In re Pandey Traders (GST AAR Uttar Pradesh)
We see that Customs Tariff/HSN do not define ‘Unmanufactured/manufactured tobacco’ in the Section /Chapter notes specifically. ‘Manufacture’ under the GST law is defined under Section 2(72) as (72) manufacture’ means processing of raw material or inputs in any manner that results in emergence of a new product having a distinct name, character and use and the term manufacturer shall be construed accordingly; Thus, any process on the raw material resulting in emergence of a new product with a distinct name, character and use is defined as manufacture’ under GST. In the applicant case the raw unmanufactured tobacco dust which is result of screening of raw tobacco through which tobacco leafs, it stem, and other tender parts are separated through the process drying, winnowing, crushing and separating though sieving, and the better part are used for chewing tobacco and remaining part in raw form i.e. stems, hard veins and leaves of tobacco plant are then crushed in the dust form, and the dust is also sold as such for human consumption. When these tobacco dust under goes process of mixing with scent(mixture of various perfumes and not jarda scent) results in new irreversible product distinct in character in the form of manufactured chewing tobacco.
Thus, it is evident that the raw material undergoes a set of processes and emerges as a distinct product which makes it marketable/consumable for the chewing needs. Therefore, the product supplied by the applicant is “Manufactured Tobacco product for Chewing”. Once it is held that the product is ‘Manufactured Chewing tobacco’, the classification of the product is under CTH 2403 9910 which specifies ‘Chewing Tobacco’ under the head “2403- Other Manufactured tobacco and manufactured tobacco substitutes….”
The applicant has placed reliance on the different case laws-
i) Yogesh Associates v/s Commissioner of Central Excise, Surat-II reported in 2006 (195) ELT 196 (Tri.-Mum.).
ii) Shrikant Prasad v/s Commissioner of Central Excise, Calcutta-1 reported in 2000 (117) ELT 345 (Tribunal).
iii) Suresh Enterprises v/s Commissioner of Central Excise, Pune reported in 2006(203) ELT 432 (Tri. – Mumbai).
iv) Iswar Grinding Mills v/s Commissioner of C.Ex., Calcutta-1 reported in 2000 (117) ELT 743 (Tri.).
The above case laws deals with difference of classification of same goods of two different dealers differently. In other case it was related to treatment of tobacco leaves. In the above laws it has been discussed that crushing / powdering of tobacco leaves doesn’t amount to manufacture. Hence facts of the above case laws are different from applicant case. In the applicant case mixing of tobacco dust with scent(mixture of various perfumes and not jarda scent) is a cumulative process of manufacturing and resulted in different and irreversible goods i.e. manufactured chewing tobacco and classifiable under the specific heading under CTH 24039910.
Also Read AAAR Ruling: AAAR Ruling on classification of unmanufactured tobacco product
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, UTTAR PRADESH
1. M/s Rajiv Pandey is registered under GST1N 09FOSPP6028C1ZI under trade name of M/s Pandey Traders having principal address at Siyapuram, Station Road, Mainpuri, Uttar Pradesh-205001 (hereinafter referred as “the applicant”). The applicant is engaged in mixing of scent in the raw/unmanufactured tobacco dust, procured from various traders.
2. The applicant has submitted application for Advance Ruling dated 27.06.2022 enclosing dully filled Form ARA-01 (the application form for Advance Ruling) along with annexure and attachments. The applicant in his application has sought advance ruling on following question/clarification-
1. Whether mixing of scent (mixture of various perfumes and not jarda scent) in raw unmanufactured tobacco dust by the Applicant after procuring the same from various traders, and its subsequent sale to customers on B to B and B to C basis, after ensuring packing from third party, would change the character of unmanufactured tobacco to manufactured tobacco?
2.Whether processing of unmanufactured tobacco dust by add mixing the scent (mixture of various perfumes and not jarda scent) would change the character of unmanufactured tobacco to manufactured tobacco?
