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2023 Supreme(Online)(SC) 28267
SUPREME COURT
D.Y. Chandrachud, CJ, A.S. Bopanna, J, V. Ramasubramanian, J
COMMISSIONER OF CENTRAL EXCISE AHMEDABAD – Appellant
Versus
M/S URMIN PRODUCTS – Respondent
CIVIL APPEAL NO. 10159-10161 OF 2010 | CIVIL APPEAL NO. 5146 OF 2015 | CIVIL APPEAL NO. 2469 OF 2020 | CIVIL APPEAL ARISING OUT OF DIARY NO. 44912/2019 | CIVIL APPEAL ARISING OUT OF DIARY NO. 6888/2020
For the Appellants/Petitioners: N. Venkataraman, Nisha Bagchi, S.K. Bagaria, Vivek Kohli, A.R. Madhav Rao, Rupesh Kumar, Seema Jain
For the Respondents: Senior Counsel
Classification of products for tax purposes requires solid evidentiary backing from the Revenue to prove misclassification or intent to evade tax; established classifications should remain unless appropriately challenged.
Headnote:(A) Central Excise Act, 1944 - Sections 4 and 11A - Classification of products - Two groups of appeals concerning taxation of chewing tobacco and zarda/jarda scented tobacco - The Revenue contended misclassification by assessee to evade higher duties - Key statutory rules examined, including CTPM Rules, to ascertain manufacturing process and correct classification - Tribunal's findings indicated that the department failed to establish misrepresentation or intent to evade payment of duty, thus upholding the classifications made by the tribunal in several cases. (Paras 1-142)
(B) Taxation - Legal principles - Classification - Burden of proof lies with the Revenue to demonstrate misclassification or intent to evade duty - Precedents affirm that established classifications should not be altered without substantial evidence. (Paras 50-61)
Facts of the case:
The appeals stem from disputes regarding the classification of products manufactured for central excise duty under different categories of tobacco that shifted regulatory responsibilities based on changing definitions and product characteristics. The Revenue alleged that the change in classification from zarda/jarda to chewing tobacco was a strategy to reduce tax liabilities.
Findings of Court:
Conclusively, the tribunal affirmed the classification based on consumer perception and established legal principles surrounding tax classifications.
Issues: The main issues presented were regarding proper classification mandates, the onus of proof in misrepresentation cases, and legislative intent regarding duties.
Ratio Decidendi: The courts reiterated that classifications stand unless proven otherwise by the Revenue, highlighting the importance of consistent standards across similar products.
Result: Appeals partly allowed, with demands for differential duties overturned where due classification was established.
| Table of Content |
|---|
| 1. initialization of judgment process (Para 1 , 2 , 3 , 4 , 5 , 6) |
| 2. historical classification of tobacco products (Para 10 , 11 , 12 , 13 , 14) |
| 3. arguments from revenue regarding product classification (Para 23 , 24) |
| 4. additional contentions from assessee (Para 29 , 30) |
| 5. court's assessment on classification validity (Para 32 , 34 , 35 , 36) |
| 6. conclusion based on proper classification under ceta (Para 84 , 107 , 110) |
| 7. final verdict and resolution of appeals (Para 118 , 122) |
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
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
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
8. It would be apt and appropriate to extract S.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:
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.
10. A PRELUDE TO THE LIS
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 conta
