differential duty fails and naturally the penalties imposed under Section 11AC of Central Excise Act or rules of Central Excise Rules, 2002 also have to be set aside.”

21Copy pinpoint21. The issue of limitation was also held in favour of the assessee by opining as under: “22. In any case, we consider that the limitation would apply in this case and show cause notice should not have been issued beyond one year in view of the fact that the appellant intimated their intention to change. Further, the appellant had also intimated that the proposed change was not in line with industrial factory. Therefore, extended period also could not have been applied in this case.”

22Copy pinpoint22. Hence these appeals. SUBMISSIONS OF THE PARTIES

23Copy pinpoint23. We have heard Shri N. Venkataraman, learned Additional Solicitor General appearing for the Revenue, and Ms. Nisha Bagchi, appearing for the Revenue.

24Copy pinpoint24. It is the contention of the Revenue that Notification No.2 of 2006 dated 01.03.2006 was issued in supersession of Notification No.13 of 2002 dated 01.03.2002 specifying thereunder that the goods covered under Section 4A of CE Act 1944 was for MRP-based assessment and it did not specify the goods falling under CET SH 2403 9930 that is ‘zarda/jarda scented tobacco’, but it covers the goods falling under CET SH 2403 9910 that is ‘chewing tobacco’. It was contended that as ‘zarda/jarda scented tobacco’ was not specified under MRP-based assessment under Section 4A, the goods have to be assessed under Section 4 of the CE Act. Shri Venkataraman, Learned Additional Solicitor General and Shrimati Nisha Bagchi have contended that the assessee changed and misclassified the product from ‘zarda/jarda scented tobacco’ i.e., CET SH 2403 9930 to ‘chewing tobacco’ i.e., CET SH 2403 9910 with an intention to evade payment of duty under Section 4 of the CE Act, 1944 despite there being no change in the nature

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of the products. It is contended that the assessee despite being aware of the fact that their product was not covered under relevant notification which provides for valuation under Section 4A of CE Act, had continued to avail the benefit of Section 4A of CE Act till 11.07.2006. It is contended by the Revenue, that abatement provided to the goods classifiable under CET SH 2403 9910 i.e., ‘chewing tobacco’ was 50 percent, therefore if the goods are cleared as ‘chewing tobacco’ the duty has to be paid on lower value, resulting in payment of such amount of duty as the value determined under Section 4A of CE Act, after 50 percent abatement, which was much less as compared to transaction value under Section 4 of CE Act. It is further contended by the Revenue that ‘zarda/jarda scented tobacco’ was brought into the ambit of Section 4A of CE Act, by amendment to Notification No.16 dated 11.07.2006 and thus the product ‘zarda/jarda scented tobacco’ was not specified for assessment under Section 4A of the CE Act, for the period 01.03.2006 to 10.07.2006. Hence, the Revenue sought to justify the demand of duty short paid by the assessee by invoking the proviso under Section 11A (1), along with interest, at the appropriate rate under Section 11AB of the Act 1944.

25Copy pinpoint25. The learned Senior counsel for the Revenue would further elaborate his submissions by contending that the assessee has not shown any proof of record for concluding that ‘zarda/jarda scented tobacco’ is also ‘chewing tobacco’. By contending that this tariff classification was in force during the period of the board’s letter dated 23.06.1987, notice dated 15.07.1987, and the notification dated 16.03.1995 and as such they would not come to the rescue of the assessee. It is also urged that the tariff has been aligned to 8 digits and more specifically calculation has been provided where ‘chewing tobacco’ and ‘zarda/jarda scented tobacco’ have been separately classified and as such the contention of the assessee has no legs to stand.

26Copy pinpoint26. The Revenue would further contend that the assessee is selling its product as “zafrani zarda” and as such it cannot claim ‘zarda/jarda’ used in the tariff heading is different from ‘zarda/jarda’ used by assessee and further, the assessee has not been able to demonstrate how its product is different from ‘zarda/jarda scented tobacco’ mentioned in the tariff. The Revenue would also contend that once the product is sold as ‘zarda/jarda’, which is specifically covered under CET SH 2403 9930, it cannot claim that

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 593 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

the said product would fall CET SH 2403 9910 as ‘chewing tobacco’. The Revenue has drawn the attention of this Court to the fact that assessee earlier classified the product as ‘zarda/jarda scented tobacco’, and there being no change in classification of the product, to pay duty at lesser value would be without any justification. They would also contend that the tribunal has committed a serious error in ignoring the statement of the persons who were in charge of the factory and the statement of the factory manager which was relied upon by the department to substantiate as to how the assessee had been manufacturing the product, and the process, and there being no change in the manufacturing process, or any new plant and machinery having been installed in their unit. The standing counsel for the Revenue, would also contend that during 2005-06 the assessee themselves described the product as ‘zarda/jarda scented tobacco’ and suddenly from April 06, 2006, started describing their product as ‘chewing tobacco’ classifiable under CET SH 2403 9910 to avail the benefit of Notification No.2 of 2006 dated 01.03.2006. It was also contended that when two or more headings are available, the product should be classified under the more specific heading according to the description of the product and in the instant group it would fall under CET SH 2403 9930 as ‘zarda/jarda scented tobacco’.

27Copy pinpoint27. The Revenue also contended that tribunal in paragraph 21 of the impugned order having held that “both sides have some points in their favour and some against them” failed to elaborate or assign the reasons for extending the benefit of Section 4A to assessee and on this ground alone the impugned order is liable to be set aside.

28Copy pinpoint28. The Revenue would also contend that tribunal committed a serious error in concluding that show cause notice should have been issued within one year period as the assessee intimated their intention to change the classification and contended that the assessee has not mentioned any details of the products which they were manufacturing at that material time but had only forwarded a cryptic communication, lacking details and bereft of material particulars, namely the intention of changing the heading and classification of the product which was being manufactured by them and no evidence for reasons of change was forthcoming from the said communication, and as such the assessee cannot take umbrage under the said communication to stave-off its liability or, to contend that extended period of limitation cannot be applied as the department knew about such change.

