1. A common issue is involved in both these appeals ; they relate to the same appellants and were argued before us together. They are, therefore, being disposed of by this combined order.
2. The common issue involved in the two appeals is the classification of the product 'Keora Golap Paner Dokta' manufactured by the appellants- whether it came under item 4-11(5) 'Chewing Tobacco' of the Central Excise Tariff or under residuary item 68 thereof. The product 'Dokta' was specifically included in item 4-11(5) by the Finance Bill of 1984 w.e.f. 1-3-1984. The dispute before us relates to the period prior to 1-3-1984.
3. The appellants have described the process of manufacture of their 'Dokta' in their appeal to us in the following terms:- "Tobacco leaves are first cleaned of dust, stalks and stems and are reduced to flakes. These flakes are then mixed in an emulsion prepared out of Veligur (Molasses) and Katha (Catachu). After liquid Gur is drained, Gum is added and then decorted and fried Dhania, Panmouri (Sooff), Chandani, Ajwain, Kalajeera and also Sandalwood Powder are mixed. This mixture is then dried in the Sun. When the mixture is completely dried, Glycerin, Scents and Attars, Sandalwood Oil and Patchouli Oil are added. It is now ready for packing in paper packets and to be marketed for use with Pan (Betel leaves) as Paner Dokta or Pan Masalla (mouth flavour." 4. Before we start the discussion of the merits of this case, it would be helpful to notice the events of the case as they took place, chronologically.
12-9-1975 Tariff advice issued by the Central Board of Excise and Customs to the effect that the entry 'Chewing tobacco' did not cover 'Paan Masala'.
3-9-1981 Another tariff advice issued by the Board saying that "Khara Masala' as well as 'Dokta' having less than 50% tobacco contents would continue to fall outside the purview of item 4-11(5) as already clarified in the Ministry of Finance (Department of Revenue) letter No.B. 4/3/75-TRU dated 12-9-1975." 5-11-1981 A trade notice issued by the Collector of Central Excise, West Bengal, Calcutta on the basis of the tariff advice dated 3-9-1981.
7-7-1982 The Superintendent of Central Excise drew a representative sample of the appellants' product 'Dokta' and sent it to the National Test House, Alipore, Calcutta to ascertain the tobacco content in the product.
3-6-1983 The Assistant Collector issued a notice to the appellants saying that it was proposed to classify their product 'Dokta' on the basis of its tobacco content with effect from 5-11-1981 and not from 1-3-1975 in terms of the trade notice dated 5-11-1981 and that if the appellants had to say anything against such proposal, they may come for a personal hearing before him on 13-6-1983 along with all evidence.
13-6-1983 The appellants were heard by the Assistant Collector. They claimed that the effective date of classification should be from 12-9-1975, the date of the first tariff advice.
23-6-1983 The Assistant Collector adjudicated the matter holding that since the tobacco content in all the 3 varieties of 'Dokta' manufactured by the appellants was less than 50%, they would not fall within the purview of item 4-II(5) as per the trade notice and would fall under item 68. He further held that since it was the tariff advice of 3-9-1981 which dealt with the classification of 'Dokta' and which accepted the percentage of tobacco content as the basis of classification, the classification decided by him would be effective from 3-9-1981.
12-8-1983 The appellants filed a refund claim for Rs. 4,58,089.91 for the period 26-12-1981 to 23-6-1983 consequent to the Assistant Collector's above order.
25-8-1983 The appellants filed an appeal before the Collector (Appeals) praying that the Assistant Collector's order should have effect from 12-9-1975.
24-10-1983 The Collector (Appeals) held that the Assistant Collector's order could not be sustained in law as it had been influenced by the tariff advice and the trade notice issued by administrative authorities. He set aside the order without prejudice to the right of the Assistant Collector to decide the matter afresh independently in accordance with law.
20-12-1983 The Assistant Collector passed the de novo order holding that chewing tobacco, which 'Dokta' was, remained chewing tobacco irrespective of its tobacco contents. He ordered its classification under item 4-II(5).
24-3-1984 Consequent upon his de novo order on classification, the Assistant Collector rejected the refund claim.
14-9-1984 The Collector (Appeals) passed the impugned orders-in-appeal upholding the above de novo order of the Assistant Collector on classification as well as the order rejecting the refund claim.
