2015 (3) TMI 1144 - AT - Central Excise

Entitlement for abatement - stoppage of production - Held that - When a manufacturer of Gutka/Pan Masala is manufacturing Gutka/Pan Masala pouches of different RSPs and for a certain period of 15 days or more, he stops the production of only one particular RSP, he will not be entitled for abatement, if continues the production or clearances of Pan Masala/Gutka of other RSPs by operating those machines. As find that from the language of Rule 10 it is clear that for claiming abatement under Rule 10, there must be total Gutka/Pan Masala pouches which have to be sealed in such a manner that same cannot be operated and besides this, there should be no clearances of any specified goods during the period of stoppage of production for which abatement has been claimed. From the objectives of notifying the goods for assessment and collection of duty based on capacity of production, as mentioned in Section 3A(1) of the Central Excise Act, 1944 and from perusal of the Rules framed under Section 3A(1), it is clear that these rules have been framed keeping in view the widespread duty evasion by Pan Masala/Gutka manufacturers and the provisions of various rules of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 including Rule 10 thereof must be seen in this background. The interpretation of Rule 10 sought by the appellant would be not only against the provisions of this rule but would also be against the smooth functioning of the system of collection of duty from Gutka/Pan Masala units, as envisaged under these Rules. It appears that it is not the case of the appellant that during the period of abatement, there was total stoppage of production and clearances. It is very much clear that there should be complete stoppage of the machine which is not in the matter in hand. Therefore, find that both the lower authorities have concluded correctly that the appellant has not satisfied the condition of the grant of abatement as production in the factory of the notified goods was in operation. Appellant is not entitled for abatement. - Decided against assessee

Summary

Issues:
- Rebate claim rejection for duty paid on packing machines

Analysis:
The appellant, a manufacturer of Branded Chewing Tobacco, filed a rebate claim for &8377; 7,12,500/- for the non-operative period of the "second machine." The lower authorities rejected the claim citing non-compliance with Rule 10 of Packing Machine Rules, 2010, which requires complete stoppage of production for a specified period. The appellant's first machine was operational for the entire month, and the abatement claim for the non-operational second machine was deemed inadmissible. A show cause notice was issued, leading to the rejection of the abatement claim in the Order-in-Original.

The Commissioner (Appeals) upheld the rejection, prompting the appellant's appeal. The appellant argued that duty should be proportionate to the machine's operational period, as per Notification No. 16/2010 and the relevant rules. The Assistant Commissioner and the Advocate for the Respondent supported the lower authorities' findings.

Upon review, the judge found that Rule 10 of the Pan Masala Packing Machine Rules, 2008, governs cases of non-production of goods. The rule mandates a complete stoppage of production for at least 15 days, with prior intimation and sealing of machines. No manufacturing activity or goods removal is allowed during the stoppage. The judge emphasized the rule's objective to prevent duty evasion by manufacturers and ensure smooth duty collection. The appellant's interpretation of Rule 10 was deemed contrary to its provisions and the duty collection system's functioning.

The judge concluded that the appellant failed to meet the abatement conditions due to continued production in the factory, rendering them ineligible for abatement. The impugned order was upheld, and the appellant's appeal was dismissed. The judgment was pronounced on 16-3-2015 by Shri Ashok Jindal, Member (J) of the Appellate Tribunal CESTAT NEW DELHI.