2021 (5) TMI 605 - HC - Central Excise

Abatement of duty - closure of the production activity at the unit was not for a continuous period exceeding 15 days - officer of the department has failed to mention about the machine which was made un-operational why could not be removed for certain reasons - due to heaviness of machine it cannot be removed when it become unoperational - HELD THAT - In terms of sub-rule (5) of Rule 6 of the said Rules the machines which the manufacturer does not intend to operate would be uninstalled and sealed by the Superintendent of Central Excise and removed from the factory premises under his physical supervision. For the period during which the machine is thus rendered incapacitated the concerned manufacturer would be spared the burden of excise duty since the entire levy is based on installed production capacity and not on actual manufacture or clearance of goods - In case of the present assessee under an order dated 19th October 2015 the Inspector of Central Excise recorded that the machine was uninstalled and sealed on the said date under his supervision. However since the machine was heavy and removal would require large number of skilled labourers and the tools which were not available the machine was sealed in such a manner that it cannot be operated. As noted this order was found sufficient by the Commissioner(Appeals) to enable the assessee to claim abatement of duty. It appears that the department has also accepted this order of the Commissioner(Appeals). However for the remaining period the claim of the assessee is rejected on the ground that the sealing order did not specify that it was sealed in such a manner that the machinery cannot be operated - the proviso to sub-rule (5) envisages that in case it is not feasible to remove such machine out of the factory premises it shall be uninstalled and sealed by the Superintendent of Central Excise in such a manner that it cannot be operated. The fact that the machine is too heavy to be removed was recorded by the Superintendent of Central Excise in his order dated 19th October 2015. Being the same machine the situation for a different period would not change. In absence of any allegations by the department and any material on record suggesting that despite sealing the assessee operated the machine it would not be permissible to withhold the abatement of duty only on the ground that the Superintendent of Central Excise did not draw proper proceedings and did not elaborately record that the sealing was done in such a manner that the machine could not be operated. The question of law is answered in favour of the assessee.

Summary

Issues Involved:
1. Denial of abatement claim under the Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010.
2. Compliance with Rule 6(5) of the Rules, 2010 regarding the sealing and uninstallation of machinery.
3. Interpretation of the proviso to Rule 6(5) regarding the feasibility of removing machinery from the factory premises.

Issue-wise Detailed Analysis:

1. Denial of Abatement Claim:
The appellant, a manufacturer of Jarda Scented Tobacco, challenged the denial of their abatement claim for the periods between 1st October 2015 to 7th October 2015 and 20th October 2015 to 31st October 2015. The Assistant Commissioner of Central Excise rejected the claim on two grounds: the production activity was not closed for a continuous period exceeding 15 days, and the provisions of Rule 6(5) were not satisfied as the machine was not removed from the factory.

2. Compliance with Rule 6(5):
The appellant argued that the machine was sealed and uninstalled as per Rule 6(5). The Commissioner(Appeals) partially allowed the appeal, recognizing that the machine was not operational for the specified periods. However, the claim for the period from 1st October 2015 to 7th October 2015 was rejected because the sealing order did not explicitly state that the machine was sealed in a manner that it could not be operated.

3. Interpretation of Proviso to Rule 6(5):
The Tribunal upheld the Commissioner(Appeals)' decision, noting that the sealing report dated 19th October 2015 explicitly mentioned that the machine could not be operated, whereas the report for the earlier period did not. The appellant contended that the same machine was involved and that the manner in which the Inspector sealed the machine was beyond their control. The appellant further argued that there was no evidence of the machine being operated during the sealed period.

Judgment Analysis:
The High Court examined the relevant provisions of the Central Excise Act, 1944, and the Rules of 2010. Rule 10 allows for abatement if the factory did not produce goods for a continuous period of fifteen days or more, provided the machines are sealed in a manner that they cannot be operated. Rule 6(5) requires that machines not intended for operation be uninstalled and sealed, and if removal is not feasible, they must be sealed in a manner that they cannot be operated.

The Court noted that the sealing order dated 19th October 2015 was accepted as sufficient compliance, but the earlier sealing order did not explicitly state that the machine could not be operated. The Court held that it was the duty of the Excise Superintendent to ensure proper sealing and documentation. The lack of specific wording in the earlier order should not penalize the assessee, especially in the absence of any allegations of the machine being operated during the sealed period.

Conclusion:
The High Court concluded that the benefit of abatement should not be denied due to the Superintendent's failure to use specific language in the sealing order. The appeals were allowed, and the department was directed to grant the abatement for the periods in question. The Tribunal's judgment was reversed, and the appeals were disposed of accordingly.