2021 (4) TMI 717 - AT - Central Excise

Compounded levy scheme - levy of penalty - clearance of stock of finished goods relating to December, 2010 and January, 2011, admittedly, cleared during May, 2011 - violation of provisions of Rule 10 of Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010 - HELD THAT - Rule 10 of 2010 Rules, provides for abatement in case of nonproduction of goods (in case of factory did not produce the notified goods during for continuous period of fifteen days or more). It is found from the admitted facts on record that the appellant, being engaged in production during the period December, 2010 to 31.01.2011, admittedly have not sought for any abatement, and are not entitled to any abatement under Rule 10 of 2010 Rules. Thus, the view of the Department, first proviso of Rule 2010 is attracted is misconceived. Where a Rule is not attracted, the proviso thereunder does not attract. Under the Rules of Interpretation, a proviso is sub-servent to the Rule, and does not override the provisions of the Rule, of which it is a proviso. The Ist proviso to Rule 10 of 2010 Rules is not attracted under the admitted facts and circumstances - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Imposition of penalty under Rule 18 read with Rule 16 of Chewing Tobacco and Unmanufactured Tobacco Packing Machines (2010 Rules) read with Section 11 AC of Central Excise Act for contravention of Rule 10.

Analysis:
The appellant, engaged in manufacturing chewing tobacco under the Compounded Levy Scheme, faced an issue regarding the imposition of a penalty of ?3,89,660 under Rule 18 read with Rule 16 of the 2010 Rules for alleged contravention of Rule 10. The appellant had suspended production and sealed their pouch packing machines on 31.01.2011, then manually resumed production on 6.5.2011, and later requested desealing due to restrictions on plastic packaging for tobacco products. The Department observed that the appellant cleared final products in May 2011, violating Rule 10 by removing stock produced in December 2010 and January 2011 during the suspension period. A penalty notice was issued, leading to a show cause notice proposing the penalty.

The appellant contested the notice, arguing that Rule 10 provides for abatement in case of non-production of goods, which was not sought by them. The Asstt. Commissioner confirmed the penalty, leading to an appeal before the Commissioner (Appeals) who upheld the decision. The appellant then approached the Tribunal, emphasizing that they had paid duty under the Compounded Levy Scheme for the relevant months, making the goods duty paid. The appellant highlighted that Rule 10 was not attracted as they did not seek abatement.

Upon review, the Tribunal found that the appellant did not seek abatement under Rule 10 despite engaging in production during the specified period. The Tribunal clarified that the first proviso to Rule 10 was not applicable in this case, as the appellant did not qualify for abatement. The Tribunal emphasized that a proviso is subservient to the main rule and does not override it. Consequently, the Tribunal set aside the impugned order, allowing the appeal and granting the appellant consequential benefits in accordance with the law.

In conclusion, the Tribunal ruled that the first proviso to Rule 10 of the 2010 Rules was not applicable based on the admitted facts and circumstances, leading to the allowance of the appeal and the appellant receiving consequential benefits as per the law.