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29Copy pinpoint29. The learned counsel appearing for the respondent – asseessee by supporting impugned order passed by the tribunal would contend that intention of the Revenue/Government was to levy duty on the product manufactured by the appellant-assessee under Section 4A of CE Act only. He would submit that the product manufactured by the assessee was classified under CET SH No.2404.41 as ‘chewing tobacco’ and duty was assessed under Section 4A of CE Act on MRP basis and accordingly duty was paid. He would contend that with introduction of the 8 (eight) digit tariff era, assessee classified its product as ‘zarda/jarda scented tobacco’ under CET SH 2403 9930 for the period 01.03.2005 to 28.02.2006. At this juncture, he would hasten to add that in accordance with the policy on taxation on ‘tobacco production’, the duty assessment regime remained constant i.e., under Section 4A of CE Act on MRP basis only. He would contend that Notification No.2 of 2006 dated 01.03.2006 which was issued superseding Notification No.13 of 2002 dated 01.03.2002 under the list of notified goods with the respective Chapter heading/sub-heading, would cover assessment in terms of Section 4A of the CE Act. Though notified, by oversight ‘zarda/ jarda scented tobacco’ under CET SH was omitted, he would contend that taxation of ‘tobacco products’ remains constant i.e., under Section 4A of CE Act on MRP basis. In this background he would contend that throughout the respondent-assessee has classified its product as ‘chewing tobacco’ with the knowledge and acceptance of the Department.

30Copy pinpoint30. He would also contend that the extended period of limitation could not have been invoked in the background of assessee having intimated the Department about the change in classification in advance and there was no suppression of fact or mis-declaration.

31Copy pinpoint31. He would also contend that assessment under Section 4 of the CE Act in terms of the transaction value of the product, the price charged and recovered by the assessee would necessarily have to be treated as cum- duty-price and assessment ought to be done and when such an exercise is undertaken the differential duty would be insignificant.

32Copy pinpoint32. He would contend that the product manufactured by the assessee is only ‘chewing tobacco’ and ‘zarda/jarda scented tobacco’, which expressions are not defined under the Act and no explanation is provided on what products could possibly have been covered under the heading ‘zarda/

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 595 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

jarda scented tobacco’, or what is the scope of that heading. In that view of the matter, he would contend that the ‘Common Trade Parlance Test’ as has been enunciated by this Court will have to be applied and tested. He would also further contend that classification is a question relating to chargeability and, therefore, the burden of proof lies on the Department, for which no evidence whatsoever has been adduced by the Department to justify the change. It is his submission that any change in the classification has to be based on something more than just change in tariff entry. Even otherwise, if classification is possible under two entries, the one more beneficial to the assessee would be adopted. Hence, relying upon the following judgments he prays for dismissal of the appeal filed by the Revenue:

1. HPL Chemical Ltd. v. CCE 2006 197 ELT Chandigarh 324 (SC)

2. Mauri Yeast India Pvt. Ltd. v. State of U.P. (2008) 5 SCC 680 3.C.G. & S.T. CCE and ST Rohtak v. Som Flavours Masala Pvt. Ltd. - Civil Appeal No.1251 of 2023 disposed of on 17.02.2023.

4. Commissioner of Central Excise, Nagpur v. Shree Baidyanath Ayurved Bhawan Ltd. (2009) 12 SCC 419. ISSUES/QUESTIONS FOR CONSIDERATION

33Copy pinpoint33. Questions that arise for our consideration in this group are as under: Q.1 Whether the authorities below were correct and justified in invoking the proviso to Section 11A of the CE Act? Q.2 Whether the product manufactured and cleared by the assessee for the period 01.03.2006 to 10.07.2006 was required to be classified under the CET SH 2403 9910 as ‘chewing tobacco’ or to be classified under CET SH 2403 9930 as ‘zarda/jarda scented tobacco’? DISCUSSION AND FINDINGS BACKGROUND

34Copy pinpoint34. The assessee herein was availing the benefit of the Notification No. 13 of 2002 dated 01.03.2002, issued in exercise of the power under Section 4A of CE Act, whereunder the goods/products were chargeable to a duty of excise with reference to value, notwithstanding anything

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contained in Section 4 of CE Act, to be deemed to be the retail sale price declared on such goods, else such amount of abatement, if any, from such retail sale price by classifying the product manufactured as ‘chewing tobacco’.

35Copy pinpoint35. Undisputedly, the assessee was availing the benefit of Notification No.13 of 2002 dated 01.03.2002 and adopting MRP-based assessment. Even after the introduction of 8-digit tariff classification (w.e.f. 28.02.2005), the assessee was availing the same benefit. However, in the teeth of two classifications made under Notification dated 24.02.2005, re-organizing the CET SH 2403 9910 as ‘chewing tobacco’ and CET SH 2403 9930 as ‘zarda/jarda scented tobacco’, which attracted duty of 34% on both the products at the time, the assessee classified or re-classified the product manufactured and hitherto declared as ‘chewing tobacco’ to ‘zarda/jarda scented tobacco’. Notification No.2 of 2006 dated 01.03.2006 issued in supersession of Notification No.13 of 2002 excluded ‘zarda/jarda scented tobacco’ and did not specify CET SH 2403 9930 for MRP-based assessment, or in other words did not include or did not specify ‘zarda/jarda scented tobacco’ for MRP- based assessment. Hence, the assessee started classifying the product manufactured as ‘chewing tobacco’ though he had declared earlier as ‘zarda/jarda scented tobacco’. Thus, by virtue of such deletion/omission in light of Notification No.13 of 2002, the assessment was required to be made under Section 4 which provides for the valuation of excisable goods for purposes of charging of duty of excise. In other words, the benefits that were flowing from the operation of Section 4A having been excluded by virtue of the Notification dated 01.03.2006, the assessee reverted to ‘chewing tobacco’ to avail the benefit of Section 4A. In the light of the analysis of these notifications vis-à-vis the statutory provisions of the levy of duty or chargeability, it would not detain us for long to answer the questions formulated hereinabove. RE: Q. No. 1 Issue of Limitation/ Section 11A of the CE Act:

36Copy pinpoint36. In the instant case i.e., Civil Appeal Nos.10159-10161 of 2010 -CCE Ahmedabad vs. M/s Urmin Products Pvt. Ltd. the show cause notice came to be issued on 09.07.2007 and the OIO came to be passed on 28.01.2008 which resulted in the impugned order dated 25.03.2010.