3. As per declaration given by the applicant in Form ARA-01, the issue raised by the applicant is neither pending nor decided in any proceedings under any of the provisions of the Act. against the applicant.
4. The applicant has submitted that-
(i) The Applicant, M/s Pandey Traders, Siyapuram, Station Road, Mainpuri 205001 (U.P.) [GSTIN No. 09FOSPP6028CIZI ] is engaged in mixing of scent in the raw/unmanufactured tobacco dust, procured from various traders.
(ii) That said unmanufactured raw tobacco dust after mixing of scent (mixture of various perfumes and not jarda scent) is being sent for packing along with packing rolls of pouch to M/s Purwar Enterprises, who with the help of pouch packing machine prepares, the Pouches of Igm and then ensures packing of 26 pouches of 1 gramps in a transparent packet, bearing no marking, whatsoever and howsoever, and return it to the Applicant. Even the Pouches being supplied for packing contains only statutory marking in terms of Prohibition of Advertisement & Regulation of Trade and Commerce, production, Supply and Distribution Act, 2003 along with marking of Rate and weight in terms of Legal Metrology Act. The said pouches also do not bear any brand and /or trade name.
(iii) That the said product is then supplied on B to B and B to C basis from the premises of the Applicant, classifying it under GST Tariff Sub Heading 24012090, as unmanufactured tobacco, under cover of proper tax invoice and on payment of duty in accordance with law.
5. The applicant have submitted their interpretation of law as under-
(i) That the raw unmanufactured tobacco dust which is result of screening of raw tobacco through which tobacco leafs, it stem, and other tender parts are separated through the process drying, winnowing, crushing and separating though sieving, and the better part are used for chewing tobacco and remaining part in raw form i.e. stems, hard veins and leaves of tobacco plant are then crushed in the dust form, and the dust is also sold as such for human consumption.
(ii) That mixing of scent (mixture of various perfumes and not jarda scent) by the Applicant in raw unmanufactured tobacco dust does not make any irreversible change and remains raw unmanufactured tobacco dust only. The Applicant to prepare a blend of raw unmanufactured tobacco dust, only add mixture scent (mixture of various perfumes and not jarda scent) only, for human consumption. Since application of scent (mixture of various perfumes and not jarda scent) on raw unmanufactured tobacco dust do not result in proven irreversible change, the raw unmanufactured tobacco dust remains raw unmanufactured tobacco dust only, as such the same cannot be equated with manufactured tobacco.
The Applicant has placed reliance is the following case laws:-
i) Yogesh Associates v/s Commissioner of Central Excise, Surat-II reported in 2006 (195) ELT 196 (Tri.-Mum.).
ii) Shrikant Prasad v/s Commissioner of Central Excise, Calcutta-1 reported in 2000 (117) ELT 345 (Tribunal).
iii) Suresh Enterprises v/s Commissioner of Central Excise, Pune reported in 2006(203) ELT 432 (Tri. – Mumbai).
iv) Iswar Grinding Mills v/s Commissioner of C.Ex., Calcutta-1 reportedin 2000 (117) ELT 743 (Tri.).
6. The application for advance ruling was forwarded to the Jurisdictional GST Officer to offer their comments/views/verification report on the matter. But no reply was received.
7. The applicant was granted a personal hearing on 24.02.2023 which was attended by Mr. Amit Awasthi (Advocate), & Mr. Ashish Kumar Shukla (Advocate) Authorized Representatives during which they reiterated the submissions made in the application of advance ruling.
DISCUSSION AND FINDING
8. At the outset, we would like to make it clear that the provisions of both the CGST Act and the UPGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the UPGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / UPGST Act would be mentioned as being under the ‘CGST Act’.
9. We have gone through the submissions made by the applicant and have examined the interpretation submitted by them. At the outset, we find that the issue raised in the application is squarely covered under Section 97(2) (a) of the CGST Act 2017 being a matter related to classification of goods. We therefore, admit the application for consideration on merits.
