2023 (4) TMI 1193 - AT - Central Excise

Valuation of manufactured goods - Change in Retail Sale Price (RSP) - existing retail sale price of Rs. 2.00 discontinued permanently and restored sales price of Rs. 1.50 with effect from 08.04.2012 - Revenue confirmed charges of the show cause notice and demanded Central Excise duty by considering that the said three machines operated for manufacture of goods having RSP of Rs. 1.00, Rs. 1.50 and Rs. 2.00 in the month of January 2012 and April 2012 - Revenue held that the appellant did not file declaration showing balance stock lying in the factory for the discontinued retail sale price hence, it was not considered as permanently discontinuation of existing retail sale price - penalty under Section 11AC of the Central Excise Act, 1944. HELD THAT - The appellant proposed to avail the option of 4th proviso to Rule 9 of Pan Masala Packing Machines (Capacity Determination and Collection of duty) Rules 2008 - From 4th proviso to Rule 9, the manufacturer is allowed to permanently discontinue the goods of existing retail sale price or commence a new retail sale price during the month. In such case, monthly duty payable shall be re-calculated pro-rata on the basis of total number of days in that month and the number of days remaining in that month counting from the date of such discontinuation or commencement and the duty liability for the month shall not be discharged. The entire case of the department is that since the appellant have changed the retail sale price twice i.e. one in January, 2012 and second in April, 2012, the appellant has not permanently discontinued the manufacturing of goods of existing retail sale price. As per the Adjudicating Authority, only when the retail sale price is changed permanently, the appellant can be eligible for pro-rata duty on the reduced retail sale price whereas in the present case, since the retail sale price was reintroduced, the change in retail sale price was not permanently made. Hence, the 4th proviso to Rule 9 is not applicable in the appellant s case. From the careful reading of above 4th proviso to Rule 9 of Pan Masala Packing Machine Rules, it is observed that the term permanently discontinues or commences is in respect of a particular month wherein the new retail sale price is discontinued or commenced, from which it is clearly inferred that the term permanently does not mean that the discontinuation or commencement of new retail sale price should be once forever. It is clear that the discontinuation or commencement of new retail sale price should be once in a month and in the said month the retail sale price should not be changed again in the same month, connotes to the term permanently . In the present case either commencement or discontinuation of a particular retail sale price was made only once in particular month i.e. in the month of January, 2012 or in April 2012. The Adjudicating Authority has wrongly interpreted the 4th proviso to construe that permanently discontinuation or commencement of retail sale price means once a new retail sale price is commenced or discontinued the same cannot be re-introduced or discontinued ever in future - The proviso clearly suggests that the action of permanent discontinuation or commencement of new retail sale price during the month is for the purpose of calculation of pro-rata duty for that particular month. Therefore, the term permanently is clearly related to a particular month and not forever as contemplated by the Adjudicating Authority in his adjudication order. Therefore, we are of the clear view that since in the present case appellant have changed retail sale price either by commencement or discontinuation only once in the month of January, 2012 and April, 2012 it cannot be said that the appellant have not discontinued or commenced the new retail sale price permanently in the respective months. Therefore, on this count the Adjudicating Authority s contention is clearly not acceptable. Revenue also demanded duty in only one month i.e. January, 2012 and April, 2012 whereas if the Revenue stick to interpretation of term permanently then the differential duty for the months of February, 2012, March, 2012 and even for May, 2012 should have been demanded. This itself establish that permanent discontinuation or commencement of one retail sale price means permanent in a particular month, hence the same was not violated in the present case for the reason that in the month of January, 2012 or April, 2012 the retail sale price was changed only once in the respective month, hence the said change was permanent in that particular month. Accordingly, the condition of 4th proviso to Rule 9 of PMPM Rules was scrupulously complied with by the appellant - there is no doubt that the term permanently discontinuation or commencement of retail sale price must be considered in a particular month and not otherwise - the terms permanently in the 4th proviso to Rule 9 was not violated by the appellant. Third proviso to Rule 9 provides that a manufacturer permanently discontinue manufacturing of goods of existing retail sale price or commence manufacturing of goods of new retail sale price during the month. The appellant had discontinued retail sale price Rs. 1.50 since January 2012 which has been accepted by the Revenue for the month of February and March 2012 therefore, findings of the Revenue that no intimation for discontinuation permanently is factually incorrect - the double standard of the same authority cannot be accepted. It is also noted that the appellant permanently discontinued retail sale price Rs. 2 with effect from 08.04.2012 thereafter they did not manufacture the notified goods having retail sale price Rs. 2.00 in the same month which demonstrates that the appellant permanently discontinued the retail sale price Rs. 2.00. Therefore, the Revenue ought to have accepted the duty payment on pro-rata basis in terms of 3rd proviso read with 4th provisoto Rule 9. The appellant have not filed declaration under Rule 13(5) of Pan Masala Rules, 2008 inasmuch as the non-declaration of closing stock of notified goods, we find that merely by non-filing of declaration under Rule 13(5) the benefit of pro-rata duty on retail sale price as per 4th proviso to Rule 9 cannot be denied. It is not the case of the department that the appellant have manipulated the stock. The stock of the finished goods was very much recorded in the records of the appellant and the same was neither altered nor manipulated - The Revenue has not disputed the correctness of the stock in the appellant s factory which was recorded in the records. Due to this procedural lapse, the benefit of pro-rata based duty in terms of 4th proviso read with 3rd proviso, cannot be denied. The differential duty confirmed by the lower authority is not sustainable. As regards the Revenue s appeal which is seeking imposition of penalty under Section 11AC for confirmation of demand of duty, since the duty demand itself is not sustainable, there is no question of any penalty, hence the Revenue s appeal has no substance - Appeal of assessee allowed.

