2017 (8) TMI 1266 - AT - Central Excise

Compounded Levy Scheme - Pan Masala packed manually in tins - CBEC (Tax Research Unit) vide circular dated 04.08.2008 - Held that - the circular clarifies that the Compounded Levy Scheme notified under Section 3A will not be applicable to Pan Masala packed in tin containers manually. Such scheme is specifically notified only for pan Masala packed in FFS machines - the demand of duty on Pan Masala packed in tin containers cannot be sustained and is set aside. Demand of duty made on the basis of pouch packing machines installed in the factory on 01.07.2008 - Held that - From a perusal of Section 3A ibid, along with the relevant N/N. 29 and 30/2008 CE NT dated 01.07.2008, it is evident that the Compounded Levy Scheme notified mandatorily required the manufacturer to pay duty as per the number of FFS machines installed in the factory. The manufacturer has the option of getting his machines sealed to avoid demand of duty under the above scheme - it is not disputed that the machines were installed in the factory and not sealed on 01.07.2008 i.e. available for manufacture of Pan Masala on 01.07.2008. Consequently, in terms of the scheme notified under Section 3A, the appellant is liable to pay duty for one day on 01.07.2008 for the machines which were installed in the factory and are sealed. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
1. Demand for duty on Pan Masala packed manually in tins.
2. Demand for duty on Pan Masala packed in pouches with packing machines.

Issue 1: Demand for duty on Pan Masala packed manually in tins
The appellant argued that the Compounded Levy Scheme did not apply to Pan Masala packed in tin containers, citing a CBEC circular. The circular clarified that the scheme was only for Pan Masala packed in FFS machines. The Tribunal confirmed that the demand for duty on Pan Masala packed in tin containers was not sustainable based on the circular, and thus set it aside.

Issue 2: Demand for duty on Pan Masala packed in pouches with packing machines
The appellant contended that no duty was payable for Pan Masala packed in pouches on 01.07.2008 as there was no manufacturing activity that day. Additionally, the appellant highlighted that the relevant notification was uploaded on the CBEC website only after the day in question. However, the Tribunal found that the Compounded Levy Scheme mandated duty payment based on the number of FFS machines installed in the factory. The appellant had requested sealing of the machines on 02.07.2008, thereby avoiding duty liability from that date onwards. Since the machines were available for production on 01.07.2008 but not sealed, the Tribunal held that duty was payable for that day. Consequently, the demand for duty on Pan Masala packed in pouches with packing machines was sustained, and the original authority was directed to re-quantify the demand, leading to a partial allowance of the appeal.

In conclusion, the Tribunal set aside the demand for duty on Pan Masala packed manually in tins based on the CBEC circular. However, it upheld the duty demand for Pan Masala packed in pouches with packing machines for the day when the machines were installed but not sealed, directing a re-quantification of the demand.