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 597 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

37Copy pinpoint37. The tribunal by the impugned order has held to the following effect: “22. In any case, we consider that the limitation would apply in this case and show cause notice should not have been issued beyond one year in view of the fact that the appellant intimated their intention to change. Further, the appellant had also intimated that the proposed change was not in line with the industrial factory. Therefore, the extended period also could not have been applied in this case.”

38Copy pinpoint38. It would be apt to note at this juncture itself that the judgment of this Court in CCE Vs. Cotspun (1999) 7 SCC 633, whereunder, it came to be held that levy of excise duty based on an approved classification list is not a short levy and differential duty cannot be recovered on the ground that it is a short levy. It was further held that levy of excise duty based on an approved classification list is the correct levy, at least until the correctness of the approval is questioned by the issuance of a show cause notice to the assessee. It is only when the correctness of the approval is challenged that an approved classification list ceases to be such. It was further held: “14. The levy of excise duty on the basis of an approved classification list is the correct levy, at least until such time as to the correctness of the approval is questioned by the issuance to the assessee of a show-cause notice. It is only when the correctness of the approval is challenged that an approved classification list ceases to be such.

15. The levy of excise duty on the basis of an approved classification list is not a short levy. Differential duty cannot be recovered on the ground that it is a short levy. Rule 10 has then no application.

16. We are, therefore, of the opinion that the judgment in Ballarpur Industries which did not advert to Rule 173-B, does not lay down the law correctly and it is overruled. The decision in Rainbow Industries, on the other hand, correctly lays down the law. It was delivered in the context of Rule 173-C dealing with approved price lists and the provisions of Rules 173-C and 173-B are analogous.”

39Copy pinpoint39. However, the said finding in Cotspun’s case would not merit acceptance for the simple reason that the amendment to Section 11A of

p. 598

CE Act, brought by Act 10 of 2000, would clearly take within its sweep, that even if there is non-levy or non-payment, short levy or short payment, or erroneous refund, as the case may be, on the basis of any approval, acceptance or assessment relating to the rate of duty or on valuation of excisable goods under any other provisions of the CE Act or the rules made thereunder, the Central Excise Officer can, within one year from the relevant date, serve a notice on the person chargeable with duty which has not been levied or unpaid or which has been short levied or short paid or to whom the refund has been erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice.

40Copy pinpoint40. Notification No.2 of 2006 dated 01.03.2006 was issued in supersession of Notification No.13 of 2002 dated 01.03.2002 specifying thereunder the goods covered under Section 4A of Act 1944 for MRP- based assessment. It was noticed that the notification did not specify the goods falling under CET SH 2403 9930 (‘zarda/jarda scented tobacco’) but covered the goods falling under CET SH 2403 9910 (‘chewing tobacco’). Since the ‘zarda/jarda scented tobacco’ was not specified under MRP-based assessment under Section 4A of CE Act, the goods had to be assessed under Section 4 of the CE Act. The abatement provided to the goods classified under CET SH 2403 9910 was 50 percent. Hence, if the goods are cleared as ‘chewing tobacco’ the duty has to be paid on lower value resulting in payment of a 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 aforesaid discussion, we are of the considered view the contention of the assessee cannot be accepted and the Revenue was correct and justified in issuing the show cause notice.

41Copy pinpoint41. One of the contentions raised by the assessee throughout has been that they had filed a letter on 30.03.2006 clearly showing the change in the

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 599 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

classification by the assessee and the reasons for the change were shown in the statement as well as their letter dated 25.06.2007 and there was no suppression. In fact, the adjudicating authority has extracted the contents of the letter dated 30.03.2006 in paragraph 13.1 of the OIO dated 28.01.2008. However, for immediate reference and at the cost of repetition it is extracted herein below: “This is to inform you that as per the practice followed by our industry, we classified our product; chewing tobacco into CETSH 2403 9910.”

42Copy pinpoint42. It is an admitted fact that till the filing of this letter, the assessee continued to classify the product as ‘zarda/jarda scented tobacco’ falling under CET SH 2403 9930. It is for this precise reason, that the adjudicating authority has observed, and rightly so that 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’. Though the classification in the letter shows entry CET SH 2403 9910 (‘chewing tobacco’), it would depict a picture as though it is a new product. A plain reading of the letter would not indicate that the author of the said letter intended to reveal any details about the product that is being manufactured. However, the assessee cannot feign ignorance as to the necessity of furnishing such relevant details necessary for determination of payment of duty. The assessee having been in this industry for a long period was well aware of this statutory requirement. Upon a deeper examination of the said letter, the suppression becomes more apparent, namely the non- mentioning of change of the name and classification of the goods which they were currently manufacturing and which they ought to have disclosed. It would be apposite to note the judgment of this court in Continental Foundation Jt. Venture v. Commissioner of Central Excise (2007) 10 SCC 337 that suppression means failure to disclose full information with intent to evade payment of duty. It has been further held: “12. The expression “suppression” has been used in the proviso to Section 11A of the Act accompanied by very strong words as ‘fraud’ or “collusion” and, therefore, has to be construed strictly. Mere omission to give correct information is not suppression of facts unless it was deliberate to stop the payment of duty. Suppression means failure to disclose full information with the intent to evade payment of duty.

p. 600

When the facts are known to both the parties, omission by one party to do what he might have done would not render it suppression. When the revenue invokes the extended period of limitation under Section 11A the burden is cast upon it to prove suppression of fact. An incorrect statement cannot be equated with a wilful misstatement. The latter implies making of an incorrect statement with the knowledge that the statement was not correct.

14. As far as fraud and collusion are concerned, it is evident that the intent to evade duty is built into these very words. So far as misstatement or suppression of facts are concerned, they are clearly qualified by the word ‘wilful’, preceding the words “ misstatement or suppression of facts” which means with intent to evade duty. The next set of words ‘contravention of any of the provisions of this Act or Rules’ are again qualified by the immediately following words ‘with intent to evade payment of duty.’ Therefore, there cannot be suppression or misstatement of fact, which is not wilful and yet constitute a permissible ground for the purpose of the proviso to Section 11A. Misstatement of fact must be wilful.” 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 and just two days before the date of the said Notification No.2 of 2006 coming into effect, this

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 601 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

communication dated 30.03.2006 has been forwarded to the Department by the assessee. The intention of springing up such a letter is evident from the fact that 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.

