2013 (8) TMI 607 - AT - Central Excise

Compounded levy - Production capacity based duty - Chewing tobacco and Filter Khaini - Notified Goods as per Notification No. 10/2010 - The assesse was engaged in the manufacture of Chewing tobacco and Filter Khaini falling under tariff item No.24039910 of the First Schedule of the Central Excise Tariff Act, 1985 - Whether the Filter Khaini Pouches manufactured by the Respondents with the help of packing machines were required to be considered as notified goods in terms of notification No.10/2010-CE(NT) and whether the same were required to be taken into consideration while determining the annual capacity of production and collection of duty. Held that - The packing machine used for packing of filter khaini pouches/pillows/sachets cannot be considered to be notified item and the goods manufactured with the aid of packing machine would not be covered under the compounded levy Rules - They were required to discharge duty not in terms under the said Rule, but in terms of the normal provisions of law - in the pillow packing machine for the manufacture of the said sachets would not be taken into consideration for determining the annual capacity of production and collection of duty - Section 3 A covers only pouches packed with the aid of packing machine and not the pouches that were packed manually - Inasmuch as the plastic pouches were pre-sealed and zipped from one side and the sachets were put in manually and the pouch was sealed with the help of hot iron/band sealer. The filter khaini, pillows/sachets packed with the aid of packing machine do not bear any brand name, MRP, warnings as to health hazards and manufacturer s particulars, as required under the capacity Rules, it cannot be held that the same were notified goods in terms of the compounded levy rules - The same were more or less like the Tea bags, which were without any brand, name or carrying any other requisite information and which were ultimately packed in the final containers carrying various requisite information. It was only the final container, which can be held to be as the final product -The Tea bags cannot be held to be the product which was marketable in that condition inasmuch as not even the manufacturer s name was described - even if the Tea packs were manufactured with the aid of power, they cannot be considered to be notified goods in terms of the Capacity Determination Rule. The packing machine used for packing of filter khaini pouches/pillows/sachets can not be considered to be notified item and the goods manufactured with the aid of packing machine would not be covered under the compounded levy Rules. They are required to discharge duty not in terms under the said Rule, but in terms of the normal provisions of law. Decided against Revenue.

Summary

Issues Involved:
1. Whether Filter Khaini Pouches manufactured by the Respondents with the help of packing machines are to be considered as notified goods under Notification No.10/2010-CE(NT) dated 27.02.2010.
2. Whether these pouches should be taken into consideration while determining the annual capacity of production and collection of duty.

Issue-Wise Detailed Analysis:

1. Whether Filter Khaini Pouches manufactured by the Respondents with the help of packing machines are to be considered as notified goods under Notification No.10/2010-CE(NT) dated 27.02.2010:

The Tribunal examined the manufacturing process of Filter Khaini Pouches, noting that the pouches are initially packed using machines but are subsequently manually packed into larger plastic pouches. The Commissioner (Appeals) referenced the Capacity Determining Rule 2010 and various notifications, particularly Notification No.26/2010 and Notification No.19/2010-CE dated 13.04.2010, which clarified the definition of "filter khaini." The explanation provided in these notifications indicated that "filter khaini" refers to chewing tobacco packed in sachets of filter paper or fabric before being packed in pouches with the aid of a packing machine. The Commissioner (Appeals) concluded that the compounded levy scheme applies only to pouches packed with the aid of packing machines. Since the final packing into plastic pouches was done manually, the product did not fall under the compounded levy scheme.

2. Whether these pouches should be taken into consideration while determining the annual capacity of production and collection of duty:

The Tribunal agreed with the Commissioner (Appeals) that the plastic pouches packed manually did not qualify as notified goods under the compounded levy scheme. The Deputy Commissioner had excluded the packing machines from the annual capacity determination since the final packing was manual. The Commissioner (Appeals) supported this view, noting that the intent of the compounded levy scheme was to cover only those pouches packed entirely with the aid of packing machines. The Tribunal upheld this reasoning, emphasizing that the filter khaini sachets, which lacked branding, MRP, and health warnings, could not be considered marketable in their initial form. The final product, which included these details, was packed manually, thus not meeting the criteria for the compounded levy scheme.

Conclusion:

The Tribunal found no grounds to interfere with the lower authorities' decisions and rejected the Revenue's appeals. The final judgment affirmed that the manually packed plastic pouches did not fall under the compounded levy scheme, and the packing machines used for the initial packing of filter khaini sachets were not to be considered in determining the annual capacity of production and duty collection. The appeals were dismissed, and the order was pronounced in open court on 17.6.2013.