2015 (1) TMI 937 - AT - Central Excise

Denial of refund claim - Refund for advance duty paid - Ban on manufacturing and sale of gutkha - Held that - Appellant clearly informed the Assistant Commissioner that in view of the ban on manufacture and sale of gutkha and pan masala imposed by the State Government with effect from 27-7-2012 they are compelled to stop their manufacturing activities and for this reason they wish to permanently discontinue the manufacture of gutkha from 27-7-2012. There is no dispute that all the machines were sealed in the evening of 27-7-2012 in the presence of Panchas and hence there could not be manufacture of any gutkha from 28-7-2012 onwards. Assistant Commissioner has refunded the disputed amount strictly in accordance with Rule 16 of the Pan Masala Packing Machines Rules I am therefore of prima facie view that this rule is applicable in the circumstances of this case. The ground on which the Commissioner (Appeals) has reversed the Assistant Commissioner s order sanctioning the refund is factually incorrect as from the Appellant s letter to the Assistant Commissioner it is absolutely clear that the appellant wanted to stop the manufacture of gutkha permanently in view of ban on its manufacture and sale. In view of this the appellant have a strong prima facie case in their favour. The requirement of pre-deposit of the disputed amount of refund is waived for hearing of the appeal and recovery thereof stayed. - Stay granted.

Summary

Issues:
1. Refund claim for duty paid on pan masala due to permanent cessation of manufacturing.
2. Commissioner's order reversing refund claim based on intimation of closure.
3. Appeal against Commissioner's order and stay application for recovery of the amount.

Analysis:
1. The appellant, a manufacturer of pan masala containing tobacco, paid duty liability for July 2010 but ceased manufacturing due to a ban by the Chhattisgarh government. They filed a refund claim for the period post-closure. The claim was sanctioned under Rule 16 of the Pan Masala Packing Machines Rules, which allows duty refund when a manufacturer permanently ceases work. The Commissioner directed an appeal, questioning the closure's permanency. The Commissioner (Appeals) reversed the refund, stating the intimation lacked clarity on permanent closure. The appellant contested, emphasizing their clear intimation of permanent closure due to the ban, supported by sealing of machines and surrender of registration certificates.

2. The Commissioner (Appeals) held that the intimation of closure was not explicit about permanent cessation, leading to the reversal of the refund claim. The appellant argued that their letter clearly indicated permanent closure due to the ban on manufacturing and sale of gutkha and pan masala. The Assistant Commissioner's refund was based on Rule 16, which provides for duty adjustment and refund in case of permanent cessation. The Tribunal found the Commissioner (Appeals)'s reasoning factually incorrect, as the appellant's intimation unambiguously indicated permanent closure due to the ban.

3. The Tribunal analyzed the appellant's letter to the Assistant Commissioner, confirming the permanent closure due to the ban on manufacturing and sale. Rule 16 of the Pan Masala Packing Machines Rules was deemed applicable, justifying the refund claim. The Tribunal observed that the Commissioner (Appeals) misinterpreted the intimation, leading to the incorrect reversal of the refund. Consequently, the Tribunal allowed the stay application, waiving the pre-deposit requirement for the disputed refund amount, and stayed the recovery pending appeal hearing.

This detailed analysis of the judgment highlights the issues surrounding the refund claim, the Commissioner's reversal, and the Tribunal's decision to uphold the refund based on the appellant's clear intimation of permanent closure due to the ban on manufacturing and sale of gutkha and pan masala.