43Copy pinpoint43. Yet another factor which cannot go unnoticed is the statement of the production manager and factory in-charge and manager recorded at the time of the inspection of the units/factory of the assessee, whereunder they have clearly admitted in their statement dated 21.06.2007 recorded under Section 14 of the CE Act, wherein they confirmed that in the E.R. 1 returns filed for the month of April 2006 onwards, they have revised the classification of their final product from CET SH 2403 9930 to CET SH 2403 9910 and started describing their product as ‘chewing tobacco’ instead of ‘zarda/jarda scented tobacco’ and by virtue of such declaration they continued to pay duty as per MRP-based assessment under the relevant Notification No.2 of 2006 dated 01.03.2006 though ‘zarda/jarda scented tobacco’ was not covered under MRP-based assessment during the period 01.03.2006 to 10.07.2006 till the tariff entry i.e., CET SH 2403 9930 being brought within the ambit of Section 4A of CE Act by issuance of Notification 16 of 2006 dated 11.07.2006. It is for this precise reason that the act of the assessee was held to be a deliberate and accordingly wilful misstatement was alleged on part of the assessee, with an intention to evade duty payable under Section 4 of the CE Act, which would attract the extended period of limitation, namely proviso to Section 11A (1) being invoked. The adjudicating authority has examined the issue of invoking an extended period of limitation, in the background of the communication dated 30.03.2006 which has been very heavily relied upon by the assessee to stave off the allegation of misrepresentation or wilful misstatement of facts and the adjudicating authority opined as under: “It can be seen that the assessee had very cleverly drafted the letter and did not mention any details of the product which they were

p. 602

manufacturing at that material time i.e.,’Jarda scented tobacco’. On reading this letter, any person could conclude that they have started a new product ‘Chewing tobacco’ which they have classified in 2403 9910 as it is the, correct subheading of Chewing tobacco. On a plain reading of the letter, at the first instance, no one will be able to understand the real motive. The assessee did not mention in the letter that they are changing the name and classification of the goods which are currently being manufactured by them which they were supposed to do. Had they mentioned this fact at that time, the issue would not have arisen at all. Intentionally, they have hidden the facts and did not elaborate in the letter. The assessee, on the contrary preferred to show the reasons in the statement recorded under Section 4 on 26-6- 2006 when the department caught him for evading the duty. Further, the assessee has mentioned that as per the practice followed by their industry, they classify their product Chewing tobacco into 2403 9910. The classification of the goods manufactured by an assessee is based on many factors including the raw material used, manufacturing process and the end use. If any of the deciding factors is changed then the classification may change and therefore the industry cannot decide the classification in such type of goods. The assessee intentionally hid the fact that they have changed the classification of their product viz. ‘Jarda scented tobacco’. It is an establish fact that when there is no dispute on classification and the assessee suddenly submits a very carefully drafted letter of such type, a general inference will be drawn that a new product has been introduced in place of earlier one. The assessee, with intent to evade the Central Excise duty, deliberately resorted to mis-statement and willfully suppressed the vital facts. The assessee had changed and misclassified the product from ‘Jarda scented tobacco’ to ‘Chewing tobacco’ with an intention to evade payment of duty payable under Section 4 of the Central Excise Act, 1944, despite knowing the fact that their product was not covered under the relevant Notification which provides for valuation under Section 4A. The assessee did so to enable them to pay duty on lower value [as the value as per Section 4A of Central Excise Act, 1944 (MRP based assessment) was lower than the value as per Section 4 of Central Excise Act, 1944. Thus, there was a deliberate intention to evade payment of duty by the assessee,

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 603 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

by misclassification and willful mis-statement of their product and due to this act, the department is entitled to invoke the extended period as provided in the proviso to Section 11A (1) of the Central Excise Act, 1944 to recover the differential duty along with interest under section 11 AB for the larger period upto 5 years and has also rendered themselves liable to penalty under section 11 AC of the Central Excise Act 1944. I, accordingly hold that the assessee is liable to penalty under Section 11AC of the Central Excise Act, 1944.” However, the tribunal has proceeded to hold that limitation would apply and show cause notice should not have been issued beyond one year in view of the fact that the assessee intimated their intention to change – vide Paragraph 22 of the impugned order, without addressing the aforesaid issues which has been dealt in detail hereinabove. In other words, the tribunal by cryptic order has negatived the contentions of the Revenue and held that the invocation of the extended period of limitation was not warranted. This finding, not being in consonance with the facts obtained on the hand, we are unable to subscribe our views to the judgment of the tribunal. In that view of the matter, we are of the considered view that Question No.1 is to be answered against the assessee and in favour of the Revenue and affirm the finding of the adjudicating authority and reverse and/or set aside the finding recorded by the tribunal which has been observed at the initial stage herein given that it is not only contrary to the facts but also contrary to law as noticed hereinabove. It is for these precise reasons 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. RE: Q.2 – WHETHER ASSESSEE’S CLASSIFICATION FOR THE PERIOD IN DISPUTE IS TO BE ACCEPTED?

44Copy pinpoint44. In the instant case 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. On advent of 8-digit era under the CETA, ‘chewing tobacco’ was classified under CET SH 2403 9910, and ‘zarda/jarda scented tobacco’ came to be separately classified under CET

p. 604

SH 2403 9930 from 01.03.2005 despite such classification, the notification issued in respect of goods to be assessed on the basis on MRP continued to show the tariff heading and the goods covered under ‘chewing tobacco’ head as 2404.41. When Notification No.2 of 2006 dated 01.03.2006 came to be issued and it reflected under Serial No.28 that all goods classified under entry SH 2403 9910 to 2403 9920 were covered for MRP assessment and the product ‘zarda/jarda scented tobacco’ was not included under said entry, it necessarily meant that ‘zarda scented tobacco’ could not be determined under MRP assessment scheme.

