Tobacco Pouches Up To 10g Not Liable To MRP-Based Excise Duty: CESTAT Chandigarh

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chandigarh, has ruled that small tobacco pouches of 4 grams and 9 grams are not liable to MRP-based valuation under Section 4A of the Central Excise Act, 1944, allowing a batch of appeals filed by Shiva Tobacco Co. and others.

If Section 4A (MRP-based valuation) does not apply, valuation falls back to Section 4 (transaction value).

The bench comprising Judicial Member S. S. Garg and Technical Member P. Anjani Kumar delivered the ruling.

The Tribunal said, “Rule 34 (1) (b) of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 exempts the packages containing 4 gm/ 9 gm from the purview of the Act and Rules.”

It further held that the Department had failed to substantiate its allegation that the appellants manufactured and cleared 15 gram pouches, observing, “.....other than making an allegation, Revenue did not provide any quantifiable data of 15gm pouches manufactured/ cleared by the appellants and the applicable duty on the same. The same was also not given in the show cause notice. Under the circumstances, there are no reasons to disbelieve the version of the appellants. Moreover, the benefit of doubt, if any, should always go to the appellants.”

The case arose from show cause notices issued by the Department alleging misclassification of “spit tobacco” and seeking to levy duty on the basis of Section 4A of the Central Excise Act, 1944.

Initially, the adjudicating authority ruled in favour of the assessees, and the decision was upheld by the Commissioner (Appeals). The Tribunal later remanded the matter for fresh adjudication.

Following chemical examination reports, the Department went on to confirm duty demands along with penalties. The Commissioner (Appeals) upheld this view, which brought the assessees back before the Tribunal.

Before the Tribunal, the appellants maintained that the product in question was not chewing tobacco.

They pointed to differences in how it is used, what goes into it, and how it is made.

At the same time, they argued that this classification dispute did not really matter, since the pouches were only 5 grams and 9 grams in size. Being below 10 grams, they said, the product fell within the exemption under Rule 34(1)(b).

The Tribunal found merit in this line of reasoning. It noted that the real question was whether Section 4A applied at all, not how the product was classified.

Since packages of 10 grams or less are exempt from MRP declaration requirements, the Tribunal held that such goods cannot be assessed under Section 4A.

On the Department's claim that 15 gram pouches had also been manufactured and cleared, the Tribunal found no supporting material. There was no evidence placed on record and no quantifiable data in the show cause notices to back the allegation.

Consequently, the tribunal held that the 4 gram and 9 gram pouches were squarely covered by the exemption under Rule 34(1)(b). As a result, Section 4A did not apply, and the appeals were allowed.

For Appellant: Advocate Naveen Bindal

For Respondent: S.K. Meena, Authorized Representative