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

- **Citation:** 2023 INSC 951
- **Court:** Supreme Court of India
- **Decided:** 2023-10-20
- **Case number:** Civil Appeal No. 10159-10161 of 2010
- **Bench:** S. Ravindra Bhat, Aravind Kumar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/case-details-commr-of-cen-exc-ahmedabad-v-m-s-urmin-products-p-ltd-and-others-54617
- **Pages:** 85

## Headnote

Issues for consideration:
The primary dispute in the present seven groups of appeals revolved
around classifi cation of the product in question keeping in view two
competing Central Excise Tariff Sub-Headings / entries i.e. under CET SH
2403 9910 as 'chewing tobacco' or under CET SH 2403 9930 as 'zarda/
jarda scented tobacco'. Ancillary issues related to invoking of the proviso
to Section 11A of the Central Excise Act, 1944 and declaration made r.6 of
the 'Chewing Tobacco' and Unmanufactured Tobacco Packing Machines
(Capacity Determination and Collection of Duty) Rules, 2010 (CTPM
Rules).
Central Excise Tax, 1944 - s.11A, proviso - Invoking extended
period of limitation - Deliberate intention to avoid payment of duty by
the assessee by misclassifi cation and willful misstatement of its product
- Adjudicating Authority therefore justifi ed in invoking the extended
period as provided in the proviso to s.11A(1).
Held: Notifi cation No.2 of 2006 dated 01.03.2006 was issued in
supersession of Notifi cation No.13 of 2002 dated 01.03.2002 specifying
thereunder the goods covered under Section 4A of Act 1944 for MRPbased assessment. The notifi cation 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 specifi ed 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 classifi ed under CET
SUPREME COURT REPORTS
[2023] 13 S.C.R.
574
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
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
classifi cation 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 Notifi cation
No.2 of 2006 vide Notifi cation No.16 of 2006 dated 11.07.2006. In other
words, 'zarda/jarda scented tobacco' was not specifi ed 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 justifi ed in issuing the show cause
notice. Though one of the contentions raised by the assessee was that they
had fi led a letter on 30.03.2006 to the Department clearly showing the change
in the classifi cation 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 fi ling 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 diff erence between
these two products, or to contend that it had classifi ed the product as 'zarda/
jarda scented tobacco' by ignorance, is not a plausible justifi cation on part of
the assessee. However, on the issuance of Notifi cation 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 notifi cation, 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 signifi cance in as much

## Text

_Characters 0–39,837 of 193,405. This is a partial read: ask again with offset=39837 for what follows._

