2011 (2) TMI 611 - AT - Central Excise

Compounded levy scheme- cold rolling machines installed for cold rolling of these goods - Claim of Refund - Excess payment of duty - Notification No. 34/2001-C.E., dated 28-6-2001 - Rule 15(1) of the Central Excise Rules, 2001 - Actual number of machines used to maximum number of machines during the quarter - Held that - When the first para of the Notification talks of payment of duty on the basis of cold rolling machines installed and not on the basis of the maximum number of cold rolling machines installed during the preceding three months, notwithstanding the provisions of para 3(1) and 4(1) of the Notification No. 38/2001-C.E. (N.T.), dated 28-6-2001, the duty can be charged only on the basis of actual number of cold rolling machines installed and, therefore, if in a particular month, some cold rolling machines have been dismantled, in subsequent month duty in respect of the same cannot be charged.

Summary

Issues Involved:
1. Applicability of compounded levy scheme under Notification No. 34/2001-C.E. (N.T.), dated 28-6-2001.
2. Calculation of duty liability on dismantled Cold Rolling Machines.
3. Relevance of the Rajasthan High Court judgment in CCE, Jaipur-II v. Jupiter Industries.
4. Interpretation of the provisions of Notification No. 34/2001-C.E. (N.T.) in relation to Rule 96ZA to 96ZGG of Central Excise Rules, 1944.
5. Refund of duty paid on dismantled machines and the principle of unjust enrichment.

Detailed Analysis:

1. Applicability of Compounded Levy Scheme under Notification No. 34/2001-C.E. (N.T.), dated 28-6-2001:
The appellants, manufacturers of Stainless Steel Pattas and Pattis, operated under the compounded levy scheme as per Notification No. 34/2001-C.E. (N.T.), dated 28-6-2001. According to this scheme, they were required to pay a fixed duty of Rs. 15,000/- per month per Cold Rolling Machine installed, without availing Cenvat credit. The duty payment was considered full discharge of their liability for the production during the period.

2. Calculation of Duty Liability on Dismantled Cold Rolling Machines:
The appellants dismantled some Cold Rolling Machines during the period but continued to pay duty for these machines. They later claimed refunds, arguing that dismantled machines should not incur duty as they were not in production. The original Adjudicating Authority and the Commissioner (Appeals) rejected these claims, stating that duty liability must be calculated based on the maximum number of machines installed during the three months preceding the application month, regardless of subsequent dismantling.

3. Relevance of the Rajasthan High Court Judgment in CCE, Jaipur-II v. Jupiter Industries:
The appellants cited the Rajasthan High Court's judgment in CCE, Jaipur-II v. Jupiter Industries, which dealt with a similar compounded levy scheme under Rule 96ZA to 96ZGG of Central Excise Rules, 1944. The High Court held that no duty is leviable for periods when a machine is not operational or dismantled, as no production occurs in such cases. The principle of unjust enrichment was also deemed inapplicable for refunds of duty paid on dismantled machines.

4. Interpretation of Notification No. 34/2001-C.E. (N.T.) in Relation to Rule 96ZA to 96ZGG of Central Excise Rules, 1944:
The Tribunal noted that the provisions of Notification No. 34/2001-C.E. (N.T.) are identical to Rule 96ZA to 96ZGG of the Central Excise Rules, 1944. Both sets of rules require duty calculation based on the maximum number of machines installed during the preceding three months. However, the Rajasthan High Court's interpretation that no duty is payable for dismantled machines was found applicable to the present case, as the provisions are in pari materia.

5. Refund of Duty Paid on Dismantled Machines and the Principle of Unjust Enrichment:
The Tribunal agreed with the appellants that duty should not be charged for dismantled machines, aligning with the Rajasthan High Court's judgment. It was emphasized that the principle of unjust enrichment does not apply when no production occurs from dismantled machines, and thus, refunds are justified.

Conclusion:
The Tribunal concluded that the duty liability should be based on the actual number of Cold Rolling Machines installed, not the maximum number during the preceding three months. The dismantling of machines means no duty is payable for those machines in subsequent months. The impugned order was set aside, and the appeals were allowed, granting the appellants the refunds claimed.