2016 (1) TMI 1141 - AT - Central Excise

Demand of interest for leviability of duty for full period - availing of abatement by its own - manufacture of tobacco - Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010 - operation discontinued and again stared after some time - whether demand of interest valid on the ground that the appellants availed abatement on their own? Had the appellants followed the proper procedure, the full amount as confirmed in the original order would have been paid and later, abatement would have been granted as per the actual dates of operation - Held that - The reason given for confirming the interest is that the due date for payment of duty in terms of the above mentioned Rules is 5th of same month. The same is stipulated in Rule 9. The 3rd proviso to Rule 9 gives an exception that in case of increase in the number of operating machines in the factory during the month on account of addition or installation of packing machines, the differential duty amount, if any, shall be paid by the 5th day of the following month. During the period in which the due date falls, there is no manufacturing operation by the appellant. Hence, it follows that no duty could be determined and paid by them by 5th of the same month. The machines were unsealed and allowed for operation much later and such situation will be covered by the 3rd proviso of Rule 9 - decision in the case of Trimurti Fragrance Pvt. Ltd. Versus Commissioner of Central Excise, Delhi-II 2016 (2) TMI 718 - CESTAT NEW DELHI relied upon. Demand of interest fails - appeal allowed - decided in favor of appellant.

Summary

Issues: Liability for Central Excise duty payment, interest payment on duty liability, interpretation of Chewing Tobacco and Unmanufactured Tobacco Packing Machines Rules, 2010.

In this case, the appellants, engaged in manufacturing chewing tobacco, faced a dispute regarding the payment of Central Excise duty for the months of December 2011 and February 2012. The appellants had intimated their production stoppage and recommencement, paying duty for specific operational days. The Department alleged short-payment of duty, demanding the full amount for the respective months. The Original Authority confirmed the duty demand, but the Commissioner (Appeals) set it aside, upholding interest payment of Rs. 63,616. The Commissioner found that the appellants availed abatement incorrectly, depriving the Government of interest. The appellants contested this decision, leading to the appeal.

The main issue revolved around the liability of the appellants to pay interest on the duty liability arising in December 2011 and February 2012. The Commissioner (Appeals) based the interest payment on the due date for duty payment, set as the 5th of the same month under the Chewing Tobacco and Unmanufactured Tobacco Packing Machines Rules, 2010. However, the appellants argued that as there were no operating machines in their factory on the due dates, no duty liability could be determined or paid by the 5th of the month. They relied on the third proviso to Rule 9, which states that in case of inoperative machines during the due date period, the duty payable would be the 5th of the following month. Citing a similar Tribunal case, the appellants contended that the duty payment date should align with the actual operational days. The Tribunal concurred with this argument, setting aside the Commissioner (Appeals) decision and allowing the appeal.

The Tribunal's decision emphasized the importance of aligning duty payment dates with actual manufacturing operations, especially when machines are inoperative during the due date period. By invoking the third proviso to Rule 9 of the Chewing Tobacco and Unmanufactured Tobacco Packing Machines Rules, 2010, the Tribunal clarified that duty liability arises based on operational days, not fixed monthly due dates. This judgment highlights the necessity for a practical approach in interpreting excise duty payment rules, ensuring fairness and adherence to legal provisions.