45Copy pinpoint45. The signatory to the ER – 1 returns filed by the assessee for the relevant period was Smt. Sheetal K Majithia, Director – Finance and she was the one who took the decision to change the classification of the product. Hence, she was issued with the summons for appearing and explaining the same. However, she chose to ignore the summons and has not appeared before the adjudicating authority. Whereas, the factory in-charge and manager, Shri Dipak S Shah, has appeared and has furnished the statement, whereunder he admits that he reports to Smt. Sheetal K Majithia, Director – Finance. He further admits in his statement dated 26.06.2007 and 09.07.2007, that their/assessee’s product is classifiable as ‘jarda/zarda scented tobacco,’ they still continued to pay duty as per MRP-based assessment prescribed under Section 4A of the CE Act. He further admits at the material time 2005-06, the product manufactured by them was described as ‘jarda/zarda scented tobacco’ and was known and sold in the market as ‘jarda/zarda scented tobacco’, which was also described in their invoices accordingly. He has categorically admitted in his statement that from April 2006 onwards the assessee started describing their product as ‘chewing tobacco’ for availing the benefit of Notification of 2 of 2006 dated 01.03.2006, which undisputedly did not continue to reflect ‘jarda/zarda scented tobacco’. In this background, when the communication dated 30.03.2006 to the Department intimating the change of classification is perused, it would indicate the details of the products which was being manufactured was not specified in the said communication at all. In that view of the matter, the communication relied upon by the assessee would pale into insignificance. `

46Copy pinpoint46. The label of the product manufactured by the appellant is “Baghban Zafrani Zarda” and below the label it is indicated as “flavoured chewing

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 605 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

tobacco.” It has been the consistent stand of the assessee that the expression “zarda/jarda” in the tariff entry is different from the term “zarda/jarda” used by the appellant. It is nobody’s case that there was a change in the label or manufacturing process from the six (6) digit era to the eight (8) digit tariff era. The tribunal itself seems to have been in dilemma and has been swayed by the fact that no expert opinion had been obtained by the Department for classification. This situation would not arise at all for reasons more than one, firstly, 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’.

47Copy pinpoint47. At the cost of repetition it requires to be noticed that the 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 MRP-based assessment under Section 4A of the CE Act, the goods had to be necessarily assessed under Section 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 under Section 4 of the CE Act would have been much more than the determination under Section 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’. 48.The reliance placed by the assessee on Board’s letter dated 23.06.1987, trade notice dated 15.07.1997 and Notification dated 16.03.1995, would have no impact or bearing on the facts of the present case/group, since

p. 606

they were issued during the era of 6-digit tariff classification being imposed. As noticed by us above, the tariff entry having been realigned to 8 digits and there being a specific sub-heading being provided and two competing products namely – ‘chewing tobacco’ and ‘zarda/jarda scented tobacco’ having been separately classified, the aforesaid circular/notifications relied upon by the assessee would not come to rescue of the assessee.

49Copy pinpoint49. 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 sub-headings, the heading which provides the most specific description will have to be preferred to a heading providing a more general description. In the light of the aforestated discussion we are of the considered view that classification of the product as adjudicated by the authority deserves to be accepted and finding recorded by the tribunal deserves to be set aside and consequently allow these appeals. Thus, both the points formulated hereinabove in this group is answered in favour of the Revenue and against the asessee. II. COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH V. M/S. FLAKES-N-FLAVOURZ [ C. A. 5146/2015]

50Copy pinpoint50. In the instant group, the Revenue is in appeal assailing the order passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi dated 20.02.2014 by the jurisdictional tribunal. BRIEF FACTS

51Copy pinpoint51. The respondent-assessee is the manufacturer of zarda, pan chatni and scented supari falling under the category of excisable goods under the CETA, and was clearing its product ‘Gopal Zarda’ under CET SH 2403 9910 as ‘chewing tobacco’ and paid excise duty based on retail sale price under section 4A of the CE Act, (hereinafter to referred as “CE Act”). During the audit, it was found that the assessee’s product merits classification under CET SH 2403 9930 as ‘Zarda/Jarda scented Tobacco’. On redetermination of value under section 4 of the CE Act it was found that the assessee has short- paid excise duty by Rs. 4,28,65,508/- and accordingly, a show cause notice came to be issued under section 11A of the CE Act. The Commissioner of Central Excise, in his OIO dated 02.04.2008 confirmed the demand of duty, interest, penalty and held that the product manufactured by the respondent-

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 607 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

assessee falls under CET SH 2403 9930 as ‘Zarda/Jarda scented tobacco’ by concluding that assessment has to be made under section 4 of the CE Act. An appeal was preferred against the said order before the CESTAT which came to be allowed and the OIO dated 02.04.2008 was set aside. SUBMISSIONS OF THE PARTIES

52Copy pinpoint52. We have heard the learned advocates appearing for the parties.

53Copy pinpoint53. Ms. Nisha Bagchi learned counsel appearing for the Department has supported the OIO dated 02.04.2008 while contending that the tribunal committed an error in setting aside the said findings and in holding that the product in question was classifiable as ‘chewing tobacco’ under CET SH 2403 9910 and rejecting the stand of the department that same should be classified as ‘zarda/jarda scented tobacco’ under CET SH 2403 9930. She would contend that the tribunal erred in relying upon its findings recorded in M/s Urmin Products Private Limited which undisputedly is under challenge before this Court in Civil Appeal No. 10159-161 of 2010 (Group I) and as such it ought not to have relied upon the said judgment. She would also contend that the tribunal erred in not considering the fact on 15.02.2007 Shri Manoj Gupta, partner of the appellant, he has admitted that perfumery compounds are added to the raw tobacco and as such product is to be classified under CET SH 2403 9930 as ‘Zarda/Jarda scented tobacco’ and not ‘chewing tobacco’.

54Copy pinpoint54. She would contend that prior to CETA (Amendment), 2004 came into force on 28.02.2005, ‘chewing tobacco’ and its preparations were covered under chapter 2404.41 and after the amendment the said chapter heading was classified into three separate tariff items within the chapter heading 2404 namely, ‘chewing tobacco’, preparations containing ‘chewing tobacco’ and ‘zarda/jarda scented tobacco’ and would contend all these three items were earlier classified collectively under chapter heading 2404.41 and the classification as it exists today clearly suggests that ‘chewing tobacco’ is not scented/flavoured/perfumed tobacco and both the disputed items fall under different and distinct classes of products. She would also submit that the assessee themselves admit that their product is ‘zarda/jarda’ and even the packed pouches bear printed description of their contents as ‘Gopal Zarda’. Reiterating the contentions raised, grounds urged and pleas put forward Civil Appeal No. 10159-161 of 2010 (M/s Urmin Products Private Limited), she prays for allowing this appeal.