[2023] 13 S.C.R. 573 : 2023 INSC 951
573
CASE DETAILS
COMMR. OF CEN. EXC. AHMEDABAD
v.
M/S URMIN PRODUCTS P. LTD. AND OTHERS
(Civil Appeal No. 10159-10161 of 2010)
OCTOBER 20, 2023
[S. RAVINDRA BHAT AND ARAVIND KUMAR, JJ.]
HEADNOTES
Issues for consideration:
The primary dispute in the present seven groups of appeals revolved
around classifi cation of the product in question keeping in view two
competing Central Excise Tariff Sub-Headings / entries i.e. under CET SH
2403 9910 as 'chewing tobacco' or under CET SH 2403 9930 as 'zarda/
jarda scented tobacco'. Ancillary issues related to invoking of the proviso
to Section 11A of the Central Excise Act, 1944 and declaration made r.6 of
the 'Chewing Tobacco' and Unmanufactured Tobacco Packing Machines
(Capacity Determination and Collection of Duty) Rules, 2010 (CTPM
Rules).
Central Excise Tax, 1944 - s.11A, proviso - Invoking extended
period of limitation - Deliberate intention to avoid payment of duty by
the assessee by misclassifi cation and willful misstatement of its product
- Adjudicating Authority therefore justifi ed in invoking the extended
period as provided in the proviso to s.11A(1).
Held: Notifi cation No.2 of 2006 dated 01.03.2006 was issued in
supersession of Notifi cation No.13 of 2002 dated 01.03.2002 specifying
thereunder the goods covered under Section 4A of Act 1944 for MRPbased assessment. The notifi cation 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 specifi ed 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 classifi ed under CET
SUPREME COURT REPORTS
[2023] 13 S.C.R.
574
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
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
classifi cation 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 Notifi cation
No.2 of 2006 vide Notifi cation No.16 of 2006 dated 11.07.2006. In other
words, 'zarda/jarda scented tobacco' was not specifi ed 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 justifi ed in issuing the show cause
notice. Though one of the contentions raised by the assessee was that they
had fi led a letter on 30.03.2006 to the Department clearly showing the change
in the classifi cation 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 fi ling 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 diff erence between
these two products, or to contend that it had classifi ed the product as 'zarda/
jarda scented tobacco' by ignorance, is not a plausible justifi cation on part of
the assessee. However, on the issuance of Notifi cation 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 notifi cation, 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 signifi cance in as much as the Notifi cation No.2 of
2006 dated 01.03.2006 were to take eff ect 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 notifi cation which provides for valuation under Section 4A, yet
575
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 benefi t 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 misclassifi cation and willful misstatement of its product and hence it
was justifi ed 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 - Classifi cation - 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 classifi ed 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 classifi ed 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-classifi ed the entries
as 'chewing tobacco' and 'zarda/jarda scented tobacco' - In the ER-I returns
fi led from March 2005 till April 2006 i.e., after the sub-classifi cation, the
assessee mentioned the description of the product as 'zarda scented tobacco'
and from April 2006 reclassifi ed it as 'chewing tobacco' -Notifi cation No.
2 of 2006 dated 01.03.2006 was issued in supersession of Notifi cation 13
of 2002 dated 01.03.2002 specifying the goods covered under Section
4A of the CE Act, for MRP based assessment - The said notifi cation 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
specifi ed 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 misclassifi ed the product
COMMR. OF CEN. EXC. AHMEDABAD v.
M/S URMIN PRODUCTS P. LTD. AND OTHERS
SUPREME COURT REPORTS
[2023] 13 S.C.R.
576
as 'chewing tobacco' from 'zarda/jarda scented' tobacco - Had the assessee
continued its classifi cation 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
classifi cation was deliberately changed from 'zarda/jarda scented tobacco'
to 'chewing tobacco'. [Paras 44, 46 and 47]
Interpretation of Statutes - Entry in Fiscal Statute - Specifi c entry
vis-a-vis General entry:
Held: It is trite law that when specifi c entry is found in a fi scal statute,
the same would prevail over any general entry - If there are two or more subheadings, the heading which provides the most specifi c description will have
to be preferred to a heading providing a more general description. [Para 49]
Tax/ Taxation - Central Excise - Chargeability - Classifi cation
- Burden/Onus of Proof- For change in classifi cation of the product -
Lies on whom:
Held: It is settled law that the onus/burden of proof for change in
classifi cation of the product lies on the Department, particularly when
it wishes to challenge a long-accepted classifi cation - Classifi cation 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 fi led under
Rule 6 of CTPM Rules - Parameters to be examined, determined, and
