2015 (1) TMI 666 - CGOVT - Central Excise

Rebate claim - export of Gutkha under - Revenue contested that the pro rata basis payment of monthly duty is in contravention of provision 3 of section 3(4) of the Central Excise Act, 1944 and Rule 8 of Pan Masala Rules,2008. The respondent has contested they were issued registration certificate on 15.03.2011 and commences production from 22.04.2011 and as such, he was the new manufacture within the meaning of proviso to sub-rule 3 of Rule 6 of the said Pan Masala Packing Machines rules, 2008 and for this reason-duty of April, 2011 was calculated on prorate basis. Such payment is as per proviso to rule 6(3) of the said Pan Masala Packing Machines Rules, 2008. Held that - rule (8) of the said Pan Masala Packing Rules, 2008 is applicable to cases where there is alteration In number of operating packing machines. In this case respondent were issued registration on 15.03.2011 and hence, are to be treated as a new manufacturer and hence, their production of Gutkha shall be specifically' governed by the proviso to sub rule (3) of Rule (6) of the said Pan Masala PackingRules, 2008. The proviso of sub rule (3) of rule (6) allows payment of duty on pro-rata basis. As such, the applicant who commenced production w.e.f. 22.04.2011 rightly paid duty on pro-rata basis. Under such circumstances, Government concurs with observation of Commissioner (Appeals) that allegation of short payment by the respondent is not tenable. Trade Notice No. 20/2011 dated 20.09.2011 issued on the basis of CBEC Circular F.No.528/69/2011-STO(TI) dated 30.08.2011 clarifying distinction between sachets and carry bags, cannot have retrospective effect. The clarification issued by Chief Commissioner Lucknow was binding on the Central Excise officers and as such the rebate allowed for duty paid on exported goods at the relevant time cannot now attract the provisions of condition 3(g) of Notification No. 19/2004-CE(NT) dated 06.09.2004. Departmental authorities are bound by Circular/Instruction and they have to comply with the same. Hon ble Supreme Court has held in the case of Paper Products Ltd. Vs. CCE 1999 (8) TMI 70 - SUPREME COURT OF INDIA that Circular/Instructions issued by CBEC are binding on departmental authorities. They cannot take contrary stand and department cannot repudiate a Circular on the basis that it was inconsistent with the statutory provision. Apex court has further held that department s actions have to be consistent with circulars, consistency and discipline are of far greater importance than, winning or losing court proceedings. In view of said principles laid down by Hon ble Supreme Court, the instructions issued by Chief Commissioner Lucknow were rightly followed by departmental Central Excise officers. - No infirmity in impugned Orders-in-Appeal - Decided against Revenue.

Summary

Issues Involved:

1. Pro-rata basis payment of duty.
2. Rebate of duty on exported goods prohibited under law.
3. Retrospective effect of Trade Notice and CBEC Circular.
4. Compliance with departmental Circulars/Instructions.

Issue-wise Detailed Analysis:

1. Pro-rata basis payment of duty:

The department contended that the respondent paid monthly duty on a pro-rata basis, which contravenes Section 3A of the Central Excise Act, 1944, and Rule 8 of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008. The department argued that the number of operating packing machines for the month should be taken as the maximum number installed on any day during the month, thus alleging short payment of duty by the respondent. However, the respondent claimed they were a new manufacturer, having commenced production on 22.04.2011, and thus paid duty on a pro-rata basis as per the proviso to Rule 6(3) of the Pan Masala Packing Machines Rules, 2008. The judgment upheld the respondent's stance, stating that as a new manufacturer, they correctly discharged duty on a pro-rata basis.

2. Rebate of duty on exported goods prohibited under law:

The department argued that the rebate of duty on Gutkha exported in plastic sachets/material was in contravention of Notification No. 19/2004-CE(NT) dated 06.09.2004, which prohibits rebate on goods whose export is forbidden by law. The respondent countered that the exports were conducted under departmental permissions and clarifications, specifically citing a letter from the Chief Commissioner, Central Excise, Lucknow Zone, which stated that the ban on Gutkha in plastic sachets does not apply to exports. The judgment agreed with the respondent, noting that the exports were allowed under the said clarification and similar rebates were granted to other exporters like M/s Pan Parag India Ltd., Kanpur.

3. Retrospective effect of Trade Notice and CBEC Circular:

The department referenced Trade Notice No. 20/2011 and CBEC Circular F.No.528/69/2011-STO(TI) dated 30.08.2011, which clarified the distinction between sachets and carry bags, arguing that these should apply retrospectively. The respondent contended that these notices cannot have retrospective effect. The judgment upheld the respondent's view, stating that the clarification issued by the Chief Commissioner, Lucknow, was binding at the time of the exports and thus the rebate claims were valid.

4. Compliance with departmental Circulars/Instructions:

The judgment emphasized that departmental authorities are bound by Circulars/Instructions, as held by the Supreme Court in Paper Products Ltd. Vs. CCE 1999(112) ELT 765(SC). The instructions from the Chief Commissioner, Lucknow, were binding and followed correctly by the Central Excise officers, thus supporting the respondent's rebate claims.

Conclusion:

The judgment found no infirmity in the Orders-in-Appeal and upheld them, rejecting the department's revision applications as devoid of merit. The respondent's actions, including pro-rata duty payment and rebate claims on exported Gutkha, were validated based on the applicable rules and departmental clarifications at the time.