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55Copy pinpoint55. Per contra, Mr. Vivek Kohli, learned senior counsel, appearing for the respondent has reiterated the contentions raised and grounds urged before the tribunal. He would contend that throughout the period before dispute, during the disputed period and even after the disputed period, the product manufactured by the assessee was classified as ‘chewing tobacco/ flavoured chewing tobacco’. Even the ER-1 returns and weekly online returns filed by the assessee classifying the product as ‘chewing tobacco’ were accepted by the Revenue without any objection. He would contend that even after introduction of 8-digit tariff for full one year i.e., from 1.03.2005 to 28.02.2006, the assessee classified its product under tariff entry number 2403 9910 and discharged its tax liability under Section 4A of CE Act, which was accepted with full knowledge by the Revenue and raising objection during audit of the unit for the period 1.03.2006 to 11.07.2006 is possibility of higher Revenue during this period is due to (a) technical oversight by the Revenue itself which was later corrected and, (b) the alternate assessment on transaction value rather than MRP based assessment. He would contend that when classification of the product is accepted earlier and for the subsequent period, same cannot be classified differently. There being no definition of the competing products, the application of the common parlance test is to be adopted and when so adopted the only conclusion that has to be drawn is that product is to be construed as ‘chewing tobacco’, as declared in invoices and understood by distribution chain of dealers, stockists, retailers and consumers. He would submit that burden of proof lies on the Revenue as classification is a question relating to chargeability and the same having not been discharged by adducing any evidence whatsoever the classification as done by the adjudicating authority has been right set-aside by the tribunal.

56Copy pinpoint56. He would submit that the Revenue is seeking to impose classification wherein the word ‘perfumery’ to impart flavour to ‘chewing tobacco’ has the basis and the fact remains the very same process is adopted since decades. Based on uncorroborated statement the classification cannot be done. To conclude he would contend that as opined that this court in W.P.I.L. v. CCE Meerut – 2005 (181) ELT 359 has opined that during transition phases inadvertent mistakes have to be interpreted/ understood in the light of or in the context of policy prevailing in respect of the product and the policy then existing was to tax tobacco products under Section 4 A of the CE Act – MRP based assessment, it is only logical that classification

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 609 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

declared by the assessee and declared by the department prevail. Hence, he prays for dismissal of the appeal by relying upon the following judgments. i. HPL Chemicals Limited v. CCE Chandigarh. 2006 (197) ELT 324 (SC) ii. Mauri Yeast India Private Limited v. State of UP. 2008 (225) ELT 321 (SC) iii. C.G. and S.T. CCE and S.T., Rohtak v. Som Flavour Masala Private Limited iv. CCE, Nagpur v. Shree Baidyanath Ayurved Bhawan. 2009 (237) ELT 225 (SC) v. W.P.I.L. Limited v. CCE, Meerut. 2005 (181) ELT 359 SC. DISCUSSION AND FINDINGS

57Copy pinpoint57. The period involved in the present appeal pertains to 01.03.2006 to 10.07.2006. During the audit of the accounts of the assessee, the department noticed that the assessee was manufacturing ‘zarda/jarda scented tobacco’ and was claiming it as ‘chewing tobacco’. The stand of the assessee has been that they were manufacturing varieties of flavoured ‘chewing tobacco’. Hence, the statement of the partner of the assessee came to be recorded on 15.02.2007, which has been noticed in paragraph 3 of show cause notice dated 30.03.2007. Hence, we do not propose to extract the same. A perusal of the said statement would indicate the manner in which the product has been manufactured. It is admitted in the statement given by the partner of the assessee, that raw tobacco is mixed with an additive mixture which is manufactured by mixing perfumery compounds received from the noticee’s Delhi Unit itself. He also admits that to this perfumery mixture, further compounds are added for making various types of tobacco to be manufactured. Based on this statement and precisely for the reason that the product manufactured by the assessee seems to not be ‘chewing tobacco’, aforesaid show cause notice dated 30.03.2007 came to be issued by calling upon the assessee to show cause as to why the short-paid duty amounting to Rs.4,28,65,508/- should not be recovered. The said show cause notice came to be adjudicated and the Commissioner confirmed the said demand.

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58Copy pinpoint58. Being aggrieved by the order dated 02.04.2008 passed by the Commissioner, appeal before the tribunal was filed and as already noticed hereinabove, there were divergent views of the Member (Judicial) and Member (Technical). The judicial member at paragraph 16 of the order held that the appellant (assessee) had properly classified it as ‘chewing tobacco’ under CET SH 2403 9910 and applying the principles laid in M/s Urmin Products Private Limited (which is the subject matter of Civil Appeal No. 10159-161 of 2010) allowed the appeal whereas the technical member disagreed with the said view and held that the product manufactured by the appellant-assessee is to be classified as ‘zarda/jarda scented tobacco’ under CET SH 2403 9930 and should be assessed under the provision of Section 4 of CE Act, for the relevant period and with effect from 11.07.2006 under Section 4A when specific Notification No.16/2006 dated 11.07.2006 came into force.

59Copy pinpoint59. In the light of the difference of opinion the matter came to be referred to the opinion of a third member who concurred with the view expressed by the judicial member and held that the product manufactured by the petitioner was ‘chewing tobacco’ and not ‘zarda/jarda scented tobacco’ as claimed by the Revenue.

60Copy pinpoint60. It is pertinent to mention that the issue concerning classification has been discussed by us herein above in the matter of Commissioner of Central Excise, Ahmedabad Vs. M/s Urmin Products Private Limited and Others and findings recorded by us in paragraph no.(s) 46,47,48 and 49 supra would be squarely applicable to the facts on hand.

61Copy pinpoint61. Undisputedly, the tribunal as noticed herein above has relied upon the view expressed in M/s Urmin Products Private Limited by it to arrive at a conclusion that the product is to be classified as ‘chewing tobacco’.

