Powdered tobacco for gudakhu is not a new commodity, so excise demand and penalty were set aside.

Powdering tobacco leaves with other raw materials for use in gudakhu did not amount to manufacture of a new and distinct commodity for Central Excise purposes. The Tribunal applied its earlier decisions on the same end-use, which had held that such powdering does not create a different marketable product. On that reasoning, the excise demand and penalty were set aside, and consequential relief followed.

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Issues: Whether powdered tobacco used in the manufacture of gudakhu amounts to manufacture of a new and distinct commodity so as to attract Central Excise duty.

Analysis: The product was prepared by powdering tobacco leaves along with other raw materials for making gudakhu. The facts were found to be similar to earlier Tribunal decisions cited before the Bench, where powdering of tobacco for the same end-use was held not to result in manufacture of a new commodity. Applying that reasoning, the Tribunal treated the earlier decisions as fully governing the present dispute.

Conclusion: Powdered tobacco used for gudakhu was not held to be a new and distinct commodity; the demand and penalty were set aside and the appeal was allowed with consequential relief.

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