Raj Jaggi
Quick Summary
A Rs.1.31 Crore Classification Shift Turned on One Legal Question The Madras High Court ruling in M/s R. Renganathan Sons v. Assistant Commissioner of GST and Central Excise, Thanjavur, 2026-VIL-587-MAD, W.P.(MD) No.26461 of 2025, pronounced on 01.06.2026, examines a deceptively simple question
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FAQ :
The main legal question was whether cutting dried tobacco and sprinkling it with jaggery water constituted the manufacture of a new tobacco product or if the material remained unmanufactured tobacco.
Under Section 2(72) of the CGST Act, manufacture means processing raw materials or inputs in a manner that results in the emergence of a new product having a distinct name, character, and use.
No, adding jaggery water to tobacco and cutting it does not automatically constitute manufacture. The process must result in a new product with a distinct name, character, and use; simply softening the leaves for easier handling is not enough.
The court relied heavily on the precedent set in Pachaiappa Chettiar v. State of Madras, which held that merely sprinkling jaggery water and cutting tobacco did not constitute the manufacture of a new commodity.
The HSN Explanatory Notes confirm that unmanufactured tobacco can include leaves treated with liquid for preservation or to prevent drying, supporting the idea that such treatments do not automatically classify the product as manufactured.
Taxpayers must ensure all records consistently document their processes, including ingredients and stages, to support claims about the limited role of any treatment, such as jaggery water being used solely for preservation and ease of cutting.
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