2017 (6) TMI 272 - AT - Central Excise

Valuation - pan masala - duty liability of the appellant is fixed as per the number of packing machines operated during a particular month - Revenue entertained a view that irrespective of the closure of the unit and sealing of the machines, for more than 15 days in a month, the appellant /assessee is liable to pay full duty liability for all the machines by 5th of the given month and thereafter, obtain abatement of duty for closed period, from the jurisdictional officer - Held that - The appellant could not pay duty by 5th of the same month as they have closed for operation during the period stipulated for payment of duty. By the end of the month, they were aware of the number of days for which the unit operated and also their exact duty liability on prorata basis. This duty liability was discharged subsequently in the next month. This will necessarily bring the liability for interest, which is admitted by the appellant also. We are not able to accept the view of the Revenue that the appellant have to first pay full duty liability for the all days, as determined by the jurisdictional officers and thereafter, after the end of the month, ascertaining the number of days closed, they should claim the excess paid amount, as abatement from the Department. No such procedure has been laid down in the said rules. Reliance also placed in the case of The Commissioner Versus M/s Thakkar Tobacco Products P. Ltd. 2015 (11) TMI 319 - GUJARAT HIGH COURT , where it was held that when the duty stands reduced to the extent provided in the rule, there is no liability to pay the same, inasmuch as, to that extent the duty stands abated. Therefore, if the assessee has correctly calculated the proportion of duty and set off the same against the duty payable for the next month, it cannot be said that the said action is contrary to the statutory scheme. The demand of full duty liability from the appellant not justified - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Duty liability under the Compounded Levy Scheme.
2. Procedure for claiming abatement under Rule 10.
3. Payment of duty by the 5th of the month.
4. Interest liability for late payment of duty.
5. Imposition of penalties.

Issue-wise Detailed Analysis:

1. Duty Liability under the Compounded Levy Scheme:
The main appellant, M/s. MSS Food Processors, is engaged in the manufacture of Pan Masala, which is liable to duty under the Compounded Levy Scheme as per the Pan Masala Packing Machine (Capacity Determination and Collection of Duty) Rules, 2008. The duty liability is determined based on the number of packing machines operated during a particular month. The appellant did not operate the packing machines for the full period of the month and closed operations with due intimation, sealing the machines for periods exceeding 15 days.

2. Procedure for Claiming Abatement under Rule 10:
The appellant contended that they are required to pay duty as per the abated liability under Rule 10, which provides for abatement in case of non-production of goods for any continuous period of fifteen days or more. The appellant followed the procedure for sealing and de-sealing the machines, and thus, there was no need to pay full duty for the entire month and then claim abatement. They argued that no such procedure has been prescribed by the said Rules.

3. Payment of Duty by the 5th of the Month:
Rule 9 mandates that the monthly duty payable on notified goods shall be paid by the 5th day of the same month. The appellant admitted that they could not discharge the duty by the 5th of any given month due to the closure of operations. However, they were aware of the exact duty liability on a pro-rata basis by the end of the month and discharged it subsequently in the next month.

4. Interest Liability for Late Payment of Duty:
The appellant acknowledged their liability to pay interest for the period of late payment of duty. They did not contest the interest liability and admitted that wherever they could not discharge the duty by the 5th of the month, the interest liability has to be discharged until the actual date of payment.

5. Imposition of Penalties:
The Original Authority confirmed the central excise duty liability of ?14,58,04,420 and imposed a penalty of 50% of the duty demand. Additionally, a penalty of ?20 lakhs was imposed on Shri Upadhyay, Partner of the main appellant. However, the Tribunal found no merit in the impugned order, which confirmed the full duty liability and penalties, and thus, set aside the order.

Tribunal's Findings:
The Tribunal noted that similar disputes had been resolved in favor of the appellant by various High Courts and the Tribunal itself. The Hon’ble Gujarat High Court in Thakkar Tobacco Products Pvt. Ltd. and the Hon’ble Delhi High Court in Shakti Fragrances Pvt. Ltd. had ruled that the procedure for claiming abatement does not require the payment of full duty for the entire month and then claiming abatement. The Tribunal followed these precedents and held that the appellant is not required to first pay full duty and then claim abatement. The appellant is liable to pay duty only for the days the machines were operating and interest for the period of late payment. Consequently, the penalties imposed were also set aside.

Conclusion:
The Tribunal concluded that the impugned order confirming the full duty liability and penalties was legally unsustainable. The appeals were allowed, and the impugned order was set aside. The Tribunal emphasized that the appellant's procedure of paying duty on a pro-rata basis and subsequently discharging the exact duty liability was in compliance with the rules, and no additional duty or penalties were warranted.

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