2016 (1) TMI 108 - AT - Central Excise

Consequences for Delay in payment of duty in terms of the provisions of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules 2008 - apart from interest, revenue has referred to Proviso-7, which also talks about the assessee having not discharged his duty liability. - The contention of the Revenue is that in terms of the said Proviso, where an assessee does not discharge his duty liability in time, his liability for the subsequent months would be dependent upon the total number of packing machines found available in his premises at any time thereafter, if the number of such machines is higher than the number of machines used by the assessee for production. - Revenue ignored the number of machines sealed by them which was never used. Held that - there is no dispute about the factual position. There is no allegation of any misdeclaration against the assessee as regards the number of machines used for production of goods or the retail sale price of the pouches declared by them. The Commissioner has confirmed the demand of duty by adopting Proviso-7 to Rule 9 and by discarding the assessee s contention that incase of delayed payment of duty it is only Proviso-2 which has to be adopted. Apart from the fact that we agree with the learned advocate s contention that Proviso 7 essentially refer to a situation envisaged by Proviso-6 and will have no applicability to a situation which stands separately considered by Proviso 2 to the said Rule, we find that the issue stands covered by the majority decision of the Tribunal in the above referred situation. Inasmuch as the facts in the present case are identical to the facts involved in the case of Sanket Food Products 2014 (9) TMI 665 - CESTAT MUMBAI (LB) , we find no reasons to take a different view - Decided in favor of assessee.

Summary

Issues Involved:
1. Interpretation of Rule 9 of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008.
2. Applicability of Proviso-2 versus Proviso-7 of Rule 9 in cases of delayed duty payment.
3. Liability for duty based on the number of packing machines declared versus the number of machines actually used or available.

Detailed Analysis:

1. Interpretation of Rule 9 of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008:

The central issue revolves around the interpretation of Rule 9, which governs the manner of payment of duty and interest. The rule specifies that the monthly duty on notified goods must be paid by the 5th day of the same month, with an intimation to the Jurisdictional Superintendent of Central Excise by the 10th day. If the manufacturer fails to pay the duty by the due date, they are liable to pay the outstanding amount along with interest as specified by the Central Government under section 11AB of the Act.

2. Applicability of Proviso-2 versus Proviso-7 of Rule 9 in cases of delayed duty payment:

The appellants argued that only Proviso-2 should apply in cases of delayed duty payment, which merely requires the payment of the outstanding amount along with interest. They contended that Proviso-7, which deals with the reassessment of duty based on the number of packing machines available, should not apply to mere delays in duty payment. The Revenue, however, argued that Proviso-7 should apply, which would reassess the duty based on the total number of packing machines found available in the premises, including those not used for production.

3. Liability for duty based on the number of packing machines declared versus the number of machines actually used or available:

The appellants had declared the number of packing machines to be used for production at the start of each month and paid the duty accordingly. Machines not declared were sealed by the Revenue. However, due to delays in duty payment, the Revenue initiated proceedings under Proviso-7, reassessing the duty based on the higher number of machines available in the premises, irrespective of whether they were used for production or not.

Judgment:

The Tribunal found that the factual position was clear and undisputed, with no allegations of misdeclaration against the assessee regarding the number of machines used or the retail sale price of the pouches. The Tribunal agreed with the appellants that Proviso-7 primarily refers to situations envisaged by Proviso-6, which deals with clandestine activities or misdeclaration. The Tribunal held that Proviso-7 should not apply to mere delays in duty payment, which are already covered under Proviso-2.

The Tribunal also referenced a similar case, Sanket Food Products vs. CCE, where a majority decision supported the view that Proviso-7 should not apply to delayed duty payments. The third member in that case emphasized that treating manufacturers who declared the correct number of machines and those who misdeclared the number of machines the same would be unjust.

Conclusion:

The Tribunal set aside the impugned orders and allowed the appeals, concluding that Proviso-2 should apply in cases of delayed duty payment, requiring only the payment of the outstanding amount along with interest, without reassessing the duty based on the higher number of machines available. This decision provided consequential relief to the appellants.