5. After adverting to the process of manufacture of their 'Dokta' as already extracted above, the appellants pressed for the following arguments before us during the hearing :- (1) Their product was only a Paan Masala or a Mouth Freshner. It could be chewed with Paan (Betel leaves) or without it. It was not chewing tobacco as its tobacco content was only 38.0%, as determined by the National Test House, vide the extract below :-"Results of tests Raw Tobacco Keora Golap1.Nicotine content (on dry 5.94 2.26 (This equi- basis) per cent by weight: valent to 38.03% raw Tobacco)." The tariff advice of 12-9-1975 had already determined the classification of preparations in the nature of Paan Masala. The subsequent tariff advice of 3-9-1981 only amplified and put the matter beyond doubt for their 'Dokta'. No product could be considered chewing tobacco unless tobacco was its principal ingredient. In this connection, they invited our attention to the following technical and judicial authorities extracted in their appeal to us:- (i) "The product is clearly distinguishable from chewing tobacco, which is described in the Report of Taxation Enquiry Committee as follows : 'The main areas of consumption of Chewing Tobacco are in South India where it is mostly used in the raw form without any process of manufacture. Uttar Pradesh and Delhi and to a smaller extent of Hyderabad are areas where there are manufacture of Chewing Tobacco called "Zarda".' (ii) The use and manufacture of Chewing Tobacco has been judicially noticed by Mr. Justice D. Basu in Civil Revision Case No. 344 W of 1961 (Dilip Kumar Mukherjee v. C.T.O.) thus :- 'It is common knowledge that Zarda (Chewing Tobacco) is taken by people with or without betel leaves in the country who are used to take narcotics in the process of chewing. It may be said that the act of taking Zarda (Chewing Tobacco) is analogous to that of taking Snuff or Hookah though it may vary in form of degree or intensity but the main ingredient is tobacco. The fact that the other ingredients are added to tobacco in the manufacture of Zarda like Scents or Colouring Substances does not seem to be material if the main ingredient after manufacture is tobacco.' (iii) His Lordship's findings received support and was approved by another Judge of Calcutta High Court Mr. Binayaka Banerjee who laid down in Civil Rivision Case No. 3985 of 1960-Taraknath Gupta v. C.T.O. :- 'Zarda (Chewing Tobacco) is tobacco manufactured into Zarda. The addition of aromatics of tasty substance with tobacco, so as to make Zarda fragrant or palatable retains the character of tobacco, if the tobacco be not denatured in the process of manufacture. If tobacco remains tobacco even though turned by manufacture into Chewing Tobacco, it comes within the definition of Tobacco or Chewing Tobacco within the definition as in the Central Excises and Salt Act.' (iv) In the appeal No. 157 of 1964 decided by Division Bench of Calcutta High Court constituted by Mr. D.N. Sinha, C.J. and Mr.
Aroon Kumar Mookerjee (as he then was), the yardstick to determine classification of a product as Chewing Tobacco was laid down in the following words- "Whether the Zarda involved in the case had its chief ingredient tobacco and whether the Zarda was result of a process of manufacture of tobacco or not." (2) As Tobacco is a hygroscopic product and is likely to be spoiled by absorbing moisture in the atmosphere, Chewing Tobacco is sold in tins. On the other hand, their 'Dokta' was sold in paper packets.
(3) The Assistant Collector's first order on classification was in their favour. The department had not filed any appeal against it. It was the appellants who went in appeal for back-dating the effect of the Assistant Collector's order. The process of appeal could not, therefore, put them in a worse position. This was the settled position in law. The scope of the order of remand made by the Collector (Appeals) has to be considered in the context of this legal position. Even though they did not appeal against the remand order, the remand and the consequential de novo adjudication could not take away the benefit already accrued to them from 3-9-1981 as a result of the Assistant Collector's first order.
(4) However, at the same time, the appellants accepted the position before us that any refund payable to them would have to be subject to the limitation contained in Section 11B of the Central Excises and Salt Act, 1944. They stated that they had claimed re-classification retrospectively from 12-9-1975 through a revised classification list filed by them on 27-4-1983 and that prior to it they had filed a protest letter on 26-12-1981.
6. The learned representative of the department stated that the methodology of test adopted by the National Test House, Alipore, Calcutta was not correct. It was common knowledge that Nicotine content in tobacco could vary. No standard Nicotine content in tobacco could, therefore, be presumed for deducing the tobacco content in the preparation 'Dokta'. In response to queries from the Bench, she stated that the Central Board of Excise and Customs had not laid down any other method for determining the tobacco content and also that it was the department which drew samples of the product and sent them to National Test House for testing. She also stated that as per the record, the department had not checked the process of manufacture of 'Dokta' at any time nor ascertained the weight of the various ingredients contained in it nor had the department asked for the formula of manufacture from the appellants. The Bench put it to her that the onus to establish classification under a particular entry of the tariff was on the department. She stated that the department had no other evidence as regards the tobacco content of 'Dokta'.
7. We have carefully considered the matter. We agree with the appellants that in the light of the judicial and technical authorities cited by them, and not controverted by the department, the subject varieties of 'Dokta' containing around 38% of tobacco could not be considered chewing tobacco during the prior to 1-3-1984. We observe that the Board's own advices are also to the same effect. All the authorities placed before us have consistently held that to be considered Chewing Tobacco, a product should have tobacco as its main ingredient. We also hold accordingly and order that the composite product 'Dokta' manufactured and cleared by the appellants prior to 1-3-1984 should be assessed under the residuary item 68 of the tariff.
8. The next question to decide is the period from which the appellants should get the consequential refund. The appellants have accepted before us that the refund payable to them would be subject to the provision of time bar in Section 11B of the Act. Even so we find that the facts on record before us do not help us to determine the precise period for which refund should be granted. The revised classification list on record does not bear any date. It is claimed by the appellants that it was submitted on 27-4-1983 but there is nothing on record to support it. The appellants' claim that before that they had filed a protest letter on 26-12-1981. But neither the protest letter is on record nor is any mention of it found in the lower orders. In the circumstances, we have to leave the question of determining the period of refund to the Assistant Collector.
8. In the light of our above discussion, we allow the two appeals in terms that classification of the subject varieties of 'Dokta' is ordered under item 68 during the period prior to 1-3-1984 and consequential refund, subject to the limitation of Section 11B, is ordered to be granted to the appellants.