2018 (1) TMI 345 - AT - Central Excise

Whether the appellant is required to discharge differential duty on the products Pan Masala which were not produced during the period 1st to 10th June 2013 on the new machine which was installed? Held that - the demand of the duty on the products Pan Masala can be done so only from the date of production only, if any new machinery installation is done, which in the case is from 10th June, 2013. Since there is no dispute as to the fact that the third packing machine was installed on 10th June, 2013, any demands of the duty liability on an assumed production from the period 1st to 10th June 2013 does not arise. Appeal allowed - decided in favor of appellant.

Issues:
1. Interpretation of Rule 9 of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008.
2. Discharge of duty liability on new machinery installation.
3. Differential duty payment timeline.

Issue 1: Interpretation of Rule 9 of the Pan Masala Packing Machines Rules

The case involved a dispute regarding the interpretation of Rule 9 of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008. The appellant argued that the 3rd Proviso of Rule 9 had been misinterpreted by the lower authorities. The appellant contended that the proviso required the assessee to pay differential duty from the date of installation of any new machine. The appellant also referenced Section 3A (ii) and the 2nd proviso thereto, emphasizing the determination of annual production on a proportionate basis in case of alteration or modification. The Tribunal examined the provisions of the Rules and the relevant sections of the Central Excise Rules, 1944, concluding that the demand for differential duty on products not produced during a specific period on a new machine was not justified based on the clear language of the rules.

Issue 2: Discharge of duty liability on new machinery installation

The central issue revolved around whether the appellant was obligated to discharge differential duty on Pan Masala products not produced during a certain period on a newly installed machine. The Tribunal analyzed the relevant proviso of Rule 9, which mandated the payment of differential duty in case of an increase in the number of operating packing machines due to the addition or installation of machines. The Tribunal highlighted that duty liability should only arise from the date of production on a new machine, as specified in the rules. Since the new packing machine was installed on a specific date, any demand for duty liability before that installation date was deemed unsustainable. Consequently, the Tribunal ruled in favor of the appellant, setting aside the demand for differential duty for the period before the installation of the new machine.

Issue 3: Differential duty payment timeline

Another aspect of the case involved the timeline for the payment of the differential duty amount. The Tribunal reiterated the requirement, as per Rule 9, that any differential duty arising from the addition or installation of packing machines should be paid by the 5th day of the following month. By examining the language of the rule, the Tribunal clarified that duty liability should be determined based on the date of production on a new machine. Therefore, any demands for duty prior to the installation date were deemed unjustifiable. The Tribunal's decision to set aside the impugned order and allow the appeal was based on the correct interpretation of the rules and the specific circumstances of the case.

In conclusion, the Tribunal's judgment in the case addressed the interpretation of Rule 9 of the Pan Masala Packing Machines Rules, the discharge of duty liability concerning new machinery installation, and the timeline for differential duty payment. The decision favored the appellant, emphasizing that duty liability should be linked to the date of production on a new machine, as outlined in the relevant rules and provisions of the Central Excise Rules, 1944.

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