2007 (3) TMI 24 - AT - Central Excise

Classification Department contended that the cigrattes imported by appellant is filter cigrattes and accordingly demand for differential duty Authority after considering the evidence rejected the department contention and allow the appeal

Summary

Issues: Classification of cigarettes as filter cigarettes, Duty demand, Imposition of penalty

In this case, the appellant manufactured cigarettes under the brand name "Tipper - Gold Tipped" and classified them as "other than filter cigarettes," discharging duty accordingly. However, the authorities held that these cigarettes should be classified as filter cigarettes, leading to a duty demand of over Rs. 2.3 crores and a penalty. The main issue was whether the cigarettes should indeed be classified as filter cigarettes, impacting the duty liability and penalty imposed.

The appellant argued that the cigarettes were not filter cigarettes, presenting expert opinions, distributor affidavits, and chemical examiner reports to support their claim. They highlighted that tobacco is not a typical filter material for cigarettes according to ISI specifications and industry norms. The appellant contended that the dense end rod in the cigarettes did not meet the essential characteristics of a filter, as it did not effectively filter smoke and nicotine. They also emphasized that the use of the term "filter" was deliberately avoided in marketing the product.

The authorities rejected the appellant's contentions, classifying the cigarettes as filter cigarettes based on their filtration efficiency and resemblance to filter cigarettes. They imposed duty demand and penalty, alleging mala fide intent to evade excise duty. The appellant challenged this decision, arguing that the authorities failed to provide substantial evidence supporting the classification as filter cigarettes and that the decision contradicted industry standards.

The tribunal analyzed the evidence, including expert opinions, chemical examiner reports, and industry practices. It concluded that the cigarettes did not meet the common parlance understanding of filter cigarettes and were incorrectly classified as such. As a result, the duty demand, penalty, and interest were deemed unsustainable. The tribunal set aside the impugned order, allowing the appeal in favor of the appellant.