2026-VIL-966-CESTAT-DEL-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - Classification of Manufactured Tobacco Product – Appellant-manufacturer of tobacco products filed returns showing classification under CETI 2403 99 10 as chewing tobacco from 2012 to 2016. The Department issued multiple orders during this period confirming the same classification - Subsequently, SCN issued contending that the product should be classified as zarda scented tobacco under CETI 2403 99 30 and demanded differential excise duty - Whether the goods manufactured and cleared by the assessee are classifiable as chewing tobacco under CETI 2403 99 10 or zarda scented tobacco under CETI 2403 99 30 - HELD - The assessee and the Department have consistently classified the product as chewing tobacco throughout the relevant period. The assessee filed ten returns from August 2012 to March 2016 consistently showing classification under CETI 2403 99 10, and the department itself issued thirteen orders between 2012 and 2016 confirming this classification. No objection was raised by the department during this entire period - The Supreme Court decision in Commissioner of Central Excise and S.T., Alwar vs. Tara Chand Naresh Chand establishes that once both the assessee and the Department have consistently classified a product in a particular manner, the department cannot subsequently contend that a different classification applies. The principles of consistency, estoppel and reliance prevent the Department from changing its classification stance after years of accepting the assessee's returns and issuing confirmatory orders - The demand for differential excise duty, interest under section 11AA, and penalty under section 11AC of the Central Excise Act cannot be sustained and set aside - All demands against the assessee are set aside and the appeals are allowedrnrnImposition of Penalty under Rule 26 of Central Excise Rules - Whether penalties under Rule 26 of the Central Excise Rules can be imposed on individuals when the order does not contain a clear finding that the goods are liable to confiscation – HELD - The Rule 26(1) provides that penalty is imposable only when a person knowingly deals with excisable goods which are liable to confiscation under the Act or the rules. A clear finding and discussion regarding confiscation or goods being liable to confiscation is an essential ingredient and prerequisite for imposing penalty under Rule 26 - The mere mention of confiscation while imposing penalties without a separate discussion and finding is insufficient to satisfy the statutory requirement. The impugned order lacks any discussion establishing that the goods were liable to confiscation, which is a mandatory condition for imposing penalties under rule 26 - Penalties imposed under Rule 26 of the Central Excise Rules are set aside.
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