2023 (9) TMI 290 - AT - Central Excise

Operating packing machine or not - packing machine which has been sealed/uninstalled by the jurisdictional superintendent, but not removed from the factory - determination order passed by the adjudicating authority is within time as prescribed under the Rules or not - adjudicating authority is within jurisdiction to determine the monthly duty liability or not - HELD THAT - The legislature has very carefully used the words and the words available and installed have been used in different context. That means that it s not necessary that all available packing machines can be considered as installed or operating in the factory and that has to be determined on the facts of each case. Similar words have been used in Rule 6(1)(iv), (v) (vi) ibid for multiple line packing machines. Mere existence/availability of a packing machine in the factory would not entitle Revenue to count its capacity for imposing duty and the words used in the aforesaid clauses itself makes the distinction between the operating/installed machines as compared to available machine. he appellant did not intend to operate machine No.1 (SL110S,L2), therefore they requested for sealing/uninstalling of the same vide request letter dated 27.2.2012 in accordance with Rule 6(5) ibid and the same was uninstalled sealed by the jurisdictional authorities on 29.2.2012. No reasoning is available on record as to why the same was not removed from the factory premises and that does not mean that wherever a sealed/uninstalled machine is available in the factory it necessarily has to be taken into account while determining the annual production capacity as there is an exception provided in Rule 6(5) by way of proviso stating that where it is not feasible to remove packing machine out of factory premises, it shall be uninstalled and sealed by the Superintended in such a manner that it cannot be operated. Merely because the sealed/uninstalled packing machine is available in the factory premises is not sufficient to saddle the manufacturer with the duty liability except if it falls under Rule 18 (2) ibid which provides for Penalty for contravention etc. The appellant has also raised the issue about the deeming acceptance of the declaration given by them in Form-1 as per Rule 6 ibid - The upper time limit for any modification to be made by the concerned authority is of thirty days and it means that after thirty days the declaration made by the manufacturer in Form-1 cannot be modified by the revenue under any circumstance. Admittedly in the present case the modification has been made by way of determination order/Order-in-Original dated 4.12.2012 whereas the declaration Form-1 was filed by the appellant on 23.10.2012, which is certainly beyond the period prescribed by the statute for making any modification by the revenue authorities and therefore the same is without any authority of law. Jurisdiction to determine the monthly tax liability - HELD THAT - As per Rules, 2010 the adjudicating/capacity determining authority was required to only determine the annual capacity of production and determining the duty payable per month certainly is beyond his jurisdiction in view of Rule 6(2) ibid as the said rule require the said authority to determine and pass order concerning the annual capacity of production of the factory. The appeal filed by the appellant deserve to be allowed - Impugned order set aside - appeal allowed.

Summary

Issues Involved:
1. Treatment of sealed/uninstalled packing machine as operating.
2. Timeliness of the determination order.
3. Jurisdiction of the adjudicating authority to determine monthly duty liability.

Summary:

Issue (i): Treatment of Sealed/Uninstalled Packing Machine:
The core issue was whether a packing machine that was sealed/uninstalled but not removed from the factory should be treated as an operating machine under the Chewing Tobacco & Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010. The appellant argued that Machine No.1, which was sealed/uninstalled by jurisdictional authorities, should not be considered for determining annual production capacity. The Tribunal noted that the mere existence of a packing machine in the factory does not automatically classify it as an operating machine. Rule 6(5) provides that if it is not feasible to remove the machine, it should be uninstalled and sealed in a manner that it cannot be operated. The Tribunal found that there was no evidence of the machine being operated illegally and concluded that the sealed/uninstalled machine should not be counted for duty liability.

Issue (ii): Timeliness of the Determination Order:
The appellant contended that the determination order was issued beyond the statutory time limit prescribed by the Rules, 2010. The Tribunal observed that the declaration in Form-1 was filed on 23.10.2012, and the order approving the declaration was issued on 4.12.2012 and communicated on 17.12.2012, which was beyond the statutory limit of three working days and the extended period of thirty days for modifications. Therefore, the Tribunal held that the approval was deemed to have been granted as per the appellant's declaration, and any modification beyond the thirty-day period was without legal authority.

Issue (iii): Jurisdiction to Determine Monthly Duty Liability:
The appellant argued that the adjudicating authority overstepped its jurisdiction by determining the monthly duty liability, which should only involve determining the annual capacity of production. The Tribunal agreed, stating that under Rule 6(2), the authority is only required to determine the annual production capacity and not the monthly duty liability. Hence, the determination of monthly duty liability was beyond the adjudicating authority's jurisdiction.

Conclusion:
The Tribunal allowed the appeal, setting aside the impugned order and granting consequential relief in accordance with the law. The decision emphasized that the sealed/uninstalled machine should not be considered operational for duty purposes, the determination order was issued beyond the permissible time frame, and the adjudicating authority exceeded its jurisdiction in determining monthly duty liability.