Refundability of Central Excise Duty Paid on Unmanufactured Tobacco

At present based on the new tax framework introduced by the Government of India:

•              Tobacco and related products (including unmanufactured tobacco) are being brought back under central excise duty with revised rates under the Central Excise (Amendment) Act, 2025, effective from 1 February 2026.

•              The aim of this amendment is to ensure the tax incidence on tobacco remains comparable to the previous GST + compensation cess regime, as the compensation cess is being phased out.

•              Unlike GST compensation cess or GST itself, central excise duty is generally not refundable once legitimately paid, except under specific circumstances provided in the Central Excise Rules (such as export of excisable goods or court/tribunal orders where duty was wrongly collected). However, routine refund on domestic consumption excise duty (like on unmanufactured tobacco) is not provided simply because the rate changed.

 Key Points

1.            Central Excise duty on unmanufactured tobacco has been reinstated and revised (e.g., 60–70 % or as specified). This is meant to replace the outgoing compensation cess and maintain comparable tax burden.

2.            In general excise law (Central Excise Act and Rules), excise duty paid is not refundable simply because a higher or different rate is introduced later. Refunds are typically limited to specific statutory provisions (e.g., goods exported without use in India, duty paid in excess under mistake, etc.). There is no general refund provision on account of rate changes alone for domestically consumed goods.

3.            Therefore, central excise duty paid on unmanufactured tobacco under the new regime is not refund-able merely because of the new notification rate change. Refund would only be available if duty was paid erroneously or in a situation explicitly covered under the Central Excise Rules/Act provisions (e.g., wrongful collection, re-export, etc.).

 Conclusion

✔ No automatic refund on central excise duty paid on unmanufactured tobacco merely because of the new notification or change in rate.

✔ Refund may be claimed only in cases expressly provided under excise law (e.g., incorrect payment under mistake of law/fact, export, or as otherwise statutorily justified).

✔ The new law reflects a policy change to continue taxation on tobacco via excise after GST compensation cess is phased out, not to provide refunds on previously paid cess/duty