2016 (1) TMI 831 - AT - Central Excise

Correct amount of duty payable as per the compounding scheme - Re-determine the duty liability in terms of the deeming provision as per proviso to Rule 8 - Held that - It is an admitted fact that the appellants did make ₹ 0.50/- pouches alongwith ₹ 1/- pouches during the impugned period. Though prima facie such situation will attract the proviso to Rule 8, when a combined reading is made of the provisions of Rule 5, Rule 9 and Rule 8, it is clear that the new RSP mentioned in the said proviso to Rule 8 should be taken to mean a new RSP which will be higher than the previous RSP of pouches manufactured and which will attract different category of serial number under Rule 5 with higher duty liability. The retrospective amendment of the impugned provisions by Finance Act, 2014 concluded that the intention of the Government was to levy duty at the rate applicable to highest RSP on a particular machine during a particular month when during that month, on that machine, pouches of different RSPs have been produced. Giving emphasis to the harmonious reading of the various provisions of the said Rules of 2008, manufacturing of Gutkha pouches of ₹ 0.50/- is not to be considered as a new RSP for the purpose of proviso to Rule 8. Thus the demand made in the present case is not sustainable. - Decided in favour of assessee.

Summary

Issues:
- Interpretation of Rule 8 regarding duty liability for manufacturing products with different Retail Sale Prices (RSP)
- Applicability of proviso to Rule 8 when manufacturing pouches with different RSPs
- Effect of retrospective amendment in Rule 8 by Finance Act, 2014

Analysis:

Interpretation of Rule 8:
The case involved a dispute over the correct amount of duty payable by the appellants under the compounding scheme, specifically concerning the proviso to Rule 8. The appellants manufactured pouches with RSPs of Rs. 1/- and Rs. 0.50/- during the relevant period. While prima facie, this situation might attract the proviso to Rule 8, a combined reading of Rule 5, Rule 9, and Rule 8 clarified that the new RSP mentioned in the proviso should be higher than the previous RSP and fall under a different category with higher duty liability. The Tribunal analyzed a similar case and emphasized that the term "new retail sale price" in Rule 8 should be understood in the context of Rule 5, where different RSP slabs determine deemed production per operating machine per month.

Applicability of Proviso to Rule 8:
The Tribunal's interpretation highlighted that RSPs within the same slab should be treated the same for determining deemed production per month. Therefore, the RSP of Rs. 0.50/- could not be considered a new RSP as it belonged to the same slab as Rs. 1/-. The Tribunal concluded that manufacturing Gutkha pouches of Rs. 0.50/- should not trigger additional duty liability under the proviso to Rule 8, aligning with the intention of the Government to levy duty based on the highest RSP produced on a machine during a month with pouches of different RSPs.

Effect of Retrospective Amendment:
The Tribunal also considered the retrospective amendment of the provisions by the Finance Act, 2014. It concluded that the retrospective amendment aimed to levy duty at the rate applicable to the highest RSP produced on a machine during a month when pouches of different RSPs were manufactured. By harmoniously interpreting the rules, the Tribunal held that manufacturing Gutkha pouches of Rs. 0.50/- did not constitute a new RSP for the proviso to Rule 8, consistent with previous decisions.

In light of the legal position and the Tribunal's analysis, the demand made in the case was deemed unsustainable. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential relief.