adjudicated under Rule 6 - Such declaration, if having any nexus to
classifi cation of the product - Whether on account of classifi cation 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 fi led 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 fi xing the packing
capacity of the machine and determine the duty. (2) What are the parameters
577
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 classifi cation or specifi c entry within which the declared
product is to be classifi ed? OR Whether the issue of classifi cation 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 classifi cation of the product? ANSWER: Yes,
for the purpose of determining the packing capacity and corresponding
duty. (5) Whether on account of classifi cation 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 - Classifi cation - Common parlance test continues
to be one of the determinative tests for the classifi cation 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
COMMR. OF CEN. EXC. AHMEDABAD v.
M/S URMIN PRODUCTS P. LTD. AND OTHERS
SUPREME COURT REPORTS
[2023] 13 S.C.R.
578
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 363-
referred to.
OTHER CASE DETAILS INCLUDING IMPUGNED
ORDER AND APPEARANCES
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1015910161 of 2010.
From the Judgment and Order dated 25.03.2010 of the Customs Excise
& Service Tax Appellate Tribunal, West Zonal Bench, Ahmedabad in Appeal
No. E/426, 427 and 428 of 2008.
With
Civil Appeal Nos. 6519 of 2023, 2469 of 2020, 6521, 6522, 6523-24
of 2023, 959 of 2019, 6538-42, 6531-37, 6525, 6526, 6527, 6528, 6529,
6530 of 2023, 5146 of 2015 and 3596 of 2023.
579
Appearances:
S K Bagaria, Vivek Kohli, Sr. Advs., B. Krishna Prasad,
Ms. Sheena Taqui, Ms. Akansha Saini, Ajit K Sinha, Shiv Vinayak Gupta,
Mrs. Bina Gupta, Mrs. Nisha Bagchi, Mukesh Kumar Maroria, Shetty
Uday Kumar Sagar, Ms. Aakansha Kaul, S.K. Singhania, H.R. Rao, Ajay
Choudhary, Kavin Gulati, Aditya Bhattacharya, Bhanu Gupta, Kishan Datta,
A.R. Madhav Rao, A. Mukunda Rao, Siddhant Buxy, M.P. Vinod, Sunil
Tyagi, Ashwani Sharma, Nalin Talwar, Sandeep Buraria, Archit Upadhayay,
Ms. Bhavya Bhatia, Kumar Ajit Singh, Rupesh Kumar, Aditya Kumar, Ms.
Pankhuri Shrivastava, Ms. Neelam Sharma, Aryaman Sharma, Dr. Seema
Jain, Vimlesh Kumar, A.K. Jain, Advs. for the appearing parties.
JUDGMENT / ORDER OF THE SUPREME COURT
JUDGMENT
ARAVIND KUMAR, J.
1. Delay condoned on 23.08.2023.
2. 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
NUMBER.
CONTENT - DETAILS
PAGE 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
COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN
PRODUCTS P. LTD. AND OTHERS
SUPREME COURT REPORTS
[2023] 13 S.C.R.
580
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
3.
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
4.
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
5.
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
6.
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
7.
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
581
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/
Abbreviation
Particulars / Meaning
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
8.
"CRCL"
Central Revenue Control Laboratory
9.
"OIA"
Order-In-Appeal
10.
"OIO"
Order-In-Original
11.
"CT"
Chewing Tobacco
12.
"ZST"
Zarda/Jarda Scented Tobacco
COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN
PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]
SUPREME COURT REPORTS
[2023] 13 S.C.R.
582
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 notifi cations/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.
Notifi cation No. 13/2002 - CE (NT) dated 01.03.2002 under Section
4A prescribing abatement from MRP for arriving at assessable value.
3.
Notifi cation 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.
Notifi cation 2/2006 - CE (NT) dated 01.03.2006 under Section 4A.
7.
Notifi cation 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.
Notifi cation: 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
Notifi cation: 11/2010-C.E. (N.T.) dated 27-Feb-2010
583
3.
Notifi cation: 16/2010 - CE. Dated 27.02.2010 prescribing rate for
branded unmanufactured tobacco and chewing tobacco.
4.
Notifi cation: 16/2010 - CE. Dated 27.02.2010 prescribing rate for
branded unmanufactured tobacco and chewing tobacco.
5.
Notifi cation: 17/2010 - CE (NT) dated 13.04.2010- Notifi es Jarda
scented tobacco under Section 3A.
6.
Notifi cation 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.
Notifi cation: 19/2010- C.E. dated 13.04.2010 - prescribing the rate
for Chewing Tobacco, Unmanufactured Tobacco and Filter Khaini.
8.
Notifi cation: 14/2012 - CE Dated 14.03.2012 prescribing the new rate
for Chewing Tobacco, Unmanufactured Tobacco and Filter Khaini.
9.
Notifi cation: 2/2014 - C.E. dated 24.01.2014 - prescribing the new
rate for Chewing Tobacco, Unmanufactured Tobacco and Filter
Khaini.
10.
Notifi cation: 17/2014 - C.E. dated 11.07.2014 - Prescribing the new
rate for chewing tobacco, unmanufactured tobacco and fi lter 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:
COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN
PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]
SUPREME COURT REPORTS
[2023] 13 S.C.R.
584
1980
2000
2011
Section 11A.

