1. Dispute over classification of tobacco products as chewing tobacco or zarda/jarda scented tobacco under CETA and CE Act, affecting duty valuation and limitation periods. (Para 10 , 11 , 14 , 19 , 51 , 74 , 87 , 114 , 124 , 131 )
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2023 Supreme(SC) 1083
SUPREME COURT OF INDIA
S. RAVINDRA BHAT, ARAVIND KUMAR, JJ.
Commr. of Cen. Exc. Ahmedabad – Appellant
Versus
M/s Urmin Products Pvt. Ltd. and Others – Respondents
Civil Appeal Nos. 10159-10161 of 2010, Civil Appeal No. 5146 of 2015, Civil Appeal No. 959 of 2019, Civil Appeal No. 2469 of 2020, Civil Appeal Nos. 3596, 6519, 6521, 6522, 6523-6524, 6525, 6526, 6527, 6528, 6529, 6530, 6531-6537, 6538-6542 of 2023, Diary Nos. 2810, 3484, 3487, 3492, 3513, 3536, 3544, 3545, 3547, 6888 of 2020, Diary Nos. 14581, 44912 of 2019
Decided On : 20-10-2023
Important Points
The court established that the burden of proof on classification disputes lies with the Revenue, affirming that misclassification can lead to penalties, while reclassifications must reflect actual product characteristics and adhere to market understanding.
Subject
Taxation - Central Excise and Customs
Act Referred
Headnote
(A) Central Excise Act, 1944 - Section 11A - Classification of goods - The Revenue contended the incorrect classification of products by the assessee as 'chewing tobacco' instead of 'zarda/jarda scented tobacco.' The appeal was structured in seven groups to ascertain the respective classifications. The principle of common parlance was highlighted, and the burden of proof on classification disputes remained with the Revenue (Paras 33, 96-104, 128-141).
(B) Misclassification - The tribunal noted that improper classification does not preclude the Revenue from taxing appropriately. Improperly declared products can lead to penalties and reassessment (Paras 25, 37, 110-142).
(C) Evidence and Burden of Proof - The court reaffirmed that the burden to substantiate claims regarding classifications lay with the Revenue, especially in cases of mixed products. The assessment must be based on actual product characteristics and market understanding (Paras 48, 49, 123-128).
(D) Ambiguities in Tariff Classification - The tribunal emphasized that where multiple classifications exist, the more beneficial classification to the taxpayer is preferred, reasserting principles of justice and fairness in fiscal matters (Paras 28-34, 99-104).
Findings of Court:
The appeals were largely decided in favor of the Revenue, with certain cases remanded for reassessment based on updated tariff entries and classifications.
Result: Some appeals allowed, others dismissed, with remanding for specific issues (Paras 143).
(B) Misclassification - The tribunal noted that improper classification does not preclude the Revenue from taxing appropriately. Improperly declared products can lead to penalties and reassessment (Paras 25, 37, 110-142).
(C) Evidence and Burden of Proof - The court reaffirmed that the burden to substantiate claims regarding classifications lay with the Revenue, especially in cases of mixed products. The assessment must be based on actual product characteristics and market understanding (Paras 48, 49, 123-128).
(D) Ambiguities in Tariff Classification - The tribunal emphasized that where multiple classifications exist, the more beneficial classification to the taxpayer is preferred, reasserting principles of justice and fairness in fiscal matters (Paras 28-34, 99-104).
Findings of Court:
The appeals were largely decided in favor of the Revenue, with certain cases remanded for reassessment based on updated tariff entries and classifications.
Result: Some appeals allowed, others dismissed, with remanding for specific issues (Paras 143).
Legal Category Hierarchy
Advocates appeared:
For the Appellant(s) : Mr. B. Krishna Prasad, AOR Mr. S.K. Bagaria, Sr. Adv. Mr. Ramesh Singh, Sr. Adv. Ms. Sheena Taqui, Adv. Ms. Akansha Saini, Adv. Mr. Ajit K Sinha, Adv. Mr. Shiv Vinayak Gupta, Adv. Mrs. Bina Gupta, AOR Mr. N. Venkatraman, A.S.G. Mr. Mukesh Kumar Maroria, AOR Ms. Nisha Bagchi, Adv. Mr. H.R. Rao, Adv. Mr. S.K. Singhania, Adv. Ms. Aakansha Kaul, Adv. Mr. Shetty Uday Kumar Sagar, Adv.
For the Respondent(s): Mr. Kishan Datta, AOR Mr. A R Madhav Rao, Adv. Mr. A Mukunda Rao, Adv. Mr. Siddhant Buxy, AOR Mr. Ajay K. Jain, Adv. Ms. Seema Jain, Adv. Mr. Dushant Mahant, Adv. Mr. Vimlesh Kumar, Adv. Mr. Dileep Pillai, Adv. Mr. Atul Shankar Vinod, Adv. Mr. M. P. Vinod, AOR Mr. Vivek Kohli, Sr. Adv. Mr. S K Bagaria, Sr. Adv. Mr. Sunil Tyagi, Adv. Mr. Ashwani Sharma, Adv. Mr. Nalin Talwar, Adv. Mr. Sandeep Buraria, Adv. Mr. Archit Upadhayay, AOR Ms. Bhavya Bhatia, Adv. Mr. Kumar Ajit Singh, Adv. Mr. Rupesh Kumar, AOR Mr. R. Krishnan, Adv. Ms. Pankhuri Shrivastava, Adv. Ms. Neelam Sharma, Adv. Mr. Rajeev Sharma, Adv. Mr. Aryaman Sharma, Adv. Mr. B. Krishna Prasad, AOR
For the Appellant(s) : Mr. B. Krishna Prasad, AOR Mr. S.K. Bagaria, Sr. Adv. Mr. Ramesh Singh, Sr. Adv. Ms. Sheena Taqui, Adv. Ms. Akansha Saini, Adv. Mr. Ajit K Sinha, Adv. Mr. Shiv Vinayak Gupta, Adv. Mrs. Bina Gupta, AOR Mr. N. Venkatraman, A.S.G. Mr. Mukesh Kumar Maroria, AOR Ms. Nisha Bagchi, Adv. Mr. H.R. Rao, Adv. Mr. S.K. Singhania, Adv. Ms. Aakansha Kaul, Adv. Mr. Shetty Uday Kumar Sagar, Adv.
