1981 (5) TMI 119 - Board - Central Excise

Destroyed cigarettes not excisable goods, not liable for excise duty. Consistent rules application crucial.

IN RE: INDIA TOBACCO CO. LTD.

IN RE: INDIA TOBACCO CO. LTD. - 1981 (8) E.L.T. 847 (C. B. E. & C.) Issues:1. Appeal against penalty imposed by Collector of Customs & Central Excise.2. Interpretation of whether destroyed cigarettes were excisable goods.3. Liability for excise duty on destroyed cigarettes.4. Liability for penalty on appellants.Analysis:The judgment pertains to an appeal by India Tobacco Ltd. against a penalty imposed by the Collector of Customs & Central Excise, Bangalore. The advocates for the appellant argued that the entire proceedings leading to a judgment by the Karnataka High Court had become non-est due to a subsequent Supreme Court judgment. The Board examined the case history where the company destroyed cigarettes without prior intimation to Central Excise authorities. The company contended that the destroyed cigarettes were not excisable goods and hence not liable for excise duty or penalty. The respondents argued that even spoiled cigarettes are liable for duty and destruction should be supervised. The Board reviewed the Supreme Court's definition of 'manufacture' and concluded that contaminated cigarettes not fit for sale are not excisable goods. The Board also assessed the liability for excise duty and penalty based on the circumstances of the case.The Board found that the destroyed cigarettes were indeed oily and unfit for consumption, thus not liable for excise duty. The Board highlighted that the Collector's attempt to reopen the issue was self-defeating as prior proceedings had treated the cigarettes as excisable goods. The Board emphasized that the Department's stance on the matter must be consistent and supported by evidence. Regarding the liability for penalty, the Board noted the lack of evidence showing intent to evade duty. The Board highlighted doubts about the disposal of the cigarettes and the possibility of pilferage, leading to the conclusion that the appellants did not willfully evade duty. The Board criticized the Department for not presenting sufficient evidence to support the penalty imposition, ultimately ruling in favor of the appellants and allowing the appeal against the penalty.In conclusion, the judgment addressed the issues of excisability of destroyed cigarettes, liability for excise duty, and penalty imposition. The Board's analysis focused on the definitions of excisable goods, the company's actions, and the Department's evidence. The decision highlighted the importance of consistent application of rules and the burden of proof in establishing liability for duty and penalties. The ruling favored the appellants, emphasizing the lack of evidence supporting the massive penalty imposed by the Collector.