ORDER
Gowri Shankar, Member (T)
1. Applications are for waiver of duty totalling Rs. 4.90 lakhs approximately and penalty Rs. 2 lakhs.
2. Advocate for the applicants says that the applicant manufactures panmasala classifiable under Heading 2106.00. One of the ingredients is tobacco which the applicant received and thereafter seives and flavours. To this plain tobacco the applicant adds quimam, which is stated to be consisting of flavouring agent and also containing some proportion of tobacco. He says that this mixture of tobacco with quimam has been leading to chewing tobacco classifiable under Heading 2404.49. He contends that this mixture by itself cannot be chewed and it is not marketable. Preparation of chewing tobacco requires additional jaggery and subsequent fermentation for a number of days in order to break down the tobacco. He contends that the allegation that the applicant purchased tobacco in 1994-95 is not correct; the applicant was receiving on payment of duty such mixture from its own factory. He further contends that Notification 10/96 grants exemption from additional duty as well as from basic duty and this exemption has not been given. Additional duty is 10% of the basic duty and since basic duty is exempted no additional duty is payable.
3. The Departmental Representative relies on the finding of the Commissioner that duty paid on clearances of the mixture receipt shows the marketability of the product. She contends that the judgment of the Supreme Court in the State of Madras v. Bell Mark Tobacco Co. 1967 (19) STC 129 related to particular process of manufacturing chewing tobacco and showing to be universally applicable. She says that the Notification 10/96 only provides an exemption on basic duty to the product and did not specifically exempt additional duty. Additional duty was leviable of 10% of the value of the basic duty.
4. Issues are prima facie arguable. It has not been demonstrated to us that the mixture in question cannot be used as chewing tobacco; nor has it prima facie established processes such as mixture of jaggery and curing are essential to render tobacco chewable. The question as to whether the products received by the applicant were on sale or transfer without sale within the firm is not clear. The applicant had not provided specific evidence before the Commissioner in reply to the notice that these were not on sale. Prima facie the contention that exemption from additional duty is available is also not acceptable. Notification prima facie again levied independent, and not connected with levy of basic duty. Taking into account all these aspects, we direct to the applicant to deposit Rs. 2.5 lakhs within two months upon which we waive deposit of remaining duty and penalty and stay its recovery.
5. Compliance on 18-11-1998.