2015 (10) TMI 1123 - AT - Central Excise

Imposition of penalty - Compounded levy scheme - Violation of Chewing Tobacco and Unmanufactured Tobacco Packing Machine (Capacity Determination and Collection of Duty) Rules 2010 - Held that - show cause notice has been issued on 26.09.2011. Therefore, the Panchnama dated 30.03.2012 have no relevance to impose penalty on the appellant in this case. Further, I find that in show cause notice itself it is recorded that appellant was engaged manually with laborers for packing the tobacco pouches and paying Central Excise duty under section 3 of the Central Excise Act 1944 and filing their returns regularly. In these circumstances, the impugned order deserves no merits. Accordingly, same is set aside and by holding that no penalty is imposable on the appellant as appellant has not violated the provisions of Rule 6/8 of the Chewing Tobacco And Unmanufactured Tobacco Rules (Capacity determination and Collection of Duty) Rules. - Decided in favour of assessee.

Summary

Issues:
1. Imposition of mandatory penalty under section 11AC of Central Excise Act 1944.
2. Violation of Chewing Tobacco and Unmanufactured Tobacco Packing Machine Rules 2010.

Analysis:

1. The appellant appealed against an order imposing a mandatory penalty under section 11AC of the Central Excise Act 1944. The appellant, a manufacturer of chewing tobacco and unmanufactured tobacco, operated under a compound levy scheme. They used sealing machines for packing tobacco pouches but also manually packed pouches with laborers during a specific period. The show cause notice was issued to impose a penalty for contravention of rules 6 and 8 of the Chewing Tobacco and Unmanufactured Tobacco Packing Machine Rules 2010. The Adjudicating Authority initially dropped the proceedings, but the Commissioner (A) set aside that decision and imposed the penalty as proposed in the show cause notice.

2. The appellant's counsel argued that the appellant did not violate any rules and therefore, the penalty under section 11AC should not apply. The counsel pointed out discrepancies in dates between the panchnama and the show cause notice, questioning the merit of the Commissioner (A)'s order. On the other hand, the Revenue's representative contended that the appellant did use sealing machines during the period in question, citing the Commissioner (A)'s order as evidence of rule violation. The representative highlighted an explanation in the rules stating that even if the appellant did not use a packing machine directly, their manual labor should be deemed as using a packing machine.

3. After hearing both parties and reviewing the submissions, it was observed that the Commissioner (A) relied on a panchnama dated after the show cause notice was issued, rendering it irrelevant to impose a penalty. The show cause notice itself acknowledged the manual labor employed by the appellant for packing tobacco pouches and their regular duty payments and filings under the Central Excise Act. Consequently, the impugned order was deemed to lack merit, and the penalty was found not imposable as the appellant had not violated the specific rules mentioned.

4. Ultimately, the impugned order imposing the penalty was set aside, and the appeal was allowed in favor of the appellant.