!

"

 !

#

 $
%

Section 11A.

&erroneously
refunded, whether or
not such non-levy or
non-payment,
shortlevy or short payment
or erroneous refund,
as the case may be,
was on the basis of any
approval, acceptance
or assessment relating
to the rate of duty
on or valuation of
excisable goods under
any other provisions
of this Act or the rules
made thereunder], a
Central Excise Offi cer
may, within one year
from the relevant date,
serve notice on the
person chargeable with
the
2Section
11.
'

for
any
reason,
other
than
the reason of fraud
or 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,-
(a) the Central Excise
Offi cer shall, within
[two years] from the
relevant
date,
serve
notice on the person
chargeable
with
the
duty which has not been
so levied or paid
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
585

'

 !

(

)

) **

+

+

+
#

+

duty which has not been
levied or paid or which
has been short- levied or short- paid or to
whom the refund has
erroneously been made,
requiring him to show
cause why he should
not pay the amount
specifi ed in the notice:
Provided that where
any duty of exercise
has not been levied
or paid or has been
short-levied or shortpaid
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 eff ect, as if for the
words [one year], the
words "fi ve years" were
substituted.
Explanation. - Where
the service of the notice
is stayed by an order of
a Court, the period of
such stay

"

 !

#

,
COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN
PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]
SUPREME COURT REPORTS
[2023] 13 S.C.R.
586
shall be excluded in
computing the aforesaid
period of [one year] or
fi ve years, as the case
may be.
[(1A) When any duty
of
excise
has
not
been levied or paid
or
has been
shortlevied 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 Offi cer,
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-fi ve per cent
of the duty specifi ed in
the notice or the duty so
accepted by such person
within thirty days of the
receipt of the notice.]
587
9. The detailed discussion of the relevant provisions, rules, notifi cations,
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 briefl y state the history of classifi cation 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 defi ned 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 eff ect 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".
13. In 2002, under Section 4A of the CE Act, Notifi cation 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 Notifi cation No.13/2002 had
not covered 'Chewing Tobacco' refl ecting under the relevant Entry 2404.21,
within its ambit of 'notifi ed goods' for the purposes of availing benefi ts under
Section 4A. However, subsequently by Notifi cation No.10/2003 - CE (NT)
dated 01.03.2003 was issued introducing Entry 24A in Notifi cation 13/2002
dated 1.03.2002, thereby covering all goods under entry 2404.41 within
the ambit of 'notifi ed goods' for the purposes of Section 4A of the CE Act.
COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN
PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]
SUPREME COURT REPORTS
[2023] 13 S.C.R.
588
14. Prior to the introduction of the 8-digit tariff classifi cation, 'chewing
tobacco' was refl ected under Chapter 24, under specifi c entry '2404.41' of
the six-digit Central Excise Tariff classifi cation. Subsequently the new 8-digit
Central Excise Tariff classifi cation 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."
15. On 01.03.2006, Notifi cation No.2/2006 was issued, vide which
Notifi cation 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 notifi ed in terms of the eight-digit tariff classifi cation. However, it is
pertinent to note that said Notifi cation No.2/2006 did not include 'Jarda/
Zarda scented tobacco - CET SH 2403 9930' within the scope of 'notifi ed
goods' under Section 4A of the CE Act, for availing the benefi ts of abatement
as percentage of retail sale price.
16. Subsequently, Notifi cation No.16 of 2006 dated 11.07.2006 was
issued, wherein CET SH 2403 9930 came to be included within Notifi cation
No.2/2006 dated 01.03.2006, thereby including 'jarda/ zarda scented
tobacco' within the scope of 'notifi ed goods' under Section 4A of CE Act.
17. It is relevant to note at this juncture, the period between 1.03.2006
and 11.07.2006, during which the benefi ts of MRP-based assessment
was not available to goods classifi ed 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-fl avourz).
589
18. In light of the evolution of classifi cation 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 fi ndings and
conclusions arrived at will pertain to the issues formulated and adjudicated
