2017 (12) TMI 209 - AT - Central Excise

Abatement - closure of factory - manufacture of pan masala - manufacturing unit/machines were closed and sealed for continuous period of 15 days or more - violation of proviso to Rule 10 - the appellants cleared notified goods even after 2 days of sealing of the machines - Held that - The facts of the case that the machines were sealed by the Jurisdictional officers as per the request of the appellant and they remained sealed during the impugned periods is not in dispute. It is also not the case of the Revenue that any notified goods were manufactured during these periods. In terms of proviso to Rule 10 they should have cleared already manufactured notified goods within two days of sealing of their machines. In view of the admitted fact that the appellants did not produce any notified goods during the period of closure/sealing of the machines and there being no allegation of any manufacturing during the said period, the abatement claim cannot be rejected. The non-adherence of the condition regarding clearance of already manufactured goods in stock within two days of closure will attract, if at all, the provisions of Rule 17 of 2008 Rules or Rule 18 of the Chewing Tobacco Rules, 2010, for penalty. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Rejection of abatement claims under compounded levy scheme based on production capacity due to violation of proviso to Rule 10 regarding clearance of manufactured goods within two days of sealing of machines.

Analysis:
The appeals involved the rejection of abatement claims by the appellants, engaged in manufacturing Pan Masala and Chewing Tobacco, under the compounded levy scheme based on production capacity. The issue centered around the rejection of claims for abatement of duty for periods during which the pouch making machines remained sealed for 15 days or more. The abatements were claimed in accordance with Rule 10 of 2008 Rules, which required no manufacturing activity or removal of notified goods during the sealing period. The rejection was based on the appellants clearing goods after the stipulated two-day period post-sealing, violating the proviso to Rule 10.

The appellant contended that as per Section 3A read with rules, abatement of duty on a proportionate basis should be granted if no notified goods were produced during a continuous period of 15 days or more. They argued that the machines were sealed for the required period, and no manufacturing occurred during that time. However, they cleared leftover stock after the two-day clearance window post-sealing, leading to the rejection of abatement claims by the lower authorities.

The Tribunal examined the statutory provisions, particularly Section 3A and Rule 10, which allow for abatement when notified goods are not produced for 15 days or more. The Tribunal noted that while the appellants failed to clear manufactured goods within two days of sealing, there was no manufacturing or clearance of notified goods during the sealed period. The purpose of the rule was to prevent misuse of the compounded levy scheme, ensuring no production or clearance of notified goods during closure periods.

Referring to legal precedents, the Tribunal highlighted that non-production of notified goods during closure/sealing period entitles abatement, emphasizing that minor procedural lapses should not deny substantial rights. The Tribunal also clarified that any penalty for non-adherence to clearance conditions would fall under specific penalty rules, not affecting abatement entitlement.

Ultimately, the Tribunal set aside the impugned orders, allowing the appeals based on the fact that no notified goods were produced during the closure/sealing period, and there was no evidence of manufacturing during that time.

In conclusion, the Tribunal's decision rested on the interpretation of statutory provisions, adherence to procedural requirements, and the fundamental principle that abatement is warranted when no notified goods are produced during closure periods, irrespective of minor procedural lapses.