The EU’s general excise duty framework, Directive 2020/262, does not itself define the products subject to excise duty. Instead, Article 1 refers to the specific EU legislation governing energy products and electricity (Directive 2003/96), alcohol and alcoholic beverages (Directive 92/83), and manufactured tobacco (Directive 2011/64).
In the case of energy products and alcoholic beverages, the relevant legislation generally identifies the products concerned by reference to their Combined Nomenclature (CN) codes. Determining whether a particular product falls within the scope of excise duty therefore requires consideration of the relevant customs classification rules, including the CN Explanatory Notes.
Interestingly, these rules do not generally refer to EU technical regulations, even where such regulations provide more precise product definitions. This perhaps reflects the traditionally close relationship between customs classification and excise duty.
The distinction can nevertheless be important. In the case of alcoholic beverages, for example, technical regulations can help resolve classification difficulties involving fermented beverages and spirits. Article 2 of Regulation 2019/787 defines spirit drinks by reference, among other matters, to production processes involving the distillation of fermented products. From that perspective, a fermented product would not normally become a spirit merely because of its alcoholic characteristics; the production process is also relevant.
Tobacco is different
The position becomes more complicated when considering Directive 2011/64 on manufactured tobacco.
Unlike the legislation governing energy products and alcohol, Directive 2011/64 does not define its products by reference to CN codes or to the relevant technical legislation, such as Directive 2014/40. Instead, it contains its own definitions of the tobacco products falling within the excise duty regime.
There are historical reasons for this approach.
The harmonisation of tobacco taxation was one of the earliest areas of European excise legislation. Tobacco monopolies in the principal producing countries, together with differing national tax systems, created barriers to competition and cross-border trade.
The first harmonising tobacco Directive, adopted on 19 December 1972, therefore sought to establish a common structure for the taxation of cigarettes. Its preamble recognised that the existing taxes on tobacco products were not neutral from the perspective of competition and could constitute a serious obstacle to the integration of national markets.
Further legislation was then required to define cigarettes and the other categories of manufactured tobacco.
The second harmonising Directive, adopted on 18 December 1978, introduced definitions for cigars, cigarillos and cigarettes. It also introduced a category that has continued to create considerable interpretative difficulty: “other smoking tobacco”.
Broadly, this included tobacco that had been cut or otherwise split, twisted or pressed into blocks and was capable of being smoked without further industrial processing, together with certain tobacco refuse put up for retail sale.
A definition struggling to keep pace with the market
The concept of “other smoking tobacco” has proved increasingly difficult to apply as the tobacco market has evolved.
The legislation has remained largely unchanged while new products and methods of sale have developed. These include, for example, minimally processed tobacco leaves supplied to consumers who carry out further preparation themselves.
Unsurprisingly, the Court of Justice of the European Union (CJEU) has been asked repeatedly to interpret the definition, including in Brinkmann (24 September 1998), Schenker (8 September 2016), Eko-Tabak (6 April 2017) and Skonis (16 September 2020).
Two particularly important judgments were delivered in April 2026:
Case T-190/25, Tabako lapai, 15 April 2026; and
Case T-194/25, Scrap-Transporteur, 29 April 2026.
Both judgments provide useful clarification of when partially processed tobacco becomes “other smoking tobacco” and therefore falls within the excise duty regime.
Tabako lapai – what amounts to “industrial processing”?
The Tabako lapai case concerned a business carrying out partial processing of imported tobacco.
Its activities included tearing, chopping, humidifying and partially or completely removing the stems from shredded tobacco leaves. The resulting product was packed into 20-kilogram plastic bags before being sent to other EU Member States.
The competent authorities regarded the product as “other smoking tobacco” and therefore subject to excise duty.
The CJEU's judgment is important for two reasons.
First, it provides further guidance on what is meant by “industrial processing” when determining whether tobacco is capable of being smoked without further industrial processing.
Second, it confirms that CN classification is not determinative for the purposes of Directive 2011/64.
What is industrial processing?
The Court described industrial processing as generally involving the transformation, normally on a large scale and through a standardised process, of raw materials into tangible goods.
By contrast, relatively simple handling that makes an unfinished tobacco product capable of being smoked does not necessarily amount to industrial processing.
