ORDER
K.K. Agarwal, Member (T)
1. The appellants are engaged in the preparation of raw material for gutka which is in the form of raw tobacco treated with quimam and the same was marketed by them to the gutka manufacturers. The unit was visited by the officers of the Anti Evasion and after conducting investigations the officers concluded that the product manufactured by them was ‘loose unbranded scented tobacco’ which is rightly classified under Ch.2404.40 as chewing tobacco and preparation containing chewing tobacco. They were accordingly issued a Show Cause Notice demanding duty amounting to Rs. 1,35,525/- and seeking imposition of penalty. The matter was adjudicated wherein the duty was confirmed and a penalty of Rs. 40,000/- was imposed under Rule. 173Q(1) by the Commissioner.
2. The learned Advocate for the appellants submits that the Show Cause Notice suffers an ambiguity of describing the correct status of the product i.e. whether it is chewing tobacco by itself or it is a preparation containing chewing tobacco. The Commissioner has ruled out its classification as preparation containing the chewing tobacco and finally concluded the same as chewing tobacco. It was submitted that the Commissioner has not disputed the process of manufacturing i.e. manually applying quimam and perfumes to the raw tobacco patti. The Commissioner has relied upon the decision of the Tribunal in the case of Dharampal Satyapal 2000 (36) 289 (Tri.) wherein quimam was held to be excisable under ch.2404.40 which has been incorrectly relied upon as a powder manufactured by them is not quimam. The Order refers to their production as preparation containing chewing tobacco with quimam as ingredient, rubbing chewing tobacco and not raw-tobacco patti used in such alleged preparation. He has further held that treatment of tobacco patti with quimam and perfumes brings about an irreversible change in the chewing tobacco. Raw tobacco as such is consumed for chewing and at times it has mixture of lime and other additives, the mixing of which is done by individual consumer. Therefore, raw chewing tobacco without any additives only qualifies as an un-manufactured tobacco. The commissioner has further held that in order to qualify the product as preparation containing chewing tobacco, the starting point has to be chewing tobacco, which is not a case here as the whole product itself is chewing tobacco and not its preparation and further that since quimam and perfume brings about an irreversible change, it demonstrates that raw tobacco is no longer an unprocessed product to be categorized as un-manufactured tobacco as claimed by appellant. The learned advocate submits that the Department in the Show Cause Notice has acknowledged that quimam and perfume are the only two ingredients which are manually applied in meager doses to raw tobacco patti. It is also admitted that quimam itself is tobacco extract and its application upgrades tobacco taste and smell. In other words, application of quimam helps in restoration of tobacco smell during its storage before its use in other product i.e. say gutka as popularly referred to. For the product to be taken as preparation it has either to be a mixture or a compound. Since ingredients of tobacco patti and its extract represent the same substance for all purposes, the application of latter to former does not lead to any mixture or compound of two. It was submitted that the issue has now been finally decided by the CESTAT in the case of Yogesh Associates v. Commissioner of Central Excise, Surat-II wherein it was held that raw leaf of tobacco treated with tobacco solution quimam and other flavours including saffron water – raw tobacco leaf not undergone any irreversible change and remains raw leaf tobacco un-manufactured – mixture too concentrated for comfortable consumption by human beings and fails to meet test of marketability of product as ‘chewing tobacco’- classification under sub-heading 2401.10 of Central Excise Tariff appropriate. In view of this it was submitted that the Commissioner’s Order was incorrect and should be set aside.
3. The learned SDR Shri S.G. Dewalwar, on the other hand, submits that the matter has been settled by the Hon’ble Supreme Court in the case of Gopal Zarda Udyog v. Commissioner of Central Excise, New Delhi, wherein it has been held that quimam which consists of ingredients like raw quimam, menthol, aromatic chemicals, spices, gulab jal, attar and perfumes etc. and used in manufacture of chewing tobacco is excisable product and classifiable under Sub-heading 2404.49/2404.40 of Central Excise Tariff. It was therefore submitted that Commissioner’s Order is correct and should be upheld.
4. Shri T. Gunasekharan, Advocate for the Appellants, on the other hand, submits that the Supreme Court Order relates to the classification of quimam and not of raw tobacco treated with quimam and therefore is not applicable to their case.
5. We have considered the submissions. We find that identical product has been considered by the tribunal in the case of Yogesh Associates cited supra wherein it was held that raw tobacco treated with quimam and perfumes will be classifiable under heading 2401.10 and not 2404.40. The Hon’ble Supreme Court decision in the case of Gopal Zarda Udyog is not applicable as it relates to classification of quimam where there is no use of raw tobacco. Since the facts of the present case are fully covered by the decision of the CESTAT in the case of Yogesh Associates, we allow the appeal and set aside the order of the Commissioner.