Input-output norm for cut tobacco cannot include tissue paper weight when consumption is measured by cigarette count.

For cut tobacco cleared under Chapter X Procedure, an input-output norm based on the number of cigarettes producible from one kilogram of cut tobacco could not be tested by adding the weight of tissue paper in the finished cigarettes. The declared consumption ratio and the Revenue's pilot tests both measured tobacco consumption by cigarette count, so the gross weight of cigarettes was not relevant to the norm. On that basis, tissue paper could not be used to allege short consumption or sustain a duty demand. The reasoning followed the assessee's earlier case on similar facts, and the demand was set aside in favour of the assessee.

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Issues: Whether the demand of duty on cut tobacco was sustainable by treating the weight of tissue paper used in manufactured cigarettes as part of the consumption norm under Chapter X Procedure.

Analysis: The appellants had declared the input-output ratio on the basis of the number of cigarettes producible from one kilogram of cut tobacco, and the Revenue's own pilot tests were conducted on the same basis. The demand was raised only by adding the weight of tissue paper to the weight of the finished cigarettes, although the declared norm and the verified pilot results related to quantity of cut tobacco consumed in terms of number of cigarettes and not the gross weight of cigarettes. On that footing, the weight of tissue paper had no relevance to the declared consumption norm. The reasoning was also consistent with the earlier decision in the appellants' own case on similar facts.

Conclusion: The demand was unsustainable and was set aside; the appeal was allowed in favour of the assessee.

Ratio Decidendi: For cut tobacco cleared under Chapter X Procedure on the basis of an input-output norm expressed in number of cigarettes, the weight of tissue paper in the finished cigarettes cannot be used to allege short consumption or justify duty demand.

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