2015 (6) TMI 540 - AT - Central Excise

Abatement under Rule 10 of the PMPM Rules - Gutkha, Pan Masala and/Chewing Tobacco. - whether for claiming the abatement, the appellant should first pay the duty for the whole month by 5th March 2013 and should have thereafter claimed the abatement - Held that - Department does not dispute that the appellant would be eligible for abatement under Rule 10 of the PMPM Rules for the period of closure from 1st March 2011 to 16th March 2011 - Tribunal held that in such cases for claiming abatement it is not necessary that the assessee should pay duty for the whole month and that the assessee would be required to pay proportionate duty only for the number of days for which the unit were functioning. Therefore, so far as the duty demand of ₹ 32,25,805/- is concerned, the same is prima facie not sustainable. - Decision in the case of assessee s own previous case 2015 (6) TMI 550 - CESTAT NEW DELHI followed - Demand of duty is not sustainable. There were a total number of 21 packing machines out of which 13 machines were installed for packing of Pan Masala pouches of MRP ₹ 1 and 8 machines installed were for packing of Chewing Tobacco of MRP ₹ 1. W.e.f 24.07.2013 four new machines were installed which were used for packing of Pan Masala pouches of MRP of ₹ 4. - In terms of Rule 8 of the PMPM Rules in case of addition or installation or removal or un-installation of a packing machine in the factory during a month, the number of operating packing machines for that month shall be taken as maximum number of packing machines installed on any day during the month. Thus, in terms of Rule 8, if the number of packing machines installed in a factory, during the month varies, the maximum number of machines on any particular date would be treated as the number of operating machines for the purpose of calculation of duty liability under Rule 7, according to which the duty payable by a pan masala/ gutkha unit for a particular month shall be calculated by application of the appropriated rate of duty specified in the notification no. 42/08-CE to the number of operating packing machines in the factory during the month. Since the appellant had installed the 4 new machines on 24.07.2013 for manufacture of the new RSP of ₹ 4 per pouch in our prima facie view, the 4th Proviso to Rule 9 would be applicable. Therefore, we are of prima facie view that in respect of 4 new machines, the duty would be chargeable on prorata basis for the remaining days in the month that is, from 24.07.2013 to 31.07.2013, and as such the duty demand confirmed by the Commissioner on this basis would not be sustainable. - requirement of pre deposit of duty demand, interest and penalty is waived for hearing of the appeal and recovery thereof is stayed - Stay granted.

Summary

Issues:
1. Dispute regarding duty liability under Pan Masala Packing Machines Rules and Chewing Tobacco Packing Machines Rules for March 2011.
2. Dispute regarding duty payment for new Pan Masala packing machines added in July 2013.

Analysis:

Issue 1:
The appellant, a manufacturer of retail pouches of Gutkha, Pan Masala, and Chewing Tobacco, faced a duty dispute for the months of March 2011 and July 2013. In March 2011, the unit was closed from 1st to 16th, and the duty was paid only for the days the unit functioned. The Department contended that duty should have been paid for the whole month. The Tribunal held that paying duty for the entire month was not a precondition for claiming abatement. The duty demand of Rs. 32,25,805 for March 2011 was deemed unsustainable.

Issue 2:
In July 2013, the appellant added 4 new Pan Masala packing machines for pouches of MRP Rs. 4. The dispute arose over whether duty for these new machines should be paid for the entire month or prorated. The Tribunal analyzed the relevant rules and found that the 4th Proviso to Rule 9 applied, requiring duty calculation on a prorata basis for the days the new machines operated. The duty demand of Rs. 1,51,35,483 for July 2013 was considered unsustainable.

The Commissioner had earlier confirmed a duty demand of Rs. 1,83,61,288 against the appellant for both issues, along with penalties. The Tribunal, based on precedent and legal provisions, waived the pre-deposit of duty demand, interest, and penalty for the appeal hearing. The stay application was allowed, and the matters were listed for a final hearing.