Jyoti Balasundaram, Vice President - (1.)THE brief facts of the case are that during the month July 2004, the appellants herein who are manufacturers of Cigarettes, sent a particular quantity of raw tobacco (inputs for cigarettes) to M/s Laxmi Ventures India Ltd for curing, blending and manufacture of cut tobacco on job work basis and received back the cut tobacco and claimed exemption in terms of Notification No. 214/86 on the ground that the same would be used for the manufacture of excisable goods namely Cigarettes. THE authorities below confirmed a demand of Rs. 5,25,400/- holding that the cut tobacco was not entitled to exemption in terms of the notification to the extent that it contained tobacco dust/tobacco refuse which are goods attracting nil tariff rate of Central Excise Duty. In other words the benefit of the notification has been denied by treating tobacco dust/tobacco refuse as a final product not attracting duty liability, thus giving rise to the demand on input namely cut tobacco.
(2.)We have heard both sides and perused the notification in question. There is no dispute that the appellants are registered manufacture of cigarettes. There is also not dispute that cigarettes are entirely cleared for export. The fallacy in the impugned order arises in its concept/perception of what is final product. It has been erroneously held that tobacco dust/tobacco refuse arising during the course of manufacture of cigarettes is a final product and on that basis since that final product namely tobacco dust/tobacco refuse does not discharge any duty liability cut tobacco which is input for manufacture of the cigarettes has been held to be liable to duty as the benefit of notification No. 214/86 is not available. We are of the view that the tobacco dust/tobacco refuse cannot be treated as final product for the purpose of Notification No. 214/86. the final products are the cigarettes. Therefore the assessee is entitled to the benefit of exemption on cut tobacco under seizure under notification. We therefore, set aside the impugned order by which the demand has been confirmed and penalty of Rs. 50,000/- imposed, and allow the appeal.