P.C. Jain, Member (T)

1. The appellant company herein undertook crushing of tobacco leaves, stems, stalks and butts and they convert them into powder form. Question involved in this appeal is whether the tobacco powder so obtained as mentioned above is liable to duty or not under Chapter 24 of the Central Excise Tariff Act, 1985. The appellants contention is that it falls under 2401.00 as unmanufactured tobacco which carries the nil rate of duty whereas the contention of the lower authorities is that it falls under Tariff Heading: 2404.90. In order to appreciate the contention of both sides, we reproduce the relevant Tariff Headings :-

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"24.01 2401.00 Unmanufactured tobacco; tobacco refuse Nil Nil

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24.04 "Other manufactured tobacco and manufactured

tobacco substitutes; homogenised or

Reconstituted tobacco ; tobacco extracts and

essences

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2404.90 Other 15%

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2. We also reproduce below the definition of manufacture given in Section 2(f) of the Central Excise Act, 1944 as also the specific definition in relation to tobacco, as mentioned in the Judgment reported in 1990 (48) E.L.T. 115 at para 12:-

"12. The relevant portion of amended Section 2(f) of the Central Excises & Salt Act reads as follows :-

"Manufacture" includes any process incidental or ancillary to the completion of a manufactured product; and

(i) in relation to tobacco, includes the preparation of cigarettes, cigars, cheroots, biris, cigarettes or pipe or hookah tobacco, chewing tobacco or snuff;

(ii) in relation to manufactured tobacco, includes the labelling or re-labelling of containers and repacking from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer."

2. Learned Consultant, Shri N.C. Mitra for the appellant company urges that tobacco powder produced by them in the manner aforesaid still remains as an unmanufactured tobacco. It is merely a change in forms i.e. from one form of unmanufactured tobacco to another form of unmanufactured tobacco. It does not bring into existence any new manufacture.

3. On the other hand, the lower authorities have held that the tobacco powder as brought into existence by the appellants, is different from tobacco stems, stalks, butts and leaves and it is made fit for use in the nearby industry for the manufacture of gudakhu-form tobacco. Since the process of crushing/grinding of the aforesaid unmanufactured tobacco into tobacco powder has brought into existence a new product known to the market as such, therefore, it is a manufactured tobacco falling under sub-Heading: 2404.90.

3. We have carefully considered the pleas advanced from both sides. We are of the view that mere crushing/grinding of unmanufactured tobacco to bring into existence powdered-form tobacco is not a process of manufacture to say that such tobacco powder will be a manufactured tobacco as mentioned in Tariff Heading: 24.04.

4. We agree with the appellants learned Counsel that it is merely a change from one form of unmanufactured tobacco to another form. This is also clear from the definition of manufacture in relation to tobacco. None of the processes mentioned in Section 2(f) of the Central Excise Act, 1944 which sets out the various processes of manufacture in relation to tobacco, are carried out in the present case. No other evidence has also been brought on record by the Revenue that tobacco powder so produced by appellants is known in the market as a manufactured tobacco. This burden squarely rests on the Revenue if they want to levy duty under Tariff Heading: 24.04 on the said product under consideration. We also observe that there is a Judgment of the Tribunal in the case of Shree Chand Agarwal v. Collector of Central Excise reported in 1990 (48) E.L.T. 115 (Tribunal), which helps the appellant company in this case. In view of the foregoing discussion, we, therefore, hold that the tobacco powder manufactured by the appellants herein would fall under the Tariff Heading 2401.00 being manufactured tobacco carrying nil rate of duty. The appeal is thus allowed with consequential relief to the appellants.