The Tamil Nadu Appellate Authority of Advance Ruling (AAAR) ruled that the Tobacco manufactured used for ‘chewing’ classifiable under CTH 2403, not as ‘unmanufactured tobacco’.
The Appellant is the supplier of the product which is stated to undergo the below process in the brand name Kavi cut tobacco. Process followed: Raw dried tobacco leaves are purchased from wholesale dealers or farmers; Stems and dust particles are removed.
The First step is liquoring i.e. the dried tobacco leaves are cured using jaggery water for the purpose of preventing it from moulding or further decaying (the shelf life of the produce being very short).
Secondly, it will be cut into small pieces in a cutting machine to facilitate easy manual packing.; Then the cut tobacco will be packed in packets or pottalams for the purpose of retail sale in the shops. The product does not undergo any change in the essential character and remains in its original nature.
Accordingly the Appellant claims that the product is classifiable under 24012090 i.e. Unmanufactured tobacco partly or wholly stemmed or stripped ‘Others’.
The Appellant made an Application to AAR seeking advance ruling on the classification of the product intended for manufacture and applicable rate of Compensation Cess.
The AAR ruled that the product intended to be manufactured by the applicant and supplied as “Chewing tobacco” with the brand name “Kavi cut tobacco” is classifiable under CTH 2403 9970 as Chewing Tobacco.
The AAR further ruled that the applicable rate of Compensation Cess is provided under Sl. No. 26 of the Notification No. 01/20l7-Compensation cess dated June 28, 2017 at the rate of 160%.
The two-member bench of M.A. Siddique and K.V. Krishna Rao while upholding the ruling of the lower authority ruled that the raw material undergoes a set of processes and emerges as a distinct product which makes it marketable/consumable for the chewing needs. Therefore, the product supplied by the appellant is “Manufactured Tobacco product for Chewing”.
“Once it is held that the product is ‘Manufactured Chewing tobacco’, the classification of the product is under CTH 2403 9910 which specifies ‘Chewing Tobacco’ under the head “2403-Other Manufactured tobacco and manufactured tobacco substitutes” as held by the lower authority and there appears to be no need for our intervention with the order of the Lower Authority,” the AAAR said.
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