2017 (4) TMI 1166 - AT - Central Excise

Clandestine manufacture and removal - maximum capacity on the basis of maximum speed of machines - the speed of the machines who are manufacturing Chewing Tobacco except Khaini - Held that - As the manufacturer of the machines itself has stated in the technical literature that the maximum speed of the machines is 280 PPM and on physical verification of the machines it was found that the speed of the machines is similar. In that circumstances, the observation made by the Chartered Engineer that the capacity of each machine could be operated to run at a speed of beyond 350 PPM provided the locking i.e. presetting for maximum number of pouches which the machines could be produced rest to higher value by the company or manufacturer of the machines through password and logical sequencing is without any positive evidence - The maximum speed at which machines declared by the appellant in Form-I and Form-II can operate in terms of Rule 6 of the Rules is about 280 PPM at present, till any deviation/alteration is not done in the machines. The appellant is also directed to inform at least 3 days in advance to the Divisional Deputy Commissioner of Central Excise or Assistant Commissioner of Central Excise, as the case may be, as and when any alteration in machines regarding maximum speed at which machines can be operated is to be carried out by the appellant - appeal disposed off.

Summary

Issues:
Interpretation of duty payment rules based on machine speed for Chewing Tobacco production.

Analysis:
The appellant, engaged in manufacturing Kuber Brand Tobacco, was paying duty under specific rules based on the speed of packing machines. The machines were categorized into two speed groups: up to 300 pouches per minute and 301 pouches per minute and above. The appellant declared the intention to run three machines to pack pouches at a certain speed. The Revenue, during visits, found the machines' speeds to be above 300 pouches per minute. The Assistant Commissioner determined the monthly production capacity of Chewing Tobacco based on this speed. The appellant challenged this decision, leading to the current appeal.

The appellant's counsel argued that the Chartered Engineer's certificate indicated the machines could be operated beyond 350 PPM, but the Department had not verified this claim. The Department contended that duty should be based on the maximum speed achievable by adjusting Servo Motors. The Tribunal noted that the Chartered Engineer's opinion lacked technical specifics on Servo Motors and relied on the manufacturer's literature stating a maximum speed of 280 PPM. Similar cases were cited where duty was determined based on the machines' actual operational speeds.

In light of the evidence, the Tribunal modified the adjudication order. It determined that the machines' maximum speed, as declared by the appellant, was around 280 PPM until any alterations were made. The appellant was directed to inform the authorities in advance of any changes to the machines' speed. The appeal was disposed of with these directives.

The judgment highlights the importance of verifying machine speeds for duty determination, relying on technical specifications and manufacturer's literature. It emphasizes the need for transparency and advance notification of any alterations to machine speeds to ensure accurate duty payments.