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2024 Supreme(Online)(Mad) 81092
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Not specified, J
The petitioners in W.P.(MD)Nos.10565, 12626, 12689, 12724, 12835 and 15533 of 2020 and 5414 of 2021 – Appellant
Versus
Shri.Arumugam, Proprietor of M/s.Kavi Cut Tobacco, Thanjavur – Respondent
W.P.(MD)Nos.10565 | W.P.(MD)No.12626 | W.P.(MD)No.12689 | W.P.(MD)No.12724 | W.P.(MD)No.12835 | W.P.(MD)No.15533 | W.P.(MD)No.5414 | W.P.(MD)No.13023 | W.P.(MD)No.12813 | W.P.(MD)No.204
For the Appellants/Petitioners: Mr.R.Sivaraman
For the Respondents: Mr.Joseph Prabakar
The classification of tobacco products under GST must reflect their true nature; unmanufactured tobacco is not subject to higher cess rates applicable to manufactured products.
Headnote:(A) Goods and Services Tax (Compensation to States) Act, 2017 - Notification No.1/2017 - Compensation Cess (Rate), dated 28.06.2017 - Classification of chewing tobacco - Petitioners challenged the classification imposed by the Department, contending their products were unmanufactured tobacco under Heading 2401, while the Department classified them under Heading 2403 99 10 with a 160% cess. Court held that the petitioners were dealing with unmanufactured tobacco, and thus, the impugned orders were quashed. (Paras 12, 24, 79, 105)
(B) Food Safety and Standards Act, 2006 - Section 3(1)(j) - Definition of food - Court clarified that tobacco leaves are considered food under the Act, and the prohibition on using tobacco as an ingredient applies only when it is mixed with other food products. (Paras 11, 76)
(C) Legal principles - Classification of goods cannot be altered to evade taxes; the nature and use of the product must remain the same for classification changes to be justified. (Paras 100, 104)
Facts of the case:
Petitioners challenged various Orders-in-Original regarding classification and cess on chewing tobacco products, arguing that they were unmanufactured tobacco and thus subject to lower rates.
Findings of Court:
The Court ruled that the petitioners were dealing with unmanufactured tobacco, not manufactured products, and quashed the impugned orders.
Issues: The main issues included the correct classification of products under GST and the applicability of the Food Safety Act.
Ratio Decidendi: The Court emphasized that classification must reflect the product's nature and purpose, and tobacco leaves themselves are food products under the Food Safety Act.
Result: Writ petitions allowed; impugned orders quashed.
| Table of Content |
|---|
| 1. challenge to orders regarding compensation cess. (Para 1 , 2 , 3) |
| 2. appeal against ruling on product classification. (Para 4 , 5 , 6 , 7) |
| 3. dispute on classification of chewing tobacco. (Para 8 , 9 , 10 , 11) |
| 4. arguments on product classification and legal implications. (Para 12 , 13 , 14 , 15) |
| 5. government's ban on certain tobacco products. (Para 16 , 17 , 18) |
| 6. classification under customs tariff act. (Para 19 , 20 , 21 , 22) |
| 7. previous court decisions on similar issues. (Para 23 , 24 , 25) |
| 8. interpretation of gst notifications. (Para 26 , 27 , 28 , 29) |
| 9. analysis of compensation cess rates. (Para 30 , 31 , 32 , 33) |
| 10. classification changes over time. (Para 34 , 35) |
| 11. alternate remedies for petitioners. (Para 36 , 37 , 38) |
| 12. binding nature of advance rulings. (Para 39 , 40 , 41 , 42) |
| 13. limitations on judicial review. (Para 43 , 44 , 45) |
| 14. grounds for judicial review. (Para 46 , 47 , 48 , 49 , 50) |
| 15. merits of the case and grounds for dismissal. (Para 51 , 52 , 53 , 54 , 55) |
| 16. comparison with similar cases. (Para 56 , 57 , 58 , 59 , 60) |
| 17. historical context of product classification. (Para 61 , 62 , 63) |
| 18. legal definitions and implications. (Para 64 , 65 , 66 , 85 , 86 , 87 , 88) |
| 19. implications of food safety act. (Para 67 , 68 , 69) |
| 20. court's interpretation of food definitions. (Para 70 , 71 , 72 , 73) |
| 21. court's stance on tobacco regulations. (Para 74 , 75 , 76 , 77) |
| 22. conclusions on product classification. (Para 78 , 79 , 80 , 81) |
| 23. final remarks on the case. (Para 82 , 83 , 84) |
| 24. court's conclusions on classification. (Para 89 , 90 , 91 , 92) |
| 25. legal principles on product classification. (Para 93 , 94 , 95 , 96) |
| 26. conditions for changing product classification. (Para 97 , 98 , 99 , 100) |
| 27. final ruling on the case. (Para 101 , 102 , 103 , 104) |
| 28. conclusion and order. (Para 105 , 106) |
COMMON ORDER
The petitioners in W.P.(MD)Nos.10565, 12626, 12689, 12724, 12835 and 15533 of 2020 and 5414 of 2021 have challenged the Orders-in- Originals, dated 31.03.2020. The petitioners in W.P.(MD)No.13023 of 2020 and W.P.(MD)No.12813 of 2021 have challenged the Orders-in- Originals, dated 30.03.2020 and 30.04.2020, respectively.
2. The dispute in these cases arise primarily relate to the classification of “chewing tobacco” marketed by the respective petitioners. The respective petitioners have challenged the following Orders-in- Originals:-
Table-1
3. By these Orders, Demand and Levy of Compensation Cess under Notification No.1/2017 – Compensation Cess (Rate), dated 28.06.2017 issued under Sub-Section (2) to Section 8 of the Goods and Service Tax (Compensation to States) Act, 2017 has been confirmed.
4. In W.P.(MD)No.204 of 2021, Shri.Arumugam, Proprietor of M/s.Kavi Cut Tobacco, Thanjavur, the petitioner is before this Court wherein he has challenged the Order dated 29.09.2020 passed by the Appellate Authority for Advance Ruling.
5. By the aforesaid Order dated 29.09.2020, the Appellate Authority for Advance Ruling has upheld Order dated 20.04.2020of the Authority for Advance Ruling.
6. Earlier, by an Order dated 20.04.2020, the Authority for Advance Ruling had held that the product dealt by the petitioner in W.P.(MD)No.204 of 2021 [Shri.Arumugam, Proprietor of M/s.Kavi Cut Tobacco, Thanjavur] fell under the heading 2403 99 10 of Customs Tariff Act, 1975 and was thus liable to rate of Goods and Services tax Compensation Cess at 160% under Notification No.1/2017-Compensation Cess (Rate), dated 28.06.2017.
7. Aggrieved by the Order dated 20.04.2020 issued under Section 98 of the respective GST enactments (Order No.16/AAR/2020), the said petitioner filed an appeal before the Appellate Authority for Advance Ruling under Section 101(1) of the TNGST Act, 2017.
8. The Appellate Authority, however, affirmed the Original decision through the impugned order dated 29.09.2020 in Appeal No.AAAR/03/2020(AR), leading the petitioner to approach this Court.
9. The petitioner in W.P.(MD) No.204 of 2021 would submit that the pro
