2012 (10) TMI 379 - AT - Central Excise

Demand of duty and interest - appellant were manufacturing Pan Masala containing tobacco up to Retail Sale Price (RSP) of Rs. 1.05 per pouch and paid the duty @ Rs. 12 lakhs per packing machine per month - alleged that besides packing Gutkha with RSP of Rs. 1.50 per pouch, the Appellants were also manufacturing Gutkha weighing 2 gm per pouch having no printed RSP on the pouches for export purposes Held that - Rate of duty is to be determined only with reference to pouches on which RSP is fixed - This is a case where the department is trying to fix, duty rate with reference to cases where RSP was not fixed - It is not as if the Appellants were required to fix RSP and they had not affixed. They were not required to fix RSP on such pouches and there is no case of the Revenue to work out RSP on such export goods based on its own method which had no sanction under law - this is not a case where any revenue loss has really happened to the exchequer but the Revenue is trying to give its own interpretation to the law which did not deal with the situation at hand demand and interest set aside

Summary

Issues:
Determination of duty liability for manufacturing Pan Masala and Gutkha, application for compounded duty, scrutiny of ER-1 return, duty demand for exported goods, method for calculating RSP, duty payment on exported goods, interpretation of Notification No. 38/2007-C.E., representation for withdrawal from scheme, revenue loss, interpretation of law.

Analysis:
1. Duty Liability and Compounded Duty Application:
The Appellants, manufacturers of Pan Masala and Gutkha, applied for paying compounded duty based on the number of machines installed in the factory as per Notification No. 38/2007-C.E. However, a scrutiny of their ER-1 return revealed discrepancies in the duty payment related to Gutkha manufacturing, leading to a demand for excise duty short levied, interest, and penalty.

2. Calculation of Duty for Exported Goods:
The department contended that the Appellants did not account for Gutkha pouches manufactured for export, resulting in a duty demand based on the department's method of calculating the Retail Sale Price (RSP) for such goods. The Appellants argued against this calculation, citing exemptions for export goods and the department's faulty method of determining RSP.

3. Interpretation of Notification No. 38/2007-C.E.:
The Notification specified the duty rates based on RSP printed on pouches, emphasizing the importance of RSP in determining duty liability. The Appellants were not required to affix RSP on export goods, and the Revenue's attempt to calculate RSP for such goods was deemed unauthorized and not supported by law.

4. Representation and Revenue Loss:
The Appellants made representations to withdraw from the compounded duty scheme due to difficulties in complying with duty payments for exported goods. The Revenue's insistence on duty payment for exported goods contradicted the general concept of duty exemption for exports, leading to a misinterpretation of the law and an unjustified demand for duty.

5. Judgment and Relief:
After considering both parties' arguments, the Tribunal found no merit in the Revenue's case and set aside the order, providing consequential relief to the Appellants. The judgment emphasized the need to interpret the law to achieve the scheme's overall objective and prevent unjust revenue demands based on misinterpretations.

This detailed analysis covers the key issues addressed in the legal judgment, highlighting the arguments presented by both sides and the Tribunal's decision based on the interpretation of relevant laws and notifications.