10. The Applicant, M/s Pandey Traders, Siyapuram, Station Road, Mainpuri 205001 (U.P.) is engaged in mixing of scent in the raw/unmanufactured tobacco dust, procured from various traders. They have sought clarification on following points:-
1. Whether mixing of scent (mixture of various perfumes and not jarda scent) in raw unmanufactured tobacco dust by the Applicant after procuring the same from various traders, and its subsequent sale to customers on B to B and B to C basis, after ensuring packing from third party, would change the character of unmanufactured tobacco to manufactured tobacco?
2. Whether processing of unmanufactured tobacco dust by add mixing the scent (mixture of various perfumes and not jarda scent) would change the character of unmanufactured tobacco to manufactured tobacco?
11. We have carefully examined the submissions of the applicant, and the related statutory provisions. The issue raised by the applicant is
(i) Whether mixing of scent (mixture of various perfumes and not jarda scent) in raw unmanufactured tobacco dust by the Applicant after procuring the same from various traders, and its subsequent sale to customers on B to B and B to C basis, after ensuring packing from third party, would change the character of unmanufactured tobacco to manufactured tobacco?
(ii). Whether processing of unmanufactured tobacco dust by add mixing the scent (mixture of various perfumes and not jarda scent) would change the character of unmanufactured tobacco to manufactured tobacco?
12 The applicant is a proprietary concern is engaged in mixing of scent in the raw/unmanufactured tobacco dust, procured from various traders. That said unmanufactured raw tobacco dust after mixing of scent (mixture of various perfumes and not jarda scent) is being sent for packing along with packing rolls of pouch to M/s Purwar Enterprises, who with the help of pouch packing machine prepares, the Pouches of Igm and then ensures packing of 26 pouches of 1 gramps in a transparent packet, bearing no marking, whatsoever and howsoever, and return it to the Applicant. Even the Pouches being supplied for packing contains only statutory marking in terms of Prohibition of Advertisement & Regulation of Trade and Commerce, production, Supply and Distribution Act, 2003 along with marking of Rate and weight in terms of Legal Metrology Act. The said pouches also do not bear any brand and /or trade name. That the said product is then supplied on B to B and B to C basis from the premises of the Applicant, classifying it under GST Tariff Sub Heading 24012090, as unmanufactured tobacco, under cover of proper tax invoice and on payment of duty in accordance with law.
12.1 Under GST, the applicable rates of CGST are notified by Notification No.01/2017-C.T.(Rate) dated 28.06.2017 and in terms of explanation (iii) and (iv) to the said Notification,
(iii) “Tariff item”, “sub-heading” “heading” and “Chapter” shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975).
(iv) The rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be, apply to the interpretation of this notification.
Thus for the purposes of classification under GST, the First Schedule to Customs Tariff Act is only applicable. Further the first schedule to the Customs Tariff Act, 1975, and the Rules of interpretation therein are to be followed for classifying a product, in terms of Explanation 1 and 2 to Notification No. 1/2017- Compensation Cess (Rate) dated 28.06.2017.
12.2. The Customs Tariff Classification in respect of chapter 2401 are reproduced below for reference
24.01 – Unmanufactured tobacco; tobacco refuse.
2401.10 – Tobacco, not stemmed/stripped
2401.20 – Tobacco, partly or wholly stemmed/stripped
2401.30 – Tobacco refuse
This heading covers :
(1) Unmanufactured tobacco in the form of whole plants or leaves in the natural state or as cured or fermented leaves, whole or stemmed/stripped, trimmed or untrimmed, broken or cut (including pieces cut to shape, but not tobacco ready for smoking).
Tobacco leaves, blended, stemmed/stripped and “cased” (“sauced” or “liquored”) with a liquid of appropriate composition mainly in order to prevent mould and drying and also to preserve the flavour are also covered in this heading.