For the Respondent(s): Mr. Kishan Datta, AOR Mr. A R Madhav Rao, Adv. Mr. A Mukunda Rao, Adv. Mr. Siddhant Buxy, AOR Mr. Ajay K. Jain, Adv. Ms. Seema Jain, Adv. Mr. Dushant Mahant, Adv. Mr. Vimlesh Kumar, Adv. Mr. Dileep Pillai, Adv. Mr. Atul Shankar Vinod, Adv. Mr. M. P. Vinod, AOR Mr. Vivek Kohli, Sr. Adv. Mr. S K Bagaria, Sr. Adv. Mr. Sunil Tyagi, Adv. Mr. Ashwani Sharma, Adv. Mr. Nalin Talwar, Adv. Mr. Sandeep Buraria, Adv. Mr. Archit Upadhayay, AOR Ms. Bhavya Bhatia, Adv. Mr. Kumar Ajit Singh, Adv. Mr. Rupesh Kumar, AOR Mr. R. Krishnan, Adv. Ms. Pankhuri Shrivastava, Adv. Ms. Neelam Sharma, Adv. Mr. Rajeev Sharma, Adv. Mr. Aryaman Sharma, Adv. Mr. B. Krishna Prasad, AOR
Table of Contents
2. Revenue alleges misclassification to evade duty and invoke extended limitation; assessees rely on trade parlance, lack of evidence for scent, and burden of proof. (Para 24 , 25 , 26 , 28 , 29 , 30 , 31 , 32 , 53 , 54 , 55 , 56 , 79 , 80 , 93 , 94 , 95 , 117 , 118 , 125 , 126 , 134 , 136 )
3. Classification depends on ingredients, trade parlance, and IS glossary; burden of proof for reclassification lies with Revenue; suppression requires wilful intent to evade duty. (Para 39 , 40 , 42 , 43 , 46 , 47 , 49 , 63 , 65 , 66 , 68 , 69 , 71 , 84 , 86 , 101 , 104 , 106 , 120 , 121 , 138 , 139 , 141 )
4. Burden of proof for chargeability rests on Revenue; specific entries prevail over general ones; suppression under Section 11A requires wilful intent to evade duty. (Para 49 , 68 , 69 , 108 , 109 )
5. Appeals allowed for Groups 1, 3, and 4; appeals dismissed for Groups 2, 5, 6, and 7; one matter remitted for de novo adjudication. (Para 143 )
6. Who bears the burden of proof in disputes regarding the classification of goods for excise duty?
The burden of proof lies squarely upon the Revenue. If the Department intends to classify goods under a heading different from that claimed by the assessee, it must adduce proper evidence to discharge this burden. (Para 68 , 69 , 70 )
7. What constitutes suppression of facts for invoking the extended period of limitation under Section 11A of the CE Act?
Suppression means failure to disclose full information with the wilful intent to evade payment of duty. Mere omission to give correct information or incorrect statements without such intent do not constitute wilful suppression. (Para 42 , 139 )
8. Does the authority under Rule 6 of the CTPM Rules, 2010 have the jurisdiction to determine the classification of a product?
Yes. To determine annual production capacity and calculate duty, the authority must necessarily examine the product's nature and classify it under the appropriate tariff head as provided under CETA. (Para 101 , 104 , 106 , 108 , 109 )
9. Which test prevails when determining the classification of goods not defined in the statute?
The common trade parlance test prevails. Classification should be based on the popular meaning and understanding attached to the product by consumers and users, rather than scientific or technical meanings. (Para 120 )
10. How is a conflict between a specific and a general tariff entry resolved?
A specific entry in a fiscal statute prevails over a general entry. When multiple sub-headings are available, the heading providing the most specific description is preferred over a more general description. (Para 49 )
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 herein-below in the following table no. 1:
TABLE 1
| GROUP NUMBER | CONTENT - DETAILS | PAGE NUMBER | |
| FROM | TO | ||
| 1. | Commissioner of Central Excise Ahmedabad vs. M/s Urmin Products and Others [C.A. No. 10159-10161 of 2010] | ||
| (i) Brief Facts | 17 | 20 | |
| (ii) Submissions of Parties | 20 | 29 | |
| (iii) Discussion and Finding | 29 | 49 | |
| 2. | Commissioner of Central Excise, Chandigarh vs. M/s. Flakes-N-Flavourz [C.A. No. 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 vs. 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. vs. Commissioner of Central Excise [C.A. No. 2469 of 2020 along with Diary Nos. 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 vs. M/s Tej Ram Dharam Paul [C.A. No. 3596 of 2023] | ||
| (i) Brief Facts | 116 | 119 | |
| (iii) Discussion and Findings | 121 | 125 | |
| 6. | Commissioner of Central Excise and Service Tax Meerut vs. 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 and ST Alwar vs. 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 | ||
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 Nos. 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 Nos. 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
| S. 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 Un-manufactured 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 |
7. The learned advocates appearing for the parties have placed reliance and referred t