The important principle is therefore that manufactured tobacco which is already ready to smoke—or which can readily be made ready to smoke using non-industrial methods—may be regarded as capable of being smoked without further industrial processing.
This gives the definition a potentially broad scope.
A product does not necessarily fall outside the excise regime simply because the consumer must undertake some additional preparation before it can actually be smoked.
CN classification does not determine the excise treatment
The Court also addressed the relationship between Directive 2011/64 and the Combined Nomenclature.
It concluded that where there is a divergence between the classification resulting from Directive 2011/64 and that resulting from the CN and its Explanatory Notes, the CN classification cannot override the Directive's definition of smoking tobacco.
This is an important distinction between tobacco and other excise goods.
Unlike Directive 2003/96 governing energy products, Directive 2011/64 does not use CN codes to define the manufactured tobacco products falling within its scope.
The Court therefore concluded that, when determining whether a product is “smoking tobacco” within Article 5(1)(a) of Directive 2011/64, it is not necessary to rely upon CN tariff headings or the CN Explanatory Notes.
The excise classification must instead be determined by applying the specific definitions contained in the tobacco Directive itself.
Scrap-Transporteur – tobacco prepared by the consumer at home
The second judgment, Scrap-Transporteur, is particularly interesting because it deals with an increasingly relevant business model: supplying tobacco leaves that require further processing by the customer at home.
Again, the Court addressed two important questions.
First, does the consumer's perception of the product determine whether it is smoking tobacco?
Second, can a product still be regarded as capable of being smoked “without further industrial processing” where the consumer has to carry out several preparation stages at home?
Consumer perception is not decisive
The Court concluded that Article 5(1)(a) makes no reference to consumer perception when defining “smoking tobacco”.
The expression “capable of being smoked” is concerned with whether the product can physically be smoked—that is, whether heating or burning it produces smoke capable of being inhaled.
It does not introduce a test based upon how the ordinary consumer regards the product.
The contrast with the Directive's treatment of cigars and cigarillos is significant. Article 4(1) expressly refers to products which, having regard to their properties and normal consumer expectations, are intended exclusively to be smoked as they are.
No equivalent consumer-expectation test appears in Article 5(1)(a).
The Court considered this omission deliberate. Had the EU legislature intended consumer perception to form part of the test for “other smoking tobacco”, it could have said so expressly.
Even multi-stage home processing may not be “industrial”
Perhaps the most significant aspect of the judgment concerns the amount of processing that can be carried out by the consumer without the process becoming “industrial”.
The product concerned had already undergone an initial drying process and had to be maintained at a controlled level of humidity.
Before it could be smoked, the consumer then had to boil the tobacco with water, glycerine and sugar and mix it with the flavourings normally used for water-pipe tobacco. Instructions explaining how to undertake the process were readily available online.
At first sight, this might appear to be a significant amount of additional processing.
However, the Court focused on the nature of the process rather than simply the number of steps involved.
The various preparation stages did not require a standardised industrial process. Furthermore, the fact that detailed instructions were freely available to consumers online supported the conclusion that the process could be undertaken by individuals at home rather than requiring industrial production facilities.
The Court therefore concluded that the expression “without further industrial processing” can encompass multi-stage preparation methods carried out by consumers at home.
As a result, the product could still be classified as “other smoking tobacco” and was therefore subject to excise duty.
Why these judgments matter
The two April 2026 judgments demonstrate just how broadly the concept of “other smoking tobacco” can operate.
Businesses cannot necessarily avoid tobacco excise duty simply by supplying a product in an unfinished or partially processed state.
Three principles are particularly important.
First, tobacco excise classification under Directive 2011/64 is determined by the Directive's own definitions rather than by CN classification.
Second, a product does not necessarily need to be immediately ready to smoke. It may still constitute smoking tobacco where it can readily be made smokable without industrial processing.
Third, even several stages of preparation undertaken by the consumer at home may fall short of “industrial processing”, particularly where no specialised or standardised industrial process is required.
The judgments therefore reinforce the need for businesses dealing in tobacco leaves, partially processed tobacco and novel tobacco products to consider excise classification carefully.
The commercial description of the product, its customs classification and even the way in which consumers perceive it may not provide the answer.
For EU excise duty purposes, the critical question is whether the product falls within the autonomous definitions contained in Directive 2011/64—and, in particular, whether it is capable of being smoked without further industrial processing.
