2023 (9) TMI 768 - AT - Central Excise

Refund of Excess duty paid - capacity based duty - closure of factory - change in constitution of business - permanent cessation of work or not - HELD THAT - On 25-06-2011, the respondent closed down their factory. The intimation given by the respondent to the Assistant Commissioner of Central Excise by letter dated 22.06.2011 would show that the respondent permanently ceases to work in respect of all the machines installed in the factory and it would be followed for surrender of registration due to the change of constitution of name. In such a peculiar facts and circumstances of the case, in our considered view, the refund claim filed by the respondent would come within the purview of Rule16 of Rules 2008. The contention of the revenue that the respondent had not permanently ceased to work in as much as they had only changed the constitution of their firm and therefore, it cannot be treated as permanently ceases to work . It is difficult to accept the contention of the learned Authorised Representative for the Revenue, as after the change of constitution new company came into existence and respondent firm (Partnership firm) has been treated as permanently ceases to works. There is no provision in Rules 2008 that after declaring permanently ceases to work , the manufacturer would not be entitled to reopen his factory with new name. Rule16 would cover the situation, where a manufacturer filed an intimation to the Deputy/ Assistant Commissioner of Central Excise intimating permanently ceases to work for surrender of registration. There is no bar on reopening of the factory with new registration in Rules, 2008, which is a subsequent event. In the undisputed facts of this case one important aspect needs to be kept in mind that the revenue gravely erred in contending that the factory was not permanently ceased to work as the changed Pvt. Ltd. Company restarted the production. On this, we are very clear in our mind that there is clear distinction in the ownership of partnership firm and a Private Limited Company. Therefore even if a partnership firm ceased their operation and in place of the same a Private Limited Company started operation, both being separate legal entities, it cannot be said that the partnership firm has not ceased it s production permanently. It s very obvious that when one entity closed it s production and surrendered the registration and a new entity obtained a fresh registration with a new PAN, the former entity became non-existent and it s closure of production is clearly falls under the term permanently . Accordingly, the present case is clearly covered under Rule 16 of the Rules and consequently the respondent is legally entitled for the refund of duty. There is no infirmity in the impugned order - Appeal filed by Revenue is dismissed.

Issues Involved:
1. Applicability of Rule 16 of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008.
2. Whether the respondent permanently ceased to work and thus entitled to a refund.
3. Distinction between Rule 10 and Rule 16 of the said Rules.
4. Impact of change in constitution from a partnership firm to a private limited company on the refund claim.

Summary:

1. Applicability of Rule 16:
The Revenue contended that Rule 16 applies only when a manufacturer permanently ceases to work in respect of all machines installed in the factory and has filed intimation for surrender of registration. The respondent changed their constitution from a partnership firm to a private limited company and continued operations in the same premises with the same machines, thus Rule 16 was not applicable.

2. Permanent Cessation of Work:
The Tribunal found that the respondent ceased manufacturing activities from midnight of 24.06.2011, and all machines were sealed. The respondent had informed the department about the change in constitution and applied for new registration. The Tribunal concluded that Rule 16 was applicable as the respondent permanently ceased operations in respect of all machines and filed intimation for surrender of registration.

3. Distinction between Rule 10 and Rule 16:
The Tribunal highlighted that Rule 10 applies to non-production of goods for a continuous period of 15 days or more, while Rule 16 applies when a manufacturer permanently ceases to work and files for surrender of registration. Rule 16 allows for the recalculation of duty on a pro-rata basis and refund of any excess amount paid.

4. Change in Constitution:
The Tribunal rejected the Revenue's argument that the respondent did not permanently cease operations due to the change in constitution. It emphasized that a partnership firm and a private limited company are distinct legal entities. The closure of the partnership firm and subsequent operation by the private limited company with a new registration and PAN indicated permanent cessation of the former entity's operations.

Conclusion:
The Tribunal upheld the refund sanctioned to the respondent, finding no infirmity in the impugned order. The appeal filed by the Revenue was dismissed, affirming that the respondent was legally entitled to the refund under Rule 16 of the Pan Masala Packing Machines Rules.

(Pronounced in the open court on 15.09.2023)

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