2013 (9) TMI 495 - AT - Central Excise

Application for modification of stay order - Duty on Pan Masala of RSP - Packaging of Goods - production capacity based duty - The Appellant operated packing machine to bring out its output for marketability in pouches - Held that - a view was taken that there may not be a case for considering that the manufacturer was manufacturing Pan Masala of two different RSPs because though the RSPs were different the duty liability was the same in that case. In this case which was originally decided before the decision in that stay petition was taken, it was seen that the manufacturer was manufacturing Pan Masala and Gutka on the same machines and the duty rates for these goods are different even when the RSPs are the same. Considering this aspect I do not find any case to change the earlier order calling for pre-deposit of Rs. 20,00,000/-which is about 16% of the confirmed demand of Rs. 1,25,29,839/. - The Application for modification of the stay order is accordingly rejected.

Issues Involved:
1. Whether the Bench that heard the stay application on 22.9.2011 should hear the Misc. application.
2. Discrepancy in the amount of pre-deposit ordered.
3. Consideration of the Hon'ble High Court of Allahabad's direction.
4. Non-consideration of Rule 8 of the 2008 Rules by the Tribunal.
5. Determination of duty liability based on the number of machines in operation.
6. Eligibility for abatement of duty for non-production periods.

Issue-Wise Detailed Analysis:

1. Whether the Bench that heard the stay application on 22.9.2011 should hear the Misc. application:
The appellant contended that the same Bench which heard its stay application on 22.9.2011 should hear the Misc. application. However, this issue was not elaborated upon in the judgment, implying no significant impact on the decision.

2. Discrepancy in the amount of pre-deposit ordered:
The appellant claimed that while the Bench initially directed a pre-deposit of Rs. 10 lakhs, the order received indicated Rs. 20 lakhs. The Tribunal clarified that there was no basis for the appellant's claim of Rs. 10 lakhs, and the pre-deposit of Rs. 20 lakhs was reasonable given the total demand of Rs. 2.5 crores. The Tribunal emphasized that the right of appeal is conditioned by pre-deposit under section 35F of the Central Excise Act, 1944, and the pre-deposit amount was only 8% of the total demand.

3. Consideration of the Hon'ble High Court of Allahabad's direction:
The appellant argued that the Bench misinterpreted the direction of the Hon'ble High Court of Allahabad. The Tribunal clarified that it had considered the matter based on facts and rules, not influenced by any opinion of the CBEC. The Tribunal reiterated its compliance with the High Court's direction to consider Rule 8 of the 2008 Rules independently of any government clarification.

4. Non-consideration of Rule 8 of the 2008 Rules by the Tribunal:
The appellant argued that the Tribunal did not consider Rule 8 of the 2008 Rules, which was directed by the Hon'ble High Court. The Tribunal acknowledged the High Court's direction and emphasized that Rule 8, which deems an existing machine to be an additional machine when manufacturing goods of a new RSP, was enacted to address potential evasion of duty. The Tribunal held that the operation of a single machine for different products or RSPs is deemed to be multiple machines under Rule 8, thereby justifying the duty demand.

5. Determination of duty liability based on the number of machines in operation:
The appellant contended that duty was wrongly levied by presuming multiple machines in operation when only one machine was used. The Tribunal explained that under Rule 5 of the 2008 Rules, the number of packing machines determines the duty liability. The Tribunal upheld the Revenue's interpretation that a single machine used for different products or RSPs is deemed to be multiple machines, thus validating the duty demand.

6. Eligibility for abatement of duty for non-production periods:
The appellant sought abatement of duty for periods of non-production, which was denied by the Revenue. The Tribunal noted that the appellant did not raise contentions on this issue during the hearing or in the appeal memorandum. The Tribunal acknowledged that the issue of abatement was previously remitted for a speaking order and was considered in the impugned order. The Tribunal did not find grounds to alter the previous denial of abatement.

Conclusion:
The Tribunal upheld the pre-deposit order of Rs. 20 lakhs and rejected the modification application. It emphasized the legislative intent behind the 2008 Rules to prevent duty evasion and justified the duty demand based on the deemed operation of multiple machines. The Tribunal extended the time for compliance with the pre-deposit order by four weeks and scheduled the compliance report for 23.7.2012.

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