2004 (12) TMI 577 - AT - Central Excise

Summary

Issues:
Appeal against order-in-appeal regarding demand of duty on cut tobacco for use in manufacturing cigarettes under concessional rate of duty - Weight of tissue paper in manufactured cigarettes affecting calculation of actual quantity of cut tobacco consumed - Comparison of input-output ratio declared by appellants with weight of manufactured cigarettes - Applicability of previous Tribunal decision in similar case.

Analysis:
The appellants filed an appeal against the order-in-appeal passed by the Commissioner (Appeals) regarding the demand of duty on cut tobacco used in manufacturing cigarettes under a concessional rate of duty. The issue arose from a show cause notice alleging short consumption of tobacco due to the weight of tissue paper not being deducted from the weight of cigarettes. The Adjudicating authority confirmed the demand based on this calculation, which was upheld by the Commissioner (Appeals).

The appellants contended that they regularly filed declarations regarding their input-output ratio, showing the quantity of cut tobacco used in manufacturing cigarettes. They argued that the weight of tissue paper in the manufactured cigarettes should not be considered in determining the actual consumption of cut tobacco. The appellants referred to a pilot experiment conducted by the Revenue authority, which consistently supported the input-output ratio declared by them. They also cited a previous Tribunal decision in their favor on similar grounds.

The Revenue's argument was based on the premise that if the weight of tissue paper was not deducted, the cut tobacco received under the concessional rate was not fully consumed in manufacturing cigarettes. However, the Tribunal found that the appellants' declarations and the pilot experiments consistently showed the use of cut tobacco in line with the declared input-output ratio, without considering the weight of tissue paper in the manufactured cigarettes.

Ultimately, the Tribunal ruled in favor of the appellants, setting aside the demand for duty. The decision was based on the lack of basis for the demand, as the input-output ratio declared by the appellants did not consider the weight of tissue paper, and previous Tribunal precedent supported their position. Therefore, the appeal was allowed, and the demand was deemed unsustainable.