Summary

Issues Involved:

1. Whether the appellant permanently discontinued manufacturing of goods of existing retail sale price for the purposes of pro-rata duty calculation under Rule 9 of the Pan Masala Packing Machines (Capacity Determination and Collection of duty) Rules, 2008.
2. Whether the appellant filed the necessary declarations as required under Rule 13(5) of the Pan Masala Rules.
3. Whether the Revenue's demand for duty and imposition of penalty under Section 11AC of the Central Excise Act, 1944, is justified.

Summary of Judgment:

1. Permanent Discontinuation of Retail Sale Price:

The appellant argued that they permanently discontinued the retail sale price of Rs. 1.50 in January 2012 and introduced new prices of Rs. 1.00 and Rs. 2.00. They later discontinued Rs. 2.00 in April 2012 and reintroduced Rs. 1.50 due to market conditions. The Revenue contended that the appellant did not permanently discontinue the retail sale price since they reintroduced Rs. 1.50 in April 2012. The Tribunal held that the term "permanently" in the 4th proviso to Rule 9 refers to a particular month and not forever. The discontinuation or commencement of a new retail sale price should be considered permanent for that month. The appellant's actions complied with this interpretation, and thus, the Revenue's contention was not acceptable.

2. Filing of Necessary Declarations:

The appellant did not file declarations under Rule 13(5) regarding the closing stock of notified goods when discontinuing the retail sale price of Rs. 1.50. However, the Tribunal found that merely not filing the declaration under Rule 13(5) does not justify denying the benefit of pro-rata duty. The stock was recorded in the appellant's records, and there was no manipulation. Therefore, the procedural lapse did not warrant denial of the benefit.

3. Revenue's Demand for Duty and Penalty:

The Revenue demanded duty for the entire month, arguing that the appellant did not permanently discontinue the retail sale price. The Tribunal found that the appellant complied with the 4th proviso to Rule 9 by permanently discontinuing or commencing a new retail sale price within the respective months. The Tribunal also noted that the duty calculation should be based on the highest retail sale price for the whole month if different prices were used. Since the duty demand itself was not sustainable, the imposition of a penalty under Section 11AC was also unjustified.

Conclusion:

The Tribunal set aside the impugned order, allowed the appeal of the assessee, and dismissed the Revenue's appeal. The differential duty confirmed by the lower authority was deemed unsustainable, and no penalty was imposed.