2016 (2) TMI 1039 - AT - Central Excise

Rebate claim - closure of factory - denial on the ground that the appellant did not give the intimation of suspension of production at least 3 days prior to the date of commencement of the period of suspension - Held that - the period of 3 days as in Rule 10 of the Rules, is in respect of the normal situation, where the manufacturer wants to suspend production. The rule is silent as to the period of intimation in case of breakdown. In such circumstances on the harmonious reading, the period of 3 days cannot be insisted upon in case breakdown. In the facts of the present case admittedly the appellant had given intimation during the working hours on 16-7-2010 and on the same day the machine was sealed. The law have been explained by Hon ble Allahabad High Court in the case of Rajat Industries Pvt. Ltd. 2015 (11) TMI 956 - ALLAHABAD HIGH COURT , where the period is prescribed so as to make available sufficient time to the Revenue to reach the premises of production and seal the machinery. Once this has been achieved the substantial benefit cannot be denied. Rebate allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against denial of rebate for the period of closure of production under Rule 10 of Pan Masala Packing Machines (Capacity Determination & Collection of Duty) Rules, 2008.

Analysis:
The appellant, a manufacturer of pan masala and Gutka, faced denial of rebate for the closure period due to a breakdown of the form fill and seal machine. The appellant informed the Revenue about the breakdown, shut down production, and requested sealing of the machine. Despite fulfilling the conditions under Rule 10 of the Rules, the claim for abatement of duty was rejected by the revenue, citing lack of prior intimation of suspension of production. The appellant contended that in cases of breakdown, it is impractical to provide a 3-day notice as required under normal circumstances. The appellant argued that the purpose of the notice period is to prevent clandestine activities, and since the Revenue was informed promptly, the benefit should not be denied.

The appellant appealed before the Tribunal, emphasizing that the 3-day notice rule should not apply in cases of breakdown. The Tribunal examined Section 3A(3) of the Act, which mandates duty abatement for continuous production closure of 15 days or more, without specifying a notice period for breakdown situations. Citing a High Court ruling, the Tribunal held that the primary objective is to allow Revenue time to seal the machinery to prevent illicit activities. Since the appellant promptly informed the Revenue and the machine was sealed without delay, the Tribunal ruled in favor of the appellant, setting aside the denial of abatement and directing the refund with interest within 45 days.

The Tribunal differentiated the present case from the precedent cited by the Revenue, emphasizing the strict adherence to prescribed conditions for availing benefits. The ruling highlighted the importance of fulfilling conditions under the law for exemption or abatement, but also recognized the practical challenges in cases of breakdown where immediate action is necessary. By considering the legislative intent and the circumstances of the case, the Tribunal concluded that the benefit of abatement should not be denied to the appellant due to the lack of a 3-day notice in a breakdown scenario, ultimately allowing the appeal and ordering the refund with interest.