in light of the facts relevant to those groups, and hence, the fi ndings 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
19. In these appeals, the Revenue has challenged the order dated
25.03.2010 passed by the jurisdictional CESTAT whereunder the
classifi cation given by the assessee was accepted as "fl avoured chewing
tobacco" falling under CET SH 2403 9910 and not as 'zarda/jarda scented
tobacco' falling under CET SH 2403 9930 of CETA.
20. 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 offi cers, 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 misclassifi cation 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 classifi ed as 'chewing tobacco'
should not be classifi ed 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
misclassifi cation should not be recovered. The said show cause notice came
to be adjudicated and the show cause notice including the demand made
COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN
PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]
SUPREME COURT REPORTS
[2023] 13 S.C.R.
590
thereunder, was upheld in OIO dated 28.01.2008. This OIO was challenged
and an appeal came to be fi led 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 offi cers
when they visited the factory premises. This is a fl owchart prepared
by the offi cers after their visit. However, when we have a look at the
statement of the Production Manager Shri Ramesh Narsinghbhai
Patel in the fl ow chart, the Zarda Scented Tobacco in the process
of manufacture is missing. Zarda Scented Tobacco fi gures in the
manufacturing fl ow 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 classifi cation list as Chewing Tobacco and from 1.3.05, to
31.3.06, it was classifi ed as Zarda Scented Tobacco and from 1.4.06
onwards, the classifi cation 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,
591
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 diff erential 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."
21. 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."
22. Hence these appeals.
SUBMISSIONS OF THE PARTIES
23. We have heard Shri N. Venkataraman, learned Additional Solicitor
General appearing for the Revenue, and Ms. Nisha Bagchi, appearing for
the Revenue.
24. It is the contention of the Revenue that Notifi cation No.2 of 2006
dated 01.03.2006 was issued in supersession of Notifi cation 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 specifi ed 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 misclassifi ed 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
COMMR. OF CEN. EXC. AHMEDABAD v. M/S URMIN
PRODUCTS P. LTD. AND OTHERS [ARAVIND KUMAR, J.]
SUPREME COURT REPORTS
[2023] 13 S.C.R.
592
of the products. It is contended that the assessee despite being aware of the
fact that their product was not covered under relevant notifi cation which
provides for valuation under Section 4A of CE Act, had continued to avail
the benefi t of Section 4A of CE Act till 11.07.2006. It is contended by the
Revenue, that abatement provided to the goods classifi able 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 Notifi cation
No.16 dated 11.07.2006 and thus the product 'zarda/jarda scented tobacco'
was not specifi ed 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.
25. 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 classifi cation was in force during the
period of the board's letter dated 23.06.1987, notice dated 15.07.1987, and
the notifi cation 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 specifi cally calculation has been provided where 'chewing
tobacco' and 'zarda/jarda scented tobacco' have been separately classifi ed
and as such the contention of the assessee has no legs to stand.
26. 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 diff erent from 'zarda/jarda' used by assessee and
further, the assessee has not been able to demonstrate how its product is
diff erent 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 specifi cally covered under CET SH 2403 9930, it cannot claim that
593
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
classifi ed the product as 'zarda/jarda scented tobacco', and there being no
change in classifi cation of the product, to pay duty at lesser value would
be without any justifi cation. 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' classifi able under CET SH
2403 9910 to avail the benefi t of Notifi cation No.2 of 2006 dated 01.03.2006.
It was also contended that when two or more headings are available, the
product should be classifi ed under the more specifi c 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'.
27.