62Copy pinpoint62. It is no doubt true that in the instant case, the assessee duly has been declaring the product manufactured by it as ‘chewing tobacco’. However, the fact remains that there was no issue till the Six-digit tariff era which was revoked with the introduction of the Eight-digit tariff head. Pursuant to the same the entry was reorganized and reclassified as ‘chewing tobacco’ (2403 9910), a preparation containing the ‘chewing tobacco’ (2403 9920) and ‘zarda/jarda scented tobacco’ (2403 9930). Circular No. 808/5/2005- CX dated 25.02.2005 came to be issued whereunder classification was

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 611 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

given that the subsisting notification having a six-digit enumeration should be read in terms of the eight-digit of the new Central Excise Tariff. On 01.03.2006, Notification No. 02/2006 came to be issued by virtue of which a Notification No. 13/2002 dated 01.03.2002 was superseded. Thus, the list of products with their respective chapter headings/sub-headings, which were to be covered under the MRP-based assessment in terms of Section 4A of the CE Act, was notified in terms of an Eight-digit tariff. In the said notification ‘zarda/jarda scented tobacco’ was left out or was not included for MRP-based assessment. Subsequently, by clarificatory Notification No. 16/2006 dated 11.07.2006, the product ‘zarda/jarda scented tobacco’ was brought back within the MRP-based assessment benefit. Thus, the burning issue would be between the period 01.03.2006 to 11.07.2006 which in the instant case relates to 01.03.2006 to 10.07.2006.

63Copy pinpoint63. In the instant case, the facts do not disclose there being a change in the declaration of the product manufactured by the present respondent herein, as was in the case with M/s Urmin Products Private Limited. Even otherwise by virtue of the change from Six-digit tariff to Eight-digit tariff era and during the period 01.03.2006 to 11.07.2006. Though the generic word ‘chewing tobacco’ including preparation commonly known as “khara masala, quiwam, dhokta, zarda, sukha, surti” or “chewing tobacco and preparation containing chewing tobacco” got bifurcated or took its new birth by virtue of which the said entry was re-organised and classified under three headings namely ‘chewing tobacco’ (2403 9910), ‘preparations containing chewing tobacco’ (2403 9920) and ‘zarda/jarda scented tobacco’ (2403 9930), the heading ‘zarda/jarda scented tobacco’ did not find a place in the corresponding Notification No. 02/2006 dated 01.03.2006 and thereby the ‘zarda/jarda’ scented tobacco got excluded from the preview of the Notification No. 02/2006 and the benefit of the assessment in terms of Section 4A was no more available for the product ‘zarda/jarda scented tobacco’ or in other words the manufacturers of ‘zarda/jarda scented tobacco’ were required to be assessed under Section 4 of CE Act. On account of this there was a huge gap in the central excise duty leviable under Section 4 of the CE Act, which would obviously be the heartburn for the taxpayers which resulted in the above-noticed tug of war between the Revenue and the assessee, wherein the assessee contended the products manufactured by it though scented or flavoured still continued to be ‘chewing tobacco’

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and it did not partake the character of the ‘zarda/jarda scented tobacco’. For finding an answer to this question, apart from the finding recorded in M/s Urmin Products Private Limited’s case, we deem it appropriate to note that the general rules for the interpretation of the goods are traceable to provisions of the CETA under the chapter heading “general rules for the interpretation this schedule”. Presuming for a moment that where goods are prima facie classifiable under two or more headings (by accepting the proposition of the assessee) it raises a serious doubt with regard to the classification of the product. In such circumstances, section 2 of the CETA, 1985 provides that the rates at which duties of excise shall be leviable under the CE Act, are specified in the first and second schedules. The first schedule contains a set of rules known as “general rules for the interpretation of this schedule”. These rules begin with a mandate that the classification of goods in this schedule shall be governed by the following principles laid thereunder. This rule had received interpretation of this Court in the matter of Westinghouse Saxby Farmer Ltd. v. Commissioner of Central Excise, Calcutta, (2021) 5 SCC 586 whereunder it came to be held as follows: “26. Rule 1 of these Rules makes it clear that “the titles of Sections, Chapters and Sub-Chapters are provided for ease of reference only and that for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and provided such headings or Notes do not otherwise require, according to the provisions of the rules that follow”.

27. Rule 2 deals with (i) incomplete or unfinished articles; and (ii) mixtures or combinations of material or substance. While Rule 2(a) deals with incomplete or unfinished Articles, Rule 2(b) deals with mixtures or combinations of a material or substance.

28. Rule 3 deals with cases where goods are classifiable under two or more sub-headings. But Rule 3 begins with a reference to Rule 2(b). Therefore, it is necessary to extract Rule 2(b) and Rule 3 together. They read as follows: “2. (a)*** (b) Any reference in a heading to a material or substance shall be taken to include a reference to mixtures or combinations of that material or

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 613 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

substance with other materials or substances. Any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance. The classification of goods consisting of more than one material or substance shall be according to the principles of Rule 3.

3. When by application of Rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows: (a) the heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods. (b) mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to clause (a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable. (c) when goods cannot be classified by reference to clause (a) or clause (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration.”

64Copy pinpoint64. On the strength of the inputs used in the manufacture of the disputed product and the end product which is sought to be classified as ‘chewing tobacco’ by the assessee and ‘zarda/jarda scented tobacco’ by the Revenue, results in the moot question, as to what test is to be adopted namely, whether sole or principal usage test is to be applied? This Court in Westinghouse Saxby Farmer Ltd.’s case (supra) had an occasion to deal with similar issues and took note of the earlier dicta of this Court rendered in A. Nagaraju Bros. v. State of A.P., 1994 Supp (3) SCC 122 and held there is no ‘one’ single universal test in this matter.

65Copy pinpoint65. Keeping these aspects in mind when the facts on hand are perused it would disclose the product manufactured by the assessee-respondent is

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sold as ‘Gopal zarda’ and both the members of the tribunal namely, technical members and judicial members are ad idem on the issue of the manufacturing process of the goods and the product in question namely, they all agree that tobacco flavouring substance is added and the judicial member has clearly held that the product is marketed as “flavoured chewing tobacco”. This addition of scent or flavour in the ‘chewing tobacco’ was contended to be ‘zarda/jarda scented tobacco’ by the Revenue, whereas the assessee has taken a stand that by addition of the scent or flavour, it would not partake the character of the ‘zarda/jarda scented tobacco’ but continues to be ‘chewing tobacco’. In this background, the difference between ‘chewing tobacco’ and ‘zarda/jarda scented tobacco’ if attempted to be ascertained from the definition found in the glossary of Bureau of Indian Standards, particularly in terms of definition and preparation, it is classified as under: “2.27 ‘Chewing Tobacco¬’- Chewing tobacco, as its name suggests is a tobacco preparation for chewing purpose, also taken with paan (betel leaf). Gutka, surti, zarda, quiwam and dokta are some of the different types of chewing tobacco preparations. 2.184 ‘Zarda’- A chewing tobacco product made of highly scented and flavoured tobacco flakes. Chewed along with betel nut and paan (betel leaf).”

66Copy pinpoint66. A careful perusal of the meaning allocated to the concerned products, ‘Chewing Tobacco’ and ‘Zarda’ leads to formulation of the following distinction based on the different parameters as under: “Preparation and Form Chewing Tobacco: Chewing tobacco typically comes in loose leaf or twist form. It consists of cured and fermented tobacco leaves. Chewing tobacco is usually taken by placing a portion of it between the cheek and gum, where it releases nicotine over time as it’s slowly chewed. Zarda Tobacco: Zarda, on the other hand, is a specific type of chewing tobacco that is finely chopped or shredded and highly scented and flavoured. It is often sweetened and can be brightly coloured. Zarda is known for its strong and distinct aroma and flavour. It is often consumed by placing it in the mouth, similar to other chewing tobacco products, and is sometimes chewed along with betel nut and paan.

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 615 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

Flavour and Aroma Chewing Tobacco: Chewing tobacco can come in various flavours, but it may not always be as strongly scented or flavoured as Zarda. The flavours can range from natural tobacco flavours to menthol, wintergreen, or other fruit and spice flavours. Zarda Tobacco: Zarda is specifically known for its highly scented and flavoured nature. It is often infused with strong spices and sweeteners, giving it a distinct and potent aroma and taste. The flavours in Zarda are often more pronounced and intense compared to regular chewing tobacco. Use with Betel Nut and Paan Chewing Tobacco: While chewing tobacco can be used alongside betel nut and paan, it is not exclusive to this combination. Chewing tobacco can be used independently as well. Zarda Tobacco: Zarda is more commonly associated with being used in combination with betel nut and paan. This combination is often considered a traditional practice in some South Asian cultures.”

67Copy pinpoint67. At this juncture, it may be relevant to draw a distinction between the facts of the instant case and the facts in the case of Urmin supra. In the present factual scenario, there has been a consistent and clear classification provided by the assessee, which was accepted by the Revenue, prior to the dispute arising from the audit objection raised by the concerned assessing officer.

68Copy pinpoint68. Unlike the facts as narrated above in Group I, i.e., Urmin, whereunder the assessee therein had sought to change the classification of the goods manufactured by them, particularly when there was a difference in the duty, and a much higher duty was required to be paid by the assessee. Whereas in the instant case on hand, there has been no change in classification of the product which was sought by the assessee. 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. This court in the case of HPL Chemicals Limited Vs. CCE, Chandigarh: 2006 5 SCC 208 while discussing the onus/burden of proof in matters of chargeability held as follows:

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“28. This apart, classification of goods is a matter relating to chargeability and the burden of proof is squarely upon the Revenue. If the Department intends to classify the goods under a particular heading or sub-heading different from that claimed by the assessee, the Department has to adduce proper evidence and discharge the burden of proof. In the present case the said burden has not been discharged at all by the Revenue. On the one hand, from the trade and market enquiries made by the Department, from the report of the Chemical Examiner, CRCL and from HSN, it is quite clear that the goods are classifiable as “denatured salt” falling under Chapter Heading 25.01. The Department has not shown that the subject product is not bought or sold or is not known or is dealt with in the market as denatured salt. The Department’s own Chemical Examiner after examining the chemical composition has not said that it is not denatured salt. On the other hand, after examining the chemical composition has opined that the subject-matter is to be treated as sodium chloride.”

29. It has been held by this Court in a number of judgments that the burden of proof is on the Revenue in the matter of classification. In Union of India v. Garware Nylons Ltd. [(1996) 10 SCC 413] in para 15 this Court held as under: (SCC pp. 419-20) “15. In our view, the conclusion reached by the High Court is fully in accord with the decisions of this Court and the same is justified in law. The burden of proof is on the taxing authorities to show that the particular case or item in question is taxable in the manner claimed by them. Mere assertion in that regard is of no avail. It has been held by this Court that there should be material to enter appropriate finding in that regard and the material may be either oral or documentary. It is for the taxing authority to lay evidence in that behalf even before the first adjudicating authority. Especially in a case as this, where the claim of the assessee is borne out by the trade enquiries received by them and also the affidavits filed by persons dealing with the subject- matter, a heavy burden lay upon the Revenue to disprove the said materials by adducing proper evidence. Unfortunately, no such attempt was made. As stated, the evidence led in this case conclusively goes to show that nylon twine manufactured by the assessee has been treated

COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN 617 PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]

as a kind of nylon yarn by the people conversant with the trade. It is commonly considered as nylon yarn. Hence, it is to be classified under Item 18 of the Act. The Revenue has failed to establish the contrary. We would do well to remember the guidelines laid down by this Court in Dunlop India Ltd. v. Union of India [(1976) 2 SCC 241 : AIR 1977 SC 597] in such a situation, wherein it was stated: (SCC p. 254, AIR p. 607, para 35) ‘When an article has, by all standards, a reasonable claim to be classified under an enumerated item in the Tariff Schedule, it will be against the very principle of classification to deny it the parentage and consign it to an orphanage of the residuary clause.’ ”

69Copy pinpoint69. Given the circumstances in the present case, the Department has not provided any sufficient evidence before this Court determine the nature, characteristics, contents, and composition of the product in order to adjudicate the present dispute purely on the issue of classification and hence no attempt can be made to determine the appropriate entry of classification for the product manufactured by the assessee at the relevant period of time of the dispute. The Revenue has also not raised any specific grounds in relation to any wilful misstatement with an intention to evade duty on part of the assessee, as opposed to the case of Urmin wherein one of the main grounds urged was the intention to avoid payment of duty. It is pertinent to mention that there is a specific observation made by the Commissioner in his OIO dated 30.03.2007 that no wilful suppression is attributable to the assessee, and placing reliance on this very observation, the tribunal had also set-aside the penalty imposed upon the assesssee. 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