ORDER
R. Jayaraman, Member (T)
1. This is an appeal against the order-in-appeal passed by Collector (Appeals) bearing No. PPM-579/B.I-262/87 dated 14-9-1987.
2. The undisputed facts are that the appellants, being manufacturers of cigarettes brought back cigarettes bearing Red & White (special) brand under the provisions of Rule 97 of the Central Excise Rules; but after remaking, they cleared cigarettes of different brands. Hence, their refund claim under Rule 97 in respect of a sum of Rs. 26,722,74 was rejected on the ground that the goods brought in were not utilised in the remaking of the same class of goods. The Collector (Appeals) confirmed the Asstt. Collector’s order of rejection and rejected the appellants’ appeal. Hence, the present appeal is before the Tribunal.
3. It is the contention of the learned advocate, Shri Dharuwalla that ‘cigarettes’ form a class. It is not disputed by the Department that damaged cigarettes brought in were refined and remade into cigarettes only. It is not necessary that the cigarettes remade should only be of the same brand. The different brands of cigarettes belong to the same class of goods – namely cigarettes. He relied upon the decision of the Government of India in their own case reported in 1982 (10) E.L.T. 495 (G.O.I.).
4. Shri Naik, the Id. JDR, would plead that cigarettes are marketed only under brand names and consumers have a preference for brands only, when they purchase. They do not ask for cigarettes generally but ask for a particular brand. Moreover, duty amount varies from brand to brand, depending on the value of tobacco and other materials used. Hence, each brand of cigarettes constitutes a different class of goods. The order of the G.O.I, is not binding on the Tribunal, since it is an order-in-revision. There is an apparent error in that decision by treating all brands of cigarettes under one class, going by the Tariff entry, without considering the criterion of marketability and how the consumers treat them. The question of refund depends upon the duty paid and if the refining and remaking result in goods carrying different duty incidence, they are to be treated as a different class of goods, and hit by the provisions of Rule 97.
5. After hearing both the sides, I find that there are no other points of dispute involved in rejection of refund claim under Rule 97. The only point to be resolved in the appeal is whether different brands of cigarettes constitutes the same class of goods namely ‘cigarettes’ or whether each brand of cigarettes is to be treated as a distinct class of goods for purposes of Rule 97.
6. For appreciating the equally attractive arguments from either side, it would be necessary to go into greater detail the provisions of Rule 97. Rule 97 envisages grant of refund of duty paid on the goods issued for home consumption from a factory and which are returned to the factory for being remade, refined, reconditioned or subjected to any other similar process in the factory, subject to compliance with the conditions laid down in the proviso. There are many conditions set out. The area of dispute in the present appeal is only confined to the provision namely:
no refund shall be admissible in respect of duty paid – “on goods which are disposed of in any manner other than for production of goods of the same class.”
[emphasis supplied]
For appreciating the meaning of the term “same class”, dictionary meaning or tariff classification or how the goods are purchased in the market are no doubt, relevant. But the term is required to be interpreted in the context of the scheme laid down in Rule 97. This is what I propose to do.
If we go by dictionary meaning, all products of tobacco, which are smoked, could generally form a class by itself as against chewing tobacco or snuff.
Cigarettes, cigars and biris, though fall in the general class of tobacco products for smoking, each have a separate identity in the market and even the tariff distinguishes them. Now taking ‘cigarettes’ individually, it is no doubt true that consumers go by brand name and each brand has its intrinsic value and consumer preference. Whether on account of these factors, they could be construed to be not falling in the same class for purposes of Rule 97, is the issue to be considered in the appeal.
On going through the other requirements laid down in Rule 97, it is found that this Rule is available for refining and remaking also. If a lower brand is brought in and refined and remade into a higher brand of cigarettes, such an activity falls within the purview of Rule 97. Refund is envisaged in respect of the duty paid on the goods removed earlier but returned to the factory. Hence, if a higher valued brand of cigarettes is Subject to processes, which result in production of a lower valued brand, will it be covered by the Rule? The term ‘any other similar’ processes would seem to cover such operations as well. This is evident from the safety clause provided in the Rule itself. That is the provision which restricts the amount of refund payable to the duty payable on such goods after being remade, refined etc. Hence, consequent on remaking, if the value depreciates, resulting in lower duty than the duty earlier paid, refund shall be restricted to the lower duty payable on such remade goods. In the context of these provisions, the term ‘same class’ referred to in Rule 97, can only mean the class of goods recognised in the tariff classification for purposes of levy of duty. Even if value changes on account of remaking or refining, because of change in brand, they would remain in the same class. But if cigarettes are remade into smoking mixtures, they would go out of the same class, because apart from trade parlance, even the Tariff distinguishes this by classifying separately. Hence, I am in agreement with the approach in the G.O.I, decision referred to by the Id. advocate, irrespective of whether it is binding or not. I, therefore, allow